aTYR PHARMA INC 10-Q

Item 2. 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 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). Such forward looking statements, which represent our intent, belief or current expectations, involve risks and uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “predict,” “potential,” “believe,” “should” and similar expressions. Factors that could cause or contribute to differences in results include, but are not limited to those set forth under “Risk Factors” under Part II, Item 1A, and elsewhere in this Quarterly Report. Except as required by law we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect actual outcomes. Overview We are a clinical stage biotechnology company leveraging evolutionary intelligence to translate tRNA synthetase biology into new therapies for fibrosis and inflammation. tRNA synthetases are ancient, essential proteins that have evolved novel domains that regulate diverse pathways extracellularly in humans. Our discovery platform is focused on unlocking hidden therapeutic intervention points by uncovering signaling pathways driven by our proprietary library of domains derived from all 20 tRNA synthetases. Efzofitimod Our lead therapeutic candidate is efzofitimod, a first-in-class biologic immunomodulator in clinical development for the treatment of interstitial lung disease (ILD), a group of immune-mediated disorders that can cause inflammation and fibrosis, or scarring, of the lungs. Efzofitimod is a tRNA synthetase derived therapy that selectively modulates activated myeloid cells through neuropilin-2 (NRP2) to resolve aberrant inflammation without immune suppression and potentially prevent the progression of fibrosis. ILDs are predominantly immune-mediated disorders that are characterized by chronic inflammation, which can lead to progressive fibrosis of the lung. There are limited treatment options for ILD and there remains a high unmet medical need. Sarcoidosis and systemic sclerosis (SSc, also known as scleroderma)-associated ILD (SSc-ILD) are two major forms of ILD. The U.S. 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 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. 16 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. These data were subsequently presented at the American Thoracic Society (ATS) International Conference and published in the peer-reviewed journal CHEST during 2022. In October 2024, the same published data for efzofitimod was featured in the Best of CHEST Journals session at the CHEST 2024 Annual Meeting. 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 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. The study design incorporates a forced steroid taper. The objective of the study is to evaluate the efficacy and safety of efzofitimod in patients with pulmonary sarcoidosis. The primary endpoint of the study is steroid reduction. 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. During 2023, 2024 and 2025, we have had data and safety monitoring board (DSMB) reviews of our EFZO-FIT study. The DSMB reviews concluded that the study could continue unmodified. In July 2024, we completed enrollment of 268 subjects with pulmonary sarcoidosis at multiple centers in the United States, Europe, Brazil, and Japan, exceeding target enrollment. In July 2025, we completed the last patient visit in the EFZO-FIT study. Topline data from the study are expected in mid-September 2025. In February 2024, we announced an Individual Patient Expanded Access Program (Individual Patient EAP). The Individual Patient EAP has been initiated based on blinded EFZO-FIT study investigator and patient participant feedback. The program is designed to allow access for patients who complete the Phase 3 EFZO-FIT study and wish to receive treatment with efzofitimod outside of the clinical trial. The administration of efzofitimod as part of the Individual Patient EAP will occur independent of the EFZO-FIT study protocol, and we, principal investigators and patients will remain blinded to the treatment that occurred as part of the EFZO-FIT study. As this Individual Patient EAP will occur independent of the EFZO-FIT study, this program is not an open-label extension (OLE) and no long-term data will be collected by us. 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 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. This is a 28-week study with three parallel cohorts randomized 2:2:1 to either 270 mg or 450 mg of efzofitimod or placebo dosed intravenously monthly for a total of six doses. 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 (limited or diffuse) and systemic manifestations in patients with SSc-ILD. The primary endpoint is reduction in FVC. Secondary endpoints include certain measures regarding safety and tolerability. In July 2024, we amended the study to add an OLE to patients. Patients who complete the study and wish to receive ongoing treatment with efzofitimod are eligible to participate in the 24-week OLE. In June 2025 we announced interim data from the study showing three out of four efzoftimod-treated diffuse SSc-ILD patients showed clinically important improvement based on the modified Rodnan Skin Score (mRSS) assessment at 12 weeks and that efzofitimod was generally safe and well tolerated at all doses. We are continuing enrollment and moving toward the 24-week endpoints, including the evaluation of the lung function endpoints to evaluate the ILD component of the disease. 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). The Phase 1 clinical trial was a placebo-controlled clinical trial to evaluate the safety, pharmacokinetics (PK) and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers. Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events, and PK findings were consistent with previous studies of efzofitimod. 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. 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. 17 Discovery Platform Using efzofitimod as a model, we have developed a process to advance novel tRNA synthetase domains from a concept to therapeutic candidate. This process leverages our early discovery work as well as current scientific understanding of tRNA synthetase evolution, protein structure, gene splicing and tissue-specific regulation to identify potentially active protein domains. 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. We are working to identify new tRNA synthetase based drug candidates through our internal discovery efforts and external collaboration efforts. tRNA Synthetase Candidates Utilizing our novel approach, we have identified target receptors for domains of two additional tRNA synthetases, gaining insights into their potential biological activity in immunology and fibrosis. These fragments form the basis of our additional pipeline candidates. We plan to further elucidate the therapeutic potential of these candidates through mechanistic investigations, including in vitro and in vivo preclinical studies. ATYR0101 ATYR0101 is a fusion protein derived from a domain of aspartyl-tRNA synthetase (DARS). ATYR0101 binds directly to latent-transforming growth factor beta-binding protein 1 (LTBP1), which regulates transforming growth factor beta (TGFβ), which is at the apex of fibrotic signaling. Derived from a naturally occurring tRNA synthetase, ATYR0101 interacts with LTBP1 in a unique way that presents a differentiated approach to targeting fibrosis. Early data suggest ATYR0101 exerts its antifibrotic effects by inducing apoptosis of myofibroblasts in a TGFβ dependent manner. We believe ATYR0101 may have broad therapeutic applications in multiple fibrotic diseases, such as lung and kidney fibrosis. ATYR0750 ATYR0750 is a fusion protein derived from a domain of alanyl-tRNA synthetase (AARS). ATYR0750 is a novel ligand to fibroblast growth factor receptor 4 (FGFR4), which is involved in many cellular processes, including cell proliferation, differentiation, and tissue repair. FGFR4 is known to play a role in diseases related to inflammation and fibrosis, particularly in the liver. 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. Liquidity and Capital Resources We have incurred losses and negative cash flows from operations since our inception. As of June 30, 2025, we had an accumulated deficit of $566.5 million, and we expect to continue to incur net losses for the foreseeable future. As of June 30, 2025, we had cash, cash equivalents, restricted cash and available-for-sale investments of $83.2 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. In addition to the factors discussed under “Material Cash Requirements,” our ability to fund our longer-term operating needs will depend on our ability to raise additional funding through equity or debt offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and other factors, including those discussed in Part II, Item 1A. “Risk Factors - Risks related to our financial condition and need for additional capital - We will need to raise additional capital or enter into strategic partnering relationships to fund our operations.” Sources of Cash From our inception through June 30, 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). 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, 2024, we sold an aggregate of 20,653,450 shares of common stock at a weighted-average price of $2.02 per share for net proceeds of approximately $40.3 million under the Jefferies ATM Offering Program. During the six 18 months ended June 30, 2025, we sold an aggregate of 8,771,725 shares of common stock at a weighted-average price of $4.32 per share for net proceeds of approximately $36.7 million under the Jefferies ATM Offering Program. Kyorin Agreement Milestone Payments 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. Kyorin has the exclusive rights to develop and commercialize efzofitimod in Japan for all forms of ILD. Cash Flows The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands): Six Months Ended June 30, 2025 2024 Net cash provided by (used in): Operating activities $ (29,314 ) $ (42,829 ) Investing activities (1,119 ) 5,372 Financing activities 36,525 21,130 Net change in cash, cash equivalents and restricted cash $ 6,092 $ (16,327 ) Operating activities. Net cash used in operating activities for the six months ended June 30, 2025 and 2024 was $29.3 million and $42.8 million, respectively. The net cash used during the six months ended June 30, 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 six months ended June 30, 2025 as compared to the same period in 2024 was due primarily to the timing of certain upfront efzofitimod manufacturing payments made during the six months ended June 30, 2024. Investing activities. Net cash (used in) provided by investing activities for the six months ended June 30, 2025 and 2024 was $(1.1) million and $5.4 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 six months ended June 30, 2025 and 2024 was $36.5 million and $21.1 million, respectively. Net cash provided by financing activities for the six months ended June 30, 2025 primarily consisted of $36.7 million in net proceeds from the issuance of common stock through the Jefferies ATM Offering Program. Net cash provided by financing activities for the six months ended June 30, 2024 consisted of $21.3 million in net proceeds from the issuance of common stock through the Jefferies ATM Offering Program. 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, 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. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. Our future capital requirements are difficult to forecast and will depend on many factors. Refer to Part II, Item 1A, "Risk Factors - Risks related to our financial condition and need for additional capital—We will need to raise additional capital or enter into strategic partnering relationships to fund our operations.” for a discussion of these factors. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and when we are closer to commercialization of our product candidates potentially through debt financings. To the extent we raise additional capital through the sale of equity, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. If we raise additional funds through 19 collaborations, strategic partnerships or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, our other technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. The incurrence of additional indebtedness would increase our fixed payment obligations and may require us to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We may be unable to raise additional funds on acceptable terms or at all. If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. 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 June 30, 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 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. 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 June 30, 2025. Financing Lease 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 totaled $1.2 million as of June 30, 2025. Additionally, as of June 30, 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 June 30, 2025. Financial Operations Overview Organization and Business; Principles of Consolidation We conduct substantially all of our activities through aTyr Pharma, Inc., a Delaware corporation, at our facility in San Diego, California. aTyr Pharma, Inc. was incorporated in the State of Delaware in September 2005. 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 June 30, 2025. All intercompany transactions and balances are eliminated in consolidation. Revenue Recognition In January 2020, we entered into the Kyorin Agreement with 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 Kyorin is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan. The Phase 1 clinical trial, which was conducted and funded by Kyorin, was a placebo-controlled clinical trial to evaluate the safety, PK and immunogenicity of efzofitimod in 32 healthy Japanese male volunteers. Efzofitimod was observed to be generally well-tolerated with no drug-related serious adverse events and PK findings were consistent with previous studies of efzofitimod. Kyorin is also participating in the EFZO-FIT study as the local sponsor in Japan. 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. Research and Development Expenses 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: • salaries and employee-related expenses, including stock-based compensation and benefits for personnel in research and product development functions; 20 • 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 and to support biologics license application (BLA) filing activities with contracted development and manufacturing organizations (CDMOs); • costs to support our pre-commercialization efforts; • costs incurred under clinical trial agreements with CROs and investigative sites; • costs for laboratory supplies; and • allocated facilities, depreciation and other allocable expenses. Product candidates in later stages of clinical development, such as efzofitimod, generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. 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. As such, we separately track and report on the majority of our research and development expenses associated with the advancement of efzofitimod. For our candidates in preclinical development, the nature of the research and development expenses incurred to advance these candidates is primarily internal personnel and laboratory supply expenses. We do not fully track or allocate these internal expenses between preclinical product candidates because the expenses can often be shared between candidates. We also incur other shared expenses to support our research and development efforts such as facilities expenses, and these expenses are not allocated to efzofitimod or our preclinical product candidates. Additionally, non-cash research and development expenses such as depreciation and stock-based compensation are not tracked or allocated between product candidates and are shared among all product candidates. We expect that the levels of our research and development expenses will continue to increase in future years and will consist primarily of costs related to our clinical development and manufacturing of efzofitimod for patients with pulmonary sarcoidosis and SSc-ILD, and other potential therapeutics based on tRNA synthetase biology. At this time, due to the inherently unpredictable nature of preclinical and clinical development and given the early stage of our programs, we are unable to estimate with any certainty the costs we will incur or the timelines we will require in the continued development of our product candidates. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. In addition, we cannot forecast which programs or product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. General and Administrative Expenses 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 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. We base our estimates on our historical experience and on various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions. We discuss our accounting policies and assumptions that involve a higher degree of judgment and complexity within Note 2 to our audited consolidated financial statements in our 2024 Annual Report. There have been no material changes to our critical accounting policies and estimates as disclosed in our 2024 Annual Report. 21 Results of Operations Comparison of the Three Months Ended June 30, 2025 and 2024 The following table summarizes our results of operations for the three months ended June 30, 2025 and 2024 (in thousands): Three Months Ended June 30, Increase / 2025 2024 (Decrease) Research and development expenses: Efzofitimod expenses $ 12,290 $ 11,335 $ 955 Preclinical development and other shared research and development expenses 2,623 2,315 308 Non-cash expenses (depreciation and stock-based compensation) 471 323 148 Total research and development expenses 15,384 13,973 1,411 General and administrative expenses: Other general and administrative expenses 3,928 2,760 1,168 Non-cash expenses (depreciation and stock-based compensation) 1,001 582 419 Total general and administrative expenses 4,929 3,342 1,587 Other income (expense), net 781 1,009 (228 ) Research and development expenses. Research and development expenses were $15.4 million and $14.0 million for the three months ended June 30, 2025 and 2024, respectively. The increase of $1.4 million was due primarily to an increase of $1.0 million in manufacturing costs for preparation toward a potential BLA filing. Preclinical development and other shared research and development expenses increased by $0.3 million, and was primarily attributable to increased 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. We expect research and development expenses to increase as we advance toward the potential commercialization of efzofitimod. General and administrative expenses. General and administrative expenses were $4.9 million and $3.3 million for the three months ended June 30, 2025 and 2024, respectively. Other general and administrative expenses increased by $1.2 million primarily due to higher personnel related costs and pre-commercialization costs. Non-cash expenses increased by $0.4 million primarily due to increased non-cash stock-based compensation expenses. We expect general and administrative expenses to increase as we incur pre-commercialization costs to prepare for the potential commercialization of efzofitimod. Other income (expense), net. Other income (expense), net was $0.8 million and $1.0 million for the three months ended June 30, 2025 and 2024, respectively. The change was primarily a result of lower interest income earned on lower cash balances as well as lower interest rates as compared to the same period in the prior year. Comparison of the Six Months Ended June 30, 2025 and 2024 The following table summarizes our results of operations for the six months ended June 30, 2025 and 2024 (in thousands): 22 Six Months Ended June 30, Increase / 2025 2024 (Decrease) License and collaboration agreement revenues $ — $ 235 $ (235 ) Research and development expenses: Efzofitimod expenses 21,094 22,299 (1,205 ) Preclinical development and other shared research and development expenses 5,184 4,389 795 Non-cash expenses (depreciation and stock-based compensation) 920 649 271 Total research and development expenses 27,198 27,337 (139 ) General and administrative expenses: Other general and administrative expenses 6,992 5,676 1,316 Non-cash expenses (depreciation and stock-based compensation) 1,896 1,173 723 Total general and administrative expenses 8,888 6,849 2,039 Other income (expense), net 1,673 2,158 (485 ) License and collaboration agreement revenues. Revenues of $0.2 million for the six months ended June 30, 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 $27.2 million and $27.3 million for the six months ended June 30, 2025 and 2024, respectively. The decrease of $0.1 million was due primarily to a decrease of $2.1 million in EFZO-FIT expense due the completion of the last patient visit in July 2025 offset by an increase of $1.1 million in manufacturing costs due to the timing of certain manufacturing activities being completed. Preclinical development and other shared research and development expenses increased by $0.8 million, and was primarily attributable to increased discovery costs for our preclinical product candidates. Non-cash expenses increased by $0.3 million primarily due to increased non-cash stock-based compensation expense. We expect research and development expenses to increase as we advance toward the potential commercialization of efzofitimod. General and administrative expenses. General and administrative expenses were $8.9 million and $6.8 million for the six months ended June 30, 2025 and 2024, respectively. The increase of $2.0 million was due primarily to higher personnel related costs and pre-commercialization costs. Non-cash expenses increased by $0.7 million primarily due to increased non-cash stock-based compensation expenses. We expect general and administrative expenses to increase as we incur pre-commercialization costs to prepare for the potential commercialization of efzofitimod. Other income, net. Other income, net was $1.7 million and $2.2 million for the six months ended June 30, 2025 and 2024, respectively. The change was primarily a result of lower interest income earned on lower cash balances as well as lower interest rates as compared to the same period in the prior year. Recent Accounting Pronouncements For discussion of recently issued accounting pronouncements, refer to Part I, Item 1, Notes to Condensed Consolidated Financial Statements (Unaudited) – Note 1 – Recent Accounting Pronouncements of this Quarterly Report. Item 3. Quantitative and Qualitati ve Disclosures About Market Risk Not applicable.