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Item 1A. Risk Factors

2026-05-15 compared with 2025-11-06 · 257 added, 227 removed, 976 unchanged (33% of the section changed)

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Some of the more significant risks we face include the following:

• There is no established FDA regulatory pathway for approval of a drug in pulmonary sarcoidosis.

In addition, a Phase 3 clinical trial that does not meet its primary endpoint may not support an FDA regulatory pathway for approval.

As a result, our 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) may not be sufficient to support FDA approval, which would materially and adversely harm our business;

• We may encounter substantial delays and other challenges in our ongoing or planned clinical trials or we may fail to demonstrate safety and efficacy, such as the failure to meet the primary endpoint in the EFZO-FIT study, to the satisfaction of applicable regulatory authorities;

• We will need to raise additional capital or enter into strategic partnering relationships to fund our operations;

• We are a biotechnology company and have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future;

• There is no established U.S.

Food and Drug Administration (FDA) regulatory pathway for approval of a drug in pulmonary sarcoidosis.

Our planned Phase 3 study for efzofitimod in pulmonary sarcoidosis may not be sufficient to support FDA approval and the FDA may require additional clinical trials which would materially and adversely harm our business;

• We may encounter substantial delays and other challenges in our ongoing or planned clinical trials or we may fail to demonstrate safety and efficacy, such as our failure to meet the primary endpoint in the EFZO-FIT study, to the satisfaction of applicable regulatory authorities;

• If we are unable to successfully complete or otherwise advance clinical development, obtain regulatory or marketing approval for, or successfully commercialize our therapeutic product candidates, including efzofitimod, or experience significant delays in doing so, our business will be materially harmed;

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• Our therapeutic product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any;

• We will need to raise additional capital or enter into strategic partnering relationships to fund our operations;

• We are a pre-commercial biotechnology company and have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future;

• We depend on our existing collaborations and may depend on collaborations with additional third parties for the development and commercialization of certain of our product candidates.

• We have depended and may again in the future depend on collaborations with third parties for the development and commercialization of certain of our product candidates.

If our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates;

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The risk factors set forth below that are marked with an asterisk (*) contain changes to the similarly titled risk factors included in, or did not appear as separate risk factors in, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 (Annual Report), which was filed with the SEC on March 5, 2026.

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.*

The development of therapeutic product candidates is expensive, and we expect our research and development expenses to fluctuate.

As of March 31, 2026, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $68.3 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 for known contractual and other obligations for a period of at least one year from the date of this Quarterly Report.

However, our operating plans may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through equity or debt offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements.

Our future funding requirements are difficult to forecast and will depend on many factors, including but not limited to:

• We held a Type C meeting with the FDA in mid-April 2026 to review the results of the EFZO-FIT study and determine the path forward for efzofitimod in pulmonary sarcoidosis.

Based on feedback from the FDA, we plan to continue the development of efzofitimod in pulmonary sarcoidosis in a planned Phase 3 study.

This study and any potential need for additional clinical studies for efzofitimod in pulmonary sarcoidosis will be costly and will require us to obtain additional capital through equity offerings or partnering to conduct such studies;

• the type, number, scope progress, expansions, results, costs and timing of, our clinical trials and preclinical studies for our product candidates or other potential product candidates or indications which we are pursuing or may choose to pursue in the future, including changes in our CROs or CDMOs;

• the costs, timing and outcome of regulatory review of our product candidates;

• potential delays of our planned clinical trials of efzofitimod;

• cost increases related to the manufacturing of preclinical study and clinical trial materials, including cost increases related to technology transfers to additional CDMOs and any delays in the manufacturing of study drug;

• cost increases as a result of global geopolitical tension, armed conflicts, potential future health pandemics, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, tariffs and trade tensions, higher interest rates and financial and credit market fluctuations, volatility in the capital markets, labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts and tightening of credit markets;

• the number and characteristics of product candidates that we pursue;

• the scope, progress, results and costs of preclinical development, and clinical trials for other product candidates;

• our ability to enter into new collaboration and licensing arrangements and the timing of any payments we may receive under such arrangements;

• the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

• the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval.

In any event, we will require additional capital to complete additional clinical trials, to obtain regulatory approval for, and to commercialize, our product candidates, such as efzofitimod.

Raising funds in the current and future economic environment may present additional challenges.

Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidates, or we may be unable to expand our operations, maintain our current organization and employee base or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

The terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities by us, or the possibility of such issuance, may cause the market price of our shares to decline.

The sale of additional equity or convertible securities would cause dilution to all of our stockholders.

The incurrence of indebtedness would result in fixed payment obligations and may require us to agree to certain restrictive covenants, such as limitations on our ability to incur 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.

As a result of global geopolitical and macroeconomic conditions, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, tariffs and trade tensions, the recent and potential future shutdowns of the federal government and the resulting effects on its regulatory agencies, higher interest rates and financial and credit market fluctuations, volatility in the capital markets, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, volatility in unemployment rates, inflation, higher interest rates and uncertainty about economic stability.

If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive.

In addition, any fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

We are a biotechnology company and have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.*

We are a biotechnology company, and we have not yet generated any revenues from product sales.

We have incurred net losses in each year since our inception in 2005, including consolidated net losses of $10.8 million for the three months ended March 31, 2026.

As of March 31, 2026, we had an accumulated deficit of $617.0 million.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities.

To date, we have financed our operations primarily through the sale of equity securities and convertible debt and through venture debt, term loans and license and collaboration agreement revenues.

The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements.

We will not generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for a product candidate.

Even if we obtain regulatory approval to market a product candidate, our future revenues will depend, in part, upon the size of any markets in which our product candidates have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors and adequate market share for our product candidates in those markets.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

We anticipate that our expenses will fluctuate in connection with our ongoing activities as we:

continue our research and preclinical and clinical development of efzofitimod or any other product candidates that we may develop;

obtain clinical trial materials and further develop the manufacturing process for our product candidates;

seek regulatory approvals for our product candidates that successfully complete clinical trials;

ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

seek to identify and validate additional product candidates;

maintain, protect and expand our intellectual property portfolio;

acquire or in-license other product candidates and technologies;

attract and retain skilled personnel;

and create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts.

Our revenues, expenses and income or losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.

In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.

We have never generated any revenue from product sales and may never be profitable.

Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize our product candidates.

We do not anticipate generating revenues from product sales for the foreseeable future, if ever.

Our ability to generate future revenues from product sales depends heavily on our success in:

• completing research, preclinical development and clinical development of our product candidates, potentially with a strategic partner;

• seeking and obtaining regulatory approvals for product candidates for which we complete clinical trials;

• developing a sustainable, scalable, reproducible, and transferable manufacturing process for our product candidates and establishing supply and manufacturing relationships with third parties;

• launching and commercializing product candidates for which we obtain regulatory approval, either by collaborating with a partner or, if launched independently, by establishing a sales force, marketing and distribution infrastructure;

• maintaining, protecting and expanding our intellectual property portfolio;

• obtaining market acceptance of our product candidates as viable treatment options for our target indications;

• identifying and validating new therapeutic product candidates;

• attracting, hiring and retaining qualified personnel;

• negotiating favorable terms in any licensing, collaboration or other arrangements into which we may enter.

Even if one of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any such approved product candidate.

Our expenses could increase beyond expectations if we are required by the FDA or other regulatory agencies, domestic or foreign, to perform clinical trials and other studies in addition to those that we currently anticipate.

Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.

Risks related to the discovery, development and regulation of our product candidates

There is no established FDA regulatory pathway for approval of a drug in pulmonary sarcoidosis.

In addition, a Phase 3 clinical trial that does not meet its primary endpoint may not support an FDA regulatory pathway for approval.

As a result, the EFZO-FIT study may not be sufficient to support FDA approval, which would materially and adversely harm our business.*

During the third quarter of 2022, we initiated the EFZO-FIT study.

The only FDA-approved therapies for the treatment of sarcoidosis are glucocorticoids which were approved by the FDA in the 1950s, prior to current regulatory standards.

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Accordingly, the FDA has not endorsed a specific primary endpoint nor a specific means for measurement of steroid reduction.

In the EFZO-FIT study, we selected steroid reduction as the primary endpoint and measured steroid reduction in multiple ways in an effort to support an approval.

Our rationale for selecting endpoints for the EFZO-FIT study was based on the anticipated effects of efzofitimod in pulmonary sarcoidosis consistent with the results of our completed Phase 1b/2a study in patients with pulmonary sarcoidosis.

The FDA highlighted the risk of proceeding with a larger study of longer duration based on our limited Phase 1b/2a data and without FDA endorsement of a specific primary endpoint, and the results of the EFZO-FIT study may not ultimately support FDA approval, which has and will adversely affect our business, prospects, financial condition and results of operations.

In addition, in September 2025, we announced top-line results from the EFZO-FIT study, including that the study did not meet its primary endpoint.

We plan to meet with the FDA in the first quarter of 2026 to review the results and determine the path forward for efzofitimod in pulmonary sarcoidosis.

The FDA may determine that the data from the EFZO-FIT study is not compelling enough for approval due to the fact that the study did not meet its primary endpoint.

In 2022 we initiated the EFZO-FIT study, where we selected steroid reduction as the primary endpoint and measured steroid reduction in multiple ways in an effort to support an approval.

In 2025, we announced top-line results from the EFZO-FIT study, including that the study did not meet its primary endpoint of steroid reduction.

Although the study did not meet its primary endpoint, we believe the improvements seen across multiple clinically relevant efficacy endpoints indicate drug activity for efzofitimod.

Based on these trial findings, we held a Type C meeting with the FDA in April 2026 to review the results of the EFZO-FIT study and determine the path forward for efzofitimod in pulmonary sarcoidosis.

Based on feedback from the FDA, we plan to continue the development of efzofitimod in pulmonary sarcoidosis in a planned Phase 3 study in patients with chronic, symptomatic pulmonary sarcoidosis with restrictive lung disease utilizing FVC as the primary endpoint of the study and the KSQ-Lung score as the key secondary endpoint.

We chose these endpoints based on the FDA’s indication that FVC and KSQ-Lung are direct measures of how patients suffering from pulmonary sarcoidosis function and feel, and we concluded FVC to be a more appropriate primary endpoint at this time pending further content validation work for KSQ-Lung as recommended by the FDA.

Additionally, as part of our discussion with the FDA regarding the benefit risk profile for efzofitimod, we plan to increase the frequency of dosing of 5.0 mg/kg efzofitimod or placebo from once every four weeks in past trials to once every three weeks in this next trial.

This planned Phase 3 study and any potential need for any additional clinical trials for efzofitimod in pulmonary sarcoidosis, will require a

significant amount of additional time and resources to support approval.

In addition, it will require us to obtain additional capital through equity offerings or partnering to conduct such studies.

The FDA views the EFZO-FIT study as a failed study due to the fact that the study did not meet its primary endpoint and indicated that results from the EFZO-FIT study will not be useful in establishing effectiveness for efzofitimod in pulmonary sarcoidosis.

The FDA highlighted the risk of proceeding with a larger study in a more limited patient population with a higher unstudied dose and expressed concerns regarding patient safety, which may not be mitigated in part or at all by our planned risk mitigation strategies, enhanced safety surveillance for the potential development of anti-synthetase syndrome and data safety monitoring committee.

The results of our planned Phase 3 study may not ultimately support FDA approval, which would adversely affect our business, prospects, financial condition and results of operations.

In general, the FDA has substantial discretion in the approval process and may refuse to accept our application or decide that our data are insufficient for approval and require additional preclinical, clinical or other trials, which would be costly and significantly delay the potential for regulatory approval.

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The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain approval of efzofitimod based on the completed clinical trials.

We may encounter substantial delays and other challenges in our ongoing or planned clinical trials or we may fail to demonstrate safety and efficacy, such as the failure to meet the primary endpoint in the EFZO-FIT study, to the satisfaction of applicable regulatory authorities.*

We may encounter substantial delays and other challenges in our ongoing or planned clinical trials or we may fail to demonstrate safety and efficacy, such as our failure to meet the primary endpoint in the EFZO-FIT study, to the satisfaction of applicable regulatory authorities.*

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans.

Clinical trials are expensive, time-consuming, often delayed and uncertain as to outcome.

We cannot guarantee that our ongoing clinical trials, including our Phase 2 study in systemic sclerosis (SSc, also known as scleroderma) associated-interstitial lung disease (ILD) (SSc-ILD) (the EFZO-CONNECT study), or planned clinical trials will be initiated or conducted as planned or completed on schedule, if at all.

We cannot guarantee that our ongoing clinical trials, including our Phase 2 study in systemic sclerosis (SSc, also known as scleroderma) associated-interstitial lung disease (ILD) (SSc-ILD) (the EFZO-CONNECT study), or planned clinical trials, including our planned Phase 3 study for efzofitimod in pulmonary sarcoidosis, will be initiated or conducted as planned or completed on schedule, if at all.

We cannot assure you that our product candidates will not be subject to new clinical holds or significant delay in the future.

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Any delay in or inability to successfully complete preclinical and clinical development (including any delays resulting from any changes in a CRO) could result in additional costs to us and impair our ability to generate revenue.

In addition, if we make manufacturing or formulation changes to our product candidates (including our technology transfer to another CDMO for bulk drug substance and production capacity changes for efzofitimod), we will need to conduct additional comparability studies to bridge our modified product

candidates to earlier versions, and the data generated from these comparability studies will need to be reviewed and accepted by the FDA or other regulatory authorities.

In addition, if we make manufacturing or formulation changes to our product candidates (including our technology transfer to another contracted development and manufacturing organization (CDMO) for bulk drug substance and production capacity changes for efzofitimod), we will need to conduct additional comparability studies to bridge our modified product candidates to earlier versions, and the data generated from these comparability studies will need to be reviewed and accepted by the FDA or other regulatory authorities.

If the results of our clinical trials are, or are perceived to be, negative or inconclusive, or if there are safety concerns or adverse events associated with our product candidates, we may be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;

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have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy;

be subject to litigation;

be subject to litigation, including as described in this report under the caption “Legal Proceedings”;

or experience damage to our reputation.

For example, in September 2025, we announced that we did not meet the primary endpoint in the EFZO-FIT study.

We plan to meet with the FDA in the first quarter of 2026 to review the results and determine the path forward for efzofitimod in pulmonary sarcoidosis.

This path forward may include additional clinical trials for efzofitimod in pulmonary sarcoidosis, which may require a significant amount of additional time and resources to support approval.

We held a Type C meeting with the FDA in mid-April 2026 to review the results of the EFZO-FIT study and determine the path forward for efzofitimod in pulmonary sarcoidosis.

In May 2026, we received the official meeting minutes from the FDA.

This planned Phase 3 study and any potential need for any additional clinical trials for efzofitimod in pulmonary sarcoidosis, will require a significant amount of additional time and resources to support approval.

In addition, it will require us to obtain additional capital through equity offerings or partnering to conduct such studies.

To date, the safety and efficacy of efzofitimod has only been studied in a limited number of humans.

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To date, we have expended significant time, resources and effort on the discovery and development of product candidates related to the extracellular proteins derived from the histidyl tRNA synthetase (HARS) family, including conducting preclinical studies and clinical trials.

We have not yet completed any evaluation of our product candidates in human clinical trials designed to demonstrate efficacy to the satisfaction of the FDA, including the EFZO-FIT study, which we announced in September 2025 did not meet its primary endpoint.

We have not yet successfully completed any evaluation of our product candidates in human clinical trials designed to demonstrate efficacy to the satisfaction of the FDA, including the EFZO-FIT study, which we announced in September 2025 did not meet its primary endpoint.

Before we can market or sell our therapeutic candidates in the United States or foreign jurisdictions, we will need to commence and complete additional clinical trials and larger, pivotal trials, manage clinical and manufacturing activities, obtain necessary regulatory approvals from the FDA in the United States and from similar regulatory authorities in other jurisdictions, obtain adequate clinical and commercial manufacturing supplies, build commercial capabilities, which may include entering into a marketing collaboration with a third party, and in some jurisdictions, obtain reimbursement authorization, among other things.

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We may be unable to identify and enroll a sufficient number of patients with the disease in question and who meet the eligibility criteria for, and are willing to participate in, our clinical trials.

For example, we are conducting the EFZO-CONNECT study in patients with SSc-ILD, where it is estimated that approximately 100,000 people in the United States are affected by SSc and up to 80% may develop ILD.

For example, we are currently planning to continue development of efzotifimod in pulmonary sarcoidosis in a planned Phase 3 study in patients with chronic, symptomatic pulmonary sarcoidosis with restrictive lung disease.

While estimates of pulmonary sarcoidosis prevalence vary, we estimate that pulmonary sarcoidosis affects an estimated 160,000 patients in the United States, with approximately 90,000 suffering from moderate to severe disease.

Of that population, however, we estimate that approximately 38,000 experience restrictive lung disease such that our targeted patient population for our planned Phase 3 study is significantly smaller.

The eligibility criteria for any of our clinical trials may further limit the pool of available participants in our trials.

We may be unable to identify and enroll a sufficient number of patients with the disease in question and who meet the eligibility criteria for, and are willing to participate in, the clinical trials.

Additionally, we are conducting the EFZO-CONNECT study in patients with SSc-ILD, where it is estimated that approximately 60,000 people in the United States have SSc-ILD.

In addition to the limited potential patient population, the eligibility criteria may further limit the pool of available participants in the EFZO-CONNECT study.

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In addition, we or our third-party collaborators may choose to conduct additional clinical trials for efzofitimod in countries outside the United States, subject to applicable regulatory approval.

For example, our partner, Kyorin Pharmaceutical Co., Ltd.

(Kyorin), conducted and funded an efzofitimod Phase 1 clinical trial in 32 healthy Japanese male volunteers and has conducted and funded the Japan portion of the EFZO-FIT study.

For example, Kyorin, conducted and funded an efzofitimod Phase 1 clinical trial in 32 healthy Japanese male volunteers and has conducted and funded the Japan portion of the EFZO-FIT study.

We conducted the EFZO-FIT study with a total of 268 subjects in centers in the United States, Europe, Brazil, and Japan.

We plan to conduct our planned Phase 3 study for efzofitimod in pulmonary sarcoidosis globally as well.

Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of such study data is generally subject to certain conditions.

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• Further, the integrity of data from any clinical trials conducted outside of the United States may not be acceptable to the FDA.

We may face CDMO manufacturing stoppages and other CDMO challenges associated with the clinical or commercial manufacture of our product candidates or regulatory activities required for a BLA submission.*

All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our CDMOs for our product candidates, are subject to extensive regulation.

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Poor control of production processes can lead to the introduction of contaminants or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing.

We or our CDMOs must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s Good Laboratory Practices and cGMP regulations enforced by the FDA through its facilities inspection

The facilities and quality systems of our CDMOs and other CROs must pass a pre-approval inspection for compliance with applicable regulations as a condition of regulatory approval of our product candidates.

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If any such inspection or audit of our facilities or those of our CDMOs and CROs identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independently of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility.

Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

For example, in March 2026, the FDA issued our current CDMO a Notice of Inspectional Observations (commonly referred to as a Form 483), which requires our CDMO to address the observations in such notice to the FDA's satisfaction.

Our CDMO may not address those observations in a timely manner or at all, and any of our CDMOs may receive a similar notice in the future.

Any remedial measures imposed upon us or third parties with whom we contract as a result of inspections or audits could materially harm our business.

If we or any of our CDMOs and CROs fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new biologic product, or revocation of a pre-existing approval.

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Currently, we are producing our efzofitimod molecule in E.coli .

The manufacturing processes for one of our product candidates may not be readily adaptable to other product candidates that we develop, and we may need to engage multiple third-party manufacturers to produce our product candidates.

The manufacturing processes

for one of our product candidates may not be readily adaptable to other product candidates that we develop, and we may need to engage multiple third-party manufacturers to produce our product candidates.

For example, we engaged an additional CDMO to manufacture efzofitimod and completed a technology transfer and validation process before the CDMO was able to produce additional bulk drug substance.

During 2023, the CDMO completed its first and second full, commercial-scale bulk drug substance GMP runs.

Quality release testing was completed and all release specifications were met, supporting the CDMO's ability to produce bulk drug substance of efzofitimod for commercial purposes if we receive regulatory approval for efzofitimod.

During 2024, we initiated preparatory work with the CDMO on three process performance qualification drug substance batches that will be required as part of our potential BLA submission for efzofitimod.

During the first quarter of 2025, the first upstream batch did not meet process performance qualification specifications, and was replaced by the CDMO, and we have now successfully completed the required three upstream batches.

During the third quarter of 2025, we initiated and successfully completed the required three downstream batches.

The drug substance material generated from these batches is now being forward processed into drug product.

Future deviations in the drug product manufacturing associated with these batches could potentially impact the timing of our potential BLA submission.

The deviations in the drug substance batches were due to operational errors at the CDMO and not related to the underlying process nor the drug substance.

Even if we successfully complete technology transfers and validation processes with third-party manufacturers, we may still experience manufacturing setbacks.

For example, during 2024, we initiated preparatory work with the additional CDMO engaged to manufacture efzofitimod on three process performance qualification drug substance batches that will be required as part of our potential BLA submission for efzofitimod.

During the first quarter of 2025, the first upstream batch did not meet process performance qualification specifications, and was replaced by the CDMO.

During the third quarter of 2025, we initiated and successfully completed the required three process performance qualification batches.

The drug substance material generated from these batches has been forward processed into drug product.

The deviations in the initial drug substance batch were due to operational errors at the CDMO and not related to the underlying process nor the drug substance.

In the future, we may experience deviations with this or other CDMOs for any number of reasons, whether due to operational errors or otherwise.

Additionally, we have been informed by our CDMO that it will be relocating the microbial manufacturing site we used to conduct our manufacturing batches.

We are currently assessing the impact of this transition, including potentially conducting future manufacturing batches with this CDMO at a different site, or with a new CDMO.

We believe we have sufficient drug product supply for all planned clinical studies, which includes our planned Phase 3 study for efzofitimod in pulmonary sarcoidosis.

However, we expect our commercial supply planning and funding needs may be significantly impacted by the transition to the CDMO's other site, or by transitioning to a new CDMO for commercial supply purposes.

We rely on the manufacturers of our product candidates (and will rely on manufacturers of our products, if approved) to purchase from third-party suppliers the materials necessary to produce the pharmaceutical ingredients, including finished drug product, for our nonclinical and clinical studies.

Suppliers may not sell these materials to our manufacturers at the time we need them or on commercially reasonable terms and all such prices are susceptible to fluctuations in price and availability due to transportation costs, government regulations, price controls, and changes in economic climate or other foreseen circumstances.

We do not have any control over the process or timing of the acquisition of these materials by our manufacturers.

In addition, the U.S.

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Additionally, other governments have enacted, and may continue to enact, retaliatory measures in response to such tariffs.

Any additional adverse developments affecting manufacturing operations for our product candidates may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls or other interruptions in the supply of our drug substance and drug product which could delay the development of our product candidates, the timing of our potential BLA submission for efzofitimod and could require significant additional funding.

Any additional adverse developments, changes in legislation or other economic policy changes affecting manufacturing operations for our product candidates may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls or other interruptions in the supply of our drug substance and drug product which could delay the development of our product candidates, the timing of our potential BLA submission for efzofitimod and could require significant additional funding.

We may also have to write off inventory, incur other charges and expenses for supply of drug substance and drug product that fails to meet specifications or expires, undertake costly remediation efforts, or seek more costly manufacturing alternatives.

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The European Commission, on the basis of the opinion of the European Medicines Agency (EMA) Committee for Orphan Medicinal Products (COMP) granted orphan drug designation to efzofitimod for the treatment of sarcoidosis in January 2023 and for the treatment of SSc in June 2023.

In Japan, the Pharmaceutical and Medical Devices Agency (PMDA) has granted efzofitimod orphan drug designation for the treatment of sarcoidosis to Kyorin, our partner in Japan in August 2023.

In Japan, the Pharmaceutical and Medical Devices Agency (PMDA) granted efzofitimod orphan drug designation for the treatment of sarcoidosis to Kyorin in August 2023.

We may apply for orphan drug designation for efzofitimod for other indications and product candidates in the United States and the EU.

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The FDA has broad discretion whether or not to grant these designations.

Accordingly, even if we believe a particular product candidate is eligible for breakthrough therapy or Fast Track

designation, we cannot assure you that the FDA would decide to grant it.

Accordingly, even if we believe a particular product candidate is eligible for breakthrough therapy or Fast Track designation, we cannot assure you that the FDA would decide to grant it.

Even if we receive breakthrough therapy or Fast Track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures.

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Average review times at the agency have fluctuated in recent years as a result.

In addition, government funding of other government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, including executive and congressional priorities, the impacts of which are inherently fluid and unpredictable.

In addition, government funding of other

government agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, including executive and congressional priorities, the impacts of which are inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, including beginning on October 1, 2025 and continuing to the present, the U.S.

For example, over the last several years, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical government employees and stop critical activities to the extent they are not funded by existing available user fees.

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We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets.

If original marketing approval were obtained

through an accelerated approval pathway, we could be required to conduct a successful post-marketing clinical trial to confirm clinical benefit for our products.

If original marketing approval were obtained through an accelerated approval pathway, we could be required to conduct a successful post-marketing clinical trial to confirm clinical benefit for our products.

An unsuccessful post-marketing study or failure to complete such a trial could result in the withdrawal of marketing approval.

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Because our work represents a new therapeutic approach, developing and commercializing our product candidates, including efzofitimod, subjects us to a number of challenges, including:

• defining indications within our targeted diseases and clinical endpoints within each indication that are appropriate to support regulatory approval, including with respect to the EFZO-FIT study and the EFZO-CONNECT study, and prioritization of outcome measurements that would best support the evaluation of efzofitimod’s efficacy;

• defining indications within our targeted diseases and clinical endpoints within each indication that are appropriate to support regulatory approval, including with respect to our planned Phase 3 study for efzofitimod in pulmonary sarcoidosis and the EFZO-CONNECT study, and prioritization of outcome measurements that would best support the evaluation of efzofitimod’s efficacy;

• obtaining regulatory approval from the FDA and other regulatory authorities that have little or no experience with the development of extracellular tRNA synthetase-based therapeutics;

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Physicians may decide the therapy is too complex or unproven to adopt and may choose not to administer the therapy.

Based on these and other factors, healthcare providers and payors may decide that the benefits of any therapeutic candidates for which we receive regulatory approval do not or will not outweigh its costs.

Based on these

and other factors, healthcare providers and payors may decide that the benefits of any therapeutic candidates for which we receive regulatory approval do not or will not outweigh its costs.

Any inability to successfully develop commercially viable drugs would have an adverse impact on our business, prospects, financial condition and results of operations.

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For example, we did not meet the primary endpoint in our EFZO-FIT study.

We plan to meet with the FDA in the first quarter of 2026 to review the results and determine the path forward for efzofitimod in pulmonary sarcoidosis.

Any failure to demonstrate in controlled clinical trials the requisite safety and efficacy of our product candidates will adversely affect our business, prospects, financial condition and results of operations.

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Undesirable side effects caused by our product candidates, or safety, tolerability or toxicity issues that may occur in our preclinical studies, clinical trials or in the future, could cause us or regulatory authorities to interrupt, restrict, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities.

Fo r instance, as part of our discussion with the FDA regarding the benefit risk profile for efzofitimod, we plan to increase the frequency of dosing of 5.0 mg/kg efzofitimod or placebo from once every four weeks in past trials to once every three weeks in the next trial.

Although we plan to include additional risk mitigation strategies, enhanced safety surveillance for the potential development of anti-synthetase syndrome and a data safety monitoring committee, these may not mitigate some or all of the safety risks.

Generalized infusion related reactions (IRRs) and other complications or side effects could harm further development and/or commercialization of our product candidates, including efzofitimod.

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There is also a risk of delayed adverse events as a result of long-term exposure to protein therapeutics that must be administered repeatedly for the management of chronic conditions, such as the development of antibodies, which may occur over time.

If any such adverse events occur, which may include the development of a negative autoimmune response from antibodies or the occurrence of IRRs associated with antibodies, further advancement of our clinical trials could be halted or delayed, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

If any such adverse events occur, which may include the development of anti-synthetase syndrome from antibodies or the occurrence of IRRs associated with antibodies, further advancement of our clinical trials could be halted or delayed, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

If one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or other safety concerns caused by such products, a number of potentially significant negative consequences could result.

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A significant portion of the research that we are conducting involves new compounds and drug discovery methods, including our proprietary technology.

Our drug discovery activities using our proprietary technology may not be successful in identifying product candidates that are useful in treating diseases.

Our drug discovery activities using our proprietary technology may not be

successful in identifying product candidates that are useful in treating diseases.

Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:

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If we are unable to identify suitable product candidates for preclinical and clinical development and regulatory approval, we will not be able to generate product revenues, which would have an adverse impact on our business, prospects, financial condition and results of operations.

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.*

The development of therapeutic product candidates is expensive, and we expect our research and development expenses to fluctuate.

As of September 30, 2025, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $92.9 million.

Our future funding requirements are difficult to forecast and will depend on many factors, including but not limited to:

• the costs, timing and outcome of regulatory review of our product candidates;

• potential delays of our planned clinical trials of efzofitimod;

• the number and characteristics of product candidates that we pursue;

• the scope, progress, results and costs of preclinical development, and clinical trials for other product candidates;

• our ability to maintain existing and enter into new collaboration and licensing arrangements and the timing of any payments we may receive under such arrangements;

• the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

In any event, we will require additional capital to complete additional clinical trials, to obtain regulatory approval for, and to commercialize, our product candidates, such as efzofitimod.

Raising funds in the current and future economic environment may present additional challenges.

The sale of additional equity or convertible securities would cause dilution to all of our stockholders.

As a result of global geopolitical and macroeconomic conditions, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, tariffs and trade tensions, the ongoing shutdown of the federal government and the resulting effects on its regulatory agencies, higher interest rates and financial and credit market fluctuations, volatility in the capital markets, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, volatility in unemployment rates, inflation, higher interest rates and uncertainty about economic stability.

If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive.

In addition, any fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

We are a pre-commercial biotechnology company and have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.*

We are a pre-commercial biotechnology company, and we have not yet generated any revenues from product sales.

We have incurred net losses in each year since our inception in 2005, including consolidated net losses of $60.2 million for the nine months ended September 30, 2025.

As of September 30, 2025, we had an accumulated deficit of $592.2 million.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities.

To date, we have financed our operations primarily through the sale of equity securities and convertible debt and through venture debt, term loans and license and collaboration agreement revenues.

We have not completed registrational clinical trials for any product candidate to date and it will be several years, if ever, before we have a product candidate ready for commercialization.