Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our interim financial statements and related notes appearing elsewhere in this Quarterly Report and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which was filed with the SEC on March 5, 2026 (Annual Report). Some of the information contained in this discussion and analysis or set forth elsewhere, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” sections of this Quarterly Report as well as our Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the “Risk Factors” sections of this Quarterly Report and our Annual Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report. Investors and others should note that we routinely use the Investor Relations section of our website to announce material information to investors and the marketplace. While not all of the information that we post on the Investor Relations section of our website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in us to review the information that we share on the Investor Relations section of our website, https://ir.arrivent.com/ .
Overview
We are a clinical-stage biopharmaceutical company dedicated to the identification, development and commercialization of differentiated medicines to address the unmet medical needs of patients with cancers. We seek to utilize our team’s deep drug development experience to maximize the potential of our lead product candidate, firmonertinib, and advance a pipeline of novel therapeutics, such as next-generation antibody drug conjugates, including ARR-217 (“MRG007”) through approval and commercialization in patients suffering from cancer, with an initial focus on solid tumors. Firmonertinib is currently being evaluated in multiple clinical trials across a range of epidermal growth factor receptor mutations (“EGFRm”) in non-small cell lung cancer (“NSCLC”). We are conducting a pivotal Phase 3 clinical trial of firmonertinib in treatment naïve, or first-line, patients with locally advanced or metastatic EGFRm NSCLC with exon 20 insertion mutations and a pivotal Phase 3 clinical trial of firmonertinib in first-line patients with locally advanced or metastatic EGFRm NSCLC with P-loop and alpha-c-helix compressing (“PACC”) mutations. We are also conducting a Phase 1 clinical trial of ARR-217 in patients with unresectable locally advanced or metastatic solid tumors.
We received Breakthrough Therapy Designation (“BTD”) for firmonertinib for first line EGFRm NSCLC with exon 20 insertion from the United States Food and Drug Administration (“FDA”) in October 2023, and Orphan Drug Designation for treatment of NSCLC with EGFRm or human epidermal growth factor receptor 2 mutations or human epidermal growth factor receptor 4 mutations in February 2024. A product candidate can receive BTD if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient path for development although BTD may not result in a faster development process, review or approval and does not increase the likelihood that the product candidate will ultimately receive FDA approval for any indication.
In 2021, we licensed from Allist the right to develop and commercialize firmonertinib worldwide, with the exception of greater China, which includes mainland China, Hong Kong, Macau and Taiwan. Firmonertinib is an investigational, novel, epidermal growth factor receptor (“EGFR”) mutant-selective tyrosine kinase inhibitor (“TKI”) that we are developing for the treatment of NSCLC patients across a broader set of EGFRm than are currently served by approved EGFR TKIs. Firmonertinib is currently approved and commercially distributed by Shanghai Allist Pharmaceuticals Co. Ltd. (“Allist”) in China as a first-line therapy to treat classical EGFRm NSCLC and Allist recently received accelerated approval in China for second-line therapy to treat EGFRm exon 20 NSCLC. The FDA has not approved firmonertinib for any use. We selected firmonertinib for global development against nonclassical, or
22
Table of Contents
uncommon, mutations based on preliminary reductions in tumor size observed in seven out of ten patients in first-line treatment with EGFR exon 20 insertion mutations treated with firmonertinib in the ongoing Phase 1b clinical trial, the FAVOUR trial, conducted by Allist in China, and preclinical activity in EGFR PACC mutations, each a subtype of uncommon mutation. In a subsequent interim data readout from the FAVOUR trial of firmonertinib in first-line patients with locally advanced or metastatic EGFRm NSCLC with exon 20 insertion mutations who were administered a 240 mg once-daily dose of firmonertinib, 79% of patients (n=22 out of 28 patients) were observed to experience a reduction in tumor size of at least 30%, as measured by blinded independent central review utilizing Response Evaluation Criteria in Solid Tumors 1.1 criteria. In the same interim data readout, those 79% of patients were observed to experience a 15.2-month median duration of response (“DOR”). In a final analysis from the Phase 1b FURTHER trial of firmonertinib, which included a cohort of EGFRm NSCLC with PACC mutations, we observed 16.0 months median progression-free survival with firmonertinib 240 mg in first-line, confirmed overall response rate (“ORR”) 68.2% (n=15 out of 22 1L patients at 240 mg) and DOR 14.6 months, and confirmed central nervous system responses with firmonertinib, including complete responses. Interim results may not be indicative of final results; however, we believe these interim clinical results underscore firmonertinib’s potential in patients whose tumors contain an uncommon EGFRm.
As one of the most prevalent cancers in the world, lung cancer imposes a significant global burden on human health, and EGFRm NSCLC represents a significant proportion of those affected. Despite progress in the therapeutic landscape for EGFRm NSCLC, many patients, particularly those with uncommon mutations, such as exon 20 insertions or PACC mutations, are underserved by existing treatments.
In May 2026 we announced clearance of a U.S. investigational new drug (“IND”) application by the FDA for ARR-002, a potential first-in-class MUC16/NaPi2b dual-targeting tetravalent antibody-drug conjugate (“ADC”) with an initial focus in ovarian and endometrial cancers and broader therapeutic potential across solid tumors. We have initiated our Phase 1 trial with the first patient expected to be dosed in the second half of 2026.
We have entered into the Global Technology Transfer and License Agreement (the “Allist License Agreement”), pursuant to which, we have, among other things, secured an exclusive, royalty bearing and sublicensable license under certain intellectual property, including patents and know-how, owned or controlled by Allist to develop and commercialize any product containing firmonertinib or any of its salts or derivatives as an active ingredient of a product, which is led by a joint collaboration committee, comprising representatives from both Allist and us. Under the Allist License Agreement, we are obligated to pay Allist milestone payments up to an aggregate of $765.0 million upon the achievement of certain development, regulatory and sales milestone events as set forth in the Allist License Agreement. We are also obligated under the Allist License Agreement to pay Allist tiered royalties based on net sales of Licensed Products (as defined in the Allist License Agreement). See “Business — Licenses, Partnerships and Collaborations —Allist Agreements” in our Annual Report.
In January 2025, we entered into the Exclusive License Agreement (the “Lepu Biopharma Agreement”) with Lepu Biopharma Co., Ltd. (“Lepu”), pursuant to which we have, among other things, secured an exclusive, royalty bearing and sublicensable license under certain intellectual property, including patents and know-how, owned or controlled by Lepu to develop and commercialize any product containing ARR-217 or the antibody component of ARR-217. Further, we are obligated to pay Lepu milestone payments up to an aggregate of approximately $1.17 billion upon the achievement of certain development, regulatory and sales milestone events as set forth in the Lepu Biopharma Agreement. We are also obligated under the Lepu Biopharma Agreement to pay Lepu tiered royalties based on net sales of Licensed Products, as defined in the Lepu Biopharma Agreement. See “Business — Licenses, Partnerships and Collaborations — Lepu Biopharma Agreement” in our Annual Report. During the third quarter of 2025, Lepu dosed the first patient in the Phase 1 study for ARR-217 in patients with unresectable locally advanced or metastatic solid tumors. In March 2026, we dosed our first patient in the ongoing Phase 1 study in partnership with Lepu.
Since our inception in April 2021, we have devoted substantially all of our resources to organizing and staffing our company, acquiring the rights to, and developing our product candidates, business planning, raising capital, identifying potential product candidates, enhancing our intellectual property portfolio and undertaking research and clinical and preclinical studies for our development programs. We do not have any products approved for sale and have not generated any revenue from product sales or otherwise. We have funded our operations to date primarily through the private placement of convertible preferred stock, and through our initial public offering of common stock in January
23
Table of Contents
2024, our “at-the-market” offering, and our underwritten public offering of common stock and pre-funded warrants to purchase common stock in July 2025.
We have incurred significant operating losses since our inception and have not yet generated any revenue. Our net losses were $93.2 million and $95.8 million for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, we had an accumulated deficit of $497.9 million. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our preclinical studies, clinical trials and our expenditures on other research and development activities. We expect to continue to incur losses for the foreseeable future. We anticipate these losses will increase substantially as we:
● advance our product candidates through clinical trials;
● acquire or in-license additional product candidates;
● advance our preclinical programs to clinical trials;
● further invest in our pipeline;
● further support our external partners’ manufacturing capabilities;
● seek regulatory approval for our product candidates;
● pursue commercialization of our product candidates, if approved;
● maintain, expand, protect and defend our intellectual property portfolio;
● secure facilities to support continued growth in our research, development and commercialization efforts;
● increase our headcount to support our development efforts and to expand our clinical development team; and
● incur additional costs and headcount associated with operating as a public company.
In addition, if we obtain regulatory approval for firmonertinib or any product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.
We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
We also face substantial competition from multiple sources, including large and specialty pharmaceutical and biotechnology companies, academic research institutions and governmental agencies and public and private research institutions. Our competitors compete with us on the level of the technologies employed, or on the level of development of product candidates. In addition, many small biotechnology companies have formed collaborations with large, established companies to (i) obtain support for their research, development and commercialization of products or (ii) combine several treatment approaches to develop longer lasting or more efficacious treatments that may potentially directly compete with our current or future product candidates. We anticipate that we will continue to face increasing competition as new therapies and combinations thereof, technologies and data emerge within the field of oncology and, furthermore, within the treatment of NSCLC.
We believe that our current and future competition for resources and eventually for customers comes from companies that are commercializing or developing candidates targeting EGFRm-positive NSCLC, including, but not limited to, AstraZeneca, Johnson & Johnson, Blossom Hill Therapeutics, Dizal Pharmaceutical, Oric Pharmaceuticals,
24
Table of Contents
Black Diamond Therapeutics, Inc., Cullinan Therapeutics, Inc., Taiho Pharmaceutical Co., Ltd., Boehringer Ingelheim, and Bayer AG. In March 2024 and October 2024, chemotherapy in combination with the anti-EGFR anti-mesenchymal epithelial transition factor receptor bispecific antibody amivantamab was approved in the United States and Europe, respectively, for first line EGFRm NSCLC patients with exon 20 insertion mutations. In January 2025, Taiho Therapeutics and Cullinan Therapeutics announced that their study of the oral EGFR inhibitor zipalertinib met the primary endpoint in a Phase 2b clinical trial of patients in second or later line NSCLC patients with EGFR exon 20 insertion mutations and in April 2026 announced a February 27, 2027 Prescription Drug User Fee Act (“PDUFA”) target action date for the New Drug Application (“NDA”) filed for that indication. In July 2025, Dizal Pharmaceutical announced the FDA approval of sunvozertinib in second or later line NSCLC patients with EGFR exon 20 insertion mutations. In March 2026, Dizal Pharmaceutical reported topline data from the study of sunvozertinib as first line treatment for NSCLC patients with EGFR exon 20 insertion mutations. In July 2026, AstraZeneca announced it had entered into an exclusive global license agreement for sunvozertinib and that a Supplemental NDA for the first line setting has been submitted to the FDA and China’s Center for Drug Evaluation.
Key Components of Our Results of Operations
Operating Expenses
Research and Development Expenses
To date, our research and development expenses have been related primarily to the development of our product candidates, preclinical studies and other clinical activities related to our portfolio. Research and development costs are expensed as incurred and payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized when the goods or services are received.
Research and development costs include:
● salaries, payroll taxes, employee benefits and stock-based compensation expenses for those individuals involved in research and development efforts;
● external research and development costs incurred under agreements with contract research organizations (“CROs”) and consultants to conduct our clinical trials and other preclinical studies;
● costs related to manufacturing our product candidates, including fees paid to third-party manufacturers and raw material suppliers;
● license fees and research funding; and
● other allocated expenses, which include direct and allocated expenses, insurance, equipment and other supplies.
Our direct research and development expenses consist principally of external costs, such as fees paid to CROs and consultants in connection with our clinical trials for firmonertinib, preclinical and toxicology studies and costs related to manufacturing materials for clinical and preclinical studies. A significant majority of our direct research and development costs have been related to firmonertinib. We deploy our personnel resources across all of our research and development activities.
We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of firmonertinib and the identification and development of new product candidates. We cannot determine with certainty the timing of initiation, the duration or the completion costs of future clinical trials and preclinical studies of product candidates due to the inherently unpredictable nature of preclinical and clinical development. 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 and development programs to pursue and how much funding to direct to each product candidate or program 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
25
Table of Contents
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.
Our future clinical development costs may vary significantly based on factors such as:
● per patient trial costs;
● the number of patients needed to determine a recommended dose;
● the number of trials required for approval;
● the number of sites included in the trials;
● the countries in which the trials are conducted;
● the length of time required to enroll eligible patients;
● the number of patients that participate in the trials;
● the number of doses that patients receive;
● the drop-out or discontinuation rates of patients;
● potential additional safety monitoring requested by regulatory agencies;
● the duration of patient participation in the trials and follow-up;
● the phase of development of the product candidate; and
● the efficacy and safety profile of the product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, payroll taxes, employee benefits and stock-based compensation expenses for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities and, if any product candidates receive marketing approval, commercialization activities. We also anticipate increased expenses related to audit, legal, regulatory and tax services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.
Interest and Investment Income
Interest and investment income consists of interest earned on our cash, cash equivalents and investments and the accretion of premiums and amortization of discounts on investments.
26
Table of Contents
Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025:
Three Months Ended June 30,
(in thousands)
2026
2025
Change
Operating expenses:
Research and development
$
42,339
$
27,720
$
14,619
General and administrative
10,352
5,903
4,449
Total operating expenses
52,691
33,623
19,068
Operating loss
(52,691)
(33,623)
(19,068)
Interest and investment income
2,798
2,224
574
Net loss
$
(49,893)
$
(31,399)
$
(18,494)
Research and Development
We track outsourced clinical and preclinical costs and other external research and development costs associated with our lead product candidate, firmonertinib, and other early-stage programs. In the table below, Phase 3 trials includes costs incurred associated with the FURVENT and ALPACCA trials. We do not track internal research and development costs by product candidate. The following table summarizes our research and development expenses for the three months ended June 30, 2026 and 2025:
Three Months Ended June 30,
(in thousands)
2026
2025
Change
Firmonertinib:
FURTHER
$
1,612
$
2,848
$
(1,236)
FAVOUR
96
71
25
Phase 3 Trials
14,792
9,790
5,002
Other Firmonertinib costs
1,447
3,773
(2,326)
Total Firmonertinib
17,947
16,482
1,465
Early-stage programs
13,383
3,625
9,758
Personnel-related and other internal costs
11,009
7,613
3,396
Total research and development expenses
$
42,339
$
27,720
$
14,619
Research and development expenses were $42.3 million and $27.7 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $14.6 million was primarily due to a $9.8 million increase in costs related to early-stage programs, $3.4 million increase in personnel-related costs due to increased headcount, and a $1.5 million increase in total costs related to our lead product candidate, firmonertinib. Costs related to firmonertinib increased as a result of increased costs of $5.0 million related to our Phase 3 trials, primarily related to the ongoing ALPACCA clinical trial, partially offset by a $1.2 million decrease in costs related to our FURTHER trial, and decreases in costs of $2.3 million related to other firmonertinib costs due to the timing of costs incurred with outside service providers and consultants.
General and Administrative
General and administrative expenses were $10.4 million and $5.9 million for the three months ended June 30, 2026 and 2025, respectively. The increase of $4.4 million was due primarily to increases in personnel-related costs, including increases in headcount, and consultant costs to support the growth in the overall business.
27
Table of Contents
Interest and Investment Income
Interest income was $2.8 million and $2.2 million for the three months ended June 30, 2026 and 2025, respectively. The increase in interest income is due primarily to increased average invested balances.
Comparison of the Six Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025:
Six Months Ended June 30,
(in thousands)
2026
2025
Change
Operating expenses:
Research and development
$
79,957
$
89,009
$
(9,052)
General and administrative
18,844
11,386
7,458
Total operating expenses
98,801
100,395
(1,594)
Operating loss
(98,801)
(100,395)
1,594
Interest and investment income
5,588
4,609
979
Net loss
$
(93,213)
$
(95,786)
$
2,573
Research and Development
We track outsourced clinical and preclinical costs and other external research and development costs associated with our lead product candidate, firmonertinib, and other early-stage programs. In the table below, Phase 3 trials includes costs incurred associated with the FURVENT and ALPACCA trials. We do not track internal research and development costs by product candidate. The following table summarizes our research and development expenses for the six months ended June 30, 2026 and 2025:
Six Months Ended June 30,
(in thousands)
2026
2025
Change
Firmonertinib:
FURTHER
$
3,350
$
5,443
$
(2,093)
FAVOUR
427
73
354
Phase 3 Trials
23,922
19,235
4,687
Other Firmonertinib costs
5,331
6,034
(703)
Total Firmonertinib
33,030
30,785
2,245
Early-stage programs
25,690
44,606
(18,916)
Personnel-related and other internal costs
21,237
13,618
7,619
Total research and development expenses
$
79,957
$
89,009
$
(9,052)
Research and development expenses were $80.0 million and $89.0 million for the six months ended June 30, 2026 and 2025, respectively. The decrease of $9.1 million was primarily due to an $18.9 million decrease in costs related to early-stage programs, offset by a $7.6 million increase in personnel-related costs due to increased headcount, and a $2.3 million increase in total costs related to our lead product candidate, firmonertinib. Costs related to firmonertinib increased as a result of increased costs of $4.7 million related to our Phase 3 trials, primarily related to the ongoing ALPACCA clinical trial, partially offset by a decrease in costs related to our FURVENT clinical trial due primarily to completion of enrollment of patients in the trial as well as decreases in costs of $0.7 million related to other firmonertinib costs. The decrease in early-stage program costs was due to a one-time $40 million up-front payment made to a collaboration partner during the six months ended June 30, 2025.
General and Administrative
General and administrative expenses were $18.8 million and $11.4 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $7.5 million was due primarily to increases in personnel-related costs, including increases in headcount, and consultant costs to support the growth in the overall business.
28
Table of Contents
Interest and Investment Income
Interest income was $5.6 million and $4.6 million for the six months ended June 30, 2026 and 2025, respectively. The increase in interest income is due primarily to increased average invested balances.
Liquidity and Capital Resources
Sources of Liquidity
To date, we have financed our operations primarily through public and private equity financings, including our initial public offering of common stock in the first quarter of 2024, from which we received aggregate net proceeds of $183.2 million, our "at-the-market" offering, and our underwritten public offering of common stock and pre-funded warrants in July 2025. Prior to becoming a public company, we raised $305.0 million in gross proceeds from the sale of our convertible preferred stock. As of June 30, 2026, we had cash and cash equivalents and short-term investments of $373.1 million.
On February 3, 2025, we filed an automatic shelf registration statement on Form S-3ASR (File No. 333-284661) with the SEC. The shelf registration statement consists of (i) a base prospectus pursuant to which we may offer and sell, from time to time, any combination of shares of our common stock, shares of our preferred stock, various series of debt securities, warrants, rights, and units to purchase any of such securities in one or more registered offerings, and (ii) a prospectus supplement (the “2025 Prospectus Supplement”) pursuant to which we may offer and sell, from time to time, up to $250.0 million of shares of common stock in "at-the-market" offerings through Jefferies LLC (“Jefferies”) as our sales agent (the “ATM Program”). On May 11, 2026, we filed a prospectus supplement (the “2026 Prospectus Supplement”) to the shelf registration with respect to our ATM program. Pursuant to the 2026 Prospectus Supplement, we may offer and sell shares of our common stock having an aggregate offering price of up to an additional $250.0 million, through Jefferies acting as our sales agent. During the six months ended June 30, 2026, we sold 5,358,318 shares of common stock pursuant to the ATM Program for total net proceeds of $140.0 million, net of commissions and offering costs. As of June 30, 2026, we have approximately $229.1 million remaining for future issuances of common stock pursuant to the ATM Program. There has been no material change in the planned use of proceeds as described in the shelf registration statement. None of the offering expenses were paid or payable, directly or indirectly, to our directors, officers, or persons owning 10% or more of any class of equity securities or to our affiliates.
In May 2025, we entered into a $75.0 million loan and security agreement with Silicon Valley Bank, a division of First Citizens Bank & Trust Company, and amended the loan and security agreement in March 2026. The credit facility provides the right, but not the obligation, to draw up to $75.0 million of capital, of which $50.0 million will be available if certain conditions and milestones are met. No amounts have been drawn on this facility at the date of this Quarterly Report.
On July 3, 2025, we closed an underwritten public offering in which we issued and sold an aggregate of 3,059,615 shares of our common stock, including the exercise in full of the underwriters’ option to purchase 576,923 additional shares of common stock, at a public offering price of $19.50 per share, and, in lieu of shares of common stock to certain investors, pre-funded warrants to purchase up to 1,363,469 shares of common stock at a public offering price of $19.4999 per pre-funded warrant, which represents the per share public offering price for the shares less the $0.0001 per share exercise price for each pre-funded warrant. The proceeds to us, net of underwriting discounts, commissions, and other expenses, were $80.5 million.
Future Funding Requirements
We plan to continue to fund our operating expenses and capital expenditure requirements through additional public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. Debt or equity financing or collaborations and partnerships with other entities may not be available on a timely basis, on acceptable terms, or at all. In addition, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount or reduce other operating expenses. This could have an adverse impact on our ability to achieve certain of our planned objectives, and thus, materially harm our business. Our ability to successfully transition to
29
Table of Contents
profitability will depend upon obtaining additional financing and achieving a level of product sales adequate to support our cost structure. We cannot be assured that we will ever be profitable or generate positive cash flows from operating activities.
We believe that our existing cash and cash equivalents and short-term investments as of June 30, 2026 will be sufficient to meet our anticipated cash requirements through at least twelve months from the issuance date of these financial statements. However, 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. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.
Our future capital requirements will depend on many factors, including:
● the initiation, progress, timing, costs and results of drug discovery, preclinical studies and clinical trials of our lead product candidate, firmonertinib, and any other product candidates;
● the number and characteristics of product candidates that we pursue;
● the outcome, timing and costs of seeking regulatory approvals;
● the cost of manufacturing firmonertinib, if approved, and our other current or future product candidates for clinical trials in preparation for marketing approval and in preparation for commercialization;
● the costs of any third-party products used in our combination clinical trials that are not covered by such third party or other sources;
● the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;
● the receipt of marketing approval and revenue received from any potential commercial sales of firmonertinib or other product candidates;
● the cost of commercialization activities for firmonertinib and our other current or future product candidates we develop if we receive marketing approval, including marketing, sales and distribution costs;
● the emergence of competing therapies and other adverse market developments;
● the ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreements;
● the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
● the extent to which we in-license or acquire other products and technologies; and
● the costs of operating as a public company.
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our platform technology, future revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit,
30
Table of Contents
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.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Six Months Ended June 30,
(in thousands)
2026
2025
Net cash (used in) provided by:
Operating activities
$
(81,473)
$
(94,132)
Investing activities
49,654
50,731
Financing activities
140,961
81,873
Net increase in cash and cash equivalents
$
109,142
$
38,472
Operating Activities
Net cash used in operating activities was $81.5 million for the six months ended June 30, 2026 reflecting our net loss of $93.2 million and $1.1 million in accretion of bond discounts. These decreases were partially offset by $12.2 million in stock-based compensation and a change of $0.7 million in our operating assets and liabilities primarily attributable to the timing in which we pay our vendors for research and development activities.
Net cash used in operating activities was $94.1 million for the six months ended June 30, 2025 reflecting our net loss of $95.8 million and a $3.9 million decrease in our operating assets and liabilities attributable to the timing in which we pay our vendors for research and development activities. These decreases were partially offset by $5.6 million in stock-based compensation. Included in the net loss is a $40.0 million upfront payment made in conjunction with our collaboration with Lepu.
Investing Activities
Net cash provided by investing activities for the six months ended June 30, 2026 was $49.7 million, and included $78.4 million of purchases of investments, offset by $128.0 million of maturities of investments.
Net cash of $50.7 million was provided by investing activities for the six months ended June 30, 2025, and included $31.4 million of purchases of investments, offset by $82.1 million of maturities of investments.
Financing Activities
Net cash provided by financing activities was $141.0 million for the six months ended June 30, 2026. This was due to $140.0 million of proceeds from sales of common stock, net of expenses, and $1.0 million of stock option exercises.
Net cash provided by financing activities was $81.9 million for the six months ended June 30, 2025. This was due to $81.9 million of proceeds from sales of common stock, net of expenses, and $0.4 million of stock option exercises, offset by payments of deferred financing costs.
Contractual Obligations and Commitments
As of June 30, 2026, except for an operating lease, we did not have any long-term obligations, capital lease obligations, purchase obligations or long-term liabilities. We enter into contracts in the normal course of business with third-party CROs and clinical trial sites for our clinical trials, and with supply vendors for other services and products for operating purposes. These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts. Amounts related to contingent milestone payments under our license and collaboration agreements are not yet considered contractual obligations as they are contingent on the successful achievement of certain clinical, regulatory and commercial milestones.
31
Table of Contents
We also have commitments for obligations under our agreements with collaboration partners. Under these agreements we are required to make milestone payments upon successful completion of certain clinical, regulatory, development, sales and commercial milestones. Additionally, we are required to make royalty payments in connection with the sale of products developed under these agreements. With the exception of $11.0 million in total developmental milestones payable, because the achievement of other milestones and royalties is not probable as of June 30, 2026, such contingencies have not been recorded in our financial statements. For additional information regarding our agreements, see Note 8 to our accompanying financial statements in Part I, Item 1 of this Quarterly Report.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development and stock-based compensation expenses. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no changes to our critical accounting policies from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Significant Judgments and Use of Estimates” included in the Annual Report.
JOBS Act and Emerging Growth Company Status
As an emerging growth company under the Jumpstart Our Business Startups (“JOBS”) Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our initial public offering, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the day on which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (Exchange Act) or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Recent Accounting Pronouncements
A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 3 to our accompanying financial statements appearing elsewhere in this Quarterly Report.
32
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.