What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-13 compared with 2025-05-14 · 64 added, 51 removed, 136 unchanged (46% of the section changed)

18 unchanged sentences

our foundational, revenue-generating pharma biocatalysis business and our Enzyme-Catalyzed Oligonucleotide (ECO) Synthesis ™ (“ECO Synthesis ™ ”) manufacturing platform, which is comprised of enzymatic tools, and processes, designed to enable large-scale manufacture of RNA interference (“RNAi”) therapeutics.

In July 2023, we announced that we discontinued investment in certain development programs, primarily in our novel biotherapeutics business segment.

As part of this strategic prioritization, during 2024 we completed the divestiture and monetization of certain biotherapeutics assets as well as certain non-core life science assets, including in genomics and next generation sequencing applications.

In our revenue-generating pharma biocatalysis business (formerly our pharmaceuticals manufacturing business), we utilize our CodeEvolver technology platform to develop optimized enzymes that are used by some of the world’s largest pharmaceutical companies to improve the efficiency and productivity of their manufacturing processes for small molecule therapeutics.

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At the end of 2024, we completed the build out of our ECO Synthesis Innovation Lab, a facility that uses our ECO Synthesis manufacturing platform to synthesize gram-scale quantities of a customer’s desired siRNA construct suitable for pre-clinical testing.

In 2025, we expect to manufacture good laboratory practice (“GLP”)-grade siRNA for customers in our Innovation Lab under development services contracts model, and we anticipate entering a partnership with a large-scale contract development and manufacturing organization (“CDMO”) to use our ECO Synthesis platform of enzymatic tools and processes to synthesize good manufacturing practices ( “ GMP ” ) -grade siRNA drug substance for our customers.

In May 2025, we presented data at the TIDES U.S.

conference demonstrating our proprietary ECO Synthesis platform’s ability to support siRNA manufacturing by reducing purification costs, improving process performance, and demonstrating the potential to control stereochemistry.

In addition, three presentations from contract development and manufacturing organizations (“CDMO”) validated the transferability of our ligation processes to their in-house facilities.

In 2025, we expect to manufacture good laboratory practice (“GLP”)-grade siRNA for customers in our Innovation Lab under development services contracts model, and we anticipate entering a partnership with a large-scale CDMO to use our ECO Synthesis platform of enzymatic tools and processes to synthesize good manufacturing practices ( “ GMP ” ) -grade siRNA drug substance for our customers.

We expect to expand our enzymatic tools and process offerings as we further enhance the ECO Synthesis platform to address the overall market needs for scalable and sustainable RNAi manufacturing.

As of March 31, 2025, we manage our business as one business segment.

As of June 30, 2025, we manage our business as one business segment.

For additional information, see Note 12, “Segment, Geographical and Other Revenue Information” in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report.

Recent Developments

Strengthened Board of Directors with new appointments

We announced the appointment of Christos Richards to our Board of Directors on January 16, 2025, followed by the appointment of Cynthia Collins on March 28, 2025.

Results of Operations

The following table shows the amounts from our unaudited condensed consolidated statements of operations for the periods presented (in thousands, except percentages):

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

6 unchanged sentences

Selling, general and administrative 12,317 15,671 (3,354) (21) % 24,672 28,531 (3,859) (14) %

Asset impairment and other charges — 165 (165) (100) % — 165 (165) (100) %

Total costs and operating expenses 28,190 30,711 (2,521) (8) % 56,219 59,672 (3,453) (6) %

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Interest and other expense, net

(984) (985) 1 — % (1,926) (1,500) (426) 28 %

Loss before income taxes (13,262) (22,745) 9,483 (42) % (33,939) (34,239) 300 (1) %

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Revenues are as follows (in thousands, except percentages):

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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Considering these industry practices and our experience, we do not believe the total of customer purchase orders outstanding (backlog) provides meaningful information that can be relied on to predict actual sales for future periods.

Total revenues decreased by $9.5 million to $7.5 million in the three months ended March 31, 2025 compared to the same period in 2024, or 56%.

Product revenue decreased by $3.5 million to $6.1 million in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to lower sales of enzymes used in the manufacture of branded pharmaceutical products.

Research and development revenue decreased by $6.0 million to $1.5 million in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to $6.0 million lower revenue from our licensing agreement with Roche Sequencing Solutions, Inc.

entered into in February 2024 and $0.6 million lower revenue from legacy collaboration agreements being recognized in 2025 as compared to the same period in 2024.

These were partially offset by $0.6 million higher revenue from existing collaboration agreements.

Total revenues increased by $7.3 million to $15.3 million in the three months ended June 30, 2025 compared to the same period in 2024.

Total revenues decreased by $2.2 million to $22.9 million in the six months ended June 30, 2025 compared to the same period in 2024.

Product revenue increased by $1.1 million to $7.4 million in the three months ended June 30, 2025 compared to the same period in 2024, and decreased by $2.4 million to $13.4 million in the six months ended June 30, 2025 compared to the same period in 2024, primarily due to variability in manufacturing schedules and timing in clinical trial progression of our customers, which impacted order volumes for our enzyme products.

Research and development revenue increased by $6.2 million to $7.9 million in the three months ended June 30, 2025 compared to the same period in 2024 primarily due to $3.6 million higher revenue from legacy agreements and $2.5 million in revenue from a licensing agreement executed in the second quarter of 2025.

Research and development revenue increased by $0.2 million to $9.4 million in the six months ended June 30, 2025 compared to the same period in 2024, primarily due to higher revenue being recognized in the second quarter of 2025 as compared to the same period in 2024, partially offset by $6.0 million in lower revenue from our licensing agreement with Roche Sequencing Solutions, Inc.

in the first quarter of 2024 that did not reoccur in the current year.

Cost and Operating Expenses

The following table shows the amounts of our cost of product revenue, research and development expense, and selling, general and administrative expense from our unaudited condensed consolidated statements of operations for the periods presented (in thousands, except percentages):

Three Months Ended March 31, Change

The following table shows the amounts of our cost of product revenue, research and development expense, selling, general and administrative expense, and asset impairment and other charges from our unaudited condensed consolidated statements of operations for the periods presented (in thousands, except percentages):

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

2 unchanged sentences

Selling, general and administrative 12,317 15,671 (3,354) (21) % 24,672 28,531 (3,859) (14) %

Asset impairment and other charges — 165 (165) (100) % — 165 (165) (100) %

Total costs and operating expenses $ 28,190 $ 30,711 $ (2,521) (8) % $ 56,219 $ 59,672 $ (3,453) (6) %

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The following table shows the amounts of our product revenue, cost of product revenue, product gross profit and product gross margin from our unaudited condensed consolidated statements of operations for the periods presented (in thousands, except percentages):

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

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Product gross margin (%) (2)

72 % 45 % 64 % 47 %

(1) Cost of product revenue consists of both internal and third-party fixed and variable costs, including materials and supplies, labor, facilities and other overhead costs associated with our product revenue.

(2) Product gross margin is used as a performance measure to provide additional information regarding our results of operations on a consolidated basis.

Cost of product revenue decreased by $2.1 million in the three months ended March 31, 2025 compared to the same period in 2024 primari ly due to a lower volume of product sales as compared to the same period in 2024.

Product gross margin increased to 55% in the three months ended March 31, 2025 compared to 49% in the three months ended March 31, 2024, primarily due to variability in the product mix.

Cost of product revenue decreased by $1.4 million and $3.5 million in the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024.

Product gross margins were 72% and 64% in the three and six months ended June 30, 2025, respectively, compared to 45% and 47% in the corresponding periods in 2024.

The changes in cost of product revenue and product gross margins are primarily due to a shift in sales toward more profitable products, and declines in less profitable legacy products.

Research and Development Expenses

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Research and development expenses are expensed when incurred.

Research and development expenses were $12.9 million in the first quarter of 2025, an increase of $1.7 million, or 15%, from $11.2 million in the first quarter of 2024.

This increase was primarily due to $0.8 million in higher allocable costs, $0.5 million increase in costs associated with higher headcount and $0.3 million in higher lab supplies expense.

Selling, Gene ral and Administrative Expenses

Research and development expenses increased by $2.4 million in the three months ended June 30, 2025 compared to the same period in 2024 prim arily due to a $1.4 million increase in employee-related costs, $1.1 million in higher allocable costs, and $0.2 million in higher lab supplies, partially offset by a $0.5 million decrease from lower use of outside services.

The increase in research and development expenses of $4.1 million in the six months ended June 30, 2025, compared to the same period in 2024, was primarily due to a $2.3 million increase in employee-related costs, $2.1 million increase in allocable costs, and $0.3 million in higher lab supplies.

These were partially offset by a $0.5 million decrease from lower use of outside services.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of employee-related costs, which include salaries and other personnel-related expenses (including stock-based compensation), hiring and training costs, consulting and outside services expenses (including audit and legal counsel related costs), marketing costs, building lease costs, and depreciation expenses and amortization expenses.

Selling, general and administrative expenses were $12.4 million in the first quarter of 2025, a decrease of $0.5 million, or 4%, compared to $12.9 million in the first quarter of 2024.

This decrease was primarily due to $0.7 million in lower legal fees, $0.6 million in lower stock-based compensation expense, and $0.3 million in lower allocable costs.

These were partially offset by a $1.1 million increase in costs associated with higher headcount.

Selling, general and administrative expenses decreased by $3.4 million during the three months ended June 30, 2025, compared to the same period in 2024 primarily due to $2.2 million in lower stock-based compensation expenses, $0.9 million in lower legal costs, $0.3 million in lower consulting and outside services, and $0.3 million in lower allocable costs.

These were partially offset by a $0.3 million increase in employee-related costs.

The decrease in selling, general and administrative expenses of $3.9 million during the six months ended June 30, 2025 as compared to the same period in 2024, was primarily due to $2.8 million in lower stock-based compensation expenses, $1.7 million in lower legal costs and $0.6 million in lower allocable costs.

These were partially offset by a $0.8 million increase in employee-related costs and a $0.5 million increase in facilities associated costs.

Asset Impairment and Other Charges

Asset impairment and other charges for the three and six months ended June 30, 2024 was due to a $0.2 million write-down on assets held for sale.

Interest Income and Interest and Other Expense, net (in thousands, except percentages):

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

1 unchanged sentence

Interest and other expense, net

(984) (985) 1 — % (1,926) (1,500) (426) 28 %

Total other income (expense), net

1 unchanged sentence

Interest Income

Interest income decreased by $0.2 million in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to lower average cash, cash equivalents and short-term investments balances.

Interest income decreased by $0.4 million and $0.5 million in the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024, primarily due to lower average cash, cash equivalents and short-term investments balances.

Interest and Other Expense, net

Interest and other expense, net, increased by $0.4 million in the three months ended March 31, 2025, compared to the same period in 2024 , primarily due to interest related to long-term debt.

Interest and other expense, net increased by $1 thousand and $0.4 million in the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024, primarily due to interest related to long-term debt.

Provision for Income Taxes (in thousands, except percentages):

Three Months Ended March 31, Change

Three Months Ended June 30, Change Six Months Ended June 30, Change

2025 2024 $ % 2025 2024 $ %

Provision for income taxes $ 10 $ 10 $ — — % $ 21 $ 21 $ — — %

The provision for income taxes for the three months ended March 31, 2025 and 2024, was primarily due to the accrual of interest and penalties on historic uncertain tax positions.

Net loss for the three months ended March 31, 2025 was $20.7 million, or a net loss per basic and diluted share of $0.25.

This compared to a net loss of $11.5 million, or a net loss per basic and diluted share of $0.16 for the three months ended March 31, 2024.

The increase in net loss i s primarily related to lower product revenues and research and development revenues, partially offset by lower cost of product revenue.

The provision for income taxes for the three and six months ended June 30, 2025 and 2024, was primarily due to the accrual of interest and penalties on historic uncertain tax positions.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, extending several key provisions of the 2017 Tax Cuts and Jobs Act.

Among its updates are provisions that allow for the immediate expensing of qualifying research and development expenses and certain capital expenditures.

The Company continues to evaluate the impact of the OBBBA, however it is not expected to have a material impact on the Company’s consolidated financial statements.

Net loss for the three months ended June 30, 2025 was $13.3 million, or a net loss per basic and diluted share of $0.16.

This compared to a net loss of $22.8 million, or a net loss per basic and diluted share of $0.32, for the three months ended June 30, 2024.

The decrease in net loss was primarily related to higher revenues and lower costs and operating expenses.

Net loss for the six months ended June 30, 2025 was $34.0 million, or a net loss per basic and diluted share of $0.40.

This compared to a net loss of $34.3 million, or a net loss per basic and diluted share of $0.49, for the six months ended June 30, 2024.

The decrease in net loss was primarily related to lower costs and operating expenses in 2025.

LIQUIDITY AND CAPITAL RESOURCES

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We have historically funded our operations primarily through cash generated from operations, stock option exercises and public and private offerings of our common stock.

In addition, pursuant to the Loan Agreement with Innovatus, an affiliate of Innovatus Capital Partners, LLC, we borrowed $30.0 million from Innovatus, as Lender, on February 13, 2024 and may become eligible to borrow up to an additional $10.0 million upon the achievement of certain financial milestones.

The Loan Agreement provides for an aggregate principal amount of up to $40.0 million and with a maturity date of February 13, 2029 (the “Innovatus Loan”).

In addition, pursuant to our five-year term loan and security agreement (the “Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), an affiliate of Innovatus Capital Partners, LLC, we borrowed $30.0 million from Innovatus, as Lender, on February 13, 2024 (the “Closing Date”) and borrowed an additional $10.0 million on June 27, 2025 upon the achievement of certain financial milestones.

The Loan Agreement, which provided for an aggregate principal amount of up to $40.0 million, has a maturity date of February 13, 2029 (the “Innovatus Loan”).

We actively manage our cash usage and investment of liquid cash to ensure the maintenance of sufficient funds to meet our working capital needs.

Our cash and cash equivalents are held in U.S.

Our primary uses of capital for the foreseeable future, including the next 12 months, are for compensation and related expenses, research and development expenses including manufacturing costs, laboratory and related supplies, legal and other regulatory expenses, and general overhead costs.

The following summarizes our cash and cash equivalents and short-term investments balances and working capital as of March 31, 2025 and December 31, 2024 (in thousands):

March 31, 2025 December 31, 2024

The following summarizes our cash and cash equivalents and short-term investments balances and working capital as of June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025 December 31, 2024

Cash and cash equivalents $ 26,761 $ 19,264

Short-term investments $ 39,569 $ 54,194

$ 41,462 $ 54,194

Working capital $ 73,492 $ 75,124

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Loan Agreement and Term Loans

We will be eligible to draw on the second tranche of $10.0 million upon achievement of certain milestones including certain pre-specified revenue thresholds and subject to payment of a facility fee equal to 1.00% of the amount of such term loan.

On February 13, 2024, we entered into the Loan Agreement with Innovatus consisting of up to two tranches, of which the first tranche of $30.0 million was disbursed upon execution of the Loan Agreement and the second tranche of $10.0 million was funded in June 2025 upon achievement of certain milestones including certain pre-specified revenue thresholds.

Both tranches were subject to payment of a facility fee equal to 1.00% of the amount of such term loan.

The Term Loan carries an interest-only period of 36 months (with the possibility to extend up to 48 months upon achievement of certain pre-specified financial milestones) and will bear interest at a floating rate of the sum of (a) the greater of (i) prime rate and (ii) 7.50% , plus (b) 3.25% .

As of June 30, 2025, we were in compliance with all covenants of the Loan Agreement.

Sales Agreements

In May 2021, we entered into an Equity Distribution Agreement (“EDA ” ) with Piper Sandler & Co (“PSC ” ), under which PSC, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period from the execution of the EDA up to a maximum of $50.0 million of shares of our common stock.

In 2023, 3,079,421 shares of our common stock were issued and sold pursuant to the EDA, all during the first half of 2023, and we received net proceeds of $7.9 million.

On April 24, 2024, we terminated the EDA.

On May 2, 2024, we entered into the Cantor Sales Agreement with Cantor, under which Cantor, at our discretion and at such times that we may determine from time to time, may sell up to a maximum of $75.0 million of shares of our common stock.

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In 2024, 10,440,000 shares of our common stock were issued and sold pursuant to the Cantor Sales Agreement, all during the third quarter of 2024, and we received net proceeds of $29.7 million after Cantor’s commissions and direct offering expenses.

During the three and six months ended June 30, 2025, 7,244,966 shares of our common stock were issued and sold pursuant to the Cantor Sales Agreement and we received gross proceeds of $17.3 million , or $16.4 million in net proceeds after Cantor’s commissions and direct offering expenses of $0.8 million.

Sales of our common stock under the Cantor Sales Agreement could be subject to business, economic or competitive unce rtainties and contingencies, many of which may be beyond our control, and which could cause actual results from the sale of our common stock to differ materially from expectations.

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If adequate funds are not available, we will not be able to successfully execute our business plan or continue our business.

The following is a summary of cash flows for three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended March 31,

The following is a summary of cash flows for the six months ended June 30, 2025 and 2024 (in thousands):

Six Months Ended June 30,

Net cash used in operating activities $ (31,765) $ (19,957)

1 unchanged sentence

Net cash provided by financing activities 27,859 29,084

Net decrease in cash, cash equivalents and restricted cash $ (944) $ (7,071)

Net increase (decrease) in cash, cash equivalents and restricted cash $ 7,496 $ (46,523)

Cash Flows from Operating Activities

The $6.0 million increase in net cash used in operations for the three months ended March 31, 2025 as compared to the same period in 2024 was primarily due to the net effect of decreases in cash received from revenue, increases in cash paid for operating expenses and changes in operating assets and liabilities.

The $11.8 million increase in net cash used in operating activities for the six months ended June 30, 2025 as compared to the same period in 2024, was primarily due to the net effect of decreases in cash received from revenue, increases in cash paid for operating expenses and changes in operating assets and liabilities.

Cash Flows from Investing Activities

The $40.3 million increase in net cash provided by investing activities for the three months ended March 31, 2025 as compared to the same period in 2024, was primarily due to proceeds from maturity of short-term investments in the first quarter of 2025 offset by cash utilized for purchase of short-term investments.

The $67.1 million increase in net cash provided by investing activities for the six months ended June 30, 2025 as compared to the same period in 2024, was primarily due to proceeds from maturity of short-term investments in the first half of 2025 offset by cash utilized for purchase of short-term investments.

Cash Flows from Financing Activities

The $28.2 million decrease in net cash provided by financing activities for the three months ended March 31, 2025 as compared to the same period in 2024 was primarily due to proceeds from the Innovatus Loan in February 2024 that did not reoccur in 2025.

The $1.2 million decrease in net cash provided by financing activities for the six months ended June 30, 2025 as compared to the same period in 2024, was primarily due to the $29.5 million in proceeds from the first tranche of the Innovatus Loan in February 2024, partially offset by the proceeds from the funding of the second tranche of the Innovatus Loan in June 2025 and proceeds from issuance of common stock under the Cantor Sales Agreement during the second quarter of 2025.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Actual results could differ from those estimates.

There have been no material changes to our critical accounting policies or estimates during the three months ended March 31, 2025 from those discussed in our Annual Report.

There have been no material changes to our critical accounting policies or estimates during the three and six months ended June 30, 2025 from those discussed in our Annual Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis