What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-14 compared with 2024-05-16 · 366 added, 259 removed, 458 unchanged (58% of the section changed)

3 unchanged sentences

(in thousands, except share and par value data)

March 31, 2024

June 30, 2024

December 31, 2023

11 unchanged sentences

$ 221,355 $ 130,386

Liabilities, convertible preferred stock and stockholders' deficit

Liabilities, convertible preferred stock and stockholders' equity (deficit)

Current liabilities:

7 unchanged sentences

Convertible preferred stock, $ 0.001 par value;

authorized shares— 16,940,594 at March 31, 2024 and December 31, 2023;

issued shares and outstanding shares— 15,906,236 at March 31, 2024 and December 31, 2023;

$ 193,462 aggregate liquidation preference at March 31, 2024

192,620 192,620

Stockholders' deficit:

Common stock, $ 0.001 par value;

authorized shares— 39,630,511 at March 31, 2024 and December 31, 2023, respectively;

issued shares— 2,384,426 and 2,349,554 at March 31, 2024 and December 31, 2023 respectively;

outstanding shares— 2,384,426 and 2,349,554 at March 31, 2024 and December 31, 2023 respectively.

no shares authorized, issued, or outstanding at June 30, 2024;

authorized shares— 16,940,594 at December 31, 2023;

issued and outstanding shares— 15,906,236 shares at December 31, 2023

Stockholders' equity (deficit):

Class A common stock, $ 0.001 par value;

authorized shares— 200,000,000 and 39,630,511 at June 30, 2024 and December 31, 2023, respectively;

issued and outstanding shares— 18,994,104 and 2,349,554 at June 30, 2024 and December 31, 2023, respectively

Class B common stock, $ 0.001 par value;

authorized shares— 20,000,000 at June 30, 2024;

issued and outstanding shares— 6,729,172 at June 30, 2024;

no shares authorized, issued, or outstanding at December 31, 2023

Preferred stock, $ 0.001 par value;

authorized shares— 10,000,000 at June 30, 2024;

no shares issued or outstanding at June 30, 2024;

no shares authorized, issued, or outstanding at December 31, 2023

Additional paid-in-capital

310,174 7,098

Accumulated deficit

1 unchanged sentence

Accumulated other comprehensive income (loss)

Total stockholders' deficit

Total stockholders' equity (deficit)

217,503 ( 67,936 )

Total liabilities, convertible preferred stock and stockholders' deficit

Total liabilities, convertible preferred stock and stockholders' equity (deficit)

$ 221,355 $ 130,386

1 unchanged sentence

CONTINEUM THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

License revenue

Operating expenses:

Research and development

$ 7,778 $ 3,632

General and administrative

Total operating expenses

Loss from operations

( 9,930 ) ( 5,115 )

Income (loss) from operations

Other income (expense):

1 unchanged sentence

Interest expense

Change in fair value of preferred stock warrant liability

Change in fair value of warrant liability

Change in fair value of investor rights and obligations liability

Other expense, net

Total other income

Loss before income taxes

( 8,417 ) ( 4,824 )

Income (loss) before income taxes

Provision for income taxes

( 8,417 ) ( 4,824 )

Net income (loss)

Other comprehensive income (loss):

Unrealized gain (loss) on marketable securities

Comprehensive loss

$ ( 8,583 ) $ ( 4,757 )

Net loss per share, basic and diluted

$ ( 3.55 ) $ ( 2.12 )

Weighted average shares of common stock outstanding, basic and diluted

Comprehensive income (loss)

Net income (loss) attributable to common stockholders, basic

Net income (loss) attributable to common stockholders, diluted

Net income (loss) per share, basic (a)

Net income (loss) per share, diluted (a)

Weighted-average shares of common stock outstanding, basic

Weighted-average shares of common stock outstanding, diluted

_____________

Basic and diluted per share amounts are the same for Class A and Class B shares.

The accompanying notes are an integral part of these unaudited condensed financial statements.

CONTINEUM THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS ’ DEFICIT

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS ’ EQUITY (DEFICIT)

(in thousands, except share data)

Class A and Class B Additional

Accumulated Other

Total Stockholders'

Convertible Preferred Stock

Comprehensive

Stockholders'

Income (Loss)

3 unchanged sentences

— — 34,872 — 122 — — 122

Stock-based compensation expense

Stock-based compensation

— — — — 768 — — 768

4 unchanged sentences

15,906,236 $ 192,620 2,384,426 $ 2 $ 7,988 $ ( 58 ) $ ( 83,561 ) $ ( 75,629 )

Issuance of common stock in connection with initial public offering, net of issuance costs of $ 10,912

— — 7,423,682 7 107,860 — — 107,867

Conversion of convertible preferred stock to common stock upon initial public offering

( 15,906,236 ) ( 192,620 ) 15,906,236 17 192,603 — — 192,620

Reclassification of warrant from liability to equity

— — — — 216 — — 216

Exercise of stock options

— — 8,932 — 13 — — 13

Stock-based compensation

— — — — 1,494 — — 1,494

— — — — — — ( 9,009 ) ( 9,009 )

Unrealized loss on marketable securities

— — — — — ( 69 ) — ( 69 )

Balance at June 30, 2024

— $ — 25,723,276 $ 26 $ 310,174 $ ( 127 ) $ ( 92,570 ) $ 217,503

Accumulated Other

Convertible Preferred Stock

Class A Common Stock

Comprehensive

Stockholders'

Income (Loss)

Balance at December 31, 2022

4 unchanged sentences

— — 7,146 — 8 — — 8

Stock-based compensation expense

Stock-based compensation

— — — — 494 — — 494

4 unchanged sentences

11,889,674 $ 132,482 2,272,126 $ 2 $ 5,233 $ ( 9 ) $ ( 102,688 ) $ ( 97,462 )

Vesting of shares of common stock subject to repurchase

— — 14,584 — 14 — — 14

Issuance of Series C convertible preferred stock, net of offering costs of $ 103

3,333,239 49,896 — — — — — —

Exercise of stock options

— — 36,715 — 47 — — 47

Stock-based compensation

— — — — 489 — — 489

Repurchase of stock options

— — ( 2,680 ) — ( 28 ) — — ( 28 )

— — — — — — 41,564 41,564

Unrealized loss on marketable securities

— — — — — ( 56 ) — ( 56 )

Balance at June 30, 2023

15,222,913 $ 182,378 2,320,744 $ 2 $ 5,755 $ ( 65 ) $ ( 61,124 ) $ ( 55,432 )

The accompanying notes are an integral part of these unaudited condensed financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

$ ( 8,417 ) $ ( 4,824 )

Adjustments to reconcile net loss to cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

Depreciation and amortization

1 unchanged sentence

Stock-based compensation

Amortization of debt discount and debt issuance costs

Accretion of debt discount and debt issuance costs

Accretion of premiums/discounts on investments, net

( 1,023 ) ( 261 )

Change in fair value of preferred stock warrant liability

Change in fair value of warrant liability

Gain on marketable securities

Change in fair value of investor rights and obligations liability

Changes in operating assets and liabilities

3 unchanged sentences

Accrued expenses

( 380 ) ( 978 )

Operating lease liabilities

Net cash used in operating activities

( 7,975 ) ( 5,244 )

Net cash provided by (used in) operating activities

Investing activities

Purchase of property and equipment

( 147 ) ( 52 )

Purchases of marketable securities

( 30,640 ) ( 9,216 )

Sales and maturities of marketable securities

39,518 18,623

Net cash provided by investing activities

Net cash used in investing activities

Financing activities

Payments of deferred offering costs

Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other offering costs

Proceeds from issuance of Series C convertible preferred stock, net of offering costs

Principal payments on debt

Proceeds from exercise of stock options

Net cash used in financing activities

( 18 ) ( 617 )

Net cash provided by financing activities

Net increase in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents at end of period

$ 16,264 $ 9,063

Supplemental disclosure of noncash investing and financing activities

Conversion of convertible preferred stock to common stock upon initial public offering

Reclassification of warrant from liability to equity

Reclassification of deferred offering costs paid in prior year to equity

The accompanying notes are an integral part of these unaudited condensed financial statements.

13 unchanged sentences

(“legacy Pipeline”) was founded and incorporated in the state of Delaware on May 9, 2017.

On May 7, 2019, legacy Sirocco acquired legacy Pipeline in a merger transaction (the “Merger”).

On May 7, 2019, legacy Sirocco acquired legacy Pipeline in a merger transaction.

As of December 31, 2019, legacy Pipeline was a wholly owned subsidiary of legacy Sirocco.

8 unchanged sentences

Upon the closing of the IPO, the Company’s outstanding convertible preferred stock automatically converted into Class A common stock or Class B common stock, as applicable.

Converted redeemable convertible preferred stock outstanding as of the date of IPO consisted of 15,906,236 shares that were outstanding as of March 31, 2024 ( see Note 6 ).

Converted redeemable convertible preferred stock outstanding as of the date of the IPO consisted of 15,906,236 shares that were outstanding immediately prior to the closing of the IPO.

Following the closing of the IPO, no shares of redeemable convertible preferred stock were authorized or outstanding.

In connection with the closing of its IPO, on April 9, 2024, the Company’s certificate of incorporation was amended and restated to authorize 220,000,000 shares of common stock of which 200,000,000 are designated as Class A common stock and 20,000,000 of which are designated as Class B common stock;

In connection with the closing of its IPO, on April 9, 2024, the Company’s certificate of incorporation was amended and restated to (i) authorize 220,000,000 shares of common stock of which 200,000,000 are designated as Class A common stock and 20,000,000 of which are designated as Class B common stock;

(ii) eliminate all references to the previously existing series of preferred stock;

(iii) authorize 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company’s board of directors in one or more series.

The unaudited condensed financial statements as of March 31, 2024, including share and per share amounts, do not give effect to the IPO and related actions as it closed subsequent to March 31, 2024.

and (iii) authorize 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company’s board of directors in one or more series.

Liquidity and Capital Resources

Since its inception, the Company has devoted substantially all its resources to research and development activities, business planning, establishing and maintaining its intellectual property portfolio, hiring personnel, raising capital to support and expand such activities and providing general and administrative support for these operations.

The Company incurred a net loss of $ 8.4 million for the three months ended March 31, 2024 .

The Company had an accumulated deficit of $ 83.6 million as of March 31, 2024 .

From its inception through March 31, 2024 , the Company has financed its operations primarily through issuance of convertible promissory notes, convertible preferred stock financings, a term loan and a license agreement (the “J&J License Agreement”) the Company entered in February 2023 with Johnson & Johnson Innovative Medicine (formerly Janssen Pharmaceutica NV), an affiliate of J&J.

As of March 31, 2024 , the Company had cash, cash equivalents and marketable securities of $ 117.9 million, which does not include net proceeds from the IPO.

Management believes its existing cash, cash equivalents and marketable securities and net proceeds received from its IPO will be sufficient to support operations for at least 12 months from the issuance of these unaudited condensed financial statements.

The Company incurred a net loss of $ 9.0 million and $ 17.4 million for the three and six months ended June 30, 2024 , respectively.

The Company had an accumulated deficit of $ 92.6 million as of June 30, 2024 .

From its inception through June 30, 2024 , the Company has financed its operations primarily through issuance of convertible promissory notes, convertible preferred stock financings, a term loan, a global license and development agreement (the “J&J License Agreement”) the Company entered in February 2023 with Janssen Pharmaceutica NV, one of the Janssen Pharmaceutical Companies of Johnson & Johnson, and net proceeds of approximately $ 107.9 million received in April 2024 from the Company's IPO.

As of June 30, 2024 , the Company had cash, cash equivalents and marketable securities of $ 218.7 million.

The Company believes its existing cash, cash equivalents and marketable securities will be sufficient to support operations for at least 12 months from the issuance of these unaudited condensed financial statements.

As the Company continues to pursue its business plan, it expects to finance its operations through both public and private sales of equity, debt financings or other commercial arrangements, which could include income from collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements with third parties.

3 unchanged sentences

Unaudited Interim Condensed Financial Statements

The condensed balance sheet as of March 31, 2024 , condensed statements of operations and comprehensive loss, condensed statements of convertible preferred stock and stockholders’ deficit and cash flows for the three months ended March 31, 2024 and 2023 and related notes to condensed financial statements are unaudited.

The condensed balance sheet as of June 30, 2024 , condensed statements of operations and comprehensive income (loss) and condensed statements of convertible preferred stock and stockholders’ equity (deficit) for the three and six months ended June 30, 2024 and 2023, and condensed statements of cash flows for the six months ended June 30, 2024 and 2023, and related notes to condensed financial statements are unaudited.

These unaudited interim condensed financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair statement of the Company’s financial position, results of operations and cash flows for the periods presented.

The condensed results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year or for any other future annual or interim period.

The condensed results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year or for any other future annual or interim period.

The condensed balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date.

These interim condensed financial statements should be read in conjunction with the Company’s audited financial statements.

These interim unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2023 included in the Company’s Form S- 1, as amended (File No.

333 - 278003 ) as filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424 (b) of the Securities Act of 1933, as amended, on April 1, 2024 and declared effective by the SEC on April 4, 2024 ( the "Registration Statement").

Summary of Significant Accounting Policies

During the three -month period ended March 31, 2024, there were no changes to our significant accounting policies as described in our registration statement on Form S- 1, as amended (File No.

333 - 278003 ) as filed with the Securities and Exchange Commission (SEC) pursuant to Rule 424 (b) of the Securities Act of 1933, as amended, on April 1, 2024 and declared effective by the SEC on April 4, 2024.

During the six months ended June 30, 2024, there were no significant changes to the Company's significant accounting policies as described in the Company's Registration Statement.

Basis of presentation

The Company has prepared the accompanying condensed financial statements in accordance with accounting principles generally accepted accounting principles (“GAAP”) and the requirements of the SEC for interim reporting.

As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted.

The financial statements are presented in U.S.

Any reference in these notes to applicable guidance is meant to refer to U.S.

GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates ("ASU") promulgated by the Financial Accounting Standards Board ("FASB").

Use of estimates

During the six months ended June 30, 2024, there were no significant changes to the Company's accounting estimates as described in the Company's Registration Statement.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU No.

2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures ("ASU 2023 - 07" ).

This standard requires a public entity to disclose significant segment expenses and other segment items on an interim and annual basis.

Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker.

ASU 2023 - 07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact of this guidance on its financial statements.

In December 2023, the FASB issued ASU No.

2023 - 09, “Improvements to Income Tax Disclosures.” ASU 2023 - 09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

ASU 2023 - 09 is effective for public entities with annual periods beginning after December 15, 2024 and for private businesses for annual periods beginning after December 15, 2025, with early adoption permitted.

2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures ("ASU 2023 - 09" ).

This standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

ASU 2023 - 09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on its financial statements.

3 unchanged sentences

The following table summarizes the amortized cost and fair value of the Company’s marketable securities by major investment category (in thousands):

As of March 31, 2024

As of June 30, 2024

Amortized Cost

US Government agency securities

$ 14,434 $ — $ ( 45 ) $ 14,389

Certificate of deposit

9,463 6 ( 1 ) 9,468

Corporate debt securities

49,544 17 ( 25 ) 49,536

Commercial paper

20,751 4 ( 11 ) 20,744

3,882 1 ( 4 ) 3,879

Asset-backed securities

3,627 3 ( 3 ) 3,627

$ 101,701 $ 31 $ ( 89 ) $ 101,643

As of December 31, 2023

1 unchanged sentence

US Government agency securities

$ 18,883 $ 11 $ — $ 18,894

Certificate of deposit

5,232 13 — 5,245

Corporate debt securities

52,310 65 ( 6 ) 52,369

Commercial paper

28,108 19 ( 1 ) 28,126

2,445 3 — 2,448

Asset-backed securities

2,576 7 ( 1 ) 2,582

$ 109,554 $ 118 $ ( 8 ) $ 109,664

The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, current and expected future economic conditions.

As of March 31, 2024 , the Company did not record an allowance for credit loss related to its investment portfolio.

As of June 30, 2024 , the Company did not record an allowance for credit loss related to its investment portfolio.

Fair Value Measurements

15 unchanged sentences

Inputs (Level 2)

As of March 31, 2024:

As of June 30, 2024:

Cash equivalents

$ 14,251 $ 14,251 $ — $ —

US Government agency securities

14,390 13,587 803 —

Certificates of deposits

9,468 — 9,468 —

Corporate debt securities

49,536 — 49,536 —

Commercial paper

20,743 — 20,743 —

3,879 — 3,879 —

Asset-backed securities

3,628 — 3,628 —

Total financial assets

$ 115,895 $ 27,838 $ 88,057 $ —

Preferred stock warrant liability

( 227 ) — — ( 227 )

Total financial liabilities

$ ( 227 ) $ — $ — $ ( 227 )

As of December 31, 2023:

Cash equivalents

$ 14,646 $ 14,646 $ — $ —

US Government agency securities

18,894 16,360 2,534 —

Certificates of deposits

5,245 — 5,245 —

Corporate debt securities

52,369 — 52,369 —

Commercial paper

28,126 — 28,126 —

2,448 — 2,448 —

Asset-backed securities

2,582 — 2,582 —

Total financial assets

$ 124,310 $ 31,006 $ 93,304 $ —

Preferred stock warrant liability

( 109 ) — — ( 109 )

Total financial liabilities

$ ( 109 ) $ — $ — $ ( 109 )

The carrying amounts of the Company’s financial instruments, including cash, cash equivalents and marketable securities, prepaid and other current assets, accounts payable, and accrued liabilities, approximate fair value due to their short maturities.

Included in cash and cash equivalents at March 31, 2024 and December 31, 2023 are money market funds with a carrying value and fair value of $ 11.9 million and $ 11.8 million, respectively, based upon a Level 1 fair value assessment.

Preferred Stock Warrant Liability

The preferred stock warrant liability (included on the balance sheet under other long-term liabilities) consists of the fair value of a warrant to purchase Series B convertible preferred stock (see Note 6 ) and was based on significant unobservable inputs, which represent a Level 3 measurement within the fair value hierarchy.

The Company’s valuation of the preferred stock warrant utilized the Black-Scholes option-pricing model.

Upon the closing of the IPO, the warrant to purchase shares of Series B preferred stock became a warrant to purchase shares of Class A common stock.

Included in cash and cash equivalents at June 30, 2024 and December 31, 2023 are money market funds with a carrying value and fair value of $ 11.3 million and $ 11.8 million, respectively, based upon a Level 1 fair value assessment.

Upon the closing of the IPO, the warrant to purchase shares of Series B preferred stock converted to a warrant to purchase shares of Class A common stock, and upon conversion the warrant met the equity classification requirements and was reclassified to equity.

The warrant was remeasured to fair value immediately prior to the conversion to a common stock warrant and the Company recognized changes in the fair value of the warrant liability until April 9, 2024.

As of December 31, 2023, the Company had preferred stock warrant liability (included on the balance sheet under other long-term liabilities), which consisted of the fair value of a warrant to purchase Series B convertible preferred stock and was based on significant unobservable inputs, which represent a Level 3 measurement within the fair value hierarchy.

The Company classified this warrant as a liability on its balance sheets and remeasured to fair value at each reporting date, and the Company recognized changes in the fair value of the warrant liability as a component of other income (expense) in its condensed statements of operations and comprehensive income (loss).

The Company’s valuation of the preferred stock warrant as of April 9, 2024 and December 31, 2023 utilized the Black-Scholes option-pricing model.

The quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the preferred stock warrant liability include the fair value per share of the underlying Series B convertible preferred stock, the remaining contractual term of the warrant, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock.

6 unchanged sentences

The Company has estimated a 0 % dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends.

The Company classifies this warrant as a liability on its balance sheets that it remeasures to fair value at each reporting date, and the Company recognizes changes in the fair value of the warrant liability as a component of other income (expense) in its statements of operations and comprehensive loss.

The Company will continue to recognize changes in the fair value of the warrant liability until the warrant is exercised, expires or qualifies for equity classification.

Significant increases or decreases in any of these inputs in isolation would result in a significantly different fair value measurement.

An increase in the risk-free interest rate, and/or an increase in the remaining contractual term or expected volatility, and/or an increase in the fair value of the convertible preferred stock would result in an increase in the fair value of the warrant.

Roll-Forward of Level 3 Financial Instruments

A reconciliation of the Level 3 financial instruments from December 31, 2023 to March 31, 2024 is as follows (in thousands):

Preferred Stock Warrant Liability

The following table summarizes the change in fair value of the preferred stock warrant liability, a Level 3 recurring fair value measurement, for the six months ended June 30, 2024 ( in thousands):

Warrant Liability

Balance at December 31, 2023

Change in fair value of preferred stock warrant liability

Balance at March 31, 2024

Change in fair value of warrant liability

Balance at April 9, 2024

Reclassification to equity

Balance at June 30, 2024

Accrued Expenses

1 unchanged sentence

Accrued compensation expenses

$ 959 $ 1,904

Accrued research and development expenses

2 unchanged sentences

Total accrued expenses

$ 5,190 $ 4,385

Convertible Preferred Stock and Stockholders ’ Deficit

Under its Amended and Restated Certificate of Incorporation dated April 10, 2023, the Company had a total of 56,571,107 shares of capital stock authorized for issuance, consisting of 39,630,511 shares of common stock, par value of $ 0.001 per share, and 16,940,594 shares of convertible preferred stock, par value of $ 0.001 per share.

Shares of authorized convertible preferred stock are designated as 1,768,607 shares of Series A convertible preferred stock, 1,429,286 shares of Series A- 1 convertible preferred stock, 3,362,377 shares of Series B convertible preferred stock and 10,362,324 shares of Series C convertible preferred stock.

Convertible Preferred Stock and Stockholders ’ Equity (Deficit)

Upon the closing of the IPO, the Company’s outstanding convertible preferred stock automatically converted into 9,177,064 shares of Class A common stock and 6,729,172 shares of Class B common stock.

Converted preferred stock outstanding as of the date of the IPO consisted of 15,906,236 shares.

Each share of outstanding Series A, Series A- 1, Series B, and Series C convertible preferred stock was convertible into one share of common stock at the option of the holder, subject to certain anti-dilution adjustments.

Convertible Preferred Stock

As of March 31, 2024 and December 31, 2023, the Company’s Series A, Series A- 1, Series B, and Series C convertible preferred stock have been classified as temporary equity in the accompanying balance sheets given that a majority of the Company’s board of director seats are held and/or voted upon by convertible preferred stockholders and they could cause certain events to occur requiring redemption of the preferred stock that are outside of the Company’s control.

The Company has not adjusted the carrying values of the convertible preferred stock to the respective liquidation preferences of such shares as the instruments are currently not redeemable and the Company believes it is not probable that the instruments will become redeemable at this point in time.

Adjustments to increase the carrying values to the respective liquidation preferences will be made if and when it becomes probable that an event would occur obligating the Company to pay such amounts.

The authorized, issued, and outstanding shares of convertible preferred stock as of March 31, 2024 consist of the following:

As of December 31, 2023, the Company’s Series A, Series A- 1, Series B, and Series C convertible preferred stock were classified as temporary equity in the accompanying condensed balance sheet given that a majority of the Company’s board of director seats were held and/or voted upon by convertible preferred stockholders and they could cause certain events to occur requiring redemption of the preferred stock that were outside of the Company’s control.

The Company did not adjust the carrying values of the convertible preferred stock to the respective liquidation preferences of such shares as the instruments were not currently redeemable and it was not probable that the instruments would become redeemable.

The authorized, issued, and outstanding shares of convertible preferred stock as of December 31, 2023 consisted of the following:

Shares Authorized

6 unchanged sentences

16,940,594 15,906,236 $ 193,462

Series C Convertible Preferred Stock

The Company’s convertible preferred stock as of March 31, 2024 has the following characteristics:

1 ) Dividends

Holders of the Series A and A- 1 convertible preferred stock, in preference to any distributions to the holders of common stock, shall be entitled to receive non-cumulative cash dividends at an annual rate of $ 0.45 and $ 0.62 per share, respectively.

Holders of the Series B convertible preferred stock, in preference to any distributions to the holders of common stock, Series A, and Series A- 1 stock, shall be entitled to receive non-cumulative cash dividends at an annual rate of $ 0.78 per share.

Holders of the Series C convertible preferred stock, in preference to any distributions to the holder of common stock, Series A, Series A- 1 and Series B convertible preferred stock shall be entitled to receive non-cumulative cash dividends at an annual rate of $ 1.18 per share.

Such dividends are payable only when and if declared by the Company’s board of directors.

No such dividends have been declared or paid through March 31, 2024 .

2 ) Preference on Liquidation

The holders of the Series A, Series A- 1, Series B, and Series C convertible preferred stock are entitled to receive liquidation preferences upon the liquidation, dissolution or winding-up of the Company at the greater of 1 ) the Series A, Series A- 1, Series B, and Series C convertible preferred stock original issue prices of $ 5.60 , $ 7.86 , $ 9.52 , $ 15.00 per share, respectively, plus all accrued and declared but unpaid dividends or 2 ) the amount that would have been payable had all shares been converted to common stock immediately prior to such liquidation, dissolution or winding up of the Company.

Liquidation payments to the holders of the Series A and Series A- 1 convertible preferred stock have priority and are made in preference to any payments to the holders of common stock.

Liquidation payments to the holders of the Series B convertible preferred stock have priority and are made in preference to any payments to the holders of common stock, Series A and Series A- 1 convertible preferred stock.

Liquidation payments to the holders of the Series C convertible preferred stock have priority and are made in preference to any payments to the holders of common stock, Series A, Series A- 1, and Series B convertible preferred stock.

After full payment of the liquidation preference to the holders of the Series A, Series A- 1, Series B and Series C convertible preferred stock upon the liquidation, dissolution or winding-up of the Company, the remaining assets, if any, will be distributed ratably to all holders of common stock.

3 ) Conversion Rights

Each share of outstanding Series A, Series A- 1, Series B, and Series C convertible preferred stock is convertible into one share of common stock at the option of the holder, subject to certain anti-dilution adjustments.

The conversion rate for the convertible preferred stock is determined by dividing the applicable original issue price, as adjusted for stock splits, by the applicable conversion price.

The conversion price is initially the original issue price for such series of convertible preferred stock, but is subject to adjustment for dividends, stock splits, and other distributions.

The conversion rate at March 31, 2024 for the Series A, Series A- 1, Series B, and Series C convertible preferred stock was 1:1.

Each share of Series A, Series A- 1, Series B, and Series C convertible preferred stock will be automatically converted into common stock at the then effective conversion rate (i) immediately upon the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of common stock for the account of the Company in which the gross cash proceeds to the Company are at least $ 50.0 million or (ii) upon written request for such conversion from the Requisite Investors (defined under the terms of the convertible preferred stock as at least 60 % of the holders of preferred stock).

4 ) Redemption Rights

The holders of Series A, Series A- 1, Series B and Series C convertible preferred stock do not have any redemption rights.

The holder of each share of Series A, Series A- 1, Series B and Series C convertible preferred stock generally vote together with the shares of common stock as a single class, but also have class vote approval rights as provided by the Company’s certificate of incorporation or as required by applicable law.

As of March 31, 2024 , of the authorized 39,630,511 shares of common stock, 2,384,446 shares of Class A common stock are issued and outstanding.

No shares of Class B common stock are outstanding.

The Company has two classes of common stock:

the Class A common stock and Class B common stock.

Class A common stock and Class B common stock.

Class A common stock has one vote per share and Class B common stock has no votes per share.

Voting, dividend, and liquidation rights of the holders of the common stock are subject to, and qualified by, the rights, preferences and privileges of the holders of the convertible preferred stock.

As of June 30, 2024 , of the authorized 200,000,000 shares of Class A common stock, 18,994,104 shares of Class A common stock were issued and outstanding, and of the authorized 20,000,000 shares of Class B common stock, 6,729,172 shares of Class B common stock were issued and outstanding.

Voting, dividend, and liquidation rights of the holders of the common stock were subject to, and qualified by, the rights, preferences and privileges of the holders of the convertible preferred stock.

The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders.

Common stock reserved for future issuance consisted of the following:

As of March 31,

Class A common stock reserved for future issuance consisted of the following:

As of June 30,

Convertible preferred stock

Common stock options granted and outstanding

Shares available for issuance under the 2012 Incentive Plan

4,090,030 2,674,405

Shares available for issuance under the 2024 Plan

Shares available for issuance under the 2012 Plan

Preferred stock warrant

Common stock warrant

Common stock reserved under the 2024 ESPP

Total common stock reserved for future issuance

7,210,286 19,098,896

There are no shares of Class B common stock reserved for future issuance.

Stock Options

In 2012, the Company adopted the 2012 Equity Incentive Plan (the “Plan”), which allowed for the issuance of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock, restricted stock units, and other stock awards (collectively “Stock Awards”).

The Plan was established to secure and retain the services of the group of persons eligible to receive Stock Awards and to provide additional incentives to its employees, directors, and consultants of the Company.

Under the Plan, the Company can offer ISOs to employees and NSOs to employees, non-employee directors, and consultants.

The Plan allows the Company to issue stock awards for shares of its common stock up to a total of 3,429,327 shares, subject to appropriate adjustments for stock splits, combinations and other similar events for issuance pursuant to awards made under the Plan.

Under the Plan, the exercise price of each ISO shall be established in the sole discretion of the Company’s board of directors (or any of the committees of the Company’s board of directors);

provided, however, that (i) the exercise price per share for an ISO shall not be less than the fair market value for shares of the Company’s common stock on the date of grant and (ii) the exercise price per share of an ISO granted to an optionee who on the date of the grant owns stock possessing more than 10 % stockholder of the Company shall not be less than 110 % of the fair market value of a share of its common stock on the date of grant and the option shall not be exercisable after five years from the date of grant.

The options that are granted under the Plan are exercisable at various dates as determined upon grant and terminate within ten years of the date of grant, unless the optionee owns 10 % or more of the common shares at which point the expiration period is 5 years, or upon the employee’s termination (whereupon the terminated employee has ninety days after termination to exercise vested options from the date of termination).

The vesting period generally occurs over four years.

Stock option activity under the Plan is as follows:

In March 2024, the Company's board of directors and its stockholders adopted and approved the 2024 Equity Incentive Plan (the "2024 Plan").

The 2024 Plan is the successor of the Company's 2012 Equity Incentive Plan (the "2012 Plan").

However, awards outstanding under the 2012 Plan will continue to be governed by their existing terms.

The 2024 Plan allowed for the issuance of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted shares, restricted stock units, and other stock awards to the Company's employees, members of its board of directors, and consultants.

The number of shares initially reserved for issuance under the 2024 Plan was 2,700,000 .

As of June 30, 2024, there were 2,824,492 shares of the Company’s common stock reserved and available for issuance under the 2024 Plan.

The aggregate number of shares reserved for issuance under the 2024 Plan will automatically increase on the first day of each fiscal year of the Company, commencing in 2025 and ending in (and including) 2034, by a number equal to the lesser of (a) 5 % of the aggregate shares of Class A common stock and Class B common stock issued and outstanding as of the last day of the prior fiscal year, or (b) a number of shares of Class A common stock determined by the Company's board of directors.

Under the 2024 Plan, the exercise price for options granted under the 2024 Plan may not be less than 100 % of the fair market value of the Class A common stock on the grant date.

Optionees will be permitted to pay the exercise price in cash or, with the consent of the compensation committee (i) with shares of common stock that the optionee already owns, (ii) by an immediate sale of shares through a broker approved by the Company, (iii) by instructing the Company to withhold a number of shares otherwise deliverable upon exercise having an aggregate fair market value that does not exceed the exercise price;

or (iv) by other methods permitted by applicable law.

The Company's board of directors (or a committee thereof to which the Company's board of directors has delegated authority) may amend or terminate the 2024 Plan at any time.

If the Company's board of directors amends the 2024 Plan, it does not need stockholder approval of the amendment unless required by applicable law, regulation or rules.

The 2024 Plan will terminate automatically ten years after the date when the Company's board of directors adopted the 2024 Plan.

In March 2024, the Company's board of directors and its stockholders adopted and approved the 2024 Employee Stock Purchase Plan (the "2024 ESPP").

The 2024 ESPP became effective as of April 9, 2024.

The purpose of the 2024 ESPP is to provide eligible employees with an opportunity to increase their interest in the success of the Company by purchasing shares of Class A common stock from the Company on favorable terms and to pay for such purchases through payroll deductions or other approved contributions.

The new payroll deduction rate may be any whole percentage of the participant’s compensation, but not less than 1 % nor more than 15 %.

As of June 30, 2024, there were 280,000 shares of the Company’s common stock reserved and available for issuance under the 2024 ESPP.

The number of shares reserved for issuance under the 2024 ESPP will automatically increase on the first day of each fiscal year of the Company, commencing in 2025 and ending in (and including) 2044, by a number equal to the lesser of (i) 280,000 shares, (ii) 1 % of the aggregate shares of Class A common stock and Class B common stock issued and outstanding on the last day of the prior fiscal year, or (iii) a number of shares determined by the Company's board of directors.

The number of shares reserved under the 2024 ESPP will automatically be adjusted in the event of a stock split, stock dividend or a reverse stock split (including an adjustment to the per-purchase period share limit).

During the six months ended June 30, 2024, there were no shares purchased under the 2024 ESPP and the recorded expense was not material.

Stock option activity under the 2024 Plan and 2012 Plan is as follows:

Options Outstanding

10 unchanged sentences

Options expired

As of March 31, 2024

As of June 30, 2024

4,090,030 $ 9.55 7.82 $ 33,050

Options vested and expected to vest as of March 31, 2024

Options vested and expected to vest as of June 30, 2024

4,090,030 $ 9.55 7.82 $ 33,050

Options exercisable as of March 31, 2024

Options exercisable as of June 30, 2024

1,930,408 $ 4.35 5.91 $ 25,592

The aggregate intrinsic value of options exercised during the period ended March 31, 2024 was $ 0.3 million, determined as of the date of exercise.

Options exercisable includes options which are not vested, but are available to be early exercised as of March 31, 2024 .

The aggregate intrinsic value of options exercised during the period ended June 30, 2024 was $ 0.1 million, determined as of the date of exercise.

Options exercisable include options which are not vested, but are available to be early exercised as of June 30, 2024 .

As of June 30, 2024, there were 133,058 options exercisable that are available to be early exercised.

The Company estimated the fair value of stock options using the Black-Scholes valuation model.

2 unchanged sentences

The fair value of stock options was estimated using the following weighted-average assumptions:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Expected term (in years)

6.05 — 6.03 6.08

Expected volatility

110 % — 110 % 90 %

Risk free interest rate

1 unchanged sentence

Dividend yield

The weighted-average grant-date fair value per share of stock options granted during the period ended March 31, 2024 was $ 13.66 per share, respectively.

The Company recorded $ 0.4 million and $ 0.4 million in stock-based compensation expense in general and administrative and research and development, respectively, for the period ended March 31, 2024 .

The Company recorded $ 0.3 million and $ 0.2 million in stock-based compensation expense in general and administrative and research and development, respectively, for the period ended March 31, 2023.

As of March 31, 2024 there was approximately $ 9.2 million of total unrecognized stock-based compensation expense related to awards granted under the Plan, which is expected to be recognized over a weighted-average period of approximately 1.3 years.

The weighted-average grant-date fair value per share of stock options granted during the three and six months ended June 30, 2024 was $ 13.53 and $ 13.55 per share, respectively.

There were no stock options granted during the three months ended June 30, 2023.

The Company recorded $ 0.9 million and $ 0.6 million in stock-based compensation in general and administrative and research and development, respectively, for the three months ended June 30, 2024.

The Company recorded $ 0.3 million and $ 0.2 million in stock-based compensation in general and administrative and research and development, respectively, for the three months ended June 30, 2023.

The Company recorded $ 1.3 million and $ 1.0 million in stock-based compensation in general and administrative and research and development, respectively, for the six months ended June 30, 2024.

The Company recorded $ 0.5 million and $ 0.5 million in stock-based compensation in general and administrative and research and development, respectively, for the six months ended June 30, 2023.

As of June 30, 2024 there was approximately $ 24.1 million of total unrecognized stock-based compensation related to nonvested stock-based compensation arrangements, which is expected to be recognized over a weighted-average period of approximately 3.2 years.

As of June 30, 2023 there was approximately $ 2.9 million of total unrecognized stock-based compensation related to nonvested stock-based compensation arrangements, which is expected to be recognized over a weighted-average period of approximately 1.0 years.

The Company’s interim income tax provision consists of U.S.

federal and state income taxes based on the estimated annual effective tax rate that the Company expects for the full year together with the tax effect of discrete items.

Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary.

For the three and six months ended June 30, 2024, the Company did not record a U.S.

federal or state income tax provision due to current and expected annual net operating losses for the year ended December 31, 2024.

As of June 30, 2023, the estimated annual effective tax rate for 2023, exclusive of discrete items, was approximately 1.94 % of projected pre-tax income.

The estimated annual tax expense consists of a provision for federal and state income taxes.

For the three months ended June 30, 2023, due to statutory limitations on the ability to utilize research and development credits and net operating losses to offset year to date taxable income, the Company recorded a tax expense of $ 0.7 million, on a pre-tax income of $ 42.3 million.

For the six months ended June 30, 2023, due to statutory limitations on the ability to utilize research and development credits and net operating losses to offset year to date taxable income, the Company recorded a tax expense of $ 0.7 million, on a pre-tax income of $ 37.5 million.

Under Section 382 and 383 of the Internal Revenue Code ("IRC"), if a corporation undergoes an ownership change (generally defined as a greater than 50% change in its equity ownership over a three -year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited.

The Company has completed an ownership change analysis pursuant to IRC Section 382 for the periods prior to February 9, 2021.

On July 13, 2012, April 29, 2018, March 15, 2019, and February 9, 2021 the Company experienced ownership changes.

Accordingly, the Company’s ability to utilize net operating loss and tax credit carryforwards attributable to periods prior to February 9, 2021 is subject to substantial limitations.

An ownership change analysis pursuant to IRC Section 382 has not been performed for the periods after February 9, 2021 and therefore additional ownership changes may have occurred which may limit the Company’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes.

In assessing the realizability of deferred tax assets, the Company evaluates whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized.

The Company assesses all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized.

This evidence includes, but is not limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income.

Significant weight is given to positive and negative evidence that is objectively verifiable.

Based on these factors, including cumulative losses in recent years, the Company continues to maintain a full valuation allowance against its net deferred tax assets as of June 30, 2023.

License Agreement

In February 2023, the Company entered into the J&J License Agreement, pursuant to which the Company granted J&J an exclusive, worldwide license to develop, manufacture and commercialize PIPE- 307 in all indications.

The agreement allows the Company to elect, at its sole discretion and cost, to conduct a Phase 2 trial of PIPE- 307 for patients with multiple sclerosis.

The J&J License Agreement allows the Company to elect, at its sole discretion and cost, to conduct a Phase 2 trial of PIPE- 307 for patients with multiple sclerosis.

After such trial, J&J may, at its sole discretion, further develop PIPE- 307 for patients with multiple sclerosis.

Additionally, upon J&J deciding to conduct a first Phase 3 clinical trial for a product using PIPE- 307, the agreement allows the Company the option to co-fund a portion of all Phase 3 and subsequent development costs for PIPE- 307, with such cost capped annually.

Additionally, upon J&J deciding to conduct a first Phase 3 clinical trial for a product using PIPE- 307, the J&J License Agreement allows the Company the option to co-fund a portion of all Phase 3 and subsequent development costs for PIPE- 307, with such costs capped annually.

If the Company opts to fund such development costs, then the royalties the Company is eligible to receive will increase.

Pursuant to the terms of the agreement, the Company received an upfront, non-refundable and non-creditable payment of $ 50.0 million upon transferring the license and know-how, existing inventory and manufacturing technology.

Pursuant to the terms of the J&J License Agreement, the Company received an upfront, non-refundable and non-creditable payment of $ 50.0 million upon transferring the license and know-how, existing inventory and manufacturing technology.

The Company is also eligible to receive approximately $ 1.0 billion in non-refundable, non-creditable milestone payments.

Additionally, the Company is eligible to receive tiered royalties in the low-double digit to high-teen percent range on net sales of products containing PIPE- 307.

The Company sold approximately 1.7 million shares of series C convertible preferred stock to JJDC, an affiliate of J&J, at $ 15.00 per share, for an aggregate purchase price of approximately $ 25.0 million, in April 2023.

The Company sold approximately 1.7 million shares of series C convertible preferred stock to Johnson & Johnson Innovation - JJDC, Inc., an affiliate of J&J, at $ 15.00 per share, for an aggregate purchase price of approximately $ 25.0 million, in April 2023.

The Company determined that this preferred stock purchase was at fair value as other new investors purchased shares of preferred stock at the same price.

The Company concluded that J&J represented a customer and applied relevant guidance from ASC 606 to evaluate the appropriate accounting for the J&J License Agreement.

The Company evaluated the J&J agreement and concluded that it had promises to transfer a license of functional intellectual property, know-how, existing inventory and manufacturing technology (each of which was determined to be a distinct performance obligation).

The Company evaluated the J&J License Agreement and concluded that it had promises to transfer a license of functional intellectual property, know-how, existing inventory and manufacturing technology (each of which was determined to be a distinct performance obligation).

Control of the promised goods was transferred to J&J in the second quarter of 2023, and the $ 50.0 million upfront payment was recognized in May 2023 upon satisfaction of the performance obligations.

The remaining consideration consists of future contingent milestone-based payments and sales-based royalties.

As of March 31, 2024 , all variable consideration under the J&J License Agreement was fully constrained.

As of June 30, 2024 , all variable consideration under the J&J License Agreement was fully constrained.

In August 2023, the Company elected to conduct a Phase 2 trial using PIPE- 307 for patients with multiple sclerosis, which was considered a contract modification under the accounting guidance that added promised goods or services that are distinct at a price that is below the standalone selling price.

3 unchanged sentences

Accordingly, the variable consideration allocated to the Phase 2 trial will be recognized as the study is completed using a cost-based measure of progress and when the amounts are no longer probable of a significant reversal.

As of March 31, 2024 , no amounts had been recognized related to the Phase 2 trial.

As of June 30, 2024 , no amounts had been recognized related to the Phase 2 trial as no additional variable consideration as been received subsequent to the contract modification.

Net Loss Per Share

The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):

Three Months Ended March 31,

$ ( 8,417 ) $ ( 4,824 )

The following table sets forth the computation of the basic and diluted net income (loss) per share (in thousands, except share and per share amounts):

Three Months Ended June 30,

Six Months Ended June 30,

Numerator, basic:

Net income (loss)

Allocation of earnings to participating preferred stockholders

Net income (loss) applicable to common stockholders

Denominator, basic:

Weighted average common shares issued

2,369,067 2,288,358

weighted average unvested common stock issued upon early exercise of stock options

Weighted average shares used to compute net loss per common share, basic and diluted

2,369,067 2,277,555

Net loss per share, basic and diluted

$ ( 3.55 ) $ ( 2.12 )

The Company’s potentially dilutive securities, which include convertible preferred stock, preferred stock warrants, common stock issued upon early exercise of stock options, common stock subject to repurchase, common stock options, and the investor rights and obligations liability, have been excluded from the computation of diluted net loss per share for the three months ended March 31, 2024 and 2023 as the effect would reduce the net loss per share.

Therefore, the weighted-average number of shares common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The Company excluded the following potential common securities, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

Convertible preferred stock (as converted to common stock)

15,906,273 11,889,698

Weighted average shares used to compute net income (loss) per common share, basic

Numerator, diluted:

Net income (loss) attributable to common stockholders

Change in fair value of put option

Net income (loss) applicable to common stockholders

Denominator, diluted:

Weighted average shares used to compute net income (loss) per common share, diluted

Common stock options

2,881,863 2,201,451

Unvested common stock issued upon early exercise of stock options

Preferred stock warrant (as converted to common stock)

15,764 15,764

18,803,900 14,124,043

Subsequent Events

The Company’s board of directors approved a one -for- 5.5972 reverse stock split of its issued and outstanding common and preferred stock, effective on April 1, 2024.

Accordingly, all share and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the effects of the reverse stock split.

Shares of common stock underlying outstanding stock options and preferred stock warrants were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities.

On April 4, 2024, the Company’s registration statement on Form S- 1 (File No.

333 - 278003 ) relating to its initial public offering (“IPO”) of its common stock was declared effective by the SEC and the shares of its common stock began trading on the Nasdaq Global Select Market (Nasdaq) on April 4, 2024.

The public offering price of the shares sold in the IPO was $ 16.00 per share.

The IPO closed on April 9, 2024, pursuant to which the Company sold 6,875,000 shares of common stock, for gross proceeds of approximately $ 110.0 million.

On April 19, 2024, the underwriters elected to partially exercise the over-allotment option purchasing 548,682 shares for gross proceeds of an additional $ 8.2 million.

Preferred stock put option (common stock issued)

Weighted average shares used to compute net income (loss) per common share, diluted

Net income (loss) per share, basic

Net income (loss) per share, diluted

For the three and six months ended June 30, 2024, net loss is attributable equally to each share of Class A common stock and Class B common stock and is determined based on the weighted average number of the respective class of common stock outstanding.

Weighted-average common shares include shares of the Company's Class A common stock and Class B common stock.

The basic and diluted net loss per share amounts are the same for Class A common stock and Class B common stock.

For the three and six months ended June 30, 2023, there were no shares of Class B common stock outstanding.

The Company’s potentially dilutive securities, which include convertible preferred stock, a common stock warrant, common stock options, common stock reserved under the 2024 ESPP, and a preferred stock warrant have been excluded from the computation of diluted net loss per share for the three and six months ended June 30, 2024 as the effect would reduce the net loss per share.

Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The Company excluded the following potentially dilutive securities, presented based on amounts outstanding at each period end, from the computation of diluted net income (loss) per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

As of June 30,

Convertible preferred stock

Common stock options

Common stock warrant

Unvested common stock issued upon early exercise of stock options

Common stock reserved under the 2024 ESPP

Preferred stock warrant

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

3 unchanged sentences

We use words such as “ may, ” “ will, ” “ expect, ” “ anticipate, ” “ estimate, ” “ intend, ” “ plan, ” “ predict, ” “ potential, ” “ believe, ” “ should ” and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Such statements may include, but are not limited to, statements concerning projections about our accounting and finances, plans and objectives for the future, future operating and economic performance and other statements regarding future performance.

Such statements may include, but are not limited to, statements concerning projections about our accounting and finances, our clinical trial and product development plans and timelines, the indications, anticipated benefits of, and market opportunities for our drug candidates, our operating runway, our business strategies and plans, and other statements regarding future performance.

Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct.

8 unchanged sentences

We completed a Phase 1 clinical trial of PIPE-791 in healthy volunteers in support of clinical development in both IPF and Progressive MS.

We plan to submit a clinical trial application (“CTA”) to the Medicines and Healthcare products Regulatory Agency (“MHRA”) to commence a Phase 1b open-label trial of PIPE-791 to measure the relationship of pharmacokinetics (“PK”) to lung and brain receptor occupancy by positron emission tomography (“PET”) imaging in 2024.

We plan to submit a clinical trial application to the Medicines and Healthcare products Regulatory Agency to commence a Phase 1b open-label trial of PIPE-791 to measure the relationship of pharmacokinetics to lung and brain receptor occupancy by positron emission tomography imaging in 2024.

This Phase 1b trial will inform dose selection for our planned future Phase 2 trials of PIPE-791 in IPF and Progressive MS.

3 unchanged sentences

To our knowledge, PIPE-307 is the most clinically advanced selective M1R antagonist in development.

We are developing PIPE-307 in collaboration with Johnson & Johnson.

We are developing PIPE-307 in collaboration with Johnson & Johnson ("J&J").

In addition, we are leveraging our drug discovery capabilities synergistically with our clinical portfolio.

10 unchanged sentences

Collaboration

In February 2023, we entered into the J&J License Agreement with J&J, pursuant to which we granted J&J an exclusive, worldwide license to develop, manufacture and commercialize PIPE-307 in all indications.

In February 2023, we entered into the license agreement with J&J (the "J&J License Agreement"), pursuant to which we granted J&J an exclusive, worldwide license to develop, manufacture and commercialize PIPE-307 in all indications.

J&J is generally responsible for all development, manufacturing and commercialization activities for PIPE-307.

18 unchanged sentences

Research and Development

Research and development costs consist primarily of costs incurred for the unallocated internal research and development costs:

Research and development expenses consist primarily of costs incurred for our internal research and development activities.

Direct costs include:

employee-related expenses, including salaries, related benefits, travel that can be directly attributable to each research project;

employee-related expenses, including salaries, related benefits, and travel that can be directly attributable to each research project;

expenses incurred in connection with research, laboratory consumables and preclinical studies;

4 unchanged sentences

Unallocated internal research and development costs include:

employee-related expenses, including salaries, related benefits, travel that cannot be directly attributable to a specific research project;

stock-based compensation expenses for employees engaged in research and development functions;

employee-related expenses, including salaries, related benefits, and travel that cannot be directly attributable to a specific research project;

stock-based compensation for employees engaged in research and development functions;

facilities, depreciation and other related expenses.

5 unchanged sentences

Certain employee activities that cannot be allocated to any one specific project or management related activities are considered indirect costs.

The following tables summarize our research and development expenses for the periods ended March 31, 2024 and 2023.

The following tables summarize our research and development expenses for the three and six months ended June 30, 2024 and 2023.

The direct external development program expenses reflect external costs attributable to our clinical development and preclinical programs and personnel costs that can be directly attributed to a development program.

1 unchanged sentence

Three Months Ended

Six Months Ended

(in thousands)

Direct external development program expense

13 unchanged sentences

successful completion of preclinical studies and clinical trials;

delays in regulators or institutional review boards ("IRBs") authorizing us or our investigators to commence or continue our clinical trials;

delays in regulators or institutional review boards authorizing us or our investigators to commence or continue our clinical trials;

our ability to negotiate agreements with clinical trial sites or CROs;

4 unchanged sentences

our ability to receive necessary regulatory approvals from the U.S.

Food and Drug Administration (:FDA") and comparable governmental bodies outside the United States;

Food and Drug Administration and comparable governmental bodies outside the United States;

our decision to elect to fund a portion of Phase 3 and subsequent development costs for PIPE-307;

8 unchanged sentences

Other significant costs include legal fees relating to intellectual property, patent applications, and corporate matters, professional fees for accounting and consulting services and facility-related costs.

We expect our general and administrative expenses will increase for the foreseeable future to support our increased research and development activities, the growth of our business operations and headcount and to reflect increased operating expenses as we begin operating as a public company.

These increased costs will likely include increased expenses related to audit, legal, regulatory services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs.

3 unchanged sentences

Interest Expense

Interest expense consists of (i) interest on our outstanding Loan Agreement with First Citizens, and (ii) amortization of our debt discount associated with our loan and security agreement recorded in connection with the fair value of the warrant issued to First Citizens, the debt issuance costs incurred and the obligation to make a final payment fee.

We repaid all of the outstanding principal on the First Citizens loan as of June 2023.

Interest expense consists of (i) interest on our outstanding loan and security agreement (the "Loan Agreement") with First Citizens Bank ("First Citizens"), and (ii) amortization of our debt discount associated with the Loan Agreement recorded in connection with the fair value of the warrant issued to First Citizens, the debt issuance costs incurred and the obligation to make a final payment fee.

We repaid all of the outstanding principal on the Loan Agreement as of June 2023.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

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

The following table summarizes our results of operations (in thousands) for the periods indicated:

Three Months Ended

License revenue

Operating expenses:

2 unchanged sentences

Total operating expenses

Loss from operations

Income (loss) from operations

Other income (expense):

1 unchanged sentence

Interest expense

Change in fair value of preferred stock warrant liability

Other expense

Change in fair value of warrant liability

Change in fair value of investor rights and obligations liability

Other expense, net

Total other income

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

License revenue.

There was no revenue recognized for the three months ended June 30, 2024.

License revenues were $50.0 million for the three months ended June 30, 2023 and was solely attributable to the upfront payment received from J&J pursuant to the J&J License Agreement.

Research and development expenses .

Research and development expenses were $7.8 million and $3.6 million for the three months ended March 31, 2024 and 2023, respectively.

The increase of $4.2 million was primarily due to a $2.0 million increase in contract research organization costs primarily related to our on-going Phase 2 clinical trial for PIPE-307 for the potential treatment of RRMS and our completed Phase 1 healthy volunteer clinical trial for PIPE-791, a $0.9 million increase in expenses for toxicology studies primarily for PIPE-791 and a $0.6 million increase in personnel-related expenses.

Research and development expenses were $7.9 million and $9.5 million for the three months ended June 30, 2024 and 2023, respectively.

The decrease of $1.6 million was primarily due to $3.0 million of contractual milestone payments paid to our consultants during the three months ended June 30, 2023 upon the receipt of the upfront payment from the J&J License Agreement and a $1.8 million decrease in manufacturing expenses for PIPE-791.

Partially offsetting these decreases was the following:

$1.0 million increase in contract research organization costs related to our on-going Phase 2 clinical trial for PIPE-307 for the potential treatment of RRMS and our completed Phase 1 healthy volunteer clinical trial for PIPE-791,

$1.0 million increase in expenses for toxicology studies primarily for PIPE-791,

$0.5 million increase in personnel-related expense, and

$0.4 million increase in stock-based compensation.

General and administrative expenses .

General and administrative expenses were $2.2 million and $1.5 million for three months ended March 31, 2024 and 2023, respectively.

The increase of $0.7 million was primarily due to a $0.5 million increase in consulting expenses primarily related to an audit completed in accordance with public company audit requirements and $0.1 million increase in personnel-related expenses.

General and administrative expenses were $3.0 million and $1.6 million for the three months ended June 30, 2024 and 2023, respectively.

The increase of $1.4 million was primarily due to a $0.6 million increase in consulting and legal expenses, a $0.6 million increase in stock-based compensation, and a $0.1 million increase in personnel-related expenses.

Interest income .

Interest income was $1.6 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively.

The increase was due to an increase in funds invested in marketable securities starting in the second quarter of 2023 consisting of net proceeds of $60.1 million from the extension of our Series C convertible preferred stock financing and the receipt of $50.0 million upfront payment pursuant to the J&J License Agreement.

We also had an increase in the yields earned on our marketable securities from the three months ended March 31, 2023 to the three months ended March 31, 2024.

Interest income was $2.0 million and $0.7 million for the three months ended June 30, 2024 and 2023, respectively.

The increase was due to an increase in funds invested in marketable securities and an increase in the yields earned on our marketable securities from the three months ended June 30, 2023 to the three months ended June 30, 2024.

Change in fair value of investor rights and obligations liability.

During the three months ended June 30, 2023, we recognized a $2.9 million gain related to the decrease in fair value of our investor rights and obligations liability as a result of reducing the Series B convertible preferred stock premium liability to zero.

This was the result of the termination of certain rights due to the change in a specified limited partner’s status in May 2023.

Provision for income taxes .

For the three months ended June 30, 2024, the Company did not record a U.S.

federal or state income tax provision due to forecasted pretax operating losses for the year ended December 31, 2024.

For the three months ended June 30, 2023, the Company recorded a tax expense of $0.7 million on pretax income of $42.3 million.

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes our results of operations (in thousands) for the periods indicated:

Six Months Ended

License revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

Income (loss) from operations

Other income (expense):

Interest income

Interest expense

Change in fair value of warrant liability

Change in fair value of investor rights and obligations liability

Other expense, net

Total other income

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

License revenue .

There was no revenue recognized for the six months ended June 30, 2024.

License revenues were $50.0 million for the six months ended June 30, 2023 and was solely attributable to the upfront payment from J&J pursuant to the J&J License Agreement.

Research and development expenses .

Research and development expenses were $15.7 million and $13.1 million for the six months ended June 30, 2024 and 2023, respectively.

The increase of $2.6 million was primarily due to a $3.0 million increase in contract research organization costs primarily related to our on-going Phase 2 clinical trial for PIPE-307 for the potential treatment of RRMS and our completed Phase 1 healthy volunteer clinical trial for PIPE-791, a $1.9 million increase in expenses for toxicology studies primarily for PIPE-791, a $1.1 million increase in personnel-related expense, and a $0.5 million increase in stock-based compensation.

Partially offsetting these increases was the following:

$2.9 million of contractual milestone payments paid to our consultants during the six months ended June 30, 2023 upon the receipt of the upfront payment from the J&J License Agreement and a $1.7 million decrease in manufacturing expenses for PIPE-791.

General and administrative expenses .

General and administrative expenses were $5.2 million and $3.1 million for the six months ended June 30, 2024 and 2023, respectively.

The increase of $2.1 million was primarily due to a $1.1 million increase in consulting and legal expenses, a $0.7 million increase in stock-based compensation, and a $0.2 million increase in personnel-related expenses.

Interest income .

Interest income was $3.6 million and $1.1 million for the six months ended June 30, 2024 and 2023, respectively.

The increase was due to an increase in funds invested in marketable securities and an increase in the yields earned on our marketable securities from the six months ended June 30, 2023 to the six months ended June 30, 2024.

Change in fair value of investor rights and obligations liability.

We recognized a $2.9 million gain related to the decrease in fair value of our investor rights and obligations liability for the six months ended June 30, 2023 as a result of reducing the Series B convertible preferred stock premium liability to zero.

This was the result of the termination of certain rights due to the change in a specified limited partner’s status in May 2023.

Provision for income taxes .

For the six months ended June 30, 2024, the Company did not record a U.S.

federal or state income tax provision due to forecasted pretax operating losses for the year ended December 31, 2024.

For the six months ended June 30, 2023, the Company recorded a tax expense of $0.7 million on pretax income of $37.5 million.

Liquidity and Capital Resources

2 unchanged sentences

We expect to incur substantial expenditures as we advance our drug candidates through clinical development, undergo the regulatory approval process, engage in other research and development activities to expand our pipeline of drug candidates, expand our operations and headcount, maintain and expand our intellectual property portfolio and, if we obtain approval for one or more of our drug candidates, launch commercial activities.

Specifically, in the near term we expect to incur substantial expenses relating to completing our clinical trials and our other product development activities.

Through March 31, 2024, we have funded our operations primarily through the issuance of convertible promissory notes, the private placements of our convertible preferred stock, the J&J License Agreement, and our term loan facility with First Citizens.

Through March 31, 2024, we have raised gross proceeds of approximately $194.0 million from the issuance of our convertible preferred stock and promissory notes and have received an upfront payment from the J&J License Agreement of $50.0 million.

Our cash equivalents are held in money market funds and marketable securities.

At March 31, 2024, we had an accumulated deficit of $83.6 million.

In April 2024, we raised an additional $108.0 million in net proceeds from the initial public offering of our shares of Class A common stock (“IPO”).

We expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations, director and officer insurance and other expenses that we did not incur as a private company.

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $117.9 million.

Management believes our existing cash, cash equivalents and marketable securities and proceeds received from our IPO will be sufficient to support our operations for at least 12 months from the date of this Quarterly Report on Form 10-Q.

We also expect to incur additional costs associated with our operating as a public company, including significant legal, accounting, investor relations, director and officer insurance, and other expenses that we did not incur as a private company.

Through June 30, 2024, we have funded our operations primarily through the issuance of convertible promissory notes, the private placements of our convertible preferred stock, the J&J License Agreement, our Loan Agreement with First Citizens, and net proceeds from our initial public offering ("IPO").

Through June 30, 2024, we have raised gross proceeds of approximately $194.0 million from the issuance of our convertible preferred stock and promissory notes and have received an upfront payment from the J&J License Agreement of $50.0 million.

Upon the closing of the IPO, the Company’s outstanding convertible preferred stock automatically converted into Class A common stock or Class B common stock, as applicable.

In April 2024, we raised approximately $107.9 million in net proceeds from the IPO of our shares of Class A common stock.

As of June 30, 2024, we had an accumulated deficit of $92.6 million.

As of June 30, 2024, we had cash, cash equivalents and marketable securities of $218.7 million.

Management believes our existing cash, cash equivalents, and marketable securities will be sufficient to support our operations for at least 12 months from the date of this Quarterly Report on Form 10-Q.

As we continue to pursue our business plan, we expect to finance our operations through both public and private sales of equity, debt financings or other commercial arrangements, which could include milestone payments from collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements with third parties.

2 unchanged sentences

Further, if we raise funds through licensing or other commercial arrangements with third parties, we may be required to relinquish valuable rights to our technology, future revenue streams, research programs or drug candidates or may be required to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock.

The following table sets forth a summary of our cash flows for the period indicated (in thousands):

Three Months Ended

Net cash used in operating activities

Net cash provided by investing activities

Net cash used in financing activities

The following table sets forth a summary of our cash flows for the periods indicated (in thousands):

Six Months Ended

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

Operating Activities

Net cash used in operating activities was $8.0 million and $5.2 million for the three months ended March 31, 2024 and 2023, respectively.

The net cash used in operating activities for the three months ended March 31, 2024 was primarily due to our net loss of $8.4 million, partially offset by $0.1 million of non-cash charges such as stock-based compensation, depreciation and amortization, amortization of premiums/discounts on marketable securities and amortization of right-of-use assets and a $0.3 million change in operating assets and liabilities.

The net cash used in operating activities for the three months ended March 31, 2023 was primarily due to our net loss of $4.8 million and a $1.0 million change in operating assets and liabilities, partially offset by $0.6 million of non-cash charges such as stock-based compensation, depreciation and amortization, amortization of premiums/discounts on marketable securities, amortization of debt discount, amortization of right-of-use assets.

Net cash used in operating activities was $16.5 million for the six months ended June 30, 2024, which primarily related to our net loss of $17.4 million and $0.1 million change in operating assets and liabilities, partially offset by $0.8 million of non-cash charges such as stock-based compensation, depreciation and amortization, accretion of premiums/discounts on investments, and non-cash operating lease expense.

Net cash provided by operating activities was $35.4 million for the six months ended June 30, 2023, which primarily related to our net income of $36.7 million from the J&J Licensing Agreement, $0.9 million of non-cash charges such as accretion of debt discount and debt issuance costs, stock-based compensation, depreciation and amortization, accretion of premiums/discounts on investments, and non-cash operating lease expense, and $0.6 million change in operating assets and liabilities.

Investing Activities

Net cash provided by investing activities was $8.7 million for the three months ended March 31, 2024, which primarily consisted of $39.5 million of sales and maturities of marketable securities, partially offset by $30.7 million of purchases of marketable securities and $0.1 million of purchases of property and equipment.

Net cash provided by investing activities was $9.4 million for the three months ended March 31, 2023, which primarily consisted of $18.6 million of proceeds from sales and maturities of marketable securities, partially offset by $9.2 million of purchases of marketable securities.

Net cash used in investing activities was $30.2 million for the six months ended June 30, 2024, which primarily related to $99.6 million of purchases of marketable securities and $0.3 million of purchases of property and equipment, partially offset by $69.7 million of sales and maturities of marketable securities.

Net cash used in investing activities was $35.1 million for the six months ended June 30, 2023, which primarily related to $67.8 million of purchases of marketable securities and $0.1 million of purchases of property and equipment, partially offset by $32.8 million of sales and maturities of marketable securities.

Financing Activities

Net cash used in financing activities was approximately $18,000 for the three months ended March 31, 2024, primarily due to payment of deferred offering costs offset by proceeds from the exercise of stock options.

Net cash used in financing activities was $0.6 million for the three months ended March 31, 2023, primarily due to principal payments on the term loan of $0.6 million.

Net cash provided by financing activities was $108.3 million for the six months ended June 30, 2024, which primarily related to $108.2 million of net proceeds from the issuance of common stock in the Company's IPO and $0.1 million of proceeds from the exercise of stock options.

Net cash provided by financing activities was $46.2 million for the six months ended June 30, 2023, which primarily related to $49.9 million of net proceeds from the issuance of Series C convertible preferred stock, partially offset by $3.8 million of principal payments on debt.

Funding Requirements

We expect our operating expenses to significantly increase as we continue to develop and seek regulatory approvals for our drug candidates, engage in other research and development activities to expand our pipeline of drug candidates, expand our operations and headcount, maintain and expand our intellectual property portfolio, and, if we obtain approval for one or more of our drug candidates, launch commercial activities.

Management believes our existing cash, cash equivalents and marketable securities and proceeds received from the IPO will be sufficient to support our operations for at least 12 months from the date of this Quarterly Report on Form 10-Q.

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 our actual results could vary materially.

22 unchanged sentences

Our contractual obligations and commitments relate to our operating leases that relate primarily to our leases of office and laboratory space in San Diego, California.

Our total contractual commitments for our lease agreements amount to approximately $7.8 million as of March 31, 2024.

Our total contractual commitments for our lease agreements amount to approximately $7.6 million as of June 30, 2024.

We enter into contracts in the normal course of business for contract research services, contract manufacturing services, professional services and other services and products for operating purposes.

7 unchanged sentences

On an ongoing basis, our actual results may differ significantly from our estimates.

There have been no material changes to our critical accounting estimates from those described under our “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” included in our Prospectus, except that from the effectiveness date of our registration statement on Form S-1 (File No.

There have been no material changes to our critical accounting estimates from those described under our “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgements and Estimates” included in our Prospectus, except that from the effectiveness date of our registration statement on Form S-1 (File No.

333-278003), our common stock is publicly traded and we therefore no longer require common stock valuations.

3 unchanged sentences

We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

We will remain an emerging growth company until the earlier of (i) December 31, 2029, the last day of the fiscal year following the fifth anniversary of the completion of our IPO, (ii) the last day of the fiscal year (a) in which we have total annual gross revenue of at least $1.235 billion or (b) in which we are deemed to be a large accelerated filer, which means the market value of our voting and non-voting common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th and (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We will remain an emerging growth company until the earlier of (i) December 31, 2029, the last day of the fiscal year following the fifth anniversary of the completion of the Company's IPO, (ii) the last day of the fiscal year (a) in which we have total annual gross revenue of at least $1.235 billion or (b) in which we are deemed to be a large accelerated filer, which means the market value of our voting and non-voting common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

2 unchanged sentences

We have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter.

Recently Issued Accounting Pronouncements

See Note 2 to our financial statements for recently issued accounting pronouncements.

Quantitative and Qualitative Disclosures About Market Risk.

1 unchanged sentence

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 1. Financial Statements