Erasca, Inc. 10-Q

Item 2 . Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2024, included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 20, 2025. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned preclinical studies and planned clinical trials for our product candidates, the timing and likelihood of regulatory filings and approvals for our product candidates, our ability to commercialize our product candidates, if approved, the impact of global geopolitical and economic events and war on our business, the pricing and reimbursement of our product candidates, if approved, the potential to develop future product candidates, the potential benefits of current and future licenses, acquisitions, and strategic arrangements with third parties, and our intent to enter into any future strategic arrangements, the timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated product development efforts, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “expect,” “intend,” "target," “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other similar expressions. These forward-looking statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. Overview We are a clinical-stage precision oncology company singularly focused on discovering, developing, and commercializing therapies for patients with RAS/MAPK pathway-driven cancers. Molecular alterations in RAS, the most frequently mutated oncogene, and the MAPK pathway, one of the most frequently altered signaling pathways in cancer, account for more than five million new patients diagnosed with cancer globally each year. Our company was co-founded by leading pioneers in precision oncology and RAS targeting to create novel therapies and combination regimens designed to comprehensively shut down the RAS/MAPK pathway for the treatment of patients with cancer. Our focused RAS/MAPK pipeline comprises modality-agnostic programs aligned with our three therapeutic strategies of: (1) targeting key upstream and downstream signaling nodes in the RAS/MAPK pathway; (2) targeting RAS directly; and (3) targeting escape routes that emerge in response to treatment. 22 The following figure shows the RAS/MAPK pathway and how the three therapeutic strategies listed above attempt to comprehensively and synergistically shut down the RAS/MAPK pathway. Our pipeline enables us to pursue a systematic, data-driven, portfolio-wide clinical development effort to identify therapeutic approaches with the goal of prolonging survival in numerous patient populations with high unmet medical needs. Our modality-agnostic approach aims to allow us to selectively and potently target critical signaling nodes with the most appropriate modality, including small and large molecule therapeutics. Our purpose-built pipeline includes three clinical-stage programs (naporafenib, a pan-RAF inhibitor; ERAS-0015, a pan-RAS molecular glue; and ERAS-4001, a pan-KRAS inhibitor), and ERAS-12, a discovery-stage program (an EGFR D2/D3 biparatopic antibody). We believe our world-class team’s capabilities and experience, further guided by our scientific advisory board, which includes the world’s leading experts in the RAS/MAPK pathway, uniquely position us to achieve our bold mission of erasing cancer. We in-licensed our RAS-targeting franchise in May 2024. The RAS targeting landscape can be divided into pan-RAS, pan-KRAS, and mutant-selective approaches. We believe pan-RAS and pan-KRAS targeting molecules can address a broad population of patients with G12X, G13X, and possibly Q61X mutations, and also have the potential to address or prevent resistance by blocking wildtype RAS activation. 23 ERAS-0015 is a potential best-in-class pan-RAS molecular glue in development for the treatment of patients with RAS-mutated solid tumors. In vitro, ERAS-0015 has shown approximately 8-21 times higher binding affinity to cyclophilin A versus the most advanced pan-RAS molecular glue in development. We believe this higher binding affinity results in approximately 5 times more potent RAS inhibition than the comparator that has been demonstrated in cell-based assays. ERAS-0015 also has favorable absorption, distribution, metabolism and excretion (ADME) and PK properties in multiple animal species. As a result of these favorable in vitro potency and ADME/PK attributes, ERAS-0015 has demonstrated comparable to greater in vivo antitumor activity at doses which are approximately one-tenth to one-eighth of the dose of the most advanced pan-RAS molecular glue. In combination with an anti-PD-1 antibody, ERAS-0015 was able to achieve complete disappearance of tumors in mice on day 31. The combination of ERAS-0015 plus the anti-EGFR antibody cetuximab induced significant tumor growth inhibition and demonstrated the combination benefit of blocking both oncogenic drivers. The initial clinical trial for ERAS-0015 is AURORAS-1. The investigational new drug application (IND) for AURORAS-1 was cleared by the US Food and Drug Administration (FDA) in May 2025. We anticipate a Phase 1 monotherapy data readout from the AURORAS-1 trial in 2026. ERAS-4001 is a potential first-in-class pan-KRAS inhibitor in development for the treatment of patients with KRAS-mutated solid tumors. The preclinical in vitro potency of ERAS-4001 showed good activity against KRAS G12X mutations, as well as KRAS wildtype amplifications, with no activity observed against HRAS or NRAS wildtype proteins. We believe sparing wildtype HRAS and NRAS has the potential to provide a wider therapeutic window in the clinic. ERAS-4001 demonstrated activity against both GDP-bound (“inactive state”) and GTP-bound (“active state”) KRAS G12D with single digit nanomolar IC 50 (a measure of the drug concentration needed to achieve half-maximal inhibition) values in a biochemical RAS – RAF1 RBD (RAS Binding Domain) assay. In vivo, ERAS-4001 showed tumor regression in multiple models when administered as a monotherapy. In combination with an anti-PD-1 antibody, ERAS-4001 was able to achieve complete disappearance of tumors in mice on day 31. The combination of ERAS-4001 plus the anti-EGFR antibody cetuximab induced significant tumor growth inhibition and demonstrated the combination benefit of blocking both oncogenic drivers. The initial clinical trial for ERAS-4001 is BOREALIS-1. The IND for BOREALIS-1 was cleared by the FDA in May 2025. We anticipate a Phase 1 monotherapy data readout from the BOREALIS-1 trial in 2026. We believe ERAS-0015 has the potential to address unmet medical needs in approximately 2.7 million patients who are diagnosed annually worldwide with RAS-mutant tumors, including the more than 2.2 million patients with KRAS-mutant tumors whom ERAS-4001 could also address. Our latest clinical stage product candidate is naporafenib, for which we initiated two trials to evaluate the naporafenib plus trametinib (MEKINIST) combination (neither of which is enrolling patients currently), the SEACRAFT-2 pivotal Phase 3 trial for patients with NRAS-mutated (NRASm) melanoma and the SEACRAFT-1 Phase 1b trial for patients with RAS Q61X solid tumors. Naporafenib is a pan-RAF inhibitor with first-in-class and best-in-class potential for patients with NRASm melanoma and other RAS/MAPK pathway-driven tumors. RAF proteins are ubiquitously expressed serine-threonine kinases that constitute a key node of the RAS/MAPK pathway downstream of RAS and upstream of MEK. The RAF protein family consists of ARAF, BRAF, and CRAF (RAF1) that are activated through dimerization. Mutations in RAF proteins have been observed in many cancers, such as melanoma, colorectal cancer (CRC), non-small cell lung cancer (NSCLC), and thyroid cancer. We in-licensed naporafenib from Novartis Pharma AG (Novartis) in December 2022. Naporafenib has been dosed in over 600 patients to date, whereby safety, tolerability, and acceptable pharmacokinetics (PK) and pharmacodynamics have been established in both monotherapy and select combinations, with clinical proof-of-concept (PoC) data in combination with trametinib for patients with NRASm melanoma, which includes NRAS Q61X melanoma. In December 2023, we announced that the FDA granted Fast Track Designation (FTD) to naporafenib in combination with trametinib for the treatment of adult patients with unresectable or metastatic melanoma who have progressed on, or are intolerant to, an anti‑programmed death-1 (ligand 1) (PD‑(L)1)-based regimen, and whose tumors contain an NRAS mutation. Programs that receive FTD may benefit from early and frequent interactions with the FDA during the clinical development process and, if relevant criteria are met, the FDA may consider reviewing portions of a marketing application before the sponsor submits the complete application. In connection with our SEACRAFT-2 trial, we have entered into a clinical trial collaboration and supply agreement (CTCSA) with Novartis for its MEK inhibitor, trametinib. Pursuant to the CTCSA, we are sponsoring and funding the clinical trial and Novartis is providing its drug to us free of charge. In addition, we are evaluating additional combinations of naporafenib with our other RAS/MAPK pathway targeting agents and/or external agents in preclinical models. 24 On October 24, 2024, we announced preliminary data from our SEACRAFT-1 trial in an oral presentation at the 36th EORTC-NCI-AACR (ENA) Symposium. The preliminary clinical activity of naporafenib plus trametinib in the melanoma cohort of SEACRAFT-1 include, as of the efficacy cutoff date*: • 40% (4/10) response rate observed in the efficacy-evaluable patients with NRAS Q61X melanoma, including three confirmed partial responses and one unconfirmed partial response; the melanoma cohort in SEACRAFT-1 is generally representative of the patient population currently being enrolled in the pivotal SEACRAFT-2 trial • 70% (7/10) of patients remained on treatment as of the data cutoff, including all four responders In addition, we reported that naporafenib plus trametinib was generally well tolerated as of the safety cutoff date*, with mostly low-grade adverse events in the majority of patients. We believe that the use of mandatory primary rash prophylaxis helped reduce the frequency and severity of skin toxicities, reduced the drug discontinuation rate due to skin-related adverse events, and improved the observed tolerability results as measured by the increased relative dose intensity, as compared to the prior clinical trials of naporafenib plus trametinib conducted by Novartis, which did not include the use of mandatory primary rash prophylaxis. * Efficacy data cutoff date was September 5, 2024. Safety data cutoff date was September 3, 2024. In May 2025, in connection with our expectation that ERAS-0015 and ERAS-4001 would both become clinical stage programs, we conducted a strategic pipeline review. Following this review, in order to prioritize organizational focus and resources to rapidly advance our differentiated RAS-targeting franchise, we decided to evaluate strategic alternatives for the Stage 2 portion of the naporafenib Phase 3 trial, including pursuing potential partnership opportunities. As a result of this decision, we will not read out data from Stage 1 of the SEACRAFT-2 trial in the second half of 2025. Our next program is ERAS-12, our investigational EGFR D2/D3 biparatopic antibody (bpAb). ERAS-12 is a potential best-in-class biologic that is designed to inhibit EGFR through multiple proposed mechanisms of action. In tumors where EGFR signaling is thought to be a primary driver of tumor growth, an antibody-based approach has been shown to be an effective way to target the receptor. However, all approved anti-EGFR antibodies target domain III (D3) only, which is the main site for ligand binding, and no approved antibodies target domain II (D2), which is responsible for dimerization of EGFR upon ligand binding. Binding of D2 prevents both EGFR homodimerization as well as heterodimerization. We believe the combined binding of D2 and D3 could result in differentiated and improved inhibition of downstream EGFR signaling. ERAS-12 also aims to exploit the innate immune system to induce tumor cell apoptosis. The Fragment crystallizable (Fc) region of IgG1 antibodies contain binding spots for both immune effector cells (e.g., NK cells) and the classical complement component C1q. By combining novel cell signal inhibition with enhancements to the Fc, we aim to create a potent multi-modal BIC anti-EGFR biologic which we believe could function as a targeted therapy with immunomodulatory activity. We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates obtain marketing approval. We are working with our current manufacturers to ensure that we will be able to scale up our manufacturing capabilities to support our clinical plans. We are also in the process of locating and qualifying additional manufacturers to build redundancies into our supply chain. In addition, we rely on third parties to package, label, store, and distribute our product candidates, and we intend to continue to rely on third parties with respect to our commercial products if marketing approval is obtained. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the design and development of our product candidates. In December 2022, we completed the sale and issuance of 15,384,616 shares of our common stock at a price to the public of $6.50 per share (the 2022 Offering). Proceeds from the 2022 Offering were $94.9 million, net of underwriting discounts and commissions and offering costs of $5.1 million. In March 2024, we entered into a stock purchase agreement with the purchasers named therein for the private placement of 21,844,660 shares of our common stock at a price of $2.06 per share, which closed on April 2, 2024 (the 2024 Private Placement). Proceeds from the 2024 Private Placement were $43.6 million, after deducting placement agent fees and expenses of approximately $1.4 million. In May 2024, we completed the sale and issuance of 99,459,458 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 12,972,972 shares of our common stock, at a price to the public of $1.85 per share (the 2024 Offering). Proceeds from the 2024 Offering were $174.4 million, net of underwriting discounts and commissions and offering costs of $9.6 million. 25 In August 2022, we entered into an Open Market Sale Agreement (the Sale Agreement) with Jefferies LLC (the Agent), pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $200 million from time to time, in an “at-the-market offering” (ATM Offering) through the Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. Pursuant to the Sale Agreement, the Agent will receive a commission from us of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sale Agreement. During the year ended December 31, 2024, we sold 9,231,114 shares of our common stock under the Sale Agreement at a weighted-average price of $2.37 per share. Proceeds from the ATM Offering during the year ended December 31, 2024 were $21.0 million, net of commissions and expenses of $0.8 million. No shares of our common stock were sold under the Sale Agreement during the three and six months ended June 30, 2025 and 2024. As of June 30, 2025, we had $178.1 million of shares available for sale under the ATM program. Since our inception in 2018, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, identifying, acquiring, and in-licensing our product candidates, establishing our intellectual property portfolio, conducting research, preclinical studies and clinical trials, establishing arrangements with third parties for the manufacture of our product candidates and related raw materials, and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue. As of June 30, 2025, we have raised a total of $1.0 billion to fund our operations, comprised primarily of gross proceeds from our IPO, underwritten offerings, a private placement of our common stock and the sale and issuance of convertible preferred stock. As of June 30, 2025, we had cash, cash equivalents and marketable securities of $386.7 million. We have incurred significant operating losses since inception. Our net losses were $33.9 million and $63.2 million for the three months ended June 30, 2025 and 2024, respectively, and $64.8 million and $98.2 million for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, we had an accumulated deficit of $832.5 million. We expect our expenses and operating losses will increase substantially for the foreseeable future, particularly if and as we conduct our ongoing and planned clinical trials and preclinical studies; continue our research and development activities; utilize third parties to manufacture our product candidates and related raw materials; hire additional personnel; acquire, in-license, or develop additional product candidates; expand and protect our intellectual property; and incur additional costs associated with being a public company. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. In addition, as our product candidates progress through development and toward commercialization, we will need to make milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and preclinical studies and our expenditures on other research and development activities. Based upon our current operating plans, we believe that our cash, cash equivalents and marketable securities as of June 30, 2025 will be sufficient to fund our operations into the second half of 2028. We do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and may never occur. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses, and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce, or terminate our research and development programs or other operations, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our financial condition and results of operations may also be impacted by other factors we may not be able to control, such as geopolitical and economic events. We do not believe that such factors had a material adverse impact on our results of operations during the three months ended June 30, 2025. 26 Our acquisition and license agreements We have entered into in-license and acquisition agreements pursuant to which we in-licensed or acquired certain intellectual property rights related to our product candidates and development programs. Katmai Pharmaceuticals, Inc. In May 2024, we announced a strategic reprioritization which included deprioritizing our THUNDERBBOLT-1 clinical trial evaluating ERAS-801 in patients with recurrent glioblastoma. In April 2025, we entered into a Termination Agreement (the Katmai Termination Agreement) with Katmai Pharmaceuticals, Inc. (Katmai). The Katmai Termination Agreement terminated the license agreement, dated March 12, 2020, between us and Katmai in which we obtained an exclusive worldwide license from Katmai to develop and commercialize ERAS-801 (the Katmai License Agreement). Pursuant to the Katmai Termination Agreement, the Katmai License Agreement was terminated as of April 1, 2025. Under the Katmai Termination Agreement, we assigned to Katmai certain know-how, intellectual property rights, third-party vendor agreements, regulatory filings, and materials that we developed in connection with the development of ERAS-801 under the Katmai License Agreement, and Katmai is obligated to make payments to us upon the occurrence of specific events related to Katmai’s future development and commercialization of ERAS-801. In addition, we provided certain transition services to Katmai for a 90-day period, for which Katmai is obligated to reimburse us for our internal costs related to such services. For additional information regarding our other in-license and acquisition agreements, see the section titled “Business—Our acquisition and license agreements” in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 20, 2025. Components of results of operations Revenue We do not expect to generate any revenue from the sale of products unless and until such time that our product candidates have advanced through clinical development and obtained regulatory approval, if ever. If we fail to complete preclinical and clinical development of product candidates or obtain regulatory approval for them, our ability to generate future revenues, and our results of operations and financial position would be adversely affected. Operating expenses Research and development Research and development expenses consist of external and internal costs associated with our research and development activities, including our discovery and research efforts and the preclinical and clinical development of our product candidates. Research and development costs are expensed as incurred. Our research and development expenses include: • external costs, including expenses incurred under arrangements with third parties, such as contract research organizations (CROs), contract manufacturing organizations (CMOs), consultants and our scientific advisors; and • internal costs, including: • employee-related expenses, including salaries, benefits, and stock-based compensation for those individuals involved in research and development efforts; • the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study materials; and • facilities and depreciation, which include direct and allocated expenses for rent of facilities and depreciation. 27 The following table summarizes our research and development expenses incurred for the following periods (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 ERAS-0015 (1) $ 5,283 $ 8 $ 11,827 $ 8 ERAS-4001 (1) 4,013 793 8,024 793 Naporafenib 8,085 13,538 18,682 26,507 Other clinical programs — — — 7,047 Other discovery and preclinical programs 3,789 18,693 8,606 27,251 Total research and development expenses $ 21,170 $ 33,032 $ 47,139 $ 61,606 (1) We in-licensed ERAS-0015 and ERAS-4001 in May 2024. We expect our research and development expenses to increase substantially for the foreseeable future as we continue to conduct our ongoing research and development activities, conduct clinical trials and advance our preclinical research programs toward clinical development, particularly as more of our product candidates move into later stages of development, which typically cost more. The process of conducting clinical trials and preclinical studies necessary to obtain regulatory approval is costly and time-consuming. We may never succeed in achieving marketing approval for any of our product candidates. The timelines and costs with research and development activities are uncertain, can vary significantly for each product candidate and program and are difficult to predict. We anticipate we will make determinations as to which product candidates and programs to pursue and how much funding to direct to each product candidate and program on an ongoing basis in response to preclinical and clinical results, regulatory developments, ongoing assessments as to each product candidate’s and program’s commercial potential, and our ability to enter into collaborations, licenses, or other similar agreements to the extent we determine the resources or expertise of a third-party would be beneficial for a given product candidate or program. We will need to raise substantial additional capital in the future. In addition, we cannot forecast which product candidates and programs may be subject to future collaborations, licenses, or other agreements, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. Our development costs may vary significantly based on factors such as: • the number and scope of preclinical and IND-enabling studies and clinical trials; • per patient trial costs; • the number of trials required for approval; • the number of sites included in the trials; • the countries in which the trials are conducted; • the length of time required to enroll eligible patients; • the number of patients that participate in the trials; • the number of doses that patients receive; • the drop-out or discontinuation rates of patients; • potential additional safety monitoring requested by regulatory agencies; • the duration of patient participation in the trials and follow-up; • the cost and timing of manufacturing our product candidates; • the phase of development of our product candidates; • the efficacy and safety profile of our product candidates; 28 • the timing, receipt and terms of any approvals from applicable regulatory authorities; • maintaining a continued acceptable safety profile of our products following approval, if any; • significant and changing government regulation and regulatory guidance; • the impact of any interruptions to our operations or to those of third parties with whom we work due to geopolitical and economic events; and • the extent to which we establish additional collaboration, license or other arrangements. In-process research and development In-process research and development expenses include rights acquired as part of asset acquisitions or in-licenses to develop and commercialize product candidates. Upfront payments that relate to the acquisition of a new product candidate, as well as pre-commercial milestone payments, are immediately expensed as in-process research and development in the period in which they are incurred, provided that the new product candidate did not also include processes or activities that would constitute a “business” as defined under US generally accepted accounting principles (US GAAP), the product candidate has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use. In-process research and development expenses consist primarily of our upfront payments, milestone payments, and our stock issuances in connection with our acquisition and in-license agreements. General and administrative General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation, for employees in our finance, accounting, legal, information technology, business development and support functions. Other general and administrative expenses include allocated facility and depreciation related costs not otherwise included in research and development expenses and professional fees for auditing, tax, intellectual property and legal services. Costs related to filing and pursuing patent applications are recognized as general and administrative expenses as incurred since recoverability of such expenditures is uncertain. We expect our general and administrative expenses will increase substantially for the foreseeable future as we continue to increase our general and administrative headcount to support our continued research and development activities and, if any product candidates receive marketing approval, commercialization activities, as well as to support our operations generally. Other income (expense), net Interest income Interest income consists primarily of interest earned on our cash, cash equivalents and marketable securities. 29 Results of operations Comparison of the three months ended June 30, 2025 and 2024 The following table summarizes our results of operations for the three months ended June 30, 2025 and 2024 (in thousands): Three Months Ended June 30, 2025 2024 Change Operating expenses: Research and development $ 21,170 $ 33,032 $ (11,862 ) In-process research and development 7,500 22,500 (15,000 ) General and administrative 9,455 12,250 (2,795 ) Total operating expenses 38,125 67,782 (29,657 ) Loss from operations (38,125 ) (67,782 ) 29,657 Total other income (expense), net 4,249 4,581 (332 ) Net loss $ (33,876 ) $ (63,201 ) $ 29,325 Research and development expenses Research and development expenses were $21.2 million for the three months ended June 30, 2025 compared to $33.0 million for the three months ended June 30, 2024. The decrease of $11.9 million was primarily driven by an impairment charge of $3.0 million on operating lease assets, leasehold improvements, and furniture related to the sublease plan of the first floor of our San Diego facility during the three months ended June 30, 2024, and decreases of $2.5 million in personnel costs, including stock-based compensation expense, $2.4 million in outsourced services and consulting fees, $2.3 million in expenses incurred in connection with clinical trials, preclinical studies and discovery activities, and $1.2 million in facilities-related expenses and depreciation. In-process research and development expenses In-process research and development expenses were $7.5 million for the three months ended June 30, 2025 compared to $22.5 million for the three months ended June 30, 2024. In-process research and development expenses for the three months ended June 30, 2025 were related to the achievement of milestones in connection with our license agreement with Joyo. In-process research and development expenses for the three months ended June 30, 2024 were related to upfront payments in connection with our license agreements with Joyo and Medshine. General and administrative expenses General and administrative expenses were $9.5 million for the three months ended June 30, 2025 compared to $12.3 million for the three months ended June 30, 2024. The decrease of $2.8 million was primarily driven by an impairment charge of $1.7 million on operating lease assets, leasehold improvements, and furniture related to the sublease plan of the first floor of our San Diego facility during the three months ended June 30, 2024, and decreases of $0.5 million in legal fees, $0.2 million in insurance costs, and $0.2 million in facilities and office-related expenses. Other income (expense), net Other income (expense), net was $4.2 million for the three months ended June 30, 2025 compared to $4.6 million for the three months ended June 30, 2024. The decrease of $0.3 million was primarily related to a decrease in interest earned on our cash, cash equivalents and marketable securities of $0.7 million, partially offset by a $0.4 million impairment charge on our investment in equity securities during the three months ended June 30, 2024. 30 Comparison of the six months ended June 30, 2025 and 2024 The following table summarizes our results of operations for the six months ended June 30, 2025 and 2024 (in thousands): Six Months Ended June 30, 2025 2024 Change Operating expenses: Research and development $ 47,139 $ 61,606 $ (14,467 ) In-process research and development 7,500 22,500 (15,000 ) General and administrative 19,116 22,527 (3,411 ) Total operating expenses 73,755 106,633 (32,878 ) Loss from operations (73,755 ) (106,633 ) 32,878 Total other income (expense), net 8,913 8,415 498 Net loss $ (64,842 ) $ (98,218 ) $ 33,376 Research and development expenses Research and development expenses were $47.1 million for the six months ended June 30, 2025 compared to $61.6 million for the six months ended June 30, 2024. The decrease of $14.5 million was primarily driven by decreases of $3.8 million in personnel costs, including stock-based compensation expense, $3.0 million in expenses incurred in connection with clinical trials, preclinical studies and discovery activities, $2.5 million in outsourced services and consulting fees, and $1.7 million in facilities-related expenses and depreciation, and an impairment charge of $3.0 million on operating lease assets, leasehold improvements, and furniture related to the sublease plan of the first floor of our San Diego facility during the six months ended June 30, 2024. In-process research and development expenses In-process research and development expenses were $7.5 million for the six months ended June 30, 2025 compared to $22.5 million for the six months ended June 30, 2024. In-process research and development expenses for the six months ended June 30, 2025 were related to the achievement of milestones in connection with our license agreement with Joyo. In-process research and development expenses for the six months ended June 30, 2024 were related to upfront payments in connection with our license agreements with Joyo and Medshine. General and administrative expenses General and administrative expenses were $19.1 million for the six months ended June 30, 2025 compared to $22.5 million for the six months ended June 30, 2024. The decrease of $3.4 million was primarily driven by an impairment charge of $1.7 million on operating lease assets, leasehold improvements, and furniture related to the sublease plan of the first floor of our San Diego facility during the six months ended June 30, 2024, and decreases of $1.0 million in legal fees, $0.4 million in facilities and office-related expenses, and $0.3 million in insurance costs. Other income (expense), net Other income (expense), net was $8.9 million for the six months ended June 30, 2025 compared to $8.4 million for the six months ended June 30, 2024. The increase of $0.5 million was primarily related to a $0.4 million impairment charge on our investment in equity securities during the six months ended June 30, 2024 and an increase in interest earned on our cash, cash equivalents and marketable securities of $0.1 million during the six months ended June 30, 2025. 31 Liquidity and capital resources Sources of liquidity In July 2021, we completed our IPO and issued 21,562,500 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 2,812,500 shares of our common stock, at a price to the public of $16.00 per share. Our aggregate net proceeds from the offering were $317.0 million, net of underwriting discounts and commissions of $24.2 million and offering costs of $3.8 million. Prior to the IPO, we received aggregate gross proceeds of $320.4 million from the sale of shares of our convertible preferred stock. In August 2022, we entered into the Sale Agreement with the Agent, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $200 million from time to time, in ATM Offerings through the Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. Pursuant to the Sale Agreement, the Agent will receive a commission from us of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sale Agreement. During the year ended December 31, 2024, we sold 9,231,114 shares of our common stock under the Sale Agreement at a weighted-average price of $2.37 per share. Proceeds from the ATM Offering during the year ended December 31, 2024 were $21.0 million, net of commissions and expenses of $0.8 million. No shares of our common stock were sold under the Sale Agreement during the three and six months ended June 30, 2025 and 2024. As of June 30, 2025, we had $178.1 million of shares available for sale under the ATM program. In December 2022, we completed the 2022 Offering and issued 15,384,616 shares of our common stock at a price to the public of $6.50 per share. Proceeds from the 2022 Offering were $94.9 million, net of underwriting discounts and commissions and offering costs of $5.1 million. In March 2024, in connection with the 2024 Private Placement, we entered into a stock purchase agreement with the purchasers named therein for the private placement of 21,844,660 shares of our common stock at a price of $2.06 per share, which closed on April 2, 2024. Proceeds from the 2024 Private Placement were $43.6 million, net of placement agent fees and expenses of approximately $1.4 million. In May 2024, we completed the 2024 Offering and issued 99,459,458 shares of our common stock, including the exercise in full by the underwriters of their option to purchase 12,972,972 shares of our common stock, at a price to the public of $1.85 per share. Proceeds from the 2024 Offering were $174.4 million, net of underwriting discounts and commissions and offering costs of $9.6 million. Future capital requirements As of June 30, 2025, we had cash, cash equivalents and marketable securities of $386.7 million. Based upon our current operating plans, we believe that our cash, cash equivalents and marketable securities will be sufficient to fund our operations into the second half of 2028. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain. Our future capital requirements are difficult to forecast and will depend on many factors, including but not limited to: • the type, number, scope, progress, expansions, results, costs and timing of discovery, preclinical studies and clinical trials of our product candidates that we are pursuing or may choose to pursue in the future, including the costs of any third-party products used in our combination clinical trials that are not covered by such third party or other sources; • the costs and timing of manufacturing for our product candidates with CMOs, including commercial manufacturing, if any product candidate is approved; • the costs, timing and outcome of regulatory review of our product candidates; • the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights; 32 • our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting; • the costs associated with hiring additional personnel, consultants, and CROs as our preclinical and clinical activities increase; • the timing and amount of the milestone or other payments we must make to the licensors and other third parties from whom we have in-licensed or acquired our product candidates or technologies; • the costs and timing of establishing or securing sales and marketing capabilities if any product candidate is approved; • our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; • patients’ willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payors; • the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; • any delays and cost increases that result from geopolitical and economic events; • evolving government regulation that impacts the way we operate, including the potential negative effects of changes in United States tariff and import/export regulations; and • costs associated with any products or technologies that we may in-license or acquire. We have no other committed sources of capital. Until we can generate a sufficient amount of product revenue to finance our cash requirements, if ever, we expect to finance our future cash needs primarily through equity offerings (including through the Sale Agreement), debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, licensing, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our research and development programs or other operations, or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourselves. Cash flows The following table shows a summary of our cash flows for the periods presented (in thousands): Six Months Ended June 30, 2025 2024 Net cash (used in) provided by: Operating activities $ (52,086 ) $ (62,434 ) Investing activities 50,010 (76,638 ) Financing activities 480 218,799 Net (decrease) increase in cash, cash equivalents and restricted cash $ (1,596 ) $ 79,727 33 Operating activities Cash used in operating activities was $52.1 million during the six months ended June 30, 2025, primarily resulting from a net loss of $64.8 million, changes in operating assets and liabilities of $6.0 million and accretion on marketable securities of $3.5 million, partially reduced by stock-based compensation expense of $13.1 million, in-process research and development expenses of $7.5 million, which are reflected in noncash and investing activities, and depreciation and amortization expense of $1.6 million. Net cash used from changes in operating assets and liabilities consisted primarily of decreases in accrued expenses and other current and long-term liabilities of $6.6 million and operating lease assets and liabilities, net of $1.1 million, partially offset by an increase in accounts payable of $1.2 million and a decrease in prepaid expenses and other current and long-term assets of $0.5 million. Cash used in operating activities was $62.4 million during the six months ended June 30, 2024, primarily resulting from a net loss of $98.2 million, accretion on marketable securities of $4.7 million and changes in operating assets and liabilities of $3.2 million, partially reduced by in-process research and development expenses of $22.5 million, which are reflected in investing activities, stock-based compensation expense of $14.0 million, an impairment charge of $4.7 million on operating lease assets, leasehold improvements and furniture and depreciation and amortization expense of $2.1 million. Net cash used from changes in operating assets and liabilities consisted primarily of a decrease in accounts payable, accrued expenses and other current and long-term liabilities of $2.4 million and an increase in prepaid expenses and other current and long-term assets of $0.8 million. Investing activities Net cash provided by investing activities was $50.0 million during the six months ended June 30, 2025 as compared to net cash used in investing activities of $76.6 million during the six months ended June 30, 2024. The increase in cash provided by investing activities of $126.6 million was primarily the result of a decrease in purchases of marketable securities of $77.1 million, an increase in maturities of marketable securities of $32.6 million and a decrease in in-process research and development of $17.0 million. Financing activities Net cash provided by financing activities was $0.5 million during the six months ended June 30, 2025 as compared to $218.8 million during the six months ended June 30, 2024. During the six months ended June 30, 2025, we received $0.4 million from the issuance of common stock under our ESPP and $0.1 million from the exercise of stock options. During the six months ended June 30, 2024, we received $174.6 million of net proceeds for the issuance of common stock from the 2024 Offering, $43.6 million in net proceeds for the issuance of common stock from the 2024 Private Placement, $0.4 million from the issuance of common stock under our ESPP and $0.1 million from the exercise of stock options. Contractual obligations and commitments As of June 30, 2025, there have been no material changes outside the ordinary course of our business to the contractual obligations we reported in “Management’s discussion and analysis of financial condition and results of operations – Cash requirements due to contractual obligations and other commitments,” included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 20, 2025. Critical accounting policies and estimates This management discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with US GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue and expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. As of June 30, 2025, there have been no material changes to our critical accounting policies and estimates from those disclosed in “Management’s discussion and analysis of financial condition and results of operations – Critical accounting policies and estimates,” included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 20, 2025. 34 Recently issued and adopted accounting pronouncements See Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued and adopted accounting pronouncements. Emerging growth company and smaller reporting company status As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the JOBS Act), we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. We also intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley). We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO; (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion; (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year; or (iv) the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period. We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may 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 our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.