Werewolf Therapeutics, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and uncertainties of cash flows from operations and from outside resources, so as to allow investors to better view our company from management’s perspective. The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, the discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors we believe could cause or contribute to these differences below and elsewhere in this Annual Report, including those factors set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” and in the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report. Overview We are an innovative biopharmaceutical company pioneering the development of therapeutics engineered to stimulate the body’s immune system for the treatment of cancer and other immune-mediated conditions. We have leveraged our proprietary PREDATOR platform to design conditionally activated molecules that stimulate both adaptive and innate immunity with the goal of addressing the limitations of conventional proinflammatory immune therapies. Our molecules, which we refer to as INDUKINE and INDUCER molecules, are intended to activate selectively in the tumor microenvironment, or TME. Our most advanced product candidates, WTX-124 and WTX-330, are systemically delivered, conditionally activated Interleukin-2 and Interleukin-12, respectively, INDUKINE molecules for the treatment of multiple tumor types. The Phase 1/1b clinical trial of WTX-124 is expected to be completed in the second quarter of 2026. Additional funding will be required to initiate any further development, which could include a registration-enabling trial. We are currently seeking a strategic partnership for the further development of WTX-124. The dose- and regimen-determining Part A of the Phase 1b/2 clinical trial of WTX-330 is expected to be completed in the second quarter of 2026. Additional funding will be required to further develop WTX-330, which could include sequential administration of WTX-330 and WTX-124 that may provide a novel development path in poorly immunogenic tumors. We are currently seeking a strategic partnership for the further development of WTX-330. Strategic Review In February 2026, we adopted a restructuring plan to extend our capital resources in connection with initiating a process to explore a full range of strategic alternatives to advance our promising platform and drug development pipeline to maximize stockholder value. We have engaged Piper Sandler & Co., or Piper Sandler, to serve as exclusive financial advisor to assist in the strategic review process. Measures contemplated during the strategic review process may include, among other options, a sale of our company, a business combination or merger, a sale of our assets, licensing or collaboration arrangements, or other strategic transactions. There can be no assurance that the strategic review process will result in any agreement or transaction that will enhance stockholder value, or any agreement or transaction at all. As part of the restructuring plan, our board of directors approved a reduction in force, representing 64% of our workforce, to better align our resources with our pursuit of strategic alternatives (the “Reduction”). As a result of the Reduction, we estimate that we will incur a one-time charge in the first quarter of 2026 related to employee separation benefits, including severance and related benefits, of approximately $4.1 million, most of which is anticipated to result in cash expenditures to be incurred in the first quarter of 2026. We may also incur additional costs, including, but not limited to, potential impairment charges not currently contemplated due to events that may occur as a result of, or that are associated with, the restructuring plan. The estimated charges that we expect to incur are subject to a number of assumptions, and actual results may differ materially from these estimates. Financial Operations Overview Revenue Historically, all of our revenue has been generated from a global collaboration and license agreement, or the Collaboration Agreement, with Jazz Pharmaceuticals Ireland Limited, or Jazz, under which Jazz acquired exclusive global development and commercialization rights to Interferon alpha, or IFNα, INDUKINE molecule, JZP898 (formerly WTX-613). In June 2024, we executed a transfer agreement, or the Transfer Agreement, to assign our rights in a development agreement with a contract manufacturer of JZP898 to Jazz. The execution of this Transfer Agreement was the last material performance obligation required of us under the Collaboration Agreement. 92 Table of Contents We retain the rights to the receipt of payments under the Collaboration Agreement upon successfully achieving various development and regulatory and sales-based milestones. There can be no assurance of the timing of when such payments will become due to us, if at all. Operating Expenses Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, and include: • salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions; • expenses incurred under agreements with third parties that conduct research, preclinical and clinical activities on our behalf; • costs of outside consultants, including their fees, stock-based compensation and related travel expenses; • costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; and • facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of performance of the individual arrangements, which may differ from the pattern of billings incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses. We typically use our employee and infrastructure resources across our development programs. We track external development costs by product candidate or development program, but generally we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates. Our external development costs were as follows: Year Ended December 31, 2025 2024 (in thousands) WTX-124 $ 15,500 $ 15,481 WTX-330 5,762 13,269 WTX-1011 208 — WTX-2022 113 — WTX-712 108 1,389 WTX-921 71 4 WTX-518 64 294 JZP898 — 545 Pre-development candidates 3,476 1,793 Total external development costs $ 25,302 $ 32,775 Research and development activities have historically been central to our business model. We expect our research and development costs will decrease in the near future as we explore strategic alternatives available to advance our platform and drug development pipeline. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. We cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete development of our current or future product candidates, if any. The actual probability of success for our product candidates will depend on a variety of factors, including: • the outcome of our strategic review process; • the scope, rate of progress and expenses of our research activities as well as any preclinical studies and clinical trials, including our ongoing Phase 1/1b clinical trial for WTX-124 and the Phase 1b/2 clinical trial for WTX-330, as well as other research and development activities; 93 Table of Contents • establishing an appropriate safety profile; • successful enrollment in and completion of clinical trials; • whether our product candidates show safety and efficacy in our clinical trials; • receipt of marketing approvals from applicable regulatory authorities; • establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; • obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; • commercializing product candidates, if and when approved, whether alone or in collaboration with others; and • continued acceptable safety profile of the products following any regulatory approval. A change in the outcome of any of these variables with respect to the development of our current and future product candidates would significantly change the costs and timing associated with the development of those product candidates and we may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development activities. General and Administrative Expenses General and administrative expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel in our executive, finance, people operations, business development, legal, information technology and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, audit, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. At this time, we cannot reasonably estimate the nature, timing, and estimated costs associated with the efforts that will be necessary to complete our strategic review process. Other (Expense) Income Interest Income Interest income consists of interest earned from cash and cash equivalents and restricted cash and cash equivalents invested in money market funds. Interest Expense Interest expense represents interest incurred from our loan agreement, or the PWB Loan Agreement, with Pacific Western Bank, or PWB, until the extinguishment of the PWB term loan in May 2024, interest incurred from our loan and security agreement, or the K2HV Loan Agreement, with K2 HealthVentures LLC, or K2HV, and non-cash interest expense related to the amortization of debt issuance costs. Loss on Extinguishment of Debt Loss on extinguishment of debt consists of any residual financial impact from the repayment of term loans with lenders, specifically the extinguishment of the PWB term loan in May 2024. Other Income, Net Other income, net primarily consists of the unrealized gain or loss recognized on the change in fair value of the derivative liability associated with the K2HV Loan Agreement. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates which include, but are not limited to those related to accrued expenses and assumptions used in the valuation of stock-based compensation expense and the fair value of the derivative liability. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions and conditions. 94 Table of Contents While our significant accounting policies are described in more detail in Note 3, “Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements included within Part IV, Item 15 in this Annual Report, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements. Accrued Research and Development Expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses as of each balance sheet date. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. This process involves reviewing open contracts and purchase orders, communicating with internal personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We periodically confirm the accuracy of our estimates with our service providers and make adjustments if necessary. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. The financial terms of agreements with these service providers are subject to negotiation, vary from contract to contract and may result in uneven payment flows. In circumstances where amounts have been paid in excess of costs incurred, we record a prepaid expense. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. Stock-based Compensation We issue stock-based awards to employees and directors, generally in the form of stock options, restricted stock units, or RSUs, restricted stock awards, or RSAs, or as awards under the 2021 Employee Stock Purchase Plan, or the 2021 ESPP. Occasionally, we may also grant inducement equity awards in the form of non-qualified stock options to purchase shares of our common stock to newly hired employees pursuant to Nasdaq Listing Rule 5635(c)(4), or Inducement Awards. Stock-based compensation is measured at the grant date based on the estimated fair value of the award and recognized as expense over the requisite service period of the award on a straight-line basis. For awards with performance conditions, we estimate the likelihood of satisfaction of the performance condition, which affects the period over which the expense is recognized. When the likelihood of satisfying the performance conditions related to an award is determined to be probable, the expense is recognized over the requisite service period. We have not granted any awards with market conditions. We recognize forfeitures of stock-based awards as they occur. The grant date fair value of stock options, Inducement Awards, and awards granted under the 2021 ESPP are measured using the Black-Scholes valuation model, which requires us to make assumptions about the fair value of the underlying common stock on the date of grant. The grant date fair value of RSUs and RSAs is estimated to be equal to the closing price of our common stock on the date of grant. In the event that stock-based awards are granted in contemplation of or shortly before a planned release of material non-public information, and such information is expected to result in a material increase in the share price of our common stock, we may consider whether an adjustment to the observable market price is required when estimating the grant date fair value. Recent Accounting Pronouncements See Note 3, “Basis of Presentation and Summary of Significant Accounting Policies,” to our consolidated financial statements included within Part IV, Item 15 of this Annual Report for a description of recent accounting pronouncements applicable to our business. JOBS Act Accounting Election and Smaller Reporting Company Implications We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or Sarbanes-Oxley Act. Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to continue to take advantage of reduced disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. 95 Table of Contents Results of Operations Comparison of the years ended December 31, 2025 and 2024 The following table summarizes our results of operations: Year Ended December 31, $ Change 2025 2024 (in thousands) Revenue: Collaboration revenue $ — $ 1,885 $ (1,885) Operating expenses: Research and development 44,830 56,434 (11,604) General and administrative 15,847 19,045 (3,198) Total operating expenses 60,677 75,479 (14,802) Operating loss (60,677) (73,594) 12,917 Other (expense) income: Interest income 3,108 6,673 (3,565) Interest expense (5,274) (4,656) (618) Loss on extinguishment of debt — — (553) 553 Other income, net 2,021 1,615 406 Total other (expense) income (145) 3,079 (3,224) Net loss $ (60,822) $ (70,515) $ 9,693 Revenue No revenue was recognized during the year ended December 31, 2025. Following the execution of the Transfer Agreement with Jazz in June 2024, the only significant source of revenue expected to be generated from the Collaboration Agreement are the remaining development and regulatory and sales-based milestones. Based on our assessment that there continues to be a high level of uncertainty of achieving these milestones, no revenue from the remaining milestones has been recognized during the year ended December 31, 2025. Comparatively, we recognized $1.9 million during the year ended December 31, 2024 related to the Collaboration Agreement with Jazz prior to the execution of the Transfer Agreement. Research and Development Expenses The following table summarizes our research and development expenses: Year Ended December 31, $ Change 2025 2024 (in thousands) Clinical trial costs $ 14,563 $ 11,710 $ 2,853 Personnel 12,604 16,192 (3,588) Manufacturing 6,690 17,458 (10,768) Contract research organization 4,049 3,607 442 Lab consumables 3,423 3,400 23 Facility costs 3,101 3,346 (245) Other 400 721 (321) Total research and development expenses $ 44,830 $ 56,434 $ (11,604) Research and development expenses for the year ended December 31, 2025 were $44.8 million, compared to $56.4 million for the year ended December 31, 2024. The decrease of $11.6 million was primarily due to: • $3.6 million of decreased personnel costs, driven primarily by a decrease in discretionary bonuses paid to employees during the year ended December 31, 2025 combined with an overall decrease in headcount compared to the year ended December 31, 2024. Additionally, costs associated with stock-based awards was lower during the year ended December 31, 2025 due to the valuation and timing of awards granted to employees; and 96 Table of Contents • $10.8 million of decreased manufacturing costs, driven by a decrease in costs associated with WTX-330, WTX-124, WTX-721, and JZP898 of $7.5 million, $2.0 million, $0.8 million, and $0.5 million, respectively. Costs associated with WTX-330 were higher during the year ended December 31, 2024 in preparation for our Phase 1b/2 clinical trial for WTX-330 that was initiated during the first quarter of 2025. Similarly, costs associated with WTX-124 were higher during the year ended December 31, 2024 due the timing of an increase in manufacturing efforts necessary to continue to support the Phase 1/1b clinical trial of WTX-124. The decrease in costs associated with WTX-712 is due to the timing of IND-enabling studies performed during the year ended December 31, 2024 that were not recurring during the year ended December 31, 2025. The costs associated with JZP898 were higher during the year ended December 31, 2024 prior to the execution of the Transfer Agreement with Jazz. These decreases were partially offset by: • $2.9 million of increased clinical trial costs, driven by costs associated with the continued enrollment in our ongoing Phase 1/1b clinical trial for WTX-124 and the initiation of our Phase 1b/2 clinical trial for WTX-330. General and Administrative Expenses The following table summarizes our general and administrative expenses: Year Ended December 31, $ Change 2025 2024 (in thousands) Personnel $ 7,359 $ 9,645 $ (2,286) Professional services 4,509 5,151 (642) Facility costs 1,346 1,446 (100) Corporate insurance 1,065 1,151 (86) Information technology costs 750 757 (7) Other 818 895 (77) Total general and administrative expenses $ 15,847 $ 19,045 $ (3,198) General and administrative expenses were $15.8 million for the year ended December 31, 2025 compared to $19.0 million for the year ended December 31, 2024. The decrease of $3.2 million was primarily due to: • $2.3 million of decreased personnel costs, driven primarily by a decrease in discretionary bonuses paid to employees during the year ended December 31, 2025 compared to the year ended December 31, 2024. Additionally, costs associated with stock-based awards was lower during the year ended December 31, 2025 due to the valuation and timing of awards granted to employees; and • $0.6 million of decreased professional services fees due to decreased use of external consultants during the period. Interest Income Interest income was $3.1 million for the year ended December 31, 2025 compared to $6.7 million for the year ended December 31, 2024. This decrease in interest income was primarily the result of lower balances in money market accounts during the year ended December 31, 2025 compared to the year ended December 31, 2024. Interest Expense Interest expense was $5.3 million for the year ended December 31, 2025 compared to $4.7 million for the year ended December 31, 2024. This increase in interest expense was primarily the result of a higher effective interest rate under the K2HV Loan Agreement compared to the effective interest rate associated with our previous term loan with PWB. Loss on Extinguishment of Debt The extinguishment of the PWB term loan resulted in a one-time loss of $0.6 million for the year ended December 31, 2024. As no corresponding finance activity occurred for the year ended December 31, 2025, we did not incur any gain or loss on a debt extinguishment during the current period. Other Income, Net Other income, net for the year ended December 31, 2025 and 2024 was $2.0 million and $1.6 million, respectively, and primarily consisted of the gains r ecognized for the change in fair value of the derivative liability associated with the K2HV Loan Agreement, as well as foreign currency gains and losses related to services performed by foreign vendors during each period. 97 Table of Contents Liquidity and Capital Resources Sources of Liquidity Since our inception in 2017, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company; business planning; raising capital; developing and optimizing our platform technology; identifying potential product candidates; enhancing our intellectual property portfolio; undertaking research, preclinical studies, and clinical trials; and enabling manufacturing for our development programs. Our net loss was $60.8 million and $70.5 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had cash and cash equivalents of $57.1 million and an accumulated deficit of $475.4 million. As we have no products that are approved for sale, we have not generated any revenue from product sales to date, and we do not expect to generate any such revenue for the foreseeable future, if at all. Instead, we have financed our operations primarily through aggregate cash proceeds from convertible promissory notes, private placements of our convertible preferred stock, our initial public offering, payments from Jazz under the Collaboration Agreement, sales of common stock through our at-the-market program, and the drawdown of our term loans. We expect to incur substantial operating losses and negative cash flows from operations for the foreseeable future. There is substantial doubt about our ability to continue as a going concern for at least twelve months from the date these consolidated financial statements are issued in this Annual Report, and we expect continuing operations beyond the near term will require additional liquidity. In February 2026, we adopted a restructuring plan to extend our capital resources in connection with initiating a process to explore a full range of strategic alternatives to advance our promising platform and drug development pipeline to maximize stockholder value. We engaged Piper Sandler to serve as exclusive financial advisor to assist in the strategic review process. Measures contemplated during the strategic review process may include, among other options, a sale of our company, a business combination or merger, a sale of our assets, licensing or collaboration arrangements, or other strategic transactions. There can be no assurance that the strategic review process will result in any agreement or transaction that will enhance stockholder value, or any agreement or transaction at all. As part of the restructuring plan, our board of directors approved a reduction in force, representing 64% of our workforce, to better align our resources with our pursuit of strategic alternatives. As a result of the reduction in force, we estimate that we will incur a one-time charge in the first quarter of 2026 related to employee separation benefits, including severance and related benefits, of approximately $4.1 million, most of which is anticipated to result in cash expenditures to be incurred in the first quarter of 2026. We may also incur additional costs, including, but not limited to, potential impairment charges not currently contemplated due to events that may occur as a result of, or that are associated with, the restructuring plan. The estimated charges that we expect to incur are subject to a number of assumptions, and actual results may differ materially from these estimates. While our strategic review process is underway, we expect our overall costs will decrease in the near term due to the reduction in force, the completion of our clinical trials, and other cost reduction initiatives. The outcome of our strategic review process will inform our future development plans and the costs associated with those efforts. If we decide to resume enrollment in our clinical trials or development of our preclinical product candidates, however, we expect that our research and development and general and administrative expenses would increase. We will need additional capital to fund our operations, which we may raise through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Additionally, the extent to which we use our at-the-market program as a source of future funding will depend on a number of factors, including the prevailing market price of our common stock, general market conditions, the extent to which we are able to secure funds from other sources, and whether we are then subject to limitations on our ability to use Form S-3 to sell more than one-third of the aggregate market value of our public float in the trailing 12-month period, which limitations will remain in place until such time as our public float exceeds $75 million. Our failure to raise capital or enter into such agreements as and when needed could have a material adverse effect on our business, results of operations and financial condition. Term Loan Facilities PWB Loan Agreement In April 2022, we entered into the PWB Loan Agreement with PWB and subsequently drew down an aggregate of $40.0 million in term loans. The term loans accrued interest on the outstanding daily balance at a floating annual rate equal to greater of (i) 0.5% above the prime rate then in effect or (ii) 4.5%. If the prime rate changed throughout the term, the interest rate would have been adjusted effective on the date of the prime rate change. All interest chargeable under the PWB Loan Agreement was computed on a 360-day year for the actual number of days elapsed, with interest payable monthly. 98 Table of Contents In May 2024, we repaid all amounts outstanding under the PWB Loan Agreement, using $29.5 million in net loan proceeds received under the K2HV Loan Agreement, as described below, together with $10.5 million in existing cash. We recognized a total loss on extinguishment of debt in the amount of $0.6 million during the second quarter of 2024 primarily due to the write off of unamortized debt issuance costs. K2HV Loan Agreement In May 2024, we, as borrower, entered into the K2HV Loan Agreement with K2HV (which we refer to, together with any other lender from time to time, as the Lenders); K2HV, as administrative agent for the Lenders; and Ankura Trust Company, LLC, as collateral trustee for the Lenders. The K2HV Loan Agreement provides up to $60.0 million principal in term loans. We received $30.0 million in gross loan proceeds at closing; $25.0 million from the first tranche commitment and $5.0 million from the second tranche commitment. A third tranche commitment of up to $10.0 million was available to be drawn at our option through June 30, 2025, subject to the achievement, as determined by the administrative agent in its discretion, of certain time-based, clinical and regulatory milestones and receipt of not less than $60.0 million in net cash proceeds from certain financing activities, with at least $50.0 million from a single offering of common stock. Our ability to draw upon the third tranche commitment expired on June 30, 2025 without being drawn upon. A fourth tranche commitment of up to $20.0 million is available to be drawn down at our option through May 1, 2026, subject to Lender’s review of our clinical, financial and operating plan and subject to the Lender’s consent in its sole and absolute discretion. The term loan matures on May 1, 2028, and we are obligated to make interest only payments for the first 24 months followed by interest and equal principal payments each month thereafter through the maturity date. The term loan bears a variable interest rate equal to the greater of (i) 10.3%, and (ii) the sum of (A) the prime rate last quoted in The Wall Street Journal (or a comparable replacement rate if The Wall Street Journal ceases to quote such rate) and (B) 1.8%. We may prepay, at our option, all, but not less than all, of the outstanding principal balance and all accrued and unpaid interest with respect to the principal balance being prepaid of the term loans, subject to a prepayment premium to which the Lenders are entitled and certain notice requirements. We are obligated to pay a final fee equal to 6.95% of the aggregate amount of the term loans funded, or the Final Fee, to occur upon the earliest of (i) the maturity date, (ii) the acceleration of the term loans, and (iii) the prepayment of the term loans. The Final Fee is being accreted to interest expense using the effective interest method over the life of the debt. Pursuant to the terms of the K2HV Loan Agreement, the lenders thereto may elect, prior to the full repayment of the term loans, to convert up to $5.0 million of the outstanding principal of the term loans into shares of our common stock at a conversion price of the lesser of $6.3182 per share, or the Fixed Price Conversion, and the lowest effective price per share of our first equity financing following the closing of the K2HV Loan Agreement, or the Variable Price Conversion, subject to customary adjustments and 9.99% and 19.99% beneficial ownership limitations. There will be no prepayment penalty for any principal amount converted into common stock. We determined that the Fixed Price Conversion and the Variable Price Conversion within the K2HV Loan Agreement are required to be bifurcated as an embedded derivative under ASC 815, Derivatives and Hedging , or ASC 815, at fair value, and recorded as a discount on the debt on the date of issuance, with subsequent changes in fair value recognized in the accompanying consolidated statements of operations. As security for our obligations under the K2HV Loan Agreement, we granted the Lenders a first priority security interest on substantially all of our assets (other than intellectual property), subject to certain exceptions. The K2HV Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, dispose of assets, make changes to our business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, incur additional liens, pay dividends or other distributions or repurchase equity, make investments, and enter into certain transactions with affiliates, in each case subject to certain exceptions. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% per annum may be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable and exercise all of its rights and remedies as set forth in the K2HV Loan Agreement and under applicable law. As of December 31, 2025, we are in compliance with all covenants. Subject to certain conditions, we granted the Lenders the right, prior to repayment of the term loans, to invest up to $5.0 million in the aggregate in future offerings of capital stock, at market terms, subject to certain exceptions and conditions. We incurred debt issuance costs of $0.7 million in connection with the term loans, composed of the facility fee of $0.4 million and other expenses paid to the Lenders of $0.2 million and external legal fees of $0.1 million. These debt issuance costs, together with fair value of the embedded derivative of $4.5 million, resulted in a debt discount of $5.1 million which is being amortized to interest expense over the term of the K2HV Loan Agreement using the effective interest method. 99 Table of Contents We have presented the full amount of the term loan payable, net of discount and issuance costs, as a current liability as of December 31, 2025, given the potential that the loan may be repaid in the subsequent twelve months. ATM Offering On May 10, 2022, we entered into a sales agreement, or the Sales Agreement, with Leerink Partners LLC, or Leerink Partners, pursuant to which, from time to time, we may offer and sell shares of our common stock, which we refer to as the ATM Offering. The Sales Agreement provides that Leerink Partners is entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering. We were initially entitled to offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million in the ATM Offering, which was subsequently increased in February 2024 to $75.0 million. On May 8, 2025, we filed a new Registration Statement on Form S-3 and filed a new prospectus covering the ATM Offering, or the Prospectus, with an aggregate offering price of up to $12.5 million in the ATM Offering as a result of being subject to General Instruction I.B.6 of Form S-3, or the Baby Shelf Limitation. As of December 31, 2025, we remain subject to the Baby Shelf Limitation. During the year ended December 31, 2025, we sold an aggregate of 3,626,701 shares of our common stock at an average price of $1.77 per share for net proceeds of $5.9 million after deducting sales commissions and offering expenses. Jazz Collaboration As of December 31, 2025, we have received $20.0 million in payments from Jazz, excluding payments for reimbursed costs, under the terms of the Collaboration Agreement. We are eligible to receive up to an additional $515.0 million in development and regulatory milestones, and up to $740.0 million in sales-based milestones for all Licensed Products. There is no guarantee of when the conditions necessary to receive the milestone payments will be met, if at all. Plan of Operation and Future Funding Requirements As of December 31, 2025, we had cash and cash equivalents of $57.1 million. We also had restricted cash and cash equivalents of $0.9 million as of December 31, 2025. Based on our current operating plan, we expect that our cash and cash equivalents as of December 31, 2025, will be sufficient to fund operational expenses and capital expenditure requirements into the fourth quarter of 2026 and will be insufficient to allow us to fund our current operating plan through at least twelve months from the date these consolidated financial statements are issued in this Annual Report. These conditions raise substantial doubt about our ability to continue as a going concern for at least twelve months from the date these consolidated financial statements are issued in this Annual Report. As described above, we have initiated a process to explore a full range of strategic alternatives to advance our promising platform and drug development pipeline to maximize stockholder. The outcome of our strategic review process will inform our future funding requirements, however, because of the numerous risks and uncertainties associated with the strategic review process, we are unable to estimate our current operating capital requirements. The timing and amount of our operating expenditures will depend largely on: • the nature, timing, and extent of our strategic review process; • the pursuit of viable strategic alternatives, if any; • the scope, progress, timing, costs and results of researching and developing our current product candidates or any future product candidates, including with respect to our clinical trials of WTX-124 and WTX-330 and the costs associated with attracting, hiring and retaining skilled personnel and consultants as our preclinical and clinical activities increase; • the cost of manufacturing our product candidates WTX-124, WTX-330, and any future product candidates for clinical trials and, if we are able to obtain marketing approval, for commercial sale; • the costs of any third-party products used in our combination clinical trials that are not covered by such third parties or other sources; • the success of our collaboration with Jazz; • the timing of, and the cost involved in, obtaining marketing approval for WTX-124 and WTX-330 or any future product candidates, and our ability to obtain marketing approval and generate revenue from any potential commercial sales of such product candidates; • the cost of building a sales force in anticipation of product commercialization and the cost of commercialization activities for WTX-124, WTX-330, our INDUCER molecules, or any future product candidates if we receive marketing approval, including marketing, sales and distribution costs; • the potential emergence of competing therapies and other adverse market developments; 100 Table of Contents • the amount and timing of any payments we may be required to make pursuant to our license agreement with Harpoon Therapeutics, Inc., or other future license agreements or collaboration agreements; • our ability to establish future collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement; • the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; • any product liability or other lawsuits related to our product candidates; • the extent to which we in-license or acquire other products and technologies; and • the costs of operating as a public company. Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financing. We may also consider entering into collaboration arrangements or selectively partnering for clinical development and commercialization. The sale of additional equity may result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations or our ability to incur additional indebtedness or pay dividends, among other items. If we raise additional funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing 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 capital when needed or on acceptable terms, we may be forced to delay, reduce, or eliminate certain costs related to our operations and research and development programs. Cash Flows The following table provides information regarding our cash flows: Year Ended December 31, 2025 2024 (in thousands) Net cash (used in) provided by: Operating activities $ (60,292) $ (56,188) Investing activities — (254) Financing activities 6,028 13,080 Net decrease in cash, cash equivalents and restricted cash and cash equivalents $ (54,264) $ (43,362) Operating Activities Net cash used in operating activities for the year ended December 31, 2025 was $60.3 million compared to $56.2 million for the year ended December 31, 2024. This increase in cash used for operating activities of $4.1 million is driven by several factors, including a decrease in the interest income recognized during the year ended December 31, 2025 of $3.6 million compared to the year ended December 31, 2024. Additionally, as a result of the execution of the Transfer Agreement in June 2024, we recognized no revenue during the year ended December 31, 2025; a decrease of $1.9 million from the collaboration revenue recognized during the year ended December 31, 2024, net of the change in deferred revenue and other receivables for the same period. Finally, our operating expenses, excluding non-cash expenses, have decreased $12.0 million during the year ended December 31, 2025 compared to the year ended December 31, 2024. This decrease was largely offset by an increase of $10.7 million in the cash used to pay down our current operating liabilities, net of prepaid expenses. Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $0.3 million, which represents capital expenditures of property and equipment used in our operations during the period. No such expenditures occurred during the year ended December 31, 2025. Financing Activities Net cash provided by financing activities for the year ended December 31, 2025 was $6.0 million compared to $13.1 million for the year ended December 31, 2024. Cash provided by financing activities for the year ended December 31, 2025 primarily consists of net proceeds of $5.9 million from our ATM Offering. Net proceeds from our ATM Offering were significantly higher for the year ended December 31, 2024 due to significantly higher transaction volume combined with a higher average 101 Table of Contents price per share of our common stock sold, which resulted in $23.6 million in net proceeds from our ATM Offering during the year ended December 31, 2024. These proceeds were partially offset by the repayment of all amounts outstanding under the PWB Loan Agreement, which resulted in the repayment of $10.7 million in term loans, net of proceeds and debt issuance costs from the K2HV Loan Agreement. Contractual Obligations Overview In the normal course of business, we enter into agreements with CROs, contract manufacturers, vendors and other third parties for preclinical studies and clinical trials, manufacturing services and other services and products for operating purposes. These contracts do not contain minimum purchase commitments and are cancellable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. Term Loan Facilities See “Liquidity and Capital Resources – Sources of Liquidity – Term Loan Facilities” for a description of the K2HV Loan Agreement. Lease Agreement The lease for office and laboratory space that we entered into in June 2021 commenced in May 2022 and expires in May 2030. Total estimated base rent payments over the remaining term of the lease are approximately $11.1 million. Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, or the Exchange Act, and are not required to provide the information under this item. Item 8. Financial Statements and Supplementary Data The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report. An index of those financial statements is found in Part IV, Item 15. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.