Larimar Therapeutics, 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 condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”), and the 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, 2025 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 19, 2026 (the “2025 Annual Report”) . Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties, and assumptions. These statements are based on our beliefs and expectations about future outcomes and are subject to risks and uncertainties that could cause our actual results to differ materially from anticipated results. We undertake no obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise. You should read the “Risk Factors” section included in our 2025 Annual Report, in addition to the“Cautionary Note Regarding Forward-Looking Statements” sections of this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel cell penetrating peptide (“CPP”) technology platform. Our lead product candidate, nomlabofusp, is a subcutaneously administered, recombinant fusion protein intended to deliver frataxin (“FXN”), an essential protein, to the mitochondria of patients with Friedreich's ataxia (“FA”). FA is a rare, progressive, and fatal disease in which patients are unable to produce sufficient FXN due to a genetic abnormality. Currently, there are no treatment options that address the core deficit of FA, low levels of FXN. Nomlabofusp represents the first potential therapy designed to systemically increase FXN levels in patients with FA. We believe that our CPP platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, also has the potential to enable the treatment of other rare and orphan diseases. We intend to use our proprietary platform to target additional orphan indications characterized by deficiencies in or alterations of intracellular content or activity. Since our inception, we have devoted substantially all of our resources to developing nomlabofusp, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, raising capital, developing sales and marketing capacities, and providing general and administrative support for such operations. Nomlabofusp Program Update We have Orphan Drug Designation, Fast Track Designation, Pediatric Rare Disease Designation and Breakthrough Therapy Designation from the FDA and have been granted orphan drug designation and access to the European Medicines Agency’s (“EMA’s”) Priority Medicines Program (“PRIME”) scheme in the European Union (the “EU”). We have also received access in the United Kingdom (the “UK”) to the Medicines and Healthcare Regulatory Agency’s (“MHRA”) Innovative Licensing and Access Pathway (“ILAP”). These programs are designed to facilitate development of certain therapeutics such as those for rare and serious diseases, and those that have the potential to meet an unmet medical need. The FDA’s Center for Drug Evaluation and Research selected nomlabofusp as one of a few drug development programs for participation in the Support for Clinical Trials Advancing Rare Disease Therapeutics (“START”) Pilot Program. The objective of the program is to accelerate the development of drugs for rare diseases that lead to significant disability or death by facilitating frequent advice and regular communication with the FDA staff to expedite the review process of biologics and drugs. We have engaged in multiple discussions and interactions with the FDA in connection with our clinical development of nomlabofusp and communications remain ongoing. We have also had numerous interactions with the EMA, the MHRA, and Canada’s Health Canada regarding the clinical development of nomlabofusp. 22 We have completed four clinical studies: (i) two Phase 1 clinical studies in adults, (ii) a Phase 2 dose exploration study in adults and (iii) a Phase 1 pharmacokinetic (“PK”) run-in study in adolescents (12-17 years old). We currently have an ongoing open label (“OL”) study (previously referred to as the Open Label Extension, (“OLE”) study) in adults and adolescents with FA. Recent significant developments are as follows: • In February 2026, the FDA granted Breakthrough Therapy Designation (“BTD”) ”) to nomlabofusp for the treatment of adults and children with FA. The designation was based on the FDA’s review of available clinical data from our ongoing OL study evaluating nomlabofusp in adult and pediatric patients with FA. BTD is intended to expedite the development and regulatory review of a drug intended to treat a serious condition. A drug is eligible for BTD if preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available treatments in one or more clinically significant endpoints. • Additionally, in February 2026, as a result of a START pilot program meeting with the FDA, we announced continued alignment with the FDA to consider the use of skin FXN as a novel surrogate endpoint reasonably likely to predict clinical benefit to support a planned Biologics License Application (“BLA”) submission seeking accelerated approval and that the use of FXN as a novel surrogate endpoint to support accelerated approval. There was also agreement on the type of analyses required to support the exposure response relationships for the nomlabofusp program. The FDA also stated that the adequacy of the safety database will be a matter of review at the time of BLA submission. We have scheduled a Type B meeting with the FDA later in the second quarter of 2026. We plan to provide topline study data from our OL study in the second quarter of 2026 and we plan to initiate a rolling BLA seeking accelerated approval with the submission of nonclinical and clinical modules in June 2026. We are continuing to focus on the completeness of our chemistry, manufacturing and controls ("CMC") module, and plan to submit the final modules, including the CMC module, in the second half of 2026. If approved, we are targeting a U.S. launch in the first half of 2027. For our global confirmatory Phase 3 study, we are planning sites in the U.S., E.U., U.K., Canada and Australia. We have obtained feedback from both the FDA and the EMA on the study protocol. We plan to initiate dosing of the first patient in mid-2026. Financing Activities, including Recent Material Financings We have funded our operations to date primarily with proceeds from sales of common stock, proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents, marketable securities, and restricted cash upon the merger with Zafgen, Inc. (“Zafgen”) and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC. In May 2024, we entered into a Sales Agreement (“2024 ATM Agreement”) with Guggenheim Securities, LLC in connection with the establishment of an “at-the-market” offering program providing for the sale of up to an aggregate of $100 million of shares of our common stock from time to time. To date, we have made no sales under the 2024 ATM agreement. In July 2025, we completed an underwritten public offering in which we issued and sold 21,562,500 shares of our common stock, including the exercise in full of the underwriters' option to purchase additional shares, at a public offering price of $3.20 per share. We received net proceeds of approximately $65.0 million, after deducting underwriting discounts, commissions and other offering expenses. In February 2026, we completed an underwritten public offering in which we issued and sold 23,000,000 shares of our common stock, including the exercise in full of the underwriters' option to purchase additional shares, at a public offering price of $5.00 per share. We received net proceeds of approximately $107.6 million, after deducting underwriting discounts, commissions, and other offering expenses. Critical Accounting Policies and Significant Judgments and Estimates Our condensed, consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles (“GAAP”). The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, costs and 23 expenses, and related disclosures. We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate these estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. Research and Development Expense Costs for certain research and development activities, such as manufacturing, non-clinical studies, and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators, and accordingly, are considered an area of significant judgment and management’s review of manufacturing, non-clinical, and clinical expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel, and outside vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. We work with vendors and suppliers to ensure that our estimates of our research and development expenses are reasonable. We expect to increase our investment in research and development in order to advance nomlabofusp through additional clinical trials. As a result, we expect that our research and development expenses will continue to increase in the foreseeable future as we pursue clinical development of nomlabofusp, including manufacturing activities, and/or any other product candidates we develop. Stock Compensation Expense We measure all stock-based awards granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. The assumptions used in our option-pricing model represent management’s best estimates. These estimates are complex, involve a number of variables, uncertainties, and assumptions and the application of management’s judgment, and thus are inherently subjective. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. Prior to May 28, 2020, we were a private company and lacked company-specific historical and implied volatility information for our common stock. Prior to January 1, 2023, we estimated our expected common stock price volatility solely based on the historical volatility of publicly traded peer companies with comparable characteristics including enterprise value, risk profiles, and position within the industry. Beginning on January 1, 2023, we began blending our historical data starting in June 2020 (following our merger with Zafgen in 2020) with its historical peer group. We regularly evaluate our peer group to assess changes in circumstances where identified companies may no longer be similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. We expect to continue to do so until we have full historical data regarding the volatility of our own traded stock price. The expected term of our stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield considers the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future. Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method. We account for forfeitures as they occur. In January 2025, our Board of Directors (“Board”) approved the issuance of an aggregate of 200,000 performance-based restricted stock units (“RSUs”) to certain of our executive officers (the “January 2025 PSU Awards”). The Board established specified performance criteria and a corresponding performance period over which such performance criteria must be achieved, the satisfaction of which are conditions to earning the January 2025 PSU Awards, and vesting of the underlying RSUs. As of March 31, 2026, the underlying performance criteria of the January 2025 PSU Awards were determined to be not probable of achievement for accounting purposes and no stock-based compensation expense was recognized for the three months ended March 31, 2026. We classify stock-based compensation expense in our consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. 24 Financial Operations Overview Revenue To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts result in clinical success and regulatory approval or collaboration agreements with third parties for our product candidates, we may generate revenue from those product candidates or collaborations. Operating Expenses The majority of our operating expenses since inception have consisted primarily of research and development activities, and general and administrative costs. Research and Development Expenses Research and development expenses, which consist primarily of costs associated with our product research and development efforts, are expensed as incurred. Research and development expenses consist primarily of: • third-party contract costs relating to research, formulation, manufacturing, non-clinical studies and clinical trial activities; • employee related costs, including salaries, benefits and stock-based compensation expenses for employees engaged in scientific research and development functions; • external costs of outside consultants and vendors; • payments made under our third-party licensing agreements; • laboratory consumables; and • allocated facility-related costs. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical and commercial development of nomlabofusp, or any other product candidates we develop. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of clinical trials and development of nomlabofusp or any other product candidates we develop will depend on a variety of factors, including: • the scope, rate of progress and expense of clinical trials and other research and development activities; • clinical trial results; • uncertainties in clinical trial enrollment rate or design; • significant and changing government regulation; • the timing and receipt of any regulatory approvals; • the influence of the FDA or other regulatory authorities on our clinical trial design and timing; • establishing manufacturing capabilities or making arrangements with third-party manufacturers and risk involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes; • our ability to obtain and maintain patent and trade secret protection and regulatory exclusivity for our product candidates; and • our ability to recruit and retain key research and development personnel. A change in the outcome of one or more of these variables with respect to the development of a product candidate could significantly change the costs, timing, and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct additional non-clinical or clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. 25 General and Administrative Expenses General and administrative expenses consist primarily of personnel costs, consisting of salaries, related benefits and stock-based compensation, costs related to our executive, finance, commercial, information technology, and costs related to other administrative functions. General and administrative expenses also include insurance expenses and professional fees for auditing, commercial readiness costs, tax, and legal services, including legal expenses to pursue patent protection for our intellectual property and related costs. We expect that our general and administrative expenses will increase in the foreseeable future as we hire additional employees to implement, improve, and scale our operational, financial, commercial and management systems. Results of Operations Comparison of three months ended March 31, 2026 and 2025 The following table summarizes our results of operations for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, Increase 2026 2025 (Decrease) (in thousands) Statement of Operations Data: Operating expenses: Research and development $ 25,031 $ 26,552 $ (1,521 ) General and administrative 6,086 4,636 1,450 Total operating expenses 31,117 31,188 (71 ) Loss from operations (31,117 ) (31,188 ) 71 Other income (expense), net 1,504 1,907 (403 ) Net loss $ (29,613 ) $ (29,281 ) $ (332 ) Research and Development Expenses Research and development expenses for the three months ended March 31, 2026 decreased $1.5 million compared to the three months ended March 31, 2025. The decrease in research and development expenses was primarily driven by a decrease of $3.1 million in nomlabofusp manufacturing related costs and a decrease of $0.5 million in clinical trial costs primarily related to the completion of the Company’s adolescent run-in study in the first half of 2025, partially offset by an increase of $1.6 million in professional consulting fees predominantly related to BLA preparation and inspection readiness, and an increase of $0.2 million in personnel expenses due to increased headcount. General and Administrative expenses General and administrative expenses for the three months ended March 31, 2026 increased $1.5 million compared to the three months ended March 31, 2025. The increase in general and administrative expenses was primarily due to an increase of $1.1 million in professional fees related to commercial consulting services performed and an increase of $0.3 million of personnel costs associated with increased headcount. Other Income (expense), net Other income (expense), net was $1.5 million income in the three months ended March 31, 2026 compared to $1.9 million income in the three months ended March 31, 2025. The decrease was primarily driven by lower interest and accretion income due to lower interest yields and lower average investable cash, cash equivalents, and marketable securities balances. Liquidity and Capital Resources Since our inception, we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from our operations. We have devoted substantially all of our resources to developing nomlabofusp, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, capital raising, and providing general and administrative support for such operations. 26 Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented below: Three Months Ended March 31, 2026 2025 (in thousands) Net cash used in operating activities $ (44,614 ) $ (26,540 ) Net cash provided by (used in) investing activities 29,000 14,448 Net cash provided by financing activities 108,115 — Net increase in cash, cash equivalents and restricted cash $ 92,501 $ (12,092 ) Net cash used in operating activities During the three months ended March 31, 2026, operating activities used $44.6 million of cash, resulting from our net loss of $29.6 million, adjusted for noncash expenses of $1.9 million and changes in our operating assets and liabilities resulting in a use of cash of $16.9 million. Our net loss was primarily attributed to research and development activities related to our nomlabofusp program and our general and administrative expenses as described above. Noncash expenses primarily relate to stock-based compensation expenses. The change in operating assets and liabilities was primarily due to an decrease in accrued expenses. During the three months ended March 31, 2025, operating activities used $26.5 million of cash, resulting from our net loss of $29.3 million, adjusted for noncash expenses of $1.1 million and changes in our operating assets and liabilities resulting in a source of cash of $1.6 million. Our net loss was primarily attributed to research and development activities related to our nomlabofusp program and our general and administrative expenses as described above. Noncash expenses are primarily stock-based compensation expenses. The change in operating assets and liabilities was primarily due to a decrease in prepaid expenses, partially offset by a decrease in accrued expense and accounts payable. Net cash provided by (used in) investing activities During the three months ended March 31, 2026, investing activities provided $29.0 million of cash from the maturities of marketable securities. During the three months ended March 31, 2025, investing activities provided $14.4 million of cash from the maturities of $67.0 million of marketable securities, partially offset by the purchase of $52.5 million in marketable securities. Net cash provided by financing activities During the three months ended March 31, 2026, financing activities provided $108.1 million of cash flows from an offering of common stock. During the three months ended March 31, 2025, there were no financing activities. Operating Capital Requirements We have not yet commercialized any products and do not expect to generate revenue from the commercial sale of any products for several years, if at all. We have incurred net losses of approximately $29.6 million and $29.3 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, we had an accumulated deficit of $464.4 million and cash, cash equivalents, and marketable securities of $200.4 million, excluding restricted cash of $0.6 million. Losses have resulted principally from costs incurred in connection with research and development activities, and general and administrative costs associated with the development of nomlabofusp and our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we expect to continue to incur expenses in connection with our ongoing activities, if and as we: • continue to advance the development of nomlabofusp through additional clinical trials, including related manufacturing costs; 27 • seek to identify and advance development of additional product candidates into clinical development and identify additional indications for our product candidates; • seek to obtain regulatory approvals for nomlabofusp and other potential product candidates; • identify, acquire or in-license other product candidates and technologies; • maintain, leverage and expand our intellectual property portfolio; and • expand our operational, financial, commercial and management systems and personnel, including personnel to support our clinical development and future commercialization efforts and our operations as a public company. In July 2025, we sold 21,562,500 shares of our common stock, after deducting underwriters' discounts, commissions and other offering expenses and received net proceeds of approximately $65.0 million, after deducting underwriting discounts, commissions, and other offering expenses. In February 2026, we completed an underwritten public offering in which we issued and sold 23,000,000 shares of our common stock, including the exercise in full of the underwriters' option to purchase additional shares, at a public offering price of $5.00 per share. We received net proceeds of approximately $107.6 million, after deducting underwriting discounts, commissions, and other offering expenses. We anticipate that our current cash, cash equivalents, and marketable securities as of March 31, 2026 will fund operations into the second quarter of 2027. If we encounter unexpected delays in our clinical trials or if there are other unanticipated changes to our operating plan from our current assumptions that negatively impact our operations, we may reduce expenditures in order to further extend our existing cash resources. Until we can generate substantial revenue, if ever, we could seek additional funding through a combination of public or private equity offerings, debt/royalty financings, collaborations, strategic alliances and licensing arrangements or other sources. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, minimum cash balances, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. There can be no assurance that, if required, we would be able to raise sufficient additional capital on acceptable terms, if at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, or we do not have sufficient authorized shares, we may be required to delay, limit, or eliminate the development of business opportunities and our ability to achieve our business objectives, our competitiveness, and our business, financial condition, and results of operations will be materially adversely affected. We could also be required to seek funds through arrangements with collaborative partners, strategic alliances or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. In addition, geopolitical tensions, volatility of capital markets, and other adverse macroeconomic events, including those due to inflationary pressures, rising interest rates, bank instability and the ability of the U.S. government to manage federal debt limits, as well as the potential impact of health crises on the global financial markets may reduce our ability to access capital, which could negatively affect our liquidity and ability to continue as a going concern. If we are required to obtain sufficient funding, but are unable to do so, when needed and/or on acceptable terms, we may be required to significantly curtail, delay or discontinue one or more of our research and development programs, the manufacture of clinical and commercial supplies, product portfolio expansion and/or pre commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. Certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. 28 During the periods presented we did not have, and we currently do not have, any off-balance sheet arrangements, as defined under applicable SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets. Recently Issued Accounting Pronouncements Please read Note 2 to our condensed consolidated financial statements included in Part I of Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business, if any. Other Company Information None. 29 Item 3. Quantitative and Qualitati ve Disclosures about Market Risk We are a "smaller reporting company" as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and are not required to provide the information under this item.