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Item 2. Management’s Discussion and Analysis

2025-08-12 compared with 2025-05-14 · 73 added, 39 removed, 191 unchanged (37% of the section changed)

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and the sections entitled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on March 31, 2025, or 2024 Form 10-K.

We are a clinical-stage biopharmaceutical company harnessing the power of human genetics to develop novel, small molecule precision medicines for patients living with renal, cardiovascular and related metabolic, or CVRM diseases, including obesity.

We are a clinical-stage biopharmaceutical company harnessing the power of human genetics to develop novel, small molecule precision medicines for patients living with kidney and metabolic diseases, including obesity.

We are advancing a pipeline using our Compass platform, which allows us to identify and characterize genetic variants in disease and then link those variants to the biological pathways that drive disease in specific patient groups through a process we refer to as variant functionalization.

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We are currently advancing two wholly owned lead programs, MZE829 and MZE782, each of which represents a novel precision medicine-based approach.

Our goal is to bring novel precision medicines to patients with CVRM diseases, which is where we believe we can maximize our impact on human health.

Our goal is to bring novel precision medicines to patients with kidney and metabolic diseases, which is where we believe we can maximize our impact on human health.

Since our inception, we have focused substantially all of our efforts and financial resources on research and development activities for our programs and on establishing arrangements and collaborations with third parties for the development of our therapeutic candidates.

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Except for the one-time, nonrefundable upfront payments we received pursuant to the license agreements we entered into with several biotechnology companies in 2024, including the exclusive license agreement with Shionogi & Company, Ltd., or Shionogi, we expect to continue incurring significant operating losses for the foreseeable future due to the cost of research and development, clinical trials, preclinical studies and the regulatory approval process for our therapeutic candidates.

We have incurred significant losses and negative cash flows from operations since our inception, except for the net income and cash provided by operations due to license revenue during the year ended December 31, 2024, and we expect to incur significant and increasing losses as a result of our continued research and development activities.

During the three months ended March 31, 2025 and 2024, we incurred net losses of $32.8 million and $32.5 million, respectively.

As of March 31, 2025, we had an accumulated deficit of $391.2 million and do not expect positive cash flows from operations in the foreseeable future.

We have incurred significant losses and negative cash flows from operations since our inception, except for the net income and cash provided by operations due to license revenue recognized during the year ended December 31, 2024, and we expect to incur significant and increasing losses as a result of our continued research and development activities.

During the three and six months ended June 30, 2025, we incurred net losses of $33.7 million and $66.5 million, respectively.

During the three and six months ended June 30, 2024, we incurred net income of $139.1 million and $106.6 million, respectively.

As of June 30, 2025, we had an accumulated deficit of $424.9 million and do not expect positive cash flows from operations in the foreseeable future.

We expect to continue incurring significant expenses and increasing losses for the foreseeable future.

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In addition, we expect to incur additional costs associated with operating as a public company.

As of March 31, 2025, we had cash and cash equivalents of $294.4 million.

As of June 30, 2025, we had cash and cash equivalents of $264.5 million.

Since our inception, we have financed our operations primarily through issuances of our equity, license agreements with biotechnology companies and issuances of convertible promissory notes.

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In 2020, we formed a spin-out company, Broadwing Bio LLC, or Broadwing, with Alloy Therapeutics, Inc., or Alloy, to develop therapeutic antibody therapies for ANGPTL7 and another undisclosed target in ophthalmic diseases, informed by our Compass platform.

As of March 31, 2025, we owned approximately 48% of the outstanding equity of Broadwing, and we expect our ownership to be significantly diluted upon the conversion of outstanding convertible notes issued by Broadwing.

As of June 30, 2025, we owned approximately 48% of the outstanding equity of Broadwing, and we expect our ownership to be significantly diluted upon the conversion of outstanding convertible notes issued by Broadwing.

We retain certain opt-in rights to jointly develop and commercialize certain therapeutic candidates developed through Broadwing with Alloy.

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The License Agreement will expire on a Licensed-Product by Licensed-Product and country-by-country basis upon the expiration of the royalty term for such Licensed Product, which will be the latest of the date when there are no remaining valid claims covering the applicable Licensed Product, the expiration of regulatory exclusivity for the applicable Licensed Product, or 11 years after the first commercial sale of the applicable Licensed Product, subject to earlier termination by the parties.

As of March 31, 2025, we estimate that the last patent right for the only currently issued patent licensed under the License Agreement will expire in 2042, without giving effect to any potential patent term extensions, patent term adjustments , or future patents that may or may not issue with respect to the Licensed Products.

As of June 30, 2025, we estimate that the last patent right for the only currently issued patent licensed under the License Agreement will expire in 2042, without giving effect to any potential patent term extensions, patent term adjustments , or future patents that may or may not issue with respect to the Licensed Products.

Upon expiration of the License Agreement, the licenses granted to Shionogi will become fully paid-up, perpetual, irrevocable and royalty-free.

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We elected to apply the fair value option, as per Accounting Standards Codification, or ASC, Section 825-10, to the outstanding convertible promissory notes issued.

As such, the convertible promissory notes were recognized at fair value with changes in fair value recognized in the condensed statements of operations and comprehensive loss.

We recorded a loss of $4.8 million, reflecting the change in the fair value of the convertible promissory notes in the condensed statements of operations and comprehensive loss for the three months ended March 31, 2024.

As such, the convertible promissory notes were recognized at fair value with changes in fair value recognized in the condensed statements of operations and comprehensive (loss) income.

We recorded a net gain of $0.2 million and a net loss of $4.5 million in the condensed statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2024, respectively, reflecting the change in the fair value of the convertible promissory notes.

The impact of interest expense on the convertible promissory notes is included within the changes in fair value.

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No convertible promissory notes were outstanding as of December 31, 2024.

Accordingly, no change in fair value of convertible promissory notes was recorded in the condensed statements of operations and comprehensive loss for the three months ended March 31, 2025.

Accordingly, no change in fair value of convertible promissory notes was recorded in the condensed statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2025.

Income tax expense

We are subject to corporate United States federal and state income taxation.

We account for income taxes using the asset and liability method and recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns subject to a determinable valuation allowance.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

In evaluating the ability to recover our deferred income tax assets, we consider all available positive and negative evidence, including our operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis.

In the event we determine that we would be able to realize our deferred income tax assets in the future in excess of our net recorded amount, we would make an adjustment to the valuation allowance that would reduce the provision for income taxes.

Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period when such determination is made.

We recognize uncertain income tax positions at the largest amount that is more likely than not to be sustained upon audit by the

relevant taxing authority.

An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.

Changes in recognition or measurement are reflected in the period in which judgment occurs.

Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of the provision for income tax.

Results of operations

Comparisons of the three months ended March 31, 2025 and 2024

Three months ended March 31,

Comparisons of the three and six months ended June 30, 2025 and 2024

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

License revenue

Operating expenses:

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Total operating expenses

Loss from operations

(Loss) income from operations

Interest and other income, net

Change in fair value of convertible promissory notes

Net loss and comprehensive loss

(Loss) income before income tax expense

Income tax expense

Net (loss) income and comprehensive (loss) income

License revenue

We recognized no license revenue for the three and six months ended June 30, 2025.

We recognized a total of $165.0 million of license revenue for the three and six months ended June 30, 2024.

License revenue recognized in 2024 primarily related to the License Agreement with Shionogi, wherein we received an upfront payment of $150.0 million in exchange for the transfer of the license, know-how, and materials related to the research, development, manufacture and commercialization of MZE001 and certain other small molecule compounds modulating glycogen synthase 1.

License revenue recognized in 2024 also included amounts related to the exclusive license agreement with Trace Neuroscience, Inc., or Trace, wherein we received an upfront payment of $15.0 million in exchange for the transfer of the license, know-how, and materials related to the research, development, manufacture and commercialization of a discovery research program targeting UNC13A for the treatment of amyotrophic lateral sclerosis, or ALS.

Research and development expenses

Research and development expenses were $27.6 million and $21.9 million for the three months ended March 31, 2025 and 2024, respectively.

The increase of $5.7 million between the comparative periods was primarily due to an increase of $3.1 million in clinical trial expenses based on the progression of our Phase 2 clinical trial for MZE829 that was initiated in November 2024 and our Phase 1 clinical trial for MZE782 that was initiated in September 2024.

The increase also reflects higher personnel-related costs of $1.7 million due to an increase in headcount and higher outside research and development services of $0.6 million primarily related to professional service fees for our research programs.

Three months ended March 31,

Research and development expenses were $28.1 million and $19.5 million for the three months ended June 30, 2025 and 2024, respectively.

The increase of $8.6 million between the comparative three month periods was primarily due to an increase of $2.7 million in clinical trial expenses and $1.6 million in manufacturing expenses based on the progression of our Phase 2 clinical trial for MZE829 that was initiated in November 2024 and our Phase 1 clinical trial for MZE782 that was initiated in September 2024.

The increase also reflects higher personnel-related costs of $2.4 million due to an increase in headcount and higher costs for outside research and development services of $1.2 million for our early research programs.

Research and development expenses were $55.7 million and $41.4 million for the six months ended June 30, 2025 and 2024, respectively.

The increase of $14.3 million between the comparative six month periods was primarily due to an increase of $5.8 million in clinical trial expenses and $1.5 million in manufacturing expenses based on the progression of our Phase 2 clinical trial for MZE829 and our Phase 1 clinical trial for MZE782.

The increase also reflects higher personnel-related costs of $4.2 million due to an increase in headcount and higher costs for outside research and development services of $1.9 million for our early research programs.

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Personnel-related costs

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General and administrative expenses

General and administrative expenses were $7.8 million and $6.1 million for the three months ended March 31, 2025 and 2024, respectively.

The increase of $1.7 million between the comparative periods was primarily due to an increase of $1.4 million in personnel-related costs due to an increase in headcount and higher professional service fees of $0.3 million.

General and administrative expenses were $8.4 million and $5.9 million for the three months ended June 30, 2025 and 2024, respectively.

The increase of $2.5 million between the comparative three month periods was primarily due to an increase of $1.2 million in personnel-related costs due to an increase in headcount and higher costs for professional service fees of $0.8 million.

General and administrative expenses were $16.2 million and $12.0 million for the six months ended June 30, 2025 and 2024, respectively.

The increase of $4.2 million between the comparative six month periods was primarily due to an increase of $2.6 million in personnel-related costs due to an increase in headcount and higher costs for professional service fees of $0.6 million.

Interest and other income, net

Interest and other income, net was $2.6 million and $0.3 million for the three months ended March 31, 2025 and 2024, respectively.

The increase of $2.3 million between the comparative periods primarily reflects an increase in interest income as a result of higher cash and cash equivalent balances held during the three months ended March 31, 2025 from the nonrefundable upfront payments that we received pursuant to the license agreements we entered with Shionogi, Trace and Neurocrine in 2024, and proceeds from the private placement of our Series D Preferred Stock completed in November 2024 and initial public offering completed in February 2025.

Interest and other income, net was $2.8 million and $5.4 million for the three and six months ended June 30, 2025, respectively.

Interest and other income, net was $1.0 million and $1.3 million for the three and six months ended June 30, 2024, respectively.

The increase of $1.8 million and $4.1 million between the comparative three and six months periods, respectively, primarily reflects an increase in interest income as a result of higher cash and cash equivalent balances held during the three and six months ended June 30, 2025 from the proceeds received from the private placement of our Series D Preferred Stock completed in November 2024 and initial public offering completed in February 2025.

Change in fair value of convertible promissory notes

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We elected to apply the fair value option to the convertible promissory notes issued.

As such, the convertible promissory notes were recorded at fair value at each reporting period with changes in fair value recognized in the condensed statements of operations and comprehensive loss.

The change in fair value of the convertible promissory notes resulted in a loss of $4.8 million for the three months ended March 31, 2024.

As such, the convertible promissory notes were recorded at fair value at each reporting period with changes in fair value recognized in the condensed statements of operations and comprehensive (loss) income.

The change in fair value of the convertible promissory notes resulted in a net gain of $0.2 million and a net loss of $4.5 million for the three and six months ended June 30, 2024.

The convertible promissory notes converted into Series D-1 Preferred Stock in November 2024 in connection with the private placement of our Series D Preferred Stock, which was a qualified preferred stock financing pursuant to the terms of the convertible promissory notes.

No convertible promissory notes were outstanding as of December 31, 2024.

Accordingly, no change in fair value of convertible promissory notes was recorded in the condensed statements of operations and comprehensive loss for the three months ended March 31, 2025.

Income tax expense

Income tax expense was zero for the three and six months ended June 30, 2025 compared to $1.7 million for the three and six months ended June 30, 2024.

The decrease between the comparative three and six months periods was due to the net income generated during the three and six months ended June 30, 2024, as a result of the recognition of license revenue under our license agreements with Shionogi and Trace, as compared to the net loss incurred during the three and six months ended June 30, 2025.

Liquidity and capital resources

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To date, we have financed our operations primarily through private placements of redeemable convertible preferred stock, one-time, nonrefundable upfront payments made to us in connection with our entry into license agreements, private placements of convertible promissory notes, and most recently, through an initial public offering of our common stock.

As of March 31, 2025, we had cash and cash equivalents of $294.4 million and an accumulated deficit of $391.2 million.

As of June 30, 2025, we had cash and cash equivalents of $264.5 million and an accumulated deficit of $424.9 million.

In February 2025, we completed our initial public offering, pursuant to which we issued and sold an aggregate of 8,750,000 shares of our common stock at an initial public offering price of $16.00 per share, resulting in net proceeds of approximately $127.8 million, after deducting underwriting discounts, commissions and other offering expenses paid by us in 2025.

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We have entered into consortium agreements with the University of Helsinki and Queen Mary University to access genomic information from patient samples and genetic and paired clinical data.

As of March 31, 2025, we are obligated to pay $5.0 million under these agreements through the year ended December 31, 2027.

As of June 30, 2025, we are obligated to pay $4.9 million under these agreements through the year ended December 31, 2027.

We enter into contracts in the normal course of business with third-party contract organizations for preclinical trials, non-clinical trials and testing, and other services and products for operating purposes.

These contracts generally provide for termination following a certain period after notice.

Comparisons of the three months ended March 31, 2025 and 2024

Comparisons of the six months ended June 30, 2025 and 2024

The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for the periods presented below:

Three months ended March 31,

Six Months Ended June 30,

(in thousands)

Net cash used in operating activities

Net cash (used in) provided by operating activities

Net cash used in investing activities

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Net increase in cash, cash equivalents and restricted cash

Net cash used in operating activities

Net cash used in operating activities was $29.5 million and $23.4 million for the three months ended March 31, 2025 and 2024, respectively.

The net cash used in operating activities for the three months ended March 31, 2025 was primarily due to our net loss of $32.8 million combined with a net change in our operating assets and liabilities of $1.4 million, offset by $4.7 million in non-cash charges such as depreciation, stock-based compensation and lease expense.

The net cash used in operating activities for the three months ended March 31, 2024 was primarily due to our net loss of $32.5 million, offset by a net change in our operating assets and liabilities of $0.3 million as well as $8.8 million in non-cash charges such as depreciation, stock-based compensation, lease expense and the change in fair value of the convertible promissory notes.

Net cash (used in) provided by operating activities

Net cash used in operating activities was $59.6 million for the six months ended June 30, 2025 and net cash provided by operating activities was $121.6 million for the six months ended June 30, 2024.

The net cash used in operating activities for the six months ended June 30, 2025 was primarily due to our net loss of $66.5 million combined with a net change in our operating assets and liabilities of $2.5 million, offset by $9.4 million in non-cash charges such as depreciation, stock-based compensation and lease expense.

The net cash provided by operating activities for the six months ended June 30, 2024 was primarily due to our net income of $106.6 million combined with a net change in our operating assets and liabilities of $2.7 million and $12.4 million in non-cash charges such as depreciation, stock-based compensation, lease expense and the change in fair value of the convertible promissory notes.

Net cash used in investing activities

Net cash used in investing activities for the three months ended March 31, 2025 and 2024 was $0.3 million in each period, which related to the purchase of property and equipment.

Net cash used in investing activities was $0.7 million and $0.4 million for the six months ended June 30, 2025 and 2024, respectively, which related to the purchase of property and equipment.

Net cash provided by financing activities

For the three months ended March 31, 2025, net cash provided by financing activities was $127.4 million, which consisted of net proceeds of $127.8 million from the issuance of common stock pursuant to the initial public offering and $0.1 million from the exercise of stock option awards, net of repurchases, offset by the payment of $0.5 million for the success fee under the loan and security agreement.

For the three months ended March 31, 2024, net cash provided by financing activities was $24.6 million, which consisted of net proceeds of $24.2 million from the issuance of convertible promissory notes and $0.4 million from the exercise of stock option awards, net of repurchases.

For the six months ended June 30, 2025, net cash provided by financing activities was $128.0 million, which consisted of net proceeds of $127.8 million from the issuance of common stock pursuant to our initial public offering, $0.6 million from the issuance of common stock under the 2025 Employee Stock Purchase Plan and $0.1 million from the exercise of stock option awards, net of repurchases, partially offset by the payment of $0.5 million for the success fee under the loan and security agreement.

For the six months ended June 30, 2024, net cash provided by financing activities was $24.7 million, which consisted of net proceeds from the issuance of convertible promissory notes of $24.5 million and $0.4 million from the exercise of stock option awards, net of repurchases, partially offset by the payment of $0.2 million for deferred offering costs related to our initial public offering.

Critical accounting policies, significant judgments and use of estimates

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We described the accounting policies that we believe involve a significant level of estimation and uncertainty, which could have a material impact on our financial condition or results of operations and are therefore deemed critical accounting policies, in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March, 31, 2025.

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2025.

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2025.

Our condensed financial statements have been prepared in accordance with U.S.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis