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Item 8. Financial Statements and Supplementary Data

2024-03-21 compared with 2023-03-15 · 194 added, 249 removed, 332 unchanged (57% of the section changed)

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Statements of Operations for the Years Ended December 31, 2023 and 2022

Statements of Convertible Preferred Stock and Stockholders’ Deficit for the Years Ended December 31, 2022 and 2021

Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Years Ended December 31, 2023 and 2022

Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board

of Directors of Mineralys Therapeutics, Inc.

We have audited the financial statements of Mineralys Therapeutics, Inc.

(the Company), which comprise the balance sheets as of December 31, 2022 and 2021, and the related statements of operations, changes in convertible preferred stock and stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with U.S.

To the Stockholders and the Board of Directors of Mineralys Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Mineralys Therapeutics, Inc.

(the Company) as of December 31, 2023 and 2022, the related statements of operations, convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

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Cash and cash equivalents $ 49,304 $ 87,701

Marketable securities 22,409 —

Investments 187,263 22,409

Prepaid and other current assets 12,536 2,701

Total current assets 249,103 112,811

Investments, noncurrent 2,482 —

Other assets 51 1,631

Total assets $ 251,636 $ 114,442

Liabilities, convertible preferred stock, and stockholders’ deficit

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

Current liabilities:

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Series A convertible preferred stock, $ 0.0001 par value, 0 and 86,332,216 shares authorized and 0 and 86,332,216 shares issued and outstanding as of December 31, 2023 and 2022, respectively, $ 0 and $ 41,180 aggregate liquidation preference as of December 31, 2023 and 2022, respectively

40,987 28,996

Series B convertible preferred stock, $ 0.0001 par value, 0 and 136,510,868 shares authorized and 0 and 136,510,868 shares issued and outstanding as of December 31, 2023 and 2022, respectively, $ 0 and $ 118,000 aggregate liquidation preference as of December 31, 2023 and 2022, respectively

Stockholders’ deficit:

Stockholders’ equity (deficit):

Common stock, $ 0.0001 par value, 500,000,000 and 319,000,000 shares authorized and 41,133,916 and 6,419,238 shares issued and outstanding as of December 31, 2023 and 2022, respectively

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Accumulated deficit ( 124,708 ) ( 52,810 )

Total stockholders’ deficit (52,269) (22,925)

Total liabilities, convertible preferred stock, and stockholders’ deficit $ 114,442 $ 11,125

Total stockholders’ equity (deficit) 241,154 ( 52,269 )

Total liabilities, convertible preferred stock, and stockholders’ equity (deficit) $ 251,636 $ 114,442

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

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Loss from operations ( 84,657 ) ( 31,479 )

Other income (expense):

Interest income (expense), net 1,676 (27)

Change in fair value of convertible notes — (657)

Interest income, net 12,756 1,676

Other income 3 4

Total other income (expense), net 1,680 (683)

Total other income, net 12,759 1,680

Net loss $ ( 71,898 ) $ ( 29,799 )

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Mineralys Therapeutics, Inc.

Statements of Convertible Preferred Stock and Stockholders’ Deficit

Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

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Deficit Total

Stockholders’ Deficit

Stockholders’ Equity (Deficit)

Shares Amount Shares Amount Shares Amount

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Issuance of Series A convertible preferred stock, net of issuance costs of $ 7

Issuance of Series A convertible preferred stock upon conversion of convertible notes 10,868,432 5,184 — — — — — — —

25,151,957 11,991 — — — — — — —

Issuance of Series B convertible preferred stock, net of issuance costs of $ 343

— — 136,510,868 117,657 — — — — —

Issuance of restricted stock awards — — — — 977,258 — — — —

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Balance as of December 31, 2022 86,332,216 40,987 136,510,868 117,657 6,419,238 1 540 ( 52,810 ) ( 52,269 )

Issuance of Series A convertible preferred stock, net of issuance costs of $7 25,151,957 11,991 — — — — — — —

Issuance of Series B convertible preferred stock, net of issuance costs of $343 — — 136,510,868 117,657 — — — — —

Issuance of restricted stock awards — — — — 977,258 — — — —

Conversion of preferred stock to common stock upon closing of initial public offering ( 86,332,216 ) ( 40,987 ) ( 136,510,868 ) ( 117,657 ) 20,637,415 2 158,642 — 158,644

Issuance of common stock from initial public offering, net of issuance costs of $ 19,441

— — — — 13,800,000 1 201,358 — 201,359

Issuance of common stock from stock option exercises — — — — 268,534 — 194 — 194

Issuance of common stock for cash under employee stock purchase plan — — — — 8,729 — 64 — 64

Stock-based compensation — — — — — — 5,060 — 5,060

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Stock-based compensation 5,060 455

Change in fair value of convertible notes — 657

Non-cash interest expense — 27

Changes in operating assets and liabilities:

Accrued interest receivable ( 355 ) —

Prepaid and other current assets ( 9,530 ) ( 2,240 )

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CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance of common stock in initial public offering, net of offering costs 202,990 ( 1,629 )

Proceeds from stock option exercises 194 —

Proceeds from the issuance of common stock for cash under employee stock purchase plan 64 —

Proceeds from the issuance of Series A convertible preferred stock, net of offering costs — 11,991

Proceeds from the issuance of Series B convertible preferred stock, net of offering costs — 117,657

Deferred offering costs (1,629) —

Net cash provided by financing activities 203,248 128,019

Net increase in cash, cash equivalents, and restricted cash 77,039 9,253

Net increase (decrease) in cash and cash equivalents ( 38,397 ) 77,039

Cash, cash equivalents, and restricted cash - beginning 87,701 10,662

Cash, cash equivalents, and restricted cash - ending (1)

Cash and cash equivalents - ending (1)

$ 49,304 $ 87,701

Supplement Disclosure of Non-Cash Financing Activities:

Conversion of convertible preferred stock to common stock upon closing of initial public offering $ 159,180 $ —

Deferred offering costs included in accounts payable and accrued liabilities $ — $ 360

Conversion of convertible notes and accrued interest to Series A convertible preferred stock $ — $ 5,184

(1) Cash and cash equivalents as of December 31, 2022 exclude marketable securities of $22.4 million.

Cash, cash equivalents, and marketable securities amounted to $110.1 million as of December 31, 2022.

(1) Cash and cash equivalents as of December 31, 2023 exclude investments of $ 189.7 million.

Cash, cash equivalents, and investments amounted to $ 239.0 million as of December 31, 2023.

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

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(the Company) is a clinical-stage biopharmaceutical company focused on developing medicines to target diseases driven by abnormally elevated aldosterone.

The Company’s clinical-stage product candidate, lorundrostat, is a proprietary, orally administered, highly selective aldosterone synthase inhibitor that the Company is initially developing for the treatment of patients with uncontrolled or resistant hypertension.

The Company has completed a Phase 2 proof-of-concept study of lorundrostat for the treatment of uncontrolled or resistant hypertension and has plans for the continued research and development of lorundrostat in hypertension and other potential indications.

The Company’s clinical-stage product candidate, lorundrostat, is a proprietary, orally administered, aldosterone synthase inhibitor that the Company is initially developing for the treatment of cardiorenal conditions affected by abnormally elevated aldosterone, including hypertension and chronic kidney disease.

The Company has initiated a pivotal clinical program of lorundrostat for the treatment of uncontrolled or resistant hypertension and initiated a Phase 2 trial for lorundrostat in hypertensive patients with Stage 2 to 3b chronic kidney disease.

The Company was incorporated as a Delaware corporation in May 2019, and it is headquartered in Radnor, Pennsylvania.

The Company’s operations to date have been limited to business planning, raising capital, in-licensing lorundrostat, conducting preclinical and clinical trials, and other research and development.

Initial Public Offering

On February 14, 2023, the Company completed an initial public offering (IPO) of 13,800,000 shares of its common stock, which included the exercise in full by the underwriters of their option to purchase 1,800,000 additional shares, at a public offering price of $ 16.00 per share.

The net proceeds to the Company from the IPO were $ 201.4 million, net of underwriting discounts, commissions, and offering costs.

Reverse Stock Split

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Liquidity and Capital Resources

Since inception, the Company has not generated any revenue from product sales or other sources and has incurred significant operating losses and negative cash flows from operations.

Since its inception, the Company has not generated any revenue from product sales or other sources and has incurred significant operating losses and negative cash flows from operations.

The Company’s primary uses of cash to date have been to fund research and development activities, business planning, establishing and maintaining the Company’s intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.

As of December 31, 2022, the Company had an accumulated deficit of $52.8 million and cash, cash equivalents, and marketable securities of $110.1 million.

As of December 31, 2023, the Company had an accumulated deficit of $ 124.7 million and cash, cash equivalents, and investments of $ 239.0 million.

For the year ended December 31, 2023, the Company had a net loss of $ 71.9 million and net cash used in operating activities of $ 81.2 million.

From inception to December 31, 2022 the Company has funded its operations by raising aggregate gross proceeds of approximately $158.0 million from the sale of the Company’s convertible preferred stock and convertible notes.

From inception to December 31, 2023, the Company has funded its operations by raising aggregate gross proceeds of approximately $ 378.8 million from the sale of the Company’s common stock, convertible preferred stock, and convertible notes.

The Company has a limited operating history, and the sales and income potential of its business is unproven.

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Additional funding will be required in the future to continue with the Company’s planned research and development and other activities.

The Company expects to finance its operations through equity offerings, including the IPO that occurred subsequent to December 31, 2022 described in Note 9.

“ Subsequent Events ,” debt financings, and other capital sources, including potential strategic collaborations, licensing, and other similar arrangements.

However, there can be no assurance that any additional financing or strategic transactions will be available to the Company on acceptable terms, if at all.

If events or circumstances occur such that the Company does not obtain additional funding, it may need to delay, reduce, or eliminate its product development or future commercialization efforts, which could have a material adverse effect on the Company’s business and results of operations or financial condition.

The Company believes that its existing cash, cash equivalents, and marketable securities as of December 31, 2022, combined with the cash proceeds received from the sale of the Company’s common stock in the IPO that occurred subsequent to December 31, 2022 described in Note 9.

“ Subsequent Events ,” will be sufficient to allow the Company to fund operations for at least one year from the issuance date of these financial statements.

The Company expects to finance its operations through equity offerings, debt financings, and other capital sources, including potential strategic collaborations, licensing, and other similar arrangements.

The Company believes that its cash, cash equivalents, and investments as of December 31, 2023 will be sufficient to allow the Company to fund operations for at least twelve months from the issuance date of these financial statements.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

Summary of Significant Accounting Policies

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The Company’s management performed an evaluation of its activities through the date of filing of these financial statements and concluded that there are no subsequent events requiring disclosure, other than as disclosed.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

Emerging Growth Company Status

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Actual results could differ from those estimates.

Estimates are used in the following areas, among others:

research and development accruals, fair value of convertible notes, fair value of the Company’s common stock, and income taxes.

Estimates have been used in the following areas, among others:

research and development accruals, fair value of the Company’s common stock prior to the closing of the Company’s IPO, and income taxes.

Cash, Cash Equivalents, and Restricted Cash

As of December 31, 2021, the Company had $50 thousand classified as restricted cash for the required collateral for a credit card facility with Silicon Valley Bank.

As of December 31, 2022, the Company did not have any restricted cash balances.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash as reported in the statement of cash flows to the balance sheets (in thousands):

All highly liquid investments that have maturities of 90 days or less at the date of purchase are classified as cash equivalents.

As of December 31, 2023 and 2022, the Company did not have any restricted

Mineralys Therapeutics, Inc.

Notes to Financial Statements

cash balances.

The following table provides a reconciliation of cash and cash equivalents as reported in the statement of cash flows to the balance sheets (in thousands):

Cash $ 643 $ 2,872

Money market securities 84,829 —

Cash equivalents 48,661 84,829

Total cash and cash equivalents $ 49,304 $ 87,701

Restricted cash, as a component of prepaid and other current assets — 50

Total $ 87,701 $ 10,662

The Company’s cash and cash equivalents balances as of December 31, 2023 include cash balances and amounts held primarily in interest-bearing money market accounts.

As of December 31, 2021, the Company had $ 50 thousand classified as restricted cash, which is reported in the 2022 opening cash, cash equivalents, and restricted cash balance reported in the statements of cash flows.

Concentration of Credit Risk

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Risks and Uncertainties

The Company has not yet generated any revenue from the sale of its products and is subject to all of the risks and uncertainties that are typically faced by biopharmaceutical companies that devote substantially all of their efforts to

Mineralys Therapeutics, Inc.

Notes to Financial Statements

research and development and clinical trials and do not yet have commercial products.

The Company expects to continue incurring losses for the foreseeable future.

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• Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of assets and liabilities)

For certain financial instruments, including cash and restricted cash, prepaid expenses, accounts payable, and certain accrued liabilities, the recorded amount approximates estimated fair value due to their relatively short maturity period.

For certain financial instruments, including cash and cash equivalents, prepaid expenses, accounts payable, and certain accrued liabilities, the recorded amount approximates estimated fair value due to their relatively short maturity period.

Refer to Note 3.

“ Fair Value of Financial Instruments ” for additional details of the Company’s financial instruments.

Marketable Securities

The Company generally invests its excess cash in money market funds and investment-grade short-term fixed-income securities, such as U.S.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

The Company generally invests its excess cash in money market funds and investment-grade short- and long-term fixed-income debt securities, such as U.S.

Treasury bills.

Such investments are included in cash and cash equivalents and marketable securities in the balance sheets.

Such investments are included in cash and cash equivalents, current investments, and investments - noncurrent in the balance sheets.

The Company determines the appropriate classification of short-term and long-term securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

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Held-to-maturity securities are carried at amortized cost, adjusted for the accretion of discounts using the interest method.

The Company invested in marketable securities during the years ended December 31, 2023 and 2022, and no impairment charges were recorded.

For held-to-maturity investments, the Company periodically reviews each individual security position that has an unrealized loss, or impairment, to determine if that impairment is other-than-temporary.

If the Company believes an impairment of a security position is other than temporary, based on available quantitative and qualitative information as of the report date, the loss will be recognized as other income (expense), net, in the Company’s statements of operations and a new cost basis in the investment is established.

The Company began investing in marketable securities during the year ended December 31, 2022, and no impairment charges were recorded.

If the Company believes an impairment of a security position is other than temporary, based on available quantitative and qualitative information as of the report date, the loss will be recognized within other income, net in the Company’s statements of operations and a new cost basis in the investment is established.

Deferred Offering Costs

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Should the equity issuance be abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the statement of operations.

Deferred offering costs as of December 31, 2022 and 2021 were $1.6 million and $3 thousand, respectively.

Deferred offering costs as of December 31, 2023 and 2022 were $ 0 and $ 1.6 million, respectively.

Such costs are classified in other assets on the balance sheets.

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The Company records convertible preferred stock at fair value on the dates of issuance, net of issuance costs.

Upon the occurrence of certain events that are outside the Company’s control, including a deemed liquidation event,

Mineralys Therapeutics, Inc.

Notes to Financial Statements

holders of the convertible preferred stock can cause redemption for cash.

Therefore, the convertible preferred stock is classified outside of stockholders’ deficit on the balance sheets as events triggering the redemption for cash are not solely within the Company’s control.

Upon the occurrence of certain events that are outside the Company’s control, including a deemed liquidation event, holders of the convertible preferred stock can cause redemption for cash.

Therefore, the convertible preferred stock is classified outside of stockholders’ deficit on the balance sheets as events triggering the redemption for cash were not solely within the Company’s control.

The carrying values of the convertible preferred stock are adjusted to their liquidation preferences if and when it becomes probable that such a liquidation event will occur.

Subsequent to December 31, 2022, the Company’s convertible preferred stock converted into shares of the Company’s common stock of which carrying value at the date of conversion was converted to permanent equity, which is described in more detail in Note 9.

“ Subsequent Events .”

In February 2023, the Company’s convertible preferred stock converted into shares of the Company’s common stock of which carrying value at the date of conversion was converted to permanent equity, which is described in more detail in Note 6.

“ Capital Stock .”

Research and Development Expenses

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These costs consist of direct and indirect costs associated with specific projects, as well as fees paid to various entities that perform certain research on behalf of the Company.

The Company’s research and development expenses consist primarily of clinical trial expenses, consulting costs and employee-related costs, and costs associated with required regulatory filings, licenses, and fees.

Non-refundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

The Company’s research and development expenses consist primarily of clinical trial expenses, consulting and employee-related costs, and costs associated with required regulatory filings, licenses, and fees.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

goods or when services are performed.

Assets acquired (or in-licensed) that are utilized in research and development that have no alternative future use are expensed as incurred.

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The Company’s stock-based awards are subject only to service-based vesting conditions.

The Company measures restricted common stock awards using the difference, if any, between the purchase price per share of the award and the fair value of the Company’s common stock at the date of the grant.

The Company estimates the fair value of its stock option awards using the Black-Scholes option pricing model, which requires the input of assumptions, including (i) the expected stock price volatility, (ii) the calculation of expected term of the award, (iii) the risk-free interest rate, and (iv) expected dividends.

Volatility — Due to the Company’s limited operating history and a lack of company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar publicly-traded companies.

The Company believes that the companies in the group were most representative of the Company and had characteristics similar to its own, including stage of product development, a focus on the life sciences industry, and other economic and industry characteristics.

Expected Term — The Company uses the simplified method to calculate the expected term, as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for options granted, and utilized the contractual term for options granted.

Risk-Free Interest Rate — The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options.

Expected Dividends — To date, the Company has not issued any dividends and does not expect to issue dividends over the life of the options and therefore has estimated the dividend yield to be zero.

Subsequent to the closing of the Company’s IPO, the Company determines the fair market value of its common stock using the closing price of its common stock as reported on the Nasdaq Global Select Market.

Prior to the closing of the Company’s IPO, there was no public market for the Company’s common stock, and the Company determined the fair value of the shares of its common stock underlying its share-based awards by considering a number of objective and subjective factors, including third-party valuations of the Company’s common stock, the valuation of comparable companies, the Company’s operating and financial performance, and general and industry-specific economic outlook, among other factors.

The assumptions underlying these valuations represented management’s best estimate, with the assistance of a third-party valuation specialist, which involved inherent uncertainties and the application of management’s judgment.

As a result, if the Company had used different assumptions or estimates, the fair value of the Company’s common stock and its stock-based compensation expense could have been materially different.

Compensation expense related to awards is recognized on a straight-line basis by recognizing the grant date fair value over the associated service period of the award, which is generally the vesting term.

Management evaluates its award grants and modifications and will adjust the fair value if any are determined to be spring-loaded.

The Company accounts for forfeitures as they occur.

As of December 31, 2022, the Company’s common stock was privately held, and there was no active trading market for the Company’s common stock.

Therefore, the Company based its estimate of expected volatility on the historical volatility of a group of similar publicly-traded companies.

The Company believes that the companies in the group have characteristics similar to its own characteristics, including stage of product development and a focus on the life sciences industry.

The Company believes the group selected has sufficient similar economic and industry characteristics and includes companies that are most representative of the Company.

The Company used the simplified method to calculate the expected term, as it did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for options granted and utilized the contractual term for options granted.

The risk-free interest rate was based on a treasury instrument whose term was consistent with the expected life of the stock options.

As of December 31, 2022, there was no public market for the Company’s common stock, and the Company determined the fair value of the shares of its common stock underlying its share-based awards by considering a number of objective and subjective factors, including third-party valuations of the Company’s common stock, the valuation of comparable companies, the Company’s operating and financial performance, and general and industry-specific economic outlook, amongst other factors.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

management’s judgment.

As a result, if the Company had used different assumptions or estimates, the fair value of the Company’s common stock and its stock-based compensation expense could have been materially different.

Net Loss Per Share

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The following table sets forth the potential common shares excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive:

Convertible preferred stock (as converted into common stock) 20,637,415 5,665,881

Outstanding options 2,540,279 1,365,442

Unvested restricted stock awards 1,007,930 1,199,136

Convertible preferred stock (as converted into common stock) — 20,637,415

Total 3,548,209 23,201,993

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

Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all the deferred tax assets will not be realized.

Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not that some or all the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740.

When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that some or all the benefit will more likely than not be realized.

The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position, as well as consideration of the available facts and circumstances.

When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that some or all of the benefit will more likely than not be realized.

The determination as to whether the tax benefit will more likely than not be realized is based on the technical merits of the tax position, as well as consideration of the available facts and circumstances.

As of December 31, 2023 and 2022, the Company does not have any significant uncertain tax positions.

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Fair Value of Financial Instruments

There were no financial instruments measured at fair value on a recurring basis based on the fair value hierarchy as of December 31, 2021, and the following table presents this information as of December 31, 2022 (in thousands):

The following table presents financial instruments measured at fair value on a recurring basis based on the fair value hierarchy as of December 31, 2023 and 2022 (in thousands):

Cash equivalents

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The fair values of money market funds are determined by Level 1 inputs utilizing quoted prices (unadjusted) in active markets for identical assets.

Treasury Bills—As of December 31, 2022, the Company had $22.4 million of short-term U.S.

Treasury bills with original maturities between three and six months.

Fair values of these investments are determined by Level 2 inputs utilizing quoted prices (unadjusted) in active markets for similar assets.

As of December 31, 2022, held-to-maturity securities had an amortized cost of $22.4 million reported as marketable securities in the balance sheet and fair value of $22.4 million.

Convertible Notes - Related Party—Between May 2019 to July 2020, the Company issued unsecured convertible promissory notes in the aggregate principal amount of $4.0 million to its founding investor and related party, Catalys Pacific Fund LP (Catalys), pursuant to a convertible notes agreement subsequently amended on December 20, 2020 (the Convertible Notes).

The Company elected the fair value option to account for the Convertible Notes because the Company determined the fair value option provided users of the financial statements greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes in the fair value of the stock underlying the conversion option and redemption feature.

The Company used a guideline transaction method valuation model to estimate the fair value of the Convertible Notes, which relied on unobservable Level 3 inputs.

Changes in the fair value of the Convertible Notes were recognized as expense as reported in change in fair value of convertible notes on the statement of operations for the year ended December 31, 2021.

The carrying value of outstanding Convertible Notes as of December 31, 2020 approximated the estimated aggregate fair value as the embedded contingent put option is recognized at fair value and classified with the debt host.

The put option allowed certain notes payable to be converted into stock, contingent upon completion of an equity financing transaction with gross proceeds above certain thresholds.

The fair value estimate of the embedded put option was based on the probability-weighted discounted value of the put feature and represented a Level 3 measurement.

Significant assumptions used to determine the fair value of the put feature include the estimated probability of exercise of the put option and the discount rate used to calculate fair value.

The estimated probability of exercise was based on management’s expectation for future equity financing transactions.

The discount rate was based on the weighted-average effective yield of notes previously issued by the Company, adjusted for changes in market yields of biotechnology sector CCC-rated debt.

The preceding methods described may have produced a fair value calculation that may not have been indicative of net realizable value or reflective of future fair values.

Although the Company believes its valuation methods were appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value could have resulted in a different fair value measurement at the reporting date.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

The following table sets forth a summary of changes in the fair value of the Convertible Notes, representing a recurring measurement that was reported as of December 31, 2020 within Level 3 of the fair value hierarchy.

The following activity related to the Convertible Notes balance during the year ended December 31, 2021 (in thousands):

Convertible Notes as of December 31, 2020 $ 4,500

Change in fair value

Accrued interest

Reclassification of Convertible Notes into convertible preferred stock

Convertible Notes as of December 31, 2021 $ —

On February 16, 2021 (the Conversion Date), the Convertible Notes and accrued interest totaling $5.2 million were converted into 10,868,432 shares of Series A convertible preferred stock upon the closing of the Series A financing.

As a result, on the Conversion Date, the Convertible Notes were reclassified to Series A convertible preferred stock, which is described in more detail in Note 6.

“ Capital Stock .”

Treasury Bills—As of December 31, 2023 and 2022, the Company had short- and/or long-term U.S.

Treasury bills.

Fair values of these securities are determined by Level 2 inputs utilizing quoted prices (unadjusted) in active markets for similar assets .

The following table presents held-to-maturity U.S.

Treasury bills information as of each reported date (in thousands):

As of December 31, 2023

Balance Sheet Location Original Maturities Amortized

Cost Estimated

Investments between 3 and 12 months $ 187,263 $ 187,293

Investments, noncurrent greater than 1 year 2,482 2,486

Total $ 189,745 $ 189,779

As of December 31, 2022

Balance Sheet Location Original Maturities Amortized

Cost Estimated

Investments between 3 and 6 months $ 22,409 $ 22,386

Commitments and Contingencies

License Agreement with Mitsubishi Tanabe

In July 2020, the Company entered into a license agreement (the Mitsubishi License) with Mitsubishi Tanabe, pursuant to which Mitsubishi Tanabe granted the Company an exclusive, worldwide, royalty-bearing, sublicensable license under Mitsubishi Tanabe’s patent and other intellectual property rights to exploit products incorporating lorundrostat (Lorundrostat Products) for the prevention, treatment, diagnosis, detection, monitoring, or predisposition testing with respect to indications, diseases, and conditions in humans.

Pursuant to the Mitsubishi License, the Company paid Mitsubishi Tanabe a $1.0 million upfront fee, and the Company is obligated to pay Mitsubishi Tanabe development milestone payments of up to $9.0 million in the aggregate and commercial milestone payments of up to $155.0 million in the aggregate upon first commercial sale and upon meeting certain annual sales targets, as well as additional commercial milestone payments of up to $10.0 million for a second indication.

In July 2020, the Company entered into a license agreement (the Mitsubishi License) with Mitsubishi Tanabe Pharmaceutical Company (Mitsubishi Tanabe), pursuant to which Mitsubishi Tanabe granted the Company an exclusive, worldwide, royalty-bearing, sublicensable license under Mitsubishi Tanabe’s patent and other intellectual property rights to exploit products incorporating lorundrostat (formerly MT-4129) (Lorundrostat Products) for the prevention, treatment, diagnosis, detection, monitoring, or predisposition testing with respect to indications, diseases, and conditions in humans.

Pursuant to the Mitsubishi License, the Company paid Mitsubishi Tanabe a $ 1.0 million upfront fee and development milestone payments of $ 9.0 million in the aggregate.

The Company has remaining obligations to pay Mitsubishi Tanabe commercial milestone payments of up to $ 155.0 million in the aggregate upon first commercial sale and upon meeting certain annual sales targets, as well as additional commercial milestone payments of up to $ 10.0 million for a

Mineralys Therapeutics, Inc.

Notes to Financial Statements

second indication.

Additionally, the Company is obligated to pay Mitsubishi Tanabe tiered royalties at percentages ranging from the mid-single-digits to ten percent ( 10 %) of aggregate net sales of each Lorundrostat Product on a Lorundrostat Product-by-Lorundrostat Product and country-by-country basis, until the later of (i) the expiration of the last-to-expire valid Mitsubishi Tanabe patent claim covering a Lorundrostat Product, (ii) ten years from the first commercial sale of a Lorundrostat Product, or (iii) the expiration of regulatory exclusivity in such country.

Such royalties are subject to reduction under specified conditions, including lack of patent coverage and generic competition.

The Company is obligated to use commercially reasonable efforts to conduct and complete the development activities and to file for regulatory approval for at least one Lorundrostat Product in a major market country and consider in good faith to develop at least one Lorundrostat Product in a non-major market country.

The Company is obligated to use commercially reasonable efforts to conduct and complete the development activities and to file for regulatory approval for at least one Lorundrostat Product in a major market country and consider in good faith developing at least one Lorundrostat Product in a non-major market country.

If the Company elects to sublicense its rights under the Mitsubishi License to a third party with respect to exploitation of lorundrostat or any Lorundrostat Product in certain countries in Asia, the Company has agreed to negotiate such a sublicense first, for a specified period of time, with Mitsubishi Tanabe, if Mitsubishi Tanabe notifies the Company that it would like to obtain such a sublicense.

The Company agreed not to commercialize any competing product prior to three years following the first commercial sale of the first Lorundrostat Product in any country without Mitsubishi Tanabe’s prior consent.

The Company also agreed not to commercialize any competing product prior to three years following the first commercial sale of the first Lorundrostat Product in any country without Mitsubishi Tanabe’s prior consent.

Unless terminated earlier, the Mitsubishi License will continue until the expiration of all of the Company’s royalty obligations to Mitsubishi Tanabe.

The Company may terminate the Mitsubishi License for any or no reason upon 90 or 180 days’ prior written notice to Mitsubishi Tanabe depending on whether the Mitsubishi Tanabe Product has received regulatory approval.

The Company may terminate the Mitsubishi License for any or no reason upon 90 or 180 days’ prior written notice to Mitsubishi Tanabe depending on whether the Lorundrostat Product has received regulatory approval.

Mitsubishi Tanabe may terminate the Mitsubishi License if the Company has not initiated regulatory consultation for the first global clinical trials of lorundrostat in at least one major market country within a specified amount of time or if the Company or its affiliates or sublicensees initiate a challenge to the patent rights licensed to the Company by Mitsubishi Tanabe.

In addition, either party may terminate the Mitsubishi License in the event of an uncured material breach by or bankruptcy of the other party, subject to certain notice and cure periods, or upon the other party’s bankruptcy or insolvency.

For the year ended December 31, 2022 and 2021, the Company did not incur any research and development expenses related to the Mitsubishi License.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

The Company incurred $ 9.0 million and $ 0 of research and development expenses related to the Mitsubishi License during the years ended December 31, 2023 and 2022, respectively.

The development milestones of $ 4.0 million and $ 5.0 million were achieved in March 2023 and December 2023, respectively, and related to the Company’s initiation of its pivotal clinical program of lorundrostat.

These payments satisfied in full the aggregate development milestone payments described above.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business.

The Company was not subject to any material legal proceedings during the year ended December 31, 2022 and 2021, and no material legal proceedings are currently pending or threatened.

The Company was not subject to any material legal proceedings during the years ended December 31, 2023 and 2022, and no material legal proceedings are currently pending or threatened.

Indemnification Agreements

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To date, the Company has not incurred any material costs as a result of such indemnifications.

The Company is not aware of any claims under indemnification arrangements, and it has not accrued any liabilities related to such obligations in its financial statements as of December 31, 2022 and 2021.

The Company is not aware of any claims under indemnification

Mineralys Therapeutics, Inc.

Notes to Financial Statements

arrangements, and it has not accrued any liabilities related to such obligations in its financial statements as of December 31, 2023 and 2022.

Accrued Liabilities

5 unchanged sentences

Capital Stock

As of December 31, 2022, the Company has reserved authorized shares of common stock, on an as-converted basis, for future issuance as follows:

Series A Preferred Stock 7,995,191

Series B Preferred Stock 12,642,224

As of December 31, 2023, the Company had reserved authorized shares of common stock for future issuance as follows:

Shares available for grant under the 2023 Plan 3,206,629

Common stock options outstanding 2,540,279

Awards available for grant under the 2020 Plan 291,432

Total 22,294,289

Amendment to the Articles of Incorporation

On May 31, 2022, the Company’s Articles of Incorporation were amended and restated to increase the authorized shares of common stock, authorize the issuance of Series B convertible preferred stock, par value $0.0001 per share (Series B Preferred Stock) and modify the participation rights of the Series A convertible preferred stock, par value $0.0001 per

Mineralys Therapeutics, Inc.

Notes to Financial Statements

share (Series A Preferred Stock).

On May 31, 2022, the authorized shares of the Company’s classes of capital stock were modified to the following share amounts:

Common stock 319,000,000

Series A Preferred Stock 86,332,216

Series B Preferred Stock 136,510,868

Shares available for grant under the ESPP 391,271

Total 6,138,179

In connection with the closing of the IPO in February 2023, the Company’s board of directors approved an amendment to the Company’s amended and restated certificate of incorporation (the Restated Certificate).

The Restated Certificate amended and restated the Company’s amended and restated certificate of incorporation, in its entirety to, among other things, increase the authorized number of shares of common stock to 500,000,000 shares and authorize 50,000,000 shares of undesignated preferred stock that may be issued from time to time by the Company’s board of directors in one or more series.

Preferred Stock Offerings

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From February 2021 to April 2021, the Company issued 50,311,827 shares of Series A Preferred Stock at $ 0.477 per share for net proceeds of $ 23.8 million.

Additionally, in February 2021, the Convertible Notes and related accrued interest converted into 10,868,432 shares of Series A Preferred Stock, which is described in more detail in Note 3.

“ Fair Value of Financial Instruments .”

Additionally, in February 2021, the Company’s convertible notes and related accrued interest converted into 10,868,432 shares of Series A Preferred Stock.

The Series A Purchase Agreement provided for an additional closing for the Series A purchasers for the issuance of up to 25,151,957 shares of Series A Preferred Stock, at a purchase price of $ 0.477 per share for aggregate cash proceeds of $ 12.0 million, upon the achievement of the Milestone (as defined in the Series A Purchase Agreement) or a waiver of the Milestone by the requisite holders.

In January 2022, the Company achieved the Milestone under the Series A Purchase Agreement and sold an aggregate of 25,151,957 shares of Series A Preferred Stock under the Series A Purchase Agreement to certain existing investors, members of the Company’s board of directors and affiliates of members of its board of directors, at a purchase price of $ 0.477 per share for aggregate net proceeds of approximately $ 12.0 million.

In June 2022, the Company entered into a Series B convertible preferred stock agreement with certain investors, including members of the Company’s board of directors and affiliates of members of its board of directors, pursuant to which the Company issued and sold to such investors an aggregate of 136,510,868 shares of Series B Preferred Stock at a purchase price of $0.8644 per share for aggregate net proceeds of approximately $117.7 million.

The rights, preferences, and privileges of the Company’s Series A Preferred Stock as of December 31, 2022 are as follows:

The holders of Series A Preferred Stock are entitled to a number of votes equal to the number of whole shares of common stock into which the shares of Series A Preferred Stock are convertible.

Except as provided by law or otherwise, the holders of the Series A Preferred Stock vote together with the holders of common stock as a single class.

Holders of Series A Preferred Stock, voting as a separate class, are entitled to elect three members of the board of directors.

Dividends are payable, if permitted by law, in accordance with the Series A Preferred Stock terms if and when declared by the board of directors.

Holders of the Series A Preferred Stock are entitled to receive dividends out of any assets at the time legally available, at the applicable dividend rate specified for such shares of the Series A Preferred Stock.

Dividends are not mandatory and are not cumulative.

No dividends have been declared or paid since inception of the Company.

In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of shares of the Series A Preferred Stock then outstanding are entitled to be paid out of the assets of the Company available for distribution to its stockholders or, in the case of a deemed liquidation event, such as a merger or consolidation or the sale, lease, transfer, exclusive license, or other disposition of substantially all of the Company’s assets (collectively, a “Deemed Liquidation Event”), out of the consideration payable to stockholders in such an event, after payment of any liquidation preference of the Series B Preferred Stock and before any payment shall be made to the holders of common stock by reason of their ownership thereof, an amount per share equal to the Series A Preferred Stock original issue price, plus any dividends declared but unpaid.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

Series A Preferred Stock share ratably in any distribution of the assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

The remaining available proceeds will be distributed pro rata among the holders of the shares of the Series A Preferred Stock and common stock, based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to common stock pursuant to the applicable terms immediately prior to such liquidation, dissolution, or winding up of the Company.

However, the aggregate amount to which the holders of the Series A Preferred Stock are entitled to shall not exceed $1.1925 per share.

Each share of the Series A Preferred Stock is convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of common stock as determined by dividing the Series A Preferred Stock original issue price by the Series A Preferred Stock conversion price in effect at the time of conversion, which as of December 31, 2022 was equal to the original issue price and, as a result of the Reverse Stock Split, was equal to $5.1506.

The applicable conversion price is subject to future adjustments upon the occurrence of certain events.

The Series A Preferred Stock automatically converts upon either (i) the closing of a qualified initial public offering of the Company’s common stock (subject to adjustment for any share split, combination or dividend or distribution payable) resulting in at least $75,000,000 in proceeds, net of underwriting discounts and commissions to the Company, or (ii) the election to convert the preferred shares by requisite holders of the Series A Preferred Stock and Series B Preferred Stock.

The Company evaluated the Series A Preferred Stock and determined that it was considered an equity host under ASC 815.

In making this determination, the Company’s analysis followed the whole instrument approach, which compares an individual feature against the entire Series A Preferred Stock instrument that includes that feature.

The Company’s analysis was based on a consideration of the economic characteristics and risks of the Series A Preferred Stock.

More specifically, the Company evaluated all of the stated and implied substantive terms and features, including (i) whether the Series A Preferred Stock included redemption features, (ii) how and when any redemption features could be exercised, (iii) whether the holders of the Series A Preferred Stock were entitled to dividends, (iv) the voting rights of the Series A Preferred Stock, and (v) the existence and nature of any conversion rights.

The Company concluded that because the Series A Preferred Stock represented an equity host, the conversion feature included in the Series A Preferred Stock was clearly and closely related to the associated host instrument.

Accordingly, the conversion feature was not considered an embedded derivative that requires bifurcation.

The Series A Preferred Stock is redeemable upon a request by two-thirds of the requisite holders of the Company’s Series A Preferred Stock in the event of a Deemed Liquidation Event, if the Company does not effect a dissolution of the Company within 90 days after such Deemed Liquidation Event, payable at a price equal to the cash or the value of the property, rights, or securities to be paid or distributed to holders pursuant to such Deemed Liquidation Event.

Any redemption is deemed to be remote as of December 31, 2022, and the fair value of Series A Preferred Stock is deemed to be the price paid by the Series A preferred stockholders.

Due to this redemption option, Series A Preferred Stock is recorded in mezzanine equity and is subject to subsequent measurement under the guidance provided under ASC 480.

Pursuant to ASC 480, the Company has elected to recognize changes in redemption value immediately.

However, based on the nature of Series A Preferred Stock, no subsequent measurement will be recognized until a Deemed Liquidation Event becomes probable.

As of December 31, 2022, a Deemed Liquidation Event was not probable;

as a result, the Series A Preferred Stock is valued at original issue price, less cost of issuance.

The rights, preferences, and privileges of the Company’s Series B Preferred Stock as of December 31, 2022 are as follows:

The holders of Series B Preferred Stock are entitled to a number of votes equal to the number of whole shares of common stock into which the shares of Series B Preferred Stock are convertible.

Except as provided by law or otherwise, the holders of the Series B Preferred Stock vote together with the holders of common stock as a single class.

Holders of Series B Preferred Stock, voting as a separate class, are entitled to elect two members of the board of directors.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

Dividends are payable, if permitted by law, in accordance with the Series B Preferred Stock terms if and when declared by the board of directors.

Holders of the Series B Preferred Stock are entitled to receive dividends out of any assets at the time legally available, at the applicable dividend rate specified for such shares of the Series B Preferred Stock.

Dividends are not mandatory and are not cumulative.

No dividends have been declared or paid since inception of the Company.

In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of shares of the Series B Preferred Stock then outstanding are entitled to be paid out of the assets of the Company available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, out of the consideration payable to stockholders in such an event, before any payment shall be made to the holders of Series A Preferred Stock or common stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series B Preferred Stock original issue price, plus any dividends declared but unpaid, or (ii) such amount per share as would have been payable had all shares of Series B Stock been converted into common stock immediately prior to liquidation, dissolution, winding up, or Deemed Liquidation Event.

If upon any such liquidation, dissolution, or winding up of the Company or a Deemed Liquidation Event, the assets of the Company available for distribution to its stockholders are insufficient to pay the holders of shares of Series B Preferred Stock the full amount to which they are entitled, the holders of shares of the Series B Preferred Stock share ratably in any distribution of the assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

Each share of the Series B Preferred Stock is convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of common stock as determined by dividing the Series B Preferred Stock original issue price by the Series B Preferred Stock conversion price in effect at the time of conversion, which as of December 31, 2022 was equal to the original issue price and, as a result of the Reverse Stock Split, was equal to $9.3338.

The applicable conversion price is subject to future adjustments upon the occurrence of certain events.

The Series B Preferred Stock automatically converts upon either (i) the closing of a qualified initial public offering of the Company’s common stock (subject to adjustment for any share split, combination or dividend or distribution payable) resulting in at least $75,000,000 in proceeds, net of underwriting discounts and commissions to the Company, or (ii) the election to convert the preferred shares by requisite holders of the Series A Preferred Stock and Series B Preferred Stock.

The Company evaluated the Series B Preferred Stock and determined that it was considered an equity host under ASC 815.

In making this determination, the Company’s analysis followed the whole instrument approach, which compares an individual feature against the entire Series B Preferred Stock instrument that includes that feature.

The Company’s analysis was based on a consideration of the economic characteristics and risks of the Series B Preferred Stock.

More specifically, the Company evaluated all of the stated and implied substantive terms and features, including (i) whether the Series B Preferred Stock included redemption features, (ii) how and when any redemption features could be exercised, (iii) whether the holders of the Series B Preferred Stock were entitled to dividends, (iv) the voting rights of the Series B Preferred Stock, and (v) the existence and nature of any conversion rights.

The Company concluded that because the Series B Preferred Stock represented an equity host, the conversion feature included in the Series B Preferred Stock was clearly and closely related to the associated host instrument.

Accordingly, the conversion feature was not considered an embedded derivative that requires bifurcation.

The holders of the Series B Preferred Stock have no rights to cause the redemption of their shares outside of a deemed liquidation event.

A deemed liquidation event would constitute a redemption event that may be outside of the Company’s control.

The Series B Preferred Stock is redeemable upon a request by two-thirds of the requisite holders of the Company’s Series B Preferred Stock in the event of a Deemed Liquidation Event, if the Company does not effect a dissolution of the Company within 90 days after such Deemed Liquidation Event, payable at a price equal to the cash or the value of the property, rights, or securities to be paid or distributed to holders pursuant to such Deemed Liquidation Event.

of Series B Preferred Stock at a purchase price of $ 0.8644 per share for aggregate net proceeds of approximately $ 117.7 million.

Immediately prior to the closing of the IPO, 86,332,216 shares of Series A Preferred Stock and 136,510,868 shares of Series B Preferred Stock converted into 20,637,415 shares of the Company’s common stock, and the carrying value of Series A Preferred Stock and Series B Preferred Stock was converted to permanent equity.

Private Placement Offering

On February 7, 2024, the Company entered into a securities purchase agreement (the Purchase Agreement) with the purchasers named therein (the Purchasers), for the private placement (the Private Placement) of (i) 8,339,169 shares (the Shares) of the Company’s common stock at a price of $ 13.50 per Share, and (ii) with respect to certain Purchasers, pre-funded warrants to purchase an aggregate of 549,755 shares of common stock (the Pre-Funded Warrants) in lieu of shares of common stock, at a purchase price of $ 13.499 per Pre-Funded Warrants (the shares of common stock issuable upon exercise of the Pre-Funded Warrants, the Warrant Shares).

The aggregate gross proceeds for the Private Placement were approximately $ 120.0 million, before deducting offering expenses.

The Company expects to use the net proceeds from the Private Placement to fund the research and development of lorundrostat and for working capital and general corporate purposes.

Each Pre-Funded Warrant has an exercise price of $ 0.001 per share of common stock, is immediately exercisable on the date of issuance, and will not expire.

Under the terms of the Pre-Funded Warrants, the Company may not effect the exercise of any portion of any Pre-Funded Warrant, and a holder will not have the right to exercise any portion of any Pre-Funded Warrant, which, upon giving effect to such exercise, would cause a holder (together with its affiliates) to own more than a specified beneficial ownership limitation of either 4.99 %, 9.99 % or 19.99 % (as selected by such holder prior to the issuance of the Pre-Funded Warrant) of the number of shares of common stock outstanding immediately after giving effect to such exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrants.

However, any holder may increase or decrease such percentage to any other percentage not in excess of 19.99 %, provided that any increase in such percentage shall not be effective until 61 days after such notice is delivered to the Company.

Pursuant to the Purchase Agreement, the Company agreed to file a registration statement with the Securities and Exchange Commission (the SEC) within 60 days after the closing of the Private Placement (subject to certain exceptions) for purposes of registering the resale of the Shares and the Warrant Shares, to use its reasonable best efforts to have such registration statement declared effective within the time period set forth in the Purchase Agreement, and to keep such registration statement effective until the earliest of (i) the time as all of the Shares and Warrant Shares purchased by the Purchasers pursuant to the terms of the Purchase Agreement have been sold pursuant to the registration statement, or (ii) such time as the Shares and Warrant Shares become eligible for resale by non-affiliates without any volume limitations or other restrictions pursuant to Rule 144 under the Securities Act of 1933, as amended, or any other rule of similar effect.

Stock-Based Compensation

2023 Incentive Award Plan

In February 2023, the Company’s board of directors adopted and stockholders approved the 2023 Incentive Award Plan that became effective upon the closing of the IPO (2023 Plan), under which the Company may grant stock options, restricted stock awards (RSAs), dividend equivalents, restricted stock units, stock appreciation rights, and other stock or cash-based awards to its employees, consultants, and directors.

The number of shares of the Company’s common stock initially available for issuance under awards granted pursuant to the 2023 Plan was the sum of (i) 4,650,000 shares of the Company’s common stock, plus (ii) any shares subject to outstanding awards under the 2020 Plan described below as of the effective date of the 2023 Plan that become available for issuance under the 2023 Plan thereafter in accordance with its terms.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

Any redemption is deemed to be remote as of December 31, 2022, and the fair value of Series B Preferred Stock is deemed to be the price paid by the Series B preferred stockholders.

Due to this redemption option, Series B Preferred Stock is recorded in mezzanine equity and is subject to subsequent measurement under the guidance provided under ASC 480.

Pursuant to ASC 480, the Company has elected to recognize changes in redemption value immediately.

However, based on the nature of Series B Preferred Stock, no subsequent measurement will be recognized until a Deemed Liquidation Event becomes probable.

As of December 31, 2022, a Deemed Liquidation Event was not probable;

as a result, the Series B Preferred Stock is valued at original issue price, less cost of issuance.

Stock-Based Compensation

The number of shares initially available for issuance will be increased on January 1 of each calendar year beginning in 2024 and ending in 2033, by an amount equal to the lesser of (i) 4 % of the shares of the Company’s common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as determined by the Company’s board of directors.

No more than 100,000,000 shares of the Company’s common stock may be issued upon the exercise of incentive stock options under the 2023 Plan.

Shares issued under the 2023 Plan may be authorized but unissued shares, shares purchased on the open market, or treasury shares.

2020 Equity Incentive Plan

On July 7, 2020, the board of directors adopted, and the Company’s stockholders approved, the 2020 Equity Incentive Plan.

The 2020 Equity Incentive Plan, as amended and restated (the 2020 Plan), provides for the grant of incentive stock options to employees of the Company, and for the grant of non-statutory stock options, restricted stock awards (RSAs), restricted stock unit awards, and other forms of stock awards to employees, directors, and consultants of the Company (collectively, “stock-based awards”).

The board of directors or a designated committee of the board of directors is responsible for the administration of the 2020 Plan and determines the term, exercise price, and vesting terms of each award.

Under the terms of existing awards, all stock option grants expire ten years from grant date.

Options may not have an exercise price less than 100% of the fair market value of the Company’s common stock on the grant date, and generally vest over a period of four years.

In June 2022, the board of directors adopted, and the Company’s stockholders approved, an amendment to the 2020 Plan to increase the authorized shares issuable to 3,445,626.

Total stock-based compensation expense reported in the statements of operations was allocated as follows (in thousands):

Research and development $ 200 $ 75

General and administrative 255 5

The 2020 Equity Incentive Plan, as amended and restated (the 2020 Plan), provided for the grant of incentive stock options to employees of the Company, and for the grant of non-statutory stock options, RSAs, restricted stock unit awards, and other forms of stock awards to employees, directors, and consultants of the Company.

Subsequent to the closing of the IPO, no additional awards will be granted under the 2020 Plan.

However, the 2020 Plan will continue to govern the terms and conditions of the outstanding awards granted under it.

Shares of the Company’s common stock subject to awards granted under the 2020 Plan that expire, lapse, or are terminated, exchanged for cash, surrendered, repurchased, or forfeited following the effective date of the 2020 Plan will be available for issuance under the 2023 Plan in accordance with its terms.

The board of directors or a designated committee of the board of directors is responsible for the administration of the 2023 Plan, and previously the 2020 Plan, and determines the term, exercise price, and vesting terms of each award.

Under the terms of existing awards, all stock option grants expire ten years from the grant date.

New option grants could not have an exercise price less than 100% of the fair market value of the Company’s common stock on the grant date and generally vested over a period of four years .

The Company issues new shares of common stock upon exercise of stock options or issuance of RSAs.

As of December 31, 2023, the Company had the following balances by plan:

Outstanding Unvested

RSAs Shares Available

2023 Plan 1,451,985 — 3,206,629

2020 Plan 1,088,294 1,007,930 —

Total 2,540,279 1,007,930 3,206,629

Mineralys Therapeutics, Inc.

Notes to Financial Statements

Stock Options

As of December 31, 2022 and 2021, the Company had 3,445,626 and 1,744,700, respectively, shares of its common stock reserved under the 2020 Plan.

As of December 31, 2022 and 2021, a total of 291,432 and 405,819, respectively, options were available for issuance under the 2020 Plan.

The following is a summary of the Company’s stock option activity under its 2020 Plan:

The following is a summary of the Company’s stock option activity under its 2023 Plan and 2020 Plan:

Shares Weighted-Average Exercise Price Total Intrinsic Value

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Options granted 1,588,235 $ 15.19

Options exercised ( 268,534 ) $ 0.73

Options forfeited or expired ( 144,864 ) $ 14.85

Options outstanding as of December 31, 2023 2,540,279 $ 9.10 $ 8,291 8.8

1 unchanged sentence

As of December 31, 2023, the Company had $ 15.2 million of unrecognized share-based compensation expense related to stock option awards that is expected to be recognized over a weighted-average period of approximately 1.5 years.

Mineralys Therapeutics, Inc.

Notes to Financial Statements

For the years ended December 31, 2022 and 2021, the total fair value of options vested was$0.1 million and $18 thousand, respectively.

For the years ended December 31, 2023 and 2022, the total fair value of options vested was $ 1.5 million and $ 0.1 million, respectively.

The aggregate intrinsic value of options exercised for the years ended December 31, 2023 and 2022 was $ 3.2 million and $ 0 , respectively.

The weighted-average grant date fair value per share for options granted during the years ended December 31, 2023 and 2022 was $ 12.41 and $ 2.12 , respectively.

1 unchanged sentence

Exercise price $ 15.19 $ 1.18

Expected term (years) 6.07 6.08

Expected term (years) 6.01 years 6.07 years

Expected stock price volatility 104.6 % 92.2 %

1 unchanged sentence

Expected dividend yield — % — %

On February 14, 2024, the Company’s board of directors approved the grant under the 2023 Plan of stock options to purchase an aggregate of 1,469,600 shares of its common stock to certain of the Company’s employees at an exercise price equal of $ 14.25 .

Restricted Stock Awards

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Upon a participant’s termination of continuous service for any reason, any shares subject to RSAs held by the participant that have not vested as of such termination date may be forfeited to or repurchased by the Company.

The following is a summary of the Company’s RSA activity under its 2020 Plan:

Mineralys Therapeutics, Inc.

Notes to Financial Statements

The following is a summary of the Company’s RSA activity under its 2023 Plan and 2020 Plan:

Shares Weighted-Average Grant Date Fair Value

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Unvested as of December 31, 2022 1,199,136 $ 1.4290

Granted 977,258 $ 1.7512

Vested ( 191,206 ) $ 0.3493

1 unchanged sentence

As of December 31, 2023, the Company had $ 1.0 million of unrecognized share-based compensation expense related to RSAs that is expected to be recognized over a weighted-average period of approximately 1.3 years.

For the years ended December 31, 2022 and 2021, the total fair value of RSAs vested was $0.1 million and $19 thousand, respectively.

For the years ended December 31, 2023 and 2022, the total fair value of RSAs vested was $ 0.1 million in each year.

2023 Employee Stock Purchase Plan

In February 2023, the Company’s board of directors and stockholders approved the 2023 Employee Stock Purchase Plan (ESPP), which became effective upon the closing of the Company’s IPO.

The ESPP permits eligible employees who elect to participate in an offering under the ESPP to have up to a specified percentage of their eligible compensation withheld, subject to certain limitations, to purchase shares of common stock pursuant to the ESPP.

A total of 400,000 shares of the Company’s common stock was initially reserved for issuance under the ESPP.

The first ESPP offering period commenced on July 1, 2023, with each new six-month offering period beginning each January 1 and July 1.

ESPP purchases of common stock occur at a price equal to 85 % of the lower of (i) the closing price on the first trading day of the offering period or (ii) the closing price on the last trading day of the offering period.

As of December 31, 2023, the Company had 391,271 shares available for issuance and 8,729 cumulative shares had been issued under the ESPP.

In addition, the number of shares available for issuance under the ESPP will be annually increased on January 1 of each calendar year beginning in 2024 and ending in and including 2033, by an amount equal to the lesser of (i) 1 % of the shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the Company’s board of directors, provided that no more than 15,000,000 shares of the Company’s common stock may be issued under the ESPP.

Total stock-based compensation expense reported in the statements of operations was allocated as follows (in thousands):

Research and development $ 2,263 $ 200

General and administrative 2,797 255

$ 5,060 $ 455

Mineralys Therapeutics, Inc.

6 unchanged sentences

Intangible assets 2,048 270

Other 857 183

Total deferred tax assets 31,503 12,915

33 unchanged sentences

Uncertain tax positions are evaluated based on the facts and circumstances that exist at each reporting period.

Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition, and measurement.

Subsequent changes in judgment based on new information may lead to changes in recognition, derecognition, and measurement.

Adjustment may result, for example, upon resolution of an issue with the taxing authorities or expiration of a statute of limitations barring an assessment for an issue.

8 unchanged sentences

Additions related to current year positions 781 143

Additions related to prior year positions 34 —

Ending balance $ 1,076 $ 261

Subsequent Events

Initial Public Offering

On February 14, 2023, the Company completed an initial public offering (the IPO) of 13,800,000 shares of its common stock, which included the exercise in full by the underwriters of their option to purchase 1,800,000 additional shares, at a public offering price of $16.00 per share.

The gross proceeds to the Company from the IPO were $220.8 million, before deducting underwriting discounts and commissions and offering expenses payable by the Company.

In connection with the closing of the IPO, the Company’s board of directors approved an amendment to the Company’s amended and restated certificate of incorporation (the Restated Certificate).

Mineralys Therapeutics, Inc.

Notes to Financial Statements

Conversion of Series A and Series B Preferred Stock

Immediately prior to the closing of the IPO, 86,332,216 shares of Series A Preferred Stock and 136,510,868 shares of Series B Preferred Stock converted into 20,637,415 shares of the Company’s common stock of which carrying value of Series A Preferred Stock and Series B Preferred Stock was converted to permanent equity.

2023 Incentive Award Plan

In February 2023, the Company’s board of directors adopted and stockholders approved the 2023 Incentive Award Plan that became effective upon the closing of the IPO (2023 Plan), under which the Company may grant stock options, restricted stock, dividend equivalents, restricted stock units, stock appreciation rights, and other stock or cash-based awards to its employees, consultants, and directors.

The number of shares of the Company’s common stock initially available for issuance under awards granted pursuant to the 2023 Plan was the sum of (i) 4,650,000 shares of the Company’s common stock, plus (ii) any shares subject to outstanding awards under the 2020 Plan as of the effective date of the 2023 Plan that become available for issuance under the 2023 Plan thereafter in accordance with its terms.

The number of shares initially available for issuance will be increased on January 1 of each calendar year beginning in 2024 and ending in 2033, by an amount equal to the lesser of (i) 4% of the shares of the Company’s common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as determined by the Company’s board of directors.

No more than 100,000,000 shares of the Company’s common stock may be issued upon the exercise of incentive stock options under the 2023 Plan.

Shares issued under the 2023 Plan may be authorized but unissued shares, shares purchased on the open market, or treasury shares.

In connection with the Company’s IPO, the Company’s board of directors approved the grant under the 2023 Plan of stock options to purchase an aggregate of 1,071,935 shares of its common stock to certain of the Company’s employees and directors, at an exercise price equal to the IPO price of $16.00.

Upon the closing of the IPO, no additional awards will be granted under the 2020 Plan.

However, the 2020 Plan will continue to govern the terms and conditions of the outstanding awards granted under it.

2023 Employee Stock Purchase Plan

In February 2023, the Company’s board of directors and stockholders approved the 2023 Employee Stock Purchase Plan (ESPP), which became effective upon the closing of the Company’s IPO.

The ESPP permits eligible employees who elect to participate in an offering under the ESPP to have up to a specified percentage of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the ESPP.

A total of 400,000 shares of the Company’s common stock was initially reserved for issuance under the ESPP.

The ESPP offering periods will commence when determined by a subcommittee of the board of directors and the offering period, offering price, and other terms will be determined subject to the terms of the ESPP.

In addition, the number of shares available for issuance under the ESPP will be annually increased on January 1 of each calendar year beginning in 2024 and ending in and including 2033, by an amount equal to the lesser of (i) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the Company’s board of directors, provided that no more than 15,000,000 shares of the Company’s common stock may be issued under the ESPP.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the U.S.

economy and fund a nationwide effort to curtail the effect of COVID-19.

The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions are removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act of 2017.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data