What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2024-11-13 · 455 added, 636 removed, 35 unchanged (97% of the section changed)

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial

condition and results of operations together with our unaudited consolidated financial statements and the related notes included in Part

1, Item 1 of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 (this “Quarterly Report”).

This discussion contains forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives,

expectations, intentions, hopes, beliefs, strategies or projections regarding the future of its pipeline and business and words such as

“may,” “will,”, “should,” “could,” “would,” “expect,” “plan,”

“anticipate,” “believe,” “estimate,” “project,” “potential,” “seek,”

“target,” “goal,” “intend” and variations of such words and any statements that refer to projections,

forecasts or other characterizations of future events or circumstances, including any underlying assumptions, and similar expressions

are intended to identify forward-looking statements.

You should not place undue reliance on these forward-looking statements.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

You should read the following

discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial

statements and the related notes included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for the quarterly period ended March

31, 2025 (this “Quarterly Report”) and with the audited consolidated financial statements and related notes included in our

Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”)

on March 6, 2025.

This discussion contains forward-looking statements that involve risks and uncertainties, such as statements regarding

our plans, objectives, expectations, intentions, hopes, beliefs, strategies or projections regarding the future of its pipeline and business

and words such as “may,” “will,”, “should,” “could,” “would,” “expect,”

“plan,” “anticipate,” “believe,” “estimate,” “project,” “potential,”

“seek,” “target,” “goal,” “intend” and variations of such words and any statements that

refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, and

similar expressions are intended to identify forward-looking statements.

You should not place undue reliance on these forward-looking

These forward-looking statements are based on current expectations and beliefs concerning future developments and their potential

There can be no assurance that future developments affecting us will be those that have been anticipated.

These forward-looking

statements are based on current expectations and beliefs concerning future developments and their potential effects.

There can be no assurance

that future developments affecting us will be those that have been anticipated.

These forward-looking statements involve a number of risks,

uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially

different from those expressed or implied by these forward looking statements.

Factors that could cause or contribute to such differences

include, but are not limited to, those discussed in the section of this Quarterly Report entitled “Risk Factors” and elsewhere

in this Quarterly Report.

These and many other factors could affect our future financial and operating results.

We undertake no obligation

to update any forward-looking statement to reflect events after the date of this Quarterly Report.

As used in this Quarterly Report, unless

the context suggests otherwise, “we,” “us,” “our,” “the Company,” “Oruka Therapeutics,

Inc.,” “Oruka,” “ARCA biopharma, Inc.,” “ARCA,” refers to Oruka Therapeutics, Inc.

and its consolidated

subsidiaries, including Oruka Therapeutics Operating Company LLC, taken as a whole.

We are a biotechnology company focused on developing novel monoclonal

antibody therapeutics for psoriasis (“PsO”) and other inflammatory and immunology (“I&I”) indications.

name is derived from or , for “skin,” and arukah , for “restoration” and reflects our mission

to deliver therapies for chronic skin diseases that provide patients the greatest possible freedom from their condition.

is to apply antibody engineering and format innovations to validated modes of action, which we believe will enable us to improve meaningfully

upon the efficacy and dosing regimens of standard-of-care medicines while significantly intending to reduce technical and biological risk.

Our programs aim to treat and potentially modify disease by targeting mechanisms with proven efficacy and safety involved in disease pathology

and the activity of pathogenic tissue-resident memory T cells.

Our lead program, ORKA-001, is designed to target the p19 subunit of interleukin-23

(“IL-23p19”) for the treatment of PsO.

Our co-lead program, ORKA-002, is designed to target interleukin-17A and interleukin-17F

(“IL-17A/F”) for the treatment of PsO, psoriatic arthritis (“PsA”), and other conditions.

These programs each

bind their respective targets at high affinity and incorporate half-life extension technology with the aim to increase exposure and decrease

dosing frequency.

We believe that our focused strategy, differentiated portfolio, and deep expertise position us to set a new treatment

standard in large I&I markets with continued unmet need.

Since our inception in February 2024, we have devoted substantially

all of our resources to raising capital, organizing and staffing the company, business and scientific planning, conducting discovery and

research activities, establishing arrangements with third parties for the manufacture of our programs and component materials, and providing

general and administrative support for these operations.

We do not have any programs approved for sale and have not generated any revenue

from product sales.

To date, we have funded our operations primarily with proceeds from the issuance of convertible preferred stock, common

stock, convertible note, pre-funded warrants, and the proceeds from the reverse recapitalization and merger with ARCA biopharma, Inc.,

statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual

results or performance to be materially different from those expressed or implied by these forward-looking statements.

Factors that could

cause or contribute to such differences include, but are not limited to, those discussed in the section of this Quarterly Report entitled

“Risk Factors” and elsewhere in this Quarterly Report.

These and many other factors could affect our future financial and

operating results.

We undertake no obligation to update any forward-looking statement to reflect events after the date of this Quarterly

As used in this Quarterly Report, unless the context suggests otherwise, “we,” “us,” “our,”

“the Company,” “Oruka Therapeutics, Inc.,” “Oruka,” “ARCA biopharma, Inc.,” “ARCA,”

refers to Oruka Therapeutics, Inc.

and its consolidated subsidiaries, taken as a whole.

We are a clinical-stage biopharmaceutical

company focused on developing novel monoclonal antibody therapeutics for psoriasis (“PsO”) and other inflammatory and immunology

(“I&I”) indications.

Our name is derived from or , for “skin,” and arukah , for “restoration,” and

reflects our mission to deliver therapies for chronic skin diseases that provide patients the most possible freedom from their condition.

Our strategy is to apply antibody engineering and format innovations to validated modes of action, which we believe will enable us to

improve meaningfully upon the efficacy and dosing regimens of standard-of-care medicines while significantly reducing technical and biological

Our programs aim to treat and potentially modify disease by targeting mechanisms with proven efficacy and safety involved in disease

pathology and the activity of pathogenic tissue-resident memory T cells.

Our lead program, ORKA-001,

is designed to target the p19 subunit of interleukin-23 (“IL-23p19”) for the treatment of PsO.

Our co-lead program, ORKA-002,

is designed to target interleukin-17A and interleukin-17F (“IL-17A/F”) for the treatment of PsO, psoriatic arthritis (“PsA”),

and other conditions.

These programs each bind their respective targets at high affinity and incorporate half-life extension technology

with the aim to increase exposure and decrease dosing frequency.

We believe that our focused strategy, differentiated portfolio, and deep

expertise position us to set a new treatment standard in large I&I markets with continued unmet need.

Since our inception in February 2024,

we have devoted substantially all of our resources to raising capital, organizing and staffing the company, business and scientific planning,

conducting discovery and research activities, establishing arrangements with third parties for the manufacture of our programs and component

materials, and providing general and administrative support for these operations.

We do not have any programs approved for sale and have

not generated any revenue from product sales.

To date, we have funded our operations primarily with proceeds from the issuance of convertible

preferred stock, common stock, a convertible note, pre-funded warrants, and the proceeds from the reverse recapitalization and merger,

our Pre-Closing Financing and subsequent PIPE Financing (as defined and further described in “Recent Developments” below).

Since our inception, we have incurred significant

losses and negative cash flows from our operations.

Our ability to generate product revenue sufficient to achieve profitability will depend

heavily on the successful development and eventual commercialization of any programs we may develop.

We generated net losses of $28.6

million for the three months ended September 30, 2024 and $57.9 million for the period from February 6, 2024 (inception) to September 30,

For the period from February 6 (inception) to September 30, 2024, we have used net cash of $39.0 million for our operating activities.

We had cash and cash equivalents of $410.9 million as of September

We expect that our existing cash and cash equivalents will be sufficient to fund our operating plans for at least twelve months

from the date of filing of this Quarterly Report.

We expect to continue to incur substantial losses for the foreseeable future, and our

transition to profitability will depend upon successful development, approval and commercialization of our product candidates and upon

achievement of sufficient revenues to support our cost structure.

ORKA-001 is a high affinity, extended half-life

monoclonal antibody (“mAb”) designed to target IL-23p19.

IL-23 is a pro-inflammatory cytokine that plays a critical role in

the proliferation and development of T helper 17 (“Th17”) cells, which are the primary drivers of several autoimmune and inflammatory

disorders, including PsO.

Since our inception, we have

incurred significant losses and negative cash flows from our operations.

Our ability to generate product revenue sufficient to achieve

profitability will depend heavily on the successful development and eventual commercialization of any programs we may develop.

the three months ended March 31, 2025, we generated net losses of $21.0 million and used net cash of $20.9 million for our operating activities.

We had cash, cash equivalents,

and marketable securities of $373.0 million as of March 31, 2025.

We expect that our existing cash, cash equivalents, and marketable securities

will be sufficient to fund our operating plans for at least twelve months from the date of filing of this Quarterly Report.

to continue to incur substantial losses for the foreseeable future, and our transition to profitability will depend upon successful development,

approval and commercialization of our product candidates and upon achievement of sufficient revenues to support our cost structure.

ORKA-001 is a high affinity,

extended half-life monoclonal antibody (“mAb”) designed to target IL-23p19.

IL-23 is a pro-inflammatory cytokine that plays

a critical role in the proliferation and development of T helper 17 (“Th17”) cells, which are the primary drivers of several

autoimmune and inflammatory disorders, including PsO.

IL-23 is composed of two subunits:

a p40 subunit that is shared with IL-12 and a p19 subunit that is specific

First-generation IL-23 antibodies bound p40 and inhibited both IL-12 and IL-23 signaling, while more recent IL-23 antibodies

targeting the p19 subunit have shown improved efficacy and safety.

Based on preclinical evidence, we believe that ORKA-001 could achieve

higher response rates than established therapies in PsO while requiring less frequent dosing and maintaining the favorable safety profile

of therapies targeting IL-23p19.

ORKA-001 is engineered with YTE half-life extension

technology, a specific three amino acid change in the Fc domain to modify the pH-dependent binding to the neonatal Fc receptor.

it has a pharmacokinetic profile that has the potential to support a SQ injection as infrequently as once or twice a year.

emerging evidence suggests that IL-23 blockade can modify the disease biology of PsO, possibly leading to durable remissions and preventing

the development of PsA.

We believe that the expected characteristics of ORKA-001 increase its potential to deliver these disease-modifying

We plan to initiate a Phase 1 trial of ORKA-001

in the first quarter of 2025.

a p40 subunit that is shared with IL-12

and a p19 subunit that is specific to IL-23.

First-generation IL-23 antibodies bound p40 and inhibited both IL-12 and IL-23 signaling,

while more recent IL-23 antibodies targeting the p19 subunit have shown improved efficacy and safety.

Based on preclinical evidence, we

believe that ORKA-001 could achieve higher response rates than established therapies in PsO while requiring less frequent dosing and maintaining

the favorable safety profile of therapies targeting IL-23p19.

ORKA-001 is engineered with

YTE half-life extension technology, a specific three amino acid change in the fragment crystallizable (“Fc”) domain to modify

the pH-dependent binding to the neonatal Fc receptor.

As a result, it has a pharmacokinetic profile designed to support a subcutaneous

injection as infrequently as once or twice a year.

In addition, emerging evidence suggests that IL-23 blockade can modify the disease

biology of PsO, possibly leading to durable remissions and preventing the development of PsA.

We believe that the expected characteristics

of ORKA-001 increase its potential to deliver these disease-modifying benefits.

We initiated the dosing of healthy volunteers in a Phase 1 trial of ORKA-001 in the fourth quarter of 2024.

We expect to share interim

data from the first-in-human trial in healthy volunteers, including initial pharmacokinetic data, in the third quarter of 2025.

Additionally,

we plan to initiate a Phase 2a proof-of-concept study in the second half of 2025 and expect to share efficacy and response duration data

in the second half of 2026.

Based on recent precedent for PsO, we anticipate that the entire development program from first-in-human to

biologics license application (“BLA”) filing could take as little as six to seven years based on the averages for recently

approved medicines.

However, we have no control over the length of time needed for United States Food and Drug Administration (“FDA”)

review, and this timeline could vary.

ORKA-002 is a high affinity, extended half-life mAb designed to target

IL-17A and IL-17F (“IL-17A/F”).

IL-17 inhibition has become central to the treatment of psoriatic diseases, including

PsO and PsA, and has also shown efficacy in other I&I indications, such as hidradenitis suppurativa and axial spondyloarthritis.

recently, the importance of inhibiting the IL-17F isoform along with IL-17A has become appreciated, and dual blockade with the recently

approved therapy Bimzelx (bimekizumab) has led to higher response rates in patients than blockade of IL-17A alone.

ORKA-002 is designed

to bind IL-17A/F at similar epitopes, or binding sites, and affinity ranges as bimekizumab, but incorporates half-life extension technology

that could enable more convenient dosing intervals.

We plan to initiate the dosing of healthy volunteers in a Phase 1 trial of ORKA-002

in the second quarter of 2025.

We expect to share interim data from the first-in-human trial in healthy volunteers, including initial

pharmacokinetic data, in the second half of 2025 and initial efficacy data in PsO patients in the second half of 2026.

ORKA-002 is a high affinity, extended half-life

mAb designed to target IL-17A and IL-17F (“IL-17A/F”).

IL-17 inhibition has become central to the treatment of psoriatic

diseases, including PsO and PsA, and has also shown efficacy in other I&I indications, such as hidradenitis suppurativa and axial

spondyloarthritis.

More recently, the importance of inhibiting the IL-17F isoform along with IL-17A has become appreciated, and dual

blockade with the recently approved therapy Bimzelx ® (bimekizumab) has led to higher response rates in patients than blockade

of IL-17A alone.

ORKA-002 is designed to bind IL-17A/F at similar epitopes, or binding sites, and affinity ranges as bimekizumab, but

incorporates half-life extension technology that could enable more convenient dosing intervals.

We plan to initiate a Phase 1 trial

of ORKA-002 in the third quarter of 2025.

We expect to share interim data from the first-in-human trial in healthy volunteers, including

initial pharmacokinetic data, in the first half of 2026.

We view ORKA-002 and ORKA-001 as highly complementary.

Patients with moderate-to-severe PsO that have purely skin manifestations are most often treated with IL-23 inhibitors due to the high

efficacy and tolerability of this mechanism.

However, for patients who also have joint involvement, or signs and symptoms of PsA, an IL-17

inhibitor is typically used due to its efficacy in addressing both skin and joint symptoms.

In addition, IL-17 inhibitors are often used

in patients with highly resistant skin symptoms that do not adequately resolve through treatment with an IL-23 inhibitor.

Together, ORKA-001

pharmacokinetic data, around year end 2025.

We view ORKA-002 and ORKA-001

as highly complementary.

Patients with moderate-to-severe PsO that have purely skin manifestations are most often treated with IL-23 inhibitors

due to the high efficacy and tolerability of this mechanism.

However, for patients who also have joint involvement, or signs and symptoms

of PsA, an IL-17 inhibitor is typically used due to its efficacy in addressing both skin and joint symptoms.

In addition, IL-17 inhibitors

are often used in patients with highly resistant skin symptoms that do not adequately resolve through treatment with an IL-23 inhibitor.

Furthermore, we have the potential opportunity to administer ORKA-002 and ORKA-001 sequentially, called ORKA-021, to combine two features

of each program:

the rapid response of an IL-17 inhibitor with the ideal maintenance profile of an IL-23 inhibitor.

We believe that ORKA-001

and ORKA-002 provide the potential to offer a highly compelling product profile for most patients with PsO and/or PsA, as well as the

opportunity to address additional I&I indications.

Pipeline Program

We have a third mAb program, ORKA-003, designed to target an undisclosed

Our strategy as a company is to remain highly focused on I&I diseases, and specifically on inflammatory dermatology

Our third program provides the potential for indication expansion beyond PsO and may create combination opportunities with

our more advanced programs.

Additional Pipeline Program

We have a third mAb program,

ORKA-003, designed to target an undisclosed pathway.

Our strategy as a company is to remain highly focused on I&I diseases, and

specifically on inflammatory dermatology conditions.

Our third program provides the potential for indication expansion beyond PsO and

may create combination opportunities with our more advanced programs.

Recent Developments

On August 29, 2024, we consummated the previously

announced business combination (“Closing”) pursuant to that certain Agreement and Plan of Merger and Reorganization, dated

April 3, 2024 (the “Merger Agreement”), by and among ARCA, Atlas Merger Sub Corp, a wholly owned subsidiary of ARCA (“First

Merger Sub”), Atlas Merger Sub II, LLC, a wholly owned subsidiary of ARCA (“Second Merger Sub”) and Oruka Therapeutics,

(“Pre-Merger Oruka”), pursuant to which, among other matters, Pre-Merger Oruka merged with and into First Merger Sub,

with Pre-Merger Oruka continuing as a wholly owned subsidiary of ARCA and the surviving corporation of the merger (“First Merger”)

and following that, Pre-Merger Oruka then merged with and into Second Merger Sub, with Second Merger Sub being the surviving entity of

the second merger (the “Second Merger” and together with the First Merger, the “Merger”).

Following consummation

of the Merger, we effected a 1-for-12 reverse stock split (the “Reverse Stock Split”) of the common stock, par value $0.001

per share, of the Company (“Company Common Stock”), which became effective on September 3, 2024.

The Company Common Stock

commenced trading on a post-Reverse Stock Split, post-Merger basis at the opening of trading on September 3, 2024.

Second Merger Sub changed

its corporate name to “Oruka Therapeutics Operating Company, LLC” and ARCA changed its name to “Oruka Therapeutics,

Inc.” We are led by the pre-reverse capitalization Pre-Merger Oruka management team and remains focused on developing biologics

to optimize the treatment of inflammatory skin diseases.

Pre-Closing Financing

Immediately prior to the execution and delivery of the Merger Agreement

on April 3, 2024, certain new and existing investors of Pre-Merger Oruka entered into a subscription agreement with Pre-Merger Oruka (the

“Subscription Agreement”), pursuant to which, and on the terms and subject to the conditions of which, immediately prior to

the Closing, those investors purchased shares of common stock of Pre-Merger Oruka (“Pre-Merger Oruka Common Stock”) and Pre-Merger

Oruka pre-funded warrants for gross proceeds of approximately $275.0 million (which includes $25.0 million of proceeds previously received

from the issuance of the Convertible Note (refer to Note 6 in our condensed consolidated financial statements included in Part I- Item

1 of this Quarterly Report for additional details) and accrued interest on such note which converted to shares of Pre-Merger Oruka Common

Stock) (the “Pre-Closing Financing”).

We incurred transaction costs of $20.5 million which was recorded as a reduction to

additional paid-in capital in the unaudited condensed consolidated financial statements.

At the Closing, the shares of Pre-Merger Oruka

Common Stock and Pre-Merger Oruka pre-funded warrants issued pursuant to the Subscription Agreement were converted into shares of Company

Common Stock and pre-funded warrants of Company Common Stock in accordance with the Exchange Ratio (defined below).

In accordance with an Exchange Ratio determined

by terms of the Merger Agreement and upon the effective time of the First Merger (the “First Effective Time”), (i) each then-issued

and outstanding share of Pre-Merger Oruka Common Stock including outstanding and unvested Pre-Merger Oruka restricted stock and shares

of Pre-Merger Oruka Common Stock issued in connection with the Subscription Agreement, were converted into the right to receive a number

of shares of Company Common Stock, equal to the exchange ratio of 6.8569 shares of Company Common Stock (the “Exchange Ratio”),

which were subject to the same vesting provisions as those immediately prior to the Merger, (ii) each share of Pre-Merger Oruka Series

A convertible preferred stock, par value $0.0001 (“Pre-Merger Oruka Series A Preferred Stock”), outstanding immediately prior

to the First Effective Time was converted into the right to receive a number of shares of ARCA Series B non-voting convertible preferred

stock, par value $0.001 per share, which are convertible into shares of Company Common Stock at a conversion ratio of approximately 83.3332:1,

(iii) each outstanding option to purchase Pre-Merger Oruka Common Stock was converted into an option to purchase shares of Company Common

Stock, (iv) each outstanding warrant to purchase shares of Pre-Merger Oruka Common Stock was converted into a warrant to purchase shares

of Company Common Stock, and (v) each share of Company Common Stock issued and outstanding at the First Effective Time remain issued and

outstanding in accordance with its terms and such shares Subsequent to the close of the merger, the common stock shares were then, subject

to the reverse stock split of 1-for-12 effected on September 3, 2024.

As part of the Pre-Closing Financing and the Closing,

the investors in the Pre-Closing Financing received 22,784,139 shares of Company Common Stock in exchange for 39,873,706 shares of Pre-Merger

Oruka Common Stock (which includes the issuance of 2,722,207 shares of Company Common Stock in exchange for 4,764,032 shares of Pre-Merger

Oruka Common Stock on the conversion of Convertible Note along with the accrued interest through the conversion date) and 5,522,207 Company

pre-funded warrants in exchange for 9,664,208 Pre-Merger pre-funded warrants.

The Merger was accounted for as a reverse recapitalization in accordance

Under this method of accounting, Pre-Merger Oruka was deemed to be the accounting acquirer for financial reporting purposes.

This determination was primarily based on the fact that, immediately following the Merger:

(i) Pre-Merger Oruka stockholders own a substantial

majority of the voting rights in the combined company;

(ii) Pre-Merger Oruka’s largest stockholders retain the largest interest

in the combined company;

(iii) Pre-Merger Oruka designated a majority of the initial members of the board of directors of the combined

and (iv) Pre-Merger Oruka’s executive management team became the management team of the combined company.

for accounting purposes:

(i) the Merger was treated as the equivalent of Pre-Merger Oruka issuing stock to acquire the net assets of ARCA;

and (ii) the reported historical operating results of the combined company prior to the Merger are those of Pre-Merger Oruka.

information regarding the Merger is included in Note 3 to the condensed consolidated financial statements included in Part I – Item

1 of this Quarterly Report.

Reverse Stock Split

On September 3, 2024, we effected the Reverse Stock Split, a 1-for-12

reverse stock split of Company Common Stock.

The par value per share and the number of authorized shares were not adjusted as a result

of the Reverse Stock Split.

The shares of Company Common Stock underlying outstanding stock options, common stock warrants and other equity

instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance

with the terms of the agreements governing such securities.

All references to common stock, options to purchase common stock, outstanding

common stock warrants, common stock share data, per share data, and related information contained in the condensed consolidated financial

statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented, unless otherwise

specifically indicated or the context otherwise requires.

Acquisition of Pre-Merger Oruka

On August 29, 2024 (the “Closing”),

we completed the acquisition (the “Merger”) of the private company, Oruka Therapeutics, Inc.

(“Pre-Merger Oruka”),

a pre-clinical stage biotechnology company that was incorporated on February 6, 2024 under the direction of Peter Harwin, a Managing Member

of Fairmount Funds Management LLC, for the purposes of holding rights to certain intellectual property being developed by Paragon Therapeutics,

On August 29, 2024, we changed our name from “ARCA biopharma, Inc.” to “Oruka Therapeutics,

Inc.” and our Nasdaq ticker symbol from “ABIO” to “ORKA”.

Following consummation of the Merger, we effected

a 1-for-12 reverse stock split (the “Reverse Stock Split”) of the common stock, par value $0.001 per share, of the Company

(“Company Common Stock”).

The Company Common Stock commenced trading on a post-Reverse Stock Split, post-Merger basis at the

opening of trading on September 3, 2024.

Pre-Closing Financing and Closing

In April 2024, certain new

and existing investors of Pre-Merger Oruka entered into a subscription agreement with Pre-Merger Oruka (as amended, the “Subscription

Agreement”), pursuant to which, and on the terms and subject to the conditions of which, immediately prior to the Closing, those

investors purchased shares of common stock of Pre-Merger Oruka and Pre-Merger Oruka pre-funded warrants for gross proceeds of approximately

$275.0 million.

We incurred transaction costs of $20.5 million.

At the Closing, those shares of common stock of Pre-Merger Oruka and the

Pre-Merger Oruka pre-funded warrants were converted into shares of Company Common Stock and pre-funded warrants of Company Common Stock.

PIPE Financing

On September 11, 2024, we entered into a Securities

Purchase Agreement for a private placement (the “PIPE Financing”) with certain institutional and accredited investors.

closing of the PIPE Financing occurred on September 13, 2024.

Pursuant to the Securities Purchase Agreement,

the investors purchased an aggregate of 5,600,000 shares of Company Common Stock at a purchase price of $23.00 per share, an aggregate

of 2,439 shares of the Company’s Series A non-voting convertible preferred stock, par value $0.001 per share (“Company Series

A Preferred Stock”), at a purchase price of $23,000.00 per share (each Company Series A Preferred Stock is convertible into 1,000

shares of Company Common Stock), and pre-funded warrants to purchase an aggregate of 680,000 shares of Company Common Stock at a purchase

price of $22.999 per pre-funded warrant, for aggregate net proceeds of approximately $188.7 million (net of issuance costs of $11.8 million).

On September 11, 2024, we

entered into a Securities Purchase Agreement for a private placement (the “PIPE Financing”) with certain institutional and

accredited investors.

The closing of the PIPE Financing occurred on September 13, 2024.

Pursuant to the Securities

Purchase Agreement, the investors purchased an aggregate of 5,600,000 shares of Company Common Stock at a purchase price of $23.00 per

share, an aggregate of 2,439 shares of our Series A non-voting convertible preferred stock, par value $0.001 per share (“Company

Series A Preferred Stock”), at a purchase price of $23,000.00 per share (each Company Series A Preferred Stock is convertible into

1,000 shares of Company Common Stock), and pre-funded warrants to purchase an aggregate of 680,000 shares of Company Common Stock at a

purchase price of $22.999 per pre-funded warrant, for aggregate net proceeds of approximately $188.7 million (net of issuance costs of

$11.9 million).

Option Agreements and License Agreements – Paragon Therapeutics

As stated above, in March 2024,

we entered into two Antibody Discovery and Option Agreements with Paragon and Paruka Holding, LLC (“Paruka”) (each, an “Option

Agreement”), pursuant to which we initiated certain research programs with Paragon focusing on discovering, generating, identifying

and/or characterizing antibodies directed to a particular target, including for IL-23 and IL-17A/F for ORKA-001 and ORKA-002, respectively.

In September 2024, we exercised our exclusive option to acquire certain rights to ORKA-001, and in December 2024, we entered into a corresponding

license agreement with Paragon pursuant to which Paragon granted us a royalty-bearing, world-wide, exclusive license to develop, manufacture,

commercialize or otherwise exploit certain antibodies and products targeting IL-23 in all fields other than the field of inflammatory

bowel disease.

In December 2024, we exercised our exclusive option to acquire certain rights to ORKA-002, and in February 2025, we entered

into the corresponding license agreement with Paragon pursuant to which Paragon granted us a royalty-bearing, world-wide, exclusive license

to develop, manufacture, commercialize or otherwise exploit certain antibodies and products targeting IL-17A/F in all fields (collectively,

the “License Agreements”).

Pursuant to each of the two

License Agreements, Paragon has agreed not to conduct any new campaigns that generate anti-IL-23 monospecific antibodies or anti-IL-17A/F

monospecific antibodies in the respective agreed-upon fields.

Each of the ORKA-001 and ORKA-002 License Agreements may be terminated on

60 days’ notice to Paragon, on material breach without cure, and on a party’s insolvency or bankruptcy to the extent permitted

Pursuant to the terms of

each of the ORKA-001 and ORKA-002 License Agreements, we are obligated to pay Paragon non-refundable milestone payments of up to $12.0

million under each respective agreement upon the achievement of certain clinical development milestones and up to $10.0 million under

each respective agreement upon the achievement of certain regulatory milestones.

In addition, we are obligated to pay Paragon a low single-digit

percentage royalty for antibody products for each of ORKA-001 and ORKA-002.

For each of the License Agreements, the royalty term ends

on the later of (i) the last-to-expire licensed patent or our patent directed to the manufacture, use or sale of a licensed antibody in

the country at issue or (ii) 12 years from the date of first sale of our product.

There is also a royalty step-down if there is no Paragon

patent in effect during the royalty term for each program.

Pursuant to the License Agreements,

as of March 31, 2025, we have incurred and expensed milestone payments of $4.0 million and $1.5 million for ORKA-001 and ORKA-002, respectively.

Components of Results of Operations

To date, we have not generated revenue from any

sources, including product sales, and do not expect to generate any revenue from the sale of products in the foreseeable future.

development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future

from product sales or payments from future collaboration or license agreements that we may enter into with third parties, or any combination

We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates.

To date, we have not generated

revenue from any sources, including product sales, and do not expect to generate any revenue from the sale of products in the foreseeable

If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue

in the future from product sales or payments from future collaboration or license agreements that we may enter into with third parties,

or any combination thereof.

We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale

of our product candidates.

We may never succeed in obtaining regulatory approval for any of our product candidates.

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Research and Development

Research and development expenses consist primarily

of costs incurred in connection with the development and research of our programs.

These expenses include costs of funding research performed

by third parties, including Paragon Therapeutics, Inc.

(“Paragon”), that conduct research and development activities on our

behalf, expenses incurred in connection with continuing our current research programs and discovery-phase development of any programs

we may identify, including under future agreements with third parties, such as consultants and contractors, personnel-related expenses,

including salaries, bonuses, employee benefits, stock-based compensation expense, and allocated human resource costs, information technology

costs, and facility-related costs, including rent, maintenance, utilities, and depreciation for our leased office space.

We expense research and development costs as incurred.

Our primary focus since inception has been the identification and development of our pipeline programs.

Our research and development expenses

primarily consist of external costs, such as fees paid to Paragon under the Option Agreements.

We separately track the amount of costs

incurred under the Option Agreements with Paragon between ORKA-001 and ORKA-002.

See “— Contractual Obligations and

Commitments ” below for further details on the Option Agreements.

We expect our research and development expenses

to increase substantially for the foreseeable future as we advance our product candidates into and through preclinical studies and clinical

trials, pursue regulatory approval of our product candidates and expand our pipeline of product candidates.

Research and development

expenses consist primarily of costs incurred in connection with the development and research of our programs.

These expenses include:

of funding research performed by third parties that conduct research and development activities on our behalf;

incurred, and milestone payments under license and option agreements;

incurred in connection with continuing our current research programs and discovery-phase development of any programs we may identify,

including under future agreements with third parties, such as consultants and contractors;

incurred under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”),

and with clinical trial sites that conduct research and development activities on our behalf;

cost of development and validating our manufacturing process for use in our preclinical studies and current and future clinical trials;

● personnel-related

expenses, including salaries, bonuses, employee benefits, travel, and stock-based compensation expense;

human resource costs, information technology costs, and facility-related costs, including rent, maintenance, utilities, and depreciation

for our leased office space.

We expense research and development

costs as incurred.

Non-refundable advance payments that we make for goods or services to be received in the future for use in research

and development activities are recorded as prepaid expenses.

The prepaid amounts are expensed as the related goods are delivered or the

services are performed, or when it is no longer expected that the goods will be delivered or the services rendered.

Our primary focus

since inception has been the identification and development of our pipeline programs.

Our research and development expenses primarily

consist of external costs.

See Note 10 to the condensed consolidated financial statements included in Part I - Item 1 of this Quarterly

Report for further details on the Option Agreements.

We expect our research and

development expenses will increase substantially for the foreseeable future as we continue to invest in research and development activities

related to the continued development of our programs, developing any future programs, including investments in manufacturing, as we advance

any program we may identify and continue to conduct clinical trials.

The success of programs we may identify and develop will depend on

many factors, including the following:

and successful completion of preclinical studies;

investigational new drug (“IND”) or comparable foreign applications that allow commencement of our planned clinical trials

or future clinical trials for any programs we may develop;

enrollment and completion of clinical trials;

results from our clinical trials that support a finding of safety and effectiveness, acceptable pharmacokinetics profile, and an acceptable

risk-benefit profile in the intended populations;

of marketing approvals from applicable regulatory authorities;

● establishment

of arrangements through our own facilities or with third-party manufacturers for clinical supply and, where applicable, commercial manufacturing

capabilities;

● maintenance

of a continued acceptable safety, tolerability, and efficacy profile of any programs we may develop following approval.

Any changes in the outcome

of any of these variables with respect to the development of programs that we may identify could mean a significant change in the costs

and possible delays in timing associated with the development of such programs.

For example, if the FDA or another regulatory authority

were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical

development of a program, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we

would be required to expend significant additional financial resources and time on the completion of clinical development.

obtain regulatory approval for any of our programs.

General and Administrative

General and administrative expenses consist primarily

of personnel-related expenses, including salaries, bonuses, employee benefits, and stock-based compensation, for our executive and other

administrative personnel.

Other significant general and administrative expenses include legal services, including intellectual property

and corporate matters;

professional fees for accounting, auditing, tax, insurance, and allocated human resource costs, information technology

costs, and facility-related costs, including rent, utilities, maintenance, and depreciation for our leased office space.

We expect our general and administrative expenses

will increase substantially for the foreseeable future as we anticipate an increase in our personnel headcount to support the expansion

of research and development activities, as well as to support our operations generally.

We also expect to continue to incur significant

expenses associated with being a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services

associated with maintaining compliance with applicable Nasdaq and SEC requirements;

additional director and officer insurance costs;

investor and public relations costs.

We also expect to incur additional intellectual property-related expenses as we file patent applications

to protect innovations arising from our research and development activities.

General and administrative

expenses consist primarily of personnel-related expenses, including salaries, bonuses, employee benefits, travel, and stock-based compensation,

for our executive and other administrative personnel.

Other significant general and administrative expenses include legal services, including

intellectual property and corporate matters;

professional fees for accounting, auditing, tax, insurance, and allocated human resource

costs, information technology costs, and facility-related costs, including rent, utilities, maintenance, and depreciation for our leased

office space.

We expect our general and

administrative expenses will increase substantially for the foreseeable future as we anticipate an increase in our personnel headcount

to support the expansion of research and development activities, as well as to support our operations generally.

We also expect to continue

to incur significant expenses associated with being a public company, including costs related to accounting, audit, legal, regulatory,

and tax-related services associated with maintaining compliance with applicable Nasdaq and SEC requirements;

director and officer

insurance costs;

and investor and public relations costs.

We also expect to incur additional intellectual property-related expenses as

we file patent applications to protect innovations arising from our research and development activities.

Other Income (Expense), Net

Other income (expense), net includes interest expense

on the convertible note from a related party, interest income, and foreign currency transactions gains and losses.

Interest expense relates

to a convertible note (the “Convertible Note”) issued to Fairmount Healthcare Fund II, L.P.

(“Fairmount”)

in March 2024.

No provision for income taxes was recorded for

the three months ended September 30, 2024 and for the period from February 6, 2024 (inception) through September 30, 2024.

tax assets generated from our net operating losses have been fully reserved as we believe it is not more likely than not that the benefit

will be realized due to its cumulative losses generated to date.

Results of Operations for the Three Months Ended September 30, 2024

The following table summarizes our results of

operations and comprehensive loss for the period presented (in thousands):

September 30,

Total other income (expense), net, consists of interest earned on our

cash, cash equivalents, and marketable securities;

interest expense on the convertible note from a related party (see discussion herein);

and foreign currency transactions gains and losses.

Interest expense relates to a convertible note (the “Convertible Note”)

issued to Fairmount Healthcare Fund II, L.P.

(“Fairmount”), a related party, in March 2024.

At the effective time

of the Merger, the Convertible Note, along with the accrued interest, was automatically converted into Company Common Stock.

Results of Operations for the Three Months

Ended March 31, 2025 and the period from February 6 (inception) to March 31, 2024

The following table summarizes

our results of operations and comprehensive loss for the periods presented (in thousands):

(Inception) to

Operating expenses

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Interest expense (3)

Total other income, net

Net loss and comprehensive loss

Includes related party amount of $13,537 for the three months ended September 30, 2024

Includes related party amount of $71 for the three months ended September 30, 2024

Includes related party amount of $504 for the three months ended September 30, 2024

Other expense, net

Total other income (expense), net

* Percentage not meaningful

Includes related party amounts of $2,122 and $5,051 for the three months ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, respectively

Includes related party amounts of $110 and $848 for the three months ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, respectively

Includes related party amounts of nil and $214 for the three months

ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, respectively

Research and Development Expenses

The following table summarizes our research and

development expenses for the period presented (in thousands):

Three Months Ended

September 30,

External research and development costs by selected target:

Other research and development costs:

Personnel-related (including stock-based compensation) (3)

development expenses for the periods presented (in thousands):

(Inception) to

External research and development expenses (1)

Other research and development expenses:

Personnel-related (excluding stock-based compensation) (2)

Stock-based compensation (3)

Total research and development expenses

Includes related party amount of $2,316 for the three months ended September 30, 2024

Includes related party amount of $3,824 for the three months ended September 30, 2024

Includes related party amount of $7,251 for the three months ended September 30, 2024

Includes related party amount of $146 for the three months ended September 30, 2024

Research and development expenses were $25.7 million

for the three months ended September 30, 2024 and consisted primarily of the following:

$2.3 million of research and development expense due to Paragon for services rendered under the Option Agreements for ORKA-001, including $1.5 million of milestone payment due to Paragon upon exercise of option to enter into a license agreement and achievement of development candidate for IL-23;

$9.4 million of research and development expenses on chemistry, manufacturing, and development costs for ORKA-001, including $3.2 million of toxicology testing for ORKA-001 with a third-party contract research organization;

$3.8 million of research and development expense due to Paragon for services rendered under the Option Agreements for ORKA-002;

$9.1 million of personnel-related costs related to salaries, benefits

and other compensation-related costs, and stock-based compensation expense of $7.8 million, including $7.3 million for stock-based compensation

related to Paruka Holding LLC (“Paruka”) warrants;

$0.7 million of other research expenses and allocated human resource costs, information technology costs, and facility-related costs, including rent, maintenance, utilities, and depreciation for our leased office space.

* Percentage not meaningful

Includes related party amounts of $707 and $4,905 for the three months ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, respectively

Includes related party amounts of nil and $78

for the three months ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, respectively

Includes related party amounts of $1,415 and $68 for the three months ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024, respectively

Research and development

expenses increased by $14.7 million, from $5.2 million for the period from February 6, 2024 (inception) to March 31, 2024 to $19.9 million

for the three months ended March 31, 2025.

External CROs, CMOs and other

third-party preclinical studies and clinical trials expenses increased by $8.7 million, from $4.9 million for the period from February

6, 2024 (inception) to March 31, 2024 to $13.6 million for the three months ended March 31, 2025.

The increase is primarily related to

increased CMO product development and manufacturing expenses, increase in our CRO expenses related to our ongoing clinical trials and

toxicology studies, partially offset by reduction of research expenses incurred by Paragon.

Employee payroll and related

expenses increased by $2.3 million, from $0.2 million for the period from February 6, 2024 (inception) to March 31, 2024 to $2.5 million

for the three months ended March 31, 2025, as we continue hiring employees in our research and development organization.

Stock-based compensation

expenses increased by $2.9 million, from $0.1 million for the period from February 6, 2024 (inception) to March 31, 2024 to $3.0 million

for the three months ended March 31, 2025.

The increase in stock-based compensation expenses is related to $1.3 million of increase in

Paruka warrant liability under the Options Agreement (“Paruka Warrant Obligation”) and $1.6 million related to the increase

in employee awards.

Facilities and allocated overhead expenses increased by $0.8 million, as we commenced using our leased office space

from June 2024 and increased our research and development headcount.

General and Administrative Expenses

The following table summarizes our general and

administrative expenses for the period presented (in thousands):

Three Months Ended

September 30,

administrative expenses for the periods presented (in thousands):

(Inception) to

Personnel-related (including stock-based compensation) (1)

Professional and consulting fees (2)

Legal fees related to patent (1)

Total general and administrative expenses

Includes related party amount of $71 for the three months ended September

General and administrative expenses were $3.8 million

for the three months ended September 30, 2024 and consisted primarily of the following:

$2.4 million of personnel-related costs related to salaries, benefits and other compensation-related costs, including stock-based compensation of $1.2 million;

$0.7 million of professional and consulting fees associated with accounting, audit, and legal fees to support our business activity and operations of a public company;

$0.1 million of legal fees due to Paragon associated with patent related activities;

$0.5 million of other business expense and allocated human resource costs, information technology costs, and facility-related costs, including rent, maintenance, utilities, and depreciation for our leased office space.

Total Other Income (Expense), Net

Interest income from money market funds was $1.3

million for the three months ended September 30, 2024.

Interest expense was $0.5 million for the three

months ended September 30, 2024 relating to the Convertible Note from Fairmount.

Results of Operations for the Period of February 6, 2024 (Inception)

to September 30, 2024

The following table summarizes our results of

operations and comprehensive loss for the period presented (in thousands):

(Inception) to

September 30,

Operating expenses

Research and development (1)

Includes related party amounts of nil and $505 for the three months

ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024

Includes related party amounts of $110 and $256 for the three months ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024

Includes related party amounts of nil and $87 for the three months

ended March 31, 2025 and the period from February 6, 2024 (inception) to March 31, 2024

General and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest income

Interest expense (3)

Total other expense, net

Net loss and comprehensive loss

Includes related party amount of $33,967 for the period from February 6, 2024 (inception) to September 30, 2024

Includes related party amount of $1,339 for the period from February 6, 2024 (inception) to September 30, 2024

Includes related party amount of $1,468 for the period from February 6, 2024 (inception) to September 30, 2024

Research and Development Expenses

The following table summarizes our research and

development expenses for the period presented (in thousands):

(Inception) to

September 30,

External research and development costs by selected target:

Other research and development costs:

Personnel-related (including stock-based compensation) (3)

Total research and development expenses

Includes related party amount of $15,478 for the period from February 6, 2024 (inception) to September 30, 2024

Includes related party amount of $10,662 for the period from February 6, 2024 (inception) to September 30, 2024

Includes related party amount of $7,681 for the period from February 6, 2024 (inception) to September 30, 2024

Includes related party amount of $146 for the period from February 6, 2024 (inception) to September 30, 2024

and development expenses were $49.6 million for the period from February 6, 2024 (inception) to September 30, 2024 and consisted

primarily of the following:

$15.5 million of research

and development expense due to Paragon for services rendered under the Option Agreements for ORKA-001, including $1.5 million of

milestone payment due to Paragon upon exercise of option to enter into a license agreement and achievement of development candidate

for IL-23, and $5.9 million of research and development expense due to Paragon incurred through March 31, 2024 upon completion of

IL-23 selection process;

$11.4 million of research and development expense on

chemistry, manufacturing, and development costs for ORKA-001, including $3.4 million in toxicology testing for ORKA-001 with a third-party

contract research organization;

$11.0 million of research and development expense

primarily due to Paragon for services rendered under the Option Agreements for ORKA-002;

$10.7 million of personnel-related costs related

to salaries, benefits, and other compensation-related costs, and stock-based compensation expense of $8.3 million, including

$7.7 million for stock-based compensation related to Paruka warrants;

$0.9 million of other research expense and allocated

human resource costs, information technology costs, and facility-related costs, including rent, maintenance, utilities, and depreciation

for our leased office space.

and Administrative Expenses

following table summarizes our general and administrative expenses for the period presented (in thousands):

(Inception) to

September 30,

Personnel-related

(including stock-based compensation) (1)

Professional and consulting fees

Legal fees related to patent (2)

general and administrative expenses

Includes related party amount

of $609 for the period from February 6, 2024 (inception) to September 30, 2024

Includes related party amount

of $550 for the period from February 6, 2024 (inception) to September 30, 2024

Includes related party amount

of $180 for the period from February 6, 2024 (inception) to September 30, 2024

and administrative expenses were $8.2 million for the period from February 6, 2024 (inception) to September 30, 2024 and consisted

primarily of the following:

$4.6 million of personnel-related

costs related to recruiting costs, salaries, benefits and other compensation-related costs, including stock-based compensation of

$1.5 million and $0.6 million of personnel-related costs are amounts due to Paragon related to recruiting costs for hiring our

executive team, legal, and finance and accounting functions;

$2.3 million of professional and consulting fees

associated with accounting, audit, and legal fees associated with becoming a public company;

$0.6 million of legal fees due to Paragon associated

with patent related activities;

$0.7 million of other business expenses and allocated

human resource costs, information technology costs, and facility-related costs, including rent, maintenance, utilities, and depreciation

for our leased office space, including $0.2 million of other business expenses due to Paragon.

Other Income (Expense), Net

income from money market funds was $1.3 million for the period from February 6, 2024 (inception) to September 30, 2024.

expense was $1.5 million for the period from February 6, 2024 (inception) to September 30, 2024 relating to the Convertible Note from

and Capital Resources

of September 30, 2024, we had $410.9 million of cash and cash equivalents.

Since our inception, we have incurred significant

operating losses and negative cash flow from operations.

We expect to incur significant expenses and operating losses for the foreseeable

future as we continue the pre-clinical and clinical development of our programs and continue our early-stage research activities.

not yet commercialized any products and we do not expect to generate revenue from sales of products for several years, if at all.

As of September 30, 2024, we had funded our operations primarily with proceeds from issuances of convertible preferred stock, common stock,

convertible note, and pre-funded warrants.

In March 2024, we received $3.0 million in gross proceeds from the issuance of Pre-Merger

Oruka Series A Preferred Stock and $25.0 million in gross proceeds from the issuance of the Convertible Note, both of which

were related party transactions.

In August 2024, we raised approximately $228.0 million in net proceeds from Pre-Closing Financing and

received $4.9 million in cash from ARCA upon consummation of the Merger.

In September 2024, we received approximately $188.7 million in

net proceeds from the issuance of common stock, Company Series A Preferred Stock, and pre-funded warrants in connection with the PIPE

primary use of cash is to fund the development of our product candidates, and advance our pipeline.

This includes both the research and

development costs and the general and administrative expenses required to support those operations.

Since we are a clinical stage biotechnology

company, we have incurred significant operating losses since our inception and we anticipate such losses, in absolute dollar terms, to

increase as we continue to pursue clinical development of our product candidates, prepare for the potential commercialization of our

product candidates, and expand our development efforts in our pipeline of nonclinical candidates.

We expect that our existing cash and

cash equivalents will be sufficient to fund our operating plans for at least twelve months from the date of filing of this Quarterly

expenses increased by $3.5 million, from $1.7 million for the period from February 6, 2024 (inception) to March 31, 2024 to $5.2 million

for the three months ended March 31, 2025.

Employee payroll and related expenses increased by $2.8 million, from $0.8 million

for the period from February 6, 2024 (inception) to March 31, 2024 to $3.6 million for the three months ended March 31, 2025,

as a result of continued hiring of executives and administrative employees.

Stock-based compensation expenses were less than $0.1 million

and $1.9 million for the period from February 6, 2024 (inception) to March 31, 2024 and for the three months ended March 31, 2025, respectively.

Expenses related to professional services increased by $0.7 million, from $0.7 million for the period from February 6, 2024

(inception) to March 31, 2024 to $1.4 million for the three months ended March 31, 2025, due to increased spending on consulting,

insurance costs, recruiting, legal, audit, accounting and other services to support our growing operations as a public company and as

we continue to expand our operations to support our business strategy and product development.

Total Other Income (Expense), Net

Interest income from cash

equivalents and marketable securities was $4.1 million for the three months ended March 31, 2025.

No interest income was recorded for

the period from February 6, 2024 (inception) to March 31, 2024.

No interest expense was recorded

during the three months ended March 31, 2025.

Interest expense was $0.2 million for the period from February 6, 2024 (inception) to March

31, 2024 relating to the Convertible Note issued to Fairmount in March 2024.

Liquidity and Capital Resources

As of March 31, 2025, we

had $373.0 million of cash, cash equivalents, and marketable securities.

Since our inception, we have

incurred significant operating losses and negative cash flow from operations.

We expect to incur significant expenses and operating losses

for the foreseeable future as we continue the pre-clinical and clinical development of our programs and our early-stage research activities.

We have not yet commercialized any products, and we do not expect to generate revenue from sales of products for several years, if

Through March 31, 2025, we had funded our operations primarily with proceeds from issuances of convertible preferred stock, common

stock, a convertible note, and pre-funded warrants.

In March 2024, we received $2.9 million in net proceeds from the issuance

of Pre-Merger Oruka Series A Preferred Stock and $25.0 million in gross proceeds from the issuance of the Convertible Note,

both of which were related party transactions.

In August 2024, we raised approximately $228.0 million in net proceeds from Pre-Closing

Financing and received $4.9 million in cash from ARCA upon consummation of the Merger.

In September 2024, we received approximately $188.7

million in net proceeds from the issuance of common stock, Company Series A Preferred Stock, and pre-funded warrants in connection with

the PIPE Financing.

Our primary use of cash is

to fund the development of our product candidates and advance our pipeline.

This includes both the research and development costs and

the general and administrative expenses required to support those operations.

Since we are a clinical stage biopharmaceutical company,

we have incurred significant operating losses since our inception and we anticipate such losses, in absolute dollar terms, to increase

as we continue to pursue clinical development of our product candidates, prepare for the potential commercialization of our product candidates,

and expand our development efforts in our pipeline of nonclinical candidates.

We expect that our existing cash, cash equivalents, and

marketable securities will be sufficient to fund our operating plans for at least twelve months from the date of filing of this Quarterly

We will need to secure additional financing in the future to fund additional research and development, and before a commercial

drug can be produced, marketed, and sold.

If we are unable to obtain additional financing or generate license or product revenue, the

lack of liquidity could have a material adverse effect on our company.

following table summarizes our cash flows for the period presented (in thousands):

(Inception) to September 30,

cash used in operating activities

cash used in investing activities

cash provided by financing activities

increase in cash and cash equivalents

February 6, 2024 (inception) to September 30, 2024, net cash used in operating activities was $39.0 million, which was primarily

attributable to a net loss of $57.9 million, offset by non-cash charges of $11.3 million and net cash provided by changes in operating

activities of $7.6 million.

Non-cash charges primarily consisted of a $9.8 million increase in stock-based compensation expense (primarily

from Paruka Warrant Obligation) and $1.5 million of non-cash interest expense.

Net cash provided by changes in our operating activities

primarily consisted of a $1.6 million increase in accounts payable, $1.7 million increase in accrued expenses and other current liabilities,

$6.4 million increase in related parties accounts payable and other current liabilities, partially offset by a $2.0 million increase

in prepaid expenses and other current assets.

The increase in amounts due to related parties, accounts payable, and accrued expenses

and other current liabilities was primarily due to an increase in our business activity, as well as vendor invoicing and payments.

increase in prepaid expenses and other current assets was primarily due to prepaid research and development expenses with our contract

research organization.

February 6, 2024 (inception) to September 30, 2024, net cash used in investing activities was $0.2 million, which was attributable

to purchases of property and equipment.

February 6, 2024 (inception) to September 30, 2024, net cash provided by financing activities was $450.1 million, consisting

of $2.9 million of net proceeds from the issuance of Series B Preferred Stock, $25.0 million of net proceeds from

the issuance of the Convertible Note, $228.1 million of net proceeds from the Pre-Closing Financing, $189.1 million of net proceeds from

the PIPE Financing, and $4.9 million of cash acquired in connection with the reverse recapitalization.

Obligations and Commitments

enter into contracts in the normal course of business with contract research organizations (“CROs”) for clinical trials,

with contract manufacturing organizations (“CMOs”) for clinical supplies manufacturing and with other vendors for preclinical

studies, supplies and other services and products for operating purposes.

These contracts generally provide for termination on notice

or may have a potential termination fee if a purchase order is cancelled within a specified time, and therefore are cancelable contracts.

We do not expect any such contract terminations and did not have any non-cancellable obligations under these agreements as of September

Option Agreements

In March 2024, we entered into antibody discovery

and option agreements with Paragon and Paruka (the “Option Agreements”).

Under the terms of the Option Agreements, Paragon

identifies, evaluates and develops antibodies directed against certain mutually agreed therapeutic targets of interest to us.

Agreements include two selected targets, IL-23 (“ORKA-001”) and IL-17 A/F (“ORKA-002”).

Under the Option Agreements,

we have the exclusive options to, on a research program-by-research program basis, be granted an exclusive, worldwide license to all of

Paragon’s right, title and interest in and to the intellectual property resulting from the applicable research program to develop,

manufacture and commercialize the antibodies and products directed to the selected targets (each, an “Option”), with the exception

of pursuing ORKA-001 for the treatment of inflammatory bowel disease.

If we exercise our options, we will be required to make non-refundable

milestone payments to Paragon of up to $12.0 million under each respective agreement upon the achievement of certain clinical development

milestones, up to $10.0 million under each respective agreement upon the achievement of certain regulatory milestones as well as

tiered royalty payments in the low-to-mid single-digits beginning on the first commercial sale.

From time to time, we can choose to add

additional targets to the collaboration by mutual agreement with Paragon.

During the three months ended September 30, 2024, we exercised

our option for ORKA-001 and recorded a $1.5 million milestone payment related to the achievement of development candidate as research

and development expense in our condensed consolidated statements of operations and comprehensive loss for the three months ended September

As of September 30, 2024, this amount is included under related party accounts payable and other current liabilities on the

condensed consolidated balance sheet.

Our exclusive Option with respect to each research

program for a particular target initiated by the parties (“Research Program”) is exercisable at our sole discretion at any

time during the period beginning on the initiation of activities under the associated Research Program and ending a specified number of days

following (i) with respect to any Research Program other than ORKA-001, the delivery of the data package from Paragon related to the results

of the Research Plan activities, or (ii) with respect to ORKA-001, the completion of the IL-23 antibody selection process described in

the agreement (the “Option Period”).

There is no payment due upon exercise of an Option pursuant to the Option Agreements.

Unless terminated earlier, the Option Agreements

shall continue in force on a Research Program-by-Research Program basis until the earlier of:

(i) the end of the Option Period for

such Research Program, as applicable, if such Option is not exercised by us;

(ii) the expiration of the 30-day period after we exercise

our Option with respect to such Research Program, subject to mutually agreed extension, during the Option Period and the parties are unable

to finalize and execute a license agreement, and (iii) the expiration of the applicable research term (the “Term”).

expiration of the Term for all then-existing Research Programs, under the Option Agreements, the Option Agreements will automatically

expire in its entirety.

We may terminate the Option Agreements or any Research Program at any time for any or no reason upon 30 days’

prior written notice to Paragon, provided that we must pay certain unpaid fees due to Paragon upon such termination, as well as any non-cancellable

obligations reasonably incurred by Paragon in connection with its activities under any terminated Research Program.

Paragon may terminate

the Option Agreements or a Research Program immediately upon written notice to us if, as a result of any action or failure to act by us

or our affiliates, such Research Program or all material activities under the applicable Research Plan are suspended, discontinued or

otherwise delayed for a certain consecutive number of months.

Each party has the right to terminate the Option Agreements or any Research

Program upon (i) 30 days’ prior written notice of the other party’s material breach that remains uncured for the

30-day period and (ii) the other party’s bankruptcy.

Pursuant to the Option Agreements, on a research

program-by-research program basis following the finalization of the research plan for each respective research program, we were required

to pay Paragon a one-time, nonrefundable research initiation fee of $0.8 million related to the ORKA-001 program.

This amount was

recognized as a research and development expense during the period from February 6, 2024 (inception) to September 30, 2024.

2024, pursuant to the Option Agreements with Paragon, we completed the selection process of our development candidate for IL-23 antibody

for ORKA-001 program.

We were responsible for 50% of the development costs incurred through the completion of the IL-23 selection process.

We received the rights to at least one selected IL-23 antibody in June 2024.

During the three months ended September 30, 2024, we exercised

our option for ORKA-001 and recorded a $1.5 million milestone payment related to the achievement of development candidate as research

and development expense in our condensed consolidated statements of operations and comprehensive loss for each of the three months ended

September 30, 2024 and for the period from February 6, 2024 (inception) to September 30, 2024.

Our share of development costs incurred

during the three months ended September 30, 3024 and for the period from February 6, 2024 (inception) to September 30, 2024 was $0.8 million

and $13.2 million, respectively, which were recorded as research and development expenses during the respective periods.

$2.3 million is included in related party accounts payable and other current liabilities as of September 30, 2024.

We were also required to reimburse Paragon $3.3 million

for development costs related to ORKA-002 incurred by Paragon through December 31, 2023 and certain other development costs incurred

by Paragon between January 1, 2024 and March 6, 2024 as stipulated by the Option Agreements.

This amount was recognized as a

research and development expense during the period from February 6, 2024 (inception) to September 30, 2024.

We are also responsible

for the development costs incurred by Paragon from January 1, 2024 through the completion of the IL-17 selection process.

We recognized

an amount of $0.8 million payable to Paragon for the research initiation fee related to ORKA-002 following the finalization of the

ORKA-002 research plan.

This was recognized as research and development expenses in the period from February 6, 2024 (inception) to September

We accounted for development costs of $3.8 million and $6.6 million during the three months ended September 30, 3024 and for

the period from February 6, 2024 (inception) to September 30, 2024, respectively, as research and development expenses during the respective

An amount of $3.8 million is included in related party accounts payable and other current liabilities as of September 30, 2024.

As part of the Option Agreements, on each of

December 31, 2024 and December 31, 2025, we will grant warrants to purchase a number of shares equal to 1.00% of outstanding shares as

of the date of the grant on a fully diluted basis with an exercise price equal to the fair market value of the underlying shares on the

The warrants are liability-classified and after the initial recognition, the liability is adjusted to fair value at the end

of each reporting period, with changes in fair value recorded in the consolidated statement of operations and comprehensive loss as stock-based

compensation expenses under research and development expenses.

We expense the service fees as the associated

costs are incurred when the underlying services are rendered.

Such amounts are classified within research and development expenses in

the accompanying condensed consolidated statement of operations and comprehensive loss.

concluded that the rights obtained under the Option Agreements represent an asset acquisition whereby the underlying assets comprise

in-process research and development assets with no alternative future use.

The Option Agreements did not qualify as a business combination

because substantially all of the fair value of the assets acquired was concentrated in the exclusive license options, which represent

a group of similar identifiable assets.

The research initiation fee represents a one-time cost on a research program-by-research program

basis for accessing research services or resources with benefits that are expected to be consumed in the near term, therefore the amounts

paid are expensed as part of research and development costs immediately.

Amounts paid as reimbursements of on-going development cost,

monthly development cost fee and additional development expenses incurred by Paragon due to work completed for selected targets prior

to the effective date of the Option Agreements that is associated with services being rendered under the related Research Programs are

recognized as research and development expense when incurred.

the three months ended September 30, 2024 and the period from February 6, 2024 (inception) to September 30, 2024, we recognized

$13.4 million and $33.8 million of expenses, respectively, in connection with services provided by Paragon and Paruka under the Option

with Related Party

March 2024, we entered into a Series A Preferred Stock and Convertible Note Purchase Agreement (the “Purchase Agreement”)

with Fairmount, whereby we issued the Convertible Note, with an initial principal amount of $25.0 million that, at the time of issuance,

could be converted into Pre-Merger Oruka Series A Preferred Stock (or a series of preferred shares that is identical in respect

to the shares of preferred shares issued in its next equity financing) or shares of Pre-Merger Oruka Common Stock in exchange for aggregate

proceeds of $25.0 million.

The Convertible Note accrued interest at a rate of 12.0% per annum.

At issuance, the Convertible Note

required all unpaid interest and principal to mature on December 31, 2025 (the “Maturity Date”) and prepayment was not

permitted without prior written consent of Fairmount.

At issuance, the principal payment along with the accrued interest on the Convertible

Note was due in full on the Maturity Date.

Pursuant to the Purchase Agreement, we had the right to sell and issue additional convertible

notes up to an aggregate principal amount equal to $30.0 million, in addition to the $25.0 million initial principal amount of the Convertible

prior to the completion of the Merger, the Convertible Note was converted into shares of Pre-Merger Oruka Common Stock based on the aggregate

principal amount of $25.0 million, plus unpaid accrued interest of $1.5 million divided by the conversion price, which was determined

based upon the Company’s fully-diluted capitalization immediately prior to the Merger.

At the effective time of the Merger, the

Pre-Merger Oruka Common Stock issued upon the conversion of the Convertible Note (including accrued interest) automatically converted

into shares of Company Common Stock.

2,722,207 shares of Company Common Stock were issued on conversion of the Convertible Note and accrued

As of September 30, 2024, there is no note payable to a related party.

Accounting Policies and Significant Judgments and Estimates

management’s discussion and analysis of its financial condition and results of operations is based on its financial statements,

which have been prepared in accordance with U.S.

The preparation of these condensed consolidated financial statements requires

us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets

and liabilities at the date of the financial statements, as well as the reported revenues recognized and expenses incurred during the

reporting periods.

Our estimates are based on its historical experience and on various other factors that we believe are reasonable under

the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are

not readily apparent from other sources.

At this time, due to the inherently unpredictable nature of clinical development, we cannot

reasonably estimate the costs we will incur and the timelines that will be required to complete development, obtain marketing approval,

and commercialize our current product candidate or any future product candidates.

For the same reasons, we are also unable to predict

when, if ever, we will generate revenue from product sales or our current or any future license agreements which we may enter into or

whether, or when, if ever, we may achieve profitability.

In addition, with a change in the presidential administration in 2025, there

has been an economic policy shift towards increasing tariffs, which in turn has led and could lead to further retaliatory tariffs.

may have the potential to impact expenses as well as our ability to, if ever, generate revenue or achieve profitability.

If we are unable

to obtain additional financing or generate license or product revenue, the lack of liquidity could have a material adverse effect on our

The following table summarizes

our cash flows for the periods presented (in thousands):

(Inception) to

Net cash used in operating activities

Net cash provided by investing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

Operating Activities

For the three months ended

March 31, 2025, net cash used in operating activities was $20.9 million, which was primarily attributable to a net loss of $21.0 million

and net changes in our operating assets and liabilities of $3.0 million, partially offset by net non-cash charges of $3.1 million.

changes in our operating assets and liabilities were primarily comprised of a decrease of $5.2 million in related party accounts payable

and other current liabilities and an increase of $2.3 million in accrued expenses and other current liabilities.

Net non-cash charges

primarily comprised of $4.9 million in stock-based compensation expense, partially offset by $1.8 million in net accretion of premiums

and discounts on marketable securities.

From February 6, 2024 (inception) to March 31, 2024, net

cash used in operating activities was $0.2 million and was primarily attributable to a net loss of $7.1 million, offset by a

$6.1 million increase in related parties accounts payable and other current liabilities and a $0.8 million increase in accrued

expenses and other current liabilities.

The increase in amounts due to related parties and accrued expenses and other current liabilities

was primarily due to an increase in Oruka’s business activity, as well as vendor invoicing and payments.

Investing Activities

For the three months ended

March 31, 2025, net cash provided by investing activities was $42.9 million, which included $87.2 million in proceeds from maturities

of marketable securities, partially offset by $44.3 million in purchases of marketable securities.

From February 6, 2024

(inception) to March 31, 2024, no cash was used in or provided by investing activities.

Financing Activities

For the three months ended

March 31, 2025, no cash was used in or provided by financing activities.

From February 6, 2024

(inception) to March 31, 2024, net cash provided by financing activities was $27.9 million, consisting of $2.9 million in net proceeds

from the issuance of Series B Preferred Stock and $25.0 million in net proceeds from the issuance of the Convertible Note.

Contractual Obligations and Commitments

We enter into contracts in

the normal course of business with CROs, CMOs and with other vendors for preclinical research studies, clinical trials, manufacturing,

and other services and products for operating purposes.

These contracts generally provide for termination on notice or may have a

potential termination fee if the contract is cancelled within a specified time, and therefore, are cancelable contracts.

We do not expect

any such contract terminations and did not have any non-cancellable obligations under these agreements as of March 31, 2025.

10 and 11 to the condensed consolidated financial statements included in Part I - Item 1 of this Quarterly Report for further information

on our contractual lease obligations for our headquarters in Menlo Park, California, and our office in Waltham, Massachusetts, and other

commitments, including the commitments under the Option and License Agreements.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion

and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance

The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions

that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the

financial statements, as well as the reported revenues recognized and expenses incurred during the reporting periods.

Our estimates are

based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of

which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other

Actual results may differ from these estimates under different assumptions or conditions.

our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements appearing elsewhere

in this Quarterly Report, we believe the following accounting policies used in the preparation of our financial statements require the

most significant judgments and estimates.

Research and Development Expenses

part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses.

This process involves estimating the level of service performed and the associated cost incurred for the services when we have not yet

been invoiced or otherwise notified of actual costs.

The majority of our service providers invoice us in arrears for services performed,

on a pre-determined schedule or when contractual milestones are met;

however, some require advance payments.

We make estimates of our

accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time.

At each period end, we corroborate the accuracy of these estimates with the service providers and make adjustments, if necessary.

accrued research and development expenses include those related to fees paid to vendors in connection with discovery development activities

and any research organizations in connection with studies and testing.

Although we do not expect our estimates to be materially different

from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing

of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.

measure stock options granted to employees and non-employees based on the estimated fair values of the awards as of the grant date using

the Black-Scholes option-pricing model.

The model requires management to make a number of assumptions, including common stock fair value,

expected volatility, expected term, risk-free interest rate and expected dividend yield.

For restricted stock awards and restricted stock

units, the estimated fair value is the fair market value of the underlying stock on the grant date.

We expense the fair value of our

equity-based compensation awards on a straight-line basis over the requisite service period, which is the period in which the related

services are received.

We account for award forfeitures as they occur.

The expense for stock-based awards with performance conditions

is recognized when it is probable that a performance condition is met during the vesting period.

Determination

of Fair Value of Common Stock

public trading market for Company Common Stock has been established in connection with the completion of this Merger.

As such, it is

no longer necessary for our board of directors to estimate the fair value of our stock-based awards in connection with its accounting

for granted stock-based awards or other such awards we may grant, as the fair value of Company Common Stock and share-based awards is

determined based on the quoted market price of Company Common Stock.

to the merger, Pre-Merger Oruka’s common stock valuations were prepared using a hybrid method, including an option pricing method

The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise

prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes.

this method, the common stock has value only if the funds available for distribution to stockholders exceed the value of the preferred

stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger.

The hybrid method is a probability-weighted

expected return method (“PWERM”), where the equity value in one or more of the scenarios is calculated using an OPM.

PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the Company,

assuming various outcomes.

The common stock value is based on the probability-weighted present value of expected future investment returns

considering each of the possible outcomes available as well as the rights of each class of stock.

The future value of the common stock

under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to

arrive at an indication of value for the common stock.

A discount for lack of marketability of the common stock is then applied to arrive

at an indication of value for the common stock.

assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application

of management’s judgment.

As a result, if Pre-Merger Oruka had used significantly different assumptions or estimates, the fair

value of Pre-Merger Oruka’s incentive shares and its stock-based compensation expense could have been materially different.

Issued Accounting Pronouncements

Note 2 to the condensed consolidated financial statements included in Part I - Item 1 of this Quarterly Report for more information regarding

recently issued accounting pronouncements.

Sheet Arrangements

of September 30, 2024, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Our significant accounting

policies are described in more detail in Note 2 to our condensed consolidated financial statements included in Part I - Item 1 of

this Quarterly Report.

During the three months ended March 31, 2025, there were no changes to our critical accounting policies and significant

judgments and estimates as disclosed in our Annual Report on Form 10-K for the period from February 6 (inception) to December 31, 2024.

Off-Balance Sheet Arrangements

As of March 31, 2025, we did not have any off-balance

sheet arrangements, as defined in the rules and regulations of the SEC.

Quantitative and Qualitative Disclosures About Market Risk

are a smaller reporting company, as defined by Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange

Act”), and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

We are a smaller reporting company, as defined

by Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in Item 10(f)(1) of Regulation

S-K, and are not required to provide the information under this item.

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