Rein Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis are meant to provide material information relevant to an assessment of the financial condition and results of operations of our Company, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources, so as to allow investors to better view our Company from management’s perspective. You should read the following discussion and analysis of our financial condition and results of operations together with ou r unaudited condensed consolidated financial statements for the six months ended June 30, 2025, included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this report, including those set forth under Item 1A. "Risk Factors" in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Annual Report”). Overview and Recent Developments We are a clinical stage biopharmaceutical company focused on developing novel therapies for the treatment of orphan pulmonary and fibrosis indications with no approved or limited effective treatments. We currently have two product candidates in clinical development, LTI-03 and LTI-01, and multiple candidates in preclinical development focused on fibrosis indications. Our pipeline includes: • LTI-03, a peptide, for which we conducted a Phase 1b dose-ranging, placebo-controlled safety, tolerability, and pharmacodynamic biomarker activity trial in development for the treatment of Idiopathic Pulmonary Fibrosis, or IPF, that has demonstrated the ability to protect healthy lung epithelial cells and reduce pro-fibrotic signaling; • LTI-01, a proenzyme that completed a Phase 2a dose-ranging, placebo-controlled trial and a Phase 1b safety, tolerability and proof of mechanism trial in loculated pleural effusion, or LPE, patients, an indication that has no approved drug treatment; and • preclinical programs targeting cystic fibrosis and a peptide program focused on the Cav1 protein for systemic fibrosis indications. In June 2024, we decided to temporarily delay clinical development of LTI-01 in an effort to focus our resources on clinical development of LTI-03 and until additional funds are raised. In the fourth quarter of 2024, we determined that the temporary delay of further clinical development of LTI-01 may not be a short-term measure. In May 2025, we initiated screening and recruitment of patients in the RENEW Phase 2 clinical trial of LTI-03. The RENEW trial is a Phase 2 multi-center, randomized, double-blind, placebo-controlled study evaluating the safety, tolerability, and efficacy of LTI-03 patients with IPF. In addition, the trial is designed to assess the activity of inhaled dry powder LTI-03 across multiple biomarkers and to measure lung function and the potential for healthy tissue regeneration. The trial is designed to enroll approximately 120 patients diagnosed with IPF within 5 years of screening, who may be receiving standard of care antifibrotic therapy, across up to 50 sites globally, including sites in the United States, United Kingdom, Germany, Austria and Poland. Patients will be randomized into two blinded placebo-controlled cohorts that will run concurrently. Patients in the low dose cohort will receive 2.5 mg of either LTI-03 or placebo administered twice daily, or BID, for a total dose of 5 mg/day, while participants in the high dose cohort will receive 5 mg BID for a total dose of 10 mg/day. The primary endpoint is the incidence of treatment-emergent adverse events from Day 1 through Week 24. The key secondary endpoint is the efficacy of LTI-03 measured through forced vital capacity, percent predicted FVC and high-resolution computer tomography, in collaboration with Qureight Ltd. Patients will undergo a 28-day screening period prior to being randomized and entering the 24-week treatment period, with a four-week follow-up. On June 10, 2025, the U.S. Food and Drug Administration, or the FDA, advised us that it had put the RENEW Phase 2 trial of LTI-03 on clinical hold and we paused enrollment and patient dosing at our clinical trial sites in the United States. On July 8, 2025, we received a formal Clinical Hold Letter from the FDA, or the Letter. In the Letter, the FDA noted that no No-Observed-Adverse-Effect Level (NOAEL) had been identified and minimal mucus cell hyperplasia in the bronchioles had been observed in the 26-week rat study conducted in support of the RENEW trial. The FDA stated that without a NOAEL, there is inadequate nonclinical support for the Phase 2 RENEW trial. The FDA requested that we conduct a rat inhalation toxicity study using doses low enough to identify a NOAEL with a dosing duration sufficient to support the Phase 2 RENEW trial. We believe that the data from the 26-week rat study supports the safety profile of LTI-03 and the conduct of the Phase 2 RENEW trial. We intend to work with the FDA to address the clinical hold as expeditiously as possible. Notwithstanding the clinical hold imposed on the RENEW Phase 2 trial in the United States, we are seeking to activate sites, enroll patients and initiate the RENEW trial in Australia, the United Kingdom and Europe. Subject to resolving the clinical hold in the second half of 2025, we expect to report interim topline data from the RENEW Phase 2 trial in the first half of 2026. We have not completed the development of any of our product candidates, have not generated any revenue from product sales and have never generated an operating profit. 24 To date, we have financed operations primarily through $145.5 million in net proceeds from sales of common stock and warrants, $0.7 million in net proceeds from sales of common stock under our “at-the-market” offering program, $131.2 million from sales of preferred stock prior to our initial public offering, or IPO, $34.9 million from a collaboration agreement in 2010, $17.5 million in net proceeds in connection with a private placement following the Lung Acquisition (as defined below) in 2023, $17.7 million in net proceeds in connection with the issuance and sale of shares and the accompanying warrants in our public offering in May 2024, $5.3 million in gross proceeds in connection with the April 2025 Transactions (as defined below) in April 2025, and $0.95 million in net proceeds from the sale of the initial pre-paid advance under the PPA (as defined below). Since our inception, we have incurred significant losses on an aggregate basis. Our net losses were $6.8 million and $8.9 million for the three months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, we had an accumulated deficit of $363.7 million. These losses have resulted primarily from costs incurred in connection with research and development activities, licensing and patent investment and general and administrative costs associated with our operations. We expect to continue to incur operating losses for the foreseeable future. As of June 30, 2025, we had cash and cash equivalents of $5.7 million. Based on our current operating plan, we believe that our existing cash and cash equivalents, together with the proceeds received by us pursuant to the PPA in July 2025 described below, will enable us to fund our planned operating expense and capital expenditure requirements into November 2025. The funds are not sufficient to enable us to complete the RENEW Phase 2 clinical trial of LTI-03 and we will need to obtain additional funding prior to completing the trial. Our future viability is dependent on our ability to raise additional capital to finance our operations. Our estimate as to how long we expect our existing cash and cash equivalents to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. In addition, our existing cash and cash equivalents will not be sufficient to fund all of the efforts that we plan to undertake or to fund the completion of development of our product candidates. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. There is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, or at all. If we are unable to obtain sufficient funding on terms acceptable to us, on a timely basis or at all, we may be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. Pre-Paid Advance Agreement and Standby Equity Purchase Agreement with Yorkville On July 29, 2025, we entered into a Pre-Paid Advance Agreement, or the PPA, and a Standby Equity Purchase Agreement, or the SEPA, with YA II PN, Ltd., a Cayman Islands exempt limited partnership, or Yorkville. The PPA and the SEPA are collectively referred to as the Yorkville Transactions. Under the PPA, we may request up to $6.0 million in pre-paid advances from Yorkville over a 12-month period, subject to certain limitations and conditions set forth in the PPA. Each pre-paid advance will be purchased by Yorkville at 95% of the face amount of the pre-paid advance. An initial pre-paid advance of $1.0 million was purchased on July 29, 2025 by Yorkville, for net proceeds of $0.95 million. Each additional pre-paid advance shall be subject to the consent of Yorkville. Interest shall accrue on the outstanding balance of any pre-paid advance at an annual rate of 8%, subject to an increase to 18% upon events of default described in the PPA. At any time that there is an outstanding balance under any pre-paid advances, Yorkville may provide a written notice to require us to issue and sell shares of common stock to offset against and reduce the balance under the pre-paid advances at a price per share equal to the lower of (i) 115% of the daily volume weighted average price, or the VWAP, of our common stock on the Nasdaq Capital Market on the last full trading day immediately prior to the date of such pre-paid advance and (ii) 95% of the lowest daily VWAP on the Nasdaq Capital Market during the seven consecutive trading days immediately preceding the date on which Yorkville provides such a purchase notice, subject to a floor price of $0.28 per share. Cash amortization payments will be triggered if the daily VWAP falls below the floor price for five of seven consecutive trading days, or in the event of any shares issued pursuant to the PPA are not eligible to be sold pursuant to an effective registration statement for a period of 10 consecutive trading days, or if we have issued substantially all of the shares available under certain exchange cap limitations. Separately, under the SEPA, we may sell up to $15.0 million of our common stock to Yorkville over a 36-month period at our discretion. Sales under the SEPA are based on our advance notices and may be for a number of shares up to 100% of the average daily trading volume of our common stock during the five trading days immediately prior to the date of each such notice, priced at 96% of the lowest daily VWAP of our common stock on the Nasdaq Capital Market during the three consecutive trading days commencing on the date of delivery each notice, subject to a minimum price floor set by us. As consideration for Yorkville’s commitment to purchase our common stock under the SEPA, we agreed to pay to Yorkville a commitment fee of $0.3 million, which was satisfied by the issuance to Yorkville of an aggregate of 213,099 shares of our common stock. The issuance of shares under both the PPA and SEPA is subject to a cap equal to 19.9% of our outstanding common stock as of July 29, 2025, unless stockholder approval is obtained or other specified conditions are met. Sales Agreement with H.C. Wainwright 25 On May 15, 2025, we entered into an “at the market offering” agreement, or the Wainwright Sales Agreement, with H.C. Wainwright & Co., LLC, or H.C. Wainwright, as agent and/or principal, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $13.7 million from time to time through or to H.C. Wainwright by any method permitted that is deemed to be an “at the market” offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. As of June 30, 2025, we had issued and sold 16,127 shares of common stock pursuant to the Wainwright Sales Agreement. In July 2025, in connection with the Yorkville Transactions, we reduced the aggregate offering price of the shares of common stock that could be offered and sold under the Wainwright Sales Agreement to $8.1 million. Prior to entering into the Wainwright Sales Agreement, in May 2025, we terminated the equity distribution agreement, dated July 26, 2024, or the Equity Distribution Agreement, with Citizens JMP Securities, LLC, or Citizens JMP, as agent and/or principal, under which we could offer and sell up to $50.0 million of shares of our common stock from time to time through or to Citizens JMP by any method that was deemed to be an “at the market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. In January 2025, we issued and sold 317,772 shares of common stock pursuant to the Equity Distribution Agreement for total net proceeds of $0.7 million. We did not issue and sell any other shares of common stock pursuant to the Equity Distribution Agreement in 2025. April 2025 Warrant Transactions and Private Placement On April 21, 2025, we entered into privately negotiated letter agreements with certain holders of the PIPE Warrants (as defined below) and certain holders of the Offering Warrants (as defined below). Pursuant to these letter agreements, these holders agreed to exercise for cash the PIPE Warrants for the purchase of an aggregate of 159,500 shares of common stock and the Offering Warrants for the purchase of an aggregate of 890,138 shares of common stock at a reduced exercise price of $1.60 per share, or the Warrant Exercises. The total gross proceeds for the Warrant Exercises were $1.7 million. On April 21, 2025, we also entered into privately negotiated letter agreements with additional holders of the PIPE Warrants who, in exchange for pre-funded warrants, or the Exchange Pre-Funded Warrants, to purchase an aggregate of 1,939,000 shares of common stock at an exercise price of $0.001 per share, surrendered PIPE Warrants to purchase an aggregate of 1,939,000 shares of common stock to us for cancellation and made an aggregate cash payment of $1.599 per share into which the Exchange Pre-Funded Warrants are exercisable, or the Warrant Exchanges. In the Warrant Exchanges, entities affiliated with Bios Equity Partners, LP, or Bios Partners, exchanged PIPE Warrants to purchase an aggregate of 1,300,500 shares common stock plus the required cash for Exchange Pre-Funded Warrants. The total gross proceeds for the Warrant Exchanges were $3.1 million. In addition, on April 21, 2025, an entity affiliated with Bios Partners, or the Bios Purchaser, purchased additional pre-funded warrants to purchase 312,695 shares of the common stock in a private placement, or the Placement Pre-Funded Warrants, pursuant to a subscription agreement at a price of $1.599 per share underlying the Placement Pre-Funded Warrants, or the Private Placement. The Private Placement closed on April 24, 2025. The total gross proceeds for the Private Placement were $0.5 million. We refer to the Warrant Exercises, the Warrant Exchanges and the Private Placement as the April 2025 Transactions. Master Services Agreement In April 2025, we entered into a master services agreement with a third party Contract Research Organization, or CRO, under which the CRO has agreed to perform certain services in accordance with written work orders. The work orders set forth the obligations of the parties with regard to conducting the clinical research study entitled “A Randomized, Double-Blind, Placebo-Controlled, Phase 2, Safety, Tolerability and Efficacy Study of Caveolin1-Scaffolding-Protein-Derived Peptide (LTI-03) in Patients with IPF”, under our Protocol LTI-03-2001. Our total potential obligation under the master services agreement is approximately $17.0 million. Exclusive Option Agreement with Advancium On October 31, 2024, we entered into an exclusive option agreement, or the Option Agreement, with Advancium Health Network, or Advancium, for the sale of ALRN-6924, a clinical stage oncology agent that we were developing prior to the Lung Acquisition (as defined below). During the option period, Advancium intends to evaluate ALRN-6924 as a potential therapy for retinoblastoma. Under the terms of the option agreement Advancium paid us a non-refundable fee of $0.1 million for the exclusive option to acquire ALRN-6924 and related assets. If Advancium exercised its option, we would receive an exercise payment with potential for additional development, regulatory and commercial milestone payments and sales royalties. In July 2025, the Option Agreement was terminated. Follow-on Public Offering In May 2024, we completed an underwritten follow-on public offering, or the Offering, pursuant to which we issued and sold 4,273,505 shares of our common stock, or the Offering Shares, and accompanying warrants, or the Offering Warrants, to purchase 4,273,505 shares of common stock, or the Offering Warrant Shares. We sold all of the Offering Shares and Offering Warrants. Each Offering Share was offered and sold together with an accompanying Offering Warrant at a combined offering price of $4.68, and the 26 underwriter purchased each Offering Share with an accompanying Offering Warrant at a combined price of $4.35. Net proceeds from the Offering were $17.7 million, after deducting underwriting discounts and commissions and offering expenses, and excluding any proceeds that may be received from exercise of the Offering Warrants. As of June 30, 2025, Offering Warrants to purchase 3,383,367 shares of common stock remained outstanding. Components of Our Results of Operations Revenue We have not generated any revenue from product sales and we do not expect to generate any revenue from the sale of products in the foreseeable future. Operating Expenses Our expenses since inception have consisted solely of research and development costs, general and administrative, and restructuring costs. Research and Development Expenses For the periods presented in this Quarterly Report on Form 10-Q, research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include: • salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions; • expenses incurred in connection with the clinical development of our product candidates, including under agreements with third parties, such as consultants and CROs; • the cost of manufacturing product candidates for use in our clinical trials and preclinical studies, including under agreements with third parties, such as consultants and contract manufacturing organizations, or CMOs; • expenses incurred in connection with the preclinical development of our product candidates, including outsourced professional scientific development services, consulting research fees and payments made under sponsored research arrangements with third parties; • the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; • third-party license fees; • costs related to compliance with regulatory requirements; and • facility-related expenses, which included direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses. In addition, we typically use our employee and infrastructure resources across our development programs. We track outsourced development costs and milestone payments made under our licensing arrangements by product candidate or development program, but we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates because these costs are deployed across multiple programs and, as such, are not separately classified. Research and development activities are central to our business model. The duration, costs and timing of clinical trials and development of a product candidate will depend on a variety of factors, including: • the scope, rate of progress, expense and results of clinical trials of the product candidates that we are developing and other research and development activities that we have conducted; • uncertainties in clinical trial design and patient enrollment rates; • significant and changing government regulation and regulatory guidance; • the timing and receipt of any marketing approvals; and 27 • the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the U.S. Food and Drug Administration, or the FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipated would be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we could be required to expend significant additional financial resources and time on the completion of clinical development. General and Administrative Expenses General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance and corporate and administrative functions. General and administrative expenses are comprised of professional fees associated with being a public company including costs of accounting, auditing, legal, regulatory, tax and consulting services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs; and both public and investor relations costs. General and administrative expenses also include legal fees relating to patent and corporate matters; legal and other professional fees relating to our strategic process; other insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. Other Income, net Interest and Other Income Interest income consists of interest income earned on our cash and cash equivalents. Historically, our interest income had not been significant due to low investment balances and low interest earned on those balances. We anticipate that our interest income will fluctuate in the future in response to our cash and cash equivalents and the interest rate environment. Other income, net consists of the income recognized under the exclusive option agreement with Advancium Health Network, or Advancium, for the sale of ALRN-6924 (the “Option Agreement”), gains or losses recognized from non-routine items such as accretion on short-term investments, and gains or losses recognized from foreign currency transactions, and the disposal of fixed assets. We anticipate that our interest income and investment accretion will fluctuate in the future in response to our then-current cash and cash equivalents, and then-current interest rates. Results of Operations Comparison of the Three Months Ended June 30, 2025 and 2024 The following table summarizes our results of operations for the three months ended June 30, 2025 and 2024: Three Months Ended June 30, Increase 2025 2024 (Decrease) (in thousands) Revenue $ — $ — $ — Operating expenses: Research and development 4,292 3,741 551 General and administrative 2,579 5,298 (2,719 ) Total operating expenses 6,871 9,039 (2,168 ) Loss from operations (6,871 ) (9,039 ) 2,168 Other income, net 49 97 (48 ) Net loss $ (6,822 ) $ (8,942 ) $ 2,120 Research and Development Expenses Research and development expenses for the three months ended June 30, 2025 were $4.3 million, compared to $3.7 million for the three months ended June 30, 2024. The increase of $0.6 million was primarily a result of the RENEW Phase 2 clinical trial of LTI-03 that was initiated in May 2025. During the three months ended June 30, 2025, we spent $2.5 million on clinical trials, $1.0 million on manufacturing, $0.5 million on employee and related expenses, and $0.3 million on regulatory and development consulting. During the three months ended June 30, 2024, we spent $1.1 million on clinical trials, $2.0 million on manufacturing including $1.8 million 28 write-offs due to the expiration of clinical materials, and $0.1 million on regulatory and development consulting as well as $0.5 million on employee and related expenses associated with clinical programs acquired in the Lung Acquisition. General and Administrative Expenses General and administrative expenses were $2.6 million for the three months ended June 30, 2025, compared to $5.3 million for the three months ended June 30, 2024. The decrease of $2.7 million in the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 was primarily due to decreased professional fees of $1.0 million as a result of decrease in legal expense and decreased employee and related expenses of $1.6 million as a result of employee turnovers in 2024. Other Income, net Other income, net was less than $0.1 million for the three months ended June 30, 2025, which primarily consisted of interest income and accretion in our then-current cash and cash equivalents. Other income, net for the three months ended June 30, 2024 was less than $0.1 million and it was primarily driven by fluctuations in foreign currency exchange rates and interest of our money market funds. Comparison of the Six Months Ended June 30, 2025 and 2024 Six Months Ended June 30, Increase 2025 2024 (Decrease) (in thousands) Operating expenses: Research and development 7,346 7,204 142 General and administrative 5,134 9,040 (3,906 ) Total operating expenses 12,480 16,244 (3,764 ) Loss from operations (12,480 ) (16,244 ) 3,764 Other income, net 157 189 (32 ) Net loss $ (12,323 ) $ (16,055 ) $ 3,732 Research and Development Expenses Research and development expenses for the six months ended June 30, 2025 were $7.3 million, compared to $7.2 million for the six months ended June 30, 2024. The increase of $0.1 million was primarily a result of the RENEW Phase 2 clinical trial of LTI-03 that was initiated in May 2025. During the six months ended June, 2025, we spent $3.8 million on clinical trials, $1.9 million on manufacturing, $1.1 million on employee and related expenses, and $0.4 million on regulatory and development consulting. During the six months ended June 30, 2024, we spent $2.2 million on clinical trials, $3.6 million on manufacturing including $2.4 million write-offs due to the expiration of clinical materials, and $0.3 million on regulatory and development consulting as well as $1.1 million on employee and related expenses associated with clinical programs acquired in the Lung Acquisition. General and Administrative Expenses General and administrative expenses were $5.1 million for the six months ended June 30, 2025, compared to $9.0 million for the six months ended June 30, 2024. The decrease of $3.9 million in the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 was primarily due to decreased professional fees of $1.8 million as a result of decrease in legal expense and decreased employee and related expenses of $1.9 million as a result of employee turnovers in 2024 as well as decreased facilities and other expenses of $0.2 million. Other Income, net Other income, net of $0.2 million for the six months ended June 30, 2025 primarily consisted of interest income and accretion in our then-current cash and cash equivalents. Other income, net for the six months ended June 30, 2024 was less than $0.2 million and it was primarily driven by fluctuations in foreign currency exchange rates and interest of our money market funds. Liquidity and Capital Resources Since inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations. If we obtain funding for our continued operations, we expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our lead product candidates, LTI-03 and LTI-01, or any future product candidates. We expect that our research and development and general and administrative costs would continue to increase significantly, including in connection with conducting clinical trials and manufacturing for our lead product candidates or any future product candidates to support potential future commercialization and providing general and administrative support for our operations, including the costs associated with operating as a public company. As of June 30, 2025, we had cash and cash equivalents of $5.7 million. Based on our current operating plan, we believe that our existing cash and cash equivalents as of June 30, 2025, together with the proceeds received by us pursuant to the PPA in July 2025, will 29 be sufficient to enable us to fund our operating expenses and capital expenditure requirements into November 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, strategic collaborations, licensing arrangements or other sources. If we are unable to obtain sufficient funding on terms acceptable to us, on a timely basis or at all, we may be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. See the section titled “ Risk Factors ” found in our Annual Report for additional risks associated with our substantial capital requirements. To date, we have funded our operations through sales of common stock in our initial public offering, sales of common stock and warrants in follow-on public offerings, sales of common stock and warrants in a private placement, sales of common stock in “at-the-market” offerings, sales of preferred stock prior to our initial public offering, payments received under a collaboration agreement, sales of common stock, preferred stock and warrants in connection with the Lung Acquisition and the PIPE Financing, sales of common stock upon option and warrant exercises and sale of the initial pre-paid advance under the PPA. On April 21, 2025, we entered into privately negotiated letter agreements with certain holders of the PIPE Warrants and certain holders of the Offering Warrants. Pursuant to these letter agreements, these holders agreed to exercise for cash the PIPE Warrants for the purchase of an aggregate of 159,500 shares of common stock and the Offering Warrants for the purchase of an aggregate of 890,138 shares of common stock at a reduced exercise price of $1.60 per share on or before April 24, 2025 in the case of the PIPE Warrants and May 1, 2025 in the case of the Offering Warrants. The total gross proceeds for the Warrant Exercises were $1.7 million. On April 21, 2025, we also entered into privately negotiated letter agreements with additional holders of the PIPE Warrants who, in exchange for the Exchange Pre-Funded Warrants, surrendered PIPE Warrants to purchase an aggregate of 1,939,000 shares of common stock to us for cancellation and made an aggregate cash payment of $1.599 per share into which the Exchange Pre-Funded Warrants are exercisable on or before April 24, 2025. In the Warrant Exchanges, entities affiliates with Bios Partners exchanged PIPE Warrants to purchase an aggregate of 1,300,500 shares of common stock plus the required cash for Exchange Pre-Funded Warrants. The total gross proceeds for the Warrant Exchanges were $3.1 million. In addition, on April 21, 2025, the Bios Purchaser purchased the Placement Pre-Funded Warrants pursuant to a subscription agreement at a price of $1.599 per share underlying the Placement Pre-Funded Warrants. The Private Placement closed on April 24, 2025. The total gross proceeds for the Private Placement were $0.5 million. On May 15, 2025, we entered into the Wainwright Sales Agreement with H.C. Wainwright, as agent and/or principal, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $13.7 million from time to time through or to H.C. Wainwright by any method permitted that is deemed to be an “at the market” offering as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. Under General Instruction I.B.6 to Form S-3, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of our common stock held by non-affiliates. As of June 30, 2025, we had issued and sold 16,127 shares of common stock pursuant to the Wainwright Sales Agreement. In July 2025, in connection with the Yorkville Transactions, we reduced the aggregate offering price of the shares of common stock that could be offered and sold under the Wainwright Sales Agreement to $8.1 million. Prior to entering into the Wainwright Sales Agreement, in May 2025, we terminated the Equity Distribution Agreement with Citizens JMP. In January 2025, we issued and sold 317,772 shares of common stock pursuant to the Equity Distribution Agreement for total net proceeds of $0.7 million. We did not issue and sell any other shares of common stock pursuant to the Equity Distribution Agreement in 2025. On July 29, 2025, we entered into the PPA and the SEPA with Yorkville. Under the PPA, we may request up to $6.0 million in pre-paid advances from Yorkville over a 12-month period, subject to certain limitations and conditions set forth in the PPA. Each pre-paid advance will be purchased by Yorkville at 95% of the face amount of the pre-paid advance. An initial pre-paid advance of $1.0 million was purchased on July 29, 2025 by Yorkville, for net proceeds of $0.95 million. Each additional pre-paid advance shall be subject to the consent of Yorkville. Interest shall accrue on the outstanding balance of any pre-paid advance at an annual rate of 8%, subject to an increase to 18% upon events of default described in the PPA. At any time that there is an outstanding balance under any pre-paid advances, Yorkville may provide a written notice to require us to issue and sell shares of common stock to offset against and reduce the balance under the pre-paid advances at a price per share equal to the lower of (i) 115% of the daily volume weighted average price, or the VWAP, of our common stock on the Nasdaq Capital Market on the last full trading day immediately prior to the date of such pre-paid advance and (ii) 95% of the lowest daily VWAP on the Nasdaq Capital Market during the seven consecutive trading days immediately preceding the date on which Yorkville provides such a purchase notice, subject to a floor price of $0.28 per share. Cash amortization payments will be triggered if the daily VWAP falls below the floor price for five of seven consecutive trading days, or in the event of any shares issued pursuant to the PPA are not eligible to be sold pursuant to an effective registration statement for a period of 10 consecutive trading days, or if we have issued substantially all of the shares available under certain exchange cap limitations. Separately, under the SEPA, we may sell up to $15.0 million of our common stock to Yorkville over a 36-month period at our 30 discretion. Sales under the SEPA are based on our advance notices and may be for a number of shares up to 100% of the average daily trading volume of our common stock during the five trading days immediately prior to the date of each such notice, priced at 96% of the lowest daily VWAP of our common stock on the Nasdaq Capital Market during the three consecutive trading days commencing on the date of delivery each notice, subject to a minimum price floor set by us. As consideration for Yorkville’s commitment to purchase our common stock under the SEPA, we agreed to pay to Yorkville a commitment fee of $300,000, which was satisfied by the issuance to Yorkville of an aggregate of 213,099 shares of our common stock. The issuance of shares under both the PPA and SEPA is subject to a cap equal to 19.9% of our outstanding common stock as of July 29, 2025, unless stockholder approval is obtained or other specified conditions are met. In May 2024, we completed the Offering as described above. We received net proceeds of $17.7 million from the Offering, after deducting underwriting discounts and commissions and offering expenses, and excluding any proceeds that may be received from exercise of the Offering Warrants. Each Offering Warrant has an exercise price per share of common stock equal to $4.68. Each Offering Warrant may be exercised until May 1, 2027. Each Offering Warrant is exercisable solely by means of a cash exercise, except that an Offering Warrant is exercisable via cashless exercise if at the time of exercise, a registration statement registering the issuance of Offering Warrant Shares is not then effective or the prospectus contained therein is not available for the issuance of such shares. Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: Six Months Ended June 30, 2025 2024 (in thousands) Cash used in operating activities $ (12,593 ) $ (13,660 ) Cash provided by financing activities 5,450 18,263 Effect of exchange rate changes on cash and cash equivalents — 1 Net decrease in cash, cash equivalents and restricted cash $ (7,143 ) $ 4,604 Operating Activities. During the six months ended June 30, 2025, net cash used in operating activities was $12.6 million primarily due to our net loss of $12.3 million and cash used in the change in operating assets and liabilities of $0.8 million, offset by non-cash charges of $0.5 million. Non-cash charges resulted primarily from stock-based compensation expense of $0.5 million. Changes in our operating assets and liabilities during the six months ended June 30, 2025 consisted primarily of a decrease of $3.5 million in other long-term liabilities and accrued expenses and other current liabilities, an increase of $2.3 million in other non-current assets, and an increase of $0.1 million in prepaid expenses and other current assets, offset by an increase of $5.1 million in accounts payable. During the six months ended June 30, 2024, net cash used in operating activities was $13.7 million primarily due to our net loss of $16.1 million, offset by cash provided by the change in operating assets and liabilities of $1.8 million and non-cash charges of $0.6 million. Non-cash charges resulted primarily from stock-based compensation expense of $0.5 million. Changes in our operating assets and liabilities during the six months ended June 30, 2024 consisted primarily of a decrease of $1.5 million in other assets due to the recognition of a prepaid expense, and an increase of $1.0 million in accrued expenses and other current liabilities, offset by an increase of $0.3 million in prepaid expenses and other current assets and a decrease of $0.4 million in accounts payable. Financing Activities. During the six months ended June 30, 2025, net cash provided by financing activities was $5.5 million primarily due to the April 2025 Transactions described above. During the six months ended June 30, 2024, net cash provided by financing activities was $18.3 million primarily due to the Offering in May 2024. Funding Requirements Subject to obtaining sufficient funding, our plan of operation is to continue implementing our business strategy, continue research and development of LTI-03 and LTI-01 and any other product candidates we may acquire or develop and continue to expand our research pipeline and our internal research and development capabilities. We expect our expenses would increase substantially, particularly as we advance the preclinical activities and clinical trials of our current and future product candidates. In addition, we expect that we would incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or terminate our research and development programs or future commercialization efforts. Our future capital requirements will depend on many factors, including: • the scope, timing, progress, costs, and results of discovery, preclinical development, and clinical trials for our current and future product candidates; 31 • the number of clinical trials required for regulatory approval of our current and future product candidates; • the costs, timing, and outcome of regulatory review of any of our current and future product candidates, including when and if and under what conditions the clinical hold on LTI-03 is removed by the FDA; • the cost of manufacturing clinical and commercial supplies of our current and future product candidates; • the costs and timing of future commercialization activities, including manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive marketing approval; • the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights; • our ability to maintain existing, and establish new, strategic collaborations, licensing, or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty, or other payments due under any such agreement; • the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; • expenses to attract, hire and retain, skilled personnel; • the costs of operating as a public company; • if our product candidates are approved, our ability to establish a commercially viable pricing structure and obtain approval for coverage and adequate reimbursement from third-party and government payors; • the effect of competing technological and market developments; • the extent to which we acquire or invest in businesses, products, and technologies; and • unfavorable global economic conditions, which may exacerbate the magnitude of the factors discussed above. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of the product candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to seek to finance our operations from the sale of equity or debt financings, strategic collaborations, licensing, arrangements or other sources. In the event that additional financing is required, we may not be able to raise it on terms acceptable to us, or at all. If we raise additional funds through the issuance of equity or convertible preferred stock, it may result in dilution to our existing stockholders. Debt financing or preferred equity financing, if available, may result in increased fixed payment obligations, and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations. If we raise funds through strategic collaborations, licensing or other arrangements, we may relinquish significant rights or grant licenses on terms that are not favorable to us. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves. Contractual and other obligations We enter into contracts in the normal course of business with CROs for clinical and preclinical research studies, external manufacturers for product for use in our clinical trials, and other research supplies and other services as part of our operations. These contracts generally provide for termination on notice, and therefore are cancelable contracts. In April 2025, we entered into a master services agreement with a third party CRO, under which the CRO has agreed to perform certain services in accordance with written work orders. The work orders set forth the obligations of the parties with regard to conducting the clinical research study entitled “A Randomized, Double-Blind, Placebo-Controlled, Phase 2, Safety, Tolerability and Efficacy Study of Caveolin1-Scaffolding-Protein-Derived Peptide (LTI-03) in Patients with IPF”, under our Protocol LTI-03-2001. Our total potential obligation under the master services agreement is approximately $17.0 million. Critical Accounting Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements to this Quarterly Report on Form 10-Q, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs, and expenses and the 32 disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. During the three and six months ended June 30, 2025, there were no material changes to the items that we disclosed as our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report. Recent Accounting Pronouncements We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our condensed consolidated financial statements to this Quarterly Report on Form 10-Q, such standards will not have a material impact on our condensed consolidated financial statements or do not otherwise apply to our operations. Item 3. Quantitative and Qualitati ve Disclosures About Market Risk. We are a smaller reporting company, as defined in Rule 12b-2 under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, for this reporting period and are not required to provide the information required under this item.