What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-09-17 compared with 2024-09-19 · 79 added, 102 removed, 152 unchanged (54% of the section changed)

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Executive Summary

Our priorities going into the second half of 2024 and first half of 2025 are to (i) complete enrollment of ex-U.S.

participants in the sunRIZE study, (ii) initiate study start-up activities in the U.S.

to enable U.S.

participant enrollment in the sunRIZE study, and (iii) continue study start-up activities and begin enrollment for the Phase 3 registrational tumor HI clinical study.

Our priorities going into the second half of 2025 and first half of 2026 are to execute across our two Phase 3 clinical trials.

Our goals include (i) complete the sunRIZE study (as defined below) to enable topline data in December 2025, (ii) continue enrollment in the registrational tumor HI study, and (iii) assuming supportive data from sunRIZE, submit a Biologics License Application to the FDA for ersodetug in mid-2026.

Clinical Development

Our focus as a Company is advancing ersodetug in two Phase 3 clinical studies for congenital HI and tumor HI.

To that end, we are actively enrolling the pivotal Phase 3 sunRIZE clinical study of ersodetug, which is a randomized, double-blind, placebo-controlled, parallel arm evaluation of ersodetug in participants with congenital HI who are not adequately responding to standard of care medical therapies.

To date, in this study we have been screening and enrolling participants outside the U.S.

because the U.S.

FDA had imposed an age restriction of 12 years of age and older on ersodetug clinical studies as well as dose level restrictions based on historical rat toxicology findings.

On September 4, 2024, FDA lifted those restrictions and authorized U.S.

inclusion in the ongoing sunRIZE study.

Currently, the Company is conducting study start-up activities at sites in the U.S.

in anticipation of enrolling U.S.

participants in the sunRIZE study in the first part of 2025.

Topline results from the study are anticipated to be available in the second half of calendar 2025.

Additionally, we have begun study start-up activities for our Phase 3 registrational tumor HI clinical study which we anticipate to begin enrolling patients in the first half of calendar 2025.

In May of 2024 we announced topline results from the Phase 2 proof-of-concept study of RZ402 in patients with DME, which met primary study endpoints, demonstrating a significant reduction in central subfield thickness in the Study Eye at all RZ402 dose levels compared to placebo (up to approximately a 50 micron improvement) and was safe and well-tolerated.

The program is available for partnering and we are actively engaged in conversations with potential partners to take RZ402 into further development.

Our focus as a Company is advancing ersodetug as a potential treatment for all forms of HI, specifically in two Phase 3 clinical studies for congenital HI and tumor HI.

To that end, we have completed enrollment in the pivotal Phase 3 sunRIZE clinical study of ersodetug, which is a randomized, double-blind, placebo-controlled, parallel arm evaluation of ersodetug in participants with congenital HI who are not adequately responding to standard of care medical therapies.

Target enrollment of 56 participants was exceeded with 62 participants between 3 months and 45 years of age enrolled, including approximately 15 percent from U.S.

Topline results from the study are anticipated to be available in December 2025, but the specific date of the availability of such results may vary.

The upLIFT study in tumor HI is currently enrolling in the U.S.

At a meeting held with FDA on August 19, 2025, the agency agreed to modifications to the design of the study including removing the need to conduct a double-blind randomized placebo-controlled trial.

The truncated study will include as few as 16 participants and will be limited to the

single-arm open-label portion of the upLIFT study.

Topline results from the study are anticipated to be available in the second half of 2026.

Recent Developments

Exchange Agreement.

On March 8, 2024, we entered into a securities exchange agreement (the “Exchange Agreement”) with certain of our stockholders (the “Exchanging Shareholders”), whereby we purchased 3,000,000 shares of common stock representing approximately 7% of our outstanding shares with an aggregate fair value of $5,700,000 (the “Retired Shares”) from the Exchanging Shareholders.

The Retired Shares were immediately cancelled whereby they will remain as authorized shares for future issuance in accordance with Nevada law.

Consideration for the acquisition of the Retired Shares consisted of (i) a cash payment to the Exchanging Shareholders of $3,000, and (ii) the issuance of pre-funded warrants (the “Exchange PFWs”) to the Exchanging Shareholders with an estimated fair value of $5,697,000.

The Exchange PFWs do not expire and were exercisable as of June 30, 2024 to purchase an aggregate of 3,000,000 shares of our outstanding common stock at an exercise price of $0.001 per share.

The Exchange PFWs required approval by our shareholders if the exercise of the Exchange PFWs resulted in aggregate beneficial ownership by the holders in excess of 19.99%.

Even though the Exchange PFWs only entitled the holders to purchase 7% of our outstanding shares of common stock, the requirement to obtain shareholder approval for ownership in excess of 19.99% resulted in the treatment of the exchange PFWs as a warrant derivative liability of $5.7 million as of the issuance date.

The fair value of this warrant derivative liability increased by approximately $2.9 million, for a total of $8.5 million as of May 13, 2024 when the Exchange PFWs were amended to permit equity classification.

Accordingly, the derivative liability of $8.5 million was reclassified to shareholders’ equity on May 13, 2024.

2024 Underwritten Offering.

On June 13, 2024, we entered into an underwriting agreement for the planned issuance and sale of equity securities in an underwritten public offering (the “2024 Underwritten Offering”).

The 2024 Underwritten Offering provided for the issuance of (i) 11,250,000 shares of common stock at a price of $4.00 per share for gross proceeds of $45.0 million, and (ii) pre-funded warrants to purchase 3,750,000 shares of common stock at a public offering price of $3.999 per pre-funded warrant (the “2024 PFWs”) for gross proceeds of $15.0 million.

The Company granted the

underwriters a 30-day option to purchase up to an additional 2,250,000 shares of its common stock at a public offering price of $4.00 per share, less underwriting discounts of 6.0% of the gross proceeds.

The underwriters’ option was partially exercised for 1,786,589 shares of common stock for gross proceeds of $7.1 million.

Closing occurred on June 24, 2024, whereby the aggregate gross proceeds amounted to $67.1 million.

The net proceeds of the 2024 Underwritten Offering amounted to approximately $62.6 million.

In July 2024, we utilized approximately $59.7 million of the net proceeds from the 2024 Underwritten Offering to purchase investments in marketable debt securities with maturities that range from October 2024 through December 2025.

Appointment of Chief Commercial Officer.

On August 18, 2025, the Board of Directors approved the appointment of Sunil Karnawat to serve as our Chief Commercial Officer.

In connection with the appointment, we extended Mr.

Karnawat an employment offer letter (the “Offer Letter”).

The Offer Letter provides for the following compensation:

(i) an annual base salary of $475,000; (ii) a signing bonus of $65,000, (iii) eligibility to receive an annual performance bonus with a target of 40% of Mr.

Karnawat’s base salary, on December 31st of each year;

(iv) an inducement grant pursuant to Nasdaq Listing Rule 5635(c)(4) in the form of stock options to purchase 275,000 shares (the “Inducement Grant”) of our common stock, and (v) 25,000 shares of RSUs.

The stock options issued as the Inducement Grant will vest and become exercisable as to 25% of the underlying shares on the first anniversary of the grant date, and will vest and become exercisable as to the remaining 75% of the underlying shares in 36 equal monthly installments from the first anniversary of the grant date, subject to his continued employment on such vesting dates.

If we are acquired during his employment, all remaining options will automatically vest.

2025 Private Placement.

In June 2024, we entered into a securities purchase agreement (the “2024 SPA”) with Handok, Inc.

and one other investor relating to a private placement (the “2024 Private Placement”), pursuant to which we agreed to sell 1,500,000 shares of common stock at a purchase price of $4.00 per share.

Closing of the 2024 Private Placement occurred in July 2024, whereby we received net proceeds of $6.0 million after deduction of underwriting discounts and other offering costs .

In May 2025, we entered into a securities purchase agreement (the “2025 SPA”) with Handok, Inc.

and two other investors relating to a private placement (the “2025 Private Placement”), pursuant to which we agreed to sell 1,295,383 shares of common stock at a purchase price of $3.25 per share.

Closing of the 2025 Private Placement occurred in June 2025, whereby we received net proceeds of $4.2 million after deduction of offering costs .

2025 Underwritten Offering.

On April 23, 2025, we entered into an underwriting agreement for the planned issuance and sale of equity securities in an underwritten public offering (the “2025 Underwritten Offering”).

The 2025 Underwritten Offering resulted in the issuance of (i) 20,786,923 shares of common stock at a price of $3.25 per share for gross proceeds of $67.6 million, and (ii) pre-funded warrants to purchase 6,905,385 shares of common stock at a public offering price of $3.249 per pre-funded warrant (the “2025 PFWs”) for gross proceeds of $22.4 million.

The Company granted the underwriters a 30-day option to purchase up to an additional 4,153,846 shares of its common stock at a public offering price of $3.25 per share.

The underwriters’ option was fully exercised for all 4,153,846 shares of common stock for gross proceeds of $13.5 million received concurrently with the closing of the 2025 Underwritten Offering.

Closing occurred on April 24, 2025, whereby the aggregate gross proceeds amounted to $103.5 million.

The net proceeds of the 2025 Underwritten Offering amounted to approximately $96.8 million, after deducting underwriting commissions and other offering costs.

Factors Impacting our Results of Operations

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Research and development (“R&D”) expenses consist primarily of clinical trial costs, compensation and benefits for our personnel engaged in R&D activities, licensing costs, and consultants and outside services.

Our R&D costs include an allocable portion of our cash and share-based compensation, employee benefits, and consulting costs related to personnel engaged in the design and development of product candidates and other scientific research projects.

research projects.

We also allocate a portion of our facilities and overhead costs based on the personnel and other resources devoted to R&D activities.

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We account for investments in marketable debt securities as available-for-sale securities whereby they are recorded in our consolidated balance sheets at fair value.

Interest income consists of accrued interest earned based on the coupon rate of the security, plus the impact of accreting discounts and amortizing premiums to maturity using the straight-line method which approximates the interest method.

Unrealized gains and losses due to subsequent changes in fair value of the investments are reported in shareholders’ equity as a component of accumulated other comprehensive income (loss).

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Allowances for credit losses may be reversed in subsequent periods if conditions improve and credit-related losses are no longer expected.

For a decline in fair value that is solely due to changes in interest rates, impairment is not recognized if we have the ability and intent to hold the investment until maturity.

For a decline in fair value that is solely due to changes in interest rates, impairment is not recognized if

we have the ability and intent to hold the investment until maturity.

The cost basis of any securities sold prior to maturity will be determined using the specific identification method.

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Share-Based Compensation Expense

We measure the fair value of services received in exchange for grants of stock options based on the fair value of the award as of the grant date.

We compute the fair value of stock options with time-based vesting using the Black-Scholes Merton (“BSM”) option-pricing model and recognize the cost of the equity awards over the period that services are provided to earn the award.

For awards that contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized on a straight-line basis over the requisite service period as if the award was, in substance, a single award.

We measure the fair value of services received in exchange for grants of share-based awards based on the fair value of the award as of the grant date.

We compute the fair value of equity awards with time-based vesting using the Black-Scholes Merton (“BSM”) option-pricing model and recognize the cost of the equity awards over the period that services are provided to earn the award.

For stock option awards that contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized on a straight-line basis over the requisite service period as if the award was, in substance, a single award.

Fair value of RSUs is based on the closing market price on the date of grant whereby compensation costs is recognized ratably over the vesting period of RSUs.

We recognize the impact of forfeitures in the period that the forfeiture occurs, rather than estimating the number of awards that are not expected to vest in accounting for share-based compensation.

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Loss from Change in Fair Value of Derivative Liabilities

We recognize warrant derivative liabilities based on assessment of the warrant’s specific terms and applicable authoritative guidance set forth by FASB in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

We recognize warrant derivative liabilities based on assessment of the warrant’s specific terms and applicable authoritative guidance set forth by Financial Accounting Standards Board (“FASB”) in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments and meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

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Loss from change in fair value of warrant derivative liability

Loss from change in fair value of embedded derivative liability

Total non-operating income, net

Loss from change in fair value of embedded derivative liabilities

Total non-operating income (expense), net

Presented below is a discussion of the key factors that resulted in changes in our results of operations for these periods.

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We are at an early stage of development and do not currently have any commercial products.

Our existing product

candidates will require extensive additional clinical evaluation, regulatory review, significant marketing efforts and substantial investment before they generate any revenues.

Our existing product candidates will require extensive additional clinical evaluation, regulatory review, significant marketing efforts and substantial investment before they generate any revenue.

We do not expect to be able to market any of our product candidates for several years.

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Total R&D expenses

The increase of $11.9 million was primarily attributable to a net increase of $8.7 million in costs incurred for our two clinical candidate programs, of which the ersodetug program had an increase in spending of $10.9 million and the RZ402 program had a decrease in spending of $2.2 million.

The increase in ersodetug program costs of $10.9 million primarily was driven by (i) an increase of $3.9 million for higher spending on drug substance and drug product manufacturing and other development activities as we began manufacturing activities for process performance qualification activities, (ii) $5.0 million in milestone payments under our license agreement with XOMA due to the dosing of the first patient in a Phase 3 clinical study, (iii) a $1.3 million increase in other ersodetug costs incurred for toxicology studies to support the efforts to lift the FDA clinical hold and (iv) a $0.7 million increase in clinical trial costs due to the ongoing enrollment of patients in the Phase 3 clinical study.

We did not incur any ersodetug milestone related costs during the fiscal year ended June 30, 2023.

The RZ402 program cost decrease of $2.2 million was primarily attributable to a $3.0 million decrease in milestone payments due under our license agreement with ActiveSite.

In February 2023, we dosed the first patient in the RZ402 Phase 2 study, triggering a milestone payment due for $3.0 million to ActiveSite.

There were no RZ402 related milestone costs incurred during the fiscal year ended June 30, 2024.

A further decrease in manufacturing preclinical, toxicology and other related costs of $1.2 million resulted in a total decrease of $4.2 million in RZ402 costs.

This $4.2 million decrease in RZ402 costs was partially offset by a $2.0 million increase in clinical operation costs related to the ongoing Phase 2 study, for which the final patients completed the protocol in April 2024.

In addition to the net increase of $8.7 million in our clinical candidate programs, we had an increase of $2.6 million in R&D compensation and benefits for our R&D workforce.

Cash-based R&D compensation and benefits increased by $2.4 million from $11.7 million for the fiscal year ended June 30, 2023 to $14.1 million for the fiscal year ended June 30, 2024.

This increase was primarily attributable to an increase in the average number of R&D employees from 36 to 42 and an increase in annual performance bonuses.

R&D share-based compensation increased by $0.2 million from $3.2 million for the fiscal year ended June 30, 2023 to $3.4 million for the fiscal year ended June 30, 2024.

This increase in share-based compensation was primarily attributable to stock options granted to R&D employees hired during the fiscal year ended June 30, 2024.

In addition to the increases in R&D compensation and benefits and our clinical programs noted above for the fiscal year ended June 30, 2024, an increase of approximately $0.6 million was incurred related to higher facilities costs and employee related travel costs allocable to R&D due to the increased headcount as noted above.

The increase in R&D expenses of $5.8 million for the fiscal year ended June 30, 2025 was primarily attributable to (i) an increase of $11.8 million related to ersodetug clinical and manufacturing costs and (ii) an increase of $1.0 million in other R&D costs.

These increases amount to $12.8 million and were partially offset by a $7.0 million decrease in costs related to RZ402 clinical and manufacturing spend as there are no active RZ402 studies in the fiscal year ended June 30, 2025.

The increase in ersodetug program costs of $11.8 million primarily was driven by (i) $6.7 million of manufacturing related costs for process performance qualification batch production of drug product, which will continue to support both phase 3 studies and the EAPs as well as prepare for potential commercialization, (ii) $3.2 million in clinical costs due to costs incurred for the tumor HI phase 3 study for which startup activities were initiated in August 2024 after clearance of our Investigational New Drug (“IND”) application and for which we are anticipating enrollment of the first patient in the study in the second half of calendar 2025, and (iii) a $1.9 million increase in costs for the sunRIZE clinical trial which enrolled its first patient in April 2024 and concluded enrollment in May 2025.

Other R&D costs increased by $1.0 million primarily due to a $1.9 million increase in R&D employee compensation and benefits.

The increase in R&D employee compensation and benefits was attributable to an increase in the average number of R&D employees from 42 for the fiscal year ended June 30, 2024 to 48 for the fiscal year ended June 30, 2025.

These costs were partially offset by a $0.9 million decrease primarily due to preclinical, toxicology and other ersodetug costs

that were no longer required to support our efforts to remove the partial clinical hold on the sunRIZE study, which was lifted by the FDA in September 2024.

General and Administrative Expenses.

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This increase was attributable to an increase in the average number of G&A employees from 15 to 19 and an increase in compensation related to annual performance bonuses.

Investor relations expenses and other G&A professional fees increased by $1.1 million from $2.4 million for the fiscal year ended June 30, 2023 to $3.5 million for the fiscal year ended June 30, 2024.

This increase in investor relations expense and other G&A professional fees resulted from pre-commercial planning activities, post regulatory approval market approval planning and other professional fee increases.

In addition to the increases in G&A compensation and benefits and our other professional expenditures noted above for the fiscal year ended June 30, 2024, an increase of approximately $0.2 million was incurred related to higher facilities costs and employee related travel costs allocable to G&A due to the increased headcount as noted above.

G&A professional fees increased by $1.8 million from $3.5 million for the fiscal year ended June 30, 2024 to $5.3 million for the fiscal year ended June 30, 2025.

This increase in G&A professional fees resulted from pre-commercial planning activities, post regulatory approval planning and other professional fee increases.

Interest and other income.

For the fiscal year ended June 30, 2025, we recognized $5.5 million of interest income compared to $4.9 million of interest income for the fiscal year ended June 30, 2024.

This increase of $0.7 million was primarily due to our decision in January 2023 to invest an aggregate of approximately $115.0 million in marketable debt securities and an overnight money market mutual fund that provided for interest at a weighted average effective rate of approximately 5.0% for the fiscal year ended June 30, 2024.

Even though we had substantially more funds available for investment during the first half of the fiscal year ended June 30, 2023, our effective interest rate was less than 2.0% compared to approximately 5.0% after we began investing in marketable debt securities in January 2023.

This change in strategy occurred midway through the fiscal year ended June 30, 2023 whereby interest income was $1.2 million for the first half of the fiscal year and $3.0 million for the second half of the fiscal year.

This increase of $0.6 million was primarily due to the Company having a higher average balance of investments in marketable debt securities throughout the fiscal year ended June 30, 2025.

Change in Fair Value of Warrant Derivative Liability.

For the fiscal year ended June 30, 2025, the Company did not have any warrant derivative liabilities.

For the fiscal year ended June 30, 2024, we recognized a loss of $2.9 million during the period from March 8, 2024 through May 13, 2024 when the Exchange PFWs were classified as liabilities.

This loss was due to an increase of $0.95 per share in our stock price, resulting in an increase in the fair value of the derivative liability that was recognized due to shareholder approval provision regarding ownership limitations that prohibited equity classification.

This loss was due to an increase of $0.95 per share in our stock price, resulting in an increase in the fair value of the derivative liability that was recognized due to a shareholder approval provision regarding ownership limitations that prohibited equity classification.

This liability existed until May 13, 2024 when the Exchange PFW holders agreed to an amendment that eliminated this provision.

Our stock price increased from $1.90 per share on March 8, 2024, to $2.85 per share on May 13, 2024 when the Exchange PFWs were modified.

For the fiscal year ended June 30, 2023, the Company did not have any warrant derivative liabilities.

Income Taxes.

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Short-term Liquidity Requirements

As of June 30, 2024, we had cash and cash equivalents of $70.4 million, investments in marketable debt securities $56.7 million for a total of $127.1 million.

As of June 30, 2025, we had cash and cash equivalents of $94.1 million and investments in marketable debt securities $73.8 million for total capital resources of $167.9 million.

Working capital amounted to approximately $159.2 million as of June 30, 2025.

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For the fiscal years ended June 30, 2025 and 2024, we received net proceeds from the issuance of equity securities of $107.0 million and $62.6 million, respectively.

The completion of equity financings between May 2022 and June 2024 is the primary source of total cash and cash equivalents and investments in marketable debt securities of $127.1 million as of June 30, 2024.

In July 2024, we received net proceeds of approximately $6.0 million related to a private placement of 1.5 million shares of common stock.

For further information about the key terms and results of our equity financing activities completed in the fourth quarter of fiscal year 2024 and the first quarter of fiscal year 2025, please refer to the discussion above under the caption Recent Developments .

Expected cash payments related to our existing contractual obligations for the fiscal year ending June 30, 2025 include approximately (i) $0.7 million under our operating lease agreements, and (ii) a milestone payment to XOMA of $5.0 million that will become due upon dosing of the last patient in our Phase 3 clinical trial for ersodetug.

Due to uncertainties in the timing associated with clinical trial activities, it is possible that the milestone payment due upon dosing of the last patient could be delayed beyond June 30, 2025.

Based on our cash, cash equivalents and marketable debt security investments totaling $127.1 million as of June 30, 2024, plus the July 2024 private placement proceeds of $6.0 million, we believe we have adequate capital resources to meet all of our contractual obligations and conduct all planned activities to advance our clinical trials at least through the second quarter of calendar year 2026.

The completion of equity financings between June 2024 and June 2025 is the primary source of total cash and cash equivalents and investments in marketable debt securities of $167.9 million as of June 30, 2025.

For further information about the key terms and results of our equity financing activities completed in the first and fourth quarter of fiscal year 2025, please refer to the discussion above under the caption Recent Developments .

Expected cash payments related to our existing contractual obligations for the fiscal year ending June 30, 2026 include approximately $0.8 million under our operating lease agreements.

Based on our cash, cash equivalents and marketable debt security investments totaling $167.9 million as of June 30, 2025, we believe we have adequate capital resources to meet the Company’s contractual obligations and carry out ongoing clinical trials and other planned activities for at least 12 months from the issuance date of the consolidated financial statements for the year ended June 30, 2025.

Long-term Liquidity Requirements

Our most significant long-term contractual obligations consist of additional clinical and regulatory milestone payments up to $30.0 million payable to XOMA and additional milestone payments up to $25.0 million payable to ActiveSite.

Of this total, we expect that $5.0 million will be payable to XOMA during the fiscal year ending June 30, 2025 as discussed above under the caption Short-term Liquidity Requirements .

The remaining $50.0 million is considered a long-term liquidity requirement.

Our most significant long-term contractual obligations consist of a regulatory milestone payment of $25.0 million payable to XOMA and additional clinical and regulatory milestone payments up to $25.0 million payable to ActiveSite.

Due to uncertainties in the timing associated with clinical trial activities and regulatory approvals, there is even greater uncertainty in forecasting the timing of future clinical and regulatory milestone payments to XOMA and ActiveSite that may be required during the fiscal year ending June 30, 2027 and thereafter.

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In addition to our licensing obligations, we also have long-term contractual obligations under existing operating lease agreements ranging between approximately $0.2 million to $0.8 million for each of the fiscal years ending June 30, 2027 through 2028.

Based on our current forecast, we expect that our existing capital resources will be sufficient to fund our contractual obligations and conduct all planned activities to advance our clinical trials at least through the second quarter of calendar year 2026.

Based on our current forecast, we expect that our existing capital resources will be sufficient to fund our contractual obligations and carry out ongoing clinical trials and other planned activities for at least 12 months from the issuance date of the consolidated financial statements for the year ended June 30, 2025.

Therefore, we will need to obtain additional equity or debt financing in order to fund all of our long-term liquidity requirements.

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Upon the achievement of certain clinical and regulatory events, we will be required to make up to $37.0 million in aggregate milestone payments to XOMA.

Milestone payments made to date include a $2.0 million payment in January 2022 for the enrollment of the last patient of the Phase 2 clinical study and $5.0 million paid in May 2024 related to the first patient enrollment in a Phase 3 study.

Milestone payments made to date include a $2.0 million payment in January 2022 for the enrollment of the last patient of the Phase 2 clinical study, $5.0 million paid in May 2024 related to the first patient enrollment in a Phase 3 study, and $5.0 million paid in June 2025 related to the last patient dosed in a Phase 3 study.

We record a liability for milestone payments in our financial statements on the date that we achieve the milestone event.

The next milestone payment of $5.0 million will be due upon the enrollment of the last patient in a Phase 3 study, which we believe will occur in the next twelve months.

Additionally, upon the future commercialization of ersodetug, we will be required to pay royalties to XOMA based on the net sales of the related

products, and milestone payments up to an additional $185.0 million if future annual sales related to ersodetug exceed targets ranging from $100.0 million to $1.0 billion.

The next milestone payment of $25.0 million will be due upon the first regulatory approval of ersodetug by any regulatory authority.

Additionally, upon the future commercialization of ersodetug, we will be required to pay royalties to XOMA based on the net sales of the related products, and milestone payments up to an additional $185.0 million if future annual sales related to ersodetug exceed targets ranging from $100.0 million to $1.0 billion.

Through June 30, 2025, no events have occurred that would result in the requirement to make additional milestone payments, and no royalties have been incurred.

ActiveSite License Agreement

In August 2017, we entered into a Development and License Agreement with ActiveSite (“ActiveSite License Agreement”) pursuant to which we acquired the rights to ActiveSite’s PKI portfolio.

We are planning to use the PKI Program to develop, file, manufacture, market and sell products for diabetic macular edema and other therapeutic indications.

In August 2017, we entered into a Development and License Agreement with ActiveSite (the “ActiveSite License Agreement”) pursuant to which we acquired the rights to ActiveSite’s Plasma Kallikrein Inhibitor program (“PKI Portfolio”).

We are planning to use the PKI Portfolio to develop, file, manufacture, market and sell products for diabetic macular edema and other therapeutic indications.

The ActiveSite License Agreement requires various milestone payments ranging from $1.0 million to $10.0 million when milestone events occur, up to an aggregate of $46.5 million of aggregate milestone payments.

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Remaining milestone payments under the ActiveSite License Agreement for various clinical and regulatory milestones amount to $25.0 million and milestones after commercial success or alternative indication approvals amount to $17.5 million.

We will also be required to pay royalties equal to 2.0% of any sales of products that use the PKI Program.

We will also be required to pay royalties equal to 2.0% of any sales of products that use the PKI Portfolio.

Through June 30, 2025, no events have occurred that would result in the requirement to make additional milestone payments and no royalties have been incurred.

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For further discussion about changes in our operating results for the fiscal years ended June 30, 2025 and 2024, please refer to Results of Operations above.

For the fiscal year ended June 30, 2024, our non-cash expenses of $10.8 million primarily consisted of share-based compensation expense of $7.4 million, a loss from change in the fair value of the warrant derivative liability of $2.9 million, and non-cash lease expense of $0.5 million.

For the fiscal year ended June 30, 2025, our non-cash expenses of $7.7 million primarily consisted of share-based compensation expense of $7.1 million and non-cash lease expense of $0.5 million.

For the fiscal year ended June 30, 2025, non-cash gains consisted of the net impact of accreting discounts and amortizing premiums on investments in marketable debt securities of $2.4 million.

For the fiscal year ended June 30, 2024, non-cash gains consisted of the net impact of accreting discounts and amortizing premiums on investments in marketable debt securities of $2.8 million.

For the fiscal year ended June 30, 2024, net changes in operating assets and liabilities increased operating cash flow by $3.1 million, primarily driven by an increase accounts payable and other accrued liabilities of $3.2 million, partially offset by an increase in prepaid expenses and other assets of $0.1 million associated with prepayments for clinical trials and manufacturing activities.

For the fiscal year ended June 30, 2023, net changes in operating assets and liabilities increased operating cash flow by $1.0 million, primarily driven by an increase accounts payable and other accrued liabilities of $2.3 million, partially offset by an increase in prepaid expenses and other assets of $1.3 million associated with prepayments for clinical trials and manufacturing activities.

For the fiscal year ended June 30, 2025, net changes in operating assets and liabilities offset for a minimal increase in operating cash flow, primarily driven by an increase accounts payable and other accrued liabilities of $2.1 million, partially offset by an increase in prepaid expenses and other assets of $2.1 million associated with prepayments for clinical trials and manufacturing activities.

For the fiscal year ended June 30, 2024, net changes in operating assets and liabilities increased operating cash flow by $3.1 million, primarily driven by an increase in accounts payable and other accrued liabilities of $3.2 million, partially offset by an increase in prepaid expenses and other assets of $0.1 million associated with prepayments for clinical trials and manufacturing activities.

Cash Flows Provided by (Used in) Investing Activities

For the fiscal year ended June 30, 2024, net cash provided by investing activities amounted to $48.7 million, primarily related to the proceeds from maturities of marketable debt securities of $115.1 million, partially offset by cash outflows used in to purchase marketable debt securities of $66.4 million.

For the fiscal year ended June 30, 2023, our net cash utilized in investing activities amounted to $101.5 million, primarily related to the purchase of $107.3 million of marketable debt securities, partially offset by cash proceeds of $6.0 million of resulting from maturities of marketable debt securities.

Additionally, for the fiscal year ended June 30, 2023, our investing activities used $0.2 million for the purchase of furniture and equipment primarily for use in our new office location in Redwood City, California.

For the fiscal year ended June 30, 2025, net cash used in investing activities amounted to $14.5 million, primarily related to cash outflows used to purchase marketable debt securities of $128.1 million, partially offset by the proceeds from maturities of marketable debt securities of $113.6 million.

For the fiscal year ended June 30, 2024, our net cash provided by investing activities amounted to $48.7 million, primarily related to the proceeds from maturities of marketable debt securities of $115.1 million, partially offset by cash outflows used to purchase marketable debt securities of $66.4 million.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities for the fiscal year ended June 30, 2025 amounted to $107.3 million.

This amount consisted of proceeds of $67.1 million from the 2024 Underwritten Offering.

The total proceeds from the 2024 Public Underwritten Offering of $67.1 million were partially offset by underwriter discounts of $4.0 million related to this offering and other offering costs of $0.3 million.

For the fiscal year ended June 30, 2024, we also received proceeds of $0.2 million from the exercise of employee stock options to purchase approximately 82,000 shares of common stock.

This amount consisted of (i) proceeds of $97.3 million from the 2025 Underwritten Offering, (ii) proceeds of $6.0 million from the 2024 Private Placement, and (iii) proceeds of $4.2 million from the 2025 Private Placement.

For the fiscal year ended June 30, 2025, we also received proceeds of $0.9 million from the exercise of employee stock options to purchase approximately 341,000 shares of common stock and paid $1.1 million for offering costs.

Net cash provided by financing activities for the fiscal year ended June 30, 2024 amounted to $63.0 million.

This amount consisted of gross proceeds of $12.3 million received from the 2022 Private Placement.

The total proceeds from the 2022 Private Placement of $12.3 million were received in July 2022 and were partially offset by payments of $0.8 million for underwriting commissions and other costs related to this offering.

This amount consisted of proceeds of $63.1 million from the 2024 Underwritten Offering.

For the fiscal year ended June 30, 2024, we also received proceeds of $0.2 million from the exercise of employee stock options to purchase approximately 82,000 shares of common stock and paid $0.3 million for offering costs.

Off-Balance Sheet Arrangements

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Recently Issued Accounting Pronouncements

See Note 1 to our consolidated financial statements included in Item 8 of this Annual Report regarding the impact of certain accounting pronouncements on our consolidated financial statements.

See Note 1 to our consolidated financial statements included in Item 8 of this Annual Report regarding the impact of certain recently issued accounting pronouncements on our consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis