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Item 7. Management’s Discussion and Analysis

2026-03-02 compared with 2025-03-20 · 86 added, 105 removed, 233 unchanged (45% of the section changed)

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You should carefully read the “Risk Factors” section of this Annual Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Also see the section titled “Cautionary Note Regarding Forward-Looking Statements.”

We are a clinical-stage biopharmaceutical company on a mission to revolutionize the current treatment paradigm for cystic fibrosis (“CF”) patients by developing novel medicines that normalize the function of the cystic fibrosis transmembrane conductance regulator (“CFTR”) protein to deliver clinically meaningful benefit to CF patients.

Our goal is to deliver differentiated medicines for people living with CF that can restore their CFTR function to as close to normal as possible by directly stabilizing CFTR’s nucleotide-binding domain 1 (“NBD1”).

We believe stabilizing NBD1 is central to unlocking dramatic improvements in clinical outcomes and quality of life for CF patients.

In February 2025, we disclosed interim data from two ongoing randomized, double-blinded, placebo-controlled Phase 1 clinical trials of our highly potent NBD1 stabilizers—SION-719 and SION-451—evaluating the safety, tolerability and PK of single ascending doses ("SAD") and multiple ascending doses ("MAD") of each

product candidate in healthy subjects.

As of the interim data cutoff date of January 14, 2025, five SAD cohorts and three MAD cohorts of SION-719 had been completed, with over 60 healthy subjects dosed, and six SAD cohorts and three MAD cohorts of SION-451 had been completed, with over 70 healthy subjects dosed.

Both SION-719 and SION-451 were generally well tolerated based on interim Phase 1 clinical data as of the interim data cutoff date.

In these trials, at both single and multiple doses, SION-719 and SION-451 exposures were achieved that have the potential, based on our preclinical CFHBE model, to provide clinically meaningful benefit if SION-719 or SION-451 were administered as part of a dual combination or as an add-on to the standard of care (“SOC”).

Since reporting interim data, we have completed dosing in the MAD part of the Phase 1 trial of SION-451, and the final MAD cohort of the SION-719 trial, evaluating 120 mg of SION-719, is planned.

The additional completed cohorts evaluated 225 mg and 25 mg (fed) of SION-451 and 160 mg of SION-719, dosed twice daily ("BID") over 10 days.

All MAD data, including from the recently completed cohorts, remain blinded to individual subject treatment assignment.

Both compounds were generally well tolerated in these additional cohorts.

The Part C of each trial, in which we are evaluating the effect of food on the PK of each product candidate and the bioequivalence of a table formulation, is ongoing.

Topline data from the Phase 1 trials are expected in the first half of 2025.

We are also developing a portfolio of complementary CFTR modulators designed to work synergistically with our NBD1 stabilizers to improve CFTR function, as seen in preclinical models.

In July 2024, we in-licensed three clinical-stage compounds from AbbVie Global Enterprises Ltd.

(“AbbVie”) to expand our portfolio of combination product opportunities, including galicaftor (SION-2222), which targets CFTR’s transmembrane domain 1 (“TMD1”), and has completed Phase 2 clinical trials.

In addition, in December 2024, we completed a Phase 1 clinical trial evaluating SION-109, which targets CFTR’s intracellular loop 4 (“ICL4”) region.

We believe our robust pipeline of NBD1 stabilizers and complementary modu lators provide multiple potential pathways to achieving our goal, either in combination with each other to produce a proprietary combination CF therapy, or in combination with the current standard of care.

We plan to evaluate multiple NBD1 stabilizer candidates and complementary modulator candidates and select the most promising candidates to advance into later-stage development.

Initially, we intend to evaluate an NBD1 stabilizer candidate in combination with the current standard of care in a proof-of-concept trial.

In parallel, we will determine the proprietary dual combination that we believe is optimal to advance into a Phase 2b dose-ranging trial in CF patients.

We currently have exclusive rights to develop and commercialize our compounds.

Since our inception in 2019, we have not generated any revenue.

Historically we had funded our operations primarily with proceeds from the sale and issuance of our preferred stock.

As of December 31, 2024, we raised aggregate net proceeds of $330.4 million from the sale and issuance of our preferred stock.

In February 2025 , we completed our initial public offering ("IPO") and raised aggregate net proceeds of $199.6 million from the sale of 12,176,467 shares of common stock, which included 1,588,234 shares of common stock sold pursuant to the underwriters' full exercise of their option to purchase additional shares.

Also see the section titled “Cautionary Note Regarding Forward-Looking Statements.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

For convenience of presentation, some of the numbers have been rounded in the text below.

We are a clinical-stage biopharmaceutical company on a mission to revolutionize the current treatment paradigm for cystic fibrosis (“CF”) by developing novel medicines that normalize the function of the cystic fibrosis transmembrane conductance regulator (“CFTR”) protein to deliver clinically meaningful benefit to people with CF.

Our goal is to deliver differentiated medicines for people with CF that can restore their CFTR function to as close to normal as possible by directly stabilizing CFTR’s nucleotide binding domain 1 (“NBD1”).

We believe stabilizing NBD1 is central to unlocking dramatic improvements in clinical outcomes and quality of life for people with CF.

We are also advancing a portfolio of complementary CFTR modulator candidates designed to work synergistically with our NBD1 stabilizers to improve CFTR function, as seen in preclinical models.

We believe our robust pipeline provides multiple potential pathways to achieve our mission, either through development of an NBD1 stabilizer and a complementary modulator in combination with each other to produce a proprietary dual combination, or an NBD1 stabilizer administered in combination with the standard of care for CF.

While we have prioritized development of a proprietary dual combination, we believe both development pathways offer attractive commercial opportunities.

In June 2025, we announced positive topline data from our two randomized, double-blinded, placebo-controlled Phase 1 clinical trials evaluating SION-719 and SION-451, our lead NBD1 stabilizer product candidates, in healthy volunteers, and our plans to advance both compounds to the next phase of clinical development.

The trials assessed the safety, tolerability, and pharmacokinetics ("PK") of single and multiple ascending doses of each product candidate, as well as food effect and tablet bioequivalence.

Both SION-719 and SION-451 were generally well tolerated in these trials, with no serious adverse events, treatment emergent adverse events that led to discontinuation of drug, or dose-limiting toxicities observed.

The Phase 1 data also supported the use of a tablet formulation in future trials and indicated that both compounds could be dosed in a fed or fasted state.

Both NBD1 stabilizers met target exposure thresholds.

Based on the Phase 1 data and our preclinical CF human bronchial epithelial ("CFHBE") model, we believe our NBD1 stabilizers have the potential to provide clinically meaningful benefit to people with CF when SION-719 is administered as an add-on to the standard of care or when SION-451 is used in proprietary dual combinations with one of our complementary modulators.

In October 2025, we announced the initiation of a Phase 2a proof-of-concept trial in CF patients evaluating SION-719 as an add-on to the standard of care.

The Phase 2a trial, called PreciSION CF, is

designed to evaluate the safety, tolerability, and PK of SION-719 when administered with the standard of care for CF, Vertex Pharmaceuticals, Inc.'s Trikafta, and to assess change in CFTR function as measured by sweat chloride levels.

Additionally, in August 2025, we announced the initiation of a Phase 1 dual combination trial in healthy volunteers evaluating SION-451 in dual combinations with each of SION-2222 and SION-109, two of our complementary CFTR modulators.

The trial will evaluate the safety, tolerability, and PK of varying doses of the dual combinations and will inform selection of a dual combination for further development.

Topline data from both trials are anticipated in mid-2026.

Liquidity and Financial Condition

Since our inception, we have funded our operations primarily with proceeds from private placements of convertible preferred stock and through net proceeds from our IPO.

During 2025, we completed our IPO and raised aggregate net proceeds of $199.6 million from the sale of 12,176,467 shares of common stock, which included 1,588,234 shares of common stock sold pursuant to the underwriters' full exercise of their option to purchase additional shares.

As of December 31, 2025, we have raised aggregate net proceeds of $530.0 million .

We have not generated any revenue from product sales or other sources.

Due to our significant research, development and manufacturing expenditures, we have accumulated substantial losses and negative cash flows since our inception, including net losses of $75.3 million and $61.7 million for the years ended December 31, 2025 and 2024, respectively.

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We expect our expenses and operating losses will increase substantially as we:

• continue to advance the clinical development of our current and future product candidates, including an NBD1 stabilizer product candidate;

• continue to advance the clinical development of our current and future product candidates;

• continue to advance our research activities and seek to discover and develop additional product candidates to expand our pipeline;

• pursue regulatory approvals for any current or future product candidates, including an NBD1 stabilizer product candidate, that successfully complete clinical trials;

• pursue regulatory approvals for any current or future product candidates that successfully complete clinical trials;

• continue to utilize third parties to manufacture our product candidates;

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We do not have any products approved for sale and have not generated any revenue from product sales.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our current and any future product candidates, which we expect will take a number of years or may never occur.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our current or any future product candidates, which we expect will take a number of years or may never occur.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy.

Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings or other capital sources, potentially including collaborations, licenses or other strategic arrangements.

arrangements.

See the section titled “— Liquidity and Capital Resources.

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As of December 31, 2025, we had cash, cash equivalents and marketable securities of $310.3 million.

Based upon our current operating plans, we believe that the net proceeds from the IPO, together with our existing cash, cash equivalents and marketable securities, will be sufficient to fund our operations into 2028.

Based upon our current operating plans, we believe that our existing cash, cash equivalents and marketable securities, will be sufficient to fund our operations into 2028.

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.

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As initial consideration for CFF’s grant of, and forbearance from exercising, its rights under the CFFT-Genzyme Agreement, we paid an upfront fee of $0.2 million and issued CFF shares of our preferred stock, valued at $1.0 million, which were previously recorded as research and development expenses.

In addition, we agreed to pay CFF a sub-teen double-digit percentage of any amounts paid by us to Sanofi under the Sanofi License Agreement, other than milestone, royalty or reimbursement payments.

In addition, we agreed to pay CFF a sub-teen double-digit percentage of any amounts paid by us to Sanofi under the Sanofi

License Agreement, other than milestone, royalty or reimbursement payments.

We are required to pay CFF a total of up to $40.0 million upon achievement of certain late-stage developmental and commercial milestones.

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We are also required to pay royalties to AbbVie in the low to mid single-digit percentage range based on net sales of licensed products, subject to customary reductions and offsets.

In addition, we are required to pay AbbVie up to $130.0 million in commercial and sales-based milestone payments, mid to high single-digit royalties on the licensed products or other payments due to

Galapagos pursuant to the Galapagos License Agreement, to the extent such payments are triggered by our use of the licensed rights owned by Galapagos under the AbbVie License Agreement.

In addition, we are required to pay AbbVie up to $130.0 million in commercial and sales-based milestone payments, mid to high single-digit royalties on the licensed products or other payments due to Galapagos pursuant to the Galapagos License Agreement, to the extent such payments are triggered by our use of the licensed rights owned by Galapagos under the AbbVie License Agreement.

There were no milestones achieved under the AbbVie License Agreement and Galapagos License Agreement as of December 31, 2025.

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In the future, we may generate revenue from product sales from any approved product, which approval we do not expect to occur for at least the next several years, if ever, as well as collaboration or license agreements we may enter into with respect to our current or future product candidates.

If our development efforts for our current or future product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales.

We cannot predict if, when or to what extent we will generate revenue as we may never succeed in obtaining regulatory approval for any of our product candidates.

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External costs represent a significant portion of our research and development expenses, which we track on a program-by-program basis following the nomination of a product candidate.

Our internal research and development expenses consist primarily of personnel-related expenses, including stock- based compensation

expenses and allocated expenses.

Our internal research and development expenses consist primarily of personnel-related expenses, including stock-based compensation expenses and allocated expenses.

We do not track our internal research and development expenses on a program-by-program basis as they either relate to early-stage research expenses, such as lab supplies or our personnel expenses, consulting fees or other costs that are deployed across multiple programs.

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• receipt of marketing approvals, if any, from applicable regulatory authorities;

• the development of commercial-scale manufacturing and distribution processes for our current any future product candidates;

• the development of commercial-scale manufacturing and distribution processes for our current and any future product candidates;

• our ability to obtain, maintain and protect patent, trade secret protection and regulatory exclusivity for our product candidates, both in the U.S.

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A change in the outcome of any of these variables with respect to the development of any current or future product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.

For example, if the FDA or another regulatory authority were to delay a planned start of a clinical trial or require us to conduct clinical trials beyond those that we currently anticipate would be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

For example, if the U.S.

Food and Drug Administration ("FDA") or another regulatory authority were to delay a planned start of a clinical trial or require us to conduct clinical trials beyond those that we currently anticipate would be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

We do not have control over many of these factors, including certain aspects of clinical development, the regulatory submissions process, potential threats to our intellectual property rights and general political and economic conditions that may negatively impact our business in the future.

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General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll tax, bonuses, benefits and stock-based compensation charges for those individuals in executive, legal, finance, human resources, information technology and other administrative functions.

Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for auditing, accounting, tax and consulting services, office and information technology costs, insurance costs and facilities, depreciation and other general and administrative expenses that are allocated.

General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll tax, bonuses, benefits and stock-based compensation charges for those individuals in executive, legal, finance, human resources, business development, information technology and other administrative functions.

Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for auditing, accounting, tax and consulting services.

Lastly, corporate overhead expenses such as information technology, insurance, facilities, and depreciation that are not allocated to the Company’s research and development activities are included in general and administrative expenses.

We recognize general and administrative expenses in the periods in which they are incurred.

We anticipate that our general and administrative expenses will increase in the future to support our increased research and development activities, pre-commercial preparation activities for our product candidates and any future product candidates and, if any product candidate receives marketing approval,

commercialization activities.

These increases will likely include increased costs related to the hiring of additional personnel and fees paid to outside consultants, among other expenses.

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Interest income consists primarily of interest earned and the amortization of discount or premiums on our cash equivalents and marketable securities.

We expect our interest income will increase as we invest the cash received from the net proceeds from the IPO.

Interest income increased in 2025 primarily due to the investment of proceeds from our IPO.

We expect interest income to decrease in future periods as our investment balances are reduced through operating activities.

Other income consists of sublease income through our subleasing agreement which is further discussed within Note 7, “ Leases ” in our consolidated financial statements included elsewhere in this Annual Report.

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each period or for our earned research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

As of December 31, 2024 and 2023, we had $65.6 million and $48.2 million of federal operating loss carryforwards, and $68.2 million and $47.1 million of state operating loss carryforwards, respectively.

available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

As of December 31, 2025 and 2024, we had $148.0 million and $65.6 million of federal net operating loss ("NOL") carryforwards, and $155.4 million and $68.2 million of state NOL carryforwards, respectively.

The federal NOLs are not subject to expiration and the state NOLs begin to expire in 2045.

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Direct research and development expenses by program:

NBD1 programs $ 22,065 $ 26,357 $ (4,292)

NBD1 and combination development programs (1)

$ 32,865 $ 22,065 $ 10,800

Complementary modulator programs (2)

5,781 6,531 (750)

Unallocated research and development expenses:

IPR&D acquisition related costs 13,639 — 13,639

Personnel-related (including stock-based compensation) 14,668 9,128 5,540

Facility, lab and depreciation 2,591 2,004 587

Other R&D related costs 4,616 3,334 1,282

Facility, lab and depreciation 2,333 2,591 (258)

IPR&D acquisition related costs — 13,639 (13,639)

Total research and development expenses $ 60,263 $ 57,288 $ 2,975

(1) NBD1 and combination development program costs include NBD1 stabilizer activities and development of our proprietary combination therapy.

(2) Complementary modulator program costs include manufacturing expenses for the complementary modulators.

Research and development expenses increased by $3.0 million to $60.3 million for the year ended December 31, 2025, from $57.3 million for the year ended December 31, 2024.

The change in research and development expenses was primarily due to the following:

• direct research and development expenses increased nominally resulting from a $4.5 million increase in complementary modulator program expenses due to the SION-109 Phase 1 clinical trial in 2024 offset by a $4.3 million decrease in NBD1 program expenses due to a decrease in manufacturing costs;

• unallocated research and development expenses increased by $16.5 million due to IPR&D acquisition costs incurred in connection with the AbbVie License Agreement of $13.6 million and an increase of $2.9 million due to professional services and other unallocated research and development expenses.

The increase in research and development expenses was primarily due to:

• direct research and development expenses increased by $10.1 million primarily due to an increase in clinical programs and combination development activities;

• unallocated research and development expenses decreased by $7.1 million primarily due to IPR&D acquisition costs incurred in connection with our license agreement with AbbVie of $13.6 million in the third quarter of 2024, partially offset by a $5.5 million increase in personnel-related expenses including stock-based compensation, driven by an increase in the size of our workforce to support our clinical pipeline, and a $1.3 million increase in other R&D related costs, primarily driven by the use of third parties.

General and Administrative Expenses

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The increase in general and administrative expenses was primarily due to:

• $1.9 million increase in personnel-related expenses due to an increase in stock-based compensation;

• $1.5 million increase in fees related to the increased use of consultants and professional service organizations.

• $11.1 million increase in personnel-related expenses including stock-based compensation, driven by an increase in the size of our workforce;

• $4.0 million increase in fees related to the use of third parties, including consultants and professional service organizations.

Interest Income

Interest income increased by $5.4 million to $8.2 million for the year ended December 31, 2024, from $2.8 million for the year ended December 31, 2023, primarily driven by an increased investment in debt securities due to the proceeds received from the issuance of our Series C preferred stock (the “Series C Financing”) and the amortization of discounts on our investment activity.

Other income increased by $0.4 million to $0.7 million for the year ended December 31, 2024, from $0.3 million for the year ended December 31, 2023, driven by sublease income in connection with our subleasing agreement.

Interest income increased by $5.1 million to $13.3 million for the year ended December 31, 2025, from $8.2 million for the year ended December 31, 2024, primarily driven by an increased investment in debt securities due to the proceeds received from the initial public offering.

Other income was $0.4 million and $0.7 million for the years ended December 31, 2025, and 2024, respectively, due to sublease income in connection with our subleasing agreement.

Liquidity and Capital Resources

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We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates and any future product candidates.

As such, we expect our research and development and general and administrative costs will continue to increase significantly, including the costs associated with operating as a public company.

As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings or strategic agreements.

We have funded our operations historically primarily from the sale of proceeds of preferred stock.

As of December 31, 2024, we had raised aggregate net proceeds of $330.4 million from the sale of our preferred stock.

As of December 31, 2025, we had $310.3 million in cash, cash equivalents and marketable securities.

In February 2025 , we raised aggregate net proceeds of $199.6 million from the sale of shares of common stock in our IPO.

The following table sets forth a summary of the net cash flow activity (in thousands):

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Net cash used in operating activities $ (66,297) $ (52,787)

Net cash (used in) provided by investing activities (126,913) 27,352

Net cash used in investing activities (118,749) (126,913)

Net cash provided by financing activities 205,710 178,967

Net decrease in cash, cash equivalents and restricted cash $ (733) $ (16,316)

Net increase (decrease) in cash, cash equivalents and restricted cash $ 20,664 $ (733)

Operating Activities

For the year ended December 31, 2024, net cash used in operating activities was $52.8 million primarily due to our net loss of $61.7 million and changes in operating assets and liabilities of $3.1 million, partially offset by $12.0 million of non-cash charges related to non-cash license expense, stock-based compensation, depreciation, non-cash operating lease expense and amortization of discounts on marketable securities.

For the year ended December 31, 2025, net cash used in operating activities was $66.3 million primarily due to our net loss of $75.3 million and changes in operating assets and liabilities of $2.7 million, partially offset by $11.6 million of non-cash charges related to stock-based compensation, depreciation, non-cash operating lease expense and amortization of discounts on marketable securities.

For the year ended December 31, 2024, net cash used in operating activities was $52.8 million primarily due to our net loss of $61.7 million and changes in operating assets and liabilities of $3.1 million, partially offset by $12.0 million of non-cash charges related to stock-based compensation, depreciation, non-cash operating lease expense and amortization of discounts on marketable securities.

Investing Activities

Net cash used in investing activities was $126.9 million during the year ended December 31, 2024, which was primarily driven by purchases of marketable securities of $182.8 million, partially offset by maturities of marketable securities of $56.0 million.

Net cash provided by investing activities was $27.4 million during the year ended December 31, 2023, which was primarily driven by maturities of marketable securities of $52.0 million, partially offset by purchases of marketable securities for $23.5 million and purchases of property and equipment of $1.1 million.

Net cash used in investing activities was $118.7 million during the year ended December 31, 2025, which was primarily driven by purchases of marketable securities of $325.0 million and purchases of property and equipment of $0.4 million, partially offset by maturities of marketable securities of $206.7 million.

Net cash used in investing activities was $126.9 million during the year ended December 31, 2024, which was primarily driven by purchases of marketable securities for $182.8 million, partially offset by maturities of marketable securities of $56.0 million.

Financing Activities

Net cash provided by financing activities was $179.0 million during the year ended December 31, 2024, as compared to $31,000 during the year ended December 31, 2023.

The increase in net cash provided by financing activities was primarily due to the Series C Financing which occurred in March 2024, compared to no financings completed during 2023, partially offset by $2.5 million of payments for offering costs related to our IPO, which closed in February 2025.

Net cash provided by financing activities was $205.7 million during the year ended December 31, 2025, primarily due to net proceeds of $202.1 million received when the Company closed its IPO plus exercise proceeds totaling $3.6 million.

Net cash provided by financing activities was $179.0 million during the year ended December 31, 2024, during which time the Company closed its Series C Financing.

Future Funding Requirements

As of December 31, 2025, we had cash, cash equivalents and marketable securities of $310.3 million.

Based upon our current operating plans, we believe that the net proceeds from our IPO, together with our existing cash, cash equivalents and marketable securities, will be sufficient to fund our operations into 2028.

Based upon our current operating plans, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations into 2028.

However, our forecast for the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

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• our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company;

• the costs associated with hiring additional personnel and consultants as our clinical activities increase;

• the costs associated with hiring additional personnel and consultants as our clinical and pre-commercial activities increase;

• the costs and timing of establishing or securing sales and marketing capabilities if any current or future product candidate is approved;

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If we raise additional funds through a strategic agreement, we may have to grant rights to develop and market our current and future product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.

Our failure to raise capital or enter

into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.

If we are unable to raise additional funds, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts.

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Research and Development and Manufacturing Agreements

We enter into contracts in the normal course of business with CROs, CDMOs and other vendors to assist in the research and development activities and other services and products for operating purposes.

We enter into contracts in the ordinary course of business with CROs, CDMOs and other vendors to assist in the research and development activities and other services and products for operating purposes.

These contracts generally provide for termination at any time upon a certain amount of prior notice.

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In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

This process involves reviewing open contracts, communicating with internal personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

service when we have not yet been invoiced or otherwise notified of the actual cost.

We periodically confirm the accuracy of our estimates with our service providers and make adjustments, if necessary.

The majority of our service providers invoice in arrears for services performed or when contractual milestones are met.

financial terms of agreements with these service providers are subject to negotiation, vary from contract-to-contract and may result in uneven payment flows.

The financial terms of agreements with these service providers are subject to negotiation, vary from contract-to-contract and may result in uneven payment flows.

In circumstances where amounts have been paid in excess of costs incurred, we record a prepaid expense.

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Stock-Based Compensation Expense

We measure stock-based awards granted to employees, directors and non-employees based on their fair value on the date of the grant.

We measure all stock options and other stock-based awards granted to employees, directors and non-employees based on their fair value on the date of the grant.

We recognize compensation expense for awards to employees and directors over the requisite service period, which is generally the vesting period of the respective award.

Compensation expense for awards to non-employees with service-based vesting conditions is recognized in the same manner as if we had paid cash in exchange for the goods or services, which is generally over the vesting period of the award.

Our stock-based payments include stock options and grants of restricted common stock awards.

For stock-based awards with service-based vesting conditions, we recognize compensation expense using the straight-line method.

The fair value of each restricted common stock award is estimated on the date of grant based on the fair value of our common stock on that same date.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option and our expected dividend yield.

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For awards to non-employees, the expected term of the option is equal to the contractual term of the non-employees’ service agreement.

The fair value of each restricted common stock award is estimated on the date of grant based on the fair value of our common stock on that same date.

Determination of Fair Value of Common Stock Valuations

Prior to our IPO, there was no public market for our common stock.

As a result, the estimated fair value of our common stock has been determined by our board of directors as of the date of each option grant with input from management, considering our most recently available third-party valuations of common stock, and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant.

These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation .

Our common stock valuation was prepared using either the option pricing method (“OPM”) or the hybrid method, both of which used a market approach to estimate our equity value.

The OPM treats common stock and convertible preferred stock as call options on the 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.

Under the OPM, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the convertible 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.

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

These third-party valuations were performed at various dates, which resulted in valuation of our common stock of $6.11 per share as of February 2024, $8.08 per share as of August 2024 and $10.33 per share as of October 2024.

The fair value of our common stock was determined by our board of directors, with input from management and considering the independent third-party valuations and various objective and subjective factors as of each grant date, including:

• the prices at which we sold preferred stock and the superior rights and preferences of the preferred stock relative to our common stock at the time of each grant;

• our ability to raise future financings;

• the progress of our research and development efforts, including the status of clinical trials for our product candidates;

• the lack of liquidity of our equity as a private company;

• our stage of development and business strategy and the material risks related to our business and industry;

• the achievement of enterprise milestones, including entering into collaboration and license agreements;

• the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies;

• any external market conditions affecting the biotechnology industry and trends within the biotechnology industry;

• the likelihood of achieving a liquidity event for the holders of our preferred stock and holders of our common stock, such as an initial public offering, or a sale of our company, given prevailing market conditions;

• the analysis of IPOs and the market performance of similar companies in the biopharmaceutical industry.

The assumptions underlying these valuations were highly complex and subjective and represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment.

As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could be materially different.

In February 2025 , we completed our IPO.

As such, the fair value of our common stock will be determined based on the quoted market price of our common stock and it is no longer necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for granted stock options and other such awards we may grant.

Prior to the completion of our IPO, there was no public market for our common stock.

As a result, the estimated fair value of our common stock was determined by our board of directors as of the date of each option grant with input from management, considering our most recently available third-party valuations of common stock, and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant.

These methodologies required the use of significant management judgment and assumptions.

Since completion of our IPO in February 2025, the fair value of our common stock has been determined based on the closing market price of our common stock on the date of equity grant.

Recent Accounting Pronouncements

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We may take advantage of these exemptions up until the time that we are no longer an “emerging growth company.”

at least $1.235 billion or (c) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means, among other things, the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means, among other things, the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are also a “smaller reporting company” as defined in the Exchange Act.

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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