Spero Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited financial information and the notes thereto included appearing elsewhere in this Quarterly Report on Form 10-Q, and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis. Overview We are a clinical-stage biopharmaceutical company focused on identifying and developing novel treatments for rare diseases and diseases caused by multi-drug resistant (“MDR”) bacterial infections with high unmet need. Our most advanced clinical stage product candidate, tebipenem HBr, is in Phase 3 development, with the potential to be the first broad-spectrum oral carbapenem to treat adult patients with complicated urinary tract infections (“cUTIs”), including acute pyelonephritis, caused by certain microorganisms. The other program in our pipeline is SPR720, a product candidate for first-line treatment of nontuberculous mycobacterial (“NTM”) pulmonary disease (“NTM-PD”). In October 2024, we announced that results from a planned interim analysis of our Phase 2a clinical trial for SPR720 demonstrated the oral agent did not meet its primary endpoint and we elected to suspend development of SPR720 in its oral formulation. We are currently completing analysis of remaining data from all 25 patients dosed in the trial ahead of determining next steps. We have experienced mostly net losses and significant cash outflows from cash used in operating activities since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. As of March 31, 2025, we had an accumulated deficit of $473.5 million, and cash and cash equivalents of $48.9 million. We expect to continue to incur significant expenses and operating losses for at least the next year. Based on our cash and cash equivalents as of March 31, 2025, together with earned and non-contingent development milestone payments from GSK, we believe that our cash runway will be sufficient to fund our operating expenses and required capital expenditures into the second quarter of 2026. During this period, we plan to prioritize advancing the Phase 3 clinical trial activities for tebipenem HBr under our GSK License Agreement and completing our analysis of the full dataset from the 25 treated patients in the Phase 2a proof-of-concept trial of SPR720. Beyond this point we will need additional funding, which we expect will primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations or additional grant funding. If we are not able to secure adequate additional funding, we plan to make further reductions in spending. In that event, we may have to delay, scale back, or eliminate some or all of our planned development activities. The actions necessary to reduce spending under this plan at a level that mitigates the factors described above is not considered probable, as defined in the accounting standards and therefore, the full extent to which management may extend our funds through these actions may not be considered in management’s assessment of our ability to continue as a going concern. As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Further, we expect to incur additional costs associated with our continued operation as a public company. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, government funding arrangements, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates. Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. 29 Recent Developments Nasdaq Deficiency Letter On February 25, 2025, we received a deficiency letter from the Listing Qualifications Department informing us that we were not in compliance with the continued listing requirements of the Nasdaq Global Select Market (“Nasdaq GS”) because the bid price for our common stock had closed below $1.00 per share for 30 consecutive business days. We have until August 25, 2025 to regain compliance with the bid price requirement. If we do not regain compliance with the bid price requirement, our common stock will be subject to delisting. Any potential delisting of our common stock could have a material adverse effect on the market for, and liquidity and price of, our common stock and would adversely affect our ability to raise capital on terms acceptable to us, or at all. Management Transitions and Board Composition In January 2025, the independent directors of our Board of Directors approved the following actions as a matter of corporate governance best practices and to enable us to maintain focus on pursuing our business objectives pending resolution of a “Wells Notice” received from the staff of the Boston Regional Office (the “Staff”) of the SEC, as further described in Part II, Item 1 “Legal Proceedings” of this Quarterly Report on Form 10-Q. • The Board of Directors appointed director Frank Thomas to serve as the Chairman of the Board of Directors, stepping in for Ankit Mahadevia, M.D. • Mr. Shukla agreed to a paid administrative leave from his role as President and Chief Executive Officer. During such leave, Mr. Shukla remained an employee and continued to serve as a member of the Board of Directors. • The Board of Directors appointed Esther Rajavelu, our then-current Chief Financial Officer, Chief Business Officer and Treasurer, to serve as Interim President and Chief Executive Officer during the term of Mr. Shukla’s administrative leave. The terms of Ms. Rajavelu’s existing employment arrangement with the Company were amended to provide that she would receive additional cash compensation of $20,000 per month while she served as the Interim President and Chief Executive Officer, in addition to her role as Chief Financial Officer and Chief Business Officer. Effective May 2, 2025, Ms. Rajavelu was appointed as our President and Chief Executive Officer. She continues to serve as our Chief Financial Officer and Treasurer. In connection with the foregoing, Ms. Rajavelu has also been nominated for election to serve as a member of our Board of Directors at our 2025 annual meeting of stockholders. In connection with the foregoing, we and Ms. Rajavelu entered into an Amended and Restated Employment Agreement, dated April 28, 2025. We and Mr. Shukla mutually decided to separate, effective May 2, 2025. In connection with the foregoing, we and Mr. Shukla entered into a Separation Agreement, dated April 28, 2025. In addition, Mr. Shukla stepped down from the Board of Directors, effective May 2, 2025. For more information about the foregoing, please see our Current Report on Form 8-K filed with the SEC on April 28, 2025. Tebipenem HBr As previously announced in March 2025, a pre-specified interim analysis of PIVOT-PO is expected to be completed in the second quarter of 2025. SPR206 In March 2025, following a reprioritization of its programs, we announced that we are no longer pursuing a planned Phase 2 clinical trial for SPR206. On April 4, 2025, U.S. National Institute of Allergy and Infectious Diseases (“NIAID”) informed us that it was canceling the five-year contract, awarded in May 2021, under the Agency’s Omnibus Broad Agency Announcement No. HHS-NIH-NIAID-BAA2020-1 award mechanism to support further development of SPR206, effective immediately, for its convenience. Components of Our Results of Operations Sales Revenue To date, we have not generated any revenue from product sales. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates. 30 Grant Revenue We expect a portion of our revenue for the next few years will continue to be derived from payments under our active government awards and any awards that we may receive in the future. Collaboration Revenue Collaboration revenue relates to our agreements with Pfizer Inc. (“Pfizer”) and GSK. Operating Expenses Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include: • employee-related expenses, including salaries, related benefits, travel and share-based compensation expense for employees engaged in research and development functions; • expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with contract research organizations (“CROs”); • costs incurred in connection with our government awards; • the cost of consultants and contract manufacturing organizations (“CMOs”) that manufacture drug products for use in our preclinical studies and clinical trials; • facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and supplies; and • payments made under third-party licensing agreements. We expense research and development costs as incurred. Nonrefundable advance payments we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed. Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to consultants, contractors, CMOs and CROs in connection with our preclinical and clinical development activities. License fees and other costs incurred after a product candidate has been designated and that are directly related to the product candidate are included in direct research and development expenses for that program. License fees and other costs incurred prior to designating a product candidate are included in early-stage research programs. We do not allocate employee costs, costs associated with our preclinical programs or facility expenses, including depreciation or other indirect costs, to specific product development programs because these costs are deployed across multiple product development programs and, as such, are not separately classified. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development and commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties, including the following: • successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority, including on account of the disruptive impacts of any global health, economic or political crises; • receipt of marketing approvals from applicable regulatory authorities; • establishment of arrangements with third-party manufacturers to obtain manufacturing supply; • obtainment and maintenance of patent, trade secret protection and regulatory exclusivity, both in the United States and internationally, including our ability to maintain our license agreement with Meiji Seika Pharma Co. Ltd. (“Meiji”) with respect to tebipenem HBr; • protection of our rights in our intellectual property portfolio; • launch of commercial sales of our product candidates, if approved, whether alone or in collaboration with others; 31 • acceptance of our product candidates, if approved, by patients, the medical community and third-party payors; • competition with other therapies; and • a continued acceptable safety profile of our product candidates, if approved. A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related costs, including share-based compensation, for personnel in executive, finance and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We also anticipate that we will continue to incur accounting, audit, legal, regulatory, compliance, infrastructure and director and officer insurance costs, as well as investor and public relations expenses associated with our continued operation as a public company. Restructuring In light of our decision to suspend planned development activities for our oral SPR720 program and our strategic restructuring, we expect that our future expenses relating to development activities with respect to SPR720 will be substantially reduced as we evaluate potential paths forward for SPR720 and implement our restructuring. In connection with our restructuring, we estimated that we would incur approximately $1.1 million of costs in connection with the reduction in workforce related to severance pay and other related termination benefits of which we incurred $0.9 million during the year ended December 31, 2024 and $0.2 million during the quarter ended March 31, 2025. We anticipate the remaining costs to be incurred in the second quarter of 2025. We may incur additional costs not currently contemplated due to events associated with or resulting from the workforce reduction; however, the majority of the costs associated with our workforce reduction were incurred during the quarters ended December 31, 2024 and March 31, 2025. Other Income (Expense) Interest Income (Expense) Interest income (expense) during the three months ended March 31, 2025 and 2024 consists of interest income related to the significant financing component related to the GSK License Agreement and interest earned on our cash equivalents, which are primarily invested in money market accounts, as well as interest earned on our investments in marketable securities. Other Income (Expense), Net Other income (expense), net, consists of insignificant amounts of miscellaneous income, as well as realized and unrealized gains and losses from foreign currency-denominated cash balances and vendor payables. Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. 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. We have made no changes to our existing critical accounting policies, as described in our Annual Report on Form 10-K for the year ended December 31, 2024. 32 Results of Operations Comparison of the Three Months Ended March 31, 2025 and 2024 The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024 (in thousands): Three Months Ended March 31, 2025 2024 $ Change Revenues: Grant revenue $ 763 $ 5,063 $ (4,300 ) Collaboration revenue - related party 5,099 4,064 1,035 Collaboration revenue 12 140 (128 ) Total revenues 5,874 9,267 (3,393 ) Operating expenses: Research and development 13,606 17,332 (3,726 ) General and administrative 6,824 5,917 907 Restructuring 175 — 175 Total operating expenses 20,605 23,249 (2,644 ) Loss from operations (14,731 ) (13,982 ) (749 ) Other income (expense): Interest income 864 1,327 (463 ) Other income (expense), net 1 (14 ) 15 Total other income (expense), net 865 1,313 (448 ) Net loss $ (13,866 ) $ (12,669 ) $ (1,197 ) Grant Revenue Three Months Ended March 31, 2025 2024 $ Change BARDA Contract (Tebipenem HBr) $ 734 $ 4,907 $ (4,173 ) NIAID Contract (SPR206) 29 156 (127 ) Total grant revenue $ 763 $ 5,063 $ (4,300 ) Grant revenue recognized during the three months ended March 31, 2025 and 2024 consisted of the reimbursement of qualifying expenses incurred in connection with our various government awards. The decrease in grant revenue during the three months ended March 31, 2025 was primarily due to a decrease of $4.2 million of committed funds remaining available under our BARDA contract for tebipenem HBr, and a decrease of $0.1 million under our NIAID agreement relating to SPR206. Collaboration Revenue Three Months Ended March 31, 2025 2024 $ Change GSK (Tebipenem HBr) $ 5,099 $ 4,064 $ 1,035 Pfizer (SPR206) 12 140 (128 ) Total collaboration revenue $ 5,111 $ 4,204 $ 907 During the three months ended March 31, 2025, we recognized $5.1 million in collaboration revenue related to our agreement with GSK and less than $0.1 million in collaboration revenue related to our agreement with Pfizer. During the three months ended March 31, 2024, we recognized $4.1 million in collaboration revenue related to our agreement with GSK and $0.1 million in collaboration revenue related to our agreement with Pfizer. 33 Research and Development Expenses Three Months Ended March 31, 2025 2024 $ Change Direct research and development expenses by program: Tebipenem HBr $ 8,669 $ 7,800 869 SPR720 449 4,369 $ (3,920 ) SPR206 49 232 (183 ) Unallocated expenses: Personnel related (including share-based compensation) 3,337 3,549 (212 ) Facility related and other 1,102 1,382 (280 ) Total research and development expenses $ 13,606 $ 17,332 $ (3,726 ) Direct costs related to our tebipenem HBr program increased by $0.9 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, due to continued clinical activities related to our pivotal Phase 3 clinical trial of tebipenem HBr, which we initiated in the fourth quarter of 2023. Direct costs related to our SPR720 program decreased by $3.9 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to decreased clinical activity during the period related to our Phase 2a clinical trial of SPR720, which completed enrollment in the second quarter of 2024. Subsequently, in October 2024, we announced that we would suspend current development activities for SPR720 based on an interim analysis of the Phase 2a proof-of-concept study of SPR720 for the treatment of NTM-PD not meeting its primary endpoint. Direct costs related to our SPR206 program decreased by $0.2 million during the three months ended March 31, 2025, primarily due to decreased preclinical activity. In March 2025, following a reprioritization of our programs, we announced that we are no longer pursuing a planned Phase 2 clinical trial for SPR206. The decrease in personnel-related costs of $0.2 million was primarily a result of increased retention program costs in our research and development functions offset by reduced headcount costs as a result of the previously announced restructuring in the fourth quarter of 2024. Personnel-related costs for the three months ended March 31, 2025 and 2024 included share-based compensation expense of $0.5 million and $0.7 million, respectively. Facility-related and other costs primarily reflect costs related to supporting our research and development staff. General and Administrative Expenses Three Months Ended March 31, 2025 2024 $ Change Personnel related (including share-based compensation) $ 4,118 $ 3,329 $ 789 Professional and consultant fees 2,263 2,031 232 Facility related and other 443 557 (114 ) Total general and administrative expenses $ 6,824 $ 5,917 $ 907 The increase in personnel-related costs of $0.8 million was primarily a result of retention program costs in our general and administrative functions during the period offsetting reduced headcount costs as a result of the previously announced restructuring in the fourth quarter of 2024. Personnel-related costs for the three months ended March 31, 2025 and 2024 included share-based compensation expense of $1.0 million and $1.3 million, respectively. The increase in professional and consultant fees of $0.2 million was primarily due to varying legal and consulting expenses incurred in the three months ended March 31, 2025. Facility-related and other costs primarily reflect costs related to supporting our general and administrative staff. Other Income (Expense), Net Other income (expense), net was $0.9 million for the three months ended March 31, 2025, compared to $1.3 million for the three months ended March 31, 2024. Total other income for the three months ended March 31, 2025, included $0.9 million of interest income, of which $0.4 million related to the significant financing component recognized under the GSK License Agreement, offset by immaterial fluctuations in unrealized foreign currency. Total other income for the three months ended March 31, 2024, included $1.3 34 million of interest income, of which $0.4 million related to the significant financing component recognized under the GSK License Agreement, offset by immaterial fluctuations in unrealized foreign currency. Liquidity and Capital Resources Since our inception, we have incurred significant operating losses. We have recognized revenue to date from funding arrangements with the U.S. Department of Defense, NIAID, CARB-X and BARDA, the GSK License Agreement and our license agreements with Everest and Pfizer. We have not yet commercialized any of our product candidates and we may not generate revenue from sales of any product candidates. To date, we have funded our operations with payments received under license and collaboration agreements and funding from government contracts, and from the proceeds of multiple common stock offerings. As of March 31, 2025, we had cash and cash equivalents of $48.9 million. We filed a universal shelf registration statement on Form S-3 with the SEC on March 15, 2024 (the “2024 Form S-3”), which became effective on March 22, 2024, and pursuant to which we registered for sale up to $300.0 million of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, including up to $75.0 million of our common stock available for issuance pursuant to a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”). Under the Sales Agreement, Cantor may sell shares of our common stock by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), subject to the terms of the Sales Agreement. During the three months ended March 31, 2025, we did not sell any shares of our common stock under the Sales Agreement. Cash Flows The following table summarizes our sources and uses of cash for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 2024 Cash used in operating activities $ (4,002 ) $ 5,938 Net decrease in cash and cash equivalents $ (4,002 ) $ 5,938 Operating Activities Net cash used in operating activities for the three months ended March 31, 2025, was $4.0 million, primarily resulting from our net loss of $13.9 million, adjusted for non-cash items of $1.8 million (primarily stock-based compensation). Net cash provided by changes in our operating assets and liabilities was $8.0 million and consisted primarily of a $25.8 million decrease in our related party collaboration receivable, primarily due to the receipt of the third installment payment from GSK (see Note 10 - License, Collaboration and Service Agreements), a $5.1 million decrease in deferred revenue, a $9.5 million decrease in accrued expenses, a $5.5 million decrease in accounts payable, a $0.4 million decrease in prepaid expenses and a $2.4 million net decrease in other receivables. Net cash provided by changes in operating activities for the three months ended March 31, 2024, was $5.9 million, primarily resulting from our net loss of $12.7 million, adjusted for a net decrease in non-cash items of $2.3 million (primarily stock-based compensation). Net cash provided by changes in our operating assets and liabilities was $16.3 million and consisted primarily of a $23.3 million decrease in our related party collaboration receivable, due to the receipt of the first installment payment from GSK (see Note 10 - License, Collaboration and Service Agreements), a $4.2 million increase in deferred revenue, a $3.5 million net increase in receivables, a $1.7 million increase in accounts payable and a decrease of $1.2 million in accrued expenses. Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses and other current assets in all periods were generally due to the advancement of our programs and the timing of vendor invoicing and payments. Changes in deferred revenue are primarily related to the GSK License Agreement and our license agreement with Pfizer. Changes in collaboration receivable related to the GSK License Agreement. Investing Activities We did not undertake any investing activities during the three months ended March 31, 2025 or 2024. Financing Activities We did not undertake any financing activities during the three months ended March 31, 2025 or 2024. 35 Funding Requirements Our future use of operating cash and capital requirements, and the timing and amount thereof, will depend largely on: • the timing and costs of our ongoing and planned clinical trials; • the initiation, progress, timing, costs and results of preclinical studies and clinical trials of our product candidates and potential new product candidates; • the amount of funding that we receive under government contracts that we have applied for or may apply for in the future; • the number and characteristics of product candidates that we pursue; • the outcome, timing and costs of seeking regulatory approvals; • the costs of commercialization activities for our product candidates if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities; • the terms and timing of any future collaborations, licensing or other arrangements that we may establish; • the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements; • the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property related claims; • the costs of operating as a public company; • the extent to which we in-license or acquire other products and technologies; and • costs associated with litigation and any government investigation. As of March 31, 2025, we had cash and cash equivalents of $48.9 million. In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we are required to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern from the issuance date of our financial statements. Based on the Company’s current operating plan and existing cash and cash equivalents, the Company has determined that there is substantial doubt regarding its ability to continue as a going concern within one year after the date that these consolidated financial statements are issued. Based on our cash and cash equivalents as of March 31, 2025, together with earned and non-contingent development milestone payments from GSK, we believe that our cash runway will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2026. This timeline is subject to uncertainty as to the timing of future expenditures. We have developed plans to mitigate this risk, which primarily consist of raising additional capital through some combination of equity or debt financings, potential new collaborations and/or reducing cash expenditures. If we are not able to secure adequate additional funding, we plan to make reductions in spending. In that event, we may have to delay, scale back, or eliminate some or all of our planned clinical trials, and research stage programs. The actions necessary to reduce spending under this plan at a level that mitigates the factors described above is not considered probable, as defined in the accounting standards and therefore, the full extent to which management may extend our funds through these actions may not be considered in management’s assessment of our ability to continue as a going concern. As a result, management has concluded that substantial doubt exists about our ability to continue as a going concern. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including those listed above. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, government funding, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or 36 marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets, our operations and financial condition could be adversely impacted. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. On February 25, 2025, we received a deficiency letter from the Listing Qualifications Department informing us that we were not in compliance with the continued listing requirements of the Nasdaq GS because the bid price for our common stock had closed below $1.00 per share for 30 consecutive business days. We have until August 25, 2025, to regain compliance with the bid price requirement. If we do not regain compliance with the bid price requirement, our common stock will be subject to delisting. Any potential delisting of our common stock could have a material adverse effect on the market for, and liquidity and price of, our common stock and would adversely affect our ability to raise capital on terms acceptable to us, or at all. Contractual Obligations and Commitments During the three months ended March 31, 2025, there have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended December 31, 2024. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Recently Issued and Adopted Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Item 3. Quantitative and Qualitati ve Disclosures About Market Risk. As of March 31, 2025, we had cash and cash equivalents of $48.9 million, consisting of cash and money market accounts. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. Treasury interest rates. We did not have any assets classified as marketable securities as of March 31, 2025. As we incur research expenses in foreign countries, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound and Australian dollar against the U.S. dollar. Historically, foreign currency fluctuations have not had a material impact on our consolidated financial statements. Please note, that we are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information under this item. Therefore, the above disclosure is discretionary.