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 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, 2025. 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 with high unmet need. Our clinical-stage product candidate, tebipenem HBr, has completed a second Phase 3 trial, and we believe has the potential to be the first oral carbapenem to treat adult patients with complicated urinary tract infections (“cUTIs”), including pyelonephritis, caused by certain microorganisms. In September 2022, we entered into an exclusive license agreement with GSK for the development, manufacture and commercialization of tebipenem HBr, which includes the transfer of the IND and the New Drug Application (“NDA”) ownership to GSK. In May 2025, we and GSK announced that the pivotal Phase 3 PIVOT-PO trial evaluating tebipenem HBr met its primary endpoint and was stopped early for efficacy. GSK has submitted the data from the trial as part of an NDA Class 2 resubmission for tebipenem HBr to the FDA in December 2025, which has been accepted by the FDA. GSK reported that the Prescription Drug User Fee Act (“PDUFA”) date has been set as June 18, 2026. Following the termination of our earlier stage programs (SPR206 and SPR720), we remain focused on supporting GSK in the FDA approval process pursuant to our obligations under the GSK License Agreement and advancing other corporate activities, including exploring opportunities to grow our portfolio of clinical-stage product candidates. 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 commercialization of tebipenem HBr, or any product candidate we may develop in the future. As of March 31, 2026, we had an accumulated deficit of $458.3 million, and cash and cash equivalents of $56.1 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Based on our current operating plan, we believe that our cash and cash equivalents as of March 31, 2026 will be sufficient to fund our operating expenses and capital expenditure requirements at least into 2028. During this period, we remain focused on supporting GSK in the FDA approval process pursuant to our obligations under our GSK License Agreement and advancing other corporate activities, including exploring opportunities to grow our portfolio of clinical-stage product candidates. Beyond this point, or in the event we change our current operating plan, we will need additional funding to support our continuing operations. 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. If we are not able to secure adequate additional funding, we will have 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 are 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. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for any of our product candidates. If we obtain regulatory approval for any of our future 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. 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. 28 Recent Developments Tebipenem HBr In May 2025, we and GSK announced that the pivotal Phase 3 PIVOT-PO trial evaluating tebipenem HBr, an investigational oral treatment for cUTIs, including pyelonephritis, caused by certain microorganisms, met its primary endpoint and the trial was stopped early for efficacy. The decision followed a recommendation from an Independent Data Monitoring Committee (“IDMC”) that completed a pre-specified interim analysis of data from 1,690 patients enrolled in the trial. Following the review of the interim analysis data by the IDMC, it was determined that the Phase 3 PIVOT-PO trial met the primary endpoint of non-inferiority of tebipenem HBr compared to intravenous imipenem-cilastatin in hospitalized adult patients with cUTI, including pyelonephritis, on overall response (composite of clinical cure plus microbiological eradication) at the test-of-cure visit. The IDMC review did not identify any new safety concerns beyond what has been reported in other studies with tebipenem, with diarrhea and headache as the two most reported adverse events. In December 2025, GSK resubmitted the NDA for tebipenem HBr to the FDA. In accordance with the terms of the GSK License Agreement, we became entitled to receive a $25.0 million milestone payment upon the filing of the NDA with the FDA, which we received in February 2026. Remaining potential payments under the GSK License Agreement, which include milestones and royalties based on commercial launch and achievement of pre-specified sales thresholds, are as follows (in millions): Contingent Event Milestone Payment Total potential commercial milestones based on first commercial sales $ 101.0 * First commercial sale of a product in the United States — $ 51.0 Second anniversary of first commercial sale of a product in the United States — $ 25.0 First commercial sale of a product in two European countries — $ 25.0 Total potential sales milestone payments $ 225.0 Net annual sales greater than $200.0 — $ 25.0 Net annual sales greater than $300.0 — $ 25.0 Net annual sales greater than $400.0 — $ 25.0 Net annual sales greater than $500.0 — $ 50.0 Net annual sales greater than $750.0 — $ 50.0 Net annual sales greater than $1,000.0 — $ 50.0 *Under the terms of the GSK License Agreement, the maximum potential milestone amount was revised from $150.0 million after PIVOT-PO was stopped early for efficacy following completion of a pre-specified interim analysis of data from 1,690 patients enrolled in the trial, thereby reducing the overall cost of the trial to us; the maximum potential milestone payment of $150.0 million was contingent upon the trial continuing to full enrollment, with 2,637 patients enrolled in the trial. In addition to the milestones described above, GSK is obligated to pay royalties to us on annual net sales of GSK Licensed Products in the GSK Territory. Such royalties are 1% for annual sales up to $750.0 million each year and range from high single-digit percentages on annual net sales above $750.0 million each year to low double-digit percentages on annual net sales above $1,000.0 million each year. Components of Our Results of Operations Sales Revenue To date, we have not generated any revenue from product sales. If our development efforts for any of 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 any of our product candidates. We may never succeed in obtaining regulatory approval for any existing or future product candidates. Grant Revenue A portion of our revenue may be derived from payments under any government awards that we may receive in the future. Collaboration Revenue Collaboration revenue relates to our agreements with Pfizer and GSK. 29 Operating Expenses Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities and the development of any 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 any 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 existing or future product candidates. The successful development and commercialization of any 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 with respect to tebipenem HBr; • protection of our rights in our intellectual property portfolio; • launch of commercial sales of any of our product candidates, if approved, whether alone or in collaboration with others; • acceptance of any 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 any of our product candidates, if approved. 30 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 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. Other Income (Expense) Interest Income (Expense) Interest income (expense) 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. Income Taxes We have not recorded any income tax benefits for the net losses we have incurred in each year 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, 2025, we had United States federal, state and foreign net operating loss carryforwards ("NOLs") of $226.1 million, $184.8 million and $4.7 million, respectively. $212.8 million of the federal NOLs can be carried forward indefinitely and $13.2 million of NOLs begin to expire in 2034. The state NOLs begin to expire in 2035 and will expire at various dates through 2045. The foreign NOLs do not expire. As of December 31, 2025, we also had federal and state research and development tax credit carryforwards of $6.7 million and $1.7 million, respectively, and federal orphan drug tax credit carryforwards of $3.1 million, which may be available to offset future income tax liabilities. The federal and state research and development tax credits begin to expire in 2035 and the federal orphan drug credits begin to expire in 2044. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date. 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 believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements. Funding Received from Government Contracts and Collaborations Since our inception, we were able to obtain partial funding for our research and development activities from government contracts, government tax incentives and collaboration arrangements. The classification within our statement of operations and comprehensive loss of the funding received under these arrangements was subject to management judgment based on the nature of the arrangements we enter into, the source of the funding and whether the funding is considered central to our business operations. 31 Government Contracts We had generated revenue from government contracts that reimbursed us for certain allowable costs for funded projects. For contracts with government agencies, when we had concluded that we were the principal in conducting the research and development expenses and where the funding arrangement is considered central to our ongoing operations, we classify the recognized funding received as revenue. Revenue from government grants was recognized as the qualifying expenses related to the contracts were incurred, provided that there is reasonable assurance of recoverability. Revenue recognized upon incurring qualifying expenses in advance of receipt of funding was recorded as unbilled receivables, a component of prepaid expenses and other current assets, in the consolidated balance sheet. We did not receive any funding under the Biomedical Advanced Research and Development Authority (“BARDA”) contract in the three months ended March 31, 2026 and do not anticipate receiving any additional funding under the BARDA contract as the Company has utilized all fully committed funds under the contract. Collaboration Agreements For collaboration agreements with a third party, to determine the appropriate statement of operations classification of the recognized funding, we first assess whether the collaboration arrangement is within the scope of the accounting guidance for collaboration arrangements. If it is, we evaluate the collaborative arrangement for proper classification in the statement of operations based on the nature of the underlying activity and we assess the payments to and from the collaborative partner. If the payments to and from the collaborative partner are not within the scope of other authoritative accounting guidance, we base the statement of operations classification for the payments received on a reasonable, rational analogy to authoritative accounting guidance, applied in a consistent manner. Conversely, if the collaboration arrangement is not within the scope of accounting guidance for collaboration arrangements, we assess whether the collaboration arrangement represents a vendor/customer relationship. If the collaborative arrangement does not represent a vendor/customer relationship, we then classify the funding payments received in the statement of operations and comprehensive loss as a reduction of the related expense that is incurred. Revenue Recognition - GSK License Agreement In determining the accounting treatment for the GSK License Agreement, we developed assumptions to determine the stand-alone selling price for each performance obligation in the contract. We developed the estimated standalone selling price for the license using a discounted cash flow model. To develop this model, we applied significant judgment in the determination of the significant assumptions relating to forecasted future revenues, development timelines, the discount rate, and probabilities of technical and regulatory success. We developed the estimated standalone selling price for the research and development services using a discounted cash flow model. The assumptions to develop the estimated standalone selling price for the related research and development services include estimates of costs to be incurred to fulfill its obligations associated with the performance of the research and development services, plus a reasonable margin. When an arrangement contains payment terms that are extended beyond one year, a significant financing component may exist. We assessed our revenue-generating arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component does exist in certain arrangements. The significant financing component is calculated as the difference between the stated value and present value of the milestones payable and is recognized as interest income over the extended payment period. Judgment is used in determining: (1) whether the financing component in a license agreement is significant and, if so, (2) the discount rate used in calculating the significant financing component. Accrued Research and Development Expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable 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 actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to: • vendors in connection with the preclinical development activities; • CMOs in connection with the production of preclinical and clinical trial materials; • CROs in connection with preclinical and clinical studies; and • investigative sites in connection with clinical trials. 32 We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. 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. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses. Share-Based Compensation We issue share-based awards to employees and directors in the form of stock options and restricted stock units. We measure and recognize compensation expense for our share-based awards granted to our employees and directors based on the estimated grant date fair value in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718 (“ASC 718”), Compensation—Stock Compensation. We determine the fair value of restricted stock units based on the fair value of our common stock. We measure all share-based options granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model, and we recognize compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. Generally, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method. The Black-Scholes option-pricing model uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options and performance-based awards, the risk-free interest rate for a period that approximates the expected term of our common stock options and performance-based awards, and our expected dividend yield. We have also granted certain awards with performance-based criteria. Results of Operations Comparison of the Three Months Ended March 31, 2026 and 2025 The following table summarizes our results of operations for the three months ended March 31, 2026 and 2025 (in thousands): Three Months Ended March 31, 2026 2025 $ Change Revenues: Grant revenue $ — $ 763 $ (763 ) Collaboration revenue - related party 258 5,099 (4,841 ) Collaboration revenue — 12 (12 ) Total revenues 258 5,874 (5,616 ) Operating expenses: Research and development 2,909 13,606 (10,697 ) General and administrative 4,887 6,824 (1,937 ) Restructuring — 175 (175 ) Total operating expenses 7,796 20,605 (12,809 ) Loss from operations (7,538 ) (14,731 ) 7,193 Other income (expense): Interest income 336 864 (528 ) Other income (expense), net (1 ) 1 (2 ) Total other income (expense), net 335 865 (530 ) Net loss $ (7,203 ) $ (13,866 ) $ 6,663 33 Grant Revenue (in thousands): Three Months Ended March 31, 2026 2025 $ Change BARDA Contract (Tebipenem HBr) $ — $ 734 $ (734 ) NIAID Contract (SPR206) — 29 (29 ) Total grant revenue $ — $ 763 $ (763 ) No grant revenue was recognized during the three months ended March 31, 2026. Grant revenue recognized during the three months ended March 31, 2025 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, 2026 was primarily due to a decrease of $0.7 million of committed funds remaining available under our BARDA contract for tebipenem HBr, and a decrease of $0.1 million in qualifying expenses incurred under our U.S. National Institute of Allergy and Infectious Diseases (“NIAID”) award relating to SPR206. We ceased development of SPR206 and the NIAID award was terminated in April 2025 and the committed funds under the BARDA contract have been fully utilized by the Company. Collaboration Revenue (in thousands): Three Months Ended March 31, 2026 2025 $ Change GSK (Tebipenem HBr) $ 258 $ 5,099 $ (4,841 ) Pfizer (SPR206) — 12 (12 ) Total collaboration revenue $ 258 $ 5,111 $ (4,853 ) During the three months ended March 31, 2026, we recognized $0.3 million in collaboration revenue related to our agreement with GSK and no collaboration revenue related to our agreement with Pfizer as we terminated the Pfizer agreement in December 2025. 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. Research and Development Expenses (in thousands): Three Months Ended March 31, 2026 2025 $ Change Direct research and development expenses by program: Tebipenem HBr $ 412 $ 8,669 (8,257 ) SPR720 — 449 $ (449 ) SPR206 — 49 (49 ) Unallocated expenses: Personnel related (including share-based compensation) 1,669 3,337 (1,668 ) Facility related and other 828 1,102 (274 ) Total research and development expenses $ 2,909 $ 13,606 $ (10,697 ) Direct costs related to our tebipenem HBr program decreased by $8.3 million during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, due to decreased clinical activities related to our pivotal Phase 3 clinical trial of tebipenem HBr, which was stopped early for efficacy during the first half of 2025. Direct costs related to our SPR720 program decreased by $0.4 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, due to the cessation of development of the SPR720 program, which was announced in November 2025. Direct costs related to our SPR206 program decreased by less than $0.1 million during the three months ended March 31, 2026, primarily due to the cessation of development of the SPR206 program, which was announced in March 2025. The decrease in personnel-related costs of $1.7 million was primarily a result of decreased headcount costs in our research and development functions between the periods. Personnel-related costs for the three months ended March 31, 2026 and 2025 included share-based compensation expense of $0.3 million and $0.5 million, respectively. Facility-related and other costs primarily reflect costs related to supporting our research and development staff. 34 General and Administrative Expenses (in thousands): Three Months Ended March 31, 2026 2025 $ Change Personnel related (including share-based compensation) $ 2,290 $ 4,118 $ (1,828 ) Professional and consultant fees 1,681 2,263 (582 ) Facility related and other 916 443 473 Total general and administrative expenses $ 4,887 $ 6,824 $ (1,937 ) The decrease in personnel-related costs of $1.8 million was primarily a result of decreased headcount costs in our general and administrative functions between the periods. Personnel-related costs for the three months ended March 31, 2026 and 2025 included share-based compensation expense of $0.8 million and $1.0 million, respectively. The decrease in professional and consultant fees of $0.6 million was primarily due to a decrease in legal and consulting expenses incurred in the three months ended March 31, 2026. 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 $0.3 million for the three months ended March 31, 2026, compared to $0.9 million for the three months ended March 31, 2025. 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. 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, Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator 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, 2026, we had cash and cash equivalents of $56.1 million. In February 2026, we received a $25.0 million milestone payment under the GSK agreement, which we were entitled to receive upon GSK’s filing of an NDA for tebipenem HBr with the FDA in December 2025. Cash Flows The following table summarizes our sources and uses of cash for the three months ended March 31, 2026 and 2025 (in thousands): Three Months Ended March 31, 2026 2025 Cash provided by (used) in operating activities $ 15,864 $ (4,002 ) Net increase (decrease) in cash and cash equivalents $ 15,864 $ (4,002 ) Operating Activities Net cash provided by operating activities for the three months ended March 31, 2026, was $15.9 million, primarily resulting from our net loss of $7.2 million, adjusted for non-cash items of $1.3 million (primarily share-based compensation). Net cash provided by changes in our operating assets and liabilities was $21.7 million and consisted primarily of a $25.4 million decrease in our related party collaboration receivable, primarily due to the receipt of the milestone payment upon the filing of the NDA from GSK (see Note 9 - License, Collaboration and Service Agreements), offset by a $2.4 million decrease in accrued expenses, a $0.6 million decrease in other liabilities, a $0.5 million decrease in accounts payable, a $0.3 million decrease in deferred revenue, and a $0.2 million decrease in prepaid expenses. 35 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 share-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 9 - License, Collaboration and Service Agreements), a $9.5 million decrease in accrued expenses, a $5.5 million decrease in accounts payable, a $5.1 million decrease in deferred revenue, a $2.4 million net decrease in other receivables, and a $0.4 million decrease in prepaid 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 program and the timing of vendor invoicing and payments. Changes in deferred revenue are related to the GSK License Agreement. Changes in collaboration receivable - related party are related to the GSK License Agreement. Investing Activities We did not undertake any investing activities during either of the three months ended March 31, 2026 or 2025. Financing Activities We did not undertake any financing activities during either of the three months ended March 31, 2026 or 2025. Funding Requirements Our future use of operating cash and capital requirements, and the timing and amount thereof, will depend largely on: • the initiation, progress, timing, costs and results of any preclinical studies and clinical trials of any of our product candidates and potential new product candidates; • the amount of funding that we receive under government contracts that we may apply for in the future; • the number and characteristics of product candidates that we may pursue; • the outcome, timing and costs of seeking regulatory approvals; • the costs of commercialization activities for our future 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, 2026, we had cash and cash equivalents of $56.1 million. In accordance with 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 our current operating plan, we believe that our cash and cash equivalents as of March 31, 2026 will enable us to fund our operating expenses and required capital expenditure requirements for at least 12 months from the issuance of the financial statements included in this report and into 2028. 36 This timeline is uncertain and subject to change as we explore opportunities to grow our pipeline. 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 are 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. 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 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. Contractual Obligations and Commitments During the three months ended March 31, 2026, 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, 2025. 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 condensed 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, 2026, we had cash and cash equivalents of $56.1 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, 2026. 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. 37