What changed in this filing

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Item 9A. Controls and Procedures

2026-03-26 compared with 2025-03-12 · 179 added, 253 removed, 781 unchanged (36% of the section changed)

7 unchanged sentences

Management’s annual report on internal controls over financial reporting

This Annual Report does not include a report of management’s assessment regarding our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered accounting firm due to a transition period established by rules of the SEC for newly public companies.

Additionally, our independent registered accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act, and our unaffiliated market capitalization exceeds $700 million.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting.

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles (“GAAP”).

Our internal control over financial reporting includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately, and fairly reflect our transactions and dispositions of our assets;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its 2013 Internal Control - Integrated Framework.

Based on this assessment, our management has concluded that, as of December 31, 2025, our internal control over financial reporting is effective based on those criteria.

Our independent registered public accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act.

Changes in internal control over financial reporting

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Amended and Restated Investors’ Rights Agreement, among the Company and certain of its stockholders, dated June 6, 2023 (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed on September 18, 2024).

Description of Securities.

Description of Securities (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form 10-K filed on March 12, 2025).

2021 Stock Option and Grant Plan, as amended, and form of award agreements thereunder (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 filed on September 18, 2024).

11 unchanged sentences

1 to the Company’s Registration Statement on Form S-1 filed on October 7, 2024).

Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1 filed on September 18, 2024).

Separation Agreement, by and between the Company and Samantha Truex, MBA, dated March 13, 2024 (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 filed on September 18, 2024).

Separation Agreement, by and between the Company and Jennifer Beachell, dated February 26, 2024 (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 filed on September 18, 2024).

Amended and Restated Non-Employee Director Compensation Policy.

Form of Employment Agreement for Executive Officers (incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 filed on September 18, 2024).

15 unchanged sentences

Upstream Bio, Inc.

Compensation Recovery Policy.

Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K filed on March 12, 2025).

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

57 unchanged sentences

Notes to Consolidated Financial Statements

Report of Independe nt Registered Public Accounting Firm Page

Report of Independe nt Registered Public Accounting Firm

To the Board of Directors and Stockholders of Upstream Bio, Inc.

1 unchanged sentence

We have audited the accompanying consolidated balance sheets of Upstream Bio, Inc.

and its subsidiary (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiary (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholder's equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

6 unchanged sentences

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

12 unchanged sentences

Short-term investments

Accounts receivable - related party

Accounts receivable

Prepaid expenses and other current assets

3 unchanged sentences

Restricted cash

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Current liabilities:

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Operating lease liabilities, net of current portion

Preferred stock tranche right liability

Total liabilities

Commitments and contingencies (Note 13)

Redeemable convertible preferred stock (Series A, B), $ 0.001 par value;

no shares and

31,764,693 shares authorized at December 31, 2024 and December 31, 2023,

respectively;

no shares and 22,941,170 shares issued and outstanding at

December 31, 2024 and December 31, 2023, respectively;

aggregate liquidation

preference of $ 0 and $ 267,718 at December 31, 2024 and December 31, 2023,

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock, $ 0.001 par value;

10,000,000 shares and no shares

authorized at December 31, 2024 and December 31, 2023, respectively;

no shares issued and outstanding at December 31, 2024

and December 31, 2023

10,000,000 shares authorized at

December 31, 2025 and December 31, 2024;

no shares issued and

outstanding at December 31, 2025 and December 31, 2024

Common stock, $ 0.001 par value;

500,000,000 shares and 40,664,346 shares

authorized at December 31, 2024 and December 31, 2023, respectively;

53,603,398 and 2,992,479 shares issued and outstanding at December 31, 2024

and December 31, 2023, respectively

500,000,000 shares authorized at

December 31, 2025 and December 31, 2024;

54,237,750 and

53,603,398 shares issued and outstanding at December 31, 2025 and

December 31, 2024, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

Total stockholders’ equity (deficit)

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

Year Ended December 31,

Collaboration revenue - related party

Collaboration revenue

Operating expenses:

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Balances at December 31, 2023

Issuance of Series A redeemable convertible

preferred stock in connection with the

settlement of the tranche right liability

Issuance of Series B redeemable convertible

preferred stock, net of preferred stock tranche

right liability of $ 11,774 and issuance costs of

Exercise of stock options, net of tax withholding

Stock-based compensation expense

Stock-based compensation expense - related

Unrealized gain on available-for-sale securities,

Balances at December 31, 2023

Issuance of Series B redeemable convertible

preferred stock in connection with the

settlement of the tranche right liability,

net of issuance costs of $ 75

preferred stock in connection with the settlement

of the tranche right liability, net of issuance costs

Conversion of convertible preferred stock to

7 unchanged sentences

Balances at December 31, 2024

Exercise of stock options, net of

tax withholding

Stock-based compensation expense

Issuance of common stock under employee stock purchase plan

Unrealized gain on available-for-sale

securities, net of tax

Balances at December 31, 2025

The accompanying notes are an integral part of these consolidated financial statements.

7 unchanged sentences

Stock-based compensation expense

Stock-based compensation expense - related party

Change in fair value of preferred stock tranche right liabilities

Series B issuance costs allocated to tranche right liability

Change in fair value of preferred stock tranche right liability

Net amortization of premiums and accretion of discounts on short-term investments

1 unchanged sentence

Changes in operating assets and liabilities:

Accounts receivable - related party

Accounts receivable

Prepaid expenses and other assets

6 unchanged sentences

Maturities of short-term investments

Purchases of property and equipment

Purchases of equipment

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from the issuance of Series A redeemable convertible preferred stock (1)

Proceeds from the issuance of Series B redeemable convertible preferred stock

including tranche right, net of issuance costs paid

Proceeds from the issuance of Series B redeemable convertible preferred stock, net of

issuance costs paid

Proceeds from initial public offering, net of underwriters discounts and commissions

Proceeds from exercises of stock options

Payments of initial public offering costs

Proceeds from exercises of stock options

Proceeds from issuance of common stock under employee stock purchase plan

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

7 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Settlement of Series A preferred stock tranche right liability

Settlement of Series B preferred stock tranche right liability

Initial public offering costs included in accounts payable

(1) Includes related party amount of $ 10.0 million for the year ended December 31, 2023 (Note 16).

The accompanying notes are an integral part of these consolidated financial statements.

13 unchanged sentences

The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

The Company has historically financed its operations principally through the issuance and sale of Series A redeemable convertible preferred stock (“Series A Preferred Stock”) and Series B redeemable convertible preferred stock (“Series B Preferred Stock”), which are collectively referred to as the “Preferred Stock”, and the proceeds from its initial public offering (“IPO”).

In October 2024, the Company completed its IPO of its common stock.

The Company has historically financed its operations principally through the issuance and sale of redeemable convertible preferred stock and the proceeds from its initial public offering (“IPO”), which was completed in October 2024.

In connection with its IPO, the Company issued and sold 17,250,000 shares of common stock, including 2,250,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $ 17.00 per share.

32 unchanged sentences

The Company’s short-term investments consist of U.S.

treasury bills and U.S.

government agency bonds which the Company believes represent minimal credit risk.

treasury securities, government agency bonds and corporate debt securities which the Company believes represent minimal credit risk.

The Company is dependent on third-party manufacturers to supply products for research and development activities related to verekitug, including preclinical and clinical studies and testing.

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The Company considers all short-term, highly liquid investments, with an original maturity of three months or less, to be cash equivalents, and as of December 31, 2025 and 2024, includes amounts held in money market funds in the amount of $ 86.0 million and $ 321.0 million, respectively and in U.S.

treasury bills of $ 4.2 million and $ 0 , respectively.

treasury securities of $ 15.0 million and $ 4.2 million, respectively.

Restricted cash

Restricted cash consisted of a letter of credit totaling $ 0.2 million as of December 31, 2024, that is required to be maintained in connection with the Company's lease arrangements.

Restricted cash consisted of a letter of credit totaling $ 0.2 million as of December 31, 2025 and 2024, that is required to be maintained in connection with the Company's lease arrangements.

The letter of credit is in the name of the Company's landlord and is required to fulfill lease requirements in the event the Company should default on its lease obligations.

As of December 31, 2024, the Company classified its restricted cash as non-current assets on the consolidated balance sheet based on the release date of the restriction.

The Company did not hold a letter of credit as of December 31, 2023 .

As of December 31, 2025 and 2024 , the Company classified its restricted cash as non-current assets on the consolidated balance sheets based on the release date of the restriction.

Short-term investments

1 unchanged sentence

The Company classifies any investments with maturities beyond one year as short term, based on their highly liquid nature and because such available-for-sale securities represent the investment of cash that is available for current operations.

The Company’s debt security investments are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in stockholders’ deficit.

Realized gains and losses and declines in fair value due to credit-related factors are based on the specific identification method and are included as other expense, net in the consolidated statements of operations and comprehensive loss.

5 unchanged sentences

The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in other expense, net.

The portion that is not credit-related is treated in accordance with other unrealized losses as a component of accumulated other comprehensive income (loss) in stockholders’ deficit.

The portion that is not credit-related is treated in accordance with other unrealized losses as a component of accumulated other comprehensive income (loss) in stockholders’ equity.

There have been no impairment or credit losses recognized during any of the periods presented.

Deferred offering costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated.

After consummation of the equity financing, these costs are recorded as a reduction of the proceeds from the offering, either as a reduction of the carrying value of the Preferred Stock or in stockholders’ deficit as a reduction of additional paid-in-capital generated as a result of the offering.

Should the planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss.

The Company did no t have any deferred offering costs as of December 31, 2024 and December 31, 2023 .

Fair value measurements

1 unchanged sentence

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used

Upstream Bio, Inc.

Notes to consolidated financial statements

to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

1 unchanged sentence

Level 2 Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Upstream Bio, Inc.

Notes to consolidated financial statements

Level 3 Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying values of the Company’s prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities.

The Company’s cash equivalents, short-term investments and preferred stock tranche right liabilities are carried at fair value (Note 3).

The carrying values of the Company’s accounts receivables, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities.

The Company’s cash equivalents, short-term investments and the preferred stock tranche right liability are carried at fair value (Note 3).

Property and equipment

2 unchanged sentences

Estimated Useful Life

Lab equipment

Computer equipment

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If an arrangement is determined to be or contain a lease, the lease is assessed for classification as either an operating or finance lease at the lease commencement date, defined as the date on which the leased asset is made available for use by the Company, based on the economic characteristics of the lease.

Upstream Bio, Inc.

Notes to consolidated financial statements

ASC 842 includes certain practical expedients that can be elected for new leases that are executed after the adoption of the new requirements.

2 unchanged sentences

These two practical expedients were elected for all classes of underlying assets.

Upstream Bio, Inc.

Notes to consolidated financial statements

At the lease commencement date, the Company recognizes a lease liability and a right-of-use (“ROU”) asset representing its right to use the underlying asset over the lease term.

14 unchanged sentences

Additionally, periods covered by an option to terminate the lease are included in the lease term as it is reasonably certain that the Company will not exercise this option.

Segment information

Operating segments are defined as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance.

The Company’s CODM, its Chief Executive Officer , views the Company’s operations and manages its business on a consolidated basis as a single operating segment, which is the business of developing treatments for inflammatory diseases, with an initial focus on severe respiratory disorders.

Revenue is generated exclusively from transactions with a related party located in Japan, and all assets are held in the United States (Note 18).

Classification and accretion of redeemable convertible preferred stock

The holders of Preferred Stock have certain redemption rights in the event of a deemed liquidation event that, in certain situations, are not solely within the control of the Company and would call for the redemption of the then outstanding Preferred Stock (Note 8).

Therefore, the Preferred Stock is classified as mezzanine equity outside of stockholders’ deficit on the consolidated balance sheets.

The holders of Preferred Stock (as defined in Note 8) have certain redemption rights in the event of a deemed liquidation event that, in certain situations, are not solely within the control of the Company and would call for the redemption of the then outstanding Preferred Stock (Note 8).

Therefore, the Preferred Stock is classified as mezzanine equity outside of stockholders’ equi ty on the consolidated balance sheets.

The Company recorded the Preferred Stock at fair value upon issuance, net of tranche right liabilities (Note 8) and associated issuance costs.

The Preferred Stock is not currently redeemable, and a deemed liquidation event is not currently probable.

As such, the carrying values of the Preferred Stock are not being accreted to the redemption values.

Subsequent adjustments to the carrying values of the Preferred Stock would be made only when a deemed liquidation event becomes probable.

The net carrying value of redeemable convertible preferred stock were accreted to their redemption values through a charge to additional paid-in capital or accumulated deficit over the period from date of issuance to the earliest date on which the holders could, at their option, elect to redeem their shares.

In connection with the IPO, all outstanding shares of convertible preferred stock converted into an aggregate of 33,321,149 shares of the Company’s common stock.

1 unchanged sentence

The purchase agreements for the Company’s Preferred Stock provide the Company an obligation to issue additional Preferred Stock in subsequent closings upon the satisfaction of certain conditions (the “preferred stock tranche rights”) (Note 8).

Upstream Bio, Inc.

Notes to consolidated financial statements

The Company classified such preferred stock tranche rights as liabilities on its consolidated balance sheets (the “preferred stock tranche right liabilities”) as each preferred stock tranche right was determined to be a freestanding financial instrument that may require the Company to transfer assets to settle its obligation upon events outside of its control.

5 unchanged sentences

The Company enters into license arrangements, pursuant to which it may provide research and development services for third parties.

Upstream Bio, Inc.

Notes to consolidated financial statements

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, Revenue from Contracts with Customers, (“ASC 606”), the Company performs the following five steps:

16 unchanged sentences

Accordingly, the Company’s estimates may change in the future and those changes could result in a change in amounts of revenue recognized and could be material.

During the years ended December 31, 2024 and 2023, the Company generated revenue from a research and development arrangement with Maruho Co., Ltd (“Maruho”), a related party, which is accounted for under ASC 606.

During the years ended December 31, 2025 and 2024, the Company generated revenue from a research and development arrangement with Maruho Co., Ltd (“Maruho”), which is accounted for under ASC 606.

Pursuant to the agreement, the Company provides to Maruho research and development services related to verekitug in Japan, and Maruho reimburses the Company for these costs incurred in performing the research and development services (Note 15).

4 unchanged sentences

Payment terms and conditions generally require payment within 60 days of invoicing.

Segment information

Revenue is generated exclusively from certain transactions with Maruho located in Japan and all assets are held in the United States (Note 18).

Research and development expenses

1 unchanged sentence

Research and development expenses include salaries and benefits, stock-based compensation expense, licensed technology, external costs of third-party vendors that conduct research and development activity on behalf of the Company, and other operational costs related to the Company’s research and development activities including costs related to a research and development arrangement with Maruho.

Upstream Bio, Inc.

Notes to consolidated financial statements

Prepaid and accrued research and development expenses

2 unchanged sentences

however, some require advanced payments.

The Company makes estimates of the accrued expenses and includes these costs in accrued liabilities in the consolidated balance sheets and within research and development expense in the consolidated statements of operations and comprehensive loss based on facts and circumstances known to the Company at that time.

The Company makes estimates of the accrued expenses and includes these costs in accrued liabilities in the consolidated balance sheets and within research and development expense in the

Upstream Bio, Inc.

Notes to consolidated financial statements

consolidated statements of operations and comprehensive loss based on facts and circumstances known to the Company at that time.

These costs are a significant component of the Company’s research and development expenses.

5 unchanged sentences

If the actual timing of the performance of services varies from the estimate, then the Company adjusts the amount of the accrued expense or the prepaid expense accordingly.

Asset acquisition and acquired in-process research and development expenses

The Company accounts for acquisitions of assets or a group of assets as asset acquisitions when substantially all of the fair value of the gross assets acquired are concentrated in a single asset or group of assets or when the definition of a business is not met.

The Company accounts for asset acquisitions based on the cost to acquire the asset or group of assets, which include certain transaction costs.

In an asset acquisition, the cost to acquire is allocated to the identifiable assets acquired and liabilities assumed based on their relative fair values as of the acquisition date.

No goodwill is recorded in an asset acquisition.

Assets that are acquired in an asset acquisition for use in research and development activities that have an alternative future use are capitalized as in-process research and development (“IPR&D”) assets.

Acquired IPR&D that has no alternative future use as of the acquisition date is recognized as acquired research and development expense as of the acquisition date.

General and administrative expenses

14 unchanged sentences

The Company accounts for forfeitures as they occur.

Upstream Bio, Inc.

Notes to consolidated financial statements

The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

1 unchanged sentence

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources, including unrealized gains and losses on marketable securities held as available for sale.

For the year ended December 31, 2024 and 2023, comprehensive loss includes net loss and unrealized gains (losses) on short-term investments.

For the years ended December 31, 2025 and 2024 , comprehensive loss includes net loss and unrealized gains (losses) on short-term investments.

Net loss per share

3 unchanged sentences

The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period has been distributed.

There is no allocation required under the two-class method during periods of loss since the participating securities do not have a contractual obligation to share in the losses of the Company.

Upstream Bio, Inc.

Notes to consolidated financial statements

allocation required under the two-class method during periods of loss since the participating securities do not have a contractual obligation to share in the losses of the Company.

Under the two-class method, basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

12 unchanged sentences

The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

Upstream Bio, Inc.

Notes to consolidated financial statements

Recently adopted accounting pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment.

ASU 2023-07 is effective for public business entities with fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted ASU 2023-07 as of the required effective date, and applied the guidance retrospectively to all periods presented, and its adoption did not have a material impact on its consolidated financial statements.

See Note 18, Segment Reporting , for further information and disclosures.

In December 2023, the FASB issued ASU No.

2023-09 , Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which focuses on the rate reconciliation and income taxes paid.

2023-09 requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold.

In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received.

For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

An entity has the option to adopt this ASU prospectively or retrospectively.

As of December 31, 2025 , the Company adopted this new ASU retrospectively and it only impacts the Company's income tax disclosures with no impact to its operations, cash flows, or financial condition.

Recently issued accounting pronouncements not yet adopted

Upstream Bio, Inc.

Notes to consolidated financial statements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date.

1 unchanged sentence

The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for non-public companies.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 requires entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state, and foreign income taxes.

It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold (if the effect of those reconciling items is equal to or greater than 5% of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).

In addition to new disclosures associated with the rate reconciliation, ASU 2023-09 requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold.

The amendments are effective for public business entities for annual periods beginning after December 15, 2024.

For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025.

Early adoption is permitted.

The Company is currently evaluating the timing and impact of adopting ASU 2023-09 on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued an ASU to require more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses , which requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement.

This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027.

2 unchanged sentences

The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and related disclosures.

Upstream Bio, Inc.

Notes to consolidated financial statements

Fair value measurements

4 unchanged sentences

Money market funds

treasury bills

treasury securities

Short-term investments:

treasury bills

treasury securities

Corporate debt securities

Government agency bonds

3 unchanged sentences

Money market funds

treasury bills

Short-term investments:

1 unchanged sentence

government agency bonds

Preferred stock tranche right liability (Series B)

There were no transfers between Level 1, Level 2 and Level 3 during the years ended December 31, 2025 and 2024.

Upstream Bio, Inc.

Notes to consolidated financial statements

The Company classifies its U.S.

treasury bills and U.S.

government agency bonds as short-term based on each instrument’s availability for use in current operations.

treasury securities, corporate debt securities and government agency bonds as short-term based on each instrument’s availability for use in current operations.

The fair value of the Company’s U.S.

treasury bills and U.S.

government agency bonds are classified as Level 2 because they are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency.

treasury securities, corporate debt securities and government agency bonds are classified as Level 2 because they are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency.

Short-term investments consisted of the following (in thousands):

3 unchanged sentences

Short-term investments:

treasury bills

treasury securities

Corporate debt securities

Government agency bonds

7 unchanged sentences

Total short-term investments:

Upstream Bio, Inc.

Notes to consolidated financial statements

The contractual maturities of the Company’s short-term investments in available-for-sale securities held were as follows (in thousands):

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Valuation of preferred stock tranche right liabilities

As of December 31, 2023, the preferred stock tranche right liability in the table above is composed of the fair value of the obligation to issue Series B Preferred Stock (Note 8).

The fair value of the preferred stock tranche right liabilities was based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy.

Series A preferred stock tranche right liability

In February 2023, upon satisfaction of certain conditions, the second closing of the Series A Preferred Stock was completed.

The Company issued and sold 8,000,000 shares of Series A Preferred Stock at a price of $ 10.00 per share, which resulted in the settlement of the associated Series A preferred stock tranche right liability.

The fair value of Series A Preferred Stock was $ 10.04 per share upon the second closing.

Series B preferred stock tranche right liability

The fair value of the preferred stock tranche right liability in the table below is composed of the fair value of the obligation to issue Series B redeemable convertible preferred stock (“Series B Preferred Stock”) (Note 8).

The fair value of the preferred stock tranche right liability was based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy.

The fair value of the Series B Preferred Stock tranche right liability was determined using an option pricing model as it represents an option for the Series B Option Shares (as defined in Note 8).

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The Company determined the fair value per share of the underlying Series B Preferred Stock by taking into consideration the most recent sales of its Series B Preferred Stock, results obtained from third-party valuations and additional factors the Company deemed relevant.

In June 2023, the initial tranche of the Series B Preferred Stock closed with a fair value of $ 13.00 per share.

As of December 31, 2023 , the fair value of Series B Preferred Stock was $ 15.86 per share.

In April 2024, upon satisfaction of certain conditions, the Company issued and sold 8,823,523 shares of Series B Preferred Stock at a price of $ 17.00 per share, which resulted in the settlement of the associated Series B preferred stock tranche right liability.

The fair value of Series B Preferred Stock was $ 17.002 per share upon the closing.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve for time periods approximately equal to the remaining estimated time to the tranche closing.

The volatility is based on the historical volatility of publicly traded peer companies adjusted for the seniority of the Series B Preferred Stock.

The expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Changes in these inputs can have a significant impact on the fair value of the preferred stock tranche right liability.

The following table presents the assumptions used in the option-pricing model to determine the fair value of the Series B preferred stock tranche right liability during the periods presented:

(Issuance Date)

Expected volatility

Expected dividends

Expected term (in years)

Risk-free rate

Upstream Bio, Inc.

Notes to consolidated financial statements

The following table presents a roll-forward of the aggregate fair value of the Series A and Series B preferred stock tranche right liabilities, for which fair value was determined using Level 3 inputs (in thousands):

Preferred Stock

Tranche Right Liability

Fair value at December 31, 2022

Fair value of Series B preferred stock tranche right liability at issuance

Change in fair value of preferred stock tranche right liabilities

Final settlement of Series A preferred stock tranche right liability

The following table presents a roll-forward of the fair value of the Series B preferred stock tranche right liability during the year ended December 31, 2024, for which fair value was determined using Level 3 inputs (in thousands):

Series B Preferred

Stock Tranche

Right Liability

Fair value at December 31, 2023

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Prepaid research and development expense

Prepaid insurance

Interest receivable

Prepaid insurance

Prepaid employee-related costs

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Leasehold improvements

Lab Equipment

Accumulated depreciation and amortization

Property and equipment, net

Depreciation and amortization expense related to property and equipment, net was less than $ 0.1 million for each of the years ended December 31, 2024 and 2023.

Upstream Bio, Inc.

Notes to consolidated financial statements

Depreciation and amortization expense related to property and equipment, net was $ 0.2 million and less than $ 0.1 million for of the years ended December 31, 2025 and 2024 , respectively.

Accrued expenses and other current liabilities

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Accrued consultant and professional fees

Upstream Bio, Inc.

Notes to consolidated financial statements

As of December 31, 2025, the Company was a party to a lease related to commercial real estate under a non-cancelable lease term and a short-term lease related to commercial real estate.

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The Company occupies approximately 16,801 square feet of space under a three-year agreement expiring in October 2027.

Initial base rent is approximately $ 0.7 million for the first year and approximately $ 0.8 million for the second and third year.

As of December 31, 2023, the Company had an operating lease for office space at 460 Totten Pond Road, Waltham, Massachusetts.

Initial base rent was approximately $ 0.7 million for the first year and approximately $ 0.8 million for the second and third year.

During the year ended December 31, 2024, the Company had an operating lease for office space at 460 Totten Pond Road, Waltham, Massachusetts.

In July 2024, the Company provided notice of termination.

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The maturities of operating lease liabilities were as follows (in thousands):

Upstream Bio, Inc.

Notes to consolidated financial statements

Year Ended December 31,

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Operating lease liabilities, net of current portion

Upstream Bio, Inc.

Notes to consolidated financial statements

Redeemable convertible preferred stock

The Company has issued Series A Preferred Stock and Series B Preferred Stock, which are collectively referred to as the Preferred Stock.

As of December 31, 2024 and 2023, the Company authorized the issuance of 31,764,693 shares of Preferred Stock, par value of $ 0.001 per share, of which 20,000,000 have been designated Series A Preferred Stock and 11,764,693 have been designated Series B Preferred Stock.

The Company has issued Series A Preferred Stock (“Series A Preferred Stock”) and Series B Preferred Stock, which are collectively referred to as the Preferred Stock.

Immediately prior to the closing of the Company’s IPO on October 15, 2024, pursuant to the stock split and a proportional adjustment to the existing conversion ratios of each series of the Company’s Preferred Stock as discussed further below, all of the Company’s outstanding shares of convertible preferred stock were converted into an aggregate of 33,321,149 shares of common stock.

Issuance and sale of Series A redeemable convertible preferred stock

In October 2021, the Company issued and sold 11,000,000 shares of Series A Preferred Stock at $ 10.00 per share.

Pursuant to the Series A Preferred Stock Purchase Agreement (the “Series A Agreement”), the Company was obligated to issue and the Series A investors were obligated to purchase an additional 9,000,000 shares of Series A Preferred Stock (“Milestone Shares”) at the same purchase price of $ 10.00 per share (the “Series A preferred stock tranche right”), after the initial closing and upon the satisfaction of certain conditions at a date which would occur at the earlier of (i) immediately prior to the Company’s first underwritten public offering of its common stock under the Securities Act;

(ii) the resolution of the board of directors that the pharmacokinetics, pharmacodynamics, immunogenicity and safety profile of verekitug (formerly referred to as ASP7266), when administered as multiple ascending doses, supports further clinical development (“Second Closing Milestone”) has been achieved;

or (iii) the written consent of the purchasers holding a majority of the Series A Preferred Stock that the Second Closing Milestone has been waived (collectively, the “Second Closing”).

The board of directors may determine at any time prior to the Second Closing to issue and sell up to 1,000,000 of the Milestone Shares at a price of $ 10.00 per share for gross cash proceeds of $ 10.0 million (“Interim Second Closing”) and the number of Milestone Shares to be issued in the Second Closing will be reduced accordingly.

In October 2022, the Interim Second Closing was completed and 1,000,000 of the Milestone Shares on a pro-rata basis to the purchasers of the Series A Preferred Stock were issued at a price of $ 10.00 per share.

In February 2023, upon the satisfaction of the Second Closing Milestone, the remaining 8,000,000 of the Milestone Shares on a pro-rata basis to the purchasers of the Series A Preferred Stock were issued at a price of $ 10.00 per share, which resulted in gross cash proceeds of $ 80.0 million.

As a result of this issuance, the Series A preferred stock tranche right liability of $ 0.3 million was settled and the Series A Preferred Stock was recorded at its fair value of $ 80.3 million.

Issuance and sale of Series B redeemable convertible preferred stock

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In the initial closing in June 2023, the Company issued 2,941,170 shares of Series B Preferred Stock resulting in gross cash proceeds of $ 50.0 million and incurred $ 0.6 million of issuance costs, of which $ 0.1 million was allocated to the preferred stock tranche right liability and recognized in the consolidated statement of operations and comprehensive loss as general and administrative expense.

Upstream Bio, Inc.

Notes to consolidated financial statements

approval of at least six ( 6 ) board of directors of which at least one ( 1 ) has to be appointed by the holders of Series B Preferred Stock.

Pursuant to the Series B Agreement, the Company has the right (“Series B Option”) to issue and sell an additional 8,823,523 shares of Series B Preferred Stock (“Series B Option Shares”) at the same price of $ 17.00 per share after the initial closing but prior to March 31, 2024 upon approval of at least six ( 6 ) board of directors of which at least one ( 1 ) has to be appointed by the holders of Series B Preferred Stock.

If the Company does not exercise the Series B Option prior or at a date which would occur at the earlier of (i) March 31, 2024 or (ii) the closing of an acquisition agreement signed prior to March 31, 2024, the holders of Series B Preferred Stock will have the right but not obligation to require the Company to issue and sell the Series B Option Shares at the same purchase price of $ 17.00 per share (the “Series B preferred stock tranche right”).

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Upon issuance of the Preferred Stock, the Company assessed the embedded conversion and liquidation features of the securities and determined that such features did not require the Company to separately account for these features.

Preferred Stock consisted of the following (dollar amounts in thousands):

December 31, 2023

and Outstanding

Issuable Upon

Series A Preferred Stock

Series B Preferred Stock

As of December 31, 2024, in connection with the IPO, all outstanding shares of convertible preferred stock converted into an aggregate of 33,321,149 shares of the Company’s common stock.

Through December 31, 2024 and 2023, no cash dividends have been declared or paid.

Modification to Series A preferred stock

In June 2023, in connection with the issuance of the Company’s Series B Preferred Stock, the rights of the Company’s Series A Preferred Stock were amended to entitle holders to a cumulative dividend from and after the date of the share issuance at the rate per annum of 5 % of the Original Issue Price (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Preferred Stock), provided that the total accrued amount will not exceed 15 % of the Original Issue Price in aggregate.

The dividend replaced the original accrued return definition within the liquidation preference terms of the Series A Preferred Stock.

Previously, holders were entitled to a liquidation preference per share equal to the greater of (a) the Original Issue Price, plus an accrued return of 5 % of the Original Issue Price per annum, provided that the total of such accrued return shall not exceed 15 % of the Original Issue Price in the aggregate, or (b) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted in common stock.

The changes to the rights of the Company’s Series A Preferred Stock were not considered to be a significant change to the contractual terms of the Company’s Series A Preferred Stock because the accrued return of the liquidation preference and the cumulative dividend definitions will result in the same amount to be received in a liquidation event, and accordingly, the Company accounted for the change as a modification.

As of December 31, 2025 and 2024 , there were no shares of redeemable convertible preferred stock issued or outstanding.

The Company’s third amended and restated certificate of incorporation authorized the issuance of preferred stock with a par value of $ 0.001 per share.

The number of shares of preferred stock authorized to be issued is 10,000,000 shares as of December 31, 2025 .

The shares of preferred stock are currently undesignated and no shares are issued or outstanding

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders.

Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of the Preferred Stock.

As of December 31, 2025 and 2024 , the Company’s third amended and restated certificate of incorporation authorized the issuance of 500,000,000 shares of common stock, par value $ 0.001 per share.

As of December 31, 2025 and 2024 , there were 54,237,750 shares and 53,603,398 shares of common stock issued and outstanding, respectively.

Upstream Bio, Inc.

Notes to consolidated financial statements

As of December 31, 2024 and 2023, the Company’s amended and restated certificate of incorporation authorized the issuance of 500,000,000 and 40,664,346 shares, respectively, of $ 0.001 par value common stock.

As of December 31, 2024 and 2023, there were 53,603,398 shares and 2,992,479 shares of common stock issued and outstanding, respectively.

In November 2023, the Company issued 20,980 shares of common stock to a related party investor.

The Company recorded stock-based compensation expense of $ 0.1 million in connection with the issuance of these shares (Note 16).

Stock-based compensation

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On August 19, 2024, the Company’s board of directors adopted, and on October 4, 2024 its stockholders approved, the 2024 Employee Stock Purchase Plan (the “2024 ESPP”), which became effective on the date immediately preceding the date on which the IPO registration statement was declared effective by the SEC.

The 2024 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1, 2025 and each January 1 thereafter through January 1, 2034, by the least of (i) 976,934 shares of common stock, (ii) one percent of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such lesser number of shares of common stock as determined by the administrator of the 2024 ESPP.

A total of 488,467 shares of common stock were initially reserved for issuance under this plan.

The 2024 ESPP provides that the number of shares reserved and available for issuance will automatically increase on the first day of each fiscal year, beginning with the fiscal year commencing on January 1, 2025 and continuing each January 1 thereafter through January 1, 2034, by the least of (i) 976,934 shares of common stock, (ii) one percent of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such lesser number of shares of common stock as determined by the administrator of the 2024 ESPP.

The number of shares reserved under the 2024 ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization.

On January 1, 2026, there was no increase to the number of shares of common stock that may be issued under the 2024 ESPP Plan.

As of December 31, 2025 , 26,197 shares have been issued under the 2024 ESPP.

Fair value inputs

Upstream Bio, Inc.

Notes to consolidated financial statements

As of December 31, 2024, the Company had 488,467 shares available for issuance under the 2024 ESPP and no shares had been issued under the 2024 ESPP.

Fair value inputs

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model.

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Year Ended December 31,

Per share fair value of common stock

Expected volatility

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Vested and expected to vest December 31, 2025

Upstream Bio, Inc.

Notes to consolidated financial statements

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2024 and 2023 was $ 0.3 million and less than $ 0.1 million, respectively.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2025 and 2024 was $ 7.8 million and $ 0.3 million, respectively.

The weighted-average grant-date fair value of options granted during the years ended December 31, 2025 and 2024 was $ 7.32 and $ 5.10 , respectively.

Upstream Bio, Inc.

Notes to consolidated financial statements

As of December 31, 2025 , there was $ 21.4 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.4 years.

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Research and development

(1) Includes related party amounts of $ 0.1 million for the year ended December 31, 2023 (Note 16)

The Company's entire pretax loss for the year ended December 31, 2025 and 2024 was from its U.S.

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During the years ended December 31, 2025 and 2024 , the Company did no t record a provision for income taxes because it has incurred net operating losses since inception and maintains a full valuation allowance against its deferred tax assets.

A reconciliation of the U.S.

federal statutory income tax rate to the Company's effective income tax rate is as follows (amount in thousands):

Year Ended December 31, 2025

federal statutory income tax rate

State and local income taxes, net of federal income tax effect

Effect of changes in tax laws or rates enacted in the current period

Research and development tax credits

Change in valuation allowance

Nontaxable or nondeductible items

Effective income tax rate

Upstream Bio, Inc.

Notes to consolidated financial statements

A reconciliation of the U.S.

federal statutory income tax rate to the Company’s effective income tax rate is as follows:

Year Ended December 31, 2024

US Federal statutory income tax rate

State income taxes, net of federal benefit

Change in fair value of financial instruments

federal statutory income tax rate

State and local income taxes, net of federal income tax effect

Effect of changes in tax laws or rates enacted in the current period

Research and development tax credits

Change in deferred tax asset valuation allowance

Stock-based compensation

Other permanent differences

Change in valuation allowance

Nontaxable or nondeductible items

Effective income tax rate

The Company's effective tax rate does not include any impact from state and local income taxes as the Company has been in losses since inception.

The significant components of the Company’s deferred tax assets and liabilities are summarized as follows (in thousands):

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Accordingly, a full valuation allowance of $ 103.6 million and $ 60.7 million has been established as of December 31, 2025 and 2024, respectively.

Upstream Bio, Inc.

Notes to consolidated financial statements

Changes in valuation allowance for deferred tax assets during the years ended December 31, 2025 and 2024 related primarily to the increase in NOL carryforwards and research and development tax credit carryforwards, offset by amortization of acquired IPR&D in 2025 and were as follows (in thousands):

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Valuation allowance at end of year

Upstream Bio, Inc.

Notes to consolidated financial statements

Utilization of the NOL and research and development credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or that could occur in the future.

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The Company’s tax years are still open under statute from December 31, 2021, to the present.

Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in future periods.

The resolution of tax matters is not expected to have a material effect on the Company's consolidated financial statements.

The Company does not pay income taxes at the federal or state level as it has been in losses since inception.

Net loss per share

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Prior to June 2023, the Company’s Series A Preferred Stockholders were not entitled to cumulative dividends.

In connection with the Series B Agreement in June 2023, the Company modified the dividend rights for its Series A Preferred Stockholders such that they became entitled to cumulative dividends based on the original issuance dates of the respective Series A Preferred Stock (Note 8).

As such, the Company calculated its net loss attributable to common stockholders for the year ended December 31, 2023 and for the year ended December 31, 2024 up through the date of the IPO when the Preferred Stock converted to common stock by adjusting its net loss for the aggregate cumulative dividends that had accrued since the original issuances dates in the period in which the Preferred Stockholders became legally entitled to such dividends.

The Company’s potentially dilutive securities, which include stock options to purchase common stock and Preferred Stock as of December 31, 2023, have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive.

As such, for the year ended December 31, 2024, the Company calculated its net loss attributable to common stockholders by adjusting its net loss for the aggregate cumulative dividends that had accrued since the original issuances dates in the period in which the Preferred Stockholders became legally entitled to such dividends.

The Company’s potentially dilutive securities, which include stock options to purchase common stock and Preferred Stock, have

Upstream Bio, Inc.

Notes to consolidated financial statements

been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive.

Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

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As of December 31,

Preferred Stock (as converted to common stock) (1)

Stock options to purchase common stock

Upstream Bio, Inc.

Notes to consolidated financial statements

(1) As of December 31, 2023, the Preferred Stock excludes 8,823,523 shares of Series B Preferred Stock (or 9,255,869 shares as converted to common stock) that were contingently issuable upon settlement of the Series B preferred stock tranche right liability (Note 8).

Commitments and contingencies

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Lonza was the originator of the master cell bank for verekitug (formerly referred to as ASP7266 and UPB-101, collectively referred to as “the Compound”) developed by Astellas.

Upstream Bio, Inc.

Notes to consolidated financial statements

As consideration for the rights and licenses granted to the Company under the Lonza License Agreement, the Company agreed to pay Lonza certain royalties and annual payments, both payable in Swiss francs, in respect of the manufacturing and sale of the Compound, such amounts to be determined by the party manufacturing the Compound, and range from no annual payment to up to a mid-six-figure annual payment, and a less-than-one percent to a low-single-digit percentage royalty on net sales of the Compound.

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Any royalties due under the Lonza License Agreement are payable on a country-by-country basis until ten years from the first commercial sale of the Compound in that particular country.

Upstream Bio, Inc.

Notes to consolidated financial statements

During the years ended December 31, 2025 and 2024 , the Company did no t make any royalty payments to Lonza under the Lonza License Agreement.

1 unchanged sentence

The Company has the right to terminate the Lonza License Agreement at any time by providing prior written notice to Lonza.

During the years ended December 31, 2024 and 2023, the Company made an annual payment in the amount of $ 0.5 million and $ 0.4 million, respectively, to Lonza pursuant to the Lonza License Agreement and recognized it as research and development expense in the consolidated statements of operations and comprehensive loss.

During each of the years ended December 31, 2025 and 2024 , the Company made an annual payment in the amount of $ 0.5 million to Lonza pursuant to the Lonza License Agreement and recognized it as research and development expense in the consolidated statements of operations and comprehensive loss.

Maruho agreement

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The Company excludes disclosures related to the aggregate amount of the transaction price allocated to the performance obligation that are unsatisfied as of the end of the reporting period because the contract has an initial expected term of one year or less.

The Company currently expects to continue providing research and development services to Maruho under the Maruho Agreement through the completion of its Phase 2 clinical trials, and if successful, through any Phase 3 clinical trials.

During the year ended December 31, 2023, the Company received a prepayment of $ 2.4 million from Maruho for research and development services to be provided by the Company under the Maruho Agreement.

During the year ended December 31, 2023, the Company recognized $ 2.4 million of related revenue from the prepayments, resulting in no deferred revenue as of December 31, 2023 .

The Company did no t receive any prepayments or recognize any deferred revenue during the year ended December 31, 2024.

Related parties

In October 2021, the Company entered into the Maruho Agreement (Note 15).

Maruho is considered to be a related party because it is one of the co-founders of the Company and has representation on the Company’s board of directors.

During the years ended December 31, 2024 and 2023, the Company received payments of $ 1.9 million and $ 2.7 million, respectively, in cost reimbursements from Maruho.

The Company recorded related party collaboration revenue of $ 2.4 million during each of the years ended December 31, 2024 and 2023.

As of December 31, 2024 and 2023, there was $ 0.6 million and $ 0.1 million in related party accounts receivable, respectively, representing amounts due for qualifying reimbursable expenses related to the Maruho Agreement.

Through the date of the IPO, Maruho was considered to be a related party because it was one of the co-founders of the Company and had representation on the Company’s board of directors.

Since the closing of the IPO in October 2024, Maruho is no longer considered a related party as they no longer have representation on the Company’s board of directors.

During the years ended December 31, 2025 and 2024 , the Company

Upstream Bio, Inc.

Notes to consolidated financial statements

In February 2023, the Company issued 1,000,000 shares of Series A Preferred Stock to Maruho for gross proceeds of $ 10.0 million.

In November 2023, the Company issued 20,980 shares of common stock to a related party investor.

The Company recorded stock-based compensation expense of $ 0.1 million in connection with the issuance of these shares (Note 9).

received payments of $ 2.8 million and $ 1.9 million, respectively, in cost reimbursements from Maruho.

The Company recorded collaboration revenue of $ 2.9 million and $ 2.4 million during the years ended December 31, 2025 and 2024, respectively.

As of December 31, 2025 and 2024 , there was $ 0.7 million and $ 0.6 million in accounts receivable, respectively, representing amounts due for qualifying reimbursable expenses related to the Maruho Agreement.

Employee benefit plan

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Matching contributions to the plan may be made at the discretion of the Company’s board of directors.

The Company made $ 0.2 million in contributions to the plan during each of the years ended December 31, 2024 and 2023.

The Company made $ 0.4 million and $ 0.2 million in contributions to the plan during the years ended December 31, 2025 and 2024 , respectively.

Segment reporting

The Company currently has a single reportable operating segment and revenue generated exclusively from transactions with a related party located in Japan.

The Company currently has a single reportable operating segment and revenue generated exclusively from the Maruho Agreement.

The Company’s chief executive officer , who is the CODM, manages the Company on a consolidated basis and utilizes consolidated net loss as a basis for resource allocation and decision making.

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Year Ended December 31,

Collaboration revenue - related party

Collaboration revenue

Operating expenses:

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Asthma indication

CRSwNP indication

COPD indication

Personnel expenses (including stock-based compensation of $ 1,162

and $ 1,073 , respectively)

CRSwNP indication

Manufacturing costs

Personnel expenses

Professional fees and other

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General and administrative:

Personnel expenses (including stock-based compensation of $ 4,842

and $ 2,354 , respectively)

Personnel expenses

Professional fees

Other (including depreciation of $ 89 and $ 60 , respectively)

Total general and administrative expenses

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Other income (expense):

Change in fair value of preferred stock tranche right liabilities

Change in fair value of preferred stock tranche right liability

Interest income

3 unchanged sentences

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 9A. Controls and Procedures