What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-07 · 100 added, 61 removed, 155 unchanged (51% of the section changed)

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In HDV, our ECLIPSE registrational program is fully underway with all three trials initiated.

Should the ECLIPSE program yield positive results that support regulatory approval and subsequent commercial launch, we believe the combination of tobevibart and elebsiran has the potential to be a new standard of care for hepatitis delta patients, for whom approved treatment options are either limited or unavailable.

Should the ECLIPSE program yield positive results that support regulatory approval and subsequent commercial launch, we believe the combination of elebsiran and tobevibart has the potential to be a new standard of care for hepatitis delta patients, for whom approved treatment options are either limited or unavailable.

In oncology, we are advancing phase 1 clinical studies for our dual-masked TCEs:

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Significant Developments

Following is a summary of selected significant developments affecting our business that occurred since the filing of our Annual Report on Form 10-K for the period ended December 31, 2025.

Following is a summary of selected significant developments affecting our business that occurred since the filing of our Quarterly Report on Form 10-Q for the period ended March 31, 2026.

For additional developments or for a more comprehensive discussion of certain developments below, see our Annual Report on Form 10-K for the year ended December 31, 2025.

• We will present additional data from the Phase 2 SOLSTICE trial evaluating the combination of tobevibart and elebsiran for CHD at the European Association for the Study of the Liver (EASL) Congress taking place May 27-30, 2026.

• In January 2026, we reported Phase 2 SOLSTICE data showing that the monthly combination of tobevibart and elebsiran was highly efficacious and well-tolerated.

Undetectable hepatitis delta virus RNA (HDV RNA Target Not Detected, TND) was achieved and maintained by 77% (24/31) of participants receiving the combination regimen at Week 72.

This rate increased to 88% (21/24) in the subset of participants evaluated through Week 96.

• We completed enrollment in the Phase 3 ECLIPSE 2 trial, and the entire ECLIPSE registrational program is now fully enrolled.

ECLIPSE 2 evaluates the efficacy and safety of switching from bulevirtide to elebsiran and tobevibart in people with CHD who have not achieved viral suppression with bulevirtide therapy and is intended support medication transitions as appropriate.

These data, along with data from ECLIPSE 1 and 3, will be part of a comprehensive global filing package.

◦ Topline data from the Phase 3 ECLIPSE 1 trial are expected in the fourth quarter of 2026.

◦ Topline data from the ECLIPSE 2 and ECLIPSE 3 trials are expected in the first quarter of 2027.

• On April 15, 2026, we closed our global strategic collaboration with Astellas US LLC (together with its subsidiaries and affiliates (including its indirect parent, Astellas Pharma Inc.), Astellas) to advance PSMA-targeted PRO-XTEN ® dual-masked TCE VIR-5500 for the treatment of prostate cancer.

• The first patient was dosed in the Phase 1 dose-expansion cohorts evaluating the safety, pharmacokinetics and preliminary efficacy of VIR-5500 in prostate cancer.

The first expansion cohort will evaluate VIR-5500 monotherapy in Q3W 800/2000/3500 µg/kg step-up dosing in late-line mCRPC.

• We presented complete Week 96 Phase 2 SOLSTICE data at the European Association for the Study of the Liver (EASL) Congress in May 2026.

◦ In the intent-to-treat (ITT) analysis, the data showed 88% (28/32) of participants treated with the combination of elebsiran and tobevibart achieved undetectable hepatitis delta virus RNA (HDV RNA Target Not Detected, TND) compared to 53% (17/32) of participants on antibody monotherapy.

◦ In the last-observation carried forward analysis, the data showed the combination regimen achieved HDV RNA TND in 97% (31/32) of participants.

◦ The combination regimen continues to be generally well tolerated.

Treatment-emergent adverse events were generally mild to moderate and transient, and there were no treatment-related serious adverse events or discontinuations.

• We closed our global strategic collaboration with Astellas US LLC (together with its subsidiaries and affiliates (including its indirect parent, Astellas Pharma Inc.), Astellas) to advance PSMA-targeted, PRO-XTEN® dual-masked T-cell engager (TCE) VIR-5500 for the treatment of prostate cancer.

We and Astellas have built a strong operational infrastructure for collaboration and rapidly worked together on Phase 1 trial design to advance the dose-expansion cohorts.

• We initiated additional Phase 1 dose-expansion cohorts evaluating VIR-5500 at Q3W 800/2000/3500 µg/kg step-up dosing.

The first patients were dosed in three monotherapy cohorts evaluating VIR-5500 in taxane naïve mCRPC, radioligand therapy naïve mCRPC and radioligand therapy exposed mCRPC, and one combination cohort evaluating VIR-5500 in combination with enzalutamide in early-line mCRPC.

• We anticipate initiating two additional Phase 1 dose-expansion cohorts, including VIR-5500 in combination with docetaxel in early-line mCRPC and VIR-5500 in combination with darolutamide in metastatic hormone-sensitive prostate cancer.

• We anticipate initiating pivotal Phase 3 trials in 2027.

• Positive updated Phase 1 data for VIR-5500 monotherapy showed dose-dependent anti-tumor activity and a well-tolerated safety profile in patients with mCRPC.

The data were presented in an oral presentation at the 2026 American Society of Clinical Oncology (ASCO) Genitourinary Cancers Symposium.

• Phase 1 dose-escalation of VIR-5818, a HER2-targeted PRO-XTEN ® dual-masked TCE, in combination with pembrolizumab continues, with response data expected in the second half of 2026.

• The Phase 1 study of VIR-5525, an EGFR-targeted PRO-XTEN ® dual-masked TCE, continues enrollment as expected.

• We expect to report updated dose-escalation data from our Phase 1 trial evaluating VIR-5818, a HER2-targeted PRO-XTEN ® dual-masked TCE, as a monotherapy and in combination with pembrolizumab, in the second half of 2026.

The dose-escalation parts of the Phase 1 trial have a basket design, enrolling across multiple tumor types.

• The Phase 1 trial of VIR-5525, an EGFR-targeted PRO-XTEN ® dual-masked TCE, as a monotherapy and in combination with pembrolizumab continues enrollment as expected.

Preclinical Pipeline Candidates

• We are currently progressing a number of PRO-XTEN ® masked TCEs in preclinical studies directed at clinically validated targets with potential applications across a variety of solid tumors, including lung, colorectal and bladder.

• We are currently progressing a number of PRO-XTEN ® masked TCEs in preclinical studies directed at clinically validated targets with potential applications across a variety of solid tumors.

Corporate Update

• In February 2026, we completed a follow-on public offering of common stock with gross proceeds of $172.5 million, before deducting underwriting discounts and commissions and offering expenses.

• On April 7, 2026, Mark Eisner, MD, MPH, Executive Vice President and Chief Medical Officer of Vir Biotechnology, Inc.

(the Company), informed us that he will be stepping down from his role, effective April 24, 2026.

The Company has initiated a search for his successor.

• On July 20, 2026, Jason O’Byrne, MBA, our Executive Vice President and Chief Financial Officer, informed us that he would be stepping down from his role, effective August 3, 2026.

We have initiated a search for his successor.

Additionally, on July 23, 2026, our Board of Directors appointed Brent Sabatini, CPA, MBA, our Senior Vice President and Chief Accounting Officer, as our interim “principal financial officer.”

• On June 9, 2026, we appointed Timothy Coughlin, CPA to our Board of Directors and as Chair of the Audit Committee.

• On May 25, 2026, we announced that Saira Ramasastry, M.S., M.Phil., a member of our Board of Directors and Chair of our Audit Committee, would be stepping down from her role as a member of our Board of Directors and the Audit Committee.

• On April 16, 2026, we announced that Vicki Sato, Ph.D., the Chair of our Board of Directors, would not stand for reelection at our 2026 Annual Meeting of Stockholders on May 26, 2026.

On May 26, 2026, Jeffrey S.

Hatfield, MBA assumed the role of Chair of our Board of Directors.

• On April 7, 2026, Mark Eisner, MD, M.P.H., our Executive Vice President and Chief Medical Officer, informed us that he would be stepping down from his role, effective April 24, 2026.

We have initiated a search for his successor.

Our Collaboration, License and Grant Agreements

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Our revenues consist of the following:

License and collaboration revenue includes revenues generated from license rights issued to Norgine and GSK, including our profit-share from the sales of sotrovimab pursuant to the 2020 GSK Agreement.

License and collaboration revenue includes revenues generated from license rights issued to Astellas, Norgine and GSK.

Grant revenue is comprised of revenue derived from grant agreements with government-sponsored and private organizations.

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the safety and efficacy of our product candidates, early clinical data, investment in our clinical programs, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability.

In addition, under our some of our license agreements , we may incur additional clinical, and regulatory milestone payments based on the development progress of certain clinical programs.

In addition, under some of our license agreements , we may incur additional clinical, and regulatory milestone payments based on the development progress of certain clinical programs.

We may also be required to pay commercial milestone payments and royalties in the event of a successful product launch and our receipt of commercial revenues.

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Interest income consists of interest earned on our cash, cash equivalents and investments.

Other Expense, Net

Other expense, net consists of gains and losses from foreign currency transactions and investment management expenses.

Other (Expense) Income, Net

Other (expense) income, net consists of gains and losses from foreign currency transactions and investment management expenses.

Provision for Income Taxes

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Results of Operations

Comparison of the Three Months Ended March 31, 2026 and 2025

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

The following table summarizes our results of operations for the periods presented (in thousands):

Three Months Ended

2026 2025 Change

June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

License and collaboration revenue $ 238,935 $ (495) $ 239,430 $ 238,894 $ (565) $ 239,459

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Operating expenses:

Cost of revenue — 11 (11) — 11 (11)

Research and development 135,283 97,509 37,774 244,205 216,154 28,051

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Total operating expenses 165,479 119,631 45,848 297,740 262,210 35,530

Loss from operations (132,290) (139,547) 7,257

Income (loss) from operations 73,467 (118,417) 191,884 (58,823) (257,964) 199,141

Other income:

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Interest income 8,966 10,785 (1,819) 16,155 23,073 (6,918)

Other expense, net (254) (72) (182)

Other (expense) income, net (451) 226 (677) (705) 154 (859)

Total other income 6,792 7,629 (837) 13,557 26,227 (12,670)

Loss before provision for income taxes (125,525) (120,949) (4,576)

Income (loss) before provision for income taxes 80,259 (110,788) 191,047 (45,266) (231,737) 186,471

Provision for income taxes (179) (170) (9) (349) (186) (163)

Net loss $ (125,695) $ (120,965) $ (4,730)

The change in license and collaboration revenue for the three months ended March 31, 2026 compared to the same period in 2025 was nominal.

The decrease in grant revenue for the three months ended March 31, 2026 compared to the same period in 2025 was primarily due to lower revenue recognized in accordance with our agreement with the Gates Foundation.

Certain grant agreements with the Gates Foundation expired in 2025.

The decrease in other revenue for the three months ended March 31, 2026 compared to the same period in 2025 was primarily due to lower revenue recognized in connection with the sale of clinical supply to Brii Biosciences Limited (Brii Bio Parent).

Net income (loss) $ 80,080 $ (110,958) $ 191,038 $ (45,615) $ (231,923) $ 186,308

The increase in license and collaboration revenue for the three and six months ended June 30, 2026 compared to the same periods in 2025 was primarily due to the recognition of $239.3 million in license and collaboration revenue related to the upfront payment received under our collaboration and license agreement with Astellas (Astellas Collaboration Agreement).

The decrease in other revenue for the three and six months ended June 30, 2026 compared to the same periods in 2025 was primarily due to lower revenue recognized in connection with option-expiration and the sale of clinical supply to Brii Biosciences Limited (Brii Bio Parent).

Research and Development Expenses

The following table shows the primary components of our research and development expenses for the periods presented (in thousands):

Three Months Ended March 31,

2026 2025 Change

Three Months Ended June 30, Six Months Ended

2026 2025 Change 2026 2025 Change

Contract manufacturing $ 23,967 $ 14,063 $ 9,904 $ 59,974 $ 23,399 $ 36,575

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Total research and development expenses $ 135,283 $ 97,509 $ 37,774 $ 244,205 $ 216,154 $ 28,051

The decrease in research and development expenses for the three months ended March 31, 2026 compared to the same periods in 2025 was primarily due to:

• lower license, collaborations and contingent consideration expenses primarily due to a $30.0 million expense in the first quarter of 2025 in connection with signing the amended and restated collaboration and license agreement with Alnylam Pharmaceuticals, Inc.

(Alnylam, and the agreement, the Restated Alnylam Agreement) and milestone payments due upon the enrollment of the first patient in phase 3 ECLIPSE registrational program for CHD and, to a lesser extent, due to R&D costs reimbursement in the first quarter of 2026 under our license agreement with Norgine;

• lower personnel expenses associated with headcount reductions;

The increase in research and development expenses for the three months ended June 30, 2026 compared to the same periods in 2025 was primarily due to:

• higher license, collaborations and contingent consideration expenses primarily due to a $48.0 million payment to Sanofi made after the closing of the Astellas Collaboration Agreement, partially offset by lower contingent consideration expense for the potential future milestone payments in connection with our CHD program and cost reimbursements in connection with our collaboration with Astellas and Norgine;

• higher contract manufacturing primarily attributable to process performance qualification (PPQ) batches for our CHD program and increased manufacturing activities supporting the advancement of our oncology program;

• higher clinical costs due to the advancement of our CHD and oncology programs.

partially offset by:

• higher contract manufacturing associated with process performance qualification batches (PPQs) related to the advancement of our CHD program;

• lower personnel expenses associated with headcount reductions.

The increase in research and development expenses for the six months ended June 30, 2026 compared to the same periods in 2025 was primarily due to:

• higher contract manufacturing attributable to PPQ batches for our CHD program and increased manufacturing activities supporting the advancement of our oncology program;

• higher clinical costs due to the advancement of our CHD and oncology programs.

partially offset by:

• lower license, collaborations and contingent consideration expenses primarily due to a $30.0 million expense recognized in the first quarter of 2025 in connection with the Restated Alnylam Agreement and a milestone payment triggered by the enrollment of the first patient in the Phase 3 ECLIPSE registrational program for CHD, as well as lower contingent consideration expense in 2026 related to potential future milestone payments in connection with our CHD program.

The decrease was partially offset by a $48.0 million milestone payment to Sanofi after the closing of the Astellas Collaboration Agreement in the second quarter of 2026;

• lower personnel expenses associated with headcount reductions.

Selling, General and Administrative Expenses

The decrease in selling, general and administrative expenses for the three months ended March 31, 2026 compared to the same period in 2025 was nominal.

The increase in selling, general and administrative expenses for the three and six months ended June 30, 2026 compared to the same periods in 2025 was primarily due to higher one-time advisory and legal fees in connection with the Astellas Collaboration Agreement.

Restructuring, long-lived assets impairment and related charges

The change in restructuring, long-lived assets impairment and related charges for the three months ended March 31, 2026 compared to the same period in 2025 was nominal.

The change in restructuring, long-lived assets impairment and related charges for the three and six months ended June 30, 2026 compared to the same periods in 2025 was nominal.

Change in Fair Value of Equity Investments

Our equity investment consisted solely of shares of Brii Bio Parent, which is a marketable equity investment and remeasured to fair value at each reporting date.

For the three months ended March 31, 2026, we recognized an unrealized loss of $0.2 million due to the change in fair value, compared to an unrealized gain of $6.4 million for the same period in 2025.

For the three and six months ended June 30, 2026, we recognized an unrealized loss of $1.7 million and $1.9 million due to the change in fair value, respectively, compared to an unrealized loss of $3.4 million and unrealized gain of $3.0 million for the same periods in 2025, respectively.

Interest Income

The decrease in interest income for the three months ended March 31, 2026 compared to the same period in 2025 was primarily due to lower balances of cash, cash equivalents, and investments and lower interest rates.

Other Expense, Net

The change in other expense, net for the three months ended March 31, 2026 compared to the same periods in 2025 was nominal.

The decrease in interest income for the three and six months ended June 30, 2026 compared to the same periods in 2025 was primarily due to lower interest rates.

Other (Expense) Income, Net

The change in other (expense) income, net for the three and six months ended June 30, 2026 compared to the same periods in 2025 was nominal.

Provision for Income Taxes

The provision for income taxes for the three months ended March 31, 2026 compared to the same period in 2025 was nominal.

Liquidity, Capital Resources and Capital Requirements Sources of Liquidity

The provision for income taxes for the three and six months ended June 30, 2026 compared to the same periods in 2025 was nominal.

Liquidity, Capital Resources and Capital Requirements

Sources of Liquidity

To date, we have financed our operations primarily through sales of our common stock from our initial public offering and subsequent follow-on offering, sales of our convertible preferred securities, and payments received under our grant and collaboration agreements.

As of March 31, 2026, we had $809.3 million in cash, cash equivalents, and investments and $8.9 million in restricted cash and cash equivalents.

As of March 31, 2026, our accumulated deficit was $1.3 billion.

As of June 30, 2026, we had approximately $1.01 billion in cash, cash equivalents, and investments and approximately $8.9 million in restricted cash and cash equivalents.

As of June 30, 2026, our accumulated deficit was $1.2 billion.

In November 2023, we filed an automatic shelf registration statement on Form S-3 and a related prospectus (the “2023 Shelf Registration Statement”) with the U.S.

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We will pay TD Cowen a commission of up to 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide TD Cowen with customary indemnification and contribution rights.

As of March 31, 2026, no shares have been issued under the Sales Agreement.

As of June 30, 2026, no shares have been issued under the Sales Agreement.

The Sales Agreement will expire in November 2026.

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Net proceeds from the 2026 Public Offering were approximately $162.2 million, after deducting underwriting discounts and commissions, and other offering expenses of approximately $10.3 million.

During the second quarter of 2026, we received $315.0 million from Astellas, including a $240.0 million upfront payment following the closing of the Astellas Collaboration Agreement and another $75.0 million upon the closing of the Astellas stock purchase agreement.

Funding Requirements and Conditions

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We may continue to incur net losses for the foreseeable future.

Based upon our current operating plan, we believe that our existing cash, cash equivalents and investments as of March 31, 2026 as noted above will enable us to fund our operations for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q.

Based upon our current operating plan, we believe that our existing cash, cash equivalents and investments as of June 30, 2026 as noted above will enable us to fund our operations for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q.

Our operating plan may change as a result of many factors currently unknown to us, and we may need to raise additional capital to complete the development and commercialization of our product candidates and fund certain of our existing manufacturing and other commitments.

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Our primary operating lease arrangements are for office and laboratory spaces located in California and Switzerland with contractual lease periods expiring between 2033 and 2035.

As of March 31, 2026, we expect to make total lease payments of approximately $117.8 million through 2035.

As of June 30, 2026, we expect to make total lease payments of approximately $114.2 million through 2035.

To date, we have entered into collaboration, license and acquisition agreements where the payment obligations are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones, and we are required to make royalty payments in connection with the sale of products developed under those agreements.

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The following table summarizes our cash flows for the periods presented (in thousands):

Three Months Ended

Six Months Ended

Net cash (used in) provided by:

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Financing activities 240,899 2,644

Net increase in cash, cash equivalents and restricted cash and cash equivalents $ 41,972 $ 49,300

Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents $ 46,532 $ (12,417)

Operating activities

Cash used in operating activities is derived by adjusting our net loss for non-cash items and changes in operating assets and liabilities.

Cash used in operating activities during the three months ended March 31, 2026 increased compared to the same period in 2025 primarily due to increase in contract manufacturing and clinical costs related to the advancement of our CHD and oncology programs and the payment timing of the $30.0 million expense in the first quarter of 2025 in connection with signing the Restated Alnylam Agreement and milestone payments due upon the enrollment of the first patient in phase 3 ECLIPSE registrational program for CHD, which was paid in April 2025.

Cash used in operating activities is derived by adjusting our net income (loss) for non-cash items and changes in operating assets and liabilities.

Cash used in operating activities during the six months ended June 30, 2026 decreased compared to the same period in 2025 primarily due to $240.0 million upfront payment received under the Astellas Collaboration Agreement, partially offset by a $48.0 million payment to Sanofi after the closing of the Astellas Collaboration Agreement and increase in payments for contract manufacturing and clinical costs related to the advancement of our CHD and oncology programs.

Investing activities

Cash provided by investing activities during the three months ended March 31, 2026 decreased compared to the same period in 2025 primarily due to lower cash provided by maturities and sales of investment, net of investment purchases.

Cash provided by investing activities during three months ended March 31, 2026 was primarily related to $170.6 million in proceeds received from investments that matured or were sold, partially offset by purchases of investments of $158.4 million.

Cash provided by investing activities during three months ended March 31, 2025 was primarily due to $301.9 million in proceeds received from investments that matured or were sold, partially offset by purchases of investments of $173.7 million.

Cash used in investing activities during the six months ended June 30, 2026 increased compared to the same period in 2025 primarily due to lower cash provided by maturities and sales of investment, net of investment purchases.

Cash used in investing activities during the six months ended June 30, 2026 was primarily related to purchases of investments of $510.5 million, partially offset by $325.6 million in proceeds received from investments that matured or were sold.

Cash provided by investing activities during the six months ended June 30, 2025 was primarily due to $553.2 million in proceeds received from investments that matured or were sold, partially offset by purchases of investments of $366.1 million.

Financing activities

Cash provided by financing activities during the three months ended March 31, 2026 increased compared to the same period in 2025 primarily due to the issuance of our common stock in connection with our follow-on public offering of $162.3 million.

Cash provided by financing activities during the six months ended June 30, 2026 increased compared to the same period in 2025 primarily due to the issuance of our common stock in connection with our follow-on public offering of $162.2 million, and issuance of our common stock in connection with the Astellas Collaboration Agreement of $75.7 million.

Critical Accounting Policies and Estimates

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For more details on our critical accounting policies, refer to Note 2 — Summary of Significant Accounting Policies to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.

There have been no significant changes in our critical accounting policies during the three months ended March 31, 2026, as compared with those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

There have been no significant changes in our critical accounting policies during the six months ended June 30, 2026, as compared with those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 other than disclosed below.

License and Collaboration Arrangements

We enter into license and collaboration arrangements that may include upfront payments, equity investments, licenses to intellectual property, research and development activities, development cost-sharing arrangements, milestone payments, royalties, and profit- and loss-sharing arrangements.

We evaluate these arrangements to determine whether they are within the scope of ASC 808, Collaborative Arrangements (ASC 808), and whether any units of account are within the scope of A SC 606, Revenue from Contracts with Customers (ASC 606).

For units of account within the scope of ASC 606, revenue is recognized when control of the promised goods or services transfers to the customer.

For units of account outside the scope of ASC 606, we apply an appropriate recognition method by analogy to other authoritative accounting guidance or through a reasonable and consistently applied accounting policy election.

Accounting for these arrangements requires judgment, including identifying units of account, determining whether the collaboration partner is a customer for each unit of account, estimating the transaction price, assessing and constraining variable consideration, estimating standalone selling prices, allocating consideration among the units of account, and determining the timing and pattern of recognition.

Variable consideration may include development milestones, sales milestones, sales royalties, profit- and loss-sharing amounts, and development cost-sharing settlements.

We include variable consideration in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue will not occur and reassess the transaction price, including estimates of variable consideration and related constraints, at each reporting date.

When an arrangement includes multiple units of account, we allocate consideration to the respective units of account based on the underlying economics of the arrangement and in a manner consistent with the overall allocation objective.

In making this determination, we consider the nature of the consideration, the underlying contractual payment terms, and whether the consideration is specifically attributable to a license, collaboration services, or other distinct units of account within the arrangement, as well as the standalone selling prices (“SSP”) of the respective units of account.

We also assess whether the resulting allocation is consistent with the overall allocation objective.

In certain circumstances, consideration may be allocated entirely to one or more, but not all, units of account when the terms of the consideration relate specifically to our efforts to satisfy the applicable unit of account or to a specific outcome resulting from the satisfaction of that unit of account, and such allocation is consistent with the overall allocation objective.

This determination requires judgment and may affect the amount and timing of revenue recognition or recognition of amounts within research and development expense.

We estimate standalone selling prices using methods appropriate for the nature of the related unit of account.

For example, standalone selling prices for licenses to intellectual property may be estimated using income-based valuation approach, while standalone selling prices for research and development activities may be estimated using cost-plus-margin approach.

These estimates require significant assumptions, including expected cash flows, development and commercialization timelines, probability of technical and regulatory success, market opportunity, expected costs, margins, and discount rates.

Changes in these assumptions could affect the allocation of consideration and the amount and timing of revenue recognition or recognition of amounts within research and development expense.

Payments to or reimbursements from collaboration partners related to collaborative research and development activities that are not transactions with a customer are generally recorded within research and development expense, based on the nature of the underlying activity.

To the extent reimbursement from partners are received in advance of the related research and development activities being performed, such amounts are recorded in the balance sheets and recognized as a reduction of research and development expense as the underlying activities are incurred.

Amounts expected to be recognized within twelve months of the balance sheet date are classified as current, with the remainder classified as non-current.

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-Q

Item 2. Management’s Discussion and Analysis