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Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-02-27 · 148 added, 111 removed, 131 unchanged (66% of the section changed)

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This section discusses 2024 and 2023 items and year-to-year comparisons between the years ended December 31, 2024 and 2023.

Discussions of the year ended December 31, 2021 and year-to-year comparisons between the years ended December 31, 2022 and 2021 have been excluded from this Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 9, 2023.

We are a biopharmaceutical company focused on discovering and developing potential best-in-class medicines for serious and rare diseases.

Discussions of the year ended December 31, 2022 and year-to-year comparisons between the years ended December 31, 2023 and 2022 have been excluded from this Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 27, 2024.

We are a biopharmaceutical company focused on discovering, developing and commercializing potential best-in-class medicines for serious and rare diseases.

We target disease areas where marketed therapies often leave room for improvements in efficacy, safety, and/or dosing convenience.

We believe that first-generation medicines rarely represent optimal solutions, especially in rare disease areas, and that there is potential to develop differentiated, best-in-class medicines that could lead to improved patient outcomes, reduced side effects, improved quality of life, expanded market access, and augmented market competition.

Our business model is designed to identify and evaluate product opportunities in disease areas where trial data establishes proof-of-concept for a

drug target in the clinic, but the competitive evolution of the product life cycle management and number of entrants appears incomplete.

Our business model is designed to identify and evaluate product opportunities in disease areas where trial data

establishes proof-of-concept for a drug target in the clinic, but the competitive evolution of the product life cycle management and number of entrants appears incomplete.

We intend to prioritize indications where a fast-follower and a potentially differentiated drug candidate, or overall product profile, could create significant medical benefit for patients.

We are engineering medicines to address unmet medical needs for patients and further advance drug innovation.

We are engineering product candidates to address unmet medical needs for patients and further advance drug innovation.

Our goal is to identify and evaluate product concepts leveraging clinically validated molecular targets using established therapeutic modalities.

We prioritize product concepts that are aligned with clinical and commercial hypotheses, which we expect will provide an attractive balance of risk and opportunity, thereby representing a compelling allocation of our resources.

We focus on advancing therapeutic proteins, including antibodies, that we either in-license or discover internally, incorporating proprietary therapeutic protein and antibody discovery and optimization platforms to advance clinical candidates with unique characteristics.

We have built relevant expertise in protein and antibody discovery and engineering, biologics manufacturing, nonclinical and clinical development for TED, development of anti-neonatal Fc receptor therapies, and nonclinical and clinical development for indications in rare and autoimmune diseases.

We focus on advancing therapeutic proteins that we either in-license or discover internally, incorporating proprietary therapeutic protein and antibody discovery and optimization platforms to advance clinical candidates with unique characteristics.

We have built relevant expertise in protein and antibody discovery and engineering, biologics manufacturing, nonclinical and clinical development, and commercialization for thyroid eye disease (“TED”), development of anti-neonatal Fc receptor (“FcRn”) therapies, and nonclinical and clinical development for indications in rare and autoimmune diseases.

Our approach to rapidly discovering and developing novel therapeutics relies on our scientific expertise in evaluating pre-existing clinical proof-of-concept data for the drug targets we are pursuing, and opportunities to improve upon existing investigational and/or approved therapies.

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We believe this strategy reduces the risks associated with discovering and developing novel therapeutics.

We have first prioritized the development of therapies for the treatment of TED, a serious and debilitating rare autoimmune disease that causes inflammation within the orbit of the eye that can cause bulging of the eyes, redness and swelling, double vision, pain, and potential blindness.

TED significantly impacts quality of life, imposing a high burden on activities of daily living and mental health for patients suffering from the disease.

TED is a progressive disease consisting of an initial active phase, followed by a transition to a secondary chronic phase.

The only medicine approved by the FDA for TED is Tepezza® (teprotumumab), which is an intravenously administered monoclonal antibody that targets IGF-1R.

Tepezza® is marketed in the United States by Horizon, which was acquired by Amgen in October 2023.

The results from clinical trials of teprotumumab conducted by Horizon provide strong clinical validation linking the targeting of IGF-1R to clinical benefit in patients with TED.

However, clinical trials evaluating teprotumumab in patients with TED reported to date used a single dosing regimen, providing little guidance as to the optimal dosing required for clinical activity in TED.

We believe that there are multiple opportunities to develop fast-follower therapeutics that improve on teprotumumab’s features, including dosing schedule, route of administration, and safety profile.

We are developing two product candidates, VRDN-001 for intravenous and VRDN-003 for subcutaneous administration, to treat patients who suffer from TED.

Our most advanced program, VRDN-001, is a differentiated humanized monoclonal antibody targeting IGF-1R intravenously administered for the treatment of TED.

In previously presented in vitro preclinical data, we showed that VRDN-001 is a potentially differentiated full antagonist of IGF-1R, compared to teprotumumab’s incomplete antagonism of IGF-1R.

We also conducted Phase 1/2 clinical trials of VRDN-001 in patients with active or chronic TED.

In the active TED portion of the Phase 1/2 clinical trials, data reported from all three dose cohorts of VRDN-001 (n=21) showed significant and rapid improvement in both the signs and symptoms of TED after two infusions of VRDN-001 compared to placebo.

Across all VRDN-001 treated patients in the active TED trial, 71% were proptosis responders, 67% were overall responders, 62% achieved a CAS of 0 or 1, and 54% had complete resolution of their diplopia.

In the chronic TED portion of the Phase 1/2 clinical trials, data reported from both dose cohorts of VRDN-001 (n=12) showed significant and rapid improvement in the signs and symptoms of TED after two infusions of VRDN-001 compared to placebo.

Across all VRDN-001 treated patients in the chronic TED trial, 42% were proptosis responders, 40% achieved a CAS of 0 or 1, and no patients had complete resolution of their diplopia.

In the Phase 1/2 clinical trials of both active and chronic TED, VRDN-001 had a favorable safety profile and was well-tolerated by all patients treated in all dose cohorts.

We are evaluating VRDN-001 in two global Phase 3 clinical trials, THRIVE and THRIVE-2, for the treatment of active and chronic TED, respectively.

THRIVE and THRIVE-2 are each designed to compare a five-dose IV treatment arm of VRDN-001 at 10 mg/kg, dosed three weeks apart, to placebo.

This five-dose VRDN-001 regimen features fewer infusions and a shorter time per infusion compared to teprotumumab, the currently marketed IGF-1R inhibitor.

We expect to report topline THRIVE and THRIVE-2 data in the middle of 2024 and by year end 2024, respectively.

We expect that the THRIVE and THRIVE-2 Phase 3 trials, together with a safety database comprising 300 treated patients will support global health authority registration for marketing approval in both active and chronic TED, respectively.

In addition to our VRDN-001 IV program, in December 2023 we selected VRDN-003 as our prioritized subcutaneous program for pivotal development in TED following positive data in a Phase 1 clinical trial in healthy volunteers.

We believe VRDN-003 has the potential to be the best-in-class subcutaneous anti-IGF-1R program by preserving the efficacy of anti-IGF-1Rs in TED, improving safety, and maximizing convenience for patients.

VRDN-003 has the same binding domain as its parent molecule, VRDN-001, and was engineered to have a longer half-life.

VRDN-003 is designed to be a low-volume, self-administered, infrequently-dosed subcutaneous IGF-1R for TED.

The VRDN-003 Phase 1 clinical study showed VRDN-003 to have a prolonged half-life of 40 to 50 days, which is four to five times that of its parent molecule, VRDN-001.

Because of the similarities between the VRDN-001 and VRDN-003 antibodies, we expect VRDN-003 to have similar clinical responses at the exposure levels of VRDN-001 that led to robust clinical activity in its Phase 2 clinical trial in TED.

Further, pharmacokinetic modeling of VRDN-003 predicted that exposure levels of VRDN-003 could be achieved that are equivalent to exposure levels of VRDN-001 that produced clinically meaningful results with multiple dosing regimens of VRDN-003, i.e., subcutaneous injection every two, four, or eight weeks.

Based on these results, we expect to initiate a global pivotal program with VRDN-003 in mid-2024, with planned trials in both active and chronic TED patients, pending regulatory authority alignment.

In addition to developing therapies for TED, we are also developing a portfolio of engineered anti-FcRn inhibitors, including VRDN-006 and VRDN-008.

Development of Therapies to Treat Thyroid Eye Disease (TED)

We are developing two product candidates, veligrotug (formerly known as VRDN-001) for intravenous and VRDN-003 for subcutaneous administration, to treat patients who suffer from TED.

Our most advanced program, veligrotug, is a differentiated humanized monoclonal antibody targeting IGF-1R intravenously administered for the treatment of TED.

In previously presented in vitro nonclinical data, we showed that veligrotug is a potentially differentiated full antagonist of IGF-1R, compared to teprotumumab’s incomplete antagonism of IGF-1R.

VRDN-003 has the same binding domain as veligrotug, and was engineered to have a longer half-life.

VRDN-003 is designed to be a low-volume, infrequently-dosed subcutaneous IGF-1R for TED, which we plan to launch commercially with an auto-injector to enable at-home patient self-administration.

We believe VRDN-003 has the potential to be the best-in-class subcutaneous anti-IGF-1R product candidate by preserving the efficacy of anti-IGF-1Rs in TED, improving safety and maximizing convenience for patients.

We conducted phase 1/2 clinical trials of veligrotug in patients with active or chronic TED.

In the active TED portion of the phase 1/2 clinical trials, data reported from all three dose cohorts of veligrotug (n=21) showed significant and rapid improvement in both the signs and symptoms of TED after two infusions of veligrotug compared to placebo.

Across all veligrotug treated patients in the active TED trial, 71% were proptosis responders, 67% were overall responders, 62% achieved a clinical activity score (“CAS”) of 0 or 1, and 54% had complete resolution of their diplopia.

In the chronic TED portion of the phase 1/2 clinical trials, data reported from both dose cohorts of veligrotug (n=12) showed significant and rapid improvement in the signs and symptoms of TED after two infusions of veligrotug compared to placebo.

Across all veligrotug treated patients in the chronic TED trial, 42% were proptosis responders, 40% achieved a CAS of 0 or 1, and no patients had complete resolution of their diplopia.

In the phase 1/2 clinical trials of both active and chronic TED, veligrotug had a favorable safety profile and was well-tolerated by all patients treated in all dose cohorts.

We are conducting a global pivotal program for veligrotug, including evaluating its efficacy and safety in two global well-controlled phase 3 clinical trials, THRIVE and THRIVE-2, for the treatment of active and chronic TED, respectively.

THRIVE and THRIVE-2 are each designed to compare a five-dose IV treatment arm of veligrotug at 10 mg/kg, dosed three weeks apart, to placebo.

This five-dose veligrotug regimen features fewer infusions and a shorter time per infusion compared to teprotumumab, the currently marketed IGF-1R inhibitor.

On September 10, 2024, we announced topline data from the THRIVE study, which enrolled 113 patients, randomized to veligrotug (n=75) and placebo (n=38).

THRIVE achieved all primary and secondary endpoints with a high level of statistical significance (p < 0.0001) and was generally well-tolerated, with no treatment-related serious adverse events (“SAEs”).

Veligrotug additionally showed a rapid onset of treatment effect, with the majority (53%) of veligrotug-treated patients achieving a proptosis response as early as three weeks.

On December 16, 2024, we announced topline data from the THRIVE-2 study, which enrolled 188 patients, randomized to veligrotug (n=125) and placebo (n=63).

THRIVE-2 achieved all primary and secondary endpoints with statistical significance and was generally well-tolerated.

Veligrotug continued to demonstrate a rapid onset of treatment effect, with a statistically significant proptosis response as early as three weeks and a statistically significant reduction and resolution of diplopia as early as six weeks.

THRIVE-2 is the first global phase 3 study in patients with chronic TED to demonstrate a statistically significant and clinically meaningful diplopia responder rate and rate of diplopia complete resolution.

To meet the 300 patient standard safety database

requirements for the veligrotug biologics license application (“BLA”), we are conducting our STRIVE clinical trial (safety database inclusive of patients from the THRIVE and THRIVE-2 trials).

STRIVE is a global study of veligrotug in TED patients that utilizes broad inclusion criteria (e.g., any severity or duration of disease) and is randomized 3:1 (10 mg/kg IV with an active control of 3 mg/kg IV).

In January 2025, we completed enrollment in STRIVE with a total of 231 patients, exceeding the enrollment target of 212 due to patient demand.

We have also completed enrollment of the open label extension study for non-responding patients in THRIVE and THRIVE-2.

We anticipate submitting a BLA for veligrotug in the second half of 2025 and an MAA to the EMA in the first half of 2026.

In addition to our intravenous veligrotug program, VRDN-003 is our subcutaneous product candidate currently in pivotal development in TED, which we selected in December 2023 following positive data in a phase 1 clinical trial in healthy volunteers.

The VRDN-003 phase 1 clinical study showed VRDN-003 to have a prolonged half-life of 40 to 50 days, which is four to five times that of veligrotug.

Because of the healthy volunteer data and the similarities between the veligrotug and VRDN-003 antibodies, we expect VRDN-003 to have similar clinical responses at the exposure levels of veligrotug that led to robust clinical activity in its clinical trials to date in TED.

Further, pharmacokinetic modeling of VRDN-003 based on the healthy volunteer data predicted that exposure levels of VRDN-003 could be achieved that are equivalent to exposure levels of veligrotug that produced clinically meaningful results with multiple dosing regimens of VRDN-003, i.e., subcutaneous injection every two, four, or eight weeks.

We are conducting a global pivotal program for VRDN-003, including evaluating its efficacy and safety in two global well-controlled phase 3 clinical trials, REVEAL-1 and REVEAL-2, for the treatment of active and chronic TED, respectively.

Both studies will evaluate subcutaneous VRDN-003 administered every four weeks or every eight weeks and will assess outcomes versus placebo.

Patient enrollment and dosing continues in both studies.

In addition, to enable BLA submission for VRDN-003, we have initiated a safety study to meet the 300 patient standard safety database requirement (to also include patients from the REVEAL-1 and REVEAL-2 trials) and plan to initiate an auto-injector study in 2025 to enable launching VRDN-003 in an auto-injector device, if approved.

We anticipate topline data for REVEAL-1 and REVEAL-2 in the first half of 2026, and we anticipate submitting a BLA for VRDN-003 for the treatment of TED by the end of 2026.

Development of FcRn Inhibitors

In addition to developing therapies for TED, we are also developing a portfolio of engineered FcRn inhibitors, including VRDN-006 and VRDN-008.

FcRn inhibitors have the potential to treat a broad array of autoimmune diseases, representing a possible significant commercial market opportunity.

Our multi-pronged engineering approach has resulted in a portfolio of FcRn-targeting molecules that leverage the clinically and commercially validated mechanism of FcRn inhibition while potentially addressing the limitations of current agents such as incomplete IgG suppression, safety, and inconvenience of dosing.

VRDN-006 is a FcRn-targeting Fc fragment, and in non-human primate studies, demonstrated specificity for blocking FcRn-IgG interactions while not showing decreases in albumin or increases in LDL levels, which are known potential side effects associated with certain full-length monoclonal anti-FcRn antibodies.

In our head-to-head non-human primate studies, VRDN-006 demonstrated comparable potency and IgG lowering to Vyvgart® (efgartigimod), the current standard of care in FcRn inhibition, as well as a similar safety profile.

We plan to file an IND for VRDN-006 by the end of 2024 and expect healthy volunteer data for VRDN-006 in the second half of 2025.

VRDN-008 is a novel, first-in-class FcRn inhibitor that aims to pair IgG suppression with extended half-life technology, potentially enabling deeper and more durable suppression of IgG than existing anti-FcRn therapies.

Both molecules are designed to be convenient, self-administered, subcutaneous products.

Our multi-pronged engineering approach has resulted in a portfolio of FcRn-targeting molecules that leverage the clinically and commercially validated mechanism of FcRn inhibition while potentially addressing the limitations of current agents such as incomplete immunoglobulin G (“IgG”) suppression, safety, and inconvenience of dosing.

VRDN-006 is a highly selective Fc fragment that inhibits FcRn and is designed to be a convenient subcutaneous and self-administered option for patients.

In non-human primate (“NHP”) studies, VRDN-006 demonstrated specificity for blocking FcRn-IgG interactions while not showing decreases in albumin or increases in low-density lipoprotein (“LDL”) levels, which are known potential side effects associated with certain full-length anti-FcRn monoclonal antibodies.

In our head-to-head NHP studies, VRDN-006 demonstrated comparable potency and IgG reductions to efgartigimod, which is the current standard of care in FcRn inhibition, as well as a similar safety profile.

We submitted an Investigational New Drug Application (“IND”) for VRDN-006 in December 2024, which cleared in January 2025, and we expect proof-of-concept IgG reduction data in healthy volunteers in the third quarter of 2025.

VRDN-008 is a half-life extended bispecific FcRn inhibitor comprising an Fc fragment and an albumin-binding domain designed to prolong IgG suppression and provide a potentially best-in-class subcutaneous option for patients.

In a single, high-dose, head-to-head study in NHPs, VRDN-008 demonstrated three times the half-life of efgartigimod.

Additionally, VRDN-008 showed a deeper and more sustained IgG reduction with peak IgG reductions that were 20% deeper than efgartigimod while not showing decreases in albumin or increases in LDL levels.

NHP studies are ongoing to generate additional data for VRDN-008.

Once completed, we plan to use the totality of VRDN-008’s NHP data to build a robust pharmacokinetic and pharmacodynamic model to predict potential human dosing regimens for VRDN-008.

We anticipate submitting an IND for VRDN-008 by the end of 2025.

Global Economic Considerations

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trade tariffs and trade disputes with other countries, instability in the global capital and credit markets, supply chain weaknesses, and instability in the geopolitical environment, including as a result of the Russian invasion of Ukraine, the rising tensions between China and Taiwan, the conflict in Israel and surrounding area and other political tensions.

Such challenges have caused, and may continue to cause, recession fears, concerns regarding potential sanctions, rising interest rates, foreign exchange volatility and inflationary pressures.

Such challenges have caused, and may continue to cause, recession fears, concerns regarding potential sanctions, high interest rates, foreign exchange volatility and inflationary pressures.

At this time, we are unable to quantify the potential effects of this economic instability on our future operations.

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Zenas BioPharma announced that it had obtained IND approval in China in July 2022.

Under the license agreement, we received a $1.0 million milestone payment from Zenas BioPharma.

Additionally, we are eligible to receive royalty payments based on a percentage of the annual net sales of any licensed products sold on a country-by-country basis in the greater area of China.

The royalty percentage may vary based on different tiers of annual net sales of the licensed

products made.

The royalty percentage may vary based on different tiers of annual net sales of the licensed products made.

Zenas BioPharma is obligated to make royalty payments to us for the royalty term in the Zenas Agreements.

In May 2022, we entered into a Manufacturing Development and Supply Agreement with Zenas BioPharma to manufacture and supply, or have manufactured and supplied, clinical drug product for development purposes.

In January 2025, Zenas BioPharma sublicensed their rights under the license agreement to Zai Lab and assigned the Manufacturing Development and Supply Agreement to Zai Lab in connection with the sublicense transaction.

In the future, we expect to continue to generate revenue from a combination of license fees and other up-front payments, payments for research and development services, milestone payments, product sales, and royalties in connection with strategic alliances.

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• expenses incurred under agreements with CROs, investigative sites that conduct our clinical trials, and other clinical trial-related vendors, and consultants;

• the costs of acquiring, developing, and manufacturing and testing clinical and preclinical materials, including costs incurred under agreements with CMOs;

• costs associated with non-clinical activities and regulatory operations;

• the costs of acquiring, developing, and manufacturing and testing clinical and nonclinical materials, including costs incurred under agreements with CDMOs;

• costs associated with nonclinical activities and regulatory operations;

• license fees and milestone payments related to the acquisition and retention of certain licensed technology and intellectual property rights;

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We record up-front and milestone payments to acquire and retain contractual rights to in-licensed technology and intellectual property rights as research and development expenses when incurred if there is uncertainty in our receiving future economic benefit from the acquired contractual rights.

We consider future economic benefits from acquired contractual rights to licensed technology to be uncertain until such a drug candidate is approved by the FDA or when other significant risk factors are abated.

We consider future economic benefits from acquired contractual rights to licensed technology to be uncertain until such a drug candidate is approved by the FDA or other regulatory authorities, or when other significant risk factors are abated.

We expect that our research and development expenses will increase as we expand our clinical development programs and initiate new clinical trials.

The process of conducting clinical trials and preclinical studies necessary to obtain regulatory approval is costly and time consuming.

The process of conducting clinical trials and nonclinical studies necessary to obtain regulatory approval is costly and time consuming.

We, or our strategic alliance collaborators, if any, may never succeed in achieving marketing approval for any of our product candidates.

The probability of success for each product candidate may be affected by numerous factors, including clinical data, preclinical data, competition, manufacturability and commercial viability of our product candidates.

The probability of success for each product candidate may be affected by numerous factors, including clinical data, nonclinical data, competition, manufacturability and commercial viability of our product candidates.

Successful development of future product candidates is highly uncertain and may not result in approved products.

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General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefits, including share-based compensation, and severance and retention benefits related to our finance, accounting, human resources, legal, business development, and other support functions, professional fees for auditing, tax, and legal services, as well as insurance, board of director compensation, consulting, and other administrative expenses.

General and administrative expenses consist primarily of salaries and related benefits, including share-based compensation, and severance and retention benefits related to our finance, accounting, human resources, legal, business development, and other support functions, professional fees for auditing, tax, and legal services, market research and other professional and consulting fees to prepare for commercial activities, as well as insurance, board of director compensation, consulting, and other administrative expenses.

Other Income, net

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We believe that the accounting policy discussed below is critical to understanding our historical and future performance, as this policy relates to the more significant areas involving our judgments and estimates.

Clinical Trial and Preclinical Study Accruals

Clinical Trial and Nonclinical Study Accruals

We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on certain facts and circumstances at that time.

Our accrued expenses for preclinical studies and clinical trials are based on estimates of costs incurred for services provided by external service providers and for other trial-related activities.

The timing and amount of expenses we incur through our external service providers depend on a number of factors, such as site initiation, patient screening, enrollment, delivery of reports, and other events.

Our accrued expenses for nonclinical studies and clinical trials are based on estimates of costs incurred for services provided by external service providers and for other trial-related activities.

and amount of expenses we incur through our external service providers depend on a number of factors, such as site initiation, patient screening, enrollment, delivery of reports, and other events.

In accruing for these activities, we obtain information from various sources and estimate the level of effort or expense allocated to each period.

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Net loss $ (269,949) $ (237,734) $ (32,215)

Revenue was $0.3 million for the year ended December 31, 2023, as compared to $1.8 million for the year ended December 31, 2022.

Revenue was $0.3 million for the years ended December 31, 2024 and 2023.

Revenue for both periods was attributable to our collaboration agreement with Zenas BioPharma.

The $1.5 million decrease in revenue is due to the timing of activities performed under the collaboration agreement.

During the year ended December 31, 2022, we recognized $1.0 million upon Zenas BioPharma’s achievement of a certain development milestone.

Research and Development Expenses

Research and development expenses were $159.8 million during the year ended December 31, 2023, compared to $100.9 million during the year ended December 31, 2022.

The $58.9 million increase in research and development expenses is primarily attributable to the following:

• $20.4 million increase in clinical trial costs mainly due to expenses associated with our THRIVE and THRIVE-2 clinical trials;

• $19.0 million increase in personnel related costs, including share-based compensation, due to an increase in headcount;

• $8.0 million increase in milestone, license and option fees due to the $15.0 million upfront payment for development of SC delivery systems, issuance of the equivalent of $5.7 million in shares of our common stock for an exclusive license and collaboration agreement, and a $5.3 million upfront payment for an exclusive license agreement during the year ended December 31, 2023, offset by upfront payments of $4.7 million for certain agreed upon development activities and the $13.0 million milestone payments for clinical trial activities for VRDN-001 during the year ended December 31, 2022;

• $5.1 million increase in professional service fees for consultants and contractors to support ongoing programs;

• $3.6 million increase in chemistry, manufacturing and controls costs for our ongoing and planned clinical trials, SC development costs for VRDN-001, as well as IND-enabling activities for VRDN-003.

We expect our research and development expenses to continue to increase as we work to progress our clinical and preclinical programs.

2024 2023 Increase (Decrease)

(in thousands)

Direct research and development expenses

TED portfolio $ 131,133 $ 71,646 59,487

FcRn inhibitor portfolio 41,941 29,973 11,968

Other nonclinical and research and development costs 3,001 13,540 (10,539)

Unallocated expenses

Personnel related expense (including share based compensation) 55,237 39,608 15,629

Facility and other operating costs 6,942 4,998 1,944

Total research and development expenses $ 238,254 $ 159,765 $ 78,489

Direct costs related to the TED portfolio increased by $59.5 million during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily attributable to:

• $50.5 million increase in clinical trial costs and a $10.9 million increase in chemistry, manufacturing and controls costs to support the veligrotug and VRDN-003 clinical trials.

Direct costs related to the FcRn inhibitor portfolio increased by $12.0 million during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily attributable to:

• $14.0 million increase in nonclinical research to advance the FcRn inhibitor portfolio;

• $14.0 million increase in chemistry, manufacturing and controls costs to support IND-enabling activities.

These increases were partially offset by a $16.3 million decrease in milestone, license and option fees as a result expenses incurred during the year ended December 31, 2023, primarily due to a $15.0 million upfront payment related to the development of subcutaneous delivery systems.

Direct costs related to other nonclinical research and development decreased by $10.5 million during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily attributable to:

• $5.7 million decrease in milestone, license and option fees as a result of an upfront payment for an exclusive license and collaboration agreement during the year ended December 31, 2023;

• $3.9 million decrease in other nonclinical research expenses due to prioritization of the FcRn inhibitor portfolio.

Personnel-related costs increased $15.6 million during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily attributable to:

• $11.3 million increase in personnel related costs, due primarily to increased headcount to support our ongoing research and development efforts, including share-based compensation and other employee compensation and recruiting costs;

• $4.3 million increase in severance costs primarily related to separation agreements with former executive officers, including a $3.2 million increase in share-based compensation related to the acceleration of stock option vesting during the year ended December 31, 2024.

Facility and other operating costs increased $1.9 million during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily attributable to an increase in professional services fees for consultants and contractors, as well as an increase in facility and information technology costs to support our ongoing research and development efforts.

We expect our research and development expenses to continue to increase as we work to progress our clinical and nonclinical programs.

General and Administrative Expenses

General and administrative expenses were $61.1 million during the year ended December 31, 2024, compared to $95.0 million during the year ended December 31, 2023.

The $59.8 million increase in general and administrative expenses is primarily attributable to the following:

• $25.6 million increase in personnel costs, including share based compensation, due to an increase in headcount;

• $31.0 million of severance costs primarily related to separation agreements with former executive officers, including $26.1 million of incremental share-based compensation related to the modification and acceleration of stock option vesting;

• $7.9 million increase in professional and license fees due to market research, accounting and other professional fees to support the growing organization and prepare for commercial activities.

The $33.9 million decrease in general and administrative expenses is primarily attributable to the following:

• $27.2 million decrease in severance costs, due primarily to separation agreements with former executive officers, including a $22.7 million decrease in share-based compensation related to the modification and acceleration of stock option vesting for former executives.

Share-based compensation costs for the year ended December 31, 2024 included $3.4 million in costs related to the modification and acceleration of vesting for former executive officers as compared to $26.1 million for the year ended December 31, 2023;

• $8.4 million decrease in personnel-related costs, primarily due to a decrease in headcount and a decrease in share-based compensation and other employee compensation and recruiting costs.

These decreases were partially offset by a $2.9 million increase in legal services, market research and other professional and consulting fees to prepare for commercial activities.

Other Income, net

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Other income, net for the year ended December 31, 2024 is comprised of $31.6 million of interest income earned on short-term investments as well as $0.3 million of sub-lease income, offset by $2.2 million in interest expense related to our Hercules Loan and Security Agreement, and $0.6 million in other losses.

Other income, net for the year ended December 31, 2022 is comprised of $4.6 million of interest income earned on short-term investments as well as $0.3 million of sub-lease income, offset by $0.5 million in interest expense related to our Hercules Loan and Security Agreement.

Other income, net for the year ended December 31, 2023 is comprised of $18.2 million of interest income earned on short-term investments as well as $0.3 million of sub-lease income, offset by $1.3 million in interest expense related to our Hercules Loan and Security Agreement and $0.5 million in other losses.

The increase in interest income is primarily attributable to higher interest rates and higher average short-term investments balances during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Liquidity and Capital Resources

We have funded our operations to date principally through proceeds received from the sale of our common stock, our Series A Preferred Stock, our Series B Preferred Stock and other equity securities, debt financings, license fees, and reimbursements received under collaboration agreements.

As of December 31, 2023, we had $477.4 million in cash, cash equivalents, and short-

term investments.

We expect that our current resources, including the gross proceeds of $186.3 million received in January 2024 from the sale of the Company’s common stock, will enable us to fund our planned operations into the second half of 2026.

We have funded our operations to date principally through proceeds received from the sale of our common stock, our Series A Convertible Preferred Stock, our Series B Convertible Preferred Stock and other equity securities, debt financings, license fees, and reimbursements received under collaboration agreements.

As of December 31, 2024, we had $717.6 million in cash, cash equivalents, and short-term investments.

We expect that our current cash, cash equivalents and short-term investments will be sufficient to fund our planned operations, including our clinical development plan described elsewhere in this Annual Report, into the second half of 2027.

In addition, as of December 31, 2024, the Company has access to additional undrawn funds under the Hercules Amended Term Loan, as described below.

We have no products approved for commercial sale and have not generated any revenue from product sales.

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We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of our development activities and efforts to achieve regulatory approval.

Our commitments primarily consist of obligations under our collaboration, development, and license agreements.

Under these agreements, we are required to make milestone payments upon successful completion of certain regulatory and sales milestones.

The payment obligations under the license agreements are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and we will be required to make development milestone payments and royalty payments in connection with the sale of products developed under these agreements.

As of December 31, 2024, we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales.

For additional information regarding our agreements, see Note 7 and Note 8 to our condensed consolidated financial statements included elsewhere in this report.

Our operating lease obligations primarily consist of lease payments on our office space in Waltham, Massachusetts and our lab and office facilities in Boulder, Colorado.

For additional information regarding our lease obligations, see Note 8 to our condensed consolidated financial statements included elsewhere in this report.

Additionally, we have entered into agreements with third-party contract manufacturers for the manufacture and processing of certain of our product candidates for clinical testing purposes, and we have entered and will enter into other contracts in the normal course of business with contract research organizations for clinical trials and other vendors for other services and products for operating purposes.

These agreements generally provide for termination or cancellation with appropriate notice, other than for costs already incurred.

We expect to enter into additional clinical development, contract research, clinical and commercial manufacturing, supplier and collaborative research agreements in the future, which may require upfront payments and long-term commitments of capital resources.

If we raise additional funds through the issuance of debt, the obligations related to such debt could be senior to rights of holders of our capital stock and could contain covenants that may restrict our operations.

Should additional capital not be available to us in the near term, or not be available on acceptable terms, we may be unable to realize value from our assets and discharge our liabilities in the normal course of business, which may, among other alternatives, cause us to further delay, substantially reduce, or discontinue operational activities to conserve our cash resources.

Should additional capital not be available to us in the near term, or not be available on acceptable terms, we may be unable to realize value from our assets and discharge our

liabilities in the normal course of business, which may, among other alternatives, cause us to further delay, substantially reduce, or discontinue operational activities to conserve our cash resources.

Loan and Security Agreement with Hercules Capital, Inc.

On April 1, 2022, we entered into the Hercules Loan and Security Agreement among the Company, certain of our subsidiaries from time to time party thereto (together with the Company, collectively, the “Borrower”), Hercules and certain other lenders party thereto (the “Lenders”).

Under the Hercules Loan and Security Agreement, the Lenders provided us with access to a term loan with an aggregate principal amount of up to $75.0 million, in four tranches (collectively the “Term Loan”), consisting of:

(1) an initial tranche of $25.0 million, which was available through June 15, 2023;

(2) a second tranche of $10.0 million, subject to the achievement of certain regulatory milestones, which was available through June 15, 2023;

(3) a third tranche of $15.0 million, subject to the achievement of certain regulatory milestones, available through March 15, 2024;

and (4) a fourth tranche of $25.0 million, subject to approval by the Lenders’ investment committee(s), available through December 15, 2024.

The milestone related to the third tranche was not achieved prior to amendment of the Hercules Loan and Security Agreement in August 2023.

Upon signing, we drew an initial principal amount of $5.0 million.

Per the terms of the Hercules Loan and Security Agreement, we were originally obligated to make interest-only payments through April 1, 2024.

However, upon the achievement of a development milestone in August 2022, the interest-only period was extended to October 1, 2024.

If additional development milestones were met, the interest-only period would be further extended to April 1, 2025 pursuant to a second extension.

Per the terms of the Hercules Loan and Security Agreement, we were originally obligated to make interest-only payments through April 1, 2024, which was extended to October 1, 2024 upon the achievement of a development milestone in August 2022.

We were required to repay the Term Loan amount in equal monthly installments of the principal amount and interest between the end of the interest-only period and the maturity date of October 1, 2026.

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In August 2023, we executed an amendment to the Hercules Loan and Security Agreement (the “Hercules Amendment”).

2022, $15.0 million of which was drawn at closing of the Hercules Amendment in August 2023, $5.0 million available through December 15, 2023, and $25.0 million available from July 1, 2024 through December 15, 2024;

The Hercules Amendment was determined to substantially alter the Hercules Loan and Security Agreement and therefore was accounted for as a debt extinguishment.

We recognized a loss on debt extinguishment of $0.2 million in August 2023 related to unamortized debt discount and debt issuance costs.

Under the Hercules Amendment, the Lenders provided the Company access to an increased term loan with an aggregate principal amount of up to $150 million, in four tranches (collectively the “Amended Term Loan”), consisting of (1) an initial tranche of $50.0 million, $5.0 million of which was drawn at closing of the Hercules Loan and Security Agreement in April 2022, $15.0 million of which was drawn at closing of the Hercules Amendment in August 2023, $5.0 million of which was available through December 15, 2023, and $25.0 million of which was available from July 1, 2024 through December 15, 2024;

(2) a second tranche of $20.0 million, subject to achievement of certain regulatory milestones, available through February 15, 2025;

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and (4) a fourth tranche of $60.0 million subject to approval by the Lenders’ investment committee(s), available through June 15, 2025.

The milestones for the second and third tranches have not yet been achieved.

As of December 31, 2024, the milestones for the second and third tranches have been achieved.

The obligations of the Borrower under the Hercules Amendment agreement are secured by substantially all of the assets of the Borrower, excluding the Borrower’s intellectual property.

The Amended Term Loan has a maturity date of October 1, 2026.

The Amended Term Loan bears interest at a floating per annum rate equal to the greater of (1) 7.45% and (2) 4.2% above the Prime Rate (as defined therein), provided that the Term Loan interest rate shall not exceed a per annum rate of 8.95%.

The Amended Term Loan bears interest at a floating per annum rate equal to the greater of (i) 7.45% and (ii) 4.2% above the Prime Rate (as defined therein), provided that the Term Loan interest rate shall not exceed a per annum rate of 8.95%.

Interest is payable monthly in arrears on the first day of each month.

The interest rate as of December 31, 2024 was 8.95%.

Per the terms of the Hercules Amendment, we are obligated to make interest-only payments through April 1, 2025.

If certain development milestones are met, then the interest-only period will be extended to October 1, 2025.

If additional development milestones are met, the interest-only period will be further extended to April 1, 2026.

Per the terms of the Hercules Amendment, we were originally obligated to make interest-only payments through April 1, 2025.

Upon achievement of certain development milestones related to our topline results for our phase 3 THRIVE trial in September 2024, the interest-only period was extended to October 1, 2025.

Upon achievement of certain development milestones related to topline results for the Company’s phase 3 THRIVE-2 trial in December 2024, the interest-only period was further extended to April 1, 2026.

The Borrower is required to repay the Amended Term Loan amount in equal monthly installments of the principal amount and interest between the end of the interest-only period and the maturity date of October 1, 2026.

In addition, the Borrower is required to pay an end-of-term fee equal to 6% of the principal amount of funded Amended Term Loan advances at maturity, which are being accreted as additional interest expense over the term of the loan.

Upon execution of the Hercules Amendment, we drew a principal amount of $15.0 million.

The Hercules Amendment was determined to substantially alter the Hercules Loan and Security Agreement and therefore was accounted for as a debt extinguishment.

We recognized a loss on debt extinguishment of $0.2 million related to unamortized debt discount and debt issuance costs as a component of other income, net in the consolidated statements of operations and comprehensive loss.

ATM Agreements

In September 2022, we entered into the September 2022 ATM Agreement with Jefferies LLC (“Jefferies”) pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $175.0 million from time to time at prices and on terms to be determined by market conditions at the time of offering, with Jefferies acting as the sales agent.

ATM Agreement

In September 2022, we entered into the September 2022 ATM Agreement with Jefferies pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $175.0 million from time to time at prices and on terms to be determined by market conditions at the time of offering, with Jefferies acting as the sales agent.

Jefferies will receive a commission of 3.0% of the gross proceeds of any shares of common stock sold under the September 2022 ATM Agreement.

During the year ended December 31, 2022, 964,357 shares were sold under the September 2022 ATM Agreement at a weighted average price of $26.01 per share, for aggregate net proceeds of approximately $24.2 million, including commissions to Jefferies as a sales agent.

During the year ended December 31, 2023, the Company sold 684,298 shares under

the September 2022 ATM Agreement with Jefferies at a weighted average price of $22.30 per share, for aggregate net proceeds of approximately $14.8 million, including commissions to Jefferies as a sales agent.

During the year ended December 31, 2024, 3,058,751 shares were sold under the September 2022 ATM Agreement at a weighted average price of $22.86 per share, for aggregate net proceeds of approximately $67.7 million, including commissions to Jefferies as a sales agent.

During the quarter ended December 31, 2024, the Company sold 1,497,181 shares under the September 2022 ATM Agreement with Jefferies at a weighted average price of $22.47 per share, for aggregate net proceeds of approximately $32.6 million, including commissions to Jefferies as a sales agent.

Underwritten Public Offerings

In August 2022, we entered into an underwriting agreement with Jefferies, Leerink Partners LLC and Evercore Group LLC relating to the offer and sale of 11,352,640 shares of our common stock, which includes 1,725,000 shares of common stock issued in connection with the exercise in full by the underwriters of their option to purchase additional shares at a public offering price of $23.50 per share, and 28,084 shares of the Company’s Series B Non-Voting Convertible Preferred Stock, at a public offering price of $1,566.745 per share (collectively, the “2022 Public Offering”).

The aggregate gross proceeds to us from the 2022 Public Offering, including the exercise of the option, were approximately $311.0 million, before deducting underwriting discounts and commissions and other offering expenses payable by us.

Purchase Agreements

In October 2023, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) for a private placement (the “2023 Private Placement”) with certain institutional and accredited investors (each, a “Purchaser” and collectively, the “Purchasers”).

Pursuant to the Securities Purchase Agreement, we agreed to sell an aggregate of 8,869,797 shares of common stock at a price of $12.38 per share (the closing price of our common stock on October 27, 2023), and 92,312 shares of the Company’s Series B non-voting convertible preferred stock at a price of $825.3746 per share.

Each share of Series B Preferred Stock is convertible into 66.67 shares of our common stock, subject to certain beneficial ownership limitations.

Our aggregate gross proceeds from the 2023 Private Placement were approximately $186.0 million, before deducting offering expenses payable by us.

Public Offerings

In September 2024, we entered into an underwriting agreement with Jefferies, Goldman Sachs & Co.

LLC and Stifel, Nicolaus & Company, Incorporated related to the offer and sale (the “September 2024 Public Offering”) of 12,466,600 shares of our common stock, which includes 1,800,000 shares of common stock issued in connection with the exercise in full by the underwriters of their option to purchase additional shares at a public offering price of $18.75 per share, and 20,000 shares of our Series B Convertible Preferred Stock at a price per share of $1,250.0625 per share.

The aggregate gross proceeds to us from the September 2024 Public Offering, including the exercise of the option, were approximately $258.8 million, before deducting underwriting discounts and commissions and other offering expenses payable by us.

In January 2024, we entered into an underwriting agreement with Jefferies LLC (“Jefferies”) and Leerink Partners LLC relating to the offer and sale (the “January 2024 Public Offering”) of 7,142,858 shares of our common stock at a public offering price of $21.00 per share.

The aggregate gross proceeds to us from the January 2024 Public Offering were approximately $150.0 million, before deducting underwriting discounts and commissions and other offering expenses payable by us.

Private Placements

In November 2023, we issued and sold in private placement transactions an aggregate of 8,869,797 shares of our common stock at a price per share of $12.38 and 92,312 shares of our Series B Convertible Preferred Stock at a price per share of $825.3746, pursuant to securities purchase agreements with certain institutional and accredited investors.

We received aggregate gross proceeds of approximately $186.0 million, before deducting offering expenses payable by us.

Summarized cash flows for the year ended December 31, 2024 and 2023 are as follows:

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Operating Activities

Net cash used in operating activities was $184.2 million for the year ended December 31, 2023, and primarily consisted of a net loss of $237.7 million, adjusted for non-cash items of $63.0 million, including share-based compensation of $67.2 million and working capital adjustments of $9.4 million.

The change in working capital was primarily related to a decrease of $7.0 million in accounts payable and accrued and other liabilities and an increase of $2.1 million in prepaid expenses and other current assets due to the timing of payments and prepayments to vendors for ongoing clinical trial and manufacturing activities.

Net cash used in operating activities was $232.3 million for the year ended December 31, 2024, and primarily consisted of a net loss of $269.9 million, adjusted for non-cash items of $28.0 million, including share-based compensation of $42.2 million partially offset by accretion and amortization of premiums and discounts on available-for-sale securities of $15.7 million, and working capital adjustments of $9.6 million.

The change in working capital was primarily related to an increase of $21.5 million in accounts payable and accrued and other liabilities, partially offset by an increase of $11.8 million in prepaid expenses and other current assets due to the timing of payments and prepayments to vendors for ongoing clinical trial and manufacturing activities.

The change in working capital was primarily related to an increase of $7.7 million in accrued and other liabilities and an increase of $3.3 million in prepaid expenses and other current assets due to the timing of payments and prepayments to vendors for ongoing clinical trial and manufacturing activities, and an increase of $11.5 million in accounts payable primarily due to a $10.0 million milestone payment due under a license agreement as of December 31, 2022.

The change in working capital was primarily related to a decrease of $7.0 million

in accounts payable and accrued and other liabilities and an increase of $2.1 million in prepaid expenses and other current assets due to the timing of payments and prepayments to vendors for ongoing clinical trial and manufacturing activities.

Investing Activities

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Net cash provided by financing activities was $457.7 million during the year ended December 31, 2024.

Net cash provided by financing activities in 2023 was primarily driven by net proceeds of $189.5 million from the 2023 Private Placement and the September 2022 ATM Agreement, as well as $19.3 million in proceeds from the exercise of stock options, $14.5 million in net proceeds from the Hercules Amendment, $1.9 million in proceeds from the exercise of warrants and $0.6 million in proceeds from the issuance of common stock under our employee stock purchase plan.

Net cash provided by financing activities in 2024 was primarily driven by net proceeds of $451.7 million from the 2024 Public Offerings and the September 2022 ATM Agreement, as well as $5.3 million in proceeds from the exercise of stock options and $0.7 million in proceeds from the issuance of common stock under our employee stock purchase plan.

Net cash provided by financing activities was $225.7 million for the year ended December 31, 2023.

Net cash provided by financing activities in 2022 was primarily driven by net proceeds of $313.8 million from the 2022 Public Offering and the September 2022 ATM Agreement, $4.6 million in net proceeds from the Hercules Loan and Security Agreement, as well as $2.8 million in proceeds from the exercise of stock options, $0.9 million in proceeds from the exercise of warrants and $0.2 million in proceeds from the issuance of common stock under our employee stock purchase plan.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis