Whitehawk Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes thereto appearing elsewhere in this Quarterly Report and our audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ending December 31, 2024 filed with the SEC on March 28, 2025. Some of the information contained in this discussion and analysis including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risk, uncertainties and assumptions. Our actual results could differ materially from those discussed in our forward-looking statements for many reasons, including those risks. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report. You should read this Quarterly Report completely, including Part II, Item 1A (Risk Factors) of this Quarterly Report and the “Cautionary Statement Regarding Forward-Looking Statements” sections of this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by our forward-looking statements contained in the following discussion and analysis. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. References in the following discussion to “ we, ” “ our, ” “ us, ” or “ Whitehawk ” refer to Whitehawk Therapeutics, Inc. Throughout this document we refer to FYARRO (nab-sirolimus, sirolimus protein-bound particles for injectable suspension (albumin-bound)) as FYARRO in the context of commercialization for the treatment of advanced malignant perivascular epithelioid cell tumor (PEComa), investigational use, our clinical trials, regulatory matters such as orphan drug designation, and our former agreements with Bristol-Myers Squibb Company and Mirati Therapeutics, Inc., all further discussed throughout this document. Overview We are an oncology therapeutics company applying advanced technologies to established tumor biology that are intended to efficiently deliver improved cancer treatments. We have deep experience in chemistry, formulation, and drug delivery, as well as research, clinical, and commercial pharmaceutical development, successfully taking product candidates from the clinic to approval, launch, and commercialization. License Agreement and ADC Therapies We recently entered into an intellectual property license agreement (the “License Agreement”) with WuXi Biologics (Shanghai FX) Co., Ltd. (“WuXi Biologics”) for the development and global commercialization of a portfolio of three next generation antibody drug conjugates (“ADCs”) targeting clinically validated, broadly overexpressed tumor antigens in high potential cancer indications with significant unmet need. These ADCs are constructed utilizing an advanced linker-payload platform called CPT113 that has been shown to provide high stability in blood circulation and deliver targeted release of a Topoisomerase I (“TOPO1”) inhibitor payload into cancer cells. These in-licensed assets originated through the collaborative efforts of WuXi Biologics, a leading global contract research, development and manufacturing organization (“CRDMO”), and Hangzhou DAC Biotechnology (“Hangzhou DAC”), a global leader in ADC innovation, where Hangzhou DAC’s CPT113 linker-payload has been conjugated to novel antibodies developed by WuXi Biologics against three tumor targets: Protein Tyrosine Kinase 7 (“PTK7”), Mucin 16 (“MUC16”) and Seizure-related Protein 6 (“SEZ6”). We believe the resulting ADCs will be able to target cancers expressing these respective tumor markers precisely and deliver the potent, cytotoxic TOPO1 inhibitor at the site of cancer. Each of these ADCs have demonstrated tumor cell binding, tumor cell line cytotoxicity, and in vivo antitumor activity in preclinical models mimicking tumor progression. We refer to these in-licensed ADC assets as the "ADC Therapies" herein. We anticipate submitting three investigational new drug (“IND”) applications with the U.S. Food and Drug Administration (“FDA”) by mid-2026, starting with HWK-007 for the treatment of solid tumors, including non-small cell lung cancer (“NSCLC”) and ovarian cancer, in the fourth quarter of 2025; HWK-016 for the treatment of cancers of female origin in the fourth quarter of 2025; and HWK-206 for the treatment of cancers of neuroendocrine origin in mid-2026. With these three assets, we believe we have the ability to pursue multiple cancer indications with high potential in large addressable patient populations, including and beyond those indications currently expected to be targeted in the upcoming Phase 1 trials. Our track record of strong execution of novel drug formulation, research, clinical development, and commercialization in oncology, combined with our deep understanding of ADCs positions us to unlock the high potential of this differentiated ADC portfolio. Our management team has extensive experience in the discovery, development, and commercialization of cancer therapeutics, including in senior roles at leading oncology companies. We are supported by our board of directors 27 Table of Contents and specialized scientific advisors, who contribute their deep understanding of drug discovery and development. Furthermore, our investor base includes top life science investors. We believe that our team is well positioned to execute on our strategy to develop and, if approved, commercialize the ADC Therapies and future pipeline assets to ultimately bring broad benefit to cancer patients worldwide. Legacy FYARRO Business . For the periods presented and through the FYARRO Divestiture (as defined below), our lead drug product was FYARRO ® . Nab-sirolimus is a potent inhibitor of the mTOR biological pathway with demonstrated anti-cancer activity in advanced malignant perivascular epithelioid cell tumor (“PEComa”), a rare cancer. We exclusively licensed FYARRO, previously called ABI-009, nab-sirolimus, from Abraxis BioScience, LLC, a wholly owned subsidiary of Celgene Corporation, which is a wholly owned subsidiary of Bristol-Myers Squibb Company (“BMS”). We refer to the development, production and commercial sale of FYARRO herein as the “FYARRO Business”. On February 22, 2022, we launched FYARRO in the United States for treatment of advanced malignant PEComa and recognized net product sales of $7.1 million and $5.4 million for the three months ended March 31, 2025 and 2024, respectively. See “Results of Consolidated Operations” for further discussion of our results. On December 19, 2024, we entered into a Stock Purchase Agreement (the “Divestiture Agreement”) with KAKEN INVESTMENTS INC., a Delaware corporation (“KAKEN”), KAKEN PHARMACEUTICAL CO., LTD (“Guarantor”), and Aadi Subsidiary, Inc., a Delaware corporation and our former wholly owned subsidiary and the operating company for the FYARRO Business (“Aadi Subsidiary”). Under the Divestiture Agreement, KAKEN acquired 100% of the outstanding shares of capital stock of Aadi Subsidiary from us at the closing for a cash payment of $102.4 million (following applicable purchase price adjustments under the Divestiture Agreement) (the "FYARRO Divestiture"). The divestiture transaction closed on March 25, 2025 and, as a result, we no longer operate the FYARRO Business. Recent Developments • License Agreement . On December 19, 2024, we entered into the License Agreement with WuXi Biologics for exclusive rights to certain patents and know-how pertaining to WuXi Biologics’ preclinical ADC Therapies leveraging Hangzhou DAC linker-payload technology targeting each of MUC16, PTK7 and SEZ6. Under the License Agreement, we paid WuXi Biologics a non-refundable, partial upfront payment of $6.0 million on December 19, 2024 and we paid an additional non-refundable, upfront payment of $38.0 million on April 16, 2025, in each case, for the rights and licenses granted to us by WuXi Biologics. • PIPE Financing . On December 19, 2024, we entered into subscription agreements for a private investment in public equity financing (the "2024 PIPE Financing") with certain investors (the "2024 PIPE Investors") for the sale of (i) 21,592,000 shares of our common stock, par value $0.0001 per share, at a purchase price of $2.40 per share, and (ii) 20,076,500 pre-funded warrants, at a purchase price of $2.3999 per pre-funded Warrant, for aggregate net proceeds of $94.5 million. The 2024 PIPE Financing was approved by our stockholders on February 28, 2025 and closed on March 4, 2025. • Divestiture of FYARRO . On December 19, 2024, we entered into the Divestiture Agreement with KAKEN for the sale to KAKEN of 100% of the outstanding shares of capital stock of Aadi Subsidiary and thereby all of our assets related to the FYARRO Business. Per the terms and subject to the conditions of the Divestiture Agreement, we received $102.4 million (following applicable purchase price adjustments under the Divestiture Agreement) from KAKEN in cash at the closing of the FYARRO Divestiture on March 25, 2025. As part of the FYARRO Divestiture, KAKEN acquired the rights to the Aadi Bioscience, Inc. name and any related trademark rights. • Company Name Change . On March 18, 2025, in connection with the FYARRO Divestiture, we changed our name from "Aadi Bioscience, Inc." to "Whitehawk Therapeutics, Inc." and the ticker symbol for our common stock on the Nasdaq Capital Markets was changed to "WHWK". • Employee Matters . In connection with the FYARRO Divestiture, 16 employees remained with Aadi Subsidiary, Inc. and transferred to KAKEN. Following the FYARRO Divestiture, we have 18 full-time or part-time employees. On February 18, 2025, we appointed David Dornan, PhD, as our Chief Scientific Officer. Dr. Dornan brings more than two decades of experience in oncology drug discovery and development, with deep expertise in ADCs and other targeted cancer therapies. Prior to joining us, Dr. Dornan served as Chief Scientific Officer at Elevation Oncology and Bolt Biotherapeutics. • 2021 Equity Incentive Plan . On February 28, 2025 our stockholders approved the amendment and restatement of the 2021 Plan to (i) increase the number of shares available for future grant under the 2021 Plan from 2,000,284 shares to 8,300,284 shares and (ii) increase the 2021 Plan’s default annual automatic share reserve increase 28 Table of Contents occurring on January 1 of each year from 4% of outstanding shares on the last day of the immediately preceding fiscal year to 5%. Upon stockholder approval, such amendment and restatement of the 2021 Plan became effective. WuXi Biologics License Agreement On December 19, 2024, we entered into the License Agreement with WuXi Biologics for exclusive rights to certain patents and know-how pertaining to WuXi Biologics’ preclinical ADC Therapies leveraging Hangzhou DAC linker-payload technology targeting each of MUC16, PTK7 and SEZ6. Under the License Agreement, we paid WuXi Biologics a non-refundable, partial upfront payment of $6.0 million on December 19, 2024 and we paid an additional non-refundable, upfront payment of $38.0 million on April 16, 2025, in each case, for the rights and licenses granted to us by WuXi Biologics. In accordance with the License Agreement, WuXi Biologics is eligible to receive from us (a) up to an aggregate of $265.0 million upon the achievement of certain development milestones, and (b) up to an aggregate of $540.0 million upon the achievement of certain commercial milestones, across all ADC Therapies programs. WuXi Biologics is also entitled to running royalties ranging from low-single-digit to upper-single-digit percentages of annual net sales of licensed products in the territory on a product-by product and region-by-region basis from the first commercial sale of the applicable licensed product in a particular region until the date which is the later of (i) expiration of the last to expire valid claim of a license patent in such region covering the sale of such licensed product in such region or (ii) ten years after the first commercial sale of such licensed product in such region. Each party may terminate the License Agreement in its entirety, or on a program-by-program basis, as applicable, if the other party remains in material breach of the License Agreement following a cure period to remedy the material breach or if the other party is declared insolvent or in similar financial distress. In addition, WuXi Biologics may terminate the License Agreement on a program-by-program basis if we do not meet certain development due diligence milestones. We may terminate the License Agreement in its entirety, or on a program-by-program basis, as applicable, with or without cause. Legacy FYARRO Business Agreements Former BMS License Agreement. We had exclusive rights for certain patents and a non-exclusive license for certain technology and know-how pertaining to ABI-009 (which we refer to as FYARRO) pursuant to an amended and restated license agreement, dated November 15, 2019, as amended August 31, 2021 (the “BMS License Agreement”) with Abraxis BioScience, LLC, a wholly owned subsidiary of Celgene Corporation, which is a wholly owned subsidiary of BMS. Under the BMS License Agreement, BMS is entitled to receive certain development milestone payments, royalties on net sales from licensed products under the agreement and any sublicense fees. We recorded royalties on net product sales of $0.5 million and $0.4 million during the three months ended March 31, 2025 and 2024, respectively, under the terms of this agreement. No development payments related to milestones under this agreement were paid during the three months ended March 31, 2025. See Note 7 to the condensed consolidated financial statements for more information about the BMS License Agreement. On August 30, 2021, we and BMS entered into Amendment No. 1 (the “Amendment”) to the BMS License Agreement. Under the terms of the Amendment, we paid BMS $5.8 million, representing 50% of the previously outstanding payment obligation under the agreement, following the effective time of our 2021 private investment in public equity (PIPE) financing ("2021 PIPE Financing") that occurred in connection with the closing of the reverse merger of Aerpio Pharmaceuticals, Inc. whereby Aspen Merger Subsidiary, Inc., our wholly-owned subsidiary (“Merger Sub”), merged with and into Aadi Subsidiary (formerly known as Aadi Bioscience, Inc., with Aadi Subsidiary surviving as our wholly-owned subsidiary (the “Reverse Merger”). Pursuant to the terms of the amendment, the remaining portion of the previously outstanding payment obligation ($5.8 million), was paid by the third anniversary of the effective time of the 2021 PIPE Financing (i.e., August 26, 2024). As part of its purchase of the FYARRO Business, KAKEN acquired Aadi Subsidiary and our rights and responsibilities under the BMS License Agreement. Former Mirati Collaboration. In October 2022, we entered into a collaboration and supply agreement with Mirati to evaluate t he combination of Mirati’s adagrasib and FYARRO in KRAS G12C mutant NSCLC and other solid tumors. In May 2024, we announced the mutually agreed upon termination of the collaboration and supply agreement with Mirati. Enrollment in the Phase 1/2 study has been closed and the study is winding down. Under the terms of the agreement, Mirati was responsible for sponsoring and operating the Phase 1/2 study and we supplied study drug and jointly shared the cost of the study, which will continue during the winding down process. Impact of Negative Global or National Events Businesses have been and will continue to be impacted by a number of challenging global and national events and circumstances that continue to evolve, including the implementation of tariffs (and, as applicable, their subsequent modification or removal), recent turmoil in the global banking system, public health epidemics, such as the COVID-19 29 Table of Contents pandemic, extreme weather conditions, increased economic and regulatory uncertainty, inflation, rising interest rates, and geopolitical instability, including trade disputes and negotiations and the military conflicts in Ukraine, the Middle East and in other countries. The extent of the impact of these events and circumstances on our business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration and scope of the events and their impact on our development activities, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. We have been and continue to actively monitor the potential impacts that these various events and circumstances may have on our business and we take steps, where warranted, to minimize any potential negative impacts on our business resulting from these events and circumstances. For example, as the COVID-19 pandemic developed, we took numerous steps to help ensure the health and safety of our employees. At this point, the extent to which these global or national events and circumstances may affect our future business, operations and development timelines and plans, including the resulting impact on our expenditures and capital needs, remains uncertain. We will continue to evaluate the impact that these events could have on our operations, financial position, results of operations and cash flows in fiscal year 2025. Key Trends and Factors Affecting Comparability Between Periods • We had built a cross-functional commercial team consisting of marketing, market access and commercial operations. Expenses related to our commercialization of FYARRO, in cluding personnel expenses, sales support, and marketing are included in selling, general and administrative expenses for three months ended March 31, 2025. We expect these expenses to decrease, as compared to prior periods, due to the divestiture of FYARRO which closed on March 25, 2025. • We expect to increase our investment in research and development related to the ADC Therapies. W e will continue to incur significant research and development and other expenses related to such ongoing operations . Under the License Agreement, we paid upfront non-refundable license fees of $6.0 million and $38.0 million to WuXi Biologics in the fourth quarter of 2024 and the second quarter of 2025, respectively . • Commercial sale of FYARRO was launched on February 22, 2022, for the treatment of patients with advanced malignant PEComa. We recorded net product sales of $7.1 million and $5.4 million for the three months ended March 31, 2025 and 2024, respectively. As a result of the FYARRO Divestiture, we no longer commercialize FYARRO as of March 25, 2025. As the commercial sale of FYARRO constituted our sole source of revenue, we do not expect to generate further revenue for the foreseeable future. Liquidity and Capital Resources As of March 31, 2025, we had $231.1 million of cash, cash equivalents and short-term investments. Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into 2028. We recorded net income for the three months ended March 31, 2025 primarily due to the gain on sale related to the divestiture of FYARRO. Prior to the sale, w e have incurred net losses in each year since inception and as of March 31, 2025, we had an accumulated deficit of $259.6 million. These losses have resulted principally from costs incurred in connection with research and development activities, selling, general and administrative costs associated with our operations, costs associated with the Reverse Merger, the FYARRO Divestiture, 2024 PIPE Financing, and the in-licensing of the ADC Therapies. We expect to continue to incur significant expenses and operating losses for the foreseeable future due to the cost of research and development, including conducting preclinical and clinical trials of the ADC Therapies and identifying and designing product candidates and the regulatory approval process for any product candidates we may develop. Basis of Presentation The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the condensed consolidated balance sheets and condensed consolidated statements of operations and comprehensive loss presented herein. The following discussion and analysis are based on our condensed consolidated financial statements contained in this Quarterly Report, which we have prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). You should read the discussion and analysis together with such condensed consolidated financial statements and the related notes thereto. 30 Table of Contents Components of Condensed Consolidated Statements of Operations and Comprehensive Loss Revenue Product Sales, Net FYARRO was approved by the FDA in November 2021 for treating adult patients with locally advanced unresectable or metastatic malignant PEComa. On February 22, 2022, we launched sales of FYARRO to specialty distributors (“SDs”) and a specialty pharmacy (“SP”). We recognize product sales when the SDs and SP obtain control of the product, which occurs upon delivery. Product sales are recorded at the net sales price, which includes provisions for the following allowances which are reflected either as a reduction to the related account receivable or as an accrued liability, depending on how the allowance is settled: • Distribution Fees : Distribution fees include distribution service fees paid to the SDs and SP based on a contractually fixed percentage of the wholesale acquisition cost (“WAC”). Distribution fees are recorded as an offset to product sales based on contractual terms at the time the sale is recognized. • Rebates : Allowance for rebates include mandated discounts under the Medicaid Drug Rebate Program and TRICARE program. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or statutory requirements. The allowance for rebates is based on contracted or statutory discount rates and expected utilization by benefit plan participants. Our estimates for expected utilization of rebates are based on utilization data received from the SDs and SP since product launch. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s activity. If actual future rebates vary from estimates, we may need to adjust prior period accruals, which would affect product sales in the period of adjustment. • Chargebacks: Chargebacks are discounts and fees that relate to contracts with government and other entities purchasing from the SDs and SP at a discounted price. The SDs and SP charge back to us the difference between the price initially paid by the SDs and SP and the discounted price paid to the SDs and SP by these entities. If actual future chargebacks vary from these estimates, we may need to adjust prior period accruals, which would affect product sales in the period of adjustment. • Co-Payment Assistance: We offer co-payment assistance to commercially insured patients meeting certain eligibility requirements. Co-payment assistance is accrued at the time of product sale to the SDs and SP based on estimated patient participation and average co-pay benefit to be paid per a claim. Our estimated amounts are compared to actual program participation and co-pay amounts paid using data provided by third-party administrators. If actual amounts differ from the original estimates the assumptions being applied are updated and adjustment for prior period accruals will be adjusted in the current period. • Product Returns: Consistent with industry practice, we offer the SDs and SP limited product return rights for damages, shipment errors, and expiring product, provided that the return is within a specified period around the product expiration date as set forth in the applicable individual distribution agreement. We do not allow product returns for product that has been dispensed to a patient. As we receive inventory reports from the SDs and SP and have the ability to control the amount of product that is sold to the SDs and SP, we estimate future potential product returns based on the on-hand channel inventory data and sell-through data obtained from the SDs and SP. In arriving at our estimate, we also consider historical product returns, the underlying product demand, and industry data specific to the specialty pharmaceutical distribution industry. Operating Expenses Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and related benefits, including share-based compensation, related to our executive, finance, business development, sales and marketing, and other corporate functions. Other general and administrative expenses include professional fees for legal, auditing, tax and business consulting services, insurance costs, intellectual property and patent costs, facility costs and travel costs. Research and Development Expenses Research and development expenses, which consist primarily of costs associated with our product research and development efforts, are expensed as incurred. Research and development expenses consist primarily of: (i) employee related costs, including salaries, benefits and share-based compensation expense for employees engaged in scientific research and development functions; (ii) third-party contract costs relating to research, formulation, manufacturing, nonclinical studies and clinical trial activities; (iii) external costs of outside consultants who assist with technology 31 Table of Contents development, regulatory affairs, clinical development and quality assurance; (iv) payments made under our third-party licensing agreements; and (v) allocated facility-related costs. Costs for certain activities, such as manufacturing, nonclinical studies and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators. Research and development activities are central to our business. We expect to increase our investment in research and development related to the ADC Therapies. W e will continue to incur significant research and development and other expenses related to such ongoing operations . Cost of Goods Sold Cost of goods sold consist primarily of royalties paid to BMS, costs incurred on sales of FYARRO and costs to manufacture and prepare the product for sales. Other Income (Expense), Net During the three months ended March 31, 2025 o ther income, net consists of gain on sale of a business and interest income earned on cash, cash equivalents and short-term investments. During the three months ended March 31, 2024 o ther income, net consists of interest income earned on cash, cash equivalents and short-term investments. Income Tax Expense During the three months ended March 31, 2025, and 2024, we recognized no income tax expense on the condensed consolidated statements of operations and comprehensive loss. Since our formation in 2011, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or our earned tax credits, due to our uncertainty of realizing a benefit from those items. Results of Operations: The following table presents the results of operations for the periods indicated (in thousands): Three Months Ended March 31, 2025 2024 Revenue Product sales, net $ 7,145 $ 5,353 Total revenue 7,145 5,353 Operating expenses Selling, general and administrative 12,815 10,620 Research and development 8,788 13,593 Cost of goods sold 760 652 Total operating expenses 22,363 24,865 Loss from operations (15,218) (19,512) Other income (expense), net 88,234 1,223 Income (loss) before income tax expense 73,016 (18,289) Income tax expense — — Net income (loss) $ 73,016 $ (18,289) Comparison of the Three Months Ended March 31, 2025 and 2024 Product Sales, Net Our product sales, net consist of sales of FYARRO since its launch in the United States on February 22, 2022. Product sales, net for the three months ended March 31, 2025 and 2024 were $7.1 million and $5.4 million, respectively. The increase in product sales, net of $1.7 million compared to the same period in the prior year was primarily driven by stronger demand. Operating Expenses Selling, General and Administrative Expenses Selling, general and administrative expenses for the three months ended March 31, 2025 and 2024, were $12.8 million and $10.6 million, respectively. The increase of $2.2 million was primarily driven by an increase of $3.8 million in consulting and insurance expenses related to the divestiture of FYARRO, an increase of $2.2 million in legal and other expenses, 32 Table of Contents offset by a decrease of $3.5 million of personnel expenses primarily related to severance expense incurred in 2024 due to the restructuring of our commercial, medical affairs, and corporate support functions, and a $0.3 million decrease in commercial and marketing expenses. Research and Development Expenses The following table presents our research and development expenses for the periods indicated (in thousands): Three Months Ended March 31, 2025 2024 Personnel expenses $ 3,800 $ 6,297 Consultants 383 415 External clinical development 2,389 4,431 Clinical drug product manufacturing 2,085 2,177 Other expenses 131 273 Total research and development expenses $ 8,788 $ 13,593 Research and development expenses for the three months ended March 31, 2025 and 2024 were $8.8 million and $13.6 million, respectively. The decrease of $4.8 million was driven by a $2.7 million decrease in personnel expense, consulting expense, and other expenses, a $2.0 million decrease in clinical development expenses primarily related to the PRECISION1 trial, and a $0.1 million decrease in clinical drug product manufacturing. Cost of Goods Sold Cost of goods sold was $0.8 million and $0.7 million for the three months ended March 31, 2025, and 2024, respectively, primarily reflecting royalties incurred on product sold. Other Income (Expense), Net Other income, net for the three months ended March 31, 2025 was $88.2 million, compared to other income, net of $1.2 million for the three months ended March 31, 2024 . The change was primarily driven by a gain on sale of a business related to the divestiture of FYARRO during the three months ended March 31, 2025 . Liquidity and Capital Resources Overview As of March 31, 2025 we had $231.1 million of cash, cash equivalents and short-term investments. Based on our current plans, we believe our existing cash, cash equivalents and short-term investments will enable us to conduct our planned operations into 2028. We have incurred net losses in each year since inception except for the three months ended March 31, 2025 as we incurred net income due to the sale of a business. As of March 31, 2025, we had an accumulated deficit of $259.6 million. Our net income was $73.0 million and our net loss was $18.3 million for the three months ended March 31, 2025 and 2024, respectively. These losses have resulted principally from costs incurred in connection with research and development activities and selling, general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses for the foreseeable future due to the cost of research and development, including conducting preclinical and clinical trials of the ADC Therapies and identifying and designing product candidates and the regulatory approval process for any product candidates we may develop. On September 22, 2022, we received funding of $72.2 million, net from a private investment in public equity financing (the “2022 PIPE Financing”) with certain investors (the “2022 PIPE Investors”) . On March 17, 2022, we entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), with respect to an “at the market offering” pursuant to which we may offer and sell, from time to time at our sole discretion, shares of our common stock having aggregate gross proceeds of up to $75.0 million through Cowen as our sales agent. Under the Sales Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number or dollar value of shares that may be sold in any one trading day and any minimum price below which sales may not be made. We will pay Cowen 3.0% of the aggregate gross proceeds from each sale of shares of common stock under the Sales Agreement. As of March 31, 2025, no shares of common stock had been sold under the Sales Agreement. 33 Table of Contents The shares of our common stock to be offered and sold under the Sales Agreement will be issued and sold pursuant to our shelf registration statement on the Form S-3 (File No. 333-277018) (the “Shelf Registration Statement”), which was filed with the SEC on February 12, 2024 and which became effective April 30, 2024. No securities have yet been sold under the Shelf Registration Statement. We filed a prospectus supplement with the SEC on April 25, 2025 in connection with the offer and sale of the shares pursuant to the Sales Agreement. The Shelf Registration Statement allows us to sell from time to time up to $150.0 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for our own account in one or more offerings and is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions and our future capital needs. The terms of any offering thereunder will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering. On September 22, 2022, we entered into the purchase agreement for the 2022 PIPE Financing with the 2022 PIPE Investors for the sale of 3,373,526 shares of our common stock for a price of $12.50 per share and Pre-Funded Warrants to purchase an aggregate of 2,426,493 shares of our common stock, at a purchase price of $12.4999 per Pre-Funded Warrant. The Pre-Funded Warrants are exercisable at an exercise price of $0.0001 and will be exercisable until exercised in full. The 2022 PIPE Financing closed on September 26, 2022. Aggregated net proceeds, after deducting certain expenses incurred of $0.3 million related to the issuance of the shares were $72.2 million. On December 19, 2024, we entered into the Subscription Agreement with certain investors (the "2024 PIPE Investors"), pursuant to which we agreed to sell to the 2024 PIPE Investors (i) 21,592,000 shares of the our common stock, par value $0.0001 per share, at a purchase price of $2.40 per share, and (ii) 20,076,500 Pre-Funded Warrants, at a purchase price of $2.3999 per Pre-Funded Warrant, for aggregate net proceeds of $94.5 million, after deducting certain expenses incurred of $5.5 million related to the issuance of shares. The Pre-Funded Warrants have an exercise price of $0.0001 per share of the Company's common stock and are exercisable and will remain exercisable until exercised in full. The holders of Pre-Funded Warrants may not exercise a Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 4.99% or 9.99%, at the election of the holder, of the number of shares of the Company's common stock outstanding immediately after giving effect to such exercise. The holders of Pre-Funded Warrants may increase or decrease such percentages not in excess of 19.99% by providing at least 61 days’ prior notice. The 2024 PIPE Financing closed on March 4, 2025. The following table summarizes our cash flows for the periods indicated (in thousands): Three Months Ended March 31, 2025 2024 Net cash used in operating activities $ (11,864) $ (19,653) Net cash provided by investing activities 115,498 10,555 Net cash provided by (used in) financing activities 95,201 (10) Net decrease in cash, cash equivalents and restricted cash $ 198,835 $ (9,108) Operating Activities Our cash used in operating activities primarily results from our net loss adjusted for non-cash expenses, changes in working capital components, amounts due to contract research organizations to conduct our clinical programs and employee-related expenditures for research and development and selling, general and administrative activities. Our cash flows from operating activities will continue to be affected by spending to advance and support FYARRO in additional indications in the clinic and other operating and general administrative activities, including operating as a public company. For the three months ended March 31, 2025 , cash used in operating activities was $11.9 million and resulted from (i) our net income of $73.0 million, (ii) a $0.8 million net decrease in cash used to fund changes in net operating assets and liabilities, and (iii) $85.6 million non-cash adjustments, which were primarily related gain on sale of business, share based compensation, lease expense, depreciation, and discount amortization on short-term investments. For the three months ended March 31, 2024 , cash used in operating activities was $19.7 million and resulted from (i) our net loss of $18.3 million, and (ii) a $4.8 million net increase in our operating assets and liabilities, and (iii) $3.4 million non-cash adjustments, which were primarily related to share based compensation, discount amortization on short-term investments, lease expense, and depreciation. Investing Activities Cash provided by investing activities for the three months ended March 31, 2025 related to proceeds from the sale of business, maturities of short-term investments of $14.7 million, offset by purchases of fixed assets of $0.6 million. 34 Table of Contents Cash provided by investing activities for the three months ended March 31, 2024 related to maturities of short-term investments of $18.9 million, offset by purchases of short-term investments of $7.6 million and fixed assets of $0.7 million. Financing Activities Cash provided by in financing activities for the three months ended March 31, 2025 related to $100.0 million proceeds received from the sale of common stock and pre-funded warrants to the 2024 PIPE Investors, offset by payment of 2024 PIPE Financing related transaction costs. Cash provided by financing activities for the three months ended March 31, 2024 related to deferred offering costs paid for financing. Contractual Obligations and Commitments In April 2022, we entered into a lease for 10,615 square feet of office space in Morristown, New Jersey. The term of the lease is seventy-three months unless terminated sooner. In connection with the FYARRO Divestiture, KAKEN assumed our sublease for the NJ office space, but we agreed to co-inhabit the office with KAKEN for six months, paying $13,000 per month. In August 2021, we entered into an amendment to extend the lease of our 2,760 square feet of office space in Pacific Palisades, California. We exercised an option, under our prior lease agreement, to extend the term of the lease for an additional three-year period. Included in the renewal were nine months of rent abatement a nd a rent escalation clause. The Pacific Palisades lease expired on February 28, 2025. Rent expense is being recorded on a straight-line basis. Rent expense related to the Pacific Palisades and Morristown leases was $0.1 million and $0.1 million for the three months ended March 31, 2025 and 2024 , respectively . See Note 6 to the condensed consolidated financial statements for details related to future lease payments. In January 2022, we entered into a Negotiated Purchase Order Terms and Conditions for Clinical and Commercial Product, as amended effective as of August 1, 2022, March 31, 2024, and July 31, 2024 (the “Fresenius Agreement”) with Fresenius Kabi, LLC (“Fresenius Kabi”), pursuant to which Fresenius Kabi manufactured FYARRO for us and we purchased FYARRO as a finished drug product from Fresenius Kabi, on a purchase order basis. The Fresenius Agreement contained specific activities such as non-cancellable commitments, minimum purchase commitments, or binding annual forecasts. Under the Fresenius Agreement, which was effective through September 30, 2024, we purchased FYARRO for either clinical or commercial purposes for use in the United States and Canada. As a result of the FYARRO Divestiture, all of our rights and obligations under the Fresenius Agreement transferred to KAKEN. We also have contracts with various organizations to conduct research and development activities, including clinical trial organizations to manage clinical trial activities. The scope of the services under these research and development contracts can be modified and the contracts cancelled by us upon written notice. In the event of cancellation, we would be liable for the cost and expenses incurred to date as well as any close out costs of the service arrangement. On December 19, 2024, we entered into the License Agreement with WuXi Biologics for exclusive rights to certain patents and know-how pertaining to WuXi Biologics’ preclinical ADC Therapies leveraging Hangzhou DAC linker-payload technology targeting each of MUC16, PTK7 and SEZ6. Under the License Agreement, we paid $6.0 million and $38.0 million to WuXi Biologics in the fourth quarter of 2024 and the second quarter of 2025, respectively, in each case, for the rights and licenses granted to us by WuXi Biologics. Critical Accounting Policies and Estimates Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. We believe that the estimates, judgments and assumptions are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. Historically, revisions to our estimates have not resulted in a material change to our financial statements. For a discussion of our critical accounting estimates, please read Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 28, 2025. There have been no material changes to the critical accounting estimates previously disclosed in our Annual Report on Form 10-K. 35 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk. We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide information under this Item.