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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-12 · 125 added, 167 removed, 177 unchanged (62% of the section changed)

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report and our audited consolidated financial statements and related notes included in our final prospectus for our IPO filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”) on September 13, 2024 (the “IPO Prospectus”).

In addition to the historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” in Part II, Item 1A of this Quarterly Report.

You should carefully read the sections entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” to gain an understanding of the important factors that could cause actual results to differ materially from our forward- looking statements.

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report and the audited financial information and the notes thereto included in our Annual Report on Form 10-K that was filed with the Securities and Exchange Commission, or SEC, on March 11, 2025.

This discussion and analysis contains forward-looking statements based upon current beliefs, plans, and expectations related to future events and our future performance that involves risks, uncertainties, and assumptions, such as statements regarding our intentions, plans, objectives, and expectations for our business.

Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q.

See also the section titled “Special Note Regarding Forward-Looking Statements.”

We are a clinical-stage global biopharmaceutical company committed to being a leader in the development and commercialization of transformative immunology-based therapies for patients in need.

With the evolving understanding of the pathogenesis of autoimmune diseases, along with the expansion of promising immunology-based pharmacologic targets, we are building an I&I focused biopharmaceutical company.

Our core business strategy combines disciplined product candidate acquisition with strategic deployment of internal expertise and effective use of external resources.

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We are developing obexelimab as a potential I&I franchise for patients in several autoimmune diseases, representing substantial commercial opportunities individually and in the aggregate.

The first four indications we are pursuing include IgG4-RD through an ongoing registration-directed Phase 3 trial, MS and SLE through Phase 2, double-blind, randomized, placebo-controlled trials, each of which we initiated in the third quarter of 2024, and wAIHA through an ongoing Phase 2/3 trial, currently in the Phase 2 open label portion.

Beyond our lead product candidate, obexelimab, we are advancing a pipeline of clinical programs for the potential treatment of other I&I indications that we may continue to develop and ultimately commercialize with partners.

Our pipeline includes two global programs, ZB002 (an anti-TNFα monoclonal antibody) and ZB004 (a CTLA-4-Ig fusion), and one regional program, ZB001 (also known as VRDN-001, an IGF-1R monoclonal antibody), and related programs, to which we hold the development and commercialization rights for in greater China.

Based on the ongoing clinical studies and clinical data generated to date, we intend to determine future potential indications in which to pursue further clinical development of these programs, and ultimately, if approved, commercialization with one or more partners.

On September 16, 2024, we completed our IPO in which we issued and sold an aggregate of 15,220,588 shares of our common stock, including 1,985,294 shares of common stock sold pursuant to the full exercise of the underwriter’s option to purchase additional shares, at a public offering price of $17.00 per share, for aggregate gross proceeds of $258.7 million.

We received approximately $234.4 million in net proceeds after deducting underwriting discounts and estimated offering expenses payable.

In connection with the IPO, all outstanding shares of convertible preferred stock (“Preferred Stock”) converted into an aggregate of 24,978,715 shares of common stock.

On October 21, 2024, we entered into a Novation Agreement (the “Novation Agreement”) with Tenacia Biotechnology (Hong Kong) Co., Limited (“Tenacia”), under which we transferred our rights and obligations under our agreements with Dianthus to Tenacia.

As partial consideration for the Novation Agreement, we will receive a non-creditable, non-refundable upfront fee of $5.0 million from Tenacia.

The first three indications we are pursuing include IgG4-RD through an ongoing registration-directed Phase 3 trial, and relapsing multiple sclerosis (“RMS”) and systemic lupus erythematosus (“SLE”) through ongoing Phase 2, double-blind, randomized, placebo-controlled trials, each of which are currently enrolling.

Beyond our lead product candidate, obexelimab, we have two other programs for the potential treatment of other I&I indications that we may continue to advance and ultimately commercialize with partners.

These consist of ZB002 and ZB004.

We retain global rights for both assets.

In addition, we hold the development and commercialization rights to one regional program, ZB001, and related programs, which were exclusively sublicensed to a partner in China, as discussed below.

On September 16, 2024, we completed our initial public offering (“IPO”) in which we issued and sold an aggregate of 15,220,588 shares of our common stock, including 1,985,294 shares of common stock sold pursuant to the full exercise of the underwriter’s option to purchase additional shares, at a public offering price of $17.00 per share, for aggregate gross proceeds of $258.7 million.

We received $234.3 million in net proceeds after deducting underwriting discounts, commissions and other offering expenses.

On October 21, 2024, we entered into the Novation Agreement with Tenacia, under which we transferred our rights and obligations under our agreements with Dianthus to Tenacia for ZB005.

As partial consideration for the Tenacia Agreement, we received a non-creditable, non-refundable upfront fee of $5.0 million from Tenacia.

In addition, we are eligible to receive up to $86.0 million upon the achievement of certain future regulatory and commercial milestones.

On January 24, 2025, the Company entered into the Zai License Agreement, with Zai, under which the Company granted Zai an exclusive sublicense to develop and commercialize ZB001 and related programs in greater China.

As partial consideration for the Zai License Agreement, the Company received an upfront fee of $10.0 million from Zai.

In addition, the Company is eligible to receive up to $96.0 million upon the achievement of certain future development and commercial milestones and royalty percentage rates from the low to mid-single digits, net of pass-through obligations due to Viridian.

Since inception, our operations have focused on research and development activities with respect to our product candidates as described above, as well as raising capital, business planning, organizing and staffing our company, establishing our intellectual property portfolio, establishing arrangements with third parties for the manufacture of our product candidates and related raw materials, and providing general and administrative support for these operations.

Through September 30, 2024, we have financed our operations primarily with the proceeds from the issuance of Preferred Stock, our convertible notes, payments received from Bristol-Myers Squibb (“BMS”) under our strategic license and collaboration agreement (the “BMS Agreement”) and from the sale of common stock in our IPO completed in September 2024.

To date, we have no product candidates approved for commercial sale in any country and have not generated any revenue from product sales.

Through March 31, 2025, we have financed our operations primarily with the proceeds from the issuance of convertible preferred stock, our convertible notes, payments received under our license and collaboration agreements and from the sale of common stock in our IPO completed in September 2024.

We have incurred significant operating losses and negative cash flows since inception.

Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates.

Our net losses for the three and nine months ended September 30, 2024 were $38.6 million and $104.4 million, respectively, and we recorded net income of $35.6 million and a net loss of $12.5 million, for the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, we had an accumulated deficit of $334.8 million.

Our net losses for the three months ended March 31, 2025 and 2024, were $33.6 million and $27.8 million, respectively.

As of March 31, 2025, we had an accumulated deficit of $421.0 million.

We expect to continue to incur significant and increasing losses for the foreseeable future.

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● incur additional costs associated with being a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance with an exchange listing and the SEC requirements, director and officer insurance premiums and investor relations costs.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate, and we cannot assure you that we will ever generate significant revenue or profits.

We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate, and we cannot assure investors that we will ever generate significant revenue or profits.

In addition, if we obtain regulatory approval for a product candidate and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities.

We expect to continue to incur significant losses for the foreseeable future as we continue to advance the development of our product candidates and incur additional costs associated with being a public company.

Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical studies and expenditures related to our research and development activities.

Furthermore, we expect to incur additional costs associated with operating as a public company, including significant audit, legal, regulatory and tax-related expenses, as well as director and officer insurance premiums and investor relations costs that we did not incur as a private company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy as a public company.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued research and development and other current liabilities.

We will need to continue to raise substantial additional capital to support our continuing operations and pursue our growth strategy as a public company.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity financings, debt financings or other capital sources, which could include collaborations with other companies, or other strategic transactions and licensing agreements.

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If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of September 30, 2024, we had $386.8 million in cash, cash equivalents and investments.

We believe that our cash, cash equivalents and investments as of September 30, 2024 will be sufficient to fund our operations and capital expenditure requirements into the fourth quarter of 2026.

As of March 31, 2025, we had $314.2 million in cash, cash equivalents and investments.

We believe that our cash, cash equivalents and investments as of March 31, 2025 will be sufficient to fund our operations and capital expenditure requirements into the fourth quarter of 2026.

We have based this estimate on our current assumptions, which may prove to be wrong, and we may exhaust our available capital resources sooner than we expect.

See section titled “Liquidity and Capital Resources”.

Significant Risks and Uncertainties

The current geopolitical, trade, regulatory and economic environment, including, but not limited to the imposition of new tariffs or increases in tariff rates and other trade measures, may materially affect our business and operating results by increasing the costs of our clinical trial materials and supplies, which in turn increase our overhead costs.

Additionally, the ongoing recession risk together with the foregoing, could result in further economic uncertainty and volatility in the capital markets in the near term and, as a result could negatively affect our operations.

Furthermore, such economic conditions have produced downward pressure on share prices.

Such economic conditions could increase our operating costs, including our labor costs and research and development costs.

For example, we import drug products and other

components from and into China for use in the manufacturing process and in our clinical studies, and such components and products are subject to tariffs, which we anticipate will result in increased costs.

Our operating and labor costs and research and development costs may also be negatively impacted due to supply chain constraints, global geopolitical tensions, worsening macroeconomic conditions and employee availability and wage increases, which may result in additional stress on our working capital.

Additionally, we are subject to other challenges and risk specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the clinical stage biopharmaceutical industry.

Components of Our Results of Operations

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Our revenue has been derived from collaboration arrangements and license fees.

Collaboration Revenue

Collaboration revenue is generated exclusively from our collaboration arrangement with BMS.

License and Collaboration Revenue

License and collaboration revenue is generated from our BMS Agreement, our Tenacia Agreement and our Zai License Agreement.

Pursuant to the BMS Agreement, we sublicensed the rights to develop and commercialize obexelimab in Japan, South Korea, Taiwan, Singapore, Hong Kong and Australia (the “BMS Territory”).

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Sales milestones and royalties on future sales will be recognized in the period the related sales occur.

For a more detailed description of this agreement, see Note 8 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Pursuant to the Tenacia Agreement, we transferred our rights, title, interest, liabilities, duties and obligations under the Option and License Agreements with Dianthus to Tenacia for ZB005.

The revenue recognized to date pursuant to this arrangement relates to the novation of the ZB005 license, asset transfer and technology transfer, which was recognized upon delivery of the license, related assets and technology transfer.

We will recognize development and regulatory milestones as defined in the Tenacia Agreement when the achievement of the underlying milestone events is deemed probable, which is expected to be upon achievement.

Sales milestones and royalties on future sales will be recognized in the period the related sales occur.

Pursuant to the Zai License Agreement, we granted Zai an exclusive sublicense to develop and commercialize ZB001 and related programs in greater China.

As partial consideration for the Zai License Agreement, we received an upfront fee of $10.0 million from Zai.

In addition, we are eligible to receive up to $96.0 million upon the achievement of certain future development and commercial milestones and royalty percentage rates from the low to mid-single digits, net of pass-through obligations due to Viridian.

For a more detailed description of these agreements, see Note 7, License and Collaboration Revenue, to our condensed consolidated financial statements in this Quarterly Report.

Operating Expenses

Our operating expenses consists of (i) research and development expenses, (ii) general and administrative expenses and (iii) acquired in-process research and development expenses.

Our operating expenses consist of (i) research and development expenses, and (ii) general and administrative expenses.

Research and Development Expenses

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Payments for these external development activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed consolidated financial statements as prepaid expenses or accrued expenses.

Nonrefundable advance payments

for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development.

Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development.

The capitalized amounts are expensed as the related goods are delivered or the services are performed.

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Product candidates in later stages of clinical development will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials and additional manufacturing activities.

There are numerous factors associated with the successful development and commercialization of any product candidates we may develop, including the safety and efficacy of our product candidates, investment in our clinical programs, manufacturing capability and competition with other products, and future commercial and regulatory factors beyond our control that will impact our clinical development program and plans.

There are numerous factors associated with

the successful development and commercialization of any product candidates we may develop, including the safety and efficacy of our product candidates, investment in our clinical programs, manufacturing capability and competition with other products, and future commercial and regulatory factors beyond our control that will impact our clinical development program and plans.

The successful development of our current product candidates, or any product candidates we may develop in the future is highly uncertain.

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● the performance of our future collaborators, if any;

● our ability to establish arrangements with third-party manufacturers for the commercial supply of products that receive marketing approval, if any;

● our ability to establish and maintain arrangements with third-party manufacturers for the commercial supply of products that receive marketing approval, if any;

● development and timely delivery of commercial-grade drug formulations that can be used in our planned clinical trials and for commercialization;

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● the costs and timing of establishing or securing sales and marketing capabilities for our product candidates if approved;

● the imposition of new laws and regulations, including those relating to labor conditions and safety standards, information and data transfer, imports, duties, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds, particularly new or increased tariffs imposed on imports, and as a result supply-related costs, from countries where our suppliers operate, as well as tariffs that impact the biopharmaceutical industry generally;

● our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;

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In addition, if we obtain regulatory approval for our current product candidates or any product candidates we may develop in the future and do not enter into a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support product sales, marketing and distribution activities.

Acquired In-Process Research and Development Expenses

We expense acquisition costs for assets purchased for use in research and development activities that have no alternative future use as in-process research and development (“IPR&D”) expense as of the acquisition date.

When we become obligated to make contingent milestone payments under the terms of the agreements by which we acquired the IPR&D assets, we will recognize additional IPR&D expense.

We measure and recognize contingent consideration in the period in which the related milestone is achieved and becomes payable.

We will also incur pre-commercialization expenses to facilitate commercial readiness, if a product candidate is approved.

Total Other Income (Expense), Net

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Other income (expense), net primarily consists of interest income generated from cash equivalents and investments and realized and unrealized gains and losses on foreign currency transactions.

Change in Fair Value of Convertible Notes

In August 2023, we issued a convertible note to BMS (the “BMS Note”) in connection with the BMS Agreement as described above.

We elected to record the BMS Note at fair value upon issuance and to subsequently remeasure the note at fair value at the end of each reporting period with the change in fair value being recorded as a component of other expense in our condensed consolidated statement of operations and comprehensive loss.

In May 2024, in connection with our Series C convertible preferred stock (“Series C Preferred Stock”) financing, the BMS Note plus accrued interest was automatically converted into 12,284,686 shares of Series C Preferred Stock.

We reassessed the estimated fair value of the BMS Note immediately prior to the conversion utilizing the fair value of the shares of Series C Preferred Stock for which the note subsequently converted into and recorded the change in fair value as a component of other income (expense), net in our condensed consolidated statement of operations and comprehensive loss during the nine months ended September 30, 2024.

Since our inception, we have not recorded income tax benefits for any of our deferred tax assets, including the net operating losses (“NOLs”) incurred or the research and development tax credits generated in each year, as we have concluded that it is more likely than not that these deferred tax assets will not be realized.

We did not record an income tax provision for the nine months ended September 30, 2024.

Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

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

Three Months Ended September 30,

Collaboration revenue

Total revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

(Loss) Income from operations

Other income (expense), net:

Other income (expense), net

Total other income (expense), net

Net (loss) income

There was no collaboration revenue for the three months ended September 30, 2024.

Collaboration revenue was $50.0 million for the three months ended September 30, 2023, and was derived from our BMS Agreement.

Research and Development Expenses

The following table summarizes our research and development expenses for each of the periods presented (in thousands):

Three Months Ended September 30,

Direct research and development expenses by program:

Global programs (ZB002 & ZB004)

Regional programs (ZB001 & ZB005)

Unallocated research and development expenses:

Personnel expenses (including stock-based compensation)

Other expenses

Total research and development expenses

Research and development expenses were $33.5 million for the three months ended September 30, 2024, compared to $9.4 million for the three months ended September 30, 2023.

The increase of $24.2 million was primarily attributable to the following:

● a $20.0 million increase in costs related to the development of obexelimab, our lead product candidate, driven by a $12.0 million increase in clinical trial costs and a $7.6 million increase in manufacturing costs for clinical trial materials;

● a $0.4 million decrease in costs related to our global programs, including a $0.1 million increase related to ZB002 and a $0.4 million decrease related to ZB004;

● a $0.6 million increase in costs related to our regional problems, including a $0.7 million decrease related to ZB001 as the ongoing clinical studies wound down and a $1.3 million increase related to ZB005, largely driven by an increase in clinical activities;

● a $3.8 million increase in personnel costs, including a $2.5 million increase in salary and benefit related expense, primarily due to an increase in headcount, a $0.7 million increase in stock-based compensation expense, and a $0.5 million increase in external contractor expense and other personnel costs.

General and Administrative Expense

The following table summarizes our general and administrative expenses for each of the periods presented (in thousands):

Three Months Ended September 30,

Personnel related expenses (including stock-based compensation)

Legal and professional fees

Facilities and supplies

Other expenses

Total general and administrative expenses

General and administrative expenses were $7.5 million for the three months ended September 30, 2024, compared to $5.0 million for the three months ended September 30, 2023.

The increase of $2.4 million was primarily attributable to the following:

a $2.2 million increase in personnel costs, including a $1.1 million increase in stock-based compensation expense, and a $1.1 million increase in salary and benefit related expense, primarily due to an increase in headcount;

a $0.3 million decrease in professional fees, including legal, audit and tax expenses, primarily due to higher costs in 2023 associated with preparation for the IPO;

a $0.4 million increase in other expenses, including insurance and other variable costs related to operating as a public company.

Total Other Income (Expense), Net

Total other income (expense), net was $2.4 million for the three months ended September 30, 2024, and was made up of interest income of $2.3 million, partially offset by realized and unrealized gains and losses on foreign currency transactions of $0.1 million.

Total other expense, net was less than $0.1 million for the three months ended September 30, 2023, and was made up primarily of immaterial realized and unrealized gains and losses on foreign currency transactions.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Comparison of the Three Months Ended March 31, 2025 and 2024

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

Nine Months Ended September 30,

Collaboration revenue

Three Months Ended March 31,

Increase (Decrease)

License and collaboration revenue

Total revenue

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General and administrative

Acquired in-process research and development

Total operating expenses

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Fair value adjustments to convertible notes

Other income (expense), net

Other income, net

Total other income (expense), net

There was no collaboration revenue for the nine months ended September 31, 2024.

Collaboration revenue was $50.0 million for the nine months ended September 30, 2023, and was derived from our BMS Agreement.

Loss before income taxes

Income tax benefit

We recognized license and collaboration revenue of $10.0 million for the three months ended March 31, 2025, related to the one-time non-refundable upfront cash payment under the Zai License Agreement that was recognized upon delivery of the license and related technology transfer.

We did not recognize any license and collaboration revenue during the three months ended March 31, 2024.

Research and Development Expenses

The following table summarizes our research and development expenses for each of the periods presented (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Increase (Decrease)

Direct research and development expenses by program:

Global programs (ZB002 & ZB004)

Regional programs (ZB001 & ZB005)

Other programs (ZB002 & ZB004)

Partnered regional programs (ZB001 & ZB005)

Unallocated research and development expenses:

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Total research and development expenses

Research and development expenses were $90.0 million for the nine months ended September 30, 2024, compared to $39.6 million for the nine months ended September 30, 2023.

Research and development expenses were $34.9 million for the three months ended March 31, 2025, compared to $22.6 million for the three months ended March 31, 2024.

The increase of $12.3 million was primarily attributable to the following:

● a $42.1 million increase in costs related to the development of obexelimab, our lead product candidate, driven by a $22.9 million increase in costs related to our ongoing lead trial in IgG4-RD and the initiation of additional clinical trials, and a $19.2 million increase in manufacturing costs for clinical trial materials;

● a $2.1 million decrease in costs related to our global programs, including a $1.1 million decrease related to ZB002 and a $0.9 million decrease related to ZB004, largely driven by a decrease in clinical and non-clinical activities as these programs were deprioritized;

● a $0.8 million increase in costs related to our regional programs, including a $1.4 million decrease related to ZB001 as the ongoing clinical studies winded down and a $2.0 million increase related to ZB005, largely driven by an increase in clinical and non-clinical activities;

● a $11.2 million increase in costs related to the development of obexelimab, our lead product candidate, driven by a $7.4 million increase in clinical trial costs and a $3.6 million increase in manufacturing costs for clinical trial materials;

● a $1.5 million decrease in costs related to our partnered regional programs, including a $0.9 million decrease related to ZB005, largely driven by a decrease in clinical activities and a $0.6 million decrease related to ZB001 as the ongoing clinical studies were out licensed;

● a $3.2 million increase in personnel costs, including a $1.9 million increase in salary and benefit related expense, primarily due to an increase in headcount, a $1.2 million increase in stock-based compensation expense, and a $0.1 million increase in external contractor expense and other personnel costs.

General and Administrative Expense

General and Administrative Expenses

The following table summarizes our general and administrative expenses for each of the periods presented (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Increase (Decrease)

Personnel related expenses (including stock-based compensation)

Legal and professional fees

Facilities and supplies

Other expenses

Total general and administrative expenses

General and administrative expenses were $18.3 million for the nine months ended September 30, 2024, compared to $12.8 million for the nine months ended September 30, 2023.

General and administrative expenses were $12.4 million for the three months ended March 31,2025, compared to $4.9 million for the three months ended March 31,2025.

The increase of $7.5 million was primarily attributable to the following:

● a $3.6 million increase in personnel costs, including a $1.6 million increase in stock-based compensation expense, and a $2.1 million increase in salary and benefit related expense, primarily due to an increase in headcount, partially offset by a $0.1 million decrease in external contractor expenses;

a $5.5 million increase in personnel costs, including a $3.3 million increase in stock-based compensation expense, a $1.8 million increase in salary and benefit related expense, primarily due to an increase in headcount, personnel associated with pre-commercialization activities, and a $0.5 million increase in recruiting expense;

a 1.0 million increase in professional fees, including legal, audit and tax expenses, primarily attributable to operating as a public company;

● a $1.0 million increase in other expenses, including insurance and other variable costs related to operating as a public company.

Acquired In-Process Research and Development Expenses

There was no acquired IPR&D expense recorded for the nine months ended September 30, 2024.

Acquired IPR&D was $10.0 million for the nine months ended September 30, 2023, and was made up of a $10.0 million development milestone payment related to obexelimab.

a $1.0 million increase in facilities and other expenses, is primarily attributable to facility, insurance and other variable costs related to operating as a public company.

Total Other Income (Expense), Net

Total other income (expense), net was $3.9 million for the nine months ended September 30, 2024, and consisted of interest income of $4.7 million, partially offset by the change in fair value of the BMS Note of $0.8 million upon remeasurement immediately prior to conversion.

Total other expense, net was $0.2 million for the nine months ended September 30, 2023, and was made up primarily of immaterial realized and unrealized gains and losses on foreign currency transactions.

For the three months ended March 31, 2025, total other income (expense), increased from the comparable period in the prior year primarily due to interest income as a result of higher cash, cash equivalents and investments.

Liquidity and Capital Resources

Sources of Liquidity

We have incurred significant operating losses since inception.

We have not yet commercialized any product candidates, and we do not expect to generate revenue from sales of any product candidates or from other sources for several years, if

As of September 30, 2024, we had $386.8 million in cash, cash equivalents, and investments and we had an accumulated deficit of $334.8 million.

Through September 30, 2024, we have funded our operations primarily with gross proceeds of $358.0 million through the sale and issuance of our Preferred Stock, our convertible notes, as well as $50.0 million through our BMS Agreement, and most recently, from the sale of common stock in our IPO.

The following table provides information regarding our cash flows for each of the periods presented (in thousands):

Nine Months Ended

September 30,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and restricted cash

Net increase in cash, cash equivalents and restricted cash

Net Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2024 was $81.2 million, and was primarily due to our net loss of $104.4 million, partially offset by a $6.3 million increase in accounts payable, a $10.2 million increase in accrued expenses, a $0.5 million increase in prepaid expenses and other assets, a $0.8 million increase in the fair value of our BMS Note liability and $5.3 million of stock-based compensation expense.

The increase in accrued expenses and accounts payable was primarily attributable to an increase in research and development expenses, while the increase in prepaid expenses and other assets was primarily due to the timing of vendor payments.

Net cash used in operating activities for the nine months ended September 30, 2023 was $15.1 million, and was primarily due to our net loss of $12.5 million, a $6.8 million decrease in accrued expenses, a $4.7 million decrease in prepaid expenses and other assets, and a $3.5 million decrease in accounts payable, partially offset by a $10.0 million acquisition of in-process research and development and $2.4 million of stock-based compensation expense.

The decrease in accrued expenses and accounts payable was primarily attributable to a decrease in research and development expenses, while the decrease in prepaid expenses and other assets was primarily due to the timing of vendor payments.

Net Cash Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2024 was $26.8 million and consisted of purchases of investments of $26.8 million and purchases of property and equipment of $0.1 million.

There was no cash used in or provided by investing activities for the nine months ended September 30, 2023.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2024 was $411.1 million, resulting from $178.4 million in net proceeds received from the issuance and sale of shares of our Series C Preferred Stock, net proceeds from our IPO of $234.4 million, and $0.2 million of proceeds received from the exercise of stock options, partially offset by a $1.9 million payment of offering costs.

Net cash provided by financing activities for the nine months ended September 30, 2023 was $20.1 million, resulting from $20.0 million in proceeds received from the sale of the BMS Note and $0.1 million in proceeds received from the exercise of stock options

We have not yet commercialized any product candidates, and we do not expect to generate revenue from sales of any product candidates or from other sources for several years, if at all.

As of March 31, 2025, we had $314.2 million in cash, cash equivalents, and investments and we had an accumulated deficit of $421.0 million.

Through March 31, 2025, we have funded our operations primarily with gross proceeds of $358.0 million through the sale and issuance of our preferred stock, our convertible notes, as well as $65.0 million through our BMS Agreement, Tenacia Agreement and Zai Agreement, and most recently, from the sale of common stock in our IPO for which we received $234.3 million in net proceeds, after deducting underwriting discounts, commissions and other offering expenses.

Future Funding Requirements:

As of September 30, 2024, we had $386.8 million in cash, cash equivalents and investments.

Based on our current operating plan, we believe that our existing cash will be sufficient to fund our operations and capital expenditure requirements for at least twelve months from the date that our financial statements are issued.

We believe that our available cash, cash equivalents and investments, as of March 31, 2025, are sufficient to fund our operations and capital expenditure requirements for at least the next 12 months from the filing of this Quarterly Report.

We estimate that our existing cash, cash equivalents and investments will be sufficient to fund our projected operations and capital expenditure requirements into the fourth quarter of 2026.

We have based this estimate on assumptions that may prove to be wrong, and we could expend our capital resources sooner than we expect.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through clinical development, seek regulatory approval, and pursue commercialization of any approved drug candidates.

We expect that our research and development and general and administrative costs will increase in connection with our planned research and clinical activities.

In addition, we expect to incur additional costs associated with operating as a public company, including significant audit, legal, regulatory and tax-related expenses, as well as director and officer insurance premiums, investor relations costs, and other expenses that we did not incur as a private company.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses, and prepaid expenses.

If we receive regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to drug manufacturing, sales, marketing and distribution, depending on where we choose to commercialize.

We may also require additional capital to pursue in-licenses or acquisitions of other product candidates.

As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future.

Because of the numerous risks and uncertainties associated with research, development, and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements.

Our primary uses of capital are, and we expect to continue to be, compensation and related expenses, third-party clinical research and development services, manufacturing costs, legal and other regulatory expenses and general overhead costs.

We have based our estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we currently expect.

Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials is uncertain.

We cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability.

Our future funding requirements will depend on, and could increase significantly as a result of, many factors, including:

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Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, which could include collaborations, strategic alliances, or licensing arrangements.

We currently have no credit facility or committed sources of capital.

Adequate additional funds may not be available to us on acceptable terms, or at all.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our existing stockholders may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect the rights of such stockholders.

Debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business.

If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research program or product candidates, or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financing and additional funding from licenses, strategic alliances and collaboration arrangements.

Except for any obligations of our collaborators to reimburse us for research and development expenses or make milestone or royalty payments under our agreements with them, we will not have any committed external source of liquidity.

We have incurred losses and cumulative negative cash flows from operations since our inception.

We anticipate that we will continue to incur significant losses for at least the next several years.

We expect our research and development, and general and administrative expenses will continue to increase.

As a result, we will need additional capital to fund our operations, which we may raise through a combination of the sale of our equity, debt financings, or other sources, including potential collaborations.

To the extent that we raise capital through the future sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders.

If we enter into debt financing arrangements, if available, they may involve restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business.

If we raise additional funds through licenses, strategic alliances or collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or drug candidates, or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.

The following table provides information regarding our cash flows for each of the periods presented (in thousands):

Three Months Ended March 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended March 31, 2025 was $37.1 million, and was primarily due to our net loss of $33.6 million, partially offset by $5.4 million of stock-based compensation expense, $2.9 million increase in accounts payable, a $0.4 million increase in prepaid expenses and other assets and a $11.2 million decrease in accrued expenses.

The net decrease in accounts payable and accrued expenses was primarily due to the timing of vendor payments.

Net cash used in operating activities for the three months ended March 31, 2024 was $19.1 million, and was primarily due to our net loss of $27.8 million, partially offset by a $3.4 million increase in accounts payable, a $1.8 million increase in prepaid expenses and other assets, a $1.5 million increase in other current liabilities, $0.9 million of stock-based compensation expense, $0.7 million increase in the fair value of our BMS Note Liability and a $0.3 million increase in accrued expenses.

The increase in accrued expenses and accounts payable was primarily due to an increase in research and development expenses, while the increase in prepaid expenses and other assets was primarily due to the timing of vendor payments.

Net Cash Used in Investing Activities

Net cash used in investing activities for the three months ended March 31, 2025 was $86.3 million and consisted primarily of proceeds from sales and maturities of investments of $12.9 million, offset by purchases of investments of $99.1 million.

Net cash used in investing activities for the three months ended March 31, 2024 was less than $0.1 million and consisted of purchases of property and equipment.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2025 was $0.1 million, resulting from $0.1 million of proceeds received from the exercise of stock options.

Net cash used in financing activities for the three months ended March 31, 2024 was $0.6 million, resulting from a $0.7 million in payment of offering costs, partially offset by less than $0.1 million of proceeds received from the exercise of stock options.

Material Cash Requirements for Known Contractual and Other Obligations

During the three months ended September 30, 2024, there were no material changes to our contractual obligations and commitments from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our IPO Prospectus.

During the three months ended March 31, 2025, there were no material changes to our contractual obligations and commitments from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Critical Accounting Policies and Significant Judgments and Estimates

This management’s discussion and analysis is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles.

The preparation of these condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reported periods.

Management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The preparation of these condensed consolidated financial statements requires us to make judgements, assumptions and estimates that may affect the reported amounts of assets and liabilities, equity, and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reported periods.

On an ongoing basis, we evaluate our judgments, assumptions and estimates in light of changes in circumstances, facts and experiences.

We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experiences.

Actual results may differ from these estimates under different assumptions or conditions.

The effects of material revisions in estimates, if any, will be reflected in the condensed consolidated financial statements prospectively from the date of change in estimates.

During the three months ended September 30, 2024, there were no material changes to our critical accounting policies from those described in the IPO Prospectus.

There have been no material changes to our critical accounting policies from those described under our “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Recent Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 in our audited consolidated financial statements included in our the IPO Prospectus.

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, Summary of Significant Accounting Policies , in this Quarterly Report on Form 10-Q.

Implications of Being an Emerging Growth Company and Smaller Reporting Company

We qualify as an “emerging growth company” as defined in the JOBS Act.

As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non binding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold nonbinding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions until December 31, 2029 or such earlier time that we are no longer an emerging growth company.

We would cease to be an emerging growth company earlier if we have more than $1.235 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non affiliates (and we have been a public company for at least twelve months and have filed one Annual Report on Form 10-K) or we issue more than $1.0 billion of non convertible debt securities over a three year period.

We would cease to be an emerging growth company earlier if we have more than $1.235 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non-affiliates (and we have been a public company for at least twelve months and have filed one Annual Report on Form 10-K) or we issue more than $1.0 billion of nonconvertible debt securities over a three year period.

For so long as we remain an emerging growth company, we are permitted, and intend, to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.

We may choose to take advantage of some, but not all, of the available exemptions.

In addition, the JOBS Act provides that, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.

In addition, the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”) provides that, an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.

This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted.

Therefore, the reported results of operations contained in our financial statements may not be directly comparable to those of other public companies.

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates following the IPO is less than $100.0 million during the most recently completed fiscal year.

We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million.

We may continue to be a smaller

reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis