Orchestra BioMed Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2025

Unless otherwise indicated or the context otherwise requires, references to “Orchestra,” “Orchestra’s,” “the Company,” “we,” “its” and “our” refer to Orchestra BioMed Holdings, Inc. and its consolidated subsidiaries. All references to years, unless otherwise noted, refer to the Company’s fiscal years, which end on December 31.

The following discussion should be read together with “Special Note Regarding Forward-Looking Statements” and the Company’s unaudited condensed consolidated financial statements, together with the related notes thereto, included elsewhere in this Quarterly Report on Form 10-Q (the “Consolidated Financial Statements”), and the Company’s audited consolidated financial statements, together with the related notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 31, 2025.

Closing of Business Combination

Prior to January 26, 2023, we were a special purpose acquisition company formed for the purpose of entering into a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. On January 26, 2023, we consummated the business combination contemplated by the Agreement and Plan of Merger, dated as of July 4, 2022 (as amended by Amendment No. 1 to Agreement and Plan of Merger, dated July 21, 2022, and Amendment No. 2 to Agreement and Plan of Merger, dated November 21, 2022, the “Merger Agreement”) by and among Health Sciences Acquisitions Corporation 2, a special purpose acquisition company incorporated as a Cayman Islands exempted company in 2020 and Orchestra’s predecessor (“HSAC2”), HSAC Olympus Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of HSAC2 (“Merger Sub”), and Orchestra BioMed, Inc. Pursuant to the Merger Agreement, (i) HSAC2 deregistered in the Cayman Islands in accordance with the Companies Act (2022 Revision) (As Revised) of the Cayman Islands and domesticated as a Delaware corporation in accordance with Section 388 of the Delaware General Corporation Law (the “Domestication”) and (ii) Merger Sub merged with and into Orchestra BioMed, Inc., with Orchestra BioMed, Inc. as the surviving company in the merger and, after giving effect to such merger, continuing as a wholly owned subsidiary of Orchestra (the “Merger” and, together with the Domestication and the other transactions contemplated by the Merger Agreement, the “Business Combination”). As part of the Domestication, we changed our name from “Health Sciences Acquisitions Corporation 2” to “Orchestra BioMed Holdings, Inc.” On January 27, 2023, our common stock (“Company Common Stock”) began trading on the Nasdaq Global Market under the symbol “OBIO.”

Overview

We are a biomedical innovation company accelerating high-impact technologies to patients through risk-reward sharing partnerships with leading medical device companies. Our partnership-enabled business model focuses on forging strategic collaborations with leading medical device companies to drive successful global commercialization of products we develop. We are led by a highly accomplished, multidisciplinary management team and a board of directors (our “Board”) with extensive experience in all phases of therapeutic device development. Our business was formed in 2018 by assembling a pipeline of multiple late-stage clinical product candidates originally developed by our founding team.

Our flagship product candidates are Atrioventricular Interval Modulation Therapy (“AVIM Therapy”) for the treatment of hypertension (“HTN”), the leading risk factor for death worldwide, and Virtue® Sirolimus AngioInfusion™ Balloon (“Virtue SAB”) for the treatment of atherosclerotic artery disease, the leading cause of mortality worldwide. We have an exclusive license and collaboration agreement with Medtronic Inc. (an affiliate of Medtronic plc) (“Medtronic”) for the development and commercialization of AVIM Therapy for the treatment of uncontrolled HTN in patients indicated for a cardiac pacemaker (as amended, the “Medtronic Agreement”). We are actively conducting a double-blind, randomized, global pivotal study (the “BACKBEAT study”), enrolling up to 500 patients with uncontrolled hypertension who are indicated for a Medtronic dual-chamber pacemaker. We currently estimate completion of enrollment of the BACKBEAT study in mid-2026. We recently initiated patient enrollments in the Virtue SAB in the Treatment of Coronary In-Stent Restenosis (“ISR”) Trial (the “Virtue Trial”) for our U.S. investigational device exemption (“IDE”) pivotal study randomizing Virtue SAB vs. Boston Scientific Corporation’s AGENT™ drug coated balloon. Designed to support regulatory approval of Virtue SAB, the Virtue Trial is expected to enroll 740 patients in the United States with enrollment completion currently planned for mid-2027. We cannot provide assurance that we will be able to complete enrollment of the BACKBEAT study or the Virtue Trial in the timeframes we anticipate.

Since Orchestra BioMed, Inc.’s inception, we have devoted the substantial majority of our resources to performing research and development and clinical activities in support of our product development and collaboration efforts. We have funded our operations primarily through the issuance of common stock, convertible preferred stock, and warrants, as well as proceeds from the Business Combination, our distribution agreement with Terumo (the “Terumo Agreement”), borrowings under debt arrangements, the sale of future revenues, and, to a lesser extent, from product revenue from our subsidiary, FreeHold Surgical, LLC. (“FreeHold”). As of September 30, 2025, we have raised a cumulative $334.9 million in gross proceeds. On November 7, 2025, we received $30.0 million pursuant to the Termination and Right of First Refusal Agreement and Terumo Stock Purchase Agreement. Future committed cash receipts expected in April 2026 include $20.0 million from the Medtronic Loan Agreement, and an additional $15.0 million from Ligand pursuant to the Royalty Purchase Agreement. We have incurred net losses each year since inception. Our net losses were $58.9 million and $44.9 million for the nine months ended September 30, 2025 and 2024, respectively. We expect to continue to incur significant losses for the foreseeable future. As of September 30, 2025, we had an accumulated deficit of $368.8 million.

Orchestra BioMed, Inc., our wholly owned subsidiary, was incorporated in Delaware in 2017 and completed a recapitalization and mergers with Caliber Therapeutics, Inc., a Delaware corporation that has, among other things, the rights to the Virtue SAB product candidate and BackBeat Medical, Inc., a Delaware Corporation that has, among other things, the rights to the AVIM Therapy product candidate, in 2018. Orchestra BioMed, Inc. completed the conversions of Caliber Therapeutics, Inc. to Caliber Therapeutics, LLC, a Delaware limited liability company, and BackBeat Medical, Inc. to BackBeat Medical, LLC, a Delaware limited liability company, in 2019.

Recent Developments

Initiation of the Virtue Trial

On October 27, 2025, we announced the first patient enrollments in the Virtue SAB in the Treatment of Coronary ISR Trial (“Virtue Trial”), our U.S. IDE pivotal trial comparing its highly differentiated Virtue SAB to the AGENT paclitaxel-coated balloon, currently the only drug-coated balloon FDA-approved for a coronary indication. The initial cases were successfully completed by the teams at The Christ Hospital Heart & Vascular Institute in Cincinnati, OH, and St. Francis Hospital & Heart Center in Roslyn, NY, marking the initiation of the Virtue Trial. Designed to support regulatory approval of Virtue SAB, the Virtue Trial is expected to enroll 740 patients at up to 75 centers in the United States with enrollment completion currently planned for mid-2027.

Termination and Right of First Refusal Agreement

On October 24, 2025 (the “Effective Date”), Orchestra BioMed, Inc. entered into a termination and right of first refusal agreement (the “Termination and ROFR Agreement”) with Terumo Corporation (“Terumo Corporation”) and Terumo Medical Corporation (“TMC” and, collectively with Terumo Corporation, “Terumo”), pursuant to which the Terumo Agreement was terminated, and Orchestra BioMed, Inc. agreed to grant Terumo a right of first refusal (the “ROFR”) with respect to certain transactions involving Virtue SAB for the treatment of coronary artery disease globally in exchange for a fee of $10.0 million, which is to be paid no later than 10 business days after the Effective Date. The ROFR does not apply to other vascular indications, such as below-the-knee peripheral artery disease, which were covered by the Terumo Agreement prior to its termination. Accordingly, all rights to these indications are fully retained by us. Pursuant to the terms of the Termination and ROFR Agreement, Orchestra BioMed, Inc. has no further performance obligations under the Terumo Agreement.

The ROFR has a term that began on the Effective Date and will end on the date that is 90 days after Orchestra BioMed, Inc. discloses primary endpoint data from the Virtue Trial to Terumo or the public, whichever occurs first (the “ROFR Period”); provided, however, that the ROFR Period will immediately expire if Terumo completes the acquisition from a third party of the exclusive right to make, use, sell, offer to sell or distribute a Competing Product (as defined in the Termination and ROFR Agreement) in the United States.

Notice of Third-Party Proposal

The ROFR provides that, in the event that during the ROFR Period, Orchestra BioMed, Inc. receives a written proposal (a “Third-Party Proposal”) reflecting the material terms of an agreement pursuant to which Orchestra BioMed, Inc. would grant to a third party either (i) an outright or staged acquisition rights to Virtue SAB or its components or (ii) a license of or the right to distribute Virtue SAB, in each case, in the treatment of coronary artery diseases (a “Virtue Transaction”), Orchestra BioMed, Inc. will promptly deliver notice of each such Third-Party Proposal together with a copy of the applicable Third-Party Proposal to Terumo (a “Third Party Proposal Notice”).

Exercise of ROFR

Pursuant to the Termination and ROFR Agreement, Terumo will have 30 days after delivery of the Third-Party Proposal Notice (the “ROFR Determination Period”) to exercise the ROFR by providing written notice to Orchestra BioMed, Inc. (the “ROFR Notice”). In the event that Terumo exercises the ROFR during the ROFR Determination Period, we and Terumo will negotiate in good faith and on an exclusive basis during the period beginning on the date of delivery of the ROFR Notice and ending 90 days thereafter (the “Terumo ROFR Negotiation Period”) to enter into a Virtue Transaction on substantially the same terms set forth in the applicable Third-Party Proposal.

If Terumo fails to deliver a ROFR Notice to Orchestra BioMed, Inc. prior to the expiration of the ROFR Determination Period, Terumo shall be deemed to have waived the ROFR with respect to the applicable Third-Party Proposal. If Terumo is deemed to have waived a Terumo ROFR pursuant to the preceding sentence, or if Terumo delivers a ROFR Notice within the applicable ROFR Determination Period, but the parties fail to enter into a definitive agreement regarding a Virtue Transaction prior to expiration of the Terumo ROFR Negotiation Period, then, in either case, effective upon such expiration, (i) the ROFR shall terminate, and be of no further force or effect, with respect to the applicable Third-Party Proposal Notice and (ii) Orchestra BioMed, Inc. shall be free to terminate negotiations with Terumo and to enter into a Virtue Transaction with the applicable third party; provided that Orchestra BioMed, Inc. shall not enter into a definitive agreement with the applicable third party on terms and conditions that are materially different than the applicable Third Party Proposal without first providing Terumo with a renewed Third Party Proposal Notice and ROFR Determination Period; provided, further, that, if Orchestra BioMed, Inc. does not consummate a transaction with respect to such Third Party Proposal within 90 days after termination of the ROFR, Terumo will retain its ROFR during the remaining portion of the ROFR Period.

Sale Transaction

In the event that Orchestra BioMed, Inc. receives a written proposal reflecting the material terms of an agreement for a Sale Transaction (as defined in the Termination and ROFR Agreement) of Orchestra BioMed, Inc. (such transaction an “Orchestra Sale”), or if Orchestra BioMed, Inc.’s board of directors approves a formal transaction process for a Orchestra BioMed, Inc. Sale (a “Sale Process”), Orchestra BioMed, Inc. will promptly give Terumo written notice (an “Orchestra Sale Notice”). During the period of 30 days that begins with the delivery of the Orchestra Sale Notice (the “Orchestra Sale Notice Period”), Orchestra BioMed, Inc. will not enter into a binding agreement or other arrangement for an Orchestra Sale with any third party. During the Orchestra Sale Notice Period, Terumo shall be given the opportunity to make an offer with respect to a Virtue Transaction, and Orchestra BioMed, Inc. will consider in good faith any such offer made. In addition, Orchestra BioMed, Inc. shall give Terumo the opportunity to participate in any Sale Process and shall consider any offer by Terumo in connection therewith in good faith.

Term

The Termination and ROFR Agreement will remain in effect for (a) the ROFR Period or (b) the end of any Terumo ROFR Negotiation Period and expiration of the parties rights and obligations under Section 3.2 of the Termination and ROFR Agreement with respect to the exercise of the ROFR, whichever comes later; provided that the Termination and ROFR Agreement will automatically terminate in the event that Orchestra BioMed, Inc. has not disclosed primary endpoint data from a U.S. clinical trial pursuant to its IDE for coronary ISR to Terumo or the public prior to the tenth anniversary of the Effective Date.

Terumo Stock Purchase Agreement

On October 24, 2025, concurrent with the execution of the Termination and ROFR Agreement, we entered into a stock purchase agreement with TMC (the “Terumo Stock Purchase Agreement”), pursuant to which TMC agreed to purchase 200,000 shares (the “Shares”) of our Series A Convertible Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”) at a purchase price equal to $100.00 per Share (the “Purchase Price”) for gross proceeds to us of $20.0 million. The closing of the sale of the Shares pursuant to the Terumo Stock Purchase Agreement occurred on November 7, 2025.

Series A Preferred Stock

On November 6, 2025, we filed a Certificate of Designation of Series A Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware. The Certificate of Designation sets forth the rights, preferences, powers, restrictions, and limitations of the Series A Preferred Stock. Below is a summary of certain of the provisions of the Certificate of Designation.

Rank; Liquidation

With respect to distribution of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, a holder of Series A Preferred Stock (a “Holder” or, collectively, “Holders”) will be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment is made to the holders of Company Common Stock (or any other class of securities junior to the Series A Preferred Stock) in an amount equal to the liquidation value of the Shares held by such Holder. The liquidation value of the Series A Preferred Stock will equal the Purchase Price of $100.00 per Share (the “Liquidation Value”) and will be subject to adjustment for stock splits and the like in accordance with the terms of the Certificate of Designation.

Conversion

Under the terms of the Certificate of Designation, a Holder may convert its Shares into Company Common Stock on or after the earlier of (i) the date that both (a) we have publicly disclosed primary endpoint data from its U.S. IDE study for ISR and (b) the trading price of the Company Common Stock has been above $15.00 per share on any trading day subsequent to such public disclosure or (ii) the consummation of a Change of Control (as defined in the Certificate of Designation). A Holder may convert all or any portion of the outstanding whole Shares held by such Holder into an aggregate number of shares of Company Common Stock as is determined by (i) multiplying the number of Shares to be converted by the Liquidation Value thereof, and then (ii) dividing the result by the Conversion Price (as defined below) in effect immediately prior to such conversion, with cash being paid in lieu of fractional shares The “Conversion Price” for the Series A Preferred Stock will be the greater of (i) $12.00 per share and (ii) a 20% discount to the closing price of the Company Common Stock on the Nasdaq Global Market on the date of conversion. Assuming no adjustments to the Conversion Price or the Liquidation Value as a result of stock splits or similar transactions, the 200,000 Shares to be issued would convert into a maximum of 1,666,666 shares of Company Common Stock.

Redemption at the Option of Holders upon a Change of Control

Upon the occurrence of a Change of Control, subject to limited exceptions, each Holder of Shares shall have the right to require the Company to redeem all or any part of such Holder’s Shares at a redemption price in cash equal to the aggregate Liquidation Value of such Shares.

No Voting Rights

Except as otherwise required by the Delaware General Corporation Law, the Holders shall have no voting rights.

Participating Dividends

If we declare or pay a dividend or distribution on all shares of the Company Common Stock, whether such dividend or distribution is payable in cash, securities, or other property but excluding any dividend or distribution payable on the Company Common Stock in shares of Company Common Stock, we shall simultaneously declare and pay a dividend on the Series A Preferred Stock on a pro rata basis with the Company Common Stock determined on an as-converted basis assuming all Shares had been converted as of immediately prior to the record date of the applicable dividend (or if no record date is fixed, the date as of which the record holders of Company Common Stock entitled to such dividends are to be determined).

Lockup Agreement

On October 24, 2025, concurrent with the execution of the Termination and ROFR Agreement, we and Terumo entered into a Lockup Agreement (the “Lockup Agreement”), pursuant to which Terumo agreed, subject to limited exceptions, that it and its affiliates will not Transfer (as such term is defined in the Lockup Agreement) or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any shares of Company Common Stock held by Terumo until October 24, 2026; provided that the Lockup Agreement only applies to Company Common Stock held by Terumo and its affiliates as of the date of the Lockup Agreement.

Registration Statement

Due to the significant number of redemptions of HSAC2’s ordinary shares in connection with the Business Combination, there was a significantly lower number of HSAC2 ordinary shares that converted into shares of Company Common Stock in connection with the Business Combination. Pursuant to the Amended and Restated Registration Rights Agreement we entered into in connection with the closing of the Business Combination and certain warrant agreements, we filed a registration statement (the “Resale Registration Statement”), which was declared effective on May 9, 2024, that registers, among other things, the resale of an aggregate of 18,586,201 shares of Company Common Stock, which constitutes approximately 33% of the outstanding Company Common Stock as of November 6, 2025. Additionally, some of the shares of the Company Common Stock being registered for resale were originally purchased by selling stockholders pursuant to investments in Orchestra BioMed, Inc. or HSAC2 at prices considerably below the current market price of the Company Common Stock. These selling stockholders may realize a positive rate of return on the sale of their shares of Company Common Stock covered by the Resale Registration Statement and therefore will have an incentive to sell their shares. Public shareholders may not experience a similar rate of return on shares of Company Common Stock they purchased. This discrepancy in purchase prices may have an impact on the market perception of the Company Common Stock’s value and could increase the volatility of the market price of the Company Common Stock or result in a significant decline in the public trading price of the Company Common Stock. The registration of these shares of Company Common Stock for resale creates the possibility of a significant increase in the supply of the Company Common Stock in the market. The increased supply, coupled with the potential disparity in purchase prices, may lead to heightened selling pressure, which could negatively affect the public trading price of the Company Common Stock.

Components of Our Results of Operations

Partnership Revenue

To date, our partnership revenues have related to the Terumo Agreement described below. In future periods, partnership revenues may also include revenues related to the Exclusive License and Collaboration Agreement, dated as of June 30, 2022, by and among, Orchestra BioMed, Inc., BackBeat Medical, LLC and Medtronic, Inc. (an affiliate of Medtronic plc) (the “Medtronic Agreement”), discussed in Note 4 to the Consolidated Financial Statements.

Orchestra BioMed, Inc. entered into the Terumo Agreement in June 2019, and has determined that the arrangement represents a contract with a customer and is therefore in scope of ASC 606, *Revenues from Contracts with Customers (“*ASC 606”). Under the Terumo Agreement, Orchestra BioMed, Inc. received an upfront payment of $30.0 million in

2019 and an equity commitment of up to $5 million of which $2.5 million was invested in June 2019 as part of Orchestra BioMed, Inc. Series B-1 financing and $2.5 million was invested in June 2022 as part of Orchestra BioMed, Inc. Series D-2 financing.

Under the Terumo Agreement, we were initially eligible for certain milestone payments in the amount of $65.0 million from Terumo upon completion of certain minimum enrollments in clinical studies, making certain filings and submissions, and obtaining certain regulatory approvals and certifications, and are also eligible to earn royalties on future sales by Terumo based on royalty rates ranging from 10 - 15%. Of these milestone payments, $35.0 million relate to achieving certain milestones by specified target achievement dates. As of September 30, 2025, the target achievement dates for all time-based milestone payments had passed, in each case, without achieving the related milestones.

As previously disclosed, we entered into a mediation procedure with Terumo pursuant to the Terumo Agreement and the International Mediation Rules of the International Centre for Dispute Resolution. As a result of this mediation procedure, we and Terumo entered into the Termination and ROFR Agreement on October 24, 2025, pursuant to which, among other things, the Terumo Agreement was terminated. See “Recent Developments—Termination and Right of First Refusal Agreement” above in this Item 2. Accordingly, we will not earn any milestone payments under the Terumo Agreement.

We recorded the $30.0 million upfront payment received in 2019 from Terumo within deferred revenue and are recognizing the upfront payment over time based on a proportional performance model based on the costs incurred to date relative to the total costs expected to be incurred through the completion of the development of the Coronary ISR indication, for which we are primarily responsible. We have recognized $16.7 million in cumulative partnership revenues from 2019 through September 30, 2025. There were no other proceeds received pursuant to the Terumo Agreement from 2019 through September 30, 2025.

In June 2022, Orchestra BioMed, Inc. entered into the Medtronic Agreement for the development and commercialization of AVIM Therapy for the treatment of pacemaker-indicated patients with uncontrolled HTN despite the use of anti-hypertensive medications. On July 31, 2025, Orchestra BioMed, Inc., our wholly owned subsidiary BackBeat Medical, LLC, and Medtronic entered into an amendment the Medtronic Agreement, which became effective on August 4, 2025 (the “Medtronic Agreement Amendment”), to provide, among other things, a development and commercialization framework for future AVIM-therapy integration into a dual-chamber leadless pacemaker. Pursuant to the Medtronic Agreement Amendment, we will be required, among other things, to reimburse Medtronic for certain expenses incurred in connection with the integration of AVIM-therapy into Medtronic’s dual-chamber leadless pacemaker, up to a specified cap.

We have determined that the arrangement is a collaboration within the scope of ASC 808, *Collaborative Arrangements (“*ASC 808”). In addition, we concluded that Medtronic, Inc., an affiliate of Medtronic plc (“Medtronic”), is a customer for a good or service that is a distinct unit of account, and therefore, the transactions in the Medtronic Agreement, as amended pursuant to the Medtronic Agreement Amendment (the “Amended Medtronic Agreement”), should be accounted for under ASC 606. Through September 30, 2025, there have been no amounts recognized as revenue under the Amended Medtronic Agreement.

Product Revenue

Product revenues related to sales of FreeHold’s intracorporeal organ retractors and such revenues are recognized at a point-in-time upon the shipment of the product to the customer given payment terms are typically 30 days. FreeHold products are currently only sold in the United States.

Cost of Product Revenue and Gross Margin

Cost of product revenue consists primarily of costs of finished goods components for use in FreeHold’s products and assembled, warehoused and inventoried by a third-party vendor. We expect the cost of finished goods product revenue to increase in absolute terms as our revenue grows.

Our gross margin has been, and will continue to be, affected by a variety of factors, including finished goods manufactured component parts, as well as the cost to assemble and warehouse the FreeHold product finished goods inventory.

Research and Development Expenses

Research and development expenses consist of applicable personnel, consulting, materials and clinical study expenses. Research and development expenses include:

• Certain personnel-related expenses, including salaries, benefits, bonus, travel and stock-based compensation;
• Cost of clinical studies to support new products and product enhancements, including expenses for clinical research organizations and site payments;
• Product device materials and drug supply, and manufacturing used for internal research and development, and clinical activities;
• Allocated overhead including facilities and information technology expenses; and
• Cost of outside consultants who assist with device and drug development, regulatory affairs, clinical affairs and quality assurance.

Research and development costs are expensed as incurred. Research and development activities are central to our business model. Product candidates in later stages of clinical development 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 studies. In the future, we expect research and development expenses to increase in absolute dollars as we continue to develop new products, enhance existing products and technologies, initiate clinical studies, manufacture drug supply for internal research and development and clinical trial supply and perform activities related to obtaining additional regulatory approvals. We do not track expenses by product candidate, unless tracking such expenses is required pursuant to the revenue recognition model for a collaborative arrangement.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of personnel-related expenses, including salaries, benefits, bonus, travel and stock-based compensation. Other selling, general and administrative expenses include professional services fees, including legal, audit, investor/public relations, and insurance costs, outside consultants costs, employee recruiting and training costs, and non-income taxes. Moreover, we incur and expect to continue to incur additional expenses associated with operating as a public company, including legal, accounting, insurance, exchange listing and U.S. Securities and Exchange Commission (“SEC”) compliance, and investor relations expenses. We expect quarterly selling, general and administrative expenses to continue to increase as we conduct additional clinical trials and expand our operations as a public company.

Interest (Expense) Income, Net

Interest (expense) income, net reflects the income generated from marketable securities during the year. Interest expense is attributable to loan interest and interest related to the Royalty Purchase Agreement.

On July 31, 2025, we entered into a revenue participation right purchase and sale agreement (the “Royalty Purchase Agreement”) with Ligand Pharmaceuticals Incorporated (“Ligand”). Under the terms of the Royalty Purchase Agreement, in exchange for payment of $35.0 million (the “Investment Amount”), less certain reimbursable expenses, Ligand acquired the right to receive tiered royalty payments from us (the “Royalty Interest”) with respect to revenue (including certain licensing revenue) received by us in a calendar year in connection with worldwide net product sales, or other product revenue received by, by us and our licensees (“Annual Net Sales”) of (a) AVIM Therapy (the “Primary Product”) and (b)

Virtue SAB (the “Secondary Product” and together with the Primary Product, the “Products”) in the field of coronary artery treatment. At execution of the Royalty Purchase Agreement, our estimate of this total interest expense resulted in an effective annual interest rate of approximately 22.5%. This estimate contains significant assumptions that impact both the amount recorded at execution and the interest expense that will be recognized over the royalty period. We will periodically assess the estimated amounts due and payable to Ligand and to the extent the amount or timing of such payments is materially different than the original estimates, an adjustment will be recorded prospectively to increase or decrease interest expense. There are a number of factors that could materially affect the amount and timing of the royalty payments to be paid by us to Ligand and, correspondingly, the amount of interest expense recorded by us.

On November 6, 2024 (the “LSA Closing Date”), we and certain of our subsidiaries (together, the “Borrower”) entered into a Loan and Security Agreement, by and among the Borrower, the several banks and other financial institutions or entities party thereto, as lenders (collectively, the “Hercules Lenders”), and Hercules Capital, Inc. (“Hercules”), as administrative agent and collateral agent for itself and the Hercules Lenders, as amended by that certain First Amendment to Loan and Security Agreement dated as of December 30, 2024 ( “2024 LSA”). Prior to July 31, 2025, the 2024 LSA provided a secured term loan facility of up to $50.0 million available in up to four tranches (collectively, the “Term Loans”), with the first tranche of $15.0 million drawn on the LSA Closing Date, and a second and third tranche of up to an aggregate of $15.0 million were available upon achievement of certain performance and financing milestones. Additionally, we had access to a fourth tranche of $20.0 million subject to future approval. On July 31, 2025, the Borrower, the Hercules Lenders and Hercules entered into the Second Amendment to the 2024 LSA, which, amended the existing 2024 LSA to, among other things, (i) delay the initial date upon which we must begin amortizing term loans under the 2024 LSA from (a) December 1, 2026 (with amortization payments delayed to as late December 1, 2027 if certain conditions were met) to (b) July 1, 2027 (with amortization payments delayed to as late as January 1, 2028 if certain conditions are met); (ii) increase by $15.0 million (from $20.0 million to $35.0 million) the amount that that may be borrowed by us in the discretion of the lender’s investment committee’s and (iii) eliminate our ability to draw up to $15.0 million if certain milestones are achieved. The Term Loan has a maturity date of November 6, 2028 and accrues interest at a floating per annum rate equal to the greater of (i) (x) the “prime rate” as reported in The Wall Street Journal plus (y) 2.0%, and (ii) 9.50%. Refer to Note 14 – “Debt Financing” to our Consolidated Financial Statements.

Loss on Fair Value of Strategic Investments

The loss on fair value of strategic investments represents a change in the preferred shares and convertible notes of Vivasure Medical Limited (“Vivasure”), a privately-held company and related party, and fair value of our investment in common stock holdings of a previously publicly-held company. The investments in Vivasure do not have readily determinable fair values and are recorded at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. The common stock held represented equity securities with a readily determinable fair value and were required to be measured at fair value at each reporting period using readily determinable pricing available on a securities exchange, in accordance with the provisions of ASU 2016-01.

Results of Operations

Comparison of the Nine Months Ended September 30, 2025 and 2024

The following table presents our statement of operations data for the nine months ended September 30, 2025 and 2024, and the dollar and percentage change between the two periods (in thousands):

Partnership Revenue

Partnership revenue increased by $192,000, or approximately 10%, to $2.1 million in the nine months ended September 30, 2025 from $1.9 million for the nine months ended September 30, 2024. Partnership revenue relates to the recognition of the combined performance obligation for the license granted to Terumo and the ongoing research and development services over the estimated performance period for the Virtue SAB coronary ISR indication, using a proportional performance model, based on the costs incurred relative to the total estimated costs of the research and development services. Prior to the termination of the Terumo Agreement, as of each quarterly reporting date, we evaluated our estimates of the total costs expected to be incurred through the completion of the combined performance obligation and updated our estimates as necessary.

For the nine months ended September 30, 2025 and 2024, the expenses incurred related to the Terumo Agreement were approximately $10.1 million and $10.5 million, respectively. The estimated total costs associated with the Terumo Agreement through completion were similar as of September 30, 2025 compared to the estimates as of December 31, 2024, and increased by approximately 2.6% as of September 30, 2024, as compared to the estimates as of December 31, 2023.

While we believe we have historically estimated total costs associated with the Terumo Agreement through completion, these estimates encompass a broad range of expenses over a multi-year period and, as such, are subject to periodic changes as new information becomes available.

Product Revenue

Product revenue decreased by $12,000, or approximately 3%, to $445,000 in the nine months ended September 30, 2025 from $457,000 for the nine months ended September 30, 2024.

Product revenue primarily consisted of the sale of FreeHold Duo and Trio intracorporeal organ retractors and revenue is recognized when product is shipped to customers. The decrease in product revenue was due to a decrease in the purchase volume. There were no changes to the per unit sale price between the periods presented.

Cost of Product Revenue

Cost of product revenue decreased by $7,000, or approximately 5%, to $139,000 in the nine months ended September 30, 2025 from $146,000 for the nine months ended September 30, 2024. The decrease was primarily due to lower sales volume of FreeHold Duo and Trio intracorporeal organ retractors.

Research and Development Expenses

The following table summarizes our research and development expenses for the nine months ended September 30, 2025 and 2024 (in thousands):

Research and development expenses increased by $9.5 million, or approximately 30%, to $41.4 million for the nine months ended September 30, 2025 from $31.8 million for the nine months ended September 30, 2024. This is primarily due to an increase in support of ongoing work to advance the BACKBEAT study and to advance Virtue SAB into the Virtue Trial, which commenced in October 2025. The increase included an increase of $5.3 million in clinical development costs, an increase in personnel-related expenses of $3.4 million due to increased headcount and consulting costs, and an increase in stock-based compensation of $1.1 million, partially offset by a decrease of $329,000 in non-clinical development costs associated with research and development program costs, supplies, and testing.

The total research and development expenses summarized above include $10.0 million for the nine months ended September 30, 2025 and $10.4 million for the nine months ended September 30, 2024 related to the Terumo Agreement. The decrease of $400,000 is due to decreased expense activity related to the Terumo Agreement during the nine months ended September 30, 2025 compared to the same period in 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $1.6 million, or approximately 9%, to $19.6 million for the nine months ended September 30, 2025, from $18.0 million of expense for the nine months ended September 30, 2024. The increase primarily resulted from an increase of $1.3 million in accounting, finance, legal, marketing, investor relations and public relations expenses and an increase of $396,000 in stock-based compensation.

Interest (Expense) Income, Net

Interest (expense) income, net, decreased by $3.2 million, or approximately 114%, to $385,000 of interest expense for the nine months ended September 30, 2025, from $2.8 million of income for the nine months ended September 30, 2024. The net interest income in the 2025 period consisted primarily of interest earned from marketable securities partially offset by monthly interest expense resulting from the Amended 2024 LSA and the Royalty Purchase Agreement. The net interest income in the 2024 period consisted primarily of interest earned from marketable securities. The decrease in interest (expense) income, net resulted from interest expense related to the Amended 2024 LSA and the Royalty Purchase Agreement, which was not in place during 2024.

Loss on Fair Value of Strategic Investments

No gain or loss on fair value of strategic investments was recognized for the nine months ended September 30, 2025. The loss of $68,000 for the nine months ended September 30, 2024 related to the change in fair value in our common stock holdings of a previously publicly-held company.

Comparison of the Three Months Ended September 30, 2025 and 2024

The following table presents our statement of operations data for the three months ended September 30, 2025 and 2024, and the dollar and percentage change between the two periods (in thousands):

Partnership Revenue

Partnership revenue decreased by $82,000, or approximately 10%, to $721,000 in the three months ended September 30, 2025 from $803,000 for the three months ended September 30, 2024. Partnership revenue relates to the recognition of the combined performance obligation for the license granted to Terumo and the ongoing research and development services over the estimated performance period for the Virtue SAB Coronary ISR indication, using a proportional performance model, based on the costs incurred relative to the total estimated costs of the research and development services. As of each quarterly reporting date, we evaluated our estimates of the total costs expected to be incurred through the completion of the combined performance obligation and updated our estimates as necessary.

For the three months ended September 30, 2025 and 2024, the expenses incurred related to the Terumo Agreement were approximately $3.3 million and $3.6 million, respectively. The estimated total costs associated with the Terumo Agreement through completion decreased by approximately 0.3% as of September 30, 2025 as compared to the estimates as of June 30, 2025, and were similar as of September 30, 2024, as compared to the estimates as of June 30, 2024.

Product Revenue

Product revenue decreased by $44,000, or approximately 24%, to $140,000 in the three months ended September 30, 2025 from $184,000 for the three months ended September 30, 2024.

Product revenue primarily consisted of the sale of FreeHold Duo and Trio intracorporeal organ retractors and revenue is recognized when product is shipped to customers. The decrease in product revenue was primarily due to a decrease in the purchase volume. There were no changes to the per unit sale price in either period presented.

Cost of Product Revenue

Cost of product revenue decreased by $19,000, or approximately 28%, to $49,000 in the three months ended September 30, 2025 from $68,000 for the three months ended September 30, 2024. The decrease was primarily due to lower sales volume of FreeHold Duo and Trio intracorporeal organ retractors.

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2025 and 2024 (in thousands):

Research and development expenses increased by $2.4 million, or approximately 21%, to $14.0 million for the three months ended September 30, 2025, from $11.6 million for the three months ended September 30, 2024. This is primarily due to an increase in support of ongoing work to advance the BACKBEAT study and to advance Virtue SAB into the Virtue Trial, which commenced in October 2025. The increase included an increase of $2.3 million in clinical development costs, an increase in personnel-related expenses of $1.2 million due to increased headcount and consulting costs, and an increase in stock-based compensation of $409,000, partially offset by a decrease of $1.5 million in non-clinical development costs associated with research and development program costs, supplies, and testing.

The total research and development expenses summarized above include $3.2 million for the three months ended September 30, 2025 and $3.6 million for the three months ended September 30, 2024 related to the Terumo Agreement. The decrease of $400,000 is due to decreased expense activity related to the Terumo Agreement during the three months ended September 30, 2025 compared to the same period in 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $1.4 million, or approximately 25%, to $7.1 million for the three months ended September 30, 2025, from $5.7 million of expense for the three months ended September 30, 2024. The increase was primarily due to an increase in accounting, finance, legal, marketing, investor relations, and public relations expenses.

Interest (Expense) Income, Net

Interest (expense) income, net, decreased by $1.4 million, or approximately 156%, to $515,000 of net interest expense for the three months ended September 30, 2025, from $916,000 of net interest income for the three months ended September 30, 2024. The decrease in interest (expense) income, net resulted from interest expense related to the Amended 2024 LSA and the Royalty Purchase Agreement.

Liquidity and Capital Resources

Overview

From inception through September 30, 2025, we have incurred significant operating losses and negative cash flows from our operations. Our net losses were $58.9 million and $44.9 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had an accumulated deficit of $368.8 million. We have funded our operations primarily through the issuance of common stock, convertible preferred stock, and warrants, as well as proceeds from the Business Combination, the Terumo Agreement, borrowings under debt arrangements, the sale of future revenues, and to a lesser extent, revenue from FreeHold products. As of September 30, 2025, we have raised a cumulative total of $334.9 million in gross proceeds. We had $95.8 million in cash and cash equivalents and marketable securities at September 30, 2025, comprised of $42.0 million in cash and cash equivalents and $53.8 million in marketable securities. Cash and cash equivalents consisted primarily of bank deposits and money market funds while short-term marketable securities consisted primarily of our investments in corporate debt securities. Future committed cash receipts expected in April 2026 include $20.0 million from the Medtronic Loan Agreement, and an additional $15.0 million from Ligand pursuant to the Royalty Purchase Agreement. On November 7, 2025, we received $30.0 million pursuant to the Termination and Right of First Refusal Agreement and Terumo Stock Purchase Agreement.

Funding Requirements

We intend to prioritize spending on our two flagship product candidates and expect operating expenses to increase accordingly. The additional investment will support clinical study costs and expanded research and development activities related to our AVIM-enabled Therapy and Virtue SAB programs, as well as the continued execution of the BACKBEAT study and Virtue Trial.

Based on internally prepared budget estimates that reflect our operating priorities, we anticipate that our Cash and cash equivalents, Marketable securities, proceeds received subsequent to September 30, 2025 but prior to the filing of this Quarterly Report on Form 10-Q, expected future proceeds from contractual financing commitments and other potential future proceeds described below are sufficient to fund our operations into the fourth quarter of 2027. The amount and timing of our future funding requirements may change from this current estimate and are dependent on many factors, including the cost and pace of execution of clinical studies and research and development activities, the strength of results from clinical studies and other research, development and manufacturing efforts, as well as the receipt of payments under the Royalty Purchase Agreement and the Amended Medtronic Loan Agreement, and the realization of cash from the sale of some or all of our strategic holdings, most notably, Vivasure Medical. There are no assurances that any of these factors will be favorable to us, and we may need to seek additional sources of liquidity to meet our funding requirements earlier than current estimates, including the issuance of new equity, and/or other financing structures. In this regard, as of the date of this Quarterly Report on Form 10-Q, we may sell up to $100.0 million of shares of Company Common Stock under the sales agreement we entered into with TD Securities (USA) LLC (the “Sales Agreement”).

Our future viability is dependent on our ability to raise additional capital to finance our operations. Our inability to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. There can be no assurance that our current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

As noted above, the sale of Company Common Stock pursuant to the Resale Registration Statement may result in a decline in the value of the Company Common Stock, which may make it more difficult and more dilutive to the existing holders of Company Common Stock to raise funds from the sale of our equity securities.

Cash Flows

The following table summarizes our cash flow data for the periods indicated (in thousands):

Comparison of the Nine Months Ended September 30, 2025 and 2024

Net Cash Flows from Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2025 was $46.7 million and primarily consisted of our net loss of $58.9 million and changes in net operating assets and liabilities of $1.9 million, partially offset by non-cash charges of $10.3 million. Our non-cash charges primarily consisted of stock-based compensation of $9.2 million, partially offset by $491,000 related to accretion and interest of marketable securities. The net change in operating assets and liabilities was primarily due to an increase in accounts payable, accrued expenses and other liabilities of $4.3 million, partially offset by a decrease in deferred revenue of $2.1 million.

Net cash used in operating activities for the nine months ended September 30, 2024 was $37.0 million and primarily consisted of our net loss of $44.9 million, partially offset by non-cash charges of $7.3 million and changes in net operating assets and liabilities of $598,000. Our non-cash charges primarily consisted of stock-based compensation of $7.7 million, partially offset by $1.3 million related to accretion and interest of marketable securities. The net change in operating assets and liabilities was primarily due to an increase in accounts payable and accrued expenses of $3.7 million and a decrease in deferred revenue of $1.9 million.

Net Cash Flows from Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2025 was $9.2 million, which primarily consisted of the purchase of $50.7 million of marketable securities and purchases of property and equipment of $456,000, partially offset by the sale of $41.9 million of marketable securities.

Net cash provided by investing activities for the nine months ended September 30, 2024 was $16.8 million, which primarily consisted of the sale of $69.4 million of marketable securities, partially offset by the purchase of $52.4 million of marketable securities.

Net Cash Flows from Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2025 was $75.7 million, which primarily consisted of $57.8 million of proceeds from the sale of common stock and the pre-funded warrants, net of issuance costs and $20.0 million of proceeds from the sale of future royalties, partially offset by $1.1 million of deferred financing costs related to the Royalty Purchase Agreement and $1.1 million used to settle taxes associated with restricted stock vesting.

Net cash provided by financing activities of $15.2 million for the nine months ended September 30, 2024 was primarily attributable to the proceeds of $15.0 million, net of issuance costs, from the at-the-market offering under the Open Market Sale AgreementSM, dated May 15, 2024, which we entered into with Jefferies LLC (the “Prior Agreement”). The Prior Agreement was terminated on August 12, 2024 in connection with our entry into the Sales Agreement.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of September 30, 2025 (in thousands):

(1) In November 2024, we entered into the 2024 LSA with Hercules, as amended. The Amended 2024 LSA will mature in November 2028. Refer to Note 14 to the Consolidated Financial Statements for additional information.

We enter into agreements in the normal course of business with clinical research organizations for work related to clinical trials and with vendors for preclinical studies and other services and products for operating purposes, which are cancelable at any time by us, generally upon 30 days prior written notice. These payments are not included in the above table of contractual obligations and commitments.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of the financial statements in conformity with U.S. GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including estimates related to the total costs expected to be incurred though the completion of the combined performance obligation of the Terumo Agreement, effective interest expense related to the Royalty Purchase Agreement, research and development prepayments, accruals and related expenses and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

We believe that the accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. For further information, see Note 2 to the Consolidated Financial Statements – “Summary of Significant Accounting Policies.”

Revenue Recognition

We recognize revenue under the core principle according to ASC 606 to depict the transfer of control to our customers in an amount reflecting the consideration we expect to be entitled to. In order to achieve that core principle, we apply the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when a performance obligation is satisfied.

Our revenues are currently comprised of partnership revenues under the Terumo Agreement related to the development and commercialization of Virtue SAB, and product revenue from the sale of FreeHold’s intracorporeal organ retractors.

Partnership Revenues

To date, our partnership revenues have related to the Terumo Agreement described below. Pursuant to the terms of the Termination and ROFR Agreement, the Terumo Agreement was terminated on October 24, 2025. In future periods, partnership revenues may also include revenues related to the Medtronic Agreement, discussed in Note 4 to the Consolidated Financial Statements.

Orchestra BioMed, Inc. entered into the Terumo Agreement as further described in Note 3 to the Consolidated Financial Statements. We assessed whether the Terumo Agreement fell within the scope of ASC 808 based on whether the arrangement involved joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. We determined that the Terumo Agreement did not fall within the scope of ASC 808. We then analyzed the arrangement pursuant to the provisions of ASC 606 and determined that the arrangement represents a contract with a customer and is therefore within the scope of ASC 606.

The promised goods or services in the Terumo Agreement include (i) license rights to our intellectual property and (ii) research and development services. We also have optional additional items in the Terumo Agreement, which are considered marketing offers and are accounted for as separate contracts with the customer if such option is elected by the customer, unless the option provides a material right which would not be provided without entering into the contract. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer. Promised goods or services are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources or (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct in the Terumo Agreement, we considered factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own or whether the required expertise is readily available.

We estimate the transaction price for the Terumo Agreement performance obligations based on the amount expected to be received for transferring the promised goods or services pursuant to the Terumo Agreement. The consideration includes both fixed consideration and variable consideration. At the inception of the Terumo Agreement, as well as at each reporting period, we evaluate the amount of potential payment and the likelihood that the payments will be received. We utilize either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method better predicts the amount expected to be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price.

The Terumo Agreement contains development and regulatory milestone payments. At contract inception and at each reporting period, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect partnership revenues and earnings in the period of adjustment.

The Terumo Agreement also includes sales-based royalties and the license is deemed to be the predominant item to which the royalties relate. Accordingly, we will recognize royalty revenue when the related sales occur. To date, we have not recognized any royalty revenue under the arrangement.

We have determined that intellectual property licensed to Terumo and the research and development services to be provided to support the premarket approval by the FDA for the ISR indication represent a combined performance obligation that is satisfied over time, which is currently estimated to be completed in 2029, and that the appropriate method of measuring progress for purposes of recognizing revenues relates to a proportional performance model that measures the proportional performance based on the costs incurred to date relative to the total costs expected to be incurred through the completion of the performance obligation. We evaluate the measure of progress at each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

In the nine months ended September 30, 2025, we updated our estimates of the total costs expected to be incurred through the completion of the combined performance obligation. The impact of the changes in estimates resulted in an increase in partnership revenues of $19,000, which resulted in a de minimis effect on net loss per share, basic and diluted. In the nine months ended September 30, 2024, the impact of the changes in estimates resulted in a reduction of partnership revenues of $371,000, which resulted in a $0.01 effect on net loss per share, basic and diluted.

We receive payments from Terumo based on billing schedules established in the contract. Such billings for milestone related events have 10-day terms from the date the milestone is achieved, royalty payments are 20-day terms after the close of each quarter, any optional services are 20 days after receipt of an invoice and sales of SirolimusEFR are within 30 days after receipt of the shipping invoices. Upfront payments are recorded as deferred revenue upon receipt or when due until we perform our obligations under these arrangements. Amounts are recorded as accounts receivable when the right to consideration is unconditional.

In June 2022, Orchestra BioMed, Inc., BackBeat Medical, LLC and Medtronic entered into the Medtronic Agreement for the development and commercialization of AVIM Therapy for the treatment of pacemaker-indicated patients with uncontrolled HTN despite the use of anti-hypertensive medications. We determined that the arrangement is a collaboration within the scope of ASC 808. In addition, we concluded Medtronic is a customer for a good or service that is a distinct unit of account, and therefore the transactions in the Medtronic Agreement should be accounted for under ASC 606. Through September 30, 2025, there have been no amounts recognized as revenue under the Medtronic Agreement.

Product Revenues

Product revenues related to sales of FreeHold’s intracorporeal organ retractors are recognized at a point-in-time upon the shipment of the product to the customer, and there are no significant estimates or judgments related to estimating the transaction price. The product revenues consist of a single performance obligation, and the payment terms are typically 30 days. Product revenues are recognized solely in the United States.

Research and Development Prepayments, Accruals and Related Expenses

We incur costs of research and development activities conducted by our third-party service providers, which include the conduct of preclinical and clinical studies. We are required to estimate our prepaid and accrued research and development costs at each reporting date. These estimates are made as of the reporting date of the work completed over the life of the individual study in accordance with agreements established with our service providers. We determine the estimates of research and development activities incurred at the end of each reporting period through discussion with internal personnel and outside service providers, as to the progress or stage of completion of trials or services, as of the end of the reporting period, pursuant to contracts with the third parties and the agreed upon fees to be paid for such services. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are accepted by us or the services are performed. Accruals are recorded for the amounts of services provided that have not yet been invoiced.

Stock-Based Compensation

We account for share-based payments at fair value. The fair value of stock options is measured using the Black-Scholes option-pricing model and the fair value of restricted stock is measured based on the fair value of the Company Common Stock underlying the award as of the grant date, described further below. For share-based awards that vest subject to the satisfaction of a service requirement, the fair value measurement date for stock-based compensation awards is the date of grant and the expense is recognized on a straight-line basis, over the vesting period. We account for forfeitures as they occur.

Prior to the Business Combination, due to the absence of an active market for Orchestra BioMed, Inc.’s common stock, Orchestra BioMed, Inc. utilized methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants’ Audit and Accounting Practice Guide: Valuation of Privately-Held Company Equity Securities Issued as Compensation to estimate the fair value of its common stock. The fair value of Orchestra BioMed, Inc.’s common stock was determined based upon a variety of factors, including valuations of Orchestra BioMed, Inc.’s common stock performed with the assistance of independent third-party valuation specialists; Orchestra BioMed, Inc.’s stage of development and business strategy, including the status of research and development efforts of its product candidates, and the material risks related to its business and industry; Orchestra BioMed, Inc.’s business conditions and projections; Orchestra BioMed, Inc.’s results of operations and financial position, including its levels of available capital resources; the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies; the lack of marketability of Orchestra BioMed, Inc.’s common stock as a private company; the prices of Orchestra BioMed, Inc.’s convertible preferred stock sold to investors in arm’s length transactions and the rights, preferences and privileges of its convertible preferred stock relative to those of its common stock; the likelihood of achieving a liquidity event for the holders of Orchestra BioMed, Inc.’s common stock, such as an initial public offering or a sale of Orchestra BioMed, Inc. given prevailing market conditions; trends and developments in its industry; the hiring of key personnel and the experience of management; and external market conditions affecting the life sciences and biotechnology industry sectors. Significant changes to the key assumptions underlying the factors used could result in different fair values of Orchestra BioMed, Inc.’s common stock at each valuation date. In determining the exercise prices for options granted and fair value of restricted stock, we have considered the fair value of the common stock as of the grant date.

Prior to the Business Combination, valuation analyses were conducted utilizing a probability weighted expected return method, in which the probability of a public company scenario was considered via either an initial public offering or special purpose acquisition company transaction. Subsequent to the Business Combination, fair value was determined by market prices of the Company Common Stock.

We classify stock-based compensation expense in our condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model, which is based on the assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment and estimation by management.

• Expected Term — The expected term represents the period that stock-based awards are expected to be outstanding. Our historical share option exercise information is limited due to a lack of sufficient data points and does not provide a reasonable basis upon which to estimate an expected term. The expected term for option grants is therefore determined using the “simplified” method, as prescribed in the SEC’s Staff Accounting Bulletin (SAB) No. 107. The simplified method deems the expected term to be the midpoint between the vesting date and the contractual life of the stock-based awards.
• Expected Volatility — We consummated the Business Combination on January 26, 2023 and lack sufficient company-specific historical and implied volatility information. Therefore, we derived expected stock volatility using a weighted average blend of historical volatility of comparable peer public companies and our own historical volatility, over a period equivalent to the expected term of the stock-based awards.
• Risk-Free Interest Rate — The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the stock-based awards’ expected term.
• Expected Dividend Yield — The expected dividend yield is zero as neither we nor Orchestra BioMed, Inc. has paid, and we do not anticipate paying, any dividends on the Company Common Stock in the foreseeable future.
• Common Stock Valuation — Prior to the Business Combination, given the absence of a public trading market for Orchestra BioMed, Inc.’s common stock, Orchestra BioMed, Inc.’s board of directors considered numerous subjective and objective factors to determine the best estimate of fair value of Orchestra BioMed, Inc.’s common stock underlying the stock options granted to its employees and non-employees. In determining the grant date fair value of Orchestra BioMed, Inc.’s common stock, Orchestra BioMed, Inc.’s board considered, among other things, contemporaneous valuations of its common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Following the Business Combination, our board of directors determines the fair value of the Company Common Stock based on the closing price of the Company Common Stock on or around the date of grant.

During the three months ended September 30, 2025 and 2024, stock-based compensation was $3.0 million and $2.4 million, respectively. During the nine months ended September 30, 2025 and 2024, stock-based compensation was $9.2 million and $7.7 million, respectively. As of September 30, 2025, we had approximately $16.2 million of total unrecognized stock-based compensation, which we expect to recognize over a weighted-average period of approximately 2.3 years.

Recently Issued 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, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements.

Emerging Growth Company and Smaller Reporting Company Status

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Upon losing our status as an emerging growth company, we will be required to hold nonbinding advisory votes on executive compensation and to obtain stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. 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, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our Consolidated Financial Statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Upon losing emerging growth company status, we will no longer be able to use the extended transition period for complying with new or revised financial accounting standards.

We expect to lose emerging growth company status on December 31, 2025. However, we will continue to be a “smaller reporting company” as defined in the Exchange Act after we lose emerging growth company status. As a smaller reporting company, we will continue to not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 as long as (a) our annual revenue is less than $100.0 million during the most recently completed fiscal year and (b) the market value of our voting and non-voting Company Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. We may also take advantage of certain reduced disclosure requirements as a smaller reporting company, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will be able to take advantage of these scaled disclosures for so long as (i) the market value of our voting and non-voting Company Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or (ii)(a) our annual revenue is less than $100.0 million during the most recently completed fiscal year and (b) the market value of our voting and non-voting Company Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

Evaluation of Disclosure Controls and Procedures.

We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025, the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2025.

Changes in Internal Control Over Financial Reporting.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on the Effectiveness of Internal Control.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A in the 2024 10-K and in Item 1A in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (the “Q1 2025 Form 10-Q”). Except as set forth in the Q1 2025 Form 10-Q, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A in the 2024 10-K.