Rezolute, Inc.: Form 10-Q for the period ended Dec 31, 2025

Certain figures, such as interest rates and other percentages included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our unaudited condensed consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding. As used in the discussion below, “we,” “our,” “us,” and the “Company” refers to Rezolute, Inc.

We are a late-stage rare disease company focused on developing biologics that significantly improve the quality of life for patients and their families.

Our priorities for 2026 are to progress our two Phase 3 programs in congenital and tumor hyperinsulinism (“HI”). Our goals include (i) achieve alignment with the U.S. Food and Drug Administration (“FDA”) on the path forward in congenital HI, (ii) complete enrollment in the registrational tumor HI study and (iii) announce topline data from the registrational tumor HI study.

Ersodetug for congenital HI

sunRIZE Phase 3 Study

On December 11, 2025, we announced that the sunRIZE study did not meet its primary (hypoglycemia events) or key secondary (time in hypoglycemia) endpoints. The study demonstrated reductions from baseline in events and time in hypoglycemia in both treatment groups, but not enough to be statistically significant compared to the pronounced study effect in the placebo arm. We believe the pronounced placebo/study effect confounded the results, particularly for hypoglycemia events by self-monitored glucometer, but that the totality of the data further supports previous clinical evidence that ersodetug is active against hypoglycemia in patients. Specifically, there was evidence of pharmacologic activity, as target therapeutic drug concentrations were achieved in both treatment groups (5 mg/kg and 10 mg/kg) with highly sensitive biomarker responses (increases in circulating insulin) in the active treatment groups that are directly indicative of reduced insulin activity at its receptor, which biologically implies fewer cell-surface glucose transporters, and a resultant increase in blood glucose.

While additional analyses are ongoing, initial observations from sunRIZE inform our belief that the pharmacologic response demonstrates therapeutic activity, which may be obscured by the nature of patient-monitored hypoglycemia endpoint, and hypoglycemia-avoidant confounding behaviors. The magnitude of the placebo response observed for hypoglycemia events was a surprise to us and reveals a significant challenge in studying glucose in an ambulatory setting, where intensive visits and monitoring is inevitable and can independently influence outcomes, particularly when the patient-monitored glucose is simultaneously the safety lifeline for patient and families.

In light of these limitations, assessing the potential benefit in the ongoing open-label extension (“OLE”) portion of the study will be important, including blood glucose levels in the placebo group following roll-over to ersodetug. All 59 participants who completed the study elected to continue to receive ersodetug in the OLE. To date, 57 participants remain in the OLE, with an exposure duration ranging from ~3 months for the most recently entered patients, to ~21 months. We believe that a potential indicator of ersodetug’s underlying efficacy is an observed reduction in overall background standard of care (“SOC”) therapies in the OLE, including several children who have discontinued SOC and tube feeds and are now receiving ersodetug as monotherapy.

We will be meeting with the FDA prior to the end of calendar Q1 2026 under our Breakthrough Therapy Designation to further characterize these and other clinical outcomes to discuss the full sunRIZE dataset and next steps for this indication. FDA may require additional clinical studies in order to advance the program, which would have an impact on our operating plans and cash resources.

The Phase 3 sunRIZE study (RZ358-301) was a multi-center, randomized, double-blind, placebo-controlled, parallel arm study designed to evaluate the efficacy and safety of ersodetug in patients with congenital hyperinsulinism (“HI”), ages 3 months to 45 years old, who were experiencing continued hypoglycemia on currently available SOC. Eligible participants were randomized to one of three treatment arms to receive either ersodetug (5 or 10 mg/kg) or matched placebo-control as add on to existing SOC. The initial 8 infant participants

(ages 3 months – 1 year old) were enrolled open-label but subsequent participants in this age range could be enrolled into the double-blind randomized, controlled trial (“RCT”). Study drug was administered every other week during an initial loading phase, and then every 4 weeks during the 24-Week controlled pivotal treatment period. Following the pivotal treatment phase of the study, participants could roll-over into an optional open-label extension phase to continue to receive ersodetug.

The study enrolled 63 participants (55 RCT) in more than a dozen countries around the world, inclusive of U.S. patients. The primary and key secondary efficacy endpoints in the study were the change from baseline in the average number of hypoglycemia events per week and the average percent time in hypoglycemia, respectively, over 24 weeks of treatment.

Congenital HI is the most common cause of recurrent and persistent hypoglycemia in children. Individuals with congenital HI typically present with signs or symptoms of hypoglycemia shortly after birth. Hypoglycemia can result in significant brain injury and death if not recognized and managed appropriately. Additionally, recurrent, or cumulative, hypoglycemia can lead to progressive and irreversible damage over time, including serious and devastating brain injury, seizures, neuro-developmental problems, feeding difficulties, and significant impact on patient and family quality of life. In cases where individuals have diffuse disease, a near-total pancreatectomy may be undertaken, although ongoing medical treatment of hypoglycemia is generally required for several years after surgery, before eventual insulin-dependent diabetes ensues. There are no FDA approved therapies for all forms of congenital HI, and the current standard of care treatments are suboptimal. The treatments used by physicians today include glucagon, diazoxide, somatostatin analogues and pancreatectomy. We estimate that in the U.S. alone, the initial addressable pediatric market for congenital HI is more than 1,500 individuals. We believe this addressable population will increase with the elimination of near-total pancreatectomy (“NTP”) and use of ersodetug in patients on diazoxide who experience side effects or are partially responsive.

Ersodetug has received Orphan Drug Designation in the U.S. and European Union for the treatment of congenital HI, as well as Rare Pediatric Disease Designation in the U.S., a prerequisite for a request for a Rare Pediatric Disease Priority Review Voucher upon Biologics License Application (“BLA”) submission. Based on the multinational Phase 2b clinical trial outcomes and the evidence of benefit in this serious condition with substantial unmet medical need, ersodetug was subsequently granted a priority medicines (“PRIME”) designation by the European Medicines Agency (“EMA”), an Innovation Passport designation by the UK Innovative Licensing and Access Pathway (“ILAP”) Steering Group for the treatment of congenital HI, and Breakthrough Therapy Designation by the FDA in the U.S.

Ersodetug for tumor HI

upLIFT Phase 3 Study

In mid-2025 we initiated the Phase 3 registrational study (“upLIFT”) of ersodetug for the treatment of hypoglycemia due to tumor HI. Topline results from the study are anticipated to be available in the second half of calendar 2026, but the specific date of the availability of such results may vary.

At a meeting held with FDA on August 19, 2025, the agency agreed to modifications to the design of the upLIFT study including removing the need to conduct a randomized, double-blind, placebo-controlled trial with hypoglycemia events as the endpoint. The truncated upLIFT study is a Phase 3 registrational, single-arm, open-label, pivotal trial in as few as 16 participants with insulinoma or paraneoplastic non-islet cell tumors, who are requiring continuous parenteral dextrose because of refractory hypoglycemia. Eligible participants requiring continuous parenteral dextrose will receive ersodetug 9 mg/kg per week for 8 weeks, as an add-on to standard of care. Following this 8-week pivotal treatment period, all participants may receive ersodetug in long-term extension, with the discretion to decrease the dosing frequency to every 2 to 4 weeks. The primary endpoint is the number of participants able to achieve at least a 50 percent reduction from baseline in the rate of continuous parenteral dextrose (glucose infusion rate; “GIR”), where 60% of participants would need to reach the endpoint to be considered statistically significant. Additional endpoints include the time to discontinuation of glucose infusion, time to discharge from the hospital, extent of hypoglycemia events and hypoglycemia time in the outpatient setting by SMBG and CMG, respectively, and patient reported quality of life.

Based on historical precedent, supportive data from the sunRIZE study (i.e., safety and drug activity), the recent liberalization of the tumor HI study and differentiation between study endpoints, and the experience that we have reported in the historical Expanded Access Program, we remain cautiously optimistic regarding the probability of success in this indication; however, there can be no assurance that FDA will not consider the sunRIZE study’s failure to meet its endpoints in assessing the approvability of tumor HI. We will continue to engage with FDA on this topic.

Expanded Access Program (“EAP”)

We maintain an EAP for a variety of HI indications for the purpose of making ersodetug available on a compassionate use basis when available therapeutic options have failed, and an individual’s hypoglycemia is unmanageable. In clinical and real-world experience, ersodetug has been shown to counteract excessive insulin action downstream, at the insulin-receptor on target organs. The unique mechanism of action of ersodetug makes the therapy a potential universal treatment for any form of HI. To date, we have received over 30 unsolicited inbound physician inquiries regarding the use of ersodetug in patients with tumor HI caused by metastatic insulinomas or non-islet cell tumors, which has thus far resulted in the request, approval, and initiation of ersodetug in 15 ICT and NICT patients. In the U.S., these requests have all been individually approved by the FDA's Office of Cardiology, Hematology, Endocrinology and Nephrology - Division of Diabetes, Lipid Disorders, and Obesity (“Division”). The tumor HI patients that have received ersodetug have been refractory to SOC therapies for chronic management of hypoglycemia. These patients have generally required continuous intravenous dextrose or nutritional infusion in order to prevent severe hypoglycemia and were typically hospitalized and in life-threatening or hospice-bound condition at the time of request. Further treatment with tumor-directed therapies (e.g., embolization, radiotherapy, chemotherapy) was often deferred as a result of debilitating hypoglycemia.

Generally, dosing for tumor HI patients has been either 6 mg/kg or 9 mg/kg every 1-4 weeks. Nearly universally, ersodetug has led to substantial reductions in GIR (equating to an improvement in hypoglycemia) and has been well tolerated. Within a relatively short period of time after administration of ersodetug, GIR was discontinued or substantially reduced, and hospitalized patients were able to be discharged and receive maintenance ersodetug doses on an outpatient basis, with durable benefit. In several cases, other background medical therapies to prevent hypoglycemia were able to be weaned or stopped, and patients were able to resume tumor-directed therapies for treatment of their underlying cancer. No participants have discontinued the therapy due to lack of response or safety, and the duration of treatment has ranged from several months to almost 2 years in some instances, in this subset of tumor HI patients with significantly advanced and metastatic tumor burden.

Presented in a table filed on January 7, 2026, on Form 8-K with the U.S. Securities and Exchange Commission are cumulative data from the initial 9 participants in the EAP, including patient characteristics, ersodetug dosing, and observed outcomes. This same data cohort was provided to FDA last year in support of our request for Breakthrough Therapy Designation and subsequently informed the discussion with FDA that led to revision of the Phase 3 upLIFT study in tumor HI to a single arm, open-label study. In summary, 75% of the patients receiving IV dextrose/total parenteral nutrition (“TPN”) in the EAP achieved a complete discontinuation of IV dextrose/TPN.

This outcome is highly relevant to the ongoing upLIFT study and provides additional evidence of the activity and potential efficacy of ersodetug across various forms of HI. Notably, the GIR assessment in the EAP is the primary endpoint in upLIFT, which measures the number of participants (out of ~16) who achieve at least a 50% reduction in GIR, an objective endpoint in a highly controlled hospital setting. For statistical significance, 60% of open-label participants need to achieve this threshold. Topline results are anticipated in the second half of 2026.

Six patients with congenital HI are currently receiving ersodetug as part of our EAP, which has served to support patients on a compassionate use basis prior to availability of the Phase 3 sunRIZE clinical trial. These participants were refractory to usual therapies and include one infant where off-label or surgical (pancreatectomy) therapies were being considered. The duration of treatment in these participants ranges from more than a year to more than 3 years, with ongoing benefit.

Tumor HI may be caused by two distinct types of solid tumors: neuroendocrine islet cell tumors (“ICTs”) and non-islet cell tumors (“NICTs”), both of which lead to hypoglycemia due to excessive activation of the insulin receptor. Insulinomas are the most common type of functional ICT and mediate hypoglycemia through excessive insulin production. NICTs are generally associated with relatively large, solid tumors such as hepatocellular carcinoma, fibrosarcoma and mesothelioma, and can cause hypoglycemia by producing and secreting insulin-like paraneoplastic substances such as IGF-2 or related variants that bind to and activate the insulin receptor. This form of hypoglycemia can occur in more than 15 different types of tumors.

Current therapies for insulinomas and NICTs can be grouped into two main categories: (a) tumor-directed de-bulking therapies (e.g., surgery, chemotherapy, radiotherapy), which may indirectly and/or eventually lead to decreased levels of circulating insulin and/or insulin-like substances, and therefore control HI and related hypoglycemia; and/or (b) medical therapies such as Diazoxide and glucocorticoids that are used to attempt to treat the hypoglycemia. Tumor-directed therapies do not directly treat hypoglycemia caused by insulinomas or NICTs. In many cases, tumor-directed therapies are administered concurrently with medical therapies for hypoglycemia and in other cases successful treatment of hypoglycemia often enables the initiation and/or continuation of tumor-directed therapies, as indicated. During the period from diagnosis to surgical treatment, or if surgery is contraindicated or refused, medical treatments are often necessary to directly manage the HI and hypoglycemia induced by the tumor. Additionally, chronic medical management of refractory hypoglycemia is often necessary for patients who cannot be cured by surgery, such as those with extensive disease of the pancreas, multi-focal insulinomas, inoperable or unresectable benign or malignant insulinomas, metastatic insulinomas, non-pancreatic insulinomas, or NICT hypoglycemia resulting from a variety of other tumors.

A significant unmet need exists for treatment options with improved efficacy and tolerability, as normalization of glucose levels is crucial to prevent serious signs and symptoms of hypoglycemia, improve patient quality of life and overall function, and even to ensure patients are fit to receive cancer treatment and to reduce mortality. Unfortunately, some patients are unresponsive to the current standard of care medical therapies for tumor HI and experience debilitating hypoglycemia that is otherwise untreatable. Currently available medical therapies are directed at reducing or eliminating insulin production and/or secretion from tumors, which may be challenging when the tumor is differentiated or dysregulated, and therefore not responding to usual control mechanisms for suppressing insulin production. In some cases, commonly utilized somatostatin analog therapies may even worsen hypoglycemia due to suppression of glucagon. Therefore, currently available medical therapies directed at suppressing insulin production may have limited effectiveness in tumor HI.

While we believe the total addressable market may be larger, the immediately addressable incidence market for the combined indications causing tumor HI is estimated to be approximately 3,000 patients in the U.S. alone per year. We believe 60% of these patients are managed at the National Cancer Institutes, which will be our primary focus at launch.

Recent Developments

Reduction in Workforce

Concurrent with the announcement on December 11, 2025 that our Phase 3 sunRIZE clinical trial did not meet its primary endpoint, management approved a reduction in workforce to conserve cash by reducing overall operating expenses based on our changing needs. We reduced our workforce by 29 employees on December 15, 2025. We incurred approximately $1.5 million of one-time severance expenses consisting of $0.9 million of research and development expense and $0.6 million in general and administrative expense in the three and six months ended December 31, 2025. All of the $1.5 million of one-time severance benefits is included as an accrued liability on the condensed consolidated balance sheet as of December 31, 2025 and included in operating expenses on the condensed consolidated statement of operations for the three and six months ended December 31, 2025. The accrued liability of $1.5 million was paid in full to the affected employees in January 2026 and no remaining liability related to the one-time severance benefits remain at the issuance date of the unaudited condensed consolidated financial statements.

Factors Impacting our Results of Operations

We have not generated any meaningful revenues since our inception in March 2010. Over the last several years, we have conducted private placements and public offerings to raise additional capital, adopted a licensing model to pursue development of product candidates, conducted pre-clinical and clinical trials, and conducted other research and development activities on our pipeline of product candidates.

We do not expect to generate revenue from any of our product candidates until we obtain regulatory approval and commercialize our approved product candidates. We expect to incur operating losses for the foreseeable future; therefore, we expect to continue efforts to raise additional capital to maintain our current operating plans over the next several years. We cannot assure you that we will secure such financing or that it will be adequate for the long-term execution of our business strategy. Even if we obtain additional financing, it may be costly and may require us to agree to covenants or other provisions that will favor new investors over our existing shareholders.

Key Components of Consolidated Statements of Operations and Comprehensive Loss

Research and development expenses. Research and development (“R&D”) expenses consist primarily of compensation and benefits for our personnel engaged in R&D activities, clinical trial costs, licensing costs, and consulting and outside services. Our R&D compensation costs include an allocable portion of our cash and share-based compensation, employee benefits, and consulting costs related to personnel engaged in the design and development of product candidates and other scientific research projects. We also allocate a portion of our facilities and overhead costs based on the personnel and other resources devoted to R&D activities.

General and administrative expenses. General and administrative (“G&A”) expenses consist primarily of (i) an allocable portion of our cash and share-based compensation and employee benefits related to personnel engaged in our administrative, finance, accounting, and executive functions, and (ii) an allocable portion of our facilities and overhead costs related to such personnel. G&A expenses also include professional fees for business development, legal, auditing, consulting, investor relations and other costs primarily related to our status as a public company.

Interest and other income. Interest and other income consist primarily of interest income earned on marketable debt securities and temporary cash investments, amortization of investment premiums and accretion of investment discounts, and realized gains on investments in marketable debt securities.

Loss from change in fair value of derivative liabilities. We recognize liabilities for financial instruments that are required to be accounted for as derivatives, as well as embedded derivatives in our debt agreements. Derivative liabilities are adjusted to fair value at the end of each reporting period until the contracts are settled, expire, or otherwise meet the conditions for equity classification. Changes in fair value are reflected as a gain or loss in our unaudited condensed consolidated statements of operations and comprehensive loss.

Critical Accounting Policies and Significant Judgments and Estimates

Overview

The discussion herein is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported revenue and expenses during the reporting periods. These items are monitored and analyzed for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are 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. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.

With respect to our significant accounting policies that are described in Note 1 to our consolidated financial statements included in Item 8 of our 2025 Form 10-K, we believe that the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Investments in Marketable Debt Securities

We account for investments in marketable debt securities as available-for-sale securities whereby they are recorded in our consolidated balance sheets at fair value. Interest income consists of accrued interest earned based on the coupon rate of the security, plus the impact of accreting discounts and amortizing premiums to maturity using the straight-line method which approximates the interest method. Unrealized gains and losses due to subsequent changes in fair value of the investments are reported in shareholders’ equity as a component of accumulated other comprehensive income (loss). The individual debt securities in our portfolio are subject to credit risk in the event of default by the issuers. We review the components of our portfolio of available-for-sale debt securities, using both quantitative and qualitative factors, to determine if declines in fair value below amortized cost have resulted from a credit-related loss or other factors. To the extent that declines in fair value are due to a deterioration of credit quality of the issuer, we will recognize an allowance for credit losses related to such investments with a corresponding loss in the consolidated statements of operations. Allowances for credit losses may be reversed in subsequent periods if conditions improve and credit-related losses are no longer expected. For a decline in fair value that is solely due to changes in interest rates, impairment is not recognized if we have the ability and intent to hold the investment until maturity. The cost basis of any securities sold prior to maturity will be determined using the specific identification method.

Research and Development

R&D costs are expensed as incurred. Intangible assets related to in-licensing costs under license agreements with third parties are charged to expense unless we are able to determine that the licensing rights have an alternative future use.

Clinical Trial Accruals

Clinical trial costs are a component of R&D expenses. We accrue and recognize expenses for clinical trial activities performed by third parties based upon estimates of the percentage of work completed over the life of the individual study in accordance with agreements established with clinical research organizations and clinical trial sites. We determine the estimates through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. Nonrefundable advance payments for goods and services that will be used or rendered in future R&D activities are deferred and recognized as expense in the period that the related goods are delivered, or services are performed.

Share-Based Compensation Expense

We measure the fair value of services received in exchange for grants of share-based awards based on the fair value of the award as of the grant date. We compute the fair value of the stock option awards with time-based vesting using the Black-Scholes-Merton option-pricing model and recognize the cost of the equity awards over the period that services are provided to earn the award. For stock option awards that contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized on a straight-line basis over the requisite service period as if the award was, in substance, a single award. We recognize the impact of forfeitures in the period that the forfeiture occurs, rather than estimating the number of awards that are not expected to vest in accounting for share-based compensation. For stock options that are voluntarily surrendered, all unrecognized compensation is immediately recognized in the period the options are cancelled. Fair value of RSUs is based on the closing market price on the date of grant whereby compensation cost is recognized ratably over the vesting period of the RSUs.

Results of Operations

Revenue. As a late-stage rare disease company, we did not generate any revenue for the three and six months ended December 31, 2025 and 2024. We are at a late stage of clinical development and do not currently have any commercial products. Our existing product candidates will require extensive additional clinical evaluation, regulatory review, significant marketing efforts and substantial investment before they generate any revenues. We do not expect to be able to generate revenue from any of our product candidates until we obtain regulatory approval and commercialize our approved product candidates.

Three months ended December 31, 2025 and 2024

Research and development expenses. R&D expenses for the three months ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):

The increase in total R&D expenses of $1.7 million for the three months ended December 31, 2025 was attributable to increases of $1.6 million in R&D compensation and benefits, one-time severance benefits of $0.9 million, and an increase of $0.8 million in other R&D costs related to quality and patient affairs costs related to the phase 3 clinical studies. These increases amount to $3.3 million and were partially offset by a decrease of $1.6 million related to ersodetug program costs.

The $1.6 million increase in R&D compensation and benefit related costs was attributable to an increase of $0.9 million in share-based compensation, and an increase of $0.7 million in cash-based compensation and benefits. The increase of $0.7 million in cash-based compensation was due to an increase in the average number of R&D employees from 46 for the three months ended December 31, 2024 to 51 employees for the three months ended December 31, 2025. The $0.9 million of one-time severance benefits related to employees who were terminated on December 15, 2025 in connection with a management implemented workforce reduction.

The $1.6 million decrease in ersodetug R&D costs was driven by a decrease of $2.9 million due to lower spending on drug substance and drug product manufacturing, including decreases in activity surrounding process performance qualification batch productions. This $2.9 million decrease was partially offset by (i) an increase of $1.0 million in clinical trial costs for our congenital HI phase 3 clinical study, which had 57 participants continuing on the open-label extension as of December 31, 2025, and (ii) an increase of $0.3 million in clinical costs due to startup activities in 2025, such as site activations, for the Phase 3 upLIFT study. For the three months ended December 31, 2024, there were de minimis clinical costs incurred for tumor HI related program spend as the Phase 3 upLIFT study had yet to be initiated and clinical costs for the Phase 3 sunRIZE study were lower as we did not complete enrollment of patients until May 2025.

General and administrative expenses. G&A expenses for the three months ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):

The increase in total G&A expenses of $5.4 million for the three months ended December 31, 2025 was attributable to an increase of $3.1 million in other G&A costs related to business development and market research and planning activities in preparation for future ersodetug commercial activities, an increase of $1.7 million in G&A compensation and benefits, and one-time severance benefits of $0.6 million.

The $1.7 million increase in G&A compensation and benefit related costs was attributable to an increase of $1.1 million in share-based compensation and an increase of $0.6 million in cash-based compensation and benefits. The increase of $0.6 million in cash-based compensation was due to an increase in the average number of G&A employees from 18 for the three months ended December 31, 2024 to 24 employees for the three months ended December 31, 2025. The $0.6 million of one-time severance benefits related to employees who were terminated on December 15, 2025 in connection with a management implemented workforce reduction.

Interest and other income. Interest and other income amounted to $1.4 million for the three months ended December 31, 2025, compared to $1.3 million for the three months ended December 31, 2024. This increase of $0.1 million was primarily due to the higher average balance of investments in marketable debt securities throughout the three months ended December 31, 2025 compared to the three months ended December 31, 2024. The impact of higher investments in marketable debt securities was partially offset by lower yields in 2025 as the weighted average yield on interest-earning assets held by us decreased from 4.82% on December 31, 2024 to 4.06% on December 31, 2025.

Income taxes. For the three months ended December 31, 2025 and 2024, we did not recognize any income tax benefit due to our net losses, and our determination that a valuation allowance was required for all of our deferred income tax assets.

Six months ended December 31, 2025 and 2024

Research and development expenses. R&D expenses for the six months ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):

The increase in total R&D expenses of $2.1 million for the six months ended December 31, 2025 was attributable to increases of $2.9 million in R&D compensation and benefits, an increase of $1.5 million in other R&D costs related to quality and patient affairs costs related to the phase 3 clinical studies, and $0.9 million for one-time severance benefits. These increases amount to $5.3 million and were partially offset by a decrease of $3.2 million related to ersodetug program costs.

The $2.9 million increase in R&D compensation and benefit related costs was attributable to an increase of $1.6 million in cash-based compensation and benefits and an increase of $1.3 million in share-based compensation. The increase of $1.6 million in cash-based compensation was due to an increase in the average number of R&D employees from 44 for the six months ended December 31, 2024 to 52 employees for the six months ended December 31, 2025. The $0.9 million of one-time severance benefits related to employees who were terminated on December 15, 2025 in connection with a management implemented workforce reduction.

The $3.2 million decrease in ersodetug R&D costs was driven by a decrease of $6.0 million due to lower spending on drug substance and drug product manufacturing, including decreases in activity for process performance qualification batch productions. This $6.0 million decrease was partially offset by (i) an increase of $1.5 million in clinical trial costs for our congenital HI phase 3 clinical study, which had 57 participants continuing on the open-label extension as of December 31, 2025, and (ii) an increase of $1.3 million in clinical costs due to startup activities in 2025, such as site activations, related to the Phase 3 upLIFT study. For the six months ended December 31, 2024, there were de minimis clinical costs incurred for the Phase 3 upLIFT study had yet to be initiated and clinical costs for sunRIZE study were lower as we did not complete enrollment of patients until May 2025.

General and administrative expenses. G&A expenses for the six months ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):

The increase in total G&A expenses of $7.9 million for the six months ended December 31, 2025 was attributable to an increase of $4.5 million in other G&A costs related to business development and market research and planning activities in preparation for future ersodetug commercial activities, an increase of $2.8 million in G&A compensation and benefits, and one-time severance benefits of $0.6 million.

The $2.8 million increase in G&A compensation and benefit related costs was attributable to an increase of $1.8 million in share-based compensation and an increase of $1.0 million in cash-based compensation and benefits. The increase of $1.0 million in cash-based compensation was due to an increase in the average number of G&A employees from 18 for the six months ended December 31, 2024 to 23 employees for the six months ended December 31, 2025. The $0.6 million of one-time severance benefits related to employees who were terminated on December 15, 2025 in connection with a management implemented workforce reduction.

Interest and other income. Interest and other income amounted to $3.1 million for the six months ended December 31, 2025, compared to $2.9 million for the six months ended December 31, 2024. This increase of $0.2 million was primarily due to the higher average balance of investments in marketable debt securities throughout the six months ended December 31, 2025 compared to the six months ended December 31, 2024. The impact of higher investments in marketable debt securities was partially offset by lower yields in 2025 as the weighted average yield on interest-earning assets held by us decreased from 4.82% on December 31, 2024 to 4.06% on December 31, 2025.

Income taxes. For the six months ended December 31, 2025 and 2024, we did not recognize any income tax benefit due to our net losses, and our determination that a valuation allowance was required for all of our deferred income tax assets.

Liquidity and Capital Resources

Short-term Liquidity Requirements

As of December 31, 2025, we had cash and cash equivalents of $11.9 million and short-term marketable debt securities of $121.0 million for total capital resources of $132.9 million. Working capital amounted to approximately $125.6 million as of December 31, 2025. We have incurred cumulative net losses of $444.8 million since our inception and as a clinical stage company we have not generated any meaningful revenue to date.

Accordingly, our primary source of liquidity has historically been from the completion of private placements and public offerings of our equity securities. The completion of equity financings between June 2024 and June 2025 is the primary source of our cash, cash equivalents and short-term investments in marketable debt securities totaling $132.9 million as of December 31, 2025.

Expected cash payments related to existing contractual obligations for the 12-months ending December 31, 2026 include approximately (i) $0.8 million under all of our operating lease agreements, and (ii) $1.5 million in one-time severance benefits due to employees impacted by the December 2025 reduction in our workforce. The $1.5 million of one-time severance benefits was paid in full in January 2026.

Based on our cash, cash equivalents and investments in marketable debt securities totaling $132.9 million as of December 31, 2025, we believe we have adequate capital resources to meet our contractual obligations and carry out ongoing clinical trials and other planned activities for at least 12 months from the issuance date of the unaudited condensed consolidated financial statements as of December 31, 2025.

Long-term Liquidity Requirements

Our most significant long-term contractual obligations consist of a regulatory milestone payment of $25.0 million payable to XOMA and additional clinical and regulatory milestone payments up to $25.0 million payable to ActiveSite. Due to uncertainties in the timing associated with clinical trial activities and regulatory approvals, there is even greater uncertainty in forecasting the timing of our long-term future clinical and regulatory milestone payments to XOMA and ActiveSite.

In addition to the clinical and regulatory milestone payments discussed above, upon the future commercialization of ersodetug and compounds from our PKI Portfolio (as defined below) we will be obligated to pay additional milestone payments and alternative indication regulatory approval payments to XOMA and ActiveSite for an aggregate up to $202.5 million and royalties based on the net sales of the related products. These future milestones include $185.0 million in potential payments to XOMA and $17.5 million to ActiveSite for various sales-based milestones and alternative indication regulatory approvals. No assurance can be provided that commercialization will ever be achieved for ersodetug or compounds from our PKI Portfolio, in which case none of these future payments may ever be required.

In addition to our licensing obligations, we also have approximately $0.8 million of long-term contractual obligations under existing operating lease agreements that expire by October 2027.

Based on our current forecast, we expect that our existing capital resources will be sufficient to fund our short-term liquidity requirements. However, we will need to obtain additional equity or debt financing in order to fund all of our long-term liquidity requirements.

Presented below is further discussion about the ongoing requirements pursuant to our license agreements with XOMA and ActiveSite, along with additional information about our ongoing financing activities that impacted our liquidity and capital resources through December 31, 2025.

XOMA License Agreement

In December 2017, we entered into a license agreement (the “XOMA License Agreement”) with XOMA through its wholly-owned subsidiary, XOMA (US) LLC, pursuant to which XOMA granted an exclusive global license to develop and commercialize XOMA 358 (formerly X358 or RZ358, now ersodetug) for all indications. In January 2019, the XOMA License Agreement was amended with an updated payment schedule, as well as revised the amount we were required to expend on development of ersodetug and related licensed products, and revised provisions with respect to our diligence efforts in conducting clinical studies.

To date we have paid a total of $12.0 million in milestone payments to XOMA. The most recent milestone payment of $5.0 became due in May 2025 upon dosing of the last patient in our Phase 3 clinical trial for ersodetug and was paid in June 2025. The next milestone payment of $25.0 million will be due upon regulatory approval for ersodetug by any regulatory authority. We record a liability for milestone payments in our financial statements on the date that we achieve the milestone event. Additionally, upon the future commercialization of ersodetug, we will be required to pay royalties to XOMA based on the net sales of the related products, and milestone payments up to an additional $185.0 million if future annual sales related to ersodetug exceed targets ranging from $100.0 million to $1.0 billion. Through December 31, 2025, no events have occurred that would result in the requirement to make additional milestone payments, and no royalties have been incurred to date.

ActiveSite License Agreement

In August 2017, we entered into a Development and License Agreement (the “ActiveSite License Agreement”) with ActiveSite Pharmaceuticals, Inc. (“ActiveSite”) pursuant to which we acquired the rights to ActiveSite’s Plasma Kallikrein Inhibitor program (“PKI Portfolio”). We initially focused on the development of RZ402 as a therapy for diabetic macular edema (“DME”). Following the completion of a Phase 2 clinical study for RZ402, we decided to pause the program to focus its resources on ersodetug. We are currently exploring the use of the PKI Portfolio to develop therapies for different indications. To date we have paid a total of $4.0 million in milestone payments to ActiveSite. The most recent milestone payment of $3.0 million was in February 2023 after dosing of the first patient in a Phase 2 clinical trial for RZ402. The next milestone payment of $5.0 million will be due upon dosing of the first patient in a Phase 3 clinical trial. Remaining milestone payments under the ActiveSite License Agreement for various clinical and regulatory milestones amount to $25.0 million and milestones after commercial success or alternative indication approvals amount to $17.5 million. We will also be required to pay royalties equal to 2.0% of any sales of products that use the PKI Program. Through December 31, 2025, no events have occurred that would result in the requirement to make additional milestone payments, and no royalties have been incurred to date.

Cash Flows Summary

Presented below is a summary of our operating, investing, and financing cash flows for the six months ended December 31, 2025 and 2024 (in thousands):

Cash Used in Operating Activities

For the six months ended December 31, 2025 and 2024, cash used in operating activities amounted to $37.8 million and $29.7 million, respectively. The key components in the calculation of our cash used in operating activities are as follows (in thousands):

For the six months ended December 31, 2025, our net loss was $40.9 million compared to $31.1 million for the six months ended December 31, 2024. For further discussion about changes in our operating results for the six months ended December 31, 2025 and 2024, please refer to Results of Operations above.

For the six months ended December 31, 2025 and 2024, our non-cash expenses of $6.3 million and $3.1 million, respectively, were primarily attributable to share-based compensation expense and non-cash lease expense. For the six months ended December 31, 2025 and 2024, the net impact of accretion of discounts and amortization of premiums on marketable debt securities reduced operating cash flows by $1.5 million and $1.6 million, respectively. For the six months ended December 31, 2025, net changes in operating assets and liabilities decreased operating cash flow by $1.6 million, primarily driven by cash outflows that resulted in a net decrease in accounts payable and other accrued liabilities of $2.7 million. This amount was partially offset by a net decrease of $1.1 million in prepaid expenses and other assets. For the six months ended December 31, 2024, net changes in operating assets and liabilities decreased operating cash flow by $0.1 million, primarily driven by cash outflows that resulted in a net increase in prepaid expense and other assets of $1.4 million. This amount was partially offset by a net increase of $1.3 million in accounts payable and other accrued liabilities.

Cash Used in Investing Activities

For the six months ended December 31, 2025, our net cash used in investing activities amounted to $45.7 million. For the six months ended December 31, 2025, we received proceeds of $70.1 million upon the maturity of certain marketable debt securities. These cash proceeds from maturities, along with certain proceeds from the 2025 Underwritten Offering in April 2025 and the 2025 Private Placement in June 2025, were used to purchase a total of $115.7 million of marketable debt securities.

For the six months ended December 31, 2024, our net cash used in investing activities amounted to $37.9 million. For the six months ended December 31, 2024, we received proceeds of $60.7 million upon the maturity of certain marketable debt securities. These cash proceeds from maturities, along with certain proceeds from the 2024 Underwritten Offering in June 2024 and 2024 Private Placement in July 2024, were used to purchase a total of $98.7 million of marketable debt securities.

Cash Provided by Financing Activities

For the six months ended December 31, 2025, our net cash provided by financing activities of $1.3 million was attributable to cash receipts from the exercise of stock options.

For the six months ended December 31, 2024, our net cash provided by financing activities was $6.2 million. Cash inflows amounted to $6.8 million, consisting of proceeds of $6.0 million from the 2024 Private Placement and $0.8 million from the exercise of employee stock options. These amounts were partially offset by cash outflows related to the payment of offering costs of $0.6 million incurred in connection with the 2024 Underwritten Offering.

Recent Accounting Pronouncements

Please refer to Note 1 to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Report regarding the expected impact of recent accounting pronouncements.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet transactions for the periods covered by this Report.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Principal Executive and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, 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. Based on that assessment under those criteria, our management has determined that our internal control over financial reporting was effective as of December 31, 2025.

Changes in Internal Controls over Financial Reporting

During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our Risk Factor disclosures are set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 filed with the Securities and Exchange Commission on September 17, 2025. The risk factors included in our 2025 Form 10-K have not materially changed, except as reflected in the following new risk factors:

Risks Related to our Clinical Trials

The development of ersodetug could be halted or significantly delayed for various reasons

Ersodetug is vulnerable to the risks of failure inherent in the drug development process. Our sunRIZE trial failed to meet its primary and secondary endpoints, and we may not be able to obtain regulatory approval for commercialization. We will be meeting with the FDA prior to the end of calendar Q1 2026 to discuss the study results and discuss a potential path forward. There can no guarantee of the outcome of our meeting with the FDA and the path forward, if any, which may require us to expend additional capital or to conduct additional studies and clinical trials which we may be unable to do.

If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for or commercialize our product candidates.

Our preclinical studies or early clinical trials of our product candidates, whether conducted by us or third parties, may not necessarily be predictive of the results of later clinical trials that we conduct. For example, despite promising results in our early clinical trials of ersodetug, our sunRIZE trial failed to meet its primary and secondary endpoints. Similarly, even if we are able to complete our planned upLIFT trial, positive results from earlier clinical trial may not be replicated in our subsequent preclinical studies or clinical trials or in real-world results.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and we cannot be certain that we will not face further setbacks for any future product candidates. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or efficacy observations made in preclinical studies and clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA, or comparable non-U.S. regulatory authority approval. Furthermore, the approval policies or regulations of the FDA or comparable non-U.S. regulatory authorities may significantly change in a manner that may render our clinical data insufficient for approval, which may lead to the FDA or comparable non-U.S. regulatory authorities delaying, limiting or denying approval of our product candidates.

Interim, “topline” and preliminary data from clinical trials may change as more data become available, are not necessarily predictive of the final results of the completed study or the results of other ongoing or future studies and are subject to audit and verification procedures that could result in material changes.

From time to time, we may announce, publish or report preliminary, topline or interim data from our clinical trials. Such data are subject to the risk that one or more of the clinical outcomes may materially change as patients continue progressing through the study (for example, in oncology studies, a patient may progress from a complete or partial response to progressive disease), as patient enrollment continues and/or as more patient data become available, and such data may not be indicative of final data from such trials, data from future trials or real-world results. In addition, such data may remain subject to audit confirmation and verification procedures that may result in the final data being materially different from the preliminary, topline or interim data disclosed. As a result, all preliminary, topline and interim data should be viewed with caution until the final data are available. Material adverse differences between preliminary, topline or interim data and final data could significantly harm our business, financial condition, cash flows and results of operations.

We may become the subject of litigation.

Following the release of the results of our sunRIZE trial our stock price suffered a decline. As a result, plaintiffs law firms have announced investigations into potential securities laws violations based on allegations related to the results of the sunRIZE trial. While we believe these allegations are without merit, and no litigation has been commenced to date regarding such allegations, we still face the potential for litigation to be initiated against us. While we would vigorously defend against any such litigation, regardless of outcome, litigation can be costly and time-consuming, divert the attention of our management team, adversely impact our reputation and brand, and if a plaintiff claim were successful, could result in significant liability, all of which could harm our business and financial condition.