IRulya Therapeutics Inc.: Form 10-Q for the period ended Sep 30, 2025

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes, included in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions, that are based on the beliefs of our management. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “Quince,” “we,” “us,” and “our” refer to Quince Therapeutics, Inc. and its consolidated subsidiaries.

Overview

We are a late-stage biotechnology company dedicated to unlocking the power of a patient’s own biology for the treatment of rare diseases. Our proprietary AIDE technology is an innovative drug/device combination platform that uses an automated process to encapsulate a drug into a patient’s own red blood cells. Red blood cells have several characteristics that make them an excellent vehicle for drug delivery, including better safety and tolerability, enhanced tissue distribution, reduced immunogenicity, and prolongation of circulating half-life. Our AIDE technology is designed to harness many of these benefits to allow for new and improved therapeutic options for patients living with high unmet medical needs. eDSP is the first product in development that leverages our AIDE technology and is composed of DSP encapsulated in autologous red blood cells targeted to treat a rare pediatric neurodegenerative disease, A-T. DSP is a corticosteroid well-described for its anti-inflammatory properties, but is also coupled with serious adverse events, including adrenal suppression. eDSP is designed to maintain the well-described efficacy of DSP while reducing or eliminating the significant adverse events that accompany chronic corticosteroid treatment. The altered biodistribution, pharmacokinetics, and pharmacodynamics of eDSP enabled by autologous red blood cells may, therefore, improve the safety profile, and maintain or increase the desired therapeutic effect of DSP.

Currently, there are no approved treatments for A-T and the global market, based on our internal estimates and assumptions, represents a more than $1 billion peak commercial opportunity. We believe this makes eDSP an ideal lead asset to demonstrate the clinical and commercial potential of our AIDE technology.

We intend to focus our development expertise and financial resources toward advancing a Phase 3 NEAT clinical trial, which is an international multicenter, randomized, double-blind, placebo-controlled study to evaluate the neurological effects of eDSP on patients with A-T. As of July 16, 2025, we completed enrollment of our Phase 3 NEAT clinical trial with a total of 105 participants, including 83 participants in the six to nine year-old primary analysis population and 22 participants aged 10 years or older. Concluding the NEAT study with 83 enrolled participants in the six to nine year-old primary analysis population reflects powering of approximately 90% to determine statistical significance on the primary endpoint. To date, 100% of NEAT study participants have elected to transition to the OLE study.

We expect to report topline results from the Phase 3 NEAT clinical trial in the first quarter of 2026. Assuming positive study results, we plan to submit a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) in the second half of 2026. The Phase 3 NEAT clinical trial is being conducted under a Special Protocol Assessment agreement with the FDA. We were also granted FDA Fast Track designation for our eDSP System for the treatment of patients with A-T based on the potential to address a high unmet medical need.

Additional clinical activities include completing a pre-planned safety analysis meeting conducted by an independent data and safety monitoring board (iDSMB) for our Phase 3 NEAT clinical trial with the iDSMB recommending that the study continue without any modifications. Study initiation activities are ongoing to support our European Union pediatric investigational plan (PIP) – named the Pediatric Encapsulated Dexamethasone Sodium Phosphate (PeD) study – to evaluate the safety and pharmacokinetics of eDSP in smaller patients with A-T who weigh between nine and 15 kilograms. We also participated at the 54th Child Neurology Society (CNS) Annual Meeting with a poster presentation of patient-reported walking capacity in children with A-T, which describes the pattern of age-related walking capacity loss in patients with A-T and compare the subjective walking scale to the two measures – International Cooperative Ataxia Rating Scale (ICARS) and Rescored modified ICARS (RmICARS) – used in our Phase 3 NEAT clinical trial. Results showed that all three scales tracked age-related loss of ambulation in a similar way, suggesting suitability of RmICARS walking capacity components in assessing A-T disease progression. In addition, we published an advanced population pharmacokinetic (PK) modeling study in the scientific journal CPT: Pharmacometrics & Systems Pharmacology (PSP) that addresses the development of a pediatric PK model based on data from the study of healthy adults and pediatric patients with A-T administered monthly with eDSP and predicts the exposure data in the A-T patient population over a six-month period.

We plan to utilize our strategic relationship with Option Care Health, Inc., the nation’s largest independent provider of home and ambulatory infusion services, to support the commercial development and efficient launch of our lead asset, eDSP, for the treatment of A-T in the U.S., assuming positive study results and subsequent regulatory approval. We expect that the strategic relationship will leverage Option Care Health’s network of specialty pharmacies and ambulatory infusion suites to provide for the administration of eDSP in an effective and efficient way while delivering this innovative treatment to patients. Option Care Health has more than 90 full-service pharmacies and 180-plus ambulatory infusion suites located across the U.S. In addition, we continue to advance commercial readiness activities, including completion of qualitative payer research covering more than 200 million U.S. lives. We believe that the findings of such research were highly encouraging with payers recognizing the significant unmet need in A-T and expressing broad support for eDSP as a potential first-to-market treatment, assuming positive NEAT study results.

We plan to expand our development pipeline to include additional indications for eDSP where chronic corticosteroid treatment is or has the potential to become a standard of care. We selected DMD as our second development program. We consider DMD an excellent indication for eDSP as corticosteroids are the standard of care for this rare disease, and their utility is limited by significant toxicities. We continue to advance the evaluation of DMD as our second targeted eDSP indication, including preparing for protocol finalization, contract research organization (CRO) evaluation and selection, and site feasibility in preparation for dosing the first patient in a DMD Phase 2 clinical study in 2026.

Financial Overview

Our strategic focus is to apply our resources and capital toward the advancement of our proprietary AIDE technology platform and Phase 3 lead asset, eDSP, targeted to treat A-T. With cash, cash equivalents, and short-term investments of $26.3 million as of September 30, 2025, we expect to fund operations into the second quarter of 2026, or into the second half of 2026 if warrants from the Company's financing in June 2025 are exercised in full for cash. However, there can be no guarantee as to when such warrants may be exercised, if at all. In addition, we expect to expand and accelerate our development pipeline by funding new program expansion into DMD and other high priority rare disease indications for our lead asset eDSP.

Components of Results of Operations

Operating Expenses

Our operating expenses since inception have consisted primarily of R&D activities and G&A costs.

Research and Development Expenses

Our research and development expenses consist of expenses incurred in connection with the research and development of our research programs. These expenses include payroll and personnel expenses, including stock-based compensation, for our research and product development employees, laboratory supplies, product licenses, consulting costs, contract research, regulatory, quality assurance, preclinical and clinical expenses, allocated rent, facilities costs and depreciation. We expense both internal and external research and development costs as they are incurred. Non-refundable advance payments and deposits for services that will be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as an expense as the related services are performed.

We expect our research and development expenses to remain in the current levels as we continue our Phase 3 NEAT clinical trial and expand into new indications, including Phase 2 study in DMD.

General and Administrative

General and administrative expenses consist principally of personnel-related costs, including payroll and stock-based compensation, for personnel in executive, finance, human resources, business and corporate development, and other administrative functions, professional fees for legal, consulting, insurance and accounting services, allocated rent and other facilities costs, depreciation, and other general operating expenses not otherwise classified as research and development expenses.

Fair Value Adjustment for Contingent Consideration

We record fair value adjustment for contingent consideration primarily due to the expected timing of achieving various milestones, and the passage of time related to the contingent consideration earnout resulting from the EryDel Acquisition. Changes in the fair value of the contingent consideration obligations may result from changes in probability assumptions with respect to the likelihood of achieving the various contingent payment obligations.

Fair Value Adjustment for Debt

We record fair value adjustment for debt primarily due to the passage of time and the interest accrued for the loan with the EIB.

Fair Value Adjustment for Warrants

We record fair value adjustment for warrant liability calculated using the Black-Scholes option pricing model, adjustments are due to changes in the Company’s stock price, the expected term, volatility, risk-free interest rate, and expected dividends.

Warrant Issuance Costs

Warrant issuance costs consist of expenses incurred in connection with the offering of our private placement warrants, which are classified as liabilities.

Interest Income

Interest income consists primarily of interest earned on our short-term and long-term investments portfolio.

Other Expense, net

Other income (expense), net consists primarily of the effects of foreign currency exchange rates.

Critical Accounting Estimates

For a description of our significant accounting policies, see Note 2 to our condensed consolidated financial statements.

Of our policies, the following are considered critical to an understanding of our consolidated financial statements as they require the application of subjective and complex judgment, involving critical accounting estimates and assumptions impacting our condensed consolidated financial statements:

• Research and Development Expenses
• Identifiable Intangible Assets
• Contingent Consideration
• Debt
• Warrant Liability

Warrant Liability

Accounting for liability classified warrants requires management to exercise judgment and make estimates and assumptions regarding their fair value. (For more information about the material inputs and assumptions used to value the liability classified warrants, refer to Note 9 to the condensed consolidated financial statements.) The warrant liabilities are initially recorded at fair value upon the date of issuance and subsequently remeasured to fair value at each reporting date, with changes recognized in the condensed consolidated statements of operations. Changes in the fair value of the liability classified warrants will continue to be recognized until the warrants are exercised, expire or qualify for equity classification.

For a discussion about the other critical accounting estimates and assumptions impacting our condensed consolidated financial statements, see the Critical Accounting Estimates section within MD&A of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 24, 2025.

Results of Operations

Comparison of the three months ended September 30, 2025 to the three months ended September 30, 2024

The following sets forth our results of operations for the three months ended September 30, 2025 and 2024 (in thousands, except for percentages):

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Research and Development Expenses (in thousands, except for percentages):

Research and development expenses were $8.1 million for the three months ended September 30, 2025, compared to $4.9 million for the three months ended September 30, 2024, an increase of $3.2 million.

The costs for eDSP development increased by $3.0 million compared to the same period from the prior year due to the continuation costs related to our Phase 3 NEAT clinical trial and OLE. This increase was primarily due to an increase of clinical trial costs of $3.0 million), an increase of eDSP consulting spend of $0.3 million, and a decrease in manufacturing costs of $0.3 million.

Our personnel related costs increased by $0.1 million during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, mainly as a result of an increase of $0.1 million in allocated stock-based compensation costs.

Facilities and other research and development expenses remained flat for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.

General and Administrative Expenses

General and administrative expenses decreased by $0.3 million for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The change in general and administrative expenses is primarily due to decreases of $0.1 million in consulting and professional costs and approximately $0.2 million in other professional and administrative expenses.

Fair Value Adjustment for Contingent Consideration

For the three months ended September 30, 2025, we recorded a fair value adjustment for contingent consideration which resulted in a $4.7 million increase primarily due to the passage of time.

Fair Value Adjustment for Debt

For the three months ended September 30, 2025, we recorded a fair value adjustment for debt which resulted in a $0.1 million charge primarily due to the passage of time and the interest accrued and paid for the loan with the EIB.

Fair Value Adjustment for Warrants

For the three months ended September 30, 2025, we recorded a fair value adjustment for warrants which resulted in a $0.3 million charge primarily due to the change in the price of our common stock.

Interest Income

Interest income decreased by $0.4 million for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024. The change was due to decreased yields on our investment portfolio and decreased average balances.

Other Income (Expense), net

Other income (expense), net decreased by $0.2 million for the three months ended September 30, 2025 primarily due to the effects resulting from changes in foreign exchange rates.

Income Tax Benefit (Expense)

We recorded tax benefit of $46 thousand for the three months ended September 30, 2025 and tax expense of $13 thousand for the three months ended September 30, 2024. Tax benefit is primarily due to the true-up of the Australian tax in the three months ended September 30, 2025.

Results of Operations

Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024

The following sets forth our results of operations for the nine months ended September 30, 2025 and 2024 (in thousands, except for percentages):

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Research and Development Expenses (in thousands, except for percentages):

Research and development expenses were $22.8 million for the nine months ended September 30, 2025, compared to $12.8 million for the nine months ended September 30, 2024, an increase of $10.0 million.

The costs for eDSP development increased by $8.2 million compared to the same period from the prior year due to the ramping up and continuation costs related to our Phase 3 NEAT clinical trial and OLE. This increase was primarily due to an increase in clinical trial costs of $7.2 million), an increase in eDSP consulting of $1.3 million, and a decrease in manufacturing costs of $0.3 million.

Our personnel related costs increased by $1.9 million during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, mainly as a result of an increase of $0.8 million in allocated stock-based compensation costs and a $1.1 million increase in other personnel related expenses, including payroll taxes and benefits.

Facilities and other research and development expenses decreased by $0.2 million for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024 primarily due to a decrease in rent, storage and facilities expenses.

General and Administrative Expenses

General and administrative expenses decreased by $1.9 million to $11.4 million for the nine months ended September 30, 2025, from $13.3 million for the nine months ended September 30, 2024. The decrease in general and administrative expenses is primarily due to decreases of $0.8 million in allocated stock-based compensation and personnel related expenses, $0.5 million in consulting and professional costs and $0.6 million decrease in other professional and administrative expenses year over year.

Goodwill Impairment Charge

During the nine months ended September 30, 2024, we conducted an impairment analysis of our goodwill that resulted from the acquisition of EryDel in October 2023. That assessment included a qualitative assessment of deteriorating macro-economic conditions, including inflationary pressures and high interest rates, and the continuing decline in our market capitalization from the date of the acquisition. This qualitative assessment indicated that our goodwill was potentially impaired. To determine the extent, if any, by which our goodwill was impaired, we conducted additional quantitative analyses which resulted in our fair value being significantly below our current carrying value. As a result of the analyses, we recorded a non-cash goodwill impairment charge of $17.1 million for the nine months ended September 30, 2024.

Fair Value Adjustment for Contingent Consideration

For the nine months ended September 30, 2025, we recorded a fair value adjustment for contingent consideration which resulted in a $2.4 million charge due to the passage of time.

Fair Value Adjustment for Debt

For the nine months ended September 30, 2025, we recorded a fair value adjustment for debt which resulted in a $0.2 million charge primarily due to the passage of time and the interest accrued and paid for the loan with the EIB.

Fair Value Adjustment for Warrants

For the nine months ended September 30, 2025, we recorded a fair value adjustment for warrants which resulted in a $4.2 million charge primarily due to the change in the price of our common stock.

Interest Income

Interest income decreased by $1.4 million for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. The change was due to decreased yields on our investment portfolio and decreased average balances.

Other Income (Expense), net

Other income (expense), net decreased by $16 thousand for the nine months ended September 30, 2025 primarily due to unrealized gains resulting from changes in foreign exchange rates.

Income Tax Expense

We recorded $68 thousand of tax expense for the nine months ended September 30, 2025 and $80 thousand for the nine months ended September 30, 2024. Tax expense is primarily driven by foreign withholding tax, interest on uncertain tax position liability and net of tax benefit from decrease in EryDel's deferred tax liabilities.

Liquidity and Capital Resources

We have not generated any revenue and we have never been profitable. To date, we have financed our operations primarily through the issuance and sale of our securities. From inception through September 30, 2025, we received net proceeds of approximately $320.1 million from the issuance of redeemable convertible preferred stock, convertible promissory notes, common warrants, pre-funded warrants, and common stock.

We have incurred net losses since the commencement of our operations. As of September 30, 2025, we had an accumulated deficit of $421.0 million. We incurred a net loss of $13.4 million and $44.5 million in the three and nine months ended September 30, 2025, respectively. We do not expect to generate product revenue unless and until we obtain marketing approval for and commercialize a drug candidate, and we cannot assure you that we will ever generate significant revenue or profits.

We evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. We have incurred losses and generated negative operating cash flows since our inception and anticipate that we will continue to incur losses for at least the next several years. The transition to profitability is dependent upon the successful development, approval and commercialization of our product candidate, and the achievement of a level of revenues adequate to support our cost structure. As of September 30, 2025, we had cash, cash equivalents and short-term investments of $26.3 million. Based on our current operating plan, we believe that our cash and cash equivalents balance as of September 30, 2025 will not be sufficient to fund operations and capital expenditures for the twelve months following the filing of this Quarterly Report on Form 10-Q, and we will need to obtain additional funding. We intend to obtain additional funding through available financing sources which may include additional public offerings of common stock, private financing of debt or equity, and/or the pursuit of strategic partnerships, licensing arrangements or collaborations. Management’s belief with respect to our ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, we may need to seek additional funding sooner than would otherwise be expected. There can be no assurance that we will be able to obtain additional funding on acceptable terms, if at all. If we are unable to obtain sufficient funding, we may be required to delay development efforts, limit activities and reduce research and development costs, which could adversely affect our business prospects. Because of the uncertainty in securing additional funding and the insufficient amount of cash and cash equivalent resources as of September 30, 2025, we concluded that substantial doubt exists with respect to our ability to continue as a going concern within one year after the date that these unaudited condensed consolidated financial statements are issued.

Our cash, cash equivalents, and marketable debt securities are held in a variety of deposit accounts, interest-bearing accounts, U.S government securities, debt securities in government-sponsored entities, and money market funds. Cash in excess of immediate requirements is invested with a view toward liquidity and capital preservation, and we seek to minimize the potential effects of concentration and credit risk. Our cash equivalents and short-term investments are held in money market funds and government agency obligations.

While we currently believe that our existing cash, cash equivalents and investments will be sufficient to fund our planned operations through Phase 3 NEAT topline results and into the second quarter of 2026, that assumption does not include any costs or cash expenditures associated with initiating additional programs.

Capital Resources

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures related to eDSP, the initiation and continuation of the Phase 3 NEAT clinical trial and OLE, and general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

We expect that we will require additional capital to develop our drug candidates and fund operations for the foreseeable future. We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:

• the progress, costs, trial design, results of and timing of our Phase 3 NEAT clinical trial and any potential future trials;
• the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;
• payment of future milestones to EryDel shareholders and payments to the EIB in respect of obligations under the EIB Loan;
• the number and characteristics of drug candidates that we pursue;
• our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
• our need and ability to retain management and hire scientific and clinical personnel;
• the effect of competing drugs and drug candidates and other market developments;
• our need to implement additional internal systems and infrastructure, including financial and reporting systems; and
• the economic and other terms, timing of and success of any collaboration, licensing or other arrangements into which we may enter in the future.

If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others rights to our drug candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.

Financing

Equity Financing

ATM Program

On December 18, 2024, we entered into a Controlled Equity OfferingSM Sales Agreement, with Cantor Fitzgerald & Co. and H.C. Wainwright & Co., LLC, or the Agents, relating to the sale of shares of our common stock, par value $0.001 per share. In accordance with the terms of this agreement, we may offer and sell up to $21.9 million of shares of common stock.

During the three and nine months ended September 30, 2025, we utilized our ATM program to raise net proceeds of approximately $1.4 million and $4.3 million by issuing 870,785 shares and 3,637,334 shares of common stock, respectively. As of September 30, 2025, $17.5 million remained available to be sold under the ATM program. In October 2025, we increased the total amount available under the ATM program to $75.0 million and utilized our ATM program to raise net proceeds of approximately $2.0 million by issuing 1,186,525 shares of common stock.

June 2025 Private Placement

On June 12, 2025, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”), with certain institutional investors (the “Investors”) and certain members of our management (together with the Investors, the “Purchasers”) pursuant to which we issued and sold to the Purchasers in a private placement (the “Private Placement”): (i) 6,671,928 shares (the “Shares”) of our common stock, par value $0.001 per share (the “Common Stock”), (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 2,000,000 shares of Common Stock, and (iii) accompanying warrants to purchase up to an aggregate of 8,671,928 shares of Common Stock (the “Common Warrants”), for aggregate gross proceeds of approximately $11.5 million (excluding up to approximately $10.4 million of aggregate gross proceeds that may be received in the future upon the cash exercise in full of the Common Warrants issued in the Private Placement), before deducting placement agent fees and other expenses payable by us. Each Share and each Pre-Funded Warrant sold pursuant to the Securities Purchase Agreement was accompanied by one Common Warrant. The combined purchase price of each Share and accompanying Common Warrant was $1.325 (which included $0.125 per Common Warrant in accordance with the rules and regulations of Nasdaq). The combined purchase price of each Pre-Funded Warrant and accompanying Common Warrant was $1.324 (equal to the combined purchase price per Share and accompanying Common Warrant, minus $0.001).

Debt

In connection with the acquisition of EryDel on October 20, 2023, we guaranteed the EIB Loan. The EIB Loan was amended and restated as of the acquisition date. The EIB Loan provides for maximum borrowings of 30.0 million euro through four tranches; tranche A, 3.0 million euro; tranche B, 7.0 million euro; tranche C, 10.0 million euro; and tranche D, 10.0 million euro. Each tranche is subject to conditions precedent related to our business and capitalization. As of September 30, 2025, only tranches A and B have been drawn. All amounts due under tranche A and B are payable on their maturity date of August 2026. Tranche C and D are payable in equal installments of principal together with all amounts outstanding under the tranches on the repayment dates specified in the relevant disbursement offer. The first repayment date of tranche C shall fall not earlier than twelve months from the disbursement date of such tranche. The last repayment date of tranche C and tranche D shall fall not later than 5 years from the disbursement date of tranche C and tranche D, respectively. The EIB Loan bears interest at fixed rates for each tranche and both principal and interest are payable on the maturity date for each tranche (with the exception of 2% cash interest which shall accrue and be payable quarterly during fiscal year 2025 pursuant to the terms of the Amendment, which shall correspondingly reduce the deferred interest rate accruing during such period). The fixed rates range from 7.0% to 9.0% per annum. As of September 30, 2025, principal of 10.0 million euros ($11.7 million) was outstanding on the EIB Loan and classified as current portion of debt on the condensed consolidated balance sheet at fair value with imputed interest of 9.0% included.

We may voluntarily prepay, in whole or in part with a prepayment premium. In the event of an occurrence of an event of default, a change in control and certain other prepayment events, as specified in the Debt Agreement, we will be required to prepay the outstanding EIB Loan together with an additional remuneration buyout fee, as specified in the Debt Agreement. The Debt Agreement includes a provision for additional remuneration to be paid in addition to interest. The amount of additional remuneration to be paid is equal to 2.5% of revenue up to 125.0 million euros, plus 1.85% of revenue between 125.0 and 250.0 million euros, plus 1.0% of revenue in excess of 250.0 million euros, multiplied by a varying percentage based on how many tranches have been drawn. The varying percentage is equal to 30.0% in the event tranche A has been drawn, 50.0% in the event tranche A and B have been drawn, 80.0% in the event tranche A, B and C have been drawn, and 100.0% in the event all four tranches have been drawn. The additional remuneration is payable for seven years, during the period January 1, 2026, through December 31, 2032. In the event of an occurrence of an event of default or prepayment, we may be required to pay an additional remuneration buyout fee.

The Debt Agreement requires us to maintain a minimum cash balance of 14.65 million euros ($17.2 million) until the outstanding obligations under the Debt Agreement, together with accrued interest and all other amounts accrued or outstanding under the agreement, is repaid in full (the “Minimum Cash Covenant”). In November 2024, we entered into an amendment (the “Amendment”) of the Debt Agreement with EIB which waives the Minimum Cash Covenant from January 1, 2025, and up to the earlier of December 31, 2025, or the date the Minimum Cash Covenant is restored (such period, the “Waiver Period”). Under the terms of the Amendment, we agreed to amendments requiring monthly reporting of cash balances and additional limitations on certain permitted acquisitions. Additionally, solely during the waiver period, 2% cash interest on the outstanding principal amounts of tranches A and B are payable on March 31, 2025, June 30, 2025, September 30, 2025 and December 31, 2025, reducing the total deferred interest on tranches A and B to 7% for the duration of the Waiver Period, and a one-time fee of 20,000 euros in connection with the Amendment. In September 2025, we entered into a second amendment (the “Second Amendment”), providing that (i) for the period from January 1, 2026 to March 31, 2026 (the “Second Amendment Period”), our required minimum cash balance will be reduced to 5.0 million euros and (ii) during the Second Amendment Period, out of the overall 9% deferred interest rate due in respect of Tranche A and Tranche B under the EIB Facility, 1% will be converted into Fixed Rate to be paid on March 31, 2026 in respect of Tranche A and Tranche B. As of September 30, 2025, we have been in compliance with all covenants under the Debt Agreement.

Cash Flows

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):

Operating Activities

Net cash used in operating activities increased by $6.6 million during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily due to higher operating payments driven by increased clinical development activities. Net cash used in operating activities was $30.9 million for the nine months ended September 30, 2025. Cash used in operating activities was primarily due to our net loss of $44.5 million for the period, adjusted for $13.2 million of non-cash items, including $4.2 million change in the fair value of warrants, $3.9 million in stock-based compensation, $4.5 million change in the fair value of contingent consideration liabilities, $1.3 million change in the fair value of the EIB Loan, and a net increase in our operating assets of $0.3 million and a net increase in our accounts payable, and accrued expenses and other current liabilities of $0.7 million.

Investing Activities

Cash provided by investing activities was $15.2 million for the nine months ended September 30, 2025, primarily related to the proceeds from maturities of short-term investments of $45.0 million, and the purchase of investments of $29.5 million.

Cash provided by investing activities was $11.0 million for the nine months ended September 30, 2024, primarily related to the maturities of short-term investments of $100.7 million, and the purchase of investments of $89.6 million.

Financing Activities

Cash provided by financing activities was $15.9 million for the nine months ended September 30, 2025, which consisted of gross proceeds of $11.4 million from the issuance of common stock, common warrants, and pre-funded warrants in connection with June 2025 Private Placement, $4.3 million from the issuance of common stock in connection with the ATM offerings, and $0.2 million from the exercise of stock options in the period.

Cash used in financing activities was $4.8 million for the nine months ended September 30, 2024, which consisted of a cash milestone payment of $5.0 million, partially offset by proceeds of $0.2 million from the exercise of stock options in the period.

Contractual Obligations and Commitments

Our contractual obligations primarily consist of our obligations under non-cancellable operating leases and other purchase obligations.

We enter into contracts in the normal course of business with third party contract organizations for clinical trials, non-clinical studies and testing, manufacturing, and other services and products for operating purposes. The amount and timing of the payments under these contracts varies based upon the timing of the services. We have recorded accrued expense of approximately $5.1 million in our condensed consolidated balance sheet for expenditures incurred by these vendors as of September 30, 2025. We have approximately $22.9 million in cancellable future operating expense commitments based on existing contracts as of September 30, 2025. These obligations will be satisfied in the normal course of business, but generally no longer than 12 months. As of September 30, 2025, the fair value of the EIB Loan is $17.5 million and classified as current portion of debt on the condensed consolidated balance sheet at fair value. As of September 30, 2025 the fair value of long-term contingent consideration on our books for the earnout related to the EryDel Acquisition is $61.2 million, and the fair value of warrants issued in connection with the private placement is $14.9 million, refer to Note 3 to the condensed consolidated financial statements for further details.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information required under this item.

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, communicated to our management to allow timely decisions regarding required disclosure, summarized and reported within the time periods specified in the SEC's rules and forms. Any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including the Chief Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2025. Based on that evaluation, the Chief Executive Officer and Principal Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth below and elsewhere in this report, you should carefully consider the factors discussed in "Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition or future results. We may be unable for many reasons, including those that are beyond our control, to implement our business strategy successfully. The occurrence of any single risk or any combination of risks could materially and adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock. As of the date of this report there has been no material change in any of the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, except as set forth below.

Future sales of our common stock in the public market could cause our share price to fall.

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Certain holders of our common stock have rights, subject to conditions, to require us to file registration statements covering their shares or to include their shares in Securities Act registration statements that we may file for ourselves or other stockholders. Once we register these shares, they can be freely sold in the public market.

Moreover, we have also registered under the Securities Act shares of common stock that we may issue under our equity compensation plans. The issuance of shares under awards granted under existing or future employee equity benefit plans may cause immediate and substantial dilution to our existing stockholders. In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.

In addition, we have filed a shelf registration statement on Form S-3, or the Shelf Registration Statement, which permits us to sell from time-to-time up to $200.0 million of additional shares of our common stock or other securities in one or more offerings. In particular, we may offer and sell up to $75.0 million of shares of our common stock from time to time pursuant to the Controlled Equity OfferingSM Sales Agreement dated December 18, 2024, or the Sales Agreement, that we have entered into with Cantor Fitzgerald & Co. and H.C. Wainwright & Co., LLC. During the nine months ended September 30, 2025, we utilized our ATM program to raise net proceeds of $4.3 million by issuing 3,637,334 shares of common stock. In October 2025, we utilized our ATM program to raise net proceeds of $2.0 million by issuing 1,186,525 shares of common stock. Depending on market liquidity at the time, sales of our common stock pursuant to the Sales Agreement, or other sales of our common stock or other securities under the Shelf Registration Statement, may cause the trading price of our common stock to decline.

Furthermore, we have warrants currently outstanding which may be immediately exercised to purchase shares of common stock. To the extent that these warrants are exercised, or to the extent we issue additional shares of common stock in the future, as the case may be, there will be further dilution to holders of shares of the common stock.

Our outstanding warrants include put rights upon the occurrence of a fundamental transaction, which could make it difficult for us to complete a fundamental transaction that would otherwise be beneficial to our stockholders.

Our outstanding warrants include provisions that, in the event of certain fundamental transactions defined in the relevant agreements, provide the holders of such warrants with the right to require us, or the successor company in such transaction, to repurchase any unexercised portion of such warrants from the holder at their Black-Scholes value. In some circumstance this repurchase must be made in cash. Such Black-Scholes value may be significant and the requirement to pay such amount could prevent us from completing a transaction which would otherwise be accretive to shareholders or make such transaction more costly and reduce the value of such transaction to holders of our common stock.