Shattuck Labs, 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 financial statements and related notes appearing in this Quarterly Report on Form 10-Q, as well as the audited financial statements, notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties such as statements of our plans, objectives, expectations, and intentions. 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. You should carefully read the “Cautionary Note About Forward-Looking Statements” of this Quarterly Report on Form 10-Q and the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2024 to gain an understanding of the important factors that could cause actual results to differ materially from the results described below.

Overview

We are a clinical-stage biotechnology company specializing in the development of potential treatments for inflammatory and immune-mediated diseases. We are developing a potentially first-in-class antibody for the treatment of inflammatory bowel disease (“IBD”) and other inflammatory and immune-mediated diseases. Our expertise in protein engineering and the development of novel tumor necrosis factor (“TNF”) receptor therapeutics come together in our lead program, SL-325, which we believe could be a first-in-class death receptor 3 (“DR3”) antagonist antibody.

SL-325 is a high-affinity DR3 blocking monoclonal antibody. In our head-to-head preclinical studies, SL-325 blocked TL1A binding to DR3 better than sequence equivalents of leading TL1A blocking antibodies. We believe that the underlying biological differences in the expression of DR3 and TL1A, and the design characteristics of SL-325, may allow SL-325 to achieve best-in-class clinical remission rates in patients with IBD due to a more complete and durable blockade of the clinically validated DR3/TL1A pathway.

TL1A is the sole known signaling ligand for DR3, and TL1A does not signal through any other receptors. Thus, we believe that the clinical safety profile of TL1A blocking antibodies generated to date in clinical trials conducted by other parties derisks the clinical safety profile for DR3 blockade. The lack of toxicity of SL-325 in our recently completed non-human primate (“NHP”) toxicology study also suggests a potentially favorable clinical safety profile. We engineered SL-325 to lack any Fc gamma receptor binding function, and SL-325 has not shown any evidence to date of antibody dependent cellular cytotoxicity or cellular phagocytosis, which further supports a potentially derisked safety profile. We have demonstrated that SL-325 binds an epitope on DR3 that does not trigger receptor-mediated endocytosis, and the binding of SL-325 to DR3 was shown to be highly durable and specific to DR3 in preclinical assays. Because DR3 is expressed on circulating peripheral blood lymphocytes, we are able to directly measure DR3 receptor occupancy (“RO”) and our preclinical studies suggest that blockade may last for at least one month as a result of the properties of SL-325 and the stable expression of DR3. The RO and pharmacokinetic (“PK”) profile of SL-325 suggests extended dosing intervals, which we intend to further characterize in our upcoming Phase 1 clinical trial. Finally, the human protein decoy receptor 3 (“DcR3”) neutralizes soluble TL1A, Fas Ligand and LIGHT, which all induce a proinflammatory immune response. DcR3 serves as a sink for these proteins, tempering the proinflammatory immune signaling. Thus, it is desirable to block DR3, but not DcR3, to preserve the natural anti-inflammatory role of DcR3. SL-325 binds to DR3 but not to DcR3.

DR3 has a distinct expression pattern from TL1A, and, consequently, blocking the receptor may allow a more complete and durable blockade of the axis, which we believe will translate to improved efficacy in patients with IBD. DR3 and TL1A have distinct expression patterns within the gastrointestinal tract (“GI”) of patients with IBD, including both ulcerative colitis (“UC”) and Crohn’s disease (“CD”). The cells within the GI tract that are capable of expressing TL1A include tissue resident antigen presenting cells and other non-hematopoietic cells. While TL1A is not usually expressed, when antigen presenting cells are exposed to inflammatory signals, a wave of TL1A mRNA expression begins, which peaks within 12 hours and ceases within 24 hours. In contrast, DR3 is stably expressed, primarily by lymphocytes both in the peripheral blood and in tissues. Direct comparison of TL1A and DR3 expression in the GI tracts of patients with IBD shows that TL1A is only upregulated in the actively inflamed areas of the GI tract. In contrast, DR3 is more abundant than TL1A and is upregulated in both actively inflamed parts of the GI tissue and in the adjacent non-inflamed tissue. The absence of TL1A in the non-inflamed areas of the bowel eliminates the mechanism through which TL1A blocking antibodies would be retained in non-inflamed areas of the GI tract. Because inflammation observed in UC and CD can wax and wane in different areas of the bowel over time, stable blockade of DR3 may reduce the spread of inflammation and may contribute to higher rates of clinical and endoscopic remission than what TL1A blocking antibodies have achieved to date.

We are planning initial clinical development of SL-325 for patients with IBD, including UC and/or CD. The clinical success of several TL1A blocking antibodies to date suggests that SL-325 may have monotherapy disease modifying activity early in clinical development. As described above, we believe that targeting DR3 may be more efficacious than targeting TL1A in patients with IBD. We have initiated enrollment in our Phase 1 clinical trial of SL-325, and we expect to complete enrollment in the full Phase 1 clinical trial in the second quarter of 2026.

Future clinical trials may explore the efficacy of SL-325 in other inflammatory and immune-mediated diseases where the DR3/TL1A axis is implicated.

Research Programs

We maintain a strong research organization that has developed a diverse pipeline of preclinical compounds. One of our guiding principles for considering additional pipeline candidates is a preference for compounds that we expect to have monotherapy activity early in clinical development.

DR3 Bispecific Antibodies

In addition to SL-325 and SL-425, which is a half-life extended version of SL-325, we are developing a series of bispecific antibodies targeting DR3 and other clinically validated targets. The future of biologic therapy for both UC and CD is widely believed to include blockade of multiple inflammatory pathways, and the mechanism of DR3/TL1A inhibition is known to be non-redundant with the mechanism of other clinically validated targets.

Several attempts have been made to develop bispecific antibodies targeting TL1A, including a TL1A and TNFα blocking antibody known as AMG966. As discussed above, TL1A blocking antibodies stabilize serum TL1A as a result of immune complex formation between soluble TL1A and anti-TL1A antibodies. These immune complexes are believed to contribute to the high rates of ADA formation with TL1A blocking monoclonal antibodies. In the case of AMG966, the bispecific antibody was shown to stabilize both soluble TL1A and TNFα, which led to large immune complex formation and the rapid development of high-titer neutralizing ADA responses in patients treated in a Phase 1 clinical trial. AMG966 was discontinued as a result of this immunogenicity. Because DR3 is a membrane-restricted target, immune complex formation is not expected either for SL-325, SL-425, or DR3 directed bispecific antibodies.

Overview of Operations

For the nine months ended September 30, 2025 and 2024, our net loss was $36.2 million and $56.7 million, respectively. We have not been profitable since inception, and as of September 30, 2025, we had an accumulated deficit of $417.9 million and $86.1 million in cash and cash equivalents and short-term investments. We expect to continue to incur significant expenses and operating losses in the near term in connection with our ongoing activities, as we:

• continue to advance the preclinical development and initiate Phase 1 clinical development of our product candidate, SL-325;
• initiate nonclinical studies and clinical trials for additional product candidates that we may identify in the future, including potential bispecific DR3 antagonist antibody product candidates;
• manufacture sufficient quantities of bulk drug substance and drug product to support our ongoing and planned nonclinical studies and clinical trials;
• maintain our operational, financial, and management systems;
• retain key personnel and infrastructure to support our nonclinical development, research, manufacturing, and future clinical development efforts;
• utilize our in-house process development and manufacturing capabilities;
• continue to develop, perfect, and defend our intellectual property portfolio; and
• incur additional legal, accounting, or other expenses in operating our business, including the additional costs associated with operating as a public company and expenses incurred in connection with ongoing and future litigation, if any.

We do not expect to generate significant product revenue unless and until we successfully complete development and obtain regulatory and marketing approval of, and begin to sell, one or more of our product candidates, if ever, which we expect will take several years. We expect to spend a significant amount in development and marketing costs prior to such time. We may never succeed in achieving regulatory and marketing approval for our product candidates. We may obtain unexpected results from our nonclinical studies and clinical trials. We may elect to discontinue, delay, or modify nonclinical studies and clinical trials of our product candidates. We may be adversely affected by inflationary pressures and the macroeconomic environment, which are beyond our control. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. Accordingly, until such time as we can generate significant product revenue, if ever, we expect to continue to seek private or public equity and debt financing, and/or additional collaborations with third parties, to meet our capital requirements. There can be no assurance that such funding may be available to us on acceptable terms, or at all, or that we will be able to commercialize our product candidates. In addition, we may not be profitable even if we commercialize any of our product candidates.

Recent Developments

As previously reported, on August 8, 2025, we received written notice from Nasdaq that we were not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5450(a)(1) for continued listing on Nasdaq for failure to maintain a minimum closing bid price of $1.00 per share. To regain compliance, the closing bid price of our common stock had to be at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to February 4, 2026. On September 16, 2025, we received written notice from Nasdaq that we satisfied the requirement and have regained compliance with Listing Rule 5450(a)(1).

Global Economic Considerations

The global macroeconomic environment is uncertain, and could be negatively affected by, among other things, inflation, slower growth or recession, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, instability or volatility in the global capital and credit markets, supply chain weaknesses, financial institution instability, changes to fiscal and monetary policy or government budget dynamics and instability in the geopolitical environment. Such challenges have caused, and may continue to cause, recession fears, high interest rates, foreign exchange volatility, and inflationary pressures. At this time, we are unable to quantify the potential effects of this economic instability on our future operations.

Components of our Results of Operations

License Revenue

In August 2025, we entered into an agreement (the "Kayak Agreement") with Kayak Therapeutics for an exclusive license to our oncology-focused TRIM7 program. Pursuant to the Kayak Agreement, we received preferred stock in Kayak with a fair market value of $1.0 million as the upfront consideration for entering into the agreement and recognized the consideration as license revenue.

Collaboration Revenue

We have no products approved for commercial sale, and we have not generated any revenue from commercial product sales. To date, we have recognized revenue generated from collaboration and research agreements with various third parties. Revenue recognized in 2024 was a result of collaboration agreements with Ono Pharmaceutical Co., Ltd (“Ono”) and ImmunoGen, Inc. (“ImmunoGen”). We have completed all of our obligations and recognized all revenues associated with the collaboration agreements with ImmunoGen and Ono in 2024.

Operating Expense

Research and Development Expense

Our research and development expenses consist primarily of costs incurred in connection with the discovery and development of our current and potential future product candidates. These expenses include:

• expenses incurred to conduct our clinical trials, including expenses associated with clinical trials of SL-325 and any potential product candidates we may advance in the future, as well as the expenses associated with prior clinical trials of SL-172154, and the associated wind-down activities;
• costs of manufacturing nonclinical study and clinical trial materials, including the costs of raw materials required for manufacturing;
• process development activities to optimize manufacturing processes, including the development and validation of Phase 3 and commercial manufacturing processes and analytical methods;
• expenses incurred to conduct our nonclinical studies;
• employee-related expenses, including salaries, benefits, and stock-based compensation;
• laboratory materials and supplies used to support our research activities;
• fees paid to third parties who assist with research and development activities;
• expenses relating to regulatory activities, including filing fees paid to regulatory agencies; and
• allocated expenses for facility-related costs.

The following table summarizes our research and development expenses by product candidate:

(in thousands)

(unaudited)

(unaudited)

1 Expenses for SL-325 that were incurred prior to it being nominated a product candidate are included in “other pipeline compounds” in the table above.

Research and development activities are central to our business model. We are focused on the preclinical and clinical development of SL-325 and other DR3 targeted assets, and conducting additional research on other potential product candidates. Product candidates in earlier stages of development generally have lower development costs than those in later stages of development. We have discontinued clinical development of SL-172154 and are no longer conducting research activities performed under the collaboration agreement with Ono. As a result of these operational changes, we expect a decrease in operating expense year-over-year, primarily associated with a reduction in clinical development, manufacturing, and process development costs earmarked to SL-172154 and the reduction in costs associated with our workforce.

The process of conducting the necessary nonclinical and clinical research to obtain regulatory approval is costly and time consuming. The actual probability of success for our product candidates may be affected by a variety of factors including:

• the safety and efficacy of our product candidates;
• nonclinical data for our product candidates;
• investment in our pipeline;
• competition;
• manufacturing capability; and
• commercial viability.

We may never succeed in achieving regulatory approval for any of our product candidates due to the uncertainties discussed above. We are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates, if ever.

General and Administrative Expense

General and administrative expense consists primarily of personnel expenses, including salaries, benefits, and stock-based compensation expense, for employees and consultants in executive, finance, accounting, legal, information technology, business development, and human resource functions. General and administrative expense also includes corporate facility costs, including rent, utilities, depreciation, and maintenance, not otherwise included in research and development expense, as well as legal fees related to intellectual property, corporate and litigation matters, and fees for accounting and tax services.

We have experienced reduced general and administrative expense due to the workforce reductions that occurred as a result of the discontinuation of SL-172154. If any of our current or future product candidates, including SL-325, continues to advance through clinical development, or obtains regulatory approval, we expect that we would incur increased expenses associated with building the appropriate general and administrative support for our increased research and development activities, or building a sales and marketing team.

Other Income

Other income consists of interest earned on our cash, cash equivalents, and investments, which consists of amounts held in a money market fund and government obligations as well as investment fees and realized gain or losses on investments (if any).

Income Taxes

Since our inception, we have not recorded any income tax benefits for the net operating losses (“NOLs”) we have incurred or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our NOLs and tax credits will not be realized. Our NOLs and tax credit carryforwards began to expire in 2025. We have recorded a full valuation allowance against our deferred tax assets at each balance sheet date.

Results of Operations

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

The following table sets forth our results of operations for the three months ended September 30, 2025 and 2024:

(in thousands)

(unaudited)

License and Collaboration Revenue

License and collaboration revenue decreased by $2.0 million, or 66.6%, to $1.0 million for the three months ended September 30, 2025 from $3.0 million for the three months ended September 30, 2024. The decrease in revenue was a result of completing all obligations and recognizing all revenues associated with the Ono and ImmunoGen collaboration agreements in 2024, offset by license revenue recognized pursuant to the Kayak Agreement for $1.0 million.

Research and Development Expense

Research and development expenses decreased by $8.7 million, or 53.3%, to $7.6 million for the three months ended September 30, 2025 from $16.3 million for the three months ended September 30, 2024. The decrease in research and development expenses was primarily a result of a decrease of $7.1 million due to the discontinuation of SL-172154, a decrease in compensation and related benefit expenses of $1.6 million as a result of workforce reductions in 2024, a decrease of $1.1 million in research and development work for other pipeline compounds, and a decrease of $0.2 million associated with the termination of the Ono Agreement, offset by an increase of $1.2 million in research and development expenses for SL-325.

General and Administrative Expense

General and administrative expenses decreased by $0.5 million, or 11.0%, to $4.1 million for the three months ended September 30, 2025 from $4.6 million for the three months ended September 30, 2024. The decrease is primarily a result of a $0.3 million decrease in legal expenses.

Other Income

Other income decreased by $0.6 million, or 47.0%, to $0.7 million for the three months ended September 30, 2025 from $1.2 million for the three months ended September 30, 2024. The decrease is a result of a decrease in investments and funds held in our money market accounts.

Results of Operations

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

The following table sets forth our results of operations for the nine months ended September 30, 2025 and 2024;

(in thousands)

(unaudited)

License and Collaboration Revenue

License and collaboration revenue decreased by $4.7 million, or 82.5%, to $1.0 million for the nine months ended September 30, 2025 from $5.7 million for the nine months ended September 30, 2024. The decrease in revenue was a result of completing all obligations and recognizing all revenues associated with the Ono and ImmunoGen collaboration agreements in 2024, offset by license revenue recognized pursuant to the Kayak Agreement for $1.0 million.

Research and Development Expense

Research and development expenses decreased by $25.6 million, or 49.4%, to $26.2 million for the nine months ended September 30, 2025 from $51.8 million for the nine months ended September 30, 2024. The decrease in research and development expenses was primarily a result of a decrease of $20.7 million as a result of the discontinuation of SL-172154, a decrease in compensation and related benefit expenses of $6.0 million as a result of workforce reductions in 2024, a decrease of $4.2 million in research and development work for other pipeline compounds, offset by an increase of $4.9 million in research and development expenses for SL-325.

General and Administrative Expense

General and administrative expenses decreased by $1.9 million, or 12.9%, to $12.9 million for the nine months ended September 30, 2025 from $14.8 million for the nine months ended September 30, 2024. The decrease was primarily a result of $1.0 million in compensation and related benefit expenses as a result of workforce reduction in 2024, $0.5 decrease in legal intellectual property expenses and a $0.2 million decrease in insurance cost.

Other Income

Other income decreased by $2.3 million, or 54.2%, to $1.9 million for the nine months ended September 30, 2025 from $4.2 million for the nine months ended September 30, 2024. The decrease is a result of a decrease in investments and funds held in our money market accounts.

Liquidity and Capital Resources

Since our inception, our primary sources of liquidity have been generated by sales of our common stock, pre-funded warrants, convertible preferred stock and convertible notes, and through our collaboration and research agreements with various third parties.

In August 2025, we issued and sold 15,225,158 shares of common stock, common stock warrants, pre-funded warrants to purchase up to 37,410,188 shares of common stock, and accompanying common stock warrants to purchase up to 52,635,346 shares of common stock for gross proceeds of $45.7 million. We may receive an additional $57.1 million in gross proceeds if all of the common stock warrants are exercised.

In July 2022, we entered into a sales agreement ("the Sales Agreement") with Leerink Partners LLC (formerly known as SVB Securities LLC) (the "Sales Agent") pursuant to which we may offer and sell up to $75 million of shares of our common stock from time to time in an at-the-market facility (the "ATM Facility"). The Sales Agent is generally entitled to compensation at a commission equal to 3.0% of the aggregate gross sales price per share sold under the Sales Agreement. As of September 30, 2025, there were no sales pursuant to the ATM Facility. Our Registration Statement on Form S-3 expired on July 29, 2025, and therefore no sales can be made under the Sales Agreement until such time as we file a new Registration Statement on Form S-3. Based on the public float of our common stock as of the date of the filing of our Annual Report on Form 10-K for the year ended December 31, 2024, we are currently subject to General Instruction I.B.6 of Form S-3 and therefore may not sell more than one-third of the market value of our common stock held by non-affiliates until our public float exceeds $75.0 million.

Capital Resources and Funding Requirements

Our primary uses of cash and cash equivalents, and short-term investments are to fund our operations, which consist primarily of research and development expenditures related to our programs, product development costs, research expenses, administrative support, and capital expenditures related to bringing in-house certain process development and manufacturing capabilities and working capital requirements. We anticipate incurring additional net losses and negative cash flows from operations in the near future until such time, if ever, that we can generate significant sales of our product candidates currently in development. Our future funding requirements will depend on many factors, including:

• the scope, timing, progress and results of discovery, nonclinical development, laboratory testing, and clinical trials for our product candidates;
• the costs of process development and scale up of a commercially ready manufacturing process to support registrational clinical trials;
• the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization;
• the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our product candidates;
• the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending other intellectual property-related claims;
• the costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies;
• the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing, distribution and storage capabilities, for any of our product candidates for which we receive marketing approval; and
• revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval.

Until we obtain regulatory approval to market our product candidates, if ever, we cannot generate revenues from sales of our products. Even if we are able to sell our products, we may not generate a sufficient amount of product revenues to finance our cash requirements. Accordingly, it will be necessary for us to seek to raise additional capital through equity offerings and/or debt financings or from other potential sources of liquidity, which may include new collaborations, licensing or other commercial agreements for one or more of our development programs or patent portfolios. There can be no assurance that such funding may be available to us on acceptable terms, or at all. The issuance of equity securities may result in dilution to stockholders and the issuance of debt securities may have rights, preferences and privileges senior to those of our common stock and the terms of any such debt securities could impose significant restrictions on our operations. The failure to raise funds as and when needed will have a negative impact on our financial condition and ability to pursue our business strategies. Additionally, if additional funding is not secured when required, we will need to delay or curtail our operations until such funding is received, which would have a material and adverse impact on our business prospects and results of operations.

We believe that our cash and cash equivalents and short-term investments as of September 30, 2025, and the potential future proceeds assuming the full exercise of all outstanding common stock warrants will be sufficient to fund projected operations into 2029.

Cash Flows

The following table shows a summary of our cash flows for the periods indicated:

(in thousands)

(unaudited)

Net Cash Used in Operating Activities

During the nine months ended September 30, 2025, net cash used in operating activities was $31.4 million and primarily reflected our net loss of $36.2 million, offset by net noncash operating charges of $7.3 million and $2.5 million in net changes to our operating assets and liabilities. We expect to continue to use cash in our operating activities as we conduct our clinical trials and nonclinical studies, incur costs of manufacturing clinical trial and nonclinical study materials, and continue process development activities to optimize our manufacturing processes.

During the nine months ended September 30, 2024, net cash used in operating activities was $43.1 million and primarily reflected our net loss of $56.7 million and an $4.3 million net change in our operating assets and liabilities, offset by noncash charges of $9.3 million in stock-based compensation, depreciation expense, amortization of investments, and operating lease expense.

Net Cash Used in Investing Activities

During the nine months ended September 30, 2025, net cash used in investing activities was $27.9 million, as a result of purchases of investments net of maturities.

During the nine months ended September 30, 2024, net cash used in investing activities was $39.5 million, which was the result of purchases of investments net of maturities.

Net Cash Provided by Financing Activities

During the nine months ended September 30, 2025, net cash provided by financing activities was $44.4 million and was primarily the result of proceeds related to the sale of common stock, common stock warrants and prefunded warrants.

During the nine months ended September 30, 2024, net cash provided by financing activities was $0.9 million and was primarily the result of $1.3 million in cash received for the exercise of stock options and purchases pursuant to our employee stock purchase plan offset by taxes paid related to net share settlement of equity awards of $0.4 million.

Contractual Obligations and Other Commitments

See Note 5 to our condensed financial statements found elsewhere in this Quarterly Report on Form 10-Q for additional disclosures. There have been no other material changes from the Contractual Obligations and Other Commitments disclosed in Note 6 and 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, the accrual for research and development expenses, and the valuation of stock-based awards. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies are those policies which require the most significant judgments and estimates in the preparation of our financial statements. We believe that the assumptions and estimates associated with our most critical accounting policies are those relating to revenue, accrued research and development costs, and stock-based compensation.

There have been no material changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Pronouncements

See Note 2 to our financial statements found elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.

Emerging Growth Company and Smaller Reporting Company Status

We are an emerging growth company as defined in the JOBS Act. Under the JOBS Act, an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards and delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from complying with new or revised accounting standards and therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We have evaluated the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation exemptions to the requirements for, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and, (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier of, (a) the last day of the fiscal year, (i) following the fifth anniversary of the completion of our initial public offering, (ii) in which we have total annual gross revenues of at least $1.235 billion or, (iii) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or, (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are also a “smaller reporting company” as defined under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). We may continue to be a smaller reporting company if either, (i) the market value of our stock held by non-affiliates is less than $250.0 million or, (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

We are a smaller reporting company, as defined by Rule 12b-2 under the Exchange Act and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on this evaluation of our disclosure controls and procedures as of September 30, 2025, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the third quarter of the year ending December 31, 2025 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Our business is subject to various risks, including those described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024. Other than the risk factors below, there have been no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10-K.

We will require additional funding in order to complete development of our product candidate(s), including SL-325, and commercialize our products, if approved. Additional funding may not be available on acceptable terms, or at all. If we are unable to raise capital when needed, we will be forced to delay, reduce, or eliminate our product development programs and other operations.

Based on our current business plans, we estimate that our existing cash and cash equivalents, short-term investments and potential future proceeds from the exercise of all outstanding common stock warrants will enable us to fund our operating expenses into 2029. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect, requiring us to seek additional funds sooner than planned through public or private equity or debt financings or other sources, such as strategic collaborations. Based on the public float of our common stock as of the date of the filing of our Annual Report on Form 10-K for the year ended December 31, 2024, we are currently subject to General Instruction I.B.6 of Form S-3 and therefore may not sell more than one-third of the market value of our common stock held by non-affiliates until our public float exceeds $75.0 million.

Holders of our outstanding common stock warrants are not obligated to exercise their warrants, and they may choose to exercise on a cashless basis to the extent permitted by the terms of the warrants, prevailing market conditions, or applicable regulations. If warrant holders elect not to exercise their common stock warrants, we will not receive any associated cash proceeds, which could adversely affect our liquidity, capital resources, and our ability to fund operations, strategic investments, or debt service that we may have anticipated financing with such proceeds. In addition, even if holders elect to exercise, a cashless exercise would result in the surrender of warrants for a net number of shares based on the spread between the exercise price and the market price, without the payment of the exercise price in cash, further reducing the cash we would otherwise expect to receive. Market volatility, the trading price of our common stock relative to the common stock warrant exercise price, the remaining term of the common stock warrants, regulatory or contractual limitations, and investor portfolio considerations may increase the likelihood that common stock warrants will either remain unexercised or be exercised on a cashless basis. Any shortfall in expected cash proceeds from common stock warrant exercises could require us to seek alternative financing on less favorable terms, curtail or delay planned activities, or otherwise negatively impact our business, financial condition, and results of operations

We may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Attempting to secure additional financing may divert our management from our day-to-day activities, which may materially and adversely affect the development of our product candidates. Our ability to raise additional funds will depend on financial, economic, and market conditions and other factors, over which we may have no or limited control. Additional funds may not be available when we need them, on terms that are acceptable to us or at all.

Disruptions at the FDA and other government agencies could negatively affect the review of our regulatory submissions, which could negatively impact our business.

The ability of the FDA to review and approve regulatory submissions can be affected by a variety of factors, including disruptions caused by government shutdowns, changes in leadership at FDA and/or the department of health and human services, reduced staffing in the federal government, and public health crises. There have been mass layoffs of federal employees since the start of the current presidential administration in January 2025, the impact of which is unclear at this time. Such disruptions could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business. In addition, the current presidential administration has led and is expected to continue to lead to changes in the leadership of various U.S. federal regulatory agencies and changes to U.S. federal government policy that have led to, in some cases, legal challenges and uncertainty around the funding, functioning and policy priorities of U.S. federal regulatory agencies.

We are unable to predict the extent to which the current presidential administration may impose or seek to impose leadership or policy changes at the U.S. federal regulatory agencies responsible for regulating our business or changes to rules and policies impacting our operations. Government proposals to reduce or eliminate budgetary deficits may include reduced allocations to the FDA and other related government agencies. These budgetary pressures may reduce the FDA’s ability to perform its responsibilities. If a significant reduction in the FDA’s workforce occurs, the FDA’s budget is significantly reduced or a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions or take other actions critical to the development of our most advanced product candidate, SL-325, or other product candidates, which could have a material adverse effect on our business.

For example, the U.S. government has been shut down since October 1, 2025, and the Senate has repeatedly failed to advance funding bills to reopen it, and the timing for restoring funding is uncertain. The FDA has not been able to accept applications for new drugs, generics, biologics, biosimilars or medical devices that require payment of a user fee while the shutdown is in effect. Any resulting delay in the acceptance, review or approval of our investigational new drug applications, clinical trial applications, marketing applications, facility inspections or lot-release/testing activities could delay or increase the cost of our clinical trials, manufacturing scale-up, product launches or post-approval changes. A prolonged U.S. federal government shutdown could materially delay our regulatory timelines, clinical development, reimbursement decisions and access to capital. If the shutdown continues or recurs, we could experience material adverse impacts on our operations, business and financial condition.

Current and future laws and regulations may increase the difficulty and cost for us, and any collaborators, to obtain marketing approval of and commercialize our drug candidates and affect the prices we, or they, may obtain.

Heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare therapies, which could result in reduced demand for our product candidate(s) or additional pricing pressures. Under the Inflation Reduction Act (the “IRA”), orphan drugs were previously exempted from the Medicare drug price negotiation program, but only if they had one orphan designation and the only approved indication(s) related to disease or condition. If a product were to have received multiple orphan designations or have multiple approved indications, it would not qualify for the orphan drug exemption. The One Big Beautiful Bill Act of 2025 eliminated this restriction and now all orphan drugs, regardless of the number of orphan designations or indications, are eligible for exemption from the Medicare drug price negotiation program. We cannot be sure whether additional legislation or rulemaking related to the IRA will be issued or enacted, or what impact, if any, such changes will have on the profitability of any of our drug candidates, if approved for commercial use, in the future.

Our business could be adversely affected by economic downturns, inflation, fluctuating interest rates, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, natural disasters, public health crises, such as pandemics, political crises, geopolitical events, or other macroeconomic conditions, which could have a material and adverse effect on our results of operations and financial condition.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including, among other things, diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, supply chain shortages, fluctuating interest and inflation rates, changes in trade policies, including tariffs or other trade restrictions or the threat of such action, and uncertainty about economic stability. For example, in September 2025, the United States announced the imposition of up to 100% tariffs on imported branded or patented pharmaceuticals, subject to certain exceptions. There remains substantial uncertainty as to when such tariffs may go into effect and whether such tariffs would apply to the importation of active pharmaceutical ingredients or bulk drug products that are intended for use in clinical trials and, more generally, about the duration of existing tariffs, tariff levels, implementation of announced tariffs, litigation challenging tariffs and whether additional tariffs or retaliatory actions may be imposed, modified or suspended

Furthermore, fluctuating interest rates, coupled with reduced government spending and volatility in financial markets, may increase economic uncertainty and affect consumer spending, and ongoing military conflicts throughout the world have created extreme volatility in the global capital markets and may have further global economic consequences, including disruptions of the global supply chain. Any such volatility and disruptions may adversely affect our business or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more costly, more dilutive, or more difficult to obtain in a timely manner or on favorable terms, if at all. Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs.

We have experienced and may in the future experience disruptions as a result of such macroeconomic conditions, including delays or difficulties in initiating or expanding clinical trials and manufacturing sufficient quantities of materials. Any one or a combination of these events could have a material and adverse effect on our results of operations and financial condition.