Tourmaline Bio(TRML) - 2025 Q1 - Quarterly Report

FORM 10-Q Filing Information Registrant Information Tourmaline Bio, Inc, a Delaware corporation, is identified as the registrant filing a Form 10-Q for the period ended March 31, 2025 - Registrant: TOURMALINE BIO, INC.[2] - State of Incorporation: Delaware[2] - Principal Executive Offices: 27 West 24th Street, Suite 702, New York, NY 10010[2] Filer Status and Securities The company is classified as a non-accelerated filer, a smaller reporting company, and an emerging growth company Registrant Filer Status | Status | Designation | | :------------------------ | :---------- | | Large accelerated filer | o | | Accelerated filer | o | | Non-accelerated filer | x | | Smaller reporting company | x | | Emerging growth company | x | - Common Stock, $0.0001 par value per share, trades under symbol TRML on The Nasdaq Global Select Market[3] - Outstanding Common Stock as of April 25, 2025: 25,688,479 shares[3] TABLE OF CONTENTS SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Nature of Forward-Looking Statements The report contains forward-looking statements regarding future operations and strategy that involve risks and uncertainties - All statements other than historical facts, including those regarding future results, business strategy, product candidates, and clinical trials, are forward-looking statements[8] - Forward-looking statements involve known and unknown risks, uncertainties, and other important factors that may cause actual results to differ materially[8] Factors Affecting Future Performance Future performance is influenced by clinical trial success, regulatory approvals, funding, and macroeconomic conditions - Key factors include success, cost, and timing of development activities, non-clinical studies, and clinical trials[9] - Ability to obtain funding, extend operating capital, and secure regulatory approval for product candidates are critical[9] - Macroeconomic and geopolitical conditions, such as international trade relations, wars, potential bank failures, and global health crises, can affect the business[10] PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the periods ended March 31, 2025 and 2024 Condensed Consolidated Balance Sheets Total assets decreased to $287.5 million at March 31, 2025, driven by a reduction in investments Condensed Consolidated Balance Sheet Highlights (amounts in thousands) | Item | March 31, 2025 | December 31, 2024 | | :---------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $35,330 | $30,506 | | Short-term investments | $213,976 | $227,797 | | Total current assets | $258,144 | $268,842 | | Long-term investments | $26,000 | $36,633 | | Total assets | $287,498 | $309,001 | | Total current liabilities | $7,622 | $8,909 | | Total liabilities | $7,635 | $8,949 | | Total stockholders' equity | $279,863 | $300,052 | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported an increased net loss for Q1 2025 due to a significant rise in research and development expenses Condensed Consolidated Statements of Operations Highlights (amounts in thousands, except per share) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $20,258 | $11,376 | | General and administrative | $5,973 | $6,141 | | Total operating expenses | $26,231 | $17,517 | | Loss from operations | $(26,231) | $(17,517) | | Other income, net | $3,261 | $4,206 | | Net loss | $(22,970) | $(13,311) | | Net loss per share, basic and diluted | $(0.89) | $(0.55) | | Comprehensive loss | $(23,039) | $(13,631) | - Research and development expenses increased by $8.9 million (77.9%) year-over-year[16] - Net loss increased by $9.7 million (72.6%) year-over-year[16] Condensed Consolidated Statements of Stockholders' Equity These statements detail changes in stockholders' equity, reflecting the impact of net loss and stock-based compensation Stockholders' Equity Changes (amounts in thousands) | Item | Balance at Dec 31, 2024 | Stock-based Comp. Expense | Net Loss | Balance at Mar 31, 2025 | | :-------------------------- | :---------------------- | :------------------------ | :------- | :---------------------- | | Additional Paid-In Capital | $435,014 | $2,273 | — | $437,864 | | Accumulated Deficit | $(135,261) | — | $(22,970) | $(158,231) | | Total Stockholders' Equity | $300,052 | $2,273 | $(22,970) | $279,863 | - Stock-based compensation expense for the three months ended March 31, 2025, was $2.3 million[18] Condensed Consolidated Statements of Cash Flows Cash flows show a net increase in cash of $4.8 million, a significant improvement driven by maturities of investments Condensed Consolidated Statements of Cash Flows Highlights (amounts in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $(21,679) | $(14,923) | | Investing activities | $25,941 | $(188,869) | | Financing activities | $562 | $161,352 | | Net increase (decrease) in cash | $4,824 | $(42,440) | | Cash, cash equivalents & restricted cash – End of period | $35,557 | $98,513 | - Net cash provided by investing activities in Q1 2025 was $25.9 million, a substantial change from $188.9 million used in Q1 2024, mainly due to investment maturities[21] - Net cash provided by financing activities decreased significantly from $161.4 million in Q1 2024 (due to public offering) to $0.6 million in Q1 2025 (primarily from stock option exercises)[21] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations for the financial statements, covering accounting policies and significant agreements Note 1. Nature of Business Tourmaline Bio is a late-stage clinical biotechnology company focused on developing pacibekitug for immune diseases - Company is a late-stage clinical biotechnology company developing pacibekitug for immune and inflammatory diseases[23] - Completed a Reverse Merger on October 19, 2023, with Legacy Tourmaline deemed the accounting acquirer[25][29] - Concurrently with the merger, Legacy Tourmaline raised approximately $75.0 million in gross proceeds from a Pre-Merger Financing Transaction[31] Note 2. Basis of Presentation and Summary of Significant Accounting Policies The financial statements are prepared in accordance with SEC rules and GAAP, reflecting all necessary recurring adjustments - Condensed consolidated financial statements are prepared in accordance with SEC rules and U.S. GAAP[34] - Adopted ASU 2023-07 (Segment Reporting) for fiscal year ended December 31, 2024, resulting in additional interim disclosures[41] - Currently evaluating ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) for potential impact[42][43] Note 3. Pfizer License Agreement The company holds an exclusive, worldwide license from Pfizer for pacibekitug, with potential future milestone payments - Obtained exclusive, worldwide license for pacibekitug from Pfizer Inc. on May 3, 2022[44] - Consideration included a $5.0 million upfront payment and 7,125,000 Series A preferred units (15% interest)[44] - Obligated to pay up to $128.0 million for development/regulatory milestones and up to $525.0 million for sales milestones, plus low double-digit royalties[45][46] Note 4. Fair Value Measurements The company measures the fair value of its investments using Level 1 and Level 2 inputs, with no Level 3 inputs used Assets Measured at Fair Value (March 31, 2025, in thousands) | Item | Total | Level 1 | Level 2 | Level 3 | | :---------------------------------- | :------ | :------ | :------ | :------ | | Money market funds | $28,927 | $28,927 | $— | $— | | Commercial paper | $46,315 | $— | $46,315 | $— | | Government securities | $53,955 | $40,529 | $13,426 | $— | | Corporate debt securities | $113,706| $— | $113,706| $— | | Total cash equivalents and short-term investments | $242,903| $69,456 | $173,447| $— | | Long-term investments | $26,000 | $9,914 | $16,086 | $— | | Total cash equivalents and investments | $268,903| $79,370 | $189,533| $— | - No liabilities were measured at fair value on a recurring basis, and no changes in valuation techniques or transfers among fair value hierarchy levels occurred[50] Note 5. Investments The company's investments primarily consist of money market funds, commercial paper, government, and corporate debt securities Cash Equivalents and Investments (March 31, 2025, in thousands) | Item | Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | | :---------------------------------- | :------------- | :--------------- | :---------------- | :--------- | | Money market funds | $28,927 | $— | $— | $28,927 | | Commercial paper | $46,305 | $16 | $(6) | $46,315 | | Government securities | $53,947 | $17 | $(9) | $53,955 | | Corporate debt securities | $113,555 | $171 | $(20) | $113,706 | | Total cash equivalents and short-term investments | $242,734 | $204 | $(35) | $242,903 | | Long-term investments | $25,942 | $58 | $— | $26,000 | | Total cash equivalents and investments | $268,676 | $262 | $(35) | $268,903 | - Aggregate fair value of securities in an unrealized loss position for less than twelve months increased from $30.6 million at December 31, 2024, to $68.1 million at March 31, 2025[52] Note 6. Accrued Expenses and Other Current Liabilities Accrued expenses increased slightly, with a notable decrease in accrued bonus offset by higher clinical and manufacturing costs Accrued Expenses and Other Current Liabilities (in thousands) | Item | March 31, 2025 | December 31, 2024 | | :---------------------------------- | :------------- | :---------------- | | Accrued bonus | $1,170 | $3,830 | | Accrued clinical and manufacturing costs | $2,873 | $696 | | Accrued consulting fees | $502 | $153 | | Accrued external audit and tax fees | $204 | $73 | | Accrued legal fees | $148 | $— | | Other accrued expenses | $294 | $347 | | Total | $5,191 | $5,099 | - Accrued clinical and manufacturing costs significantly increased from $696k to $2,873k[53] Note 7. Common Stock and Preferred Stock The company completed a public offering in January 2024, raising $161.4 million in net proceeds - Completed January 2024 Offering, issuing 4,615,384 common shares plus 692,307 shares from underwriter option, for net proceeds of approximately $161.4 million[54][55] - As of March 31, 2025, 140,000,000 voting common shares and 10,000,000 non-voting common shares are authorized; 25,684,479 voting shares are issued and outstanding[15][56] - No preferred stock was issued or outstanding as of March 31, 2025, or December 31, 2024[57] Note 8. Stock-Based Compensation Stock-based compensation expense increased to $2.3 million in Q1 2025, reflecting higher R&D and G&A payroll-related costs Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $1,043 | $556 | | General and administrative | $1,230 | $832 | | Total | $2,273 | $1,388 | - The 2023 Equity Incentive Plan and 2023 Employee Stock Purchase Plan include evergreen refresh provisions, adding shares annually[61][65] - As of March 31, 2025, total unrecognized stock-based compensation expense for unvested stock options was $26.1 million, to be recognized over approximately 2.9 years[72] Note 9. Net Loss per Share The calculation of diluted net loss per share excludes common stock equivalents as their inclusion would be anti-dilutive Anti-Dilutive Common Stock Equivalents Excluded from EPS Calculation | Item | March 31, 2025 | March 31, 2024 | | :------------------------------------------------ | :------------- | :------------- | | Outstanding stock options (2022 Plan) | 1,188,953 | 1,403,409 | | Outstanding stock options (2023 Plan) | 2,521,343 | 1,111,311 | | Unvested restricted stock units (2023 Plan) | 12,465 | 17,451 | | Common stock subject to repurchase (early exercised options) | 126,509 | 341,198 | | Total | 3,849,270 | 2,873,369 | Note 10. Segment Information The company operates as a single operating and reportable segment focused on the development of pacibekitug - Operates as a single operating and reportable segment: the pacibekitug segment[77] - CODM assesses performance and allocates resources based on net loss, as the company is pre-commercial and does not yet generate revenue[78][79] Significant Segment Expenses (in thousands) | Expense Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Research and development payroll-related costs | $5,232 | $3,028 | | General and administrative payroll-related costs | $2,154 | $1,549 | | Clinical trial expenses | $6,009 | $2,195 | | Chemistry, manufacturing, and controls costs | $4,346 | $4,393 | | Medical affairs expenses | $555 | $286 | | Research and development consulting expenses | $1,372 | $832 | | General and administrative consulting expenses | $1,036 | $1,989 | | Other segment items | $2,266 | $(961) | | Segment and consolidated net loss | $22,970 | $13,311 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, results of operations, and focus on developing pacibekitug Overview Tourmaline Bio is a late-stage clinical biotechnology company developing its lead candidate, pacibekitug, for multiple indications - Company is a late-stage clinical biotechnology company developing pacibekitug, a long-acting anti-IL-6 antibody, for immune and inflammatory diseases[86][87][88] - Strategic paths for pacibekitug include cardiovascular inflammation (Phase 2 TRANQUILITY trial, topline data expected Q2 2025) and thyroid eye disease (pivotal Phase 2b spiriTED trial, topline data expected H2 2025)[89][90][91][93] - Accumulated deficit of $158.2 million as of March 31, 2025, with net losses of $23.0 million and $13.3 million for Q1 2025 and Q1 2024, respectively[96] Financial Operations Overview The company has not generated revenue and expects significant R&D and G&A expenses to continue as it advances product candidates - No revenue generated since inception; future revenue depends on successful commercialization or collaboration/licensing agreements[113] - Research and development expenses are expected to increase substantially due to advancing pacibekitug into larger clinical trials and expanding R&D activities[117] - General and administrative expenses are expected to increase to support R&D, pre-commercial activities, and public company compliance[121][122] Revenue The company has not generated any revenue from product sales and does not anticipate doing so in the near future - No revenue generated from product sales since inception[113] - Future revenue is uncertain and dependent on product sales, collaboration, or license agreements[113] Operating Expenses Operating expenses are categorized into research and development (R&D) and general and administrative (G&A) Research and Development Expenses R&D expenses primarily cover clinical trials, manufacturing, and personnel costs and are expected to increase substantially - R&D expenses include personnel-related costs, payments to CROs and CDMOs for clinical trials and manufacturing, and preclinical development costs[114] - IPR&D assets purchased in asset acquisitions are expensed as incurred if they have not received regulatory approval and lack alternative future use[115] - R&D expenses are expected to increase substantially as pacibekitug and future product candidates advance into larger and later-stage clinical trials[117] General and Administrative Expenses G&A expenses consist of personnel costs, professional fees, and public company-related expenses, which are expected to increase - G&A expenses primarily cover salaries, bonuses, benefits, stock-based compensation for operational/finance/administrative functions, and professional fees[120] - Expected to increase due to continued R&D, pre-commercial preparation, and public company expenses (accounting, audit, legal, investor relations)[121][122] Other Income, Net Other income, net, is primarily derived from interest and investment income on the company's cash and investments - Other income, net, is mainly comprised of interest and investment income[123] Results of Operations The company's net loss increased significantly in Q1 2025 compared to the prior year, driven by higher R&D expenses Summary of Results of Operations (in thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Research and development | $20,258 | $11,376 | $8,882 | | General and administrative | $5,973 | $6,141 | $(168) | | Total operating expenses | $26,231 | $17,517 | $8,714 | | Loss from operations | $(26,231) | $(17,517) | $(8,714) | | Other income, net | $3,261 | $4,206 | $(945) | | Net loss | $(22,970) | $(13,311) | $(9,659) | Research and Development Expenses Analysis R&D expenses increased by $8.9 million, or 78%, primarily due to higher clinical trial and payroll-related costs - R&D expenses increased by $8.9 million, from $11.4 million in Q1 2024 to $20.3 million in Q1 2025[125] - Primary drivers of increase: $3.8 million in clinical trial expenses, $2.7 million in payroll-related costs (including $0.5 million stock-based compensation), $1.5 million in toxicology study expenses, $0.6 million in R&D consulting, and $0.3 million in medical affairs expenses[127] General and Administrative Expenses Analysis G&A expenses decreased by $0.2 million, or 2.7%, mainly due to lower consulting and legal expenses - G&A expenses decreased by $0.2 million, from $6.1 million in Q1 2024 to $6.0 million in Q1 2025[125] - Decrease primarily due to $1.0 million decreased consulting expenses and $0.2 million decreased legal expenses[125] - Partially offset by $1.0 million increased payroll-related costs, including $0.4 million increased stock-based compensation expense, due to increased headcount[125] Other Income, Net Analysis Other income, net, decreased by $0.9 million, or 22.5%, primarily due to a decline in investment income - Other income, net, decreased by $0.9 million, from $4.2 million in Q1 2024 to $3.3 million in Q1 2025[126] - Primarily due to a $1.3 million decrease in investment income, partially offset by a $0.4 million increase in interest income[126] Liquidity and Capital Resources The company has incurred significant losses and will require substantial additional capital to fund its operations - Incurred significant operating losses and negative cash flows, with an accumulated deficit of $158.2 million as of March 31, 2025[128][129] - As of March 31, 2025, had $275.3 million in cash, cash equivalents, and investments, expected to fund operations into the second half of 2027[130] - Future cash needs will be financed through equity or debt financings, collaborations, licensing arrangements, and strategic alliances[33][134] Sources of Liquidity The company's liquidity primarily stems from past equity financings, including a public offering in January 2024 - Funded operations primarily through Series A convertible preferred stock sales, Pre-Merger Financing Transaction, and January 2024 Offering, raising approximately $359.7 million gross proceeds[129] - Entered into an ATM Sales Agreement in November 2024 to sell up to $100.0 million of common stock, but no shares have been sold as of March 31, 2025[131][132] Future Capital Requirements The company anticipates substantial additional capital will be required to complete development and commercialization - Will require substantial additional capital to develop and commercialize product candidates and fund operations for the foreseeable future[133] - Future funding requirements depend on factors like scope, timing, and costs of R&D, regulatory review, manufacturing, marketing, and intellectual property protection[136][137] - Failure to obtain sufficient capital could force delays, reductions, or curtailment of research, product development, or commercialization efforts, or require licensing rights on less favorable terms[135] Cash Flows Analysis Net cash used in operating activities increased, while investing activities shifted to a net provision of cash Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $(21,679) | $(14,923) | | Investing activities | $25,941 | $(188,869) | | Financing activities | $562 | $161,352 | | Net increase (decrease) | $4,824 | $(42,440) | - Net cash used in operating activities increased by $6.8 million due to overall growth in operations and headcount[140] - Shift in investing activities from net cash used to net cash provided primarily due to maturities of investments[141] Contractual Obligations and Commitments The company has agreements with vendors for R&D and manufacturing services, which may include purchase obligations - Agreements with CDMOs and CROs include provisions for purchase and termination obligations[143] - Milestone and royalty payments under the Pfizer License Agreement are contingent upon future activities and are not included in current contractual obligations[144] Critical Accounting Policies and Estimates The preparation of financial statements requires management to make estimates, particularly for accrued expenses - Financial statements require management estimates and assumptions, including for accrued expenses and stock-based compensation[145] - No significant changes to critical accounting policies since the 2024 Form 10-K[146] Recently Issued and Adopted Accounting Pronouncements The company adopted ASU 2023-07, Segment Reporting, in fiscal year 2024 and is evaluating other new pronouncements - Adopted ASU 2023-07, Segment Reporting, for the fiscal year ended December 31, 2024, resulting in additional interim disclosures[41][147] - Evaluating ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) for future impact[42][43][147] Emerging Growth Company and Smaller Reporting Company Status The company qualifies as an 'emerging growth company' and 'smaller reporting company,' allowing for reduced disclosure - Qualifies as an 'emerging growth company' (EGC) and has elected to use the extended transition period for new or revised accounting standards[148] - Also qualifies as a 'smaller reporting company,' allowing reduced disclosure obligations, including exemption from auditor attestation requirements of Section 404 of Sarbanes-Oxley Act[150] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Tourmaline Bio is not required to provide these disclosures - The company is a smaller reporting company and is not required to provide disclosures about market risk[151] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025 - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025[153] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025[154] - Acknowledges inherent limitations in control systems, providing only reasonable, not absolute, assurance[155] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material pending legal proceedings - No pending legal proceedings are expected to have a material adverse effect on the company's financial position, results of operations, or cash flows[157] Item 1A. Risk Factors This section outlines significant risks associated with investing in the company's common stock - Investment in common stock involves a high degree of risk, including those related to limited operating history, recurring losses, and dependence on pacibekitug[158][159] - Key risks include the need for significant additional capital, reliance on third parties for development and manufacturing, and the unpredictable nature of clinical trials and regulatory approvals[159] - Other risks encompass market acceptance, pricing and reimbursement, government regulation, data privacy, managing growth, and protecting intellectual property[159] Summary of Risk Factors A high-level overview of primary risks, including limited operating history, net losses, and reliance on pacibekitug - Limited operating history and no commercialized products make it difficult to assess future viability[159] - Incurred net losses since inception and expects to continue, with no current product revenue[159] - Business is highly dependent on the successful clinical development, regulatory approval, and commercialization of pacibekitug[159] Risks Related to Our Financial Condition and Capital Needs The company has a limited operating history, no product revenue, and has incurred significant net losses - Limited operating history since Legacy Tourmaline's formation in 2021, with no commercialized products[162] - Incurred net losses every year since inception, with an accumulated deficit of $158.2 million as of March 31, 2025[164][165] - Requires significant additional capital to finance operations and product development, with current capital expected to fund operations into the second half of 2027[175][176] Risks Related to Our Dependence on Third Parties The company heavily relies on third parties for development, manufacturing, and clinical trials of pacibekitug - Depends on third parties (CROs, clinical investigators, CDMOs) for development, clinical trials, manufacturing, and potential commercialization[185] - Relies completely on CDMOs for manufacturing and testing of pacibekitug, which is complex and highly regulated, posing risks of product loss, quality issues, and supply disruptions[189][191] - Security incidents, system disruptions, or cyberattacks affecting the company or its third-party partners could lead to operational disruptions, data loss, regulatory investigations, and reputational harm[211][212] Risks Related to Data Privacy and Security The company is subject to rapidly evolving and stringent data privacy and security laws globally - Subject to numerous evolving data privacy and security obligations, including EU GDPR, UK GDPR, Swiss FADP, HIPAA, and state-level laws like CCPA[223][224][228][229] - Cross-border data transfer restrictions, particularly from the EEA, UK, or Switzerland to the U.S., pose significant compliance challenges and potential for fines or injunctions[225][226] - Use of generative AI technologies by personnel could lead to additional compliance costs, regulatory investigations, and lawsuits[232] Risks Related to the Discovery, Development and Regulatory Approval of Our Product Candidates The development and regulatory approval of pacibekitug are lengthy, expensive, and unpredictable - Clinical trials are rigorous, expensive, and lengthy, with potential for delays, suspension, or termination due to various factors including regulatory discussions, patient enrollment, and third-party performance[235][236] - Preliminary or interim clinical trial results may change, and pacibekitug may cause undesirable side effects or adverse events, including anti-drug antibodies (ADAs), which could terminate development or lead to restrictive product labels[253][256][257] - Success in preclinical or earlier-stage trials, or data from other IL-6 inhibitors, is not indicative of future results for pacibekitug, and the company faces significant competition in immune and inflammatory disease markets[247][260][261] Risks Related to the Marketing and Commercialization of Our Product Candidates Even if approved, pacibekitug may fail to achieve market acceptance due to pricing, competition, and other factors - Market acceptance of approved product candidates depends on efficacy, safety, advantages over alternatives, pricing, and third-party payor coverage/reimbursement[271] - Unfavorable pricing regulations, limited reimbursement by government and private payors, or healthcare reform initiatives could significantly impact revenue and commercial success[273][274] - Product liability lawsuits, whether related to clinical trials or commercialized products, could result in substantial liabilities, reputational harm, and limit development/commercialization efforts[280][281] Risks Related to Government Regulation The regulatory approval process is lengthy and unpredictable, with extensive ongoing requirements post-approval - Regulatory approval processes by the FDA and foreign health authorities are lengthy, unpredictable, and may not result in approval for pacibekitug[282][283] - Approved products face extensive ongoing regulatory requirements for manufacturing, quality control, labeling, safety surveillance, and promotion, with violations leading to significant penalties[297][300][302] - Healthcare reform measures (e.g., Inflation Reduction Act, ACA) and changes in tax laws could negatively impact drug pricing, reimbursement, and the company's financial condition[309][310][321] Risks Related to Our Business Operations, Employee Matters and Managing Growth The company faces risks related to maintaining effective internal controls, managing growth, and retaining skilled personnel - Previously identified material weaknesses in internal control over financial reporting have been remediated as of December 31, 2024, but future weaknesses could adversely affect financial reporting[331][332] - Expected significant growth in employees and operations, particularly in clinical development, regulatory affairs, and commercialization, poses management challenges[333] - International operations (manufacturing, clinical trials, future marketing) expose the company to risks including conflicting laws, supply chain disruptions, financial risks, and geopolitical instability[337][338] Global Trade Issues and Macroeconomic Conditions Global trade issues and unfavorable macroeconomic conditions could adversely impact the company's business and supply chain - Global trade restrictions, tariffs, and disputes could negatively impact demand, increase supply chain complexity and manufacturing costs, and reduce product competitiveness[340] - Disease outbreaks, epidemics, and pandemics could disrupt clinical trials, manufacturing, and supply chains, potentially delaying regulatory approvals or impacting product efficacy/safety[341][342] - Unfavorable domestic or global economic conditions could weaken demand for product candidates and hinder the ability to raise additional capital[343] Operational and Environmental Risks The company's operations are vulnerable to interruptions from natural disasters and the use of hazardous materials - Operations are vulnerable to interruptions from fire, earthquake, power loss, telecommunications failure, and terrorist activity[344] - Use of hazardous materials in clinical development and manufacturing exposes the company to risks of personal injuries, environmental damage, and significant compliance costs[345] Litigation Risks The company may be exposed to various forms of litigation, including stockholder lawsuits, which could be costly - Exposure to litigation from stockholders, suppliers, and other third parties could adversely affect business and operations[346] - Inherent limitations in disclosure controls and procedures mean that not all errors or acts of fraud may be prevented or detected[347][348] Risks Related to Our Intellectual Property The company's success depends on obtaining and maintaining intellectual property protection for its products and technologies - Success depends on obtaining and maintaining adequate intellectual property rights, including patents, for technologies and product candidates, which is an expensive and time-consuming process[349][350] - Dependent on license agreements with Pfizer and Lonza; termination or reduction of these licenses could result in loss of significant rights and harm commercialization of pacibekitug[357][359] - Faces risks of lawsuits to protect or enforce IP rights, or allegations of infringement by third parties, which could be expensive, time-consuming, and unsuccessful[366][372] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Securities The company repurchased 2,600 shares of common stock from a former employee during the quarter Issuer Purchases of Equity Securities (Three Months Ended March 31, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | March 1 through March 31, 2025 | 2,600 | $2.76 | | Three Months Ended March 31, 2025 | 2,600 | $2.76 | - Repurchased 2,600 shares from a former employee related to unvested early exercised stock options at the original exercise price[389] - No public repurchase program was in place during the period[390] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - Not Applicable[391] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - Not Applicable[392] Item 5. Other Information There is no other information to report under this item - None[393] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications - Includes Third Amended and Restated Certificate of Incorporation and Bylaws[394] - Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed[394] SIGNATURES Signatures The report is duly signed on behalf of the company by its CEO and CFO on May 2, 2025 - Report signed by Sandeep Kulkarni, Chief Executive Officer, and Ryan Robinson, Chief Financial Officer[399] - Date of signing: May 2, 2025[399]