Spyre Therapeutics(SYRE) - 2025 Q2 - Quarterly Report

FORM 10-Q This quarterly report provides financial and operational updates for SPYRE THERAPEUTICS, INC. for the period ended June 30, 2025 - This is a Quarterly Report on Form 10-Q for the period ended June 30, 2025, filed by SPYRE THERAPEUTICS, INC. (Commission File Number: 001-37722)[2] Registrant Information | Indicator | Value | | :--- | :--- | | Trading Symbol | SYRE | | Exchange | The Nasdaq Stock Market LLC | | Filer Status | Large accelerated filer | | Common Stock Outstanding (as of July 31, 2025) | 60,400,960 shares | Note About Forward-Looking Statements This section outlines the inherent risks and uncertainties associated with forward-looking statements, advising readers against undue reliance on future predictions - This report contains forward-looking statements regarding future results, financial position, business strategy, clinical development plans (including SPY001, SPY002, SPY072, SPY003 trials), regulatory feedback, and the company's ability to fund operations[9] - These statements are subject to risks and uncertainties, such as potential disagreements with regulatory authorities on clinical trial design, inconsistencies in clinical data, macroeconomic conditions (inflation, interest rates, geopolitical conflicts), and changes in law[10] - Readers are cautioned not to rely on forward-looking statements as predictions of future events, and the company undertakes no obligation to update them, except as required by law[12] PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, equity changes, and cash flows Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $81,659 | $89,423 | $(7,764) | | Marketable securities | $444,921 | $513,665 | $(68,744) | | Total current assets | $538,832 | $608,474 | $(69,642) | | Total assets | $538,832 | $608,484 | $(69,652) | | CVR liability (current) | $59,900 | $25,080 | $34,820 | | CVR liability (non-current) | — | $36,620 | $(36,620) | | Total current liabilities | $83,059 | $54,060 | $28,999 | | Total liabilities | $83,059 | $90,680 | $(7,621) | | Total stockholders' equity | $455,773 | $517,804 | $(62,031) | - Total assets decreased by $69.7 million, primarily driven by a reduction in marketable securities and cash, while total liabilities decreased by $7.6 million, mainly due to the reclassification and decrease in CVR liability[17] Condensed Consolidated Statements of Operations This section details the company's financial performance, including revenues, expenses, and net loss, for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research and development | $40,145 | $32,636 | +23% | $81,768 | $67,564 | +21% | | General and administrative | $11,790 | $11,511 | +2% | $23,734 | $24,357 | -3% | | Gain on sale of in-process R&D asset | $(10,000) | — | N/A | $(10,000) | — | N/A | | Total operating expenses | $41,935 | $44,147 | -5% | $95,502 | $91,921 | +4% | | Loss from operations | $(41,935) | $(44,147) | -5% | $(95,502) | $(91,921) | +4% | | Interest income | $5,874 | $5,920 | -1% | $12,367 | $10,352 | +19% | | Other (expense) income, net | $(656) | $(610) | +7% | $1,630 | $(1,093) | N/A | | Net loss | $(36,717) | $(38,837) | -5% | $(81,490) | $(82,694) | -1% | | Net loss per common share (basic and diluted) | $(0.49) | $(0.59) | -17% | $(1.09) | $(1.31) | -17% | - Net loss decreased by 5% for the three months ended June 30, 2025, and by 1% for the six months ended June 30, 2025, primarily due to a $10.0 million gain on the sale of an in-process R&D asset and increased interest income, partially offset by higher R&D expenses[20] Condensed Consolidated Statements of Comprehensive Loss This section presents the total comprehensive loss, including net loss and other comprehensive income items, for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net loss | $(36,717) | $(38,837) | -5% | $(81,490) | $(82,694) | -1% | | Foreign currency translation adjustment | $(36) | $4 | N/A | $(22) | $20 | N/A | | Unrealized (loss) gain on marketable securities | $(192) | $(194) | -1% | $296 | $(875) | N/A | | Total comprehensive loss | $(36,945) | $(39,027) | -5% | $(81,216) | $(83,549) | -3% | - Total comprehensive loss decreased by 5% for the three months and 3% for the six months ended June 30, 2025, primarily reflecting the decrease in net loss and a shift from unrealized loss to gain on marketable securities for the six-month period[25] Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity This section outlines changes in the company's convertible preferred stock and stockholders' equity for the six months ended June 30, 2025 and 2024 Key Changes in Stockholders' Equity (in thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | | Balances - December 31, 2024/2023 | $517,804 | $184,016 | | Issuance of common stock (options/ESPP) | $1,065 | $4,884 | | Stock-based compensation expense | $18,237 | $22,517 | | Net loss | $(81,490) | $(82,694) | | Conversion of Series B Preferred Stock to Common Stock | — | $244,010 | | Exchange of Series A Preferred Stock for Common Stock | — | $38,501 | | Balances - June 30, 2025/2024 | $455,773 | $374,385 | - Total stockholders' equity decreased by $62.0 million from December 31, 2024, to June 30, 2025, primarily due to the net loss, partially offset by stock-based compensation and common stock issuances[27] - In the six months ended June 30, 2024, significant changes included the conversion of Series B Preferred Stock and exchange of Series A Preferred Stock into common stock, and a private placement of Series B Preferred Stock[28] Condensed Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(87,557) | $(90,790) | $(3,233) | | Net cash provided by (used in) investing activities | $78,937 | $(225,481) | $304,418 | | Net cash provided by financing activities | $856 | $172,525 | $(171,669) | | Net decrease in cash, cash equivalents, and restricted cash | $(7,764) | $(143,750) | $135,986 | | Cash, cash equivalents, and restricted cash (End of period) | $81,659 | $45,465 | $36,194 | - Net cash used in operating activities decreased by $3.2 million, while net cash provided by investing activities significantly increased by $304.4 million, primarily due to higher proceeds from maturities and sales of marketable securities[31] - Net cash provided by financing activities decreased substantially by $171.7 million, mainly due to the absence of a large private placement of Series B Preferred Stock in 2025, which occurred in 2024[31] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements 1. The Company and Basis of Presentation This note provides an overview of Spyre Therapeutics, Inc., its corporate history, asset acquisition, financing activities, and liquidity status - Spyre Therapeutics, Inc. is a clinical-stage biotechnology company focused on developing therapeutics for inflammatory bowel disease (IBD) and other immune-mediated diseases, following its rebranding and the Asset Acquisition of Pre-Merger Spyre in June 2023[34][35] - Key financing events include a March 2024 private placement of Series B Preferred Stock ($168.9 million net proceeds), an April 2024 exchange of Series A Preferred Stock for common stock, and a November 2024 underwritten public offering ($215.9 million net proceeds)[37][38][42] - As of June 30, 2025, the company had an accumulated deficit of $1.1 billion and $526.6 million in cash, cash equivalents, and marketable securities, with sufficient resources to fund operations for at least one year, but will require additional future financing[45][46] 2. Summary of Significant Accounting Policies This note confirms the basis of financial statement preparation, consistency of accounting policies, and evaluation of new accounting pronouncements - The interim financial statements are unaudited and prepared on the same basis as annual statements, reflecting normal and recurring adjustments[48] - There have been no significant changes to the company's accounting policies or estimates disclosed in the Annual Report[50] - The company is evaluating the impact of ASU 2023-09 (Income Tax Disclosures, effective after Dec 15, 2024) and ASU 2024-03 (Expense Disaggregation Disclosures, effective after Dec 15, 2026) on its future disclosures[52][53][54] 3. Fair Value Measurements This note details the fair value measurements of financial assets and liabilities, categorized by the three-tier fair value hierarchy, including the CVR liability Fair Value of Financial Assets and Liabilities (in thousands) | Category | June 30, 2025 (Total) | December 31, 2024 (Total) | | :--- | :--- | :--- | | Financial Assets: | | | | Money market funds (Level 1) | $79,957 | $65,902 | | U.S. government treasury securities (Level 1) | $221,646 | $227,244 | | U.S. government agency securities (Level 2) | $70,526 | $86,681 | | Commercial paper (Level 2) | $89,178 | $165,130 | | Corporate bonds (Level 2) | $63,571 | $56,448 | | Total financial assets | $524,878 | $601,405 | | Liabilities: | | | | CVR liability (Level 3) | $59,900 | $61,700 | | Total liabilities | $59,900 | $61,700 | - The CVR liability, valued using a probability-weighted discounted cash flow method (Level 3), decreased by $1.8 million from December 31, 2024, to June 30, 2025, primarily due to changes in the likelihood of milestone achievement and increased discount rates[57][58][59] CVR Liability Valuation Inputs (June 30, 2025) | Input | Value | | :--- | :--- | | Estimated cash flow dates | 08/28/25 - 06/22/26 | | Estimated probability of success | 72% - 100% | | Estimated reimbursement rate | 49% - 100% | | Risk-adjusted discount rates | 9.38% - 9.48% | 4. Cash Equivalents and Marketable Securities This note provides a detailed breakdown of cash equivalents and marketable securities, including fair values, unrealized gains/losses, and contractual maturities Cash Equivalents and Marketable Securities (in thousands) | Category | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :--- | :--- | :--- | | Cash equivalents: | | | | Money market funds | $79,957 | $65,902 | | Commercial paper (Dec 2024 only) | — | $21,838 | | Total cash equivalents | $79,957 | $87,740 | | Marketable securities: | | | | Commercial paper | $89,178 | $143,292 | | Corporate bonds | $63,571 | $56,448 | | U.S. government treasury securities | $221,646 | $227,244 | | U.S. government agency securities | $70,526 | $86,681 | | Total marketable securities | $444,921 | $513,665 | - As of June 30, 2025, marketable securities in an unrealized loss position totaled $170.6 million with gross unrealized losses of $153 thousand, primarily due to market conditions, not credit loss[61][62] The company intends to hold these securities until recovery[62] Contractual Maturities of Marketable Securities (in thousands) | Maturity | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Due in one year or less | $327,764 | $338,442 | | Due in 1 - 2 years | $117,157 | $175,223 | | Total marketable securities | $444,921 | $513,665 | 5. Accrued and Other Current Liabilities This note details the composition of accrued and other current liabilities, highlighting changes from December 31, 2024, to June 30, 2025 Accrued and Other Current Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Accrued compensation | $3,289 | $5,688 | $(2,399) | | Accrued contracted research and development costs | $15,018 | $20,861 | $(5,843) | | Accrued professional and consulting fees | $867 | $661 | $206 | | Accrued other | $242 | $501 | $(259) | | Total accrued and other current liabilities | $19,416 | $27,711 | $(8,295) | 6. Licensing Agreements This note outlines exclusive license agreements with Paragon for key research programs, detailing milestone payment obligations and royalty terms - The company exercised options and entered into exclusive license agreements with Paragon for SPY001 (α4ß7 integrin), SPY002/SPY072 (TL1A), and SPY003 (IL-23) programs[67][68][69] - Under each License Agreement, the company is obligated to pay Paragon up to $22.0 million in development, regulatory, and clinical milestones per product, including $3.0 million upon first dosing in a Phase 2 trial[71] Paragon License Milestone Payments (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Expense recognized | $0 | $5,500 | $2,500 | $5,500 | | Payments made | $2,500 | $3,000 | $2,500 | $3,000 | | Sublicensing fees (expense/paid) | $0 | $100 | $0 | $100 | 7. Related Party Transactions This note details transactions with related parties, including reimbursable costs, license fees, and stock-based compensation, and changes in related party payables - Fairmount Funds Management LLC, a significant stockholder, has board representation and beneficial ownership in Paragon, establishing related party relationships[77] Related Party Expenses (in millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Reimbursable costs (Paragon Agreement) | $0 | $2.3 | $0.1 | $14.0 | | License Agreements milestone and sublicensing fees | $0 | $5.6 | $2.5 | $5.6 | | Total related party expense | $0 | $7.9 | $2.6 | $19.6 | - Related party accounts payable decreased from $0.6 million as of December 31, 2024, to nil as of June 30, 2025[78][82] Stock-based compensation related to Paragon services also significantly decreased in 2025[83] 8. Convertible Preferred Stock and Stockholders' Equity This note details the company's convertible preferred stock and common stock, including rights, conversion events, and recent equity offerings - As of June 30, 2025, 1,532,591 Parapyre warrants with a weighted-average exercise price of $22.49 were outstanding and unexercised[90] - In April 2024, 90,992 shares of Series A Preferred Stock were exchanged for 3,639,680 shares of common stock[92] As of June 30, 2025, 346,045 Series A shares remained outstanding, convertible into 13,841,800 common shares[92] - Following stockholder approval in May 2024, 254,958 shares of Series B Preferred Stock automatically converted to 10,198,320 common shares[97] 16,667 Series B shares remained outstanding due to beneficial ownership limitations, convertible into 666,680 common shares[97] - As of June 30, 2025, $179.1 million remained available for sale under the ATM offering program from the February 2025 Shelf Registration Statement[99] 9. Stock-Based Compensation This note details equity incentive plans, the Parapyre Option Obligation, ESPP, stock-based compensation expense, and Black-Scholes assumptions - As of June 30, 2025, the 2016 Plan had 10,911,455 shares available for future issuance, and the 2018 Plan had 7,606,811 shares available, following an amendment to increase shares by 750,000[103][104] - The Parapyre Option Obligation was settled by December 31, 2024, with 1,532,591 warrants outstanding as of June 30, 2025[108] No ongoing obligations exist under this program[109] Total Stock-Based Compensation Expense (in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $4,100 | $3,451 | $7,612 | $10,308 | | General and administrative | $5,278 | $5,231 | $10,625 | $12,209 | | Total stock-based compensation expense | $9,378 | $8,682 | $18,237 | $22,517 | Weighted-Average Black-Scholes Assumptions (6 Months Ended June 30, 2025 vs. 2024) | Assumption | 2025 | 2024 | | :--- | :--- | :--- | | Expected term (stock options) | 5.97 years | 6.00 years | | Expected volatility (stock options) | 76% | 105% | | Risk-free interest (stock options) | 4.38% | 4.01% | | Expected term (ESPP) | 0.50 years | 0.50 years | | Expected volatility (ESPP) | 69% | 98% | | Risk-free interest (ESPP) | 4.23% | 5.31% | 10. Sale of Pegzilarginase to Immedica This note describes the agreement to sell global rights to pegzilarginase to Immedica, including the recognition of a $10.0 million gain in Q2 2025 - In July 2023, the company agreed to sell global rights to pegzilarginase to Immedica for $15.0 million upfront and up to $100.0 million in contingent milestone payments[113] - A $10.0 million gain was recognized in the three and six months ended June 30, 2025, from achieving European reimbursement decision milestones for pegzilarginase[114] - Milestone payments, net of expenses, will reduce the CVR liability and be distributed to CVR holders[115] 11. Segment Reporting This note states the company operates as a single segment focused on biopharmaceutical product development, with the CEO as the CODM - The company operates in one segment: development of biopharmaceutical products for IBD and other immune-mediated diseases[116] - The CEO serves as the CODM, using consolidated Net Loss as the primary measure of segment profit or loss and Total Assets for segment assets[116] Significant Expenses Provided to CODM (in thousands) | Expense Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Compensation | $8,120 | $4,881 | $15,111 | $9,055 | | Stock-based compensation | $9,378 | $8,682 | $18,237 | $22,517 | | R&D (excl. comp/stock-based) | $30,749 | $26,808 | $64,300 | $52,910 | | Other segment items | $(11,530) | $(1,534) | $(16,158) | $(1,788) | 12. Net Loss Per Share This note explains the computation of net loss per share for common and preferred stock using the two-class method, excluding anti-dilutive securities - Net loss per share is computed using the two-class method, allocating losses to common, Series A, and Series B Preferred Stock[118][119] - For all periods presented, diluted net loss per share is the same as basic net loss per share because the company generated a net loss, making the inclusion of potential common shares anti-dilutive[120] Net Loss Per Share (Basic and Diluted) | Share Class | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Series A Preferred Stock | $(19.62) | $(23.61) | $(43.57) | $(52.32) | | Series B Preferred Stock | $(19.62) | $(23.61) | $(43.57) | $(52.32) | | Common Stock | $(0.49) | $(0.59) | $(1.09) | $(1.31) | Anti-Dilutive Equity Instruments Excluded from EPS Calculation | Instrument | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Options to purchase common stock | 805,306 | 5,010,436 | 1,324,645 | 4,526,643 | | Unvested restricted stock units | — | 79,870 | 11,943 | 71,368 | | Outstanding Parapyre warrants | — | 684,407 | — | 684,407 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, operational results, product pipeline, and critical accounting policies Acquisition of Pre-Merger Spyre This section details the acquisition of Pre-Merger Spyre, which granted the company options to license intellectual property for key research programs - On June 22, 2023, Spyre acquired Pre-Merger Spyre, gaining the option to license intellectual property rights for research programs[123] - The company exercised options for SPY001 (α4β7 integrin), SPY002/SPY072 (TL1A), and SPY003 (IL-23) programs, with expected patent expirations no earlier than 2044-2045[124] Overview This section outlines the company's strategic focus on developing next-generation therapeutics for Inflammatory Bowel Disease and Rheumatic Diseases with enhanced pharmacokinetic profiles - Following the Asset Acquisition, Spyre reshaped its business to focus on developing next-generation therapeutics for Inflammatory Bowel Disease (IBD) and Rheumatic Diseases (RD)[125] - The company's product candidates are engineered for potent binding, selectivity, and extended pharmacokinetic (PK) half-lives to enable less frequent, convenient subcutaneous administration, and plans to investigate combination therapies for greater efficacy[126] Our Portfolio and Development Plan Updates This section provides updates on the company's clinical trials, including the SKYLINE-UC and SKYWAY-RD trials, and the progress of SPY001, SPY002, SPY072, and SPY003 programs - The SKYLINE-UC Phase 2 platform trial for ulcerative colitis (UC) was initiated in May 2025, evaluating SPY001, SPY002, SPY003, and pairwise combinations[129][130] Enrollment is ongoing for the SPY001 arm of Part A[131] - The SKYWAY-RD Phase 2 basket trial for rheumatic diseases (RA, PsA, axSpA) evaluating SPY072 is planned for initiation in Q3 2025[132][133] - SPY001 Phase 1 trial showed a favorable safety profile, differentiated PK, and complete α4β7 receptor saturation beyond six months with a single 600mg dose, leading to its advancement into SKYLINE-UC[136] - SPY002 and SPY072 Phase 1 data (June 2025) demonstrated favorable safety, differentiated PK, and complete free TL1A suppression for up to 20 weeks, with SPY002 advancing to SKYLINE-UC and SPY072 to SKYWAY-RD in Q3 2025[140] - SPY003 Phase 1 trial initiated in March 2025, with interim safety and PK data expected in Q4 2025[143] Successful results would lead to its advancement into SKYLINE-UC[143] - Combination therapies (SPY120, SPY130, SPY230) are undergoing nonclinical and toxicology studies, with preclinical data showing additive or greater than additive biological activity[144][145][146][147][148] These combinations are intended for inclusion in the SKYLINE-UC Phase 2 platform trial, subject to regulatory feedback[149][150] Paragon Agreement This section details the exclusive license agreements with Paragon for SPY001, SPY002, SPY072, and SPY003 programs, including milestone payment obligations - The company exercised its option under the Paragon Agreement for SPY001, SPY002, SPY072, and SPY003 research programs, leading to exclusive license agreements[152] - Under these agreements, Spyre is obligated to pay Paragon up to $22.0 million in development, regulatory, and clinical milestones for the first product under each agreement, plus potential sublicensing fees of up to $20 million for SPY002/SPY072[153] Critical Accounting Policies and Estimates This section discusses the significant judgments and estimates required for financial statement preparation, particularly for R&D costs, CVR valuation, and stock-based compensation - The preparation of financial statements requires significant judgments and estimates, particularly for accrued research and development costs, the valuation of the contingent value right (CVR) liability, and inputs for stock-based compensation expense[155][156] - There have been no significant changes to the critical accounting policies and estimates since the Annual Report[157] Results of Operations This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2025 and 2024 Comparison of the Three Months Ended June 30, 2025 and 2024 For the three months ended June 30, 2025, the company reported a reduced net loss, driven by an asset sale gain despite increased R&D expenses Operating Results (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Increase/(Decrease) | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $40,145 | $32,636 | $7,509 | 23% | | General and administrative | $11,790 | $11,511 | $279 | 2% | | Gain on sale of in-process R&D asset | $(10,000) | — | $(10,000) | * | | Total operating expenses | $41,935 | $44,147 | $(2,212) | (5)% | | Net loss | $(36,717) | $(38,837) | $(2,120) | * | - Research and development expenses increased by $7.5 million (23%) due to higher clinical trial expenses and compensation costs, partially offset by lower early-stage R&D and intellectual property fees[159][161][162] - A $10.0 million gain was recognized from the sale of the pegzilarginase asset due to a favorable reimbursement decision in Europe[164] Comparison of the Six Months Ended June 30, 2025 and 2024 For the six months ended June 30, 2025, the net loss slightly decreased, primarily due to an asset sale gain and increased interest income, despite higher R&D Operating Results (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Dollar Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $81,768 | $67,564 | $14,204 | 21% | | General and administrative | $23,734 | $24,357 | $(623) | (3)% | | Gain on sale of in-process R&D asset | $(10,000) | — | $(10,000) | * | | Total operating expenses | $95,502 | $91,921 | $3,581 | * | | Net loss | $(81,490) | $(82,694) | $(1,204) | * | - Research and development expenses increased by $14.2 million (21%) due to higher clinical development activities and compensation costs, partially offset by lower early-stage R&D and intellectual property fees[168][170][171] - Interest income increased by $2.0 million to $12.4 million, primarily due to higher investment balances[174] - Other income, net, increased by $2.7 million, mainly driven by changes in the fair value of the CVR liability[176] Liquidity and Capital Resources This section discusses the company's historical funding sources, recent financing activities, and cash flow analysis, along with contingent contractual obligations Sources of Liquidity The company has historically funded operations through equity issuances and licensing. Recent financing activities include a private placement of Series B Preferred Stock, an ATM offering, and an underwritten public offering - Since inception through June 30, 2025, the company raised approximately $1.3 billion in gross proceeds from equity sales, pre-funded warrants, grants, and product rights licensing[178] - In March 2024, a private placement of Series B Preferred Stock generated approximately $168.9 million in net proceeds[180] - An ATM offering in September and December 2024 yielded approximately $20.5 million in net proceeds from 777,432 common shares[181] - A November 2024 underwritten public offering of 8,366,250 common shares generated approximately $215.9 million in net proceeds[182] Cash Flows The company's cash flows for the six months ended June 30, 2025, show a decrease in cash used in operating activities and a significant increase in cash provided by investing activities, while financing activities provided substantially less cash compared to the prior year Summary of Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating activities | $(87,557) | $(90,790) | | Investing activities | $78,937 | $(225,481) | | Financing activities | $856 | $172,525 | | Net (decrease) increase in cash | $(7,764) | $(143,750) | - Cash used in operating activities decreased by $3.2 million, primarily due to a lower net loss and favorable changes in operating assets and liabilities, partially offset by lower stock-based compensation[185][186] - Cash provided by investing activities significantly increased to $78.9 million (from $(225.5) million in 2024), driven by higher proceeds from maturities and sales of marketable securities[187][188] - Cash provided by financing activities decreased to $0.9 million (from $172.5 million in 2024), mainly due to the absence of the large Series B Preferred Stock private placement in 2025[189][190] Contingent Contractual Obligations This section details the company's contingent contractual obligations related to milestone and sublicensing fees under its license agreements with Paragon - The company has incurred $12.0 million in milestone fees out of a maximum of $66.0 million across all License Agreements as of June 30, 2025, with no outstanding milestone fees payable[192] - For the SPY002 and SPY072 License Agreement, the company is obligated to pay up to approximately $20 million in sublicensing fees upon achievement of mostly commercial milestones, with $0.7 million incurred and nil outstanding as of June 30, 2025[192] Recently Adopted Accounting Pronouncements This section confirms that no recently adopted accounting pronouncements have materially affected the company's financial position or results of operations - No recently adopted accounting pronouncements have had a material effect on the company's financial position or results of operations[193] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, including interest rate sensitivity, foreign currency exchange rates, and inflation risk, concluding that these risks are not currently significant - The company's primary market risk exposure is interest rate sensitivity on its $526.6 million in cash, cash equivalents, and marketable securities, which are primarily short-term and denominated in U.S. dollars[195] - A hypothetical 10% change in interest rates would not have a material effect on the total market value of cash equivalents and marketable securities as of June 30, 2025[195] - Foreign currency risk is not significant, as most expenditures are in U.S. dollars, and a hypothetical 10% change in exchange rates would not materially impact financial statements[196] Inflation has not had a material adverse effect on operations[197] Item 4. Controls and Procedures Management, with the participation of the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the quarter - As of June 30, 2025, the company's disclosure controls and procedures were evaluated and concluded to be effective at a reasonable assurance level[198] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[199] PART II. OTHER INFORMATION This part provides additional information including legal proceedings, risk factors, equity sales, defaults, and other disclosures Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its operations, financial condition, or cash flows - Management believes there are no claims or actions pending against the company that could have a material adverse effect on its results of operations, financial condition, or cash flows[201] Item 1A. Risk Factors This section outlines principal factors making an investment in the company speculative, covering financial, development, regulatory, intellectual property, and operational risks Risk Factor Summary This summary highlights key risk categories including financial, development, regulatory, intellectual property, and operational challenges - Key risk categories include financial condition and capital requirements, discovery, development and commercialization, government regulation, intellectual property, reliance on third parties, employee matters, managing growth, and risks related to common stock[203][204][205][206] - Significant risks include the need for additional capital, potential for no product revenue or profitability, dependence on SPY001, SPY002, SPY072, and SPY003 programs, and the inherent unpredictability of regulatory approval processes[204] Risks Related to Our Financial Condition and Capital Requirements This section details risks associated with the company's financial condition, including the need for additional capital, potential for dilution, and going concern uncertainties - The company will need to raise additional capital to fund operations and continue as a going concern, as it has incurred significant operating losses since inception and has no product sales revenue[209][214][215][216] - Failure to raise capital on acceptable terms could lead to delays or discontinuation of product development, unfavorable strategic partnerships, asset disposal, or even bankruptcy[212] - Raising additional capital through equity or convertible debt will dilute existing stockholders, and debt financing may impose restrictive covenants[224][226] Risks Related to Discovery, Development and Commercialization This section outlines risks inherent in product discovery, development, and commercialization, including competition, clinical trial failures, and regulatory unpredictability - The company faces intense competition from multinational biopharmaceutical companies with greater resources and expertise, which could hinder market penetration and clinical trial enrollment[229][231] - All product candidates are in clinical or nonclinical stages, and there is no guarantee of regulatory approval or commercialization[232] Delays or failures in clinical trials due to various factors (e.g., regulatory disagreements, participant enrollment, manufacturing issues) could materially harm the business[233][234][235] - Success is substantially dependent on SPY001, SPY002, SPY072, and SPY003 programs, which rely on observing longer half-lives in humans and comparable or better safety/efficacy profiles than competitors[237] - Preliminary or interim clinical data may change with more complete information, and significant adverse events or undesirable side effects could halt development, inhibit approval, or limit market acceptance[257][260] - Developing intra-portfolio drug combinations presents challenges, as they may not achieve superior outcomes, could exacerbate adverse events, or fail to demonstrate sufficient safety or efficacy for marketing approval[251][253][254] Risks Related to Government Regulation This section details risks associated with government regulation, including lengthy approval processes, CMC requirements, biosimilar competition, and healthcare reforms - The regulatory approval process is lengthy, expensive, and unpredictable[273] Delays or failure to obtain approvals for product candidates (SPY001, SPY002, SPY072, SPY003) would materially impair revenue generation[274][275] - The company must meet chemistry, manufacturing, and control (CMC) requirements for regulatory approval, and failure to do so could prevent product approval[278][279] - Approved biologics may face earlier competition from biosimilars if exclusivity periods are shortened or not granted, impacting commercial viability[280][281] - Ongoing regulatory obligations post-approval, including reporting and compliance with cGMPs, GVPs, and GCPs, will incur significant expenses, and non-compliance could lead to penalties or product withdrawal[282][283] - Healthcare legislative reforms, foreign trade regulations (e.g., tariffs, BIOSECURE Act), and strict price controls in foreign markets could negatively impact the business, increase costs, or limit revenue[284][288][290][291] Risks Related to Our Intellectual Property This section discusses risks concerning intellectual property, including patent protection uncertainties, trade secret vulnerabilities, and potential infringement claims - The ability to obtain and protect patents and other proprietary rights is uncertain, exposing the company to loss of competitive advantage if patents are not issued, are infringed, invalidated, or difficult to enforce globally[296][297] - Reliance on trade secrets carries risks of disclosure or misappropriation, which could erode competitive position[298] Confidentiality agreements may not provide adequate remedies[298] - Failure to acquire or in-license necessary third-party intellectual property rights on reasonable terms could force the abandonment of relevant programs[301][304] - The company may face costly patent infringement claims or need to file such claims, diverting resources and potentially preventing commercialization[307][308](index=308&type=chunk] Changes in patent laws (e.g., Leahy-Smith Act, Amgen v. Sanofi ruling) could diminish patent value[314][315] - Geopolitical instability (e.g., Russia-Ukraine conflict) could impact patent prosecution and maintenance in foreign countries, leading to loss of patent rights[317] Risks Related to Our Reliance on Third Parties This section outlines risks associated with reliance on third parties for collaborations, clinical trials, and manufacturing, including potential disruptions and non-compliance - The company relies heavily on collaborations and licensing arrangements with third parties, including Paragon, for discovery capabilities and in-licenses[327] Failure to maintain these or if they are unsuccessful could negatively impact the business[328] - Reliance on third parties (CROs, CMOs, investigators) for nonclinical studies and clinical trials means less direct control over conduct and timing[332] Non-compliance with GLP, GCP, GVP regulations by these parties could deem data unreliable and delay regulatory approval[332] - The company relies on CMOs for manufacturing product candidates and has a sole source relationship for SPY001, SPY002, and SPY003[338] Disruptions or difficulties in production by CMOs could adversely affect clinical development and commercialization[339][340] - Foreign CROs and CMOs, including those in China, are subject to U.S. legislation (e.g., potential BIOSECURE Act), sanctions, and trade restrictions, which could increase costs, reduce supply, or disrupt the supply chain[335][336][337] Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business This section covers risks related to managing growth, retaining key personnel, operating in foreign markets, cybersecurity, and the impact of macroeconomic conditions - The company expects significant growth in employees and operations, which may be difficult to manage effectively given limited financial resources and management experience[341] - Success is highly dependent on attracting and retaining key personnel, including executive officers and scientific/clinical teams[342][343] Loss of these individuals or inability to hire qualified personnel could impede strategic objectives[345] - Operating in foreign markets exposes the company to additional regulatory burdens, trade policy changes (e.g., U.S. tariffs), and reduced intellectual property protection[346][347] - Estimates of market opportunity and growth forecasts may be inaccurate, and the business may not grow as anticipated, impacting revenue generation[348][349] - Employees or third parties may engage in misconduct or improper activities, including noncompliance with regulatory standards, potentially leading to penalties, lawsuits, and reputational harm[350] - Internal IT systems and those of third parties are vulnerable to security breaches and cyber-attacks, including those enhanced by AI, which could result in data loss, liabilities, reputational damage, and operational disruptions[351][353][354][355][359][360][361] - The company's ability to use net operating loss (NOL) carryforwards and other tax attributes may be limited by ownership changes (Sections 382 and 383 of the Internal Revenue Code), potentially increasing future tax liability[363] - Failure of financial institutions where the company holds cash in excess of federally-insured limits could adversely affect its ability to pay operational expenses[369] Risks Related to Our Common Stock This section details risks associated with the company's common stock, including market price volatility, anti-takeover provisions, and potential future dilution - The market price of the common stock has been and may continue to be volatile due to factors such as regulatory approvals, commercial success, competition, financial projections, and macroeconomic conditions[370][371] - Anti-takeover provisions in charter documents, Delaware law, and certain contracts (e.g., Series A Preferred Stock Certificate of Designation) could make an acquisition more difficult and prevent stockholder attempts to replace management[373][374][376] - The company does not anticipate paying cash dividends in the foreseeable future, meaning capital appreciation is the sole source of gain for stockholders[380] - Future sales and issuances of equity and debt, including under equity incentive plans, could result in additional dilution to stockholders and cause the stock price to fall[383][384] - Principal stockholders own a significant percentage of the stock, enabling them to exert substantial control over matters requiring stockholder approval[385] General Risk Factors This section covers general risks such as product liability, litigation, compliance costs, internal control weaknesses, and macroeconomic impacts - The company is exposed to costly product liability and professional indemnity risks, and insurance coverage may not be sufficient to cover all damages from such claims[386] - Litigation, including securities, employment, or intellectual property matters, could result in substantial costs and divert resources, materially affecting the business[387] - As a public company, especially as a 'large accelerated filer' since December 31, 2024, the company incurs significant compliance costs and demands on management, including auditor attestation requirements under Sarbanes-Oxley Act Section 404(b)[388][389] - A material weakness in internal control over financial reporting related to net earnings (loss) per share disclosures was identified in Q4 2024, leading to restatements of prior financial statements[391][394] - Macroeconomic conditions, including inflation, interest rate increases, and geopolitical events (e.g., Russia-Ukraine, Middle East conflicts), could adversely affect operations, supply chains, and clinical trials, potentially causing delays and increased costs[397][399][400] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds are reported for the period[401] Item 3. Defaults Upon Senior Securities This section confirms no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities are reported[402] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable[402] Item 5. Other Information This section provides information on Rule 10b5-1 trading arrangements for the company's Chief Executive Officer and Chief Medical Officer during the fiscal quarter ended June 30, 2025 - On June 20, 2025, CEO Cameron Turtle terminated a previous Rule 10b5-1 trading plan and adopted a new one to sell up to 360,000 shares of common stock by August 4, 2027[404] - On June 20, 2025, CMO Sheldon Sloan adopted a Rule 10b5-1 trading plan to sell up to 102,958 shares of common stock (to be acquired upon option exercise) by September 3, 2026[405] Item 6. Exhibits This section lists all exhibits filed or furnished as part of this Quarterly Report on Form 10-Q, including key corporate and financial documents - The report includes exhibits such as the Agreement and Plan of Merger, Amended and Restated Certificate of Incorporation and Bylaws, Certificates of Designation for Series A and B Preferred Stock, and forms of Parapyre Warrants[408] - Certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1) are furnished as part of the report[408] Signatures This section contains the official signatures, duly authorized, for the Quarterly Report on Form 10-Q - The report is signed by Scott Burrows, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), on behalf of Spyre Therapeutics, Inc. on August 5, 2025[412][413]