ARCA biopharma(ABIO) - 2025 Q2 - Quarterly Report

PART I. Financial Information This part presents the company's unaudited financial statements, management's analysis, and disclosures on market risk and internal controls Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the periods ended June 30, 2025 Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $357,418 | $396,019 | | Total Current Assets | $332,012 | $376,869 | | Cash and cash equivalents | $65,396 | $61,575 | | Marketable securities, current | $263,010 | $314,073 | | Total Liabilities | $13,776 | $13,798 | | Total Stockholders' Equity | $343,642 | $382,221 | - Total assets decreased by $38.6 million from December 31, 2024, to June 30, 2025, primarily driven by a reduction in current marketable securities[9] Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $24,087 | $18,673 | $44,012 | $23,866 | | General and administrative | $4,342 | $2,820 | $9,503 | $4,490 | | Total operating expenses | $28,429 | $21,493 | $53,515 | $28,356 | | Loss from operations | $(28,429) | $(21,493) | $(53,515) | $(28,356) | | Interest income | $3,857 | — | $7,949 | — | | Interest expense | — | $(750) | — | $(964) | | Net loss | $(24,574) | $(22,243) | $(45,573) | $(29,320) | | Comprehensive loss | $(24,595) | $(22,243) | $(45,559) | $(29,320) | | Net loss per share (basic and diluted) | $(0.46) | $(6.96) | $(0.85) | $(9.17) | - Net loss increased by 10% to $24.6 million for the three months ended June 30, 2025, compared to $22.2 million in the prior year, primarily due to increased operating expenses partially offset by interest income[10][130] - Research and development expenses increased by 29% to $24.1 million for the three months ended June 30, 2025, driven by higher personnel-related and stock-based compensation expenses[10][131][132][134] Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) | Metric (in thousands) | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $382,221 | $364,725 | $343,642 | | Accumulated Deficit | $(83,724) | $(104,723) | $(129,297) | | Additional Paid-In Capital | $463,018 | $466,486 | $469,998 | - Total stockholders' equity decreased from $382.2 million at December 31, 2024, to $343.6 million at June 30, 2025, primarily due to net losses incurred during the period[11] Condensed Consolidated Statements of Cash Flows | Metric (in thousands) | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(44,014) | $(11,201) | | Net cash provided by investing activities | $47,726 | — | | Net cash provided by financing activities | $109 | $26,322 | | Net increase in cash and cash equivalents | $3,821 | $15,121 | | Cash and cash equivalents at end of period | $65,396 | $15,121 | - Net cash used in operating activities increased significantly to $44.0 million for the six months ended June 30, 2025, from $11.2 million in the prior year period, reflecting increased net loss and changes in operating assets and liabilities[13][157][158] - Investing activities provided $47.7 million in cash for the six months ended June 30, 2025, primarily from maturities of marketable securities offsetting purchases[13][159] Notes to Unaudited Condensed Consolidated Financial Statements 1. Nature of the Business and Basis of Presentation - Oruka Therapeutics, Inc is a clinical-stage biopharmaceutical company focused on developing biologics for psoriasis and other inflammatory and immunology indications, formed through a reverse recapitalization of ARCA biopharma, Inc on August 29, 2024[15][19] - The company completed a Pre-Closing Financing of approximately $275.0 million and a PIPE Financing of approximately $188.7 million in 2024 to fund operations[20][24] - The company has incurred significant operating losses and negative cash flows since inception, with net losses of $24.6 million and $45.6 million for the three and six months ended June 30, 2025, respectively; existing cash, cash equivalents, and marketable securities of $351.5 million are expected to fund operations for at least twelve months[26][27] 2. Summary of Significant Accounting Policies - The company's accounting policies remain consistent with its Annual Report, with no material changes during the six months ended June 30, 2025[28] - New accounting pronouncements include ASU 2023-09 (Income Taxes) effective for fiscal year 2025 and ASU 2024-03 (Expense Disaggregation Disclosures) effective for fiscal years beginning after December 15, 2026, both of which the company is currently evaluating for impact[30][31] 3. Fair Value Measurements | Asset Type (in thousands) | June 30, 2025 (Total Fair Value) | December 31, 2024 (Total Fair Value) | | :--- | :--- | :--- | | Cash equivalents | $63,288 | $52,175 | | Marketable securities, current | $263,010 | $314,073 | | Marketable securities, long-term | $23,053 | $18,069 | | Total | $349,351 | $384,317 | - The majority of cash equivalents and marketable securities are classified as Level 2, indicating fair value is determined using observable inputs other than quoted prices[32][33] 4. Cash Equivalents and Marketable Securities | Security Type (in thousands) | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :--- | :--- | :--- | | Money market funds | $20,931 | $6,350 | | U.S. treasury securities | $229,366 | $224,069 | | U.S. government agency securities | $18,628 | $17,454 | | Commercial papers | $40,796 | $56,988 | | Corporate debt securities | $39,630 | $75,504 | | Total | $349,351 | $384,317 | - The company holds available-for-sale securities, with total fair value decreasing from $384.3 million to $349.4 million; unrealized losses were $72 thousand as of June 30, 2025, primarily due to market conditions, but no credit losses were recorded[34][35] | Maturity (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Due in one year or less | $263,010 | $314,073 | | Due in 1-2 years | $23,053 | $18,069 | | Total | $286,063 | $332,142 | 5. Accrued Expenses and Other Current Liabilities | Category (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued research and development | $1,756 | $1,084 | | Accrued employee compensation and benefits | $1,684 | $2,041 | | Accrued professional and consulting | $138 | $221 | | Total | $3,578 | $3,346 | - Accrued research and development increased by $0.7 million, while accrued employee compensation and benefits decreased by $0.4 million[37] 6. Note Payable with Related Party - Pre-Merger Oruka issued a $25.0 million convertible note to Fairmount Healthcare Fund II, L.P. in March 2024, accruing 12.0% interest per annum; this note, including $1.5 million in accrued interest, converted into Pre-Merger Oruka Common Stock prior to the Merger in August 2024[38] - The Convertible Note was not outstanding as of December 31, 2024, and June 30, 2025, having been fully converted[40] 7. Convertible Preferred Stock and Stockholders' Equity - As of June 30, 2025, 6,202,207 pre-funded warrants were outstanding, exercisable for Company Common Stock at nominal prices, recorded as additional paid-in capital[41][42] - 137,138 shares of Company Series B Preferred Stock were outstanding as of June 30, 2025, convertible into 11,428,149 shares of Common Stock at a ratio of approximately 83.3332:1[45][47] - As of June 30, 2025, 37,450,745 shares of Company Common Stock were issued and outstanding, with 30,850,274 shares reserved for future issuance under various plans and warrants[49][50] 8. Stock-Based Compensation | Expense Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,368 | $468 | $6,371 | $538 | | General and administrative | $1,709 | $215 | $3,589 | $230 | | Total | $5,077 | $683 | $9,960 | $768 | - Total stock-based compensation expense increased significantly to $5.1 million for the three months ended June 30, 2025, from $0.7 million in the prior year, and to $10.0 million for the six months ended June 30, 2025, from $0.8 million in the prior year period[65] | Award Type (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Paruka Warrant Obligation | $1,674 | $362 | $3,089 | $430 | | Employee warrants | $1,238 | — | $2,789 | — | | Stock options | $2,130 | $321 | $4,019 | $338 | | Employee stock purchase plan | $35 | — | $63 | — | | Total | $5,077 | $683 | $9,960 | $768 | - Unrecognized compensation cost for unvested stock options, RSAs, and employee warrants totaled $28.5 million, less than $0.1 million, and $13.5 million, respectively, as of June 30, 2025, to be recognized over weighted average periods of 3.2, 2.6, and 2.8 years[65][66] 9. Segment Disclosures - The company operates as a single reportable segment, with its Chief Executive Officer reviewing total operating expenses and consolidated net loss to allocate resources[68] - All long-lived assets were located in the U.S. as of June 30, 2025, and December 31, 2024[69] 10. Option Agreements and License Agreements - The company entered into Option Agreements with Paragon Therapeutics, Inc and Paruka Holding LLC in March 2024 for antibody discovery, with exclusive options to license intellectual property for targets like IL-23 (ORKA-001) and IL-17A/F (ORKA-002)[71] - License Agreements for ORKA-001 and ORKA-002 were executed in December 2024 and February 2025, respectively, granting exclusive worldwide licenses for development and commercialization, with milestone payments up to $22.0 million per agreement and low single-digit royalties[73][75] - As of June 30, 2025, $4.0 million in milestone payments were incurred and expensed for each License Agreement; an additional $3.0 million milestone payment for ORKA-001 was accrued in Q3 2025 after dosing the first patient in a Phase 2a clinical trial[75][120] - Research and development expenses related to Paragon and Paruka services were $4.2 million and $5.7 million for the three and six months ended June 30, 2025, respectively, a decrease from $15.4 million and $20.4 million in the prior year periods[81] 11. Commitments and Contingencies - The company has operating lease agreements for headquarters in Menlo Park, California (commenced June 2024, 27 months remaining) and an office in Waltham, Massachusetts (commenced April 2025, 51 months remaining)[85][86] | Year ending December 31, | Amount (in thousands) | | :--- | :--- | | 2025 (remainder) | $527 | | 2026 | $822 | | 2027 | $768 | | 2028 | $397 | | 2029 | $304 | | Total undiscounted lease payments | $2,818 | - A non-exclusive, worldwide license agreement with WuXi Biologics Ireland Limited for cell line technology was entered in March 2024, with a non-refundable license fee of $150,000 and potential low single-digit royalty payments if manufacturing is done by a third party[88][89] 12. Net Loss per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss per share attributable to common stockholders, basic and diluted | $(0.46) | $(6.96) | $(0.85) | $(9.17) | | Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted | 42,095,951 | 3,197,975 | 41,888,906 | 3,197,975 | - The weighted-average shares outstanding for common stockholders increased significantly in 2025 due to the reverse recapitalization and subsequent financings[92][93][94] - Potential common stock shares from convertible preferred stock, warrants, and options were excluded from diluted EPS computation due to their anti-dilutive effect[95] 13. Related Party Transactions - Fairmount beneficially owns more than 5% of the company's capital stock and has a representative on the Board, also owning more than 5% of Paragon[96] | Related Party Liability (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Paragon reimbursable Option Agreements' fees | — | $1,482 | | Paragon milestone payments for License Agreement | — | $4,000 | | Paragon reimbursable other research expenses | $107 | $515 | | Paragon reimbursable patent expenses | $12 | $25 | | Total | $119 | $6,022 | - Related party accounts payable and other current liabilities significantly decreased from $6.0 million at December 31, 2024, to $0.1 million at June 30, 2025[97] 14. Income Taxes - The company is evaluating the impact of the recently signed One Big Beautiful Bill Act (July 4, 2025), which makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing[98] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operating results, liquidity, and capital resources Overview - Oruka Therapeutics is a clinical-stage biopharmaceutical company focused on developing novel monoclonal antibody therapeutics for psoriasis (PsO) and other inflammatory and immunology (I&I) indications[100] - The company's strategy involves applying antibody engineering and format innovations to validated modes of action to improve efficacy and dosing regimens[100] - Since inception in February 2024, the company has incurred significant losses and negative cash flows, with net losses of $24.6 million and $45.6 million for the three and six months ended June 30, 2025, respectively[103] - As of June 30, 2025, the company had $351.5 million in cash, cash equivalents, and marketable securities, expected to fund operating plans for at least twelve months[104] ORKA-001 - ORKA-001 is a high-affinity, extended half-life monoclonal antibody targeting IL-23p19 for the treatment of PsO, engineered with YTE half-life extension technology for potential once or twice per year subcutaneous injection[105][106] - A Phase 1 trial in healthy volunteers was initiated in Q4 2024, with interim data expected in September 2025; a Phase 2a trial in moderate-to-severe PsO (EVERLAST-A) commenced in Q3 2025, following FDA IND and Health Canada CTA clearance[107][108] ORKA-002 - ORKA-002 is a high-affinity, extended half-life monoclonal antibody targeting IL-17A and IL-17F for PsO, psoriatic arthritis (PsA), and other I&I conditions, designed for convenient dosing intervals[109] - A Phase 1 trial in healthy volunteers was initiated in Q2 2025, with interim data expected around year-end 2025[109] - The company plans to pursue a sequential combination regimen of ORKA-002 followed by ORKA-001 (ORKA-021) to combine rapid response with ideal maintenance[110] Additional Pipeline Program - ORKA-003 is a third mAb program targeting an undisclosed pathway, providing potential for indication expansion beyond PsO and combination opportunities with more advanced programs[111] Recent Developments - On August 29, 2024, the company completed the acquisition of Pre-Merger Oruka via a reverse recapitalization, changed its name to Oruka Therapeutics, Inc, and effected a 1-for-12 reverse stock split[113] - Pre-Closing Financing generated approximately $275.0 million in gross proceeds, and a PIPE Financing on September 13, 2024, generated approximately $188.7 million in net proceeds[114][116] - License Agreements with Paragon Therapeutics for ORKA-001 and ORKA-002 were entered into in December 2024 and February 2025, respectively, involving milestone payments and royalties[117][119] - As of June 30, 2025, $4.0 million in milestone payments were expensed for each program, with an additional $3.0 million accrued for ORKA-001 in Q3 2025[120] Components of Results of Operations - The company has not generated any revenue from product sales to date and does not expect to in the foreseeable future, relying on successful development and commercialization of product candidates[121] - Research and development expenses, expensed as incurred, include costs for third-party research, milestone payments, CROs/CMOs, personnel, and allocated facility costs, and are expected to increase substantially[122][123][124] - General and administrative expenses, including personnel, legal, professional fees, and allocated facility costs, are also expected to increase due to expanding operations and public company costs[126][127] - Other income (expense), net, includes interest income from cash/marketable securities and interest expense from a related party convertible note (now converted)[128] Results of Operations Comparison of Three Months Ended June 30, 2025 and 2024 (in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $24,087 | $18,673 | $5,414 | 29% | | General and administrative | $4,342 | $2,820 | $1,522 | 54% | | Total operating expenses | $28,429 | $21,493 | $6,936 | 32% | | Loss from operations | $(28,429) | $(21,493) | $(6,936) | 32% | | Interest income | $3,857 | — | $3,857 | 100% | | Interest expense | — | $(750) | $750 | (100)% | | Net loss | $(24,574) | $(22,243) | $(2,331) | 10% | - Research and development expenses increased by $5.4 million (29%) for the three months ended June 30, 2025, driven by higher personnel-related and stock-based compensation, partially offset by decreased external research expenses[132][133][134] - General and administrative expenses increased by $1.5 million (54%) for the three months ended June 30, 2025, due to increased personnel and stock-based compensation, partially offset by lower professional and consulting services[136][137][138][139] Comparison of Six Months Ended June 30, 2025, and Period from Inception to June 30, 2024 (in thousands) | Metric | June 30, 2025 | Inception to June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $44,012 | $23,866 | $20,146 | 84% | | General and administrative | $9,503 | $4,490 | $5,013 | 112% | | Total operating expenses | $53,515 | $28,356 | $25,159 | 89% | | Loss from operations | $(53,515) | $(28,356) | $(25,159) | 89% | | Interest income | $7,949 | — | $7,949 | 100% | | Interest expense | — | $(964) | $964 | (100)% | | Net loss | $(45,573) | $(29,320) | $(16,253) | 55% | - Research and development expenses increased by $20.1 million (84%) for the six months ended June 30, 2025, primarily due to increased CMO product development, CRO expenses, personnel, and stock-based compensation[145][146][147] - General and administrative expenses increased by $5.0 million (112%) for the six months ended June 30, 2025, driven by continued hiring of executives and administrative employees, and higher stock-based compensation[148][149][151] Liquidity and Capital Resources - As of June 30, 2025, the company had $351.5 million in cash, cash equivalents, and marketable securities[153] - Operations have been funded by convertible preferred stock, common stock, a convertible note, pre-funded warrants, and proceeds from the reverse recapitalization and PIPE Financing, totaling approximately $444.6 million in net proceeds from March to September 2024[154] - The company expects existing capital to fund operations for at least twelve months but will require additional financing for future research, development, and potential commercialization[155] Cash Flows Summary of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Period from Feb 6, 2024 (Inception) to June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(44,014) | $(11,201) | | Net cash provided by investing activities | $47,726 | — | | Net cash provided by financing activities | $109 | $26,322 | | Net increase in cash and cash equivalents | $3,821 | $15,121 | - Operating activities used $44.0 million in cash for the six months ended June 30, 2025, primarily due to a net loss of $45.6 million and a $5.3 million decrease in operating assets and liabilities, partially offset by $6.9 million in non-cash charges[157] - Investing activities provided $47.7 million in cash for the six months ended June 30, 2025, mainly from proceeds from marketable securities maturities ($200.1 million) exceeding purchases ($152.3 million)[159] - Financing activities provided $0.1 million in cash for the six months ended June 30, 2025, from common stock issuance under the employee stock purchase plan, a significant decrease from $26.3 million in the prior year period which included proceeds from preferred stock and convertible notes[161][162] Contractual Obligations and Commitments - The company enters into cancelable contracts with CROs, CMOs, and other vendors for research, clinical trials, and manufacturing, with no non-cancellable obligations as of June 30, 2025, beyond lease and license agreements[163] Critical Accounting Policies and Significant Judgments and Estimates - No changes were made to critical accounting policies and significant judgments and estimates during the three months ended June 30, 2025, as disclosed in the Annual Report on Form 10-K[165] Off-Balance Sheet Arrangements - As of June 30, 2025, the company did not have any off-balance sheet arrangements[166] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Oruka Therapeutics, Inc is not required to provide these disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[167] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and reports no material changes to internal control over financial reporting Management's Evaluation of Disclosure Controls and Procedures - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[169] Changes in Internal Control over Financial Reporting - 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 it[170] Inherent Limitations on Effectiveness of Controls - Management acknowledges that control systems provide reasonable, not absolute, assurance and are subject to inherent limitations, including faulty judgments, simple errors, circumvention by individuals, or management override[171] PART II. Other Information This part covers legal proceedings, risk factors, securities sales, and other required corporate disclosures Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently party to any material legal proceedings[172] Item 1A. Risk Factors This section outlines significant risks spanning financial condition, clinical development, regulations, and intellectual property RISK FACTOR SUMMARY - The company is subject to numerous risks that could harm its business, including those related to clinical development, regulatory approval, intellectual property, and reliance on third parties[174] - Key risks include limited operating history, historical and anticipated losses, no product revenue, potential inability to raise sufficient capital, and dilution from future equity sales[179] - Drug development is costly, time-consuming, and uncertain, with substantial dependence on the success of ORKA-001 and ORKA-002, facing competition and potential delays in regulatory approval[179] Risks Related to Our Financial Condition and Capital Requirements - The company is a clinical-stage biopharmaceutical company with a limited operating history, no products approved for sale, and has incurred significant losses, expecting to continue doing so for the foreseeable future[184][185][187] - Substantial additional capital will be required to fund future operations, and there is no assurance that it will be available on reasonable terms, or at all, potentially leading to curtailment or cessation of product development[185][186][189] - Raising additional capital through equity or convertible debt will dilute existing stockholders, and debt financing may impose restrictive covenants[191] Risks Related to Clinical Development, Regulatory Approval and Commercialization - The company faces intense competition from biopharmaceutical companies with greater resources and expertise, which could hinder market penetration for its product candidates[193] - Clinical testing is expensive, lengthy, and uncertain; preclinical and early clinical trial results may not predict later-stage success, and unforeseen events can delay the product development timeline[196][197] - The company is substantially dependent on the success of ORKA-001 and ORKA-002, particularly on observing an extended half-life in humans, which is not guaranteed and could significantly affect commercial potential[200] - Preliminary or interim clinical data are subject to change and audit, and negative or inconclusive results could require additional trials or halt development[212][214] - Clinical trials may reveal significant adverse events or undesirable side effects, potentially halting development, inhibiting regulatory approval, or limiting market acceptance[215][216] Risks Related to Government Regulations - Regulatory approval processes (FDA and foreign) are lengthy, unpredictable, and expensive; failure or delays in obtaining approval would materially impair revenue generation[225][226][227] - The company must meet stringent chemistry, manufacturing, and control (CMC) requirements for its drug products and delivery devices to gain regulatory approval[228] - Approved biologics may face competition sooner than anticipated due to biosimilar pathways, potentially shortening exclusivity periods[229][230] - Ongoing regulatory obligations post-approval, including safety monitoring and cGMP compliance, can be costly, and non-compliance may lead to penalties or product withdrawal[231][232] - Disruptions at government agencies (e.g., FDA, SEC) due to funding shortages or policy changes (e.g., Trump administration actions) could delay regulatory reviews and approvals[233][235][236] - Legislative or regulatory reforms, such as price controls or cost-containment measures (e.g., IRA), could adversely affect pharmaceutical pricing and profitability[238][239] - Business operations are subject to healthcare regulatory laws (fraud, abuse, data privacy), and non-compliance could result in significant penalties, fines, and reputational harm[240][242] Risks Related to Our Intellectual Property - The company's ability to obtain and protect patents and other proprietary rights is uncertain, and failure to do so could lead to loss of competitive advantage, especially in foreign jurisdictions[247][248] - Reliance on trade secrets carries risks of disclosure or misappropriation, which could erode competitive position, and enforcement of trade secret claims is challenging[249] - Failure to obtain or maintain necessary third-party intellectual property rights through acquisitions or in-licenses could force the company to abandon development programs[251][253] - The company may face patent infringement claims or need to file claims to protect its IP, leading to substantial costs, liability, and potential inability to commercialize products[255] - Changes in patent laws (e.g., U.S. Supreme Court rulings, European UPC) could diminish the value of patents and impair the ability to protect products[262][263][264] - Non-compliance with procedural and fee requirements for patent agencies could lead to abandonment or lapse of patent rights[266] Risks Related to Our Reliance on Third Parties - The company relies on licensing arrangements with Paragon for a substantial portion of its in-licenses (ORKA-001, ORKA-002); failure to maintain these or if they are unsuccessful could negatively impact the business[273][274] - Reliance on third parties (investigators, CROs, CMOs) to conduct preclinical studies and clinical trials means less direct control, and their failure to perform could delay or terminate development[277][278] - The company relies on CMOs for manufacturing product candidates and has a sole source for ORKA-001 and ORKA-002; disruptions or non-compliance could adversely affect clinical development and commercialization[279][280] - Reliance on foreign CROs and CMOs (e.g., WuXi Biologics) exposes the company to U.S. legislation (e.g., BIOSECURE Act), trade restrictions, and foreign regulatory requirements, potentially increasing costs or reducing supply[281][282] Risks Related to Employee Matters, Managing Growth, Other Risks Related to Our Business, and Risks Related to Owning Our Common Stock - Significant growth in employees and operations is expected, which may be difficult to manage effectively due to limited financial resources and management experience[283] - The company is highly dependent on key personnel, and the inability to attract and retain qualified individuals could impede research, development, and commercialization objectives[284][285] - Employees, contractors, and other third parties may engage in misconduct, leading to noncompliance with regulatory standards and potential governmental investigations or lawsuits[288] - Internal IT systems or those of third-party providers are vulnerable to security breaches, which could result in costs, revenue loss, liabilities, and disruption of operations[289][290] - The market price of common stock has been and is likely to remain highly volatile, influenced by clinical trial results, financial projections, regulatory actions, and macroeconomic conditions[306][308] - The company does not anticipate paying cash dividends in the foreseeable future, meaning capital appreciation will be the sole source of gain for stockholders[315] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds to report[318] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities[319] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[320] Item 5. Other Information No director or officer adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[321] Item 6. Exhibits This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q - The report includes various exhibits such as the Agreement and Plan of Merger and Reorganization, Amended and Restated Certificate of Incorporation and Bylaws, Certificates of Designation for Preferred Stock, Forms of Pre-Funded Warrants, Paruka Warrant, and certifications by executive officers[323] Signatures This section contains the required signatures of the registrant's authorized officers - The report is signed by Lawrence Klein, President and Chief Executive Officer (Principal Executive Officer), and Arjun Agarwal, Senior Vice President, Finance and Treasurer (Principal Financial Officer and Principal Accounting Officer), on August 11, 2025[329]