Artiva Biotherapeutics Inc

Previous wording

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Current wording

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Previous wording

The following discussion and analysis of our financial condition and results of operations and the unaudited interim condensed financial statements and related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the prospectus filed on July 22, 2024, pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act), with the Securities and Exchange Commission (the SEC) , or the Prospectus. This discussion and analysis and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections of this Quarterly Report on Form 10-Q entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factor,” under Part II, Item 1A.

Current wording

The following discussion and analysis of our financial condition and results of operations and the unaudited interim condensed financial statements and related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the prospectus filed on July 22, 2024, pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act), with the Securities and Exchange Commission (the SEC) , or the Prospectus. This discussion and analysis and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the sections of this Quarterly Report on Form 10-Q entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors,” under Part II, Item 1A.

Previous wording

We are a clinical-stage biotechnology company focused on developing natural killer (NK) cell-based therapies for patients suffering from devastating autoimmune diseases and cancers. Our product candidates are derived from donor cells (allogeneic) rather than a patient’s own cells (autologous) and arepre-manufactured, stored frozen and ready to ship to a patient’s treatment location, making them what we believe to be“off-the-shelf.” Our lead product candidate, AlloNK, is anon-genetically modified, cryopreserved NK cell therapy being evaluated in combination with B-cell targeted monoclonal antibodies (mAbs) in an ongoing Phase 1/1b trial in systemic lupus erythematosus (SLE) with or without lupus nephritis (LN) and a basket investigator-initiated trial (IIT) in multiple autoimmune indications. Seminal peer-reviewed clinical studies using autologous CD19 chimeric antigen receptor (CAR) T-cell therapy (auto-CAR-T) for the treatment of autoimmune diseases have demonstrated that deep B-cell depletion in the periphery and in the lymphoid tissue can lead to drug free disease remission. We have already demonstrated that AlloNK in combination with rituximab was able to drive deep B-cell depletion in the periphery and observed complete responses (CRs) in heavilypre-treated patients naïve toauto-CAR-T in our ongoing Phase 1/2 clinical trial in patients with relapsed or refractory B-cell non-Hodgkin lymphoma (B-NHL). We believe the preliminary results from our Phase 1/2 clinical trial evaluating AlloNK in combination with rituximab in patients with B-NHL provide a readthrough to autoimmune disease because efficacy in both diseases appears to be accomplished with a shared mechanism of action involving B-cell depletion in the periphery and in the lymphoid tissues, followed by an immunological reset and B-cell reconstitution. We expect to report initial data on autoimmune indications from at least one of our Phase 1/1b trial or the basket IIT in the first half of 2025.

Current wording

We are a clinical-stage biotechnology company focused on developing natural killer (NK) cell-based therapies for patients suffering from devastating autoimmune diseases and cancers. Our product candidates are derived from donor cells (allogeneic) rather than a patient’s own cells (autologous) and are pre-manufactured, stored frozen and ready to ship to a patient’s treatment location, making them what we believe to be “off-the-shelf.” Our lead product candidate, AlloNK, is a non-genetically modified, cryopreserved NK cell therapy being evaluated in combination with B-cell targeted monoclonal antibodies (mAbs) in an ongoing Phase 1/1b trial in systemic lupus erythematosus (SLE) with or without lupus nephritis (LN) and a basket investigator-initiated trial (IIT) in multiple autoimmune indications. Seminal peer-reviewed clinical studies using autologous CD19 chimeric antigen receptor (CAR) T-cell therapy (auto-CAR-T) for the treatment of autoimmune diseases have demonstrated that deep B-cell depletion in the periphery and in the lymphoid tissue can lead to drug free disease remission. We have already demonstrated that AlloNK in combination with rituximab was able to drive deep B-cell depletion in the periphery and observed complete responses (CRs) in heavily pre-treated patients naïve to auto-CAR-T in our ongoing Phase 1/2 clinical trial in patients with relapsed or refractory B-cell non-Hodgkin lymphoma (B-NHL). We believe the preliminary results from our Phase 1/2 clinical trial evaluating AlloNK in combination with rituximab in patients with B-NHL provide a readthrough to autoimmune disease because efficacy in both diseases appears to be accomplished with a shared mechanism of action involving B-cell depletion in the periphery and in the lymphoid tissues, followed by an immunological reset and B-cell reconstitution. We expect to report initial data on autoimmune indications from at least one of our Phase 1/1b trial or the basket IIT in the first half of 2025.

Previous wording

We commenced our operations in 2019 and have devoted substantially all of our resources to date to organizing and staffing our company, business planning, raising capital, establishing and engaging in collaborations, conducting research and development, advancing and scaling up product candidate manufacturing, establishing cold chain delivery logistics, establishing and protecting our intellectual property portfolio and providing general and administrative support for these activities. Our operations to date have been funded primarily through the issuance and sale of convertible promissory notes, convertible preferred stock, and simple agreements for future equity (SAFEs). From our inception through June 30, 2024, we have raised aggregate gross proceeds of $8.0 million from the issuance and sale of convertible promissory notes, $70.0 million from our Series A convertible preferred stock financings, $120.0 million from our Series B convertible preferred stock financing and $24.4 million from our SAFEs. Additionally, on July 22, 2024, we closed on our initial public offering (IPO), in which we issued and sold 13,920,000 shares of common stock at a public offering price of $12.00 per share. We also sold an additional 1,000,000 shares of common stock upon the partial exercise of the underwriters’ purchase option. The aggregate net proceeds of the IPO, inclusive of the partial exercise of the underwriters’ purchase option and after deducting underwriting discounts, commissions, and offering expenses, was $161.9 million.

Current wording

We commenced our operations in 2019 and have devoted substantially all of our resources to date to organizing and staffing our company, business planning, raising capital, establishing and engaging in collaborations, conducting research and development, advancing and scaling up product candidate manufacturing, establishing cold chain delivery logistics, establishing and protecting our intellectual property portfolio and providing general and administrative support for these activities. From our inception through September 30, 2024, we have raised aggregate gross proceeds of $8.0 million from the issuance and sale of convertible promissory notes, $70.0 million from our Series A convertible preferred stock financings, $120.0 million from our Series B convertible preferred stock financing and $24.4 million from our SAFEs. Additionally, in July 2024, we closed on our initial public offering (IPO), in which we issued and sold 13,920,000 shares of common stock at a public offering price of $12.00 per share. We also sold an additional 1,000,000 shares of common stock upon the partial exercise of the underwriters’ purchase option. The aggregate net proceeds of the IPO, inclusive of the partial exercise of the underwriters’ purchase option and after deducting underwriting discounts, commissions, and offering expenses, was $162.3 million.

Previous wording

We have incurred a net loss of $31.8 million and $28.0 million during the six months ended June 30, 2024 and 2023, respectively, and $28.7 million and $58.8 million during the years ended December 31, 2023 and 2022, respectively. As of June 30, 2024, we had an accumulated deficit of $213.1 million, and cash, cash equivalents and short term investments of $46.6 million. We expect to continue to incur significant losses for the foreseeable future as we advance our current and future product candidates through preclinical and clinical development, continue to build our operations and transition to operating as a public company. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity or debt financings or other capital sources, which may include our existing and any future strategic collaborations and other strategic arrangements with third parties. However, we may not be able to raise additional funds or enter into such other arrangements when needed or on favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional capital or enter into such arrangements when needed, we could be forced to delay, limit, reduce or terminate our research and development programs or future commercialization efforts, or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Current wording

We have incurred a net loss of $49.3 million and $16.7 million during the nine months ended September 30, 2024 and 2023, respectively, and $28.7 million and $58.8 million during the years ended December 31, 2023 and 2022, respectively. As of September 30, 2024, we had an accumulated deficit of $230.6 million, cash, cash equivalents and investments of $199.6 million. We expect to continue to incur significant losses for the foreseeable future as we advance our current and future product candidates through preclinical and clinical development, continue to build our operations and transition to operating as a public company. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity or debt financings or other capital sources, which may include our existing and any future strategic collaborations and other strategic arrangements with third parties. However, we may not be able to raise additional funds or enter into such other arrangements when needed or on favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional capital or enter into such arrangements when needed, we could be forced to delay, limit, reduce or terminate our research and development programs or future commercialization efforts, or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Previous wording

In January 2021, we entered into the Merck Collaboration Agreement which was subsequently terminated in October 2023, pursuant to which we received an upfront, non-refundable andnon-creditable payment of $30.0 million for two target programs, with an additional $15.0 million payable by Merck if we and Merck agreed upon a third collaboration target.

Current wording

In January 2021, we entered into the Merck Collaboration Agreement which was subsequently terminated in October 2023, pursuant to which we received an upfront, non-refundable and non-creditable payment of $30.0 million for two target programs, with an additional $15.0 million payable by Merck if we and Merck agreed upon a third collaboration target.

Previous wording

We concluded that Merck represented a customer and in accordance with Accounting Standards Codification (ASC) 606, we determined that the initial transaction price under the Merck Collaboration Agreement equals $58.0 million, consisting of the upfront, non-refundable andnon-creditable payment of $30.0 million and the aggregate estimated research and development fees of $28.0 million. The initial transaction price was allocated evenly to each of the two product targets. In addition, we identified our performance obligations under the Merck Collaboration Agreement, including our grant to Merck of a license to certain of our intellectual property subject to certain conditions, our conduct of research services, and our participation in a joint research committee. We determined that all performance obligations should be accounted for as one combined performance obligation for each target program, and that since no individual performance obligation is distinct, and that the combined performance obligation is transferred over the expected term of the conduct of the research services, which is estimated to be four years which represents the combined terms for the research programs. Upon termination of the Merck Collaboration Agreement, we recognized the remaining portion of the upfront, non-refundable $30.0 million in revenue.

Current wording

We concluded that Merck represented a customer and in accordance with Accounting Standards Codification (ASC) 606, we determined that the initial transaction price under the Merck Collaboration Agreement equals $58.0 million, consisting of the upfront, non-refundable and non-creditable payment of $30.0 million and the aggregate estimated research and development fees of $28.0 million. The initial transaction price was allocated evenly to each of the two product targets. In addition, we identified our performance obligations under the Merck Collaboration Agreement, including our grant to Merck of a license to certain of our intellectual property subject to certain conditions, our conduct of research services, and our participation in a joint research committee. We determined that all performance obligations should be accounted for as one combined performance obligation for each target program, and that since no individual performance obligation is distinct, and that the combined performance obligation is transferred over the expected term of the conduct of the research services, which is estimated to be four years which represents the combined terms for the research programs. Upon termination of the Merck Collaboration Agreement, we recognized the remaining portion of the upfront, non-refundable $30.0 million in revenue.

Previous wording

Collaboration revenues recognized under the Merck Collaboration Agreement were $0 and $3.5 million for the three months ended June 30, 2024 and 2023, respectively, and $0 and $4.5 million during the six months ended June 30, 2024 and 2023, respectively.

Current wording

Collaboration revenues recognized under the Merck Collaboration Agreement were zero and $26.7 million for the three months ended September 30, 2024 and 2023, respectively, and zero and $31.1 million during the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

License and development support-related revenues related to GC Cell’s development support activities under the AB-201 Agreement were $0 during the three months ended June 30, 2024 and 2023, and $0 and $0.3 million during the six months ended June 30, 2024 and 2023, respectively.

Current wording

License and development support-related revenues related to GC Cell’s development support activities under the AB-201 Agreement were zero during the three months ended September 30, 2024 and 2023, and $0.3 million and zero during the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on aprogram-by-program basis because these costs are associated with multiple programs and, as such, are not separately classified.

Current wording

Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on a program-by-program basis because these costs are associated with multiple programs and, as such, are not separately classified.

Previous wording

General and administrative expenses consist of personnel-related expenses, including salaries and related benefits, travel and stock-based compensation expenses for personnel engaged in executive, finance and other administrative functions. Other significant costs include facilities-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs. We expect that our general and administrative expenses will increase substantially for the foreseeable future to support our continued research and development activities, pre-commercial preparation activities for our product candidates, and, if any product candidate receives marketing approval, commercialization activities. Following the completion of this offering, we also anticipate increased expenses related to audit, legal, regulatory andtax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.

Current wording

General and administrative expenses consist of personnel-related expenses, including salaries and related benefits, travel and stock-based compensation expenses for personnel engaged in executive, finance and other administrative functions. Other significant costs include facilities-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs. We expect that our general and administrative expenses will increase substantially for the foreseeable future to support our continued research and development activities, pre-commercial preparation activities for our product candidates, and, if any product candidate receives marketing approval, commercialization activities. Following the completion of this offering, we also anticipate increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.

Previous wording

Interest income consists of interest on our money market fund and short-term investments.

Current wording

Interest income consists of interest on our money market funds and short-term and long-term investments.

Previous wording

Collaboration Revenue. Collaboration revenues were $3.5 million for the three months ended June 30, 2023, related to the Merck Collaboration Agreement, which we executed in January 2021 and was terminated in October 2023. The $3.5 million consisted of $1.6 million of recognition of revenue from the deferred upfront payment and $1.9 million in reimbursement revenues.

Current wording

Collaboration Revenue. Collaboration revenues were $26.7 million for the three months ended September 30, 2023, related to the Merck Collaboration Agreement. The $26.7 million consisted of $23.8 million of recognition of revenue from the deferred up-front payment and $2.9 million in reimbursement revenues.

Previous wording

Research and Development Expenses. We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on aprogram-by-program basis. The following table summarizes our research and development expenses for the three months ended June 30, 2024 and 2023 (in thousands):

Current wording

Research and Development Expenses. We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on a program-by-program basis. The following table summarizes our research and development expenses for the three months ended September 30, 2024 and 2023 (in thousands):

Previous wording

Research and development expenses were $12.3 million for the three months ended June 30, 2024, compared to $11.3 million for the three months ended June 30, 2023. The increase of $1.1 million was primarily due to a $0.3 million increase in external research and development expense, and a $0.8 million increase in internal research and development expense. The $0.3 million increase in external research and development expense is primarily due to increases of $1.2 million of AB-101 costs related to product candidate development and clinical trials as we progressed towards the end of our clinical trial for the B-NHL program and commenced our clinical trial on the AlloNK for LN program, offset by a decrease of $0.9 million in Merck Collaboration Agreement costs due to the termination of the agreement in October 2023, and by a decrease in AB-201 and other programs costs as we shifted our corporate focus to AB-101 development. The $0.8 million increase in internal research and development expense is primarily due to a $0.7 million increase in other operating costs and a $0.1 million increase in personnel-related expenses supporting our additional headcount as we expanded the number of research and development employees to support our programs, inclusive of a decrease of $0.3 million ofnon-cash stock-based compensation expense.

Current wording

Research and development expenses were $13.5 million for the three months ended September 30, 2024, compared to $13.1 million for the three months ended September 30, 2023. The increase of $0.5 million was primarily due to a $0.4 million increase in internal research and development expense, and a $0.1 million increase in external research and development expense. The $0.4 million increase in internal research and development expense is primarily due to a $0.5 million increase in personnel-related expenses supporting our additional headcount as we expanded the number of research and development employees to support our programs, inclusive of an increase of $0.1 million of non-cash stock-based compensation expense, offset by a $0.1 million decrease in other operating costs. The $0.1 million increase in external research and development expense is primarily due to increases of $1.5 million of AB-101 costs related to product candidate development and clinical trials as we progressed towards the end of our clinical trial for the B-NHL program and commenced our clinical trial on the AlloNK for SLE/LN program, offset by decreases of $0.2 million in other program costs and $1.2 million in Merck Collaboration Agreement costs due to the termination of the agreement.

Previous wording

General and Administrative Expenses. General and administrative expenses were $3.9 million for the three months ended June 30, 2024, compared to $4.1 million for the three months ended June 30, 2023. The decrease of $0.2 million for the three months ended June 30, 2024, was primarily comprised of a $0.5 million increase in personnel-related costs, offset by a decrease of $0.7 million ofnon-cash stock-based compensation.

Current wording

General and Administrative Expenses. General and administrative expenses were $4.8 million for the three months ended September 30, 2024, compared to $2.8 million for the three months ended September 30, 2023. The increase of $2.0 million for the three months ended September 30, 2024, was primarily comprised of a $1.2 million increase in personnel-related costs including a $0.8 increase in personnel operating costs and a $0.4 million increase in non-cash stock-based compensation, in addition to a $0.7 million increase in operational costs and a $0.1 million increase in legal costs.

Previous wording

Other Income (Expense), Net. Other expense was $1.1 million for the six months ended June 30, 2024, compared to other income of $1.5 million for the six months ended June 30, 2023. The decrease of $2.6 million was primarily due to the $2.6 million change in fair value of SAFEs, which we entered into in late 2023, and a $0.2 million decrease in dividend and interest income due to a lower investment balance during 2024, offset by a $0.2 million increase in other expenses.

Current wording

Other Income (Expense), Net. Other income was $0.9 million for the three months ended September 30, 2024, compared to other income of $0.5 million for the three months ended September 30, 2023. The increase of $0.4 million was primarily due to a $1.4 million increase in dividend and interest income due to more favorable rates of return during 2024 and higher investment balances, partially offset by a $1.0 million change in fair value of SAFEs, which we entered into in late 2023.

Previous wording

Unrealized Gain (Loss) on Short-Term Investments. Unrealized loss on short-term investments was $0.1 million for the three months ended June 30, 2024, compared to an unrealized gain of $0.1 million for the three months ended June 30, 2023. The decrease of $0.2 million was primarily due to the change in fair value ofavailable-for-sale securities purchased subsequent to June 30, 2023.

Current wording

Unrealized Gain (Loss) on Investments. Unrealized gain on investments was $0.2 million for the three months ended September 30, 2024, compared to an unrealized gain of $0.1 million for the three months ended September 30, 2023. The increase of $0.1 million was primarily due to the change in fair value of available-for-sale securities purchased subsequent to September 30, 2023.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023 (in thousands)

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands)

Previous wording

Collaboration Revenue. Collaboration revenues were $4.5 million for the six months ended June 30, 2023, related to the Merck Collaboration Agreement, which we executed in January 2021 and was terminated in October 2023. The $4.5 million consisted of $1.5 million of recognition of revenue from the deferred upfront payment and $3.0 million in reimbursement revenues.

Current wording

Collaboration Revenue. Collaboration revenues were $31.1 million for the nine months ended September 30, 2023, related to the Merck Collaboration Agreement. The $31.1 million consisted of $25.2 million of recognition of revenue from the deferred up-front payment and $5.9 million in reimbursement revenues.

Previous wording

License and Development Support Revenue. License and development support revenues were $0.3 million for the six months ended June 30, 2024, compared to $0 million for the six months ended June 30, 2023. Revenues were related to development support activities under the AB-201 Agreement.

Current wording

License and Development Support Revenue. License and development support revenues were $0.3 million for the nine months ended September 30, 2024, compared to zero for the nine months ended September 30, 2023. Revenues were related to development support activities under the AB-201 Agreement.

Previous wording

Research and Development Expenses. We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on aprogram-by-program basis. The following table summarizes our research and development expenses for the six months ended June 30, 2024 and 2023 (in thousands):

Current wording

Research and Development Expenses. We track outsourced development, outsourced personnel costs and other external research and development costs of specific programs. We do not track our internal research and development costs on a program-by-program basis. The following table summarizes our research and development expenses for the nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

Research and development expenses were $23.5 million for the six months ended June 30, 2024, compared to $26.0 million for the six months ended June 30, 2023. The decrease of $2.5 million was primarily due to a $1.1 million decrease in external research and development expense, and a $1.4 million decrease in internal research and development expense. The $1.1 million decrease in external research and development expense is primarily due to a decrease of $1.3 million in our AB-201 program and other programs as we narrowed our research focus to our AB-101 programs, and a $0.9 million decrease in Merck costs due to the termination of the agreement in October 2023, offset by increases of $1.1 million of AB-101 costs related to product candidate development and clinical trials as we progressed towards the end of our clinical trial for the B-NHL program and commenced our clinical trial on the AlloNK for LN program. The $1.4 million decrease in internal research and development expense is primarily due a $1.2 million decrease in personnel-related expenses, inclusive of a decrease of $0.5 million ofnon-cash stock-based compensation expense, as a result of the reduction in work force in March 2023, in addition to a $0.2 million decrease in other operating costs.

Current wording

Research and development expenses were $37.0 million for the nine months ended September 30, 2024, compared to $39.1 million for the nine months ended September 30, 2023. The decrease of $2.1 million was primarily due to a $1.1 million decrease in external research and development expense, and a $1.0 million decrease in internal research and development expense. The $1.1 million decrease in external research and development expense is primarily due to a decrease of $2.3 million in Merck costs due to the termination of the agreement, in addition to a $1.4 million decrease in other programs as we narrowed our research focus to our AB-101 programs, offset by a $2.6 million increase in AB-101 costs related to product candidate development and clinical trials as we progressed towards the end of our clinical trial for the B-NHL program and commenced our clinical trial on the AlloNK for SLE/LN program. The $1.0 million decrease in internal research and development expense is primarily due a $0.7 million decrease in personnel-related expenses, inclusive of a decrease of $0.4 million of non-cash stock-based compensation expense, as a result of the reduction in work force in March 2023, in addition to a $0.3 million decrease in other operating costs.

Previous wording

General and Administrative Expenses. General and administrative expenses were $7.5 million for the six months ended June 30, 2024, compared to $8.0 million for the six months ended June 30, 2023. The decrease of $0.5 million for the six months ended June 30, 2024, was primarily comprised of a $1.1 million decrease in personnel-related expenses including a $0.9 million decrease innon-cash stock-based compensation and a $0.2 million decrease in personnel operating costs due to decreased general and administrative headcount and recruiting costs as a result of the reduction in work force in March 2023. The $1.1 million decrease in personnel-related costs was offset by $0.4 million increase in operating costs and $0.2 million increase in legal expenses.

Current wording

General and Administrative Expenses. General and administrative expenses were $12.3 million for the nine months ended September 30, 2024, compared to $10.7 million for the nine months ended September 30, 2023. The increase of $1.5 million for the nine months ended September 30, 2024, was primarily comprised of a $1.1 million increase in operational costs and a $0.2 million increase in legal costs, in addition to a $0.2 million increase in personnel-related costs including a $0.6 increase in personnel operating costs offset by a $0.4 million decrease in non-cash stock-based compensation.

Previous wording

Other Income (Expense), Net. Other expense was $1.7 million for the three months ended June 30, 2024, compared to other income of $0.5 million for the three months ended June 30, 2023. The decrease of $2.2 million was primarily due to the $2.4 million change in fair value of SAFEs, which we entered into in late 2023, offset by a $0.2 million increase in dividend and interest income due to more favorable rates of return during 2024.

Current wording

Other Income (Expense), Net. Other expense was $0.3 million for the nine months ended September 30, 2024, compared to other income of $2.0 million for the nine months ended September 30, 2023. The decrease of $2.2 million was primarily due to the $3.6 million change in fair value of SAFEs, which we entered into in late 2023, offset by a $1.2 million increase in dividend and interest income due to more favorable rates of return during 2024 and by a $0.2 million increase in other income.

Previous wording

Unrealized Gain (Loss) on Short-Term Investments. Unrealized loss on short-term investments was $0.2 million for the six months ended June 30, 2024, compared to an unrealized gain of $0.1 million for the six months ended June 30, 2023. The decrease of $0.3 million in the year ended December 31, 2023 was primarily due to the change in fair value ofavailable-for-sale securities purchased subsequent to June 30, 2023.

Current wording

Unrealized Gain (Loss) on Investments. Unrealized gain on investments was $30 thousand for the nine months ended September 30, 2024, compared to an unrealized gain of $0.3 million for the nine months ended September 30, 2023. The decrease of $0.3 million in the year ended December 31, 2023 was primarily due to the change in fair value of available-for-sale securities purchased subsequent to September 30, 2023.

Previous wording

We have incurred net losses and negative cash flows from operations since our inception and expect to continue to incur significant and increasing operating losses for the foreseeable future. We have never generated any revenue from product sales and do not expect to generate any revenues from product sales unless and until we successfully complete development of and obtain regulatory approval for our product candidates, which will not be for several years, if ever. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. From our inception through June 30, 2024, we have raised aggregate gross proceeds of $222.4 million to fund our operations, comprised primarily from our issuance of convertible promissory notes, SAFEs and private placements of our convertible preferred stock. In February 2021, we received a $30.0 million upfront payment from Merck for our two target programs. In addition, as of June 30, 2024, we have received $9.4 million related to reimbursable research services from Merck. Additionally, on July 22, 2024, we closed on our IPO, in which we received aggregate net proceeds of $161.9 million. As of June 30, 2024, we had cash, cash equivalents and short-term investments of $46.6 million and an accumulated deficit of $213.1 million. Based on our current operating plans, we expect the net proceeds from the IPO (including the partial exercise of the underwriters’ option to purchase additional shares in July 2024), together with our existing cash and cash equivalents, will be sufficient to fund our planned operating expenses and capital expenditure requirements at least through the end of 2026. Our total future capital requirements will depend on many factors and is subject to the risks and uncertainties set forth in the section titled “Risk Factors.”

Current wording

We have incurred net losses and negative cash flows from operations since our inception and expect to continue to incur significant and increasing operating losses for the foreseeable future. We have never generated any revenue from product sales and do not expect to generate any revenues from product sales unless and until we successfully complete development of and obtain regulatory approval for our product candidates, which will not be for several years, if ever. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. From our inception through September 30, 2024, we have raised aggregate gross proceeds of $401.4 million to fund our operations, comprised primarily from proceeds received from the IPO, including proceeds from the underwriters partial exercise of their purchase option, our issuance of convertible promissory notes, SAFEs and private placements of our convertible preferred stock. In February 2021, we received a $30.0 million up-front payment from Merck for our two target programs. In addition, as of September 30, 2024, we have received $9.9 million related to reimbursable research services from Merck. As of September 30, 2024, we had cash, cash equivalents and investments of $199.6 million, and an accumulated deficit of $230.6 million. Based on our current operating plans, we expect our existing cash, cash equivalents and investments will be sufficient to fund our planned operating expenses and capital expenditure requirements at least through the end of 2026. Our total future capital requirements will depend on many factors and is subject to the risks and uncertainties set forth in the section titled “Risk Factors.”

Previous wording

The following table sets forth a summary of the net cash flow activity for the six months ended June 30, 2023, and 2024 (in thousands):

Current wording

The following table sets forth a summary of the net cash flow activity for the nine months ended September 30, 2023, and 2024 (in thousands):

Previous wording

Net cash used in operating activities for the six months ended June 30, 2023, was $26.0 million, consisting primarily of our net loss incurred during the period of $28.0 million and $3.4 million of a net decrease in operating assets and liabilities, partially offset by $5.4 million of netnon-cash charges. Non-cash charges consisted primarily of $4.3 million in stock-based compensation expense and $1.1 million in depreciation and amortization expense. The net change in operating assets and liabilities primarily related to a $1.5 million decrease in deferred revenue, $0.7 million decrease in accrued expenses, a $0.1 million decrease in accounts payable and a $0.2 million decrease in other net balance sheet liabilities, offset by a $2.4 million increase in receivables and a $1.1 million increase in prepaid expense and other current assets.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2024, was $40.4 million, consisting primarily of our net loss incurred during the period of $49.3 million, offset by $8.9 million of non-cash charges. Non-cash charges consisted of $4.8 million in stock-based compensation expense, $3.6 million in change in fair value of SAFEs, and $1.8 million in depreciation and amortization expense, offset by $1.3 million of accretion of discounts on investments. Changes in operating assets and liabilities included a $1.1 million decrease in receivables, a $0.6 million increase in accounts payable, a $0.3 million increase in accrued expenses, and a $0.1 million change in other net balance sheet assets and liabilities, partially offset by a $2.1 million increase in prepaid expense and other current assets.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2024, was $28.8 million, consisting primarily of our net loss incurred during the period of $31.8 million and $3.1 million of a net decrease in operating assets and liabilities, partially offset by $6.1 million ofnon-cash charges. Non-cash charges consisted of $2.9 million in stock-based compensation expense, $1.2 million in depreciation and amortization expense and a $2.6 million in change in fair value of SAFEs, offset by $0.6 million of accretion of discounts on short-term investments. The net change in operating assets and liabilities primarily related to a $2.8 million decrease in accrued expenses, a $0.3 million decrease in receivables, a $0.1 million decrease in other net balance sheet liabilities and a $0.1 million decrease in accounts payable, offset by a $0.6 million increase in prepaid expense and other current assets.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2023, was $36.8 million, consisting primarily of our net loss incurred during the period of $16.7 million and $27.2 million of a net decrease in operating assets and liabilities, partially offset by $7.2 million of net non-cash charges. Non-cash charges consisted primarily of $5.7 million in stock-based compensation expense and $1.7 million in depreciation and amortization expense, offset by $0.2 million of accretion of discounts on short-term investments. The net change in operating assets and liabilities primarily related to a $25.2 million decrease in deferred revenue, a $3.0 million increase in receivables, a $1.1 million decrease in accrued expenses, partially offset by a $1.5 million increase in accounts payable, a $0.3 million decrease in prepaid expenses and other current assets, and a $0.3 million change in other net balance sheet assets and liabilities.

Previous wording

Net cash provided by investing activities for the six months ended June 30, 2024, was $11.1 million related to $30.0 million in maturities of short-term investments, partially offset by $18.4 million of purchases of short-term investments and $0.5 million of purchases of property and equipment. Net cash used in investing activities for the six months ended June 30, 2023, was $22.8 million related to $22.4 million of purchases of short-term investments and $2.4 million of purchases of property and equipment, partially offset by $2.0 million in maturities of short-term investments.

Current wording

Net cash used in investing activities for the nine months ended September 30, 2024, was $119.5 million related to $161.3 million of purchases of investments and $0.6 million of purchases of property and equipment, partially offset by $42.4 million in maturities of short-term investments.

Previous wording

We lease certain office space in San Diego, California, under anon-cancelable operating lease, with a term through December 2025 (the Executive Drive Lease). The Executive Drive Lease commenced on December 23, 2019, with asix-year initial term and includes aggregate monthly payments to the lessor of approximately $2.8 million. The Executive Drive Lease also provides for rent abatements and scheduled increases in base rent. In connection with the lease, we made aone-time cash security deposit in the amount of $0.4 million, of which $0.2 million was refunded in October 2021 and the remaining $0.2 million is refundable at the end of the lease term and is included in long-term assets in the balance sheets. The Executive Drive Lease includes a renewal option, which includes an option to renew for five additional years. We will not exercise the option and, as such, is not reflected as part of the right of use asset and associated lease liabilities.

Current wording

We lease certain office space in San Diego, California, under a non-cancelable operating lease, with a term through December 2025 (the Executive Drive Lease). The Executive Drive Lease commenced on December 23, 2019, with a six-year initial term and includes aggregate monthly payments to the lessor of approximately $2.8 million. The Executive Drive Lease also provides for rent abatements and scheduled increases in base rent. In connection with the lease, we made a one-time cash security deposit in the amount of $0.4 million, of which $0.2 million was refunded in October 2021 and the remaining $0.2 million is refundable at the end of the lease term and is included in long-term assets in the balance sheets. The Executive Drive Lease includes a renewal option, which includes an option to renew for five additional years. We will not exercise the option and, as such, is not reflected as part of the right of use asset and associated lease liabilities.

Previous wording

In June 2021, we entered into a lease agreement for corporate office and laboratory space in San Diego, California (the Morehouse Lease), which represented a portion of a new facility that was under construction. The Morehouse Lease includes multiple, successive commencement dates. The office and laboratory space commenced in the second quarter of 2022 and the third quarter of 2022 for the cGMP manufacturing center. The Morehouse Lease has an initial term of 88 months and includes aggregate monthly payments to the lessor of approximately $23.2 million with a rent escalation clause, and a tenant improvement allowance of $12.3 million. We are also required to maintain a cash security deposit in the form of an unconditional and irrevocable letter of credit of $0.2 million which must remain in place until the termination of the lease and is considered anon-current asset as of June 30, 2024. These obligations are further described in Note 12 to our audited financial statements and Note 11 to our unaudited condensed financial statements appearing elsewhere in this this Quarterly Report.

Current wording

In June 2021, we entered into a lease agreement for corporate office and laboratory space in San Diego, California (the Morehouse Lease), which represented a portion of a new facility that was under construction. The Morehouse Lease includes multiple, successive commencement dates. The office and laboratory space commenced in the second quarter of 2022 and the third quarter of 2022 for the cGMP manufacturing center. The Morehouse Lease has an initial term of 88 months and includes aggregate monthly payments to the lessor of approximately $23.2 million with a rent escalation clause, and a tenant improvement allowance of $12.3 million. We are also required to maintain a cash security deposit in the form of an unconditional and irrevocable letter of credit of $0.3 million which must remain in place until the termination of the lease and is considered a non-current asset as of September 30, 2024. These obligations are further described in Note 12 to our audited financial statements and Note 11 to our unaudited condensed financial statements appearing elsewhere in this this Quarterly Report.

Previous wording

On July 22, 2022, we entered into a sublease (the Sublease Agreement) with Origis Operating Services, LLC, (the Sublessee), whereby we agreed to sublease to Sublessee all of the 13,405 rentable square feet of office space currently leased by us under the Executive Drive Lease. The sublease commenced on August 1, 2022, and has a term through December 31, 2025. The aggregate base rent is approximately $2.6 million commencing August 1, 2022. We record sublease income as a reduction of general and administrative expense. Upon execution of the Sublease Agreement, we received a cash security deposit of $0.1 million from the Sublessee which is recorded as othernon-current liabilities in the balance sheets.

Current wording

On July 22, 2022, we entered into a sublease (the Sublease Agreement) with Origis Operating Services, LLC, (the Sublessee), whereby we agreed to sublease to Sublessee all of the 13,405 rentable square feet of office space currently leased by us under the Executive Drive Lease. The sublease commenced on August 1, 2022, and has a term through December 31, 2025. The aggregate base rent is approximately $2.6 million commencing August 1, 2022. We record sublease income as a reduction of general and administrative expense. Upon execution of the Sublease Agreement, we received a cash security deposit of $0.1 million from the Sublessee which is recorded as other non-current liabilities in the balance sheets.

Previous wording

As of June 30, 2024, we have future remaining operating lease payments of $18.9 million relating to leases we have recognized in the condensed balance sheets, of which $2.0 million is payable before December 31, 2024.

Current wording

As of September 30, 2024, we have future remaining operating lease payments of $17.9 million relating to leases we have recognized in the condensed balance sheets, of which $1.0 million is payable before December 31, 2024.

Previous wording

We did not have, during the periods presented, and we do not currently have anyoff-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Current wording

We did not have, during the periods presented, and we do not currently have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Previous wording

As an emerging growth company under the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. However, we may elect to early adopt any new or revised accounting standards whenever such early adoption is permitted fornon-public companies. We may take advantage of these exemptions up until the time that we are no longer an emerging growth company.

Current wording

As an emerging growth company under the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. However, we may elect to early adopt any new or revised accounting standards whenever such early adoption is permitted for non-public companies. We may take advantage of these exemptions up until the time that we are no longer an emerging growth company.

Previous wording

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of this offering, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held bynon-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion innon-convertible debt securities during the prior three-year period.

Current wording

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of this offering, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Previous wording

We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting andnon-voting common stock held bynon-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting andnon-voting common stock held bynon-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

Current wording

We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.