MBX Biosciences, Inc.

NATURE OF BUSINESS AND Liquidity

MBX Biosciences, Inc. (“MBX” or the “Company”) is a clinical-stage biopharmaceutical company focused on the discovery and development of novel precision peptide therapies for the treatment of endocrine and metabolic disorders. The Company is advancing a pipeline of novel candidates for endocrine and metabolic disorders. The Company was organized in August 2018 in Indiana as a Limited Liability Company and converted to a C corporation in the state of Delaware in April 2019. The Company maintains its corporate offices in Carmel, Indiana.

Since inception, the Company has devoted substantially all of its resources to drug discovery and development of its product candidates MBX 2109, MBX 1416 and MBX 4291, and other preclinical programs, building an intellectual property portfolio, organizing and staffing the Company, business planning, raising capital and providing general and administrative support for these operations. The Company does not have any products approved for sale and has not generated any revenue from product sales. The Company has historically funded its operations primarily through the issuance and sale of our common stock, convertible preferred stock and convertible notes, which generated approximately $401.8 million in aggregate gross proceeds.

Initial Public Offering

On September 16, 2024, the Company completed its initial public offering ("IPO"), pursuant to which it sold 11,730,000 shares of its common stock at a public offering price of $16.00 per share, resulting in net proceeds of approximately $170.5 million, after deducting underwriting discounts, commissions and other offering costs. Immediately prior to the closing of the IPO, the Company's outstanding convertible preferred stock automatically converted into 20,336,599 shares of common stock. Following the closing of the IPO, zero shares of convertible preferred stock were authorized, issued or outstanding.

Reverse Stock Split

On September 6, 2024, the Company effected aone-for-12.0221 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion prices for the Company's convertible preferred stock (see Note 10). Accordingly, all issued and outstanding share and per share amounts of common stock and stock option awards for all periods presented in the accompanying financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split. The par value and the number of authorized shares of the common stock and convertible preferred stock were not adjusted in connection with the reverse stock split.

Liquidity

From inception and through December 31, 2024, the Company has devoted substantially all of its efforts to drug discovery and development. The Company has a limited operating history, has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future. The Company incurred net losses of $61.9 million and $32.6 million for the years ended December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024, the Company has an accumulated deficit of $137.5 million and cash, cash equivalents and marketable securities of$262.1 million. Based on the Company’s current business plan, management believes that existing cash and cash equivalents and marketable securities will be sufficient to fund the Company’s obligations for at least 12 months from the date of issuance of these financial statements.

Basis of presentation

The accompanying audited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP).

We operate as a single operating segment engaged in the discovery and developmentof novel precision peptide therapies for the treatment of endocrine and metabolic disorders. See Note 17 for additional information.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make judgments, assumptions, and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of income and expense during the reporting period. The most significant estimates relate to the determination of the fair value of stock option grants and estimates related to the amount of prepaid and accrued research and development expenses as of the balance sheet date. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when the facts and circumstances dictate. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. As of December 31, 2024 and 2023, cash and cash equivalents consisted primarily of checking and savings deposits, money market fund holdings, and commercial paper.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. The Company’s investment policy includes guidelines regarding the quality of the financial institutions and financial instruments and defines allowable marketable securities that it believes minimizes the exposure to concentration of credit risk. The Company may invest in money market funds (minimum of $1 billion in assets), U.S. Treasury securities, corporate debt, bank debt, U.S. government-related agency securities, other sovereign debt, municipal debt and commercial paper. These deposits may exceed federally insured limits. The Company has not experienced any losses historically in these accounts.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the estimated useful life of each asset, generally three toseven years. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the asset. Upon retirement or sale, the cost of assets disposed of, and the related accumulated depreciation, are removed from the accounts and any resulting gain or loss is included in loss from operations in the period realized. Repairs and maintenance charges that do not increase the useful life of the assets are charged to operating expenses as incurred.

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, which consist primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment losses have been recognized during the years ended December 31, 2024 and 2023.

Fair Value of Financial Instruments

Fair value is defined as the price that the Company would receive to sell an investment in a timely transaction or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. A framework is used for measuring fair value utilizing a three-tier hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 investments) and the lowest priority to unobservable inputs (Level 3 investments).

The three levels of the fair value hierarchy are as follows:

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Level 1 inputs: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

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Level 2 inputs: Quoted prices in markets that are not considered to be active or financial instrument valuations for which all significant inputs are observable, either directly or indirectly; and

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Level 3 inputs: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

Financial instruments are categorized in their entirety based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the investment.

The Company’s money market funds and marketable securities are carried at fair value determined according to the fair value hierarchy described above (Level 1 and Level 2, respectively).

Research and Development Expenses

Research and development expenses include employee-related expenses, including salaries, benefits, travel and stock-based compensation expense; external research and development expenses incurred under arrangements with third parties, such as contract research organization agreements, contract manufacturing organization agreements, clinical sites and consultants; costs associated with preclinical and clinical activities; costs associated with required regulatory filings, licenses and fees; costs incurred in development of intellectual property; and an allocated portion of facilities and other infrastructure costs associated with our research and development activities. Costs incurred in connection with research and development activities, both internal and external, are expensed as incurred.

Costs are considered incurred based on an evaluation of the progress to completion of specific tasks under each contract using information and data provided to the Company by its clinical sites and vendors. These costs consist of direct and indirect costs associated with specific projects, as well as fees paid to various entities that perform certain research on behalf of the Company. Depending upon the timing of payments to the service providers, the Company recognizes prepaid expenses or accrued expenses related to these costs. These accrued or prepaid expenses are based on management’s estimates of the work performed under service agreements, milestones achieved, and experience with similar contracts. The Company monitors each of these factors and adjusts estimates accordingly.

Patent Costs

Costs related to filing and pursuing patent applications are expensed as incurred, as recoverability of such expenditures is uncertain. These costs are included in general and administrative expenses.

Stock-Based Compensation

The Company measures all stock options and other stock-based awards granted to employees, nonemployees, and directors based on the fair value on the date of the grant and recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company issues stock option awards with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company’s policy is to account for forfeitures when they occur.

The Company classifies stock-based compensation expense in its statement of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the US Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield iszero because the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

Indetermining the exercise prices for options granted prior to the IPO of common stock, the Company has considered the estimated fair value of the common stock as of the measurement date. The estimated fair value of the common stock prior to the IPO has been determined at each grant date based upon a variety of factors, including the illiquid nature of the common stock, arm’s-length sales of the Company’s capital stock (including convertible preferred stock), the effect of the rights and preferences of the preferred shareholders, and the prospects of a liquidity event. Among other factors are the Company’s financial position and historical financial performance, forecasted future operations of the Company, an evaluation or benchmark of the Company’s competition, and the current business climate in the marketplace. Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date.

Income Taxes

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company's policy is to recognize interest and/or penalties related to income tax matters in income tax expense. Any accrued interest and penalties are included within the related tax liability.

Leases

The Company records a right-of-use ("ROU") asset and lease liability for substantially all leases for which it is a lessee, in accordance with ASC 842. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for leases on a straight-line basis over the lease term. At inception of a contract, the Company considers all relevant facts and circumstances to assess whether or not the contract represents a lease by determining whether or not the contract conveys the right to control the use of an identified asset, either explicit or implicit, for a period of time in exchange for consideration.

Basic and Diluted Net Loss Per Share

The Company calculates basic and diluted net loss per share using the two-class method. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities, when outstanding, based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company’s Convertible Preferred Stock are participating securities until their conversion to common stock. These participating securities do not contractually require the holders of such shares to participate in the Company’s losses. As such, net losses for the years presented were not allocated to the Company’s participating securities. Accordingly, basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of common shares outstanding during the period plus the dilutive effects of potentially dilutive securities outstanding during the period. Potentially dilutive securities include vested and unexercised stock options, restricted stock issued upon early exercise of stock options, restricted stock related to unvested founder shares and convertible preferred shares. The dilutive effect of stock options are computed using the treasury stock method and the dilutive effect of convertible preferred shares is calculated using the if-converted method. The Company has generated a net loss for all periods presented, therefore diluted net loss per share is the same as basic net loss per share since the inclusion of potentially dilutive securities would be anti-dilutive.

Deferred offering costs

The Company capitalizes as deferred offering costs all direct and incremental legal, professional, accounting and other third-party fees incurred in connection with the Company's IPO. The deferred offering costs were offset against the IPO proceeds upon the consummation of the offering on September 16, 2024. As of December 31, 2024, no deferred offering costs were included in accounts payable and accrued expenses in the accompanying balance sheets.

Comprehensive Income (Loss)

Comprehensive income (loss) represents net income (loss) for the period plus the results of certain other changes in stockholders’ equity (deficit). The Company’s comprehensive loss included unrealized gains (losses) related to marketable securities for the years ended December 31, 2024, and 2023.

Recently issued accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard-setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the accompanying financial statements and disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosures about significant segment expenses and additional interim disclosure requirements. This standard also requires a single reportable segment company to provide all disclosures required by Topic 280. This new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company hasadopted this standard effective January 1, 2024. See Note 17 for the segment disclosures as required by Topic 280, as amended by ASU 2023-07.

In December 2023, the FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures (Topic 740), which establishes incremental disaggregation of income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid. This new standard is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The standard should be applied prospectively to financial statements issued for periods after the effective date of this ASU with the option to apply it retrospectively. We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31, 2025. We are currently assessing the impact ASU 2023-09 (Topic 740) will have on our financial statements, including our footnote disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the face of our consolidated income statements. This new standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the consolidated financial statements. We are currently assessing the impact ASU 2024-03 will have on our financial statements, including our footnote disclosures.

FAIR VALUE Measurements

The following table presents information about the Company’s financial instruments as of December 31, 2024 and December 31, 2023, that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs the Company utilized to determine such fair value (in thousands):

Marketable Securities

The fair value of the Company’s marketable securities as of December 31, 2024 and December 31, 2023 is based on Level 1 and Level 2 inputs. The Company’s investments consist mainly of U.S. government and agency securities. Fair value is determined by taking into consideration valuations obtained from third-party pricing services. The third-party pricing services utilize industry standard valuation models, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; and other observable inputs. There were no transfers between levels within the fair value hierarchy during the years ended December 31, 2024 and December 31, 2023. The Company has assessed U.S. government treasuries as Level 1 and all other marketable securities as Level 2 within the fair value hierarchy of ASC 820. The Company classifies its entire investment portfolio as available-for-sale as defined in ASC 320, Debt Securities, and views all investments as available for use in its current operations. We have therefore classified all securities as current, even if we do not necessarily intend to dispose of the securities in the following year. Securities are carried at fair value with the unrealized gains (losses) reported in other comprehensive income (loss).

As of December 31, 2024 and December 31, 2023, none of the Company’s investments were determined to be other than temporarily impaired.

The following table summarizes the Company’s investments (in thousands):

The fair values of available-for-sale debt securities as of December 31, 2024, by contractual maturity, are summarized as follows (in thousands):

PREPAID EXPENSES and Other Current assets

Prepaid and other current assets consisted of the following (in thousands):

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following(in thousands):

Depreciation expense was $0.2 million and $0.2 million for the years ended December 31, 2024 and 2023, respectively.

ACCRUED Expenses

Accrued expenses consisted of the following (in thousands):

Other Assets

Other assets consisted of the following (in thousands):

Commitments and contingencies

Leases

In April 2022, the Company entered into an operating lease agreement for a principal executive office in Carmel, Indiana (the “Carmel Lease”). The Carmel Lease commenced in October 2022 and has an initial term of 39 months, terminating in December 2025, with anoption toextend for 36 additional months at the Company’s discretion. The option to extend is not considered reasonably certain as of the lease inception.

In December 2023, the Company entered into an operating lease agreement for laboratory space in Indianapolis, Indiana (the “Laboratory Lease”). The Laboratory Lease commenced in December 2023 and had a term of 12 months, terminating in December 2024. The Company entered into a new lease for laboratory space in August 2024, commencing in December 2024, and terminating in December 2025. Both laboratory leases are short-term leases with no corresponding lease liability or right-of-use asset recorded, and lease payments recognized as expense on a straight-line basis over the lease terms.

The Company has no other operating or finance leases as of December 31, 2024, or December 31, 2023.

The future minimum rent payments relating to the Carmel Lease under the terms and conditions existing as of December 31, 2024, are summarized as follows (in thousands):

The Company incurred $0.2 million and $0.2 million of rent expense for the years ended December 31, 2024, and 2023, respectively.

The following table summarizes the operating lease term and discount rate for the Carmel Lease as of December 31, 2024, and December 31, 2023:

Cash paid for amounts included in the measurement of the Company’s operating lease liability was $0.2 million and $0.2 million for the years ended December 31, 2024, and December 31, 2023, respectively.

The following table sets forth the amount of right-of-use assets and lease liabilities included on the Company’s balance sheet as of December 31, 2024, and December 31, 2023 (in thousands):

In January 2024, the Company entered into an amendment (the "Amendment") for the Exclusive License Agreement with Indiana University Research and Technology Corporation (“IURTC”) (the “License Agreement”), to license certain intellectual property arising under the Master Research Agreement with The Trustees of Indiana University (the "Research Agreement"). The Amendment specifies IURTC is entitled to the receipt of additional clinical and regulatory milestones, as defined in the Amendment, up to an aggregate of $9.0 million. Following the execution of the Amendment, future remaining clinical and regulatory milestone payments in the License Agreement and all amendments total up to $9.3 million. In consideration for the license, during the and years ended December 31, 2024, and December 31, 2023, the Company paid immaterial licensing fees to IURTC.

Legal proceedings

The Company is not currently a party to any material legal proceedings. At each reporting date, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to its legal proceedings.

Convertible preferred stock

The Company has issued Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and Series C Convertible Preferred Stock.

On August 30, 2024, the Company's board of directors (the "Board") and stockholders approved the fourth amended and restated certificate of incorporation, which was effective immediately prior to the closing of the IPO on September 16, 2024, and which, among other things, authorized 10,000,000 undesignated shares of preferred stock, $0.0001 par value per share.

Immediately prior to the closing of the Company's IPO on September 16, 2024, pursuant to the reverse stock split and a proportional adjustment to the existing conversion ratios of each series of the Company's preferred stock as discussed further below, all of the Company's outstanding shares of convertible preferred stock were converted into an aggregate of 20,336,599 shares of common stock.

Issuances of convertible preferred stock

In July 2020, the Company entered into a Series A convertible preferred stock purchase agreement (“Series A SPA”) under which it issued 29,112,081 shares of Series A Convertible Preferred Stock, for cash, at a price of $0.687 per share, for gross proceeds of $20.0 million (the “Initial Series A Closing”). The Company incurred issuance costs of $0.3 million in relation to the issuance of Series A Convertible Preferred Stock, which have been recorded as a reduction to the value of the Series A Convertible Preferred Stock in mezzanine equity in the accompanying balance sheets. The Series A SPA contained provisions that potentially obligated the Company to sell an additional 14,556,039 shares of Series A Convertible Preferred Stock at $0.687 per share in an additional closing contingent upon either the achievement of a regulatory milestone defined in the Series A SPA or upon the agreement of the Company’s Board and lead investor to waive the requirement to achieve the milestone. In the event that an Initial Series A Closing purchaser failed to purchase all of their required shares in the subsequent Series A closing, each of the Series A Convertible Preferred Stock held by such purchaser automatically converted into one-half of a share of common stock.

Concurrently with the Initial Series A Closing, convertible notes issued by the Company in 2019 and 2020, including accrued interest and accrued deferred compensation, plus interest, were converted into 8,474,865 shares of Series A convertible preferred stock at a conversion price equal to 90% of the Series A financing, or $0.6183, representing a total of $5.4 million.

On November 12, 2021, the Company sold 16,011,641 additional shares of Series A convertible preferred stock at the same terms and conditions as those contained in the initial Agreement. The gross proceeds from the sale of Series A Convertible Preferred Stock upon achieving the milestone event was $11.0 million at $0.687 per share. The Company incurred immaterial issuance costs in relation to the issuance of Series A Convertible Preferred Stock, which have been recorded as a reduction to the value of the Series A Convertible Preferred Stock in mezzanine equity in the accompanying balance sheets.

On November 7, 2022 (the “Initial Series B Closing”), the Company entered into a Series B preferred stock purchase agreement to issue certain investors Series B Convertible Preferred Stock at a purchase price of $0.90 per share ($0.0001 par value). The Company amended the Certificate of Incorporation (“Charter”) on November 7, 2022, which authorized the issuance of 129,240,032 shares of Series B Convertible Preferred Stock, in addition to 53,598,587 shares of Series A Convertible Preferred Stock issued and outstanding. The Company also executed the Amended and Restated Right of First Refusal and Co-Sale Agreement and the Amended and Restated Investors’ Rights Agreement.

The Initial Series B Closing resulted in the issuance of 40,545,552 shares of Series B Convertible Preferred Stock, at a price of $0.90 per share, for gross cash proceeds of $36.5 million. The Company incurred issuance costs of $0.4 million in relation to the issuance of Series B Convertible Preferred Stock, which have been recorded as a reduction to the value of the Series B Convertible Preferred Stock in mezzanine equity in the accompanying balance sheets. Concurrently with the Initial Series B Closing, the 2022 Notes, including accrued interest, were converted into 12,573,381 shares of Series B Convertible Preferred Stock at a conversion price equal to 90% of the Series B financing. After the Initial Closing, the Company agreed to sell on the same terms and conditions as the first sale, an additional 76,121,099 shares of Series B Preferred Stock (the “Series B Milestone Issuance”) upon achieving certain development milestones.

On August 15, 2023, the Company issued 76,121,099 shares of Series B Convertible Preferred Stock, at a price of $0.90 per share, for gross cash proceeds of $68.5 million in the Series B Milestone Issuance. The Company incurred immaterial issuance costs in relation to this issuance of Series B Convertible Preferred Stock, which have been recorded as a reduction to the value of the Series B Convertible Preferred Stock in mezzanine equity in the accompanying balance sheets.

On August 2, 2024, the Company entered into a Series C convertible preferred stock purchase agreement under which it issued 61,650,480 shares of Series C Convertible Preferred Stock, for cash, at a price of $1.03 per share, for gross proceeds of $63.5 million. The Company incurred issuance costs of $0.3 million in relation to the issuance of Series C Convertible Preferred Stock, which were initially recorded as a reduction to the value of Series C Convertible Preferred Stock.

The holders of the Series A, Series B and Series C Convertible Preferred Stock have the following rights and preferences:

Voting rights

Series A, Series B and Series C Convertible Preferred Stock are entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series A, Series B and Series C Convertible Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.

Election of directors

The holders of record of shares of Series A Convertible Preferred Stock, exclusively and as a separate class, shall be entitled to elect three directors of the Company. The holders of record of shares of Series B Convertible Preferred Stock, exclusively and as a separate class, shall be entitled to elect one director of the Company. The holders of record of shares of Series C Convertible Preferred Stock, exclusively and as a separate class, are not entitled to elect any directors of the Company.

Non-cumulative dividend

Holders of Series A, Series B and Series C Convertible Preferred Stock, in preference to the holders of common stock, are entitled to receive, when, as and if declared by the Board of the Company, but only out of funds that are legally available therefor, cash dividends at the rate of eight percent (8%) of the Series A, Series B and Series C original issue price per annum on each outstanding share of Series A, Series B and Series C Convertible Preferred Stock (the “Preferred Dividends”). All such Preferred Dividends shall be payable only when, as and if declared by the Board of the Company and shall be non-cumulative. No dividends have been declared to-date as of December 31, 2024.

Conversion right

Each share of Series A, Series B and Series C Convertible Preferred Stock is automatically converted into common stock upon either (a) the closing of the sale of shares of common stock to the public at a price of at least $2.061, $2.25 or $2.25, respectively, per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the common stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $50,000,000 of gross proceeds to the Corporation and in connection with such offering the common stock is listed for trading on the Nasdaq Stock Market’s National Market, the New York Stock Exchange or another exchange or marketplace approved the Board or (b) the affirmative vote or written consent of the majority preferred stockholders. All outstanding convertible preferred stock was converted into common stock immediately prior to the closing of the Company's IPO.

Liquidation preference

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of shares of Series A, Series B and Series C Convertible Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, and in the event of a Deemed Liquidation Event (as defined in the Company’s Charter), the holders of shares of Series A, Series B and Series C Convertible Preferred Stock then outstanding shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or out of the available proceeds, as applicable, before any payment shall be made to the holders of common stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series A, Series B and Series C Convertible Preferred Stock original issue prices, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A, Series B and Series C Convertible Preferred Stock been converted into common stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event.

Common stock

On August 30, 2024, the Company’s stockholders approved the fourth amended and restated certificate of incorporation, which was filed upon the closing of the IPO on September 16, 2024, and which, among other things, increased the number of shares of common stock authorized for issuance to 500,000,000 shares of common stock, $0.0001 par value.

On September 16, 2024, the Company completed the IPO of its common stock and issued and sold 11,730,000 shares of its common stock at a price of $16.00 per share. As a result, the Company received $170.5 million in net proceeds, after deducting underwriting discounts and commissions and offering costs of $17.2 million.

As of December 31, 2024, and December 31, 2023, there were 33,421,525 and 1,257,080 shares of common stock issued and outstanding, respectively. Shares of common stock issued and outstanding as of December 31, 2024, include 12,608 shares of restricted stock related to the unvested portion of early exercised common stock options. Shares of common stock issued and outstanding as of December 31, 2023 include 90,324 shares of restricted stock related to the unvested portion of early exercised common stock options. These are included in shares of common stock as they are considered to be legally outstanding as of December 31, 2024, and December 31, 2023, respectively. These shares are subject to the Company’s option to repurchase and are not transferrable until such time as they are fully vested.

Common stock reserved

The number of shares of common stock that have been reserved for the potential conversion of Preferred Stock, and outstanding stock options granted under the Company's 2019 Stock Option and Grant Plan (the "2019 Plan") and the 2024 Stock Option and Incentive Plan (the "2024 Plan") and stock options available for grant under the 2019 Plan and 2024 Plan as of December 31, 2024 and December 31, 2023, are as follows:

Stock-Based Compensation

2019 Stock Option and Grant Plan

The Company’s 2019 Plan, as amended, provides for the Company to sell or issue common stock or restricted common stock or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the Board, and consultants of the Company. The 2019 Plan is administered by the Board or at the discretion of the Board by a committee of the Board. The exercise prices, vesting periods, and other restrictions are determined at the discretion of the Board or a committee of the Board, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the contractual term of stock option may not be greater than 10 years. Stock options granted to date typically vest and become exercisable over four years from the date of grant.

As of the date the 2024 Plan became effective, there will be no further awards granted under the 2019 Plan, but all outstanding awards under the 2019 Plan will continue to be governed by their existing terms.2,955,258 stock options to purchase common stock were outstanding under the 2019 Plan as of December 31, 2024.

2024 Stock Option and Incentive Plan

In August 2024, the Company's board of directors adopted, and its stockholders approved, the 2024 Plan, which became effective in September 2024. The 2024 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors and consultants. The 2024 Plan provides for the grant of incentive stock options, stock options, stock appreciation rights, restricted shares of common stock, restricted stock units, dividend equivalent rights and cash bonuses. The number of shares initially reserved for issuance under the 2024 Plan is 3,065,000 shares. In addition, the number of shares reserved and available for issuance under the 2024 Plan will automatically increase on January 1, 2025 and each January 1 thereafter, byfive percent (5%) of the sum of the outstanding number of shares of common stock and the numbers of shares of common stock issuable pursuant to the exercise of any outstanding warrants to acquire common stock for a nominal exercise price on the immediately preceding December 31 or such lesser number of shares as determined by the compensation committee. The number of shares reserved under the 2024 Plan is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. As of December 31, 2024,547,182 stock options to purchase common stock were outstanding under the 2024 Plan and 2,603,253 shares remained available for future grant under the 2024 Plan. The shares available for issuance under the 2024 Plan may be authorized but unissued shares or shares reacquired by the Company.

The shares of common stock underlying any awards under the 2024 Plan and the 2019 Plan that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2024 Plan.

2024 Employee Stock Purchase Plan

In August 2024, the Company's board of directors adopted, and its stockholders approved, the 2024 Employee Stock Purchase Plan (the "2024 ESPP"), which became effective in September 2024. A total of 289,436 shares of common stock were initially reserved for issuance under the 2024 ESPP. The 2024 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1, 2025 and each January 1 thereafter, by the least of (i)578,872 shares of common stock, (ii)one percent (1%) of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (iii) such lesser number of shares of common stock as determined by the administrator of the 2024 ESPP. The number of shares reserved under the 2024 ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization.

No shares were issued under the 2024 ESPP during the year ended December 31, 2024.

Stock option valuation

The determination of the grant date fair value of stock-based awards granted to employees, directors and nonemployees during the years ended December 31, 2024, and 2023, is estimated using the Black-Scholes option-pricing model and was calculated based on the following assumptions.

Summary of option activity

The Company’s stock option activity regarding employees, directors, and nonemployees for the years ended December 31, 2024, and 2023, is summarized as follows (in thousands except share and per share amounts):

Additional information with regard to stock option activity involving employees and directors for the year ended December 31, 2024, and 2023, is as follows (in thousands except per share amounts):

The total fair value of shares vested during the years ended December 31, 2024 and 2023 was $3.8 million and $1.6 million, respectively.

As of December 31, 2024, total unrecognized compensation cost related to the unvested awards to employees, directors, and nonemployees is $17.8 million, which is expected to be recognized over a weighted-average period of 3.1 years.

Stock-based compensation

During the years ended December 31, 2024, and 2023, the Company recorded stock-based compensation expense regarding its employees, directors, and nonemployees as follows (in thousands):

INCOME TAXES

The Company recordedno income tax benefit for the net loss incurred for the years ended December 31, 2024 and 2023, due to the uncertainty of realizing a benefit from such losses. All of the Company’s operating losses since inception have been generated in the United States.

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate is as follows:

Significant components of the Company’s deferred tax assets as of December 31, 2024, and 2023, are included in the table below (in thousands):

The Company’s management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are composed primarily of net operating loss (“NOL”) carryforwards, capitalized research and development costs and research and development credit carryforwards. Management has considered the Company’s history of net losses incurred since inception and probability of future losses to conclude it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets. As a result, the Company has established a valuation allowance for the full amount of the net deferred tax assets as of December 31, 2024, and 2023. At such time as it is determined that it is more likely than not that the deferred tax assets will be realizable, the valuation allowance will be reduced. The valuation allowance increased by $19.9 million during the year ended December 31, 2024, due to the increase in the deferred tax assets by the same amounts.

As of December 31, 2024, the Company had $46.2 million and $134.0 million of US federal NOLs and state NOL carryforwards, respectively. The federal NOLs have no expiration and the state NOLs begin to expire in 2039. In addition, the Company had US federal research and development tax credit carryforwards of $11.0 million, which may be available to reduce future tax liabilities which start to expire in 2039. The Company had Indiana state research and development tax credits of $1.7 million as of December 31, 2024, which begin to expire in 2029.

Effective January 1, 2022, the 2017 Tax Cuts and Jobs Act ("TCJA") requires research and experimental ("R&E") expenses under Internal Revenue Code Section 174 to be capitalized. R&E expenses are required to be amortized over afive-year period for domestic expenses and over afifteen-year period for foreign expenses. Prior to the TCJA being effective, businesses had the option of deducting Section 174 expenses in the year incurred or capitalizing and amortizing the costs over five years. The Company has reflected this change in treatment of R&E expenses in the current tax provision and resulted in the capitalization of $55.9 million and $27.4 million of R&E expenses for tax years ended December 31, 2024, and 2023, respectively.

Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the NOL carryforward period. Under the provisions of Sections 382 and 383 of the Internal Revenue Code, and corresponding provisions of state law, certain substantial changes in the Company’s ownership, including a sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of NOL carryforwards, which could be used annually to offset future taxable income.

Due to the existence of the valuation allowance, future recognition of previously unrecognized tax benefits will not impact the Company’s effective tax rate. The Company is subject to taxation in the U.S and various state jurisdictions. All tax years since incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (IRS) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax year. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense.

The Company hadno material accrued interest or penalties related to income tax matters in the Company’s balance sheets as of December 31, 2024, and 2023. Further, the Company is not currently under examination by any federal, state or local tax authority.

The Inflation Reduction Act 2022 (“IRA 2022”) which incorporates a Corporate Alternative Minimum Tax (CAMT) was signed on August 16, 2022, and became applicable to the Company on January 1, 2023. The new tax will require companies to compute two separate calculations for federal income tax purposes and pay the greater of the new minimum tax or their regular tax liability. As of December 31, 2024, IRA 2022 has not had a material impact to the Company’s financial results.

The following table summarizes the changes to the Company’s gross unrecognized tax benefits for the years ended December 31, 2024, and 2023, respectively (in thousands):

The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal corresponding adjustment in the valuation allowance. The Company does not foresee material changes to its liability for uncertain tax benefits within the next twelve months.

The Company is subject to taxation in the U.S. federal and various state jurisdictions. All tax years since incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (IRS) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax year. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense.

defined contribution plan

The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretax basis. As of December 31, 2024, the Company hasnot made any contributions to the plan on behalf of our employees.

Net loss per share attributable to common stockholders

Net loss per share

The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company (in thousands except share and per share amounts).

The Company’s potential dilutive securities, which include convertible preferred stock, restricted stock related to early exercise of common stock options, restricted stock related to unvested founder shares and outstanding common stock options, have been excluded from the computation of diluted net loss per share as the effect would be antidilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The potential dilutive securities included in the table below, presented on an as converted basis, were excluded from the calculation of net loss per share due to their anti-dilutive effect:

Related Party transactions

In April 2019, the Company executed the Research Agreement pursuant to which the Company agreed to fund certain research of a director and former officer of the Company. The period of performance for this agreement is June 1, 2019 through April 30, 2022 and the contract totals approximately $2.8 million. On February 14, 2022, the Research Agreement was amended to extend the period of performance from April 30, 2022 to April 30, 2025 and increase the total contract costs by $3.0 million. On January 16, 2025, the Research Agreement was amended to extend the period of performance from April 30, 2025 through April 1, 2026 and increase the total contract costs by $1.0 million. The Company paid$1.1 million and $0.7 million pursuant to this agreement during the years ended December 31, 2024 and 2023, respectively. The Research Agreement also provides the Company an option to license the technology arising under the agreement (see Note 9).

One of the officers of the Company, who is also a director, participated in the Series B Milestone Issuance financing totaling $0.7 million and the Series C Issuance financing totaling $1.0 million in August 2023 and August 2024, respectively.

SEGMENT INFORMATION

The Company operates as asingle reportable segment engaged in the discovery and development of novel precision peptide therapies for the treatment of endocrine and metabolic disorders. The Company's determination that it operates as asingle segment is consistent with the nature of its operations and the financial information regularly reviewed by the chief executive officer, in his capacity as the chief operating decision maker(CODM), for the purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods. The Company's purpose is to help people with endocrine and metabolic disorders live fuller and healthier lives. The Company's long-term success is significantly dependent on its ability to research and develop innovative medicines. The CODM uses net loss to assess performance of the Company, ensuring that it is investing in the research and development of product candidates. The CODM allocates research and development resources based upon several factors, including the likelihood of technical success, unmet medical needs, and the viability of commercial success. A significant component of the CODM’s decision-making process is to ensure a balanced investment in the research and development portfolio to drive near-term success and long-term sustainability.

The following table summarizes our significant segment expenses and segment net loss:

(1) Other segment items are primarily comprised of general and administrative expenses and interest and other income.

subsequent events

The Company has concluded no subsequent events have occurred that require disclosure.