Upstream Bio, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read, considered and evaluated together with our audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022 and the related notes included in our initial public offering final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the Securities and Exchange Commission (“SEC”) on October 11, 2024 and our unaudited condensed consolidated financial statements as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 and the related notes included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”). This discussion and analysis as well as other parts of this Quarterly Report contain forward-looking statements that involve risks and uncertainties, including but not limited to, information with respect to our plans and strategy for our business. As a result of many factors, including those factors set forth in the section titled “Risk factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements. You should carefully read, consider and evaluate the section titled “Risk factors” to gain an understanding of the factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special note regarding forward-looking statements” included elsewhere in this Quarterly Report. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. For convenience of presentation, some of the numbers have been rounded in the text below.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes for the year ended December 31, 2024 included in our Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Previous wording

We are a clinical-stage biotechnology company developing treatments for inflammatory diseases, with an initial focus on severe respiratory disorders. We are developing verekitug, the only known antagonist currently in clinical development that targets the receptor for Thymic Stromal Lymphopoietin (“TSLP”), a cytokine which is a clinically validated driver of inflammatory response positioned upstream of multiple signaling cascades that affect a variety of immune mediated diseases. Preclinical and clinical data to date demonstrate verekitug’s highly potent inhibition of the TSLP receptor, which we believe will translate to a differentiated product profile, including improved clinical outcomes, substantially extended dosing intervals and the potential to treat a broad spectrum of patients. We have advanced this highly potent monoclonal antibody into separate Phase 2 trials for the treatment of severe asthma and chronic rhinosinusitis with nasal polyps (“CRSwNP”) and plan to initiate development in chronic obstructive pulmonary disease (“COPD”). Our experienced team is committed to maximizing verekitug’s unique attributes to address the substantial unmet needs for patients underserved by today’s standard of care.

Current wording

We are a clinical-stage biotechnology company developing treatments for inflammatory diseases, with an initial focus on severe respiratory disorders. We are developing verekitug, the only known antagonist currently in clinical development that targets the receptor for Thymic Stromal Lymphopoietin (“TSLP”), a cytokine which is a clinically validated driver of inflammatory response positioned upstream of multiple signaling cascades that affect a variety of immune mediated diseases. Preclinical and clinical data to date demonstrate verekitug’s highly potent inhibition of the TSLP receptor, which we believe will translate to a differentiated product profile, including improved clinical outcomes, substantially extended dosing intervals and the potential to treat a broad spectrum of patients. We have advanced this highly potent monoclonal antibody into separate Phase 2 trials for the treatment of severe asthma and chronic rhinosinusitis with nasal polyps (“CRSwNP”) and have initiated planning activities for a Phase 2 trial in chronic obstructive pulmonary disease (“COPD”) and a long-term safety and efficacy extension study (“Phase 2 LTE”) in certain adult patients with severe asthma following completed participation in our severe asthma Phase 2 trial. We completed enrollment in our CRSwNP Phase 2 clinical trial in January 2025 and expect to report top-line data from this trial in the third quarter of 2025, enabling regulatory discussions and preparations for a Phase 3 program in CRSwNP. We anticipate reporting top-line data from our severe asthma Phase 2 trial in the first half of 2026 and plan to dose the first patient in our COPD program in mid-2025. Our experienced team is committed to maximizing verekitug’s unique attributes to address the substantial unmet needs for patients underserved by today’s standard of care.

Previous wording

We have incurred significant net operating losses and negative cash flows since our inception. Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, establishing licensing, building our proprietary platform technologies, developing verekitug, establishing our intellectual property portfolio, conducting research, preclinical studies, and clinical trials, establishing arrangements with third parties for the manufacture of verekitug and related raw materials, and providing general and administrative support for these operations. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development, regulatory approval and eventual commercialization of verekitug and any other potential future product candidates, which we expect will take a number of years. For the three months ended September 30, 2024 and 2023, we reported net losses of $16.0 million and $3.1 million, respectively, and for the nine months ended September 30, 2024 and 2023, we reported net losses of $41.6 million and $8.7 million, respectively. Our net losses have resulted principally from costs incurred in our research and development activities. As of September 30, 2024, we had an accumulated deficit of $169.5 million, and we had cash, cash equivalents and short-term investments of $220.7 million. In October 2024, we completed our initial public offering (“IPO”) in which we issued and sold 17,250,000 shares of our common stock, including 2,250,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $17.00 per share. As a result of the IPO, we received approximately $268.7 million in net proceeds, after deducting $20.5 million in underwriting discounts and commissions, and approximately $4.0 million in other offering costs. Based on our current operating plan, we believe that our existing cash and cash equivalents and short-term investments, including the net proceeds received in connection with our IPO, will be sufficient to fund our operating expenses and capital expenditure requirements through 2027.

Current wording

Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, establishing licensing, building our proprietary platform technologies, developing verekitug, establishing our intellectual property portfolio, conducting research, preclinical studies, and clinical trials, establishing arrangements with third parties for the manufacture of verekitug and related raw materials, and providing general and administrative support for these operations. To date, we have financed our operations primarily through the issuance and sale of our redeemable convertible preferred stock and proceeds from our initial public offering (“IPO”). As of March 31, 2025, we have received total gross proceeds of $400.0 million from the issuance and sale of our redeemable convertible preferred stock. In October 2024, we completed our IPO in which we issued and sold 17,250,000 shares of our common stock, including 2,250,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $17.00 per share. As a result of the IPO, we received $268.8 million in net proceeds, after deducting $20.5 million in underwriting discounts and commissions, and $3.9 million in other offering costs.

Previous wording

As a result, we will need additional financing to support our continuing operations. To date, we have funded our operations primarily with the proceeds from our IPO and the sale of our Preferred Stock. We do not have any products approved for sale and have not generated any revenue from product sales since our inception. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates and commercialize our products or enter into collaboration arrangements with third parties. Until we can generate sufficient product revenue to finance our cash requirements, if ever, we expect to fund our operations through equity offerings or debt financings, credit or loan facilities, potentially other capital resources, or a combination of one or more of these funding sources. We may be unable to raise additional funds or enter into other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back, or discontinue the development or commercialization of verekitug and one or more potential future product candidates, which could have a material adverse effect on our business, results of operations or financial condition.

Current wording

As a result, we will need additional financing to support our continuing operations. To date, we have funded our operations primarily with the sale of our redeemable convertible preferred stock and the proceeds from our IPO. We do not have any products approved for sale and have not generated any revenue from product sales since our inception. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates and commercialize our products or enter into collaboration arrangements with third parties. Until we can generate sufficient product revenue to finance our cash requirements, if ever, we expect to fund our operations through equity offerings or debt financings, credit or loan facilities, potentially other capital resources, or a combination of one or more of these funding sources. We may be unable to raise additional funds or enter into other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back, or discontinue the development or commercialization of verekitug and one or more potential future product candidates, which could have a material adverse effect on our business, results of operations or financial condition.

Previous wording

Below is a summary of the key terms for certain of our asset purchase and license agreements. For a more detailed description of these agreements, see the section titled “Business—Asset purchase and license agreements” included in our IPO final prospectus filed on October 11, 2024.

Current wording

Below is a summary of the key terms for certain of our asset purchase and license agreements. For a more detailed description of these agreements, see the section titled “Business—Asset purchase and license agreements” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Previous wording

In October 2021, we entered into an asset purchase agreement (the “Astellas Asset Purchase Agreement”) with Astellas Pharma, Inc. (“Astellas”). Pursuant to the Astellas Asset Purchase Agreement, we purchased from Astellas the compound designated by Astellas as

Current wording

In October 2021, we entered into an asset purchase agreement (the “Astellas Asset Purchase Agreement”) with Astellas Pharma, Inc. (“Astellas”). Pursuant to the Astellas Asset Purchase Agreement, we purchased from Astellas the compound designated by Astellas as ASP7266 (the “Compound,” which was subsequently renamed by us as verekitug). There are no future payments owed to Astellas under the Astellas Asset Purchase Agreement.

Previous wording

During the year ended December 31, 2023, we received payments from Maruho in the amount of $2.7 million which was received during the nine months ended September 30, 2023. During the year ended December 31, 2022, we received payments from Maruho in the amount of $0.8 million. During the nine months ended September 30, 2024, we received payments from Maruho in the amount of $1.2 million.

Current wording

During the three months ended March 31, 2025, we received payments from Maruho in the amount of $0.6 million. We did not receive any payments from Maruho during the three months ended March 31, 2024.

Previous wording

In October 2021, in connection with the Astellas Asset Purchase Agreement, we entered into a license agreement with Lonza Sales AG (“Lonza”) (as amended, the “Lonza License Agreement”). Pursuant to the Lonza License Agreement, we obtained a worldwide, non-exclusive, sublicensable (subject to Lonza’s right of pre-approval with respect to any sublicense of manufacturing activities) license to certain intellectual property rights owned by Lonza. Lonza was the originator of the master cell bank for the Compound developed by Astellas. As consideration for the rights and licenses granted to us under the Lonza License Agreement, we agreed to pay Lonza certain royalties and annual payments, both payable in Swiss francs, in respect of the manufacturing and sale of the Compound, such amounts to be determined by the party manufacturing the Compound, and range from no annual payment to up to a mid-six figure annual payment, and a less-than-one percent to a low-single-digit percentage royalty on net sales of the Compound. In accordance with the Lonza License Agreement, we entered into a sublicense with Wuxi Biologics (Hong Kong) Limited to manufacture the Compound, requiring us to pay a mid-six-figure annual fee to Lonza pursuant to this provision. Any royalties due under the Lonza License Agreement are payable on a country-by-country basis until ten years from the first commercial sale of the Compound in that particular country. The Lonza agreement continues for an indefinite period of time unless otherwise terminated. We have the right to terminate the Lonza License Agreement at any time by providing prior written notice to Lonza. During the year ended December 31, 2023, we made an annual payment to Lonza in the amount of $0.4 million, which was paid during the nine months ended June 30, 2023. During the year ended December 31, 2022, we made an annual payment to Lonza in the amount of $0.4 million. During the nine months ended September 30, 2024, we made an annual payment to Lonza in the amount of $0.5 million. These payments are recognized as research and development expense in the consolidated statements of operations and comprehensive loss. To date, we have not made any royalty payments to Lonza under the Lonza License Agreement.

Current wording

In October 2021, in connection with the Astellas Asset Purchase Agreement, we entered into a license agreement with Lonza Sales AG (“Lonza”) (as amended, the “Lonza License Agreement”). Pursuant to the Lonza License Agreement, we obtained a worldwide, non-exclusive, sublicensable (subject to Lonza’s right of pre-approval with respect to any sublicense of manufacturing activities) license to certain intellectual property rights owned by Lonza. Lonza was the originator of the master cell bank for the Compound developed by Astellas. As consideration for the rights and licenses granted to us under the Lonza License Agreement, we agreed to pay Lonza certain royalties and annual payments, both payable in Swiss francs, in respect of the manufacturing and sale of the Compound, such amounts to be determined by the party manufacturing the Compound, and range from no annual payment to up to a mid-six figure annual payment, and a less-than-one percent to a low-single-digit percentage royalty on net sales of the Compound. In accordance with the Lonza License Agreement, we entered into a sublicense with Wuxi Biologics (Hong Kong) Limited to manufacture the Compound, requiring us to pay a mid-six-figure annual fee to Lonza pursuant to this provision. Any royalties due under the Lonza License Agreement are payable on a country-by-country basis until ten years from the first commercial sale of the Compound in that particular country. The Lonza agreement continues for an indefinite period of time unless otherwise terminated. We have the right to terminate the Lonza License Agreement at any time by providing prior written notice to Lonza. During the year ended December 31, 2024, we made an annual payment to Lonza in the amount of $0.5 million, which was paid during the three months ended March 31, 2024. During the three months ended March 31, 2025, we had $0.5 million included in accounts payable in connection with the annual payment pursuant to the Lonza License Agreement. These payments are recognized as research and development expense in the consolidated statements of operations and comprehensive loss. To date, we have not made any royalty payments to Lonza under the Lonza License Agreement.

Previous wording

our ability to maintain existing, and establish new, strategic collaborations or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement prior to regulatory approval;

Current wording

our ability to maintain existing, and establish new, strategic collaborations or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;

Previous wording

In connection with our Preferred Stock financings, we issued shares under stock purchase agreements that provided an obligation for us to issue additional Preferred Stock in subsequent closings upon the satisfaction of certain conditions. The Series A and Series B tranche right liabilities were settled in February 2023 and April 2024, respectively, upon the satisfaction of relevant conditions. We classified the preferred stock tranche rights as liabilities on our consolidated balance sheets and initially recorded them at fair value upon the issuance date of the rights. We remeasured the tranche right liabilities to fair value at each reporting date and immediately prior to being settled, and recognized changes in the fair value of the preferred stock tranche right liability as a component of other income (expense) in our consolidated statements of operations and comprehensive loss. Upon settlement of the tranche rights, we derecognized the related liability, and stopped recognizing changes in the fair value of the preferred stock tranche right liability.

Current wording

In connection with our Series B redeemable convertible preferred stock (“Series B Preferred Stock”) financing, we issued shares under a stock purchase agreement that provided an obligation for us to issue additional Series B Preferred Stock in subsequent closings upon the satisfaction of certain conditions. The Series B tranche right liability was settled in April 2024 upon the satisfaction of relevant conditions. We classified the preferred stock tranche right as a liability on our consolidated balance sheets and initially recorded it at fair value upon the issuance date of the right. We remeasured the tranche right liability to fair value at each reporting date and immediately prior to being settled, and recognized changes in the fair value of the preferred stock tranche right liability as a component of other income (expense) in our consolidated statements of operations and comprehensive loss. Upon settlement of the tranche right, we derecognized the related liability, and stopped recognizing changes in the fair value of the preferred stock tranche right liability.

Previous wording

We recorded a full valuation allowance of our deferred tax asset position as of September 30, 2024 and December 31, 2023 and 2022 as we believe it was more likely than not that we would not be able to utilize our deferred tax assets.

Current wording

We recorded a full valuation allowance of our deferred tax asset position as of March 31, 2025 and December 31, 2024 as we believe it was more likely than not that we would not be able to utilize our deferred tax assets.

Previous wording

As of December 31, 2023, we had federal and state net operating losses (“NOLs”) carryforwards of $25.0 million and $27.6 million, respectively. The federal NOLs are not subject to expiration and are limited in utilization to 80% of taxable income and the state NOLs begin to expire in 2041. As of December 31, 2023, we had federal and state research and development credits of $0.8 million which will begin to expire in 2043 and 2037, respectively.

Current wording

As of December 31, 2024, we had federal and state net operating losses (“NOLs”) carryforwards of $37.6 million and $49.1 million, respectively. The federal NOLs are not subject to expiration and are limited in utilization to 80% of taxable income and the state NOLs begin to expire in 2041. As of December 31, 2024, we had federal and state research and development credits of $3.5 million and $0.3 million, respectively, which will, if not utilized, begin to expire in 2043 and 2037, respectively.

Previous wording

Related party collaboration revenue was $0.6 million for the three months ended September 30, 2024 compared to $0.6 million for the three months ended September 30, 2023. Revenue during the three months ended September 30, 2024 was primarily related to the work performed associated with our Phase 2 clinical trial in patients with severe asthma and the revenue during the three months ended September 30, 2023 was related to the work performed associated with our Phase 1 and Phase 2 clinical trials in patients with severe asthma under the Maruho License Agreement.

Current wording

Collaboration revenue was $0.6 million for each of the three months ended March 31, 2025 and 2024. Revenue during each of the three months ended March 31, 2025 and 2024 was primarily related to the work performed associated with our Phase 2 clinical trial in patients with severe asthma under the Maruho License Agreement.

Previous wording

Research and development expenses were $15.4 million for the three months ended September 30, 2024 compared to $7.8 million for the three months ended September 30, 2023. The increase of $7.6 million was primarily driven by an increase of $4.6 million in expenses directly related to our verekitug program and $3.0 million of unallocated research and development expenses.

Current wording

Research and development expenses were $25.8 million for the three months ended March 31, 2025 compared to $11.7 million for the three months ended March 31, 2024. The increase of $14.1 million was primarily driven by an increase of $10.8 million in expenses directly related to our verekitug program and $3.3 million of unallocated research and development expenses.

Previous wording

The increase in personnel expenses of $0.5 million was primarily due to increased headcount in our research and development function. Personnel expenses for each of the three months ended September 30, 2024 and 2023 included stock-based compensation expense of $0.3 million. The increase in manufacturing costs of $1.9 million was primarily attributable to an increase in CMO costs for the development of Phase 3 clinical trial material during the three months ended September 30, 2024 for which there was no comparable expense during the same period in 2023. The increase of $0.2 million in professional fees was related to preclinical consulting services to support our verekitug program. The increase in other unallocated expenses of $0.4 million was primarily driven by an increase in preclinical studies to support our verekitug clinical trials.

Current wording

The increase in manufacturing costs of $1.8 million was primarily attributable to an increase in CMO costs for the development of Phase 3 clinical material during the three months ended March 31, 2025, compared to the same period in 2024. The increase in personnel expenses of $1.3 million was primarily due to increased headcount in our research and development function. Personnel expenses for each of the three months ended March 31, 2025 and 2024 included stock-based compensation expense of $0.5 million and $0.3 million, respectively.

Previous wording

We begin to separately track program expenses at development candidate nomination. Through September 30, 2024, we have incurred approximately $44.9 million, $9.4 million and $0.1 million in direct external expenses for the development of verekitug for severe asthma, CRSwNP and COPD, respectively, since their development candidate nominations.

Current wording

We begin to separately track program expenses at development candidate nomination. Through March 31, 2025, we have incurred approximately $61.0 million, $16.7 million and $8.8 million in direct external expenses for the development of verekitug for severe asthma, CRSwNP and COPD, respectively, since their development candidate nominations.

Previous wording

General and administrative expenses were $4.1 million for the three months ended September 30, 2024 compared to $2.2 million for the three months ended September 30, 2023. The increase of $1.8 million was primarily driven by an increase in personnel expenses of $1.5 million due to increased headcount in our general and administrative functions. Personnel expenses for the three months ended September 30, 2024 and 2023 included stock-based compensation expense of $1.6 million and $0.4 million, respectively. Additionally, there was an increase of $0.2 million of professional fees including increased consulting and audit fees. Other expenses increased by $0.1 million primarily due to an increase in software licenses.

Current wording

General and administrative expenses were $6.8 million for the three months ended March 31, 2025 compared to $4.0 million for the three months ended March 31, 2024. The increase of $2.8 million was primarily driven by an increase in personnel expenses of $1.9 million due to increased headcount in our general and administrative functions. Personnel expenses for the three months ended March 31, 2025 and 2024 included stock-based compensation expense of $2.2 million and $0.4 million, respectively. Additionally, there was an increase of $0.4 million of professional fees primarily related to market research costs, legal fees and recruiting fees. Other expenses increased by $0.6 million primarily due to an increase in corporate insurance and occupancy costs.

Previous wording

We recorded other income for the change in the fair value of the preferred stock tranche right liabilities of $4.8 million for the three months ended September 30, 2023 related to the Series B preferred stock tranche right liability, for which there was no comparable income during the three months ended September 30, 2024 as the Series B was settled in April 2024. The change in fair value of the Series B preferred stock tranche right liability was due to changes in the assumptions used in the valuation model during the period, including the estimated fair value of the Series B Preferred Stock, volatility and estimated time to the tranche closing.

Current wording

We recorded other income for the change in the fair value of the preferred stock tranche right liability of $2.9 million for the three months ended March 31, 2024 related to the Series B preferred stock tranche right liability, for which there was no comparable income during the three months ended March 31, 2025 as the Series B was settled in April 2024. The change in fair value of the Series B preferred stock tranche right liability was due to changes in the assumptions used in the valuation model during the period, including the estimated fair value of the Series B Preferred Stock, volatility and estimated time to the tranche closing.

Previous wording

Interest income was $2.9 million and $1.5 million for the three months ended September 30, 2024 and 2023, respectively, representing an increase of $1.4 million. The increase in interest income was due to increased balances in our money market funds, U.S. treasury bills and U.S. government agency bonds held during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

Current wording

Interest income was $4.7 million and $1.3 million for the three months ended March 31, 2025 and 2024, respectively, representing an increase of $3.4 million. The increase in interest income was due to increased balances in our money market funds, U.S. treasury bills and U.S. government agency bonds held during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

Previous wording

Since our inception, we have incurred significant operating losses. We have not yet commercialized verekitug and we do not expect to generate revenue from product sales of verekitug for the next several years, if at all. To date, we have funded our operations primarily with proceeds from our IPO and the sale of our Preferred Stock. Through September 30, 2024, we have received gross proceeds of $400.0 million from sales of our Preferred Stock and received $4.7 million in connection with our research and development arrangement with Maruho. As of September 30, 2024, we had cash, cash equivalents and short-term investments of $220.7 million. In October 2024, we completed our IPO and as a result, we received approximately $268.7 million in net proceeds.

Current wording

Since our inception, we have incurred significant operating losses. We have not yet commercialized verekitug and we do not expect to generate revenue from product sales of verekitug for the next several years, if at all. To date, we have funded our operations primarily with the sale of our redeemable convertible preferred stock and the proceeds from our IPO. Through March 31, 2025, we have received gross proceeds of $400.0 million from the issuance and sale of our redeemable convertible preferred stock and $268.8 million in net proceeds from our IPO. As of March 31, 2025, we had cash, cash equivalents and short-term investments of $431.4 million.

Previous wording

During the nine months ended September 30, 2023, operating activities used $21.8 million of cash, resulting primarily from our net loss of $8.7 million, non-cash changes in fair value of the preferred stock tranche right liability of $14.5 million, non-cash amortization of premiums and accretion of discounts on short-term investments of $1.0 million and changes in operating assets and liabilities of $0.3 million, partially offset by non-cash stock-based compensation expense of $2.6 million. Net cash used in changes in operating assets and liabilities was driven by a $0.3 million increase in prepaid expenses and other current assets and a $0.2 million decrease in accrued expenses and other current liabilities, partially offset by a $0.6 million increase in related party deferred revenue and a $0.1 million decrease in related party accounts receivable. The increase in related party deferred revenue and decrease in related party accounts receivable resulted primarily from the timing of revenue recognition compared to the timing of payments from Maruho for qualifying reimbursable expenses related to the Maruho License Agreement.

Current wording

During the three months ended March 31, 2025, operating activities used $41.2 million of cash, resulting primarily from our net loss of $27.3 million, changes in operating assets and liabilities of $15.0 million and non-cash amortization of premiums and accretion of discounts on short-term investments of $1.7 million, partially offset by non-cash stock-based compensation expense of $2.6 million. Net cash used in changes in operating assets and liabilities was primarily driven by a $13.7 million increase in prepaid expenses and other current assets due to upfront payments to CROs for planning activities associated with our COPD Phase 2 trial and our Phase 2 LTE study in patients with severe asthma and a $1.9 million decrease in accrued expenses and other current liabilities, partially offset by a $0.7 million increase in accounts payable.

Previous wording

During the nine months ended September 30, 2024, operating activities used $39.6 million of cash, resulting primarily from our net loss of $41.6 million, non-cash changes in fair value of the preferred stock tranche right liability of $2.9 million, and non-cash amortization of premiums and accretion of discounts on short-term investments of $2.3 million, partially offset by changes in operating assets and liabilities of $3.2 million and non-cash stock-based compensation expense of $3.9 million. Net cash provided by changes in operating assets and liabilities was primarily driven by a $2.9 million increase in accounts payable and a $1.1 million decrease in prepaid expenses and other current assets, partially offset by a $0.2 million decrease in accrued expenses and other current liabilities and a $0.5 million increase in related party accounts receivable. The increase in related party accounts receivable resulted primarily from the timing of revenue recognition compared to the timing of payments from Maruho for qualifying reimbursable expenses related to the Maruho License Agreement.

Current wording

During the three months ended March 31, 2024, operating activities used $17.6 million of cash, resulting primarily from our net loss of $10.9 million, changes in operating assets and liabilities of $3.9 million, non-cash changes in fair value of the preferred stock tranche right liability of $2.9 million, non-cash amortization of premiums and accretion of discounts on short-term investments of $0.6 million, partially offset by non-cash stock-based compensation expense of $0.6 million. Net cash used in changes in operating assets and liabilities was driven by a $1.7 million increase in prepaid expenses and other current assets and a $0.9 million decrease in accrued expenses and other current liabilities, a $0.6 million decrease in accounts receivable and a $0.6 million decrease accounts payable. The decrease in accounts receivable resulted primarily from the timing of revenue recognition compared to the timing of payments from Maruho for qualifying reimbursable expenses related to the Maruho License Agreement.

Previous wording

During the nine months ended September 30, 2024, net cash used in investing activities was $101.4 million, consisting primarily of purchases of short-term investments of $248.4 million, net of maturities of short-term investments of $147.3 million and purchases of property and equipment of $0.3 million.

Current wording

During the three months ended March 31, 2025, net cash used in investing activities was $213.4 million, consisting of purchases of short-term investments of $266.1 million, net of maturities of short-term investments of $52.7 million.

Previous wording

During the nine months ended September 30, 2023, net cash used in investing activities was $77.6 million, consisting primarily of purchases of short-term investments of $94.2 million, net of maturities of short-term investments of $16.7 million and purchases of property and equipment of $0.1 million.

Current wording

During the three months ended March 31, 2024, net cash provided by investing activities was $13.9 million, consisting of purchases of short-term investments of $23.4 million, net of maturities of short-term investments of $37.3 million.

Previous wording

During the nine months ended September 30, 2024, net cash provided by financing activities was $148.3 million, consisting of $149.9 million in net proceeds from the issuance of Series B Preferred Stock and $0.1 million in net proceeds from the exercise of stock options, partially offset by $1.8 million in payments of deferred offering costs.

Current wording

During the three months ended March 31, 2024, net cash provided by financing activities was $9.4 million, primarily consisting of partial net proceeds from the issuance of Series B Preferred Stock, which settled in April 2024.

Previous wording

We believe our existing cash and cash equivalents and short-term investments, including the net proceeds received in connection with our IPO, will be sufficient to fund our operating expenses and capital expenditure requirements through 2027. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Current wording

We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our operating expenses and capital expenditure requirements through 2027. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Previous wording

During the year ended December 31, 2023, we made an annual payment to Lonza in the amount of $0.4 million, which was paid during the nine months ended September 30, 2023. During the year ended December 31, 2022, we made an annual payment to Lonza in the amount of $0.4 million. During the nine months ended September 30, 2024, we made an annual payment to Lonza in the amount of $0.5 million. These payments were recognized as research and development expense in the condensed consolidated statements of operations and comprehensive loss. To date, we have not made any royalty payments to Lonza under the Lonza License Agreement.

Current wording

During the year ended December 31, 2024, we made an annual payment to Lonza in the amount of $0.5 million, which was paid during the three months ended March 31, 2024. During the three months ended March 31, 2025, we had $0.5 million included in accounts payable in connection with the annual license payment pursuant to the Lonza License Agreement. These payments were recognized as research and development expense in the condensed consolidated statements of operations and comprehensive loss.

Previous wording

On July 3, 2024, we entered into a three-year agreement for office space located at 890 Winter Street in Waltham, Massachusetts. We began paying monthly rent starting one month after lease commencement.

Current wording

On July 3, 2024, we entered into a three-year agreement for office space located at 890 Winter Street in Waltham, Massachusetts. We began paying monthly rent starting one month after lease commencement. Initial base rent is approximately $0.7 million for the first year and approximately $0.8 million for the second and third year. The lease commenced in September 2024.

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses incurred during the reporting periods. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities recorded revenues and expenses that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates.

Current wording

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of these condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and revenues and expenses that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Previous wording

During the nine months ended September 30, 2024, there were no material changes to our critical accounting policies and significant judgements described under Management’s Discussion and Analysis of Critical Accounting Policies and Significant Judgments which are included in our IPO final prospectus dated October 11, 2024.

Current wording

During the three months ended March 31, 2025, there were no material changes to our critical accounting policies and significant judgments described under Management’s Discussion and Analysis of Critical Accounting Policies and Significant Judgments which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Previous wording

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements included in our IPO final prospectus dated October 11, 2024.

Current wording

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Previous wording

We are also a “smaller reporting company,” meaning that the market value of our common stock and non-voting common stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our common stock and non-voting common stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our common stock and non-voting common stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Current wording

We are also a “smaller reporting company,” meaning that the market value of our common stock and non-voting common stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our common stock 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 (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our common stock 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. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.