CG Oncology, Inc.

1. Description of Business and Basis of Presentation

Description of Business

CG Oncology, Inc. (the Company) is a late-stage clinical biopharmaceutical company focused on developing and commercializing its product candidate, cretostimogene grenadenorepvec, for patients with bladder cancer. The Company is at a clinical stage and does not project to generate significant revenues if and until the U.S. Food and Drug Administration (FDA) approves its product candidate, cretostimogene, and the Company is able to commercialize this product candidate.

On March 28, 2025, the Company entered into an Open Market Sale Agreement SM (Jefferies Sales Agreement) with Jefferies LLC, as agent, pursuant to which the Company may offer and sell, from time to time through Jefferies, shares of the Company's common stock. As of March 31, 2026, the Company has completed the Jefferies Sales Agreement, having received gross proceeds of $550.0 million and net aggregate proceeds of$538.5 million under the Jefferies Sales Agreement, after deducting discounts and commissions and other offering expenses. During the three months ended March 31, 2026,6,941,407 shares were sold under the Jefferies Sales Agreement, at a weighted-average price of$57.56 per share, and the Company received net proceeds of$391.4 million, after deducting discounts and commissions and other offering expenses.

In February 2025, SafeGuard Healthcare, LLC (SafeGuard), a wholly owned subsidiary of the Company, purchased a $26.8 million convertible note, including accrued interest, from SP Healthcare SPV I, LLC (the SPV). The SPV used the proceeds from the Note to invest and acquire substantially all of the assets of Biovire, Inc. (Biovire), a contract manufacturing organization that produces cretostimogene for the Company. In July 2025, SafeGuard converted the Note (the Conversion Event) and obtained control of both the SPV and Biovire. Refer to Note 15 for additional details on the Conversion Event.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of March 31, 2026 and for the three months ended March 31, 2026 and 2025 have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed consolidated financial statements and the notes accompanying them should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2025 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (2025 Annual Report), filed with the SEC on February 27, 2026. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal and recurring adjustments, considered necessary for a fair statement of the interim periods.

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period.

Liquidity and Management’s Plans

As of March 31, 2026, the Company had approximately$1,076.2 million of cash, cash equivalents and marketable securities and working capital of approximately$1,066.9 million. The Company has a relatively limited operating history, and the revenue and income potential of the Company’s business and market are unproven. The Company has experienced net losses and negative cash flows from operations since its inception and, as of March 31, 2026, the Company had an accumulated deficit of$439.2 million. During the three months ended March 31, 2026, the Company incurred a net loss of$60.2 million and had negative cash flows from operations of$56.9 million. The Company will continue to incur significant costs and expenses related to its ongoing operations until it successfully develops, obtains regulatory approval, and gains market acceptance of a product candidate and achieves a level of revenues adequate to support the Company’s operations.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited financial statements in its 2025 Annual Report.

Recently Issued Accounting Standards

Accounting standards not listed below were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s unaudited condensed consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Comprehensive Income - Expense Disaggregation Disclosures, which will improve the disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions such as cost of sales, selling, general and administrative, and research and development. The amendments are effective for fiscal years beginning after December 15, 2026. Early adoption is permitted for annual financial statements that have not yet been issued or made available. The amendments should be applied on either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the provisions of the amendments and the effect on its future consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which clarifies and modernizes the accounting for costs related to internal-use software. The amendments remove all references to project stages and clarify the threshold entities apply to begin capitalizing costs. The amendments are effective for fiscal years beginning after December 15, 2027 and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the provisions of the amendments and the effect on its future consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements, which clarifies required interim disclosures under Topic 270 by providing a comprehensive list of required interim disclosures, and clarifies the applicability of Topic 270. This update is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within annual reporting periods beginning after December 15, 2028, with early adoption permitted. ASU 2025-11 may be adopted on a prospective or retrospective basis. The Company is currently evaluating the impact of this guidance on its future consolidated financial statements.

3. Fair Value Measurements

The following tables present the financial instruments carried at fair value on a recurring basis as of March 31, 2026 and December 31, 2025, respectively, in accordance with the ASC 820, Fair Value Measurement(ASC 820) hierarchy (in thousands):

The Company’s cash equivalents represent deposits in a short-term U.S. Treasury money market fund quoted in an active market, which were classified as a Level 1 fair value measurement, and fixed income securities (U.S. treasury bills) with original maturities of 90 days or less. Marketable securities consist primarily of fixed income securities (U.S. treasury bills and notes) and corporate bonds with original maturities greater than 90 days. All fixed income securities and corporate bonds were classified as a Level 2 fair value measurement.

There wereno transfers between Level 1 and Level 2 of the fair value hierarchy during thethree months ended March 31, 2026 and the year ended December 31, 2025.

4. Property and Equipment, Net

The components of property and equipment, net as of March 31, 2026 and December 31, 2025 were as follows (in thousands):

Depreciation expense for the three months ended March 31, 2026 and 2025 was$0.8 million and less than $0.1 million, respectively.

5. Goodwill

Goodwill

In connection with the Conversion Event in July 2025, the Company recognized goodwill of$10.3 million. See Note 15 for additional information on this transaction.

The Company annually assesses goodwill for impairment in the fourth quarter of each calendar year and at an interim date if indicators of impairment exist. During the three months ended March 31, 2026, no goodwill impairment was recognized.

6. Accrued Expenses and Other Current Liabilities

The components of accrued expenses and other current liabilities as of March 31, 2026 and December 31, 2025 were as follows (in thousands):

7. Commitments and Contingencies

Operating Leases

The Company has entered into non-cancellable operating leases with remaining lease terms expiring between 2026 and 2034. Of the four operating leases that have commenced as of March 31, 2026, three are leases in which the Company is the lessee for office space. The remaining operating lease was acquired in connection with the Conversion Event and includes office, manufacturing, and warehouse space. In the fourth quarter of 2025, the Company entered into an additional non-cancelable operating lease for office space with a term of approximately eight years, which, along with rent payments, is expected to commence in the third quarter of 2026. The Company hadno finance leases as of March 31, 2026 and December 31, 2025.

The components of lease expense for the periods ended March 31, 2026 and 2025 were as follows (in thousands):

Maturities of lease liabilities as of March 31, 2026 were as follows (in thousands):

Legal Proceedings

A liability for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources is recorded in the unaudited condensed consolidated financial statements if it is determined that it is probable that a loss has been incurred, and that the amount (or range) of the loss can be reasonably estimated.

On March 4, 2024, a complaint was filed against the Company in the Superior Court of the State of Delaware by ANI Pharmaceuticals, Inc. seeking a declaratory judgment that a provision in an assignment and technology transfer agreement between the Company and ANI, dated November 15, 2010 (the ANI Agreement), obligates the Company to pay ANI a royalty on certain “net sales” of cretostimogene, and (ii) compensatory damages alleging the Company was unjustly enriched by obtaining the benefit of certain non-patent assets under the ANI Agreement without paying adequate consideration to ANI. On July 16, 2025, the Superior Court granted the Company’s motion for summary judgment with respect to ANI’s request for a declaratory judgment to receive royalty payments from the potential sale of cretostimogene but denied the Company’s motion for summary judgment with respect to ANI’s unjust enrichment claim. On July 29, 2025, a jury entered a verdict in favor of the Company, unanimously rejecting all of ANI's claims for unjust enrichment damages. As a result, the Company will not owe ANI a future royalty of 5% on commercial sales of cretostimogene, no damages have been awarded to ANI, and there are no further payments due to ANI under the ANI Agreement. On April 10, 2026, the Superior Court heard oral arguments from ANI and the Company on pending post-trial motions submitted by the Company and ANI, which included (i) ANI’s Motion for Judgment as a Matter of Law; (ii) ANI’s Motion to Unseal Trial Exhibits; and (iii) CG’s Motion for Costs. As of the filing of this Quarterly Report on Form 10-Q, the Superior Court has not issued a ruling on these post-trial motions. The Company will continue to vigorously defend the post-trial motions and any appeals brought by ANI.

Indemnification

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with officers and members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. As of March 31, 2026, the Company had not experienced any losses related to these indemnification obligations, andno claims with respect thereto were outstanding.

8. License and Collaboration Agreements

Lepu Biotech Co., Ltd.

In March 2019, the Company entered into a development and license agreement with Lepu Biotech Co., Ltd. (Lepu) for cretostimogene (the Lepu License Agreement). Under the terms of the Lepu License Agreement, the Company granted to Lepu an exclusive license to develop, manufacture and commercialize cretostimogene and/or n-Dodecyl-beta-Maltoside (DDM) to treat and/or prevent cancer in mainland China, including Hong Kong and Macau (the Lepu Territory). The Company is obligated to use commercially reasonable efforts to supply Lepu with its requirements of cretostimogene and DDM for its development activities at Lepu’s cost and to periodically provide Lepu with manufacturing documentation and, at Lepu’s cost, reasonably requested assistance related to the manufacture of clinical and, if applicable, commercial supplies of cretostimogene and DDM. The Company determined that control of the license was transferred to Lepu on March 2019 upon execution of the contract.

Lepu paid to the Company a one-time upfront payment of $4.5 million and is obligated to make regulatory milestone payments of up to $2.5 million and commercial milestone payments of up to $57.5 million. The Company is entitled to receive a high single-digit royalty on net sales of cretostimogene and/or DDM sold in the Lepu Territory, subject to a specified reduction. Lepu’s royalty obligations will expire upon termination of the Lepu License Agreement.

The Company assessed the Lepu License Agreement in accordance with ASC 606, Revenue Recognition (ASC 606) and determined that the performance obligation is comprised solely of the license grant to Lepu. The Company determined the transaction price was $4.5 million and recorded the entire amount upon transfer of control of the functional intellectual property license rights in 2019. The Company evaluated the provision of manufacturing activities related to clinical and commercial supply of the licensed products and concluded that the manufacturing activities were not performance obligations as the terms do not provide a material right to Lepu.

Future milestone payments are fully constrained as the risk of significant revenue reversal will only be resolved depending on future regulatory approval and sales level outcomes. The Company will re-evaluate the likelihood of achieving future milestones at the end of each reporting period.

The sales-based royalty fee is considered variable consideration and will be recognized as revenue as such sales occur. The sales-based royalty fee qualifies for the royalty constraint exception and does not require an estimate of the future transaction price.

The Company recognizedno license and collaboration revenue during thethree months ended March 31, 2026 and 2025.

Kissei Pharmaceutical Co., Ltd.

In March 2020, and amended as of September 2022, the Company entered into a license and collaboration agreement with Kissei Pharmaceutical Co., Ltd. (Kissei) (the Kissei License Agreement). Under the terms of the Kissei License Agreement, the Company granted to Kissei an exclusive license to certain intellectual property rights in Bangladesh, Bhutan, Brunei, Cambodia, India, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, Nepal, Pakistan, Palau, Philippines, Singapore, Sri Lanka, Taiwan, Thailand and Vietnam (the Kissei Territory), for Kissei to develop and commercialize, but not manufacture, cretostimogene in combination with DDM (the Licensed Product) for all uses in oncology indications for which marketing approval is being sought. Under the Kissei License Agreement, the Company and Kissei agree to use commercially reasonable efforts to collaborate on clinical development activities in the Kissei Territory and each party is responsible for conducting the applicable activities pursuant to an agreed development plan. Kissei is responsible for the costs of developing the Licensed Product in the Kissei Territory, and the Company is responsible for the costs of developing the Licensed Product outside the Kissei Territory (Global Development), provided that Kissei is responsible for a low-double digit percentage and the Company is responsible for a high-double digit percentage of the cost of development activities that cannot be attributed solely to the Kissei Territory or outside the Kissei Territory. The Company is obligated to supply and Kissei will exclusively purchase its clinical and commercial requirements of Licensed Product from the Company. Kissei is responsible for commercializing the Licensed Product in the Kissei Territory and is obligated to use commercially reasonable efforts to seek regulatory approval for and commercialize at least one Licensed Product in a specified indication. Until a certain period of time has passed after the first regulatory approval of the Licensed Product, the Company is prohibited from commercializing certain competing products worldwide and Kissei is prohibited from researching, developing or commercializing certain competing products worldwide.

Under the terms of the Kissei License Agreement, the Company received a $10.0 million one-time upfront payment and, in connection with entry into this agreement, Kissei purchased $30.0 million worth of Series D redeemable convertible preferred stock as part of the Company’s Series D financing. Kissei is obligated to make development and regulatory milestone payments to the Company of up to $33.0 million and commercial milestone payments of up to $67.0 million. The Company has agreed to pay Kissei a royalty on net sales of Licensed Product outside the Kissei Territory and outside the Lepu Territory (as described above), including on any U.S. sales, in a low-single digit percentage, subject to certain capped reductions. The Company is entitled to receive a royalty on net sales of Licensed Product in the Kissei Territory in the mid-twenties percentage, subject to certain capped reductions. Also, Kissei has the right to offset the royalty payments due to the Company with respect to the cost for the supply of Licensed Product sold by the Company to Kissei, and to indefinitely carryforward credits for any excess supply amounts paid over royalty amounts owed in a given quarter. The Company is entitled to receive a specified minimum percentage of royalties on net sales of a given Licensed Product in a given country and a given quarter, unless, if for such Licensed Product in such country and such quarter, Kissei has taken the maximum allowable reductions and the ratio of the cost for the supply of Licensed Product to the sales price for Licensed Product exceeds a low-double digit percentage threshold, then the Company shall receiveno royalties on the net sales of such Licensed Product in such country and such quarter. Kissei’s and the Company’s royalty obligations will expire on a Licensed Product-by-Licensed Product and country-by-country basis on the later of twelve years from the date of first commercial sale of such Licensed Product in such country or when there is no longer a valid patent claim covering such Licensed Product in such country.

The Kissei License Agreement will expire on a Licensed Product-by-Licensed Product and country-by-country basis when there is no remaining royalty or milestone payment obligation due to a party with respect to such Licensed Product in such country. Following expiration of the Kissei License Agreement in its entirety, the licenses the Company granted to Kissei will become non-exclusive, fully-paid royalty-free and irrevocable and Kissei will have the right to negotiate directly with the Company's product suppliers for the direct supply of Licensed Product to Kissei. The Kissei License Agreement may be terminated either by Kissei or by the Company in the event of an uncured material breach by the other party or in the event the other party becomes subject to specified bankruptcy, insolvency or similar circumstances. In addition, the Company has the right to terminate the Kissei License Agreement in the event that Kissei commences a legal action challenging the validity, enforceability or scope of any licensed patents under the Kissei License Agreement. Kissei may terminate the Kissei License Agreement at will upon specified written notice. Additionally, Kissei may terminate the Kissei License Agreement for the Company's willful and malicious misconduct that results in substantial and irreparable harm to the commercial value of the Licensed Products in the Kissei Territory and upon any such termination, the licenses the Company granted to Kissei will become royalty-free and fully paid-up and Kissei will have the right to negotiate directly with the Company's contract manufacturing organizations for the supply of Licensed Product. Upon termination of the Kissei License Agreement for any other reason all rights and licenses granted to Kissei to develop and commercialize the product under the Kissei License Agreement will terminate, subject to certain rights to sell existing inventory of Licensed Products by Kissei and its sublicensees. Upon termination of the Kissei License Agreement for Kissei’s breach, any sublicenses granted by Kissei may, upon the Company’s discretion, continue.

The Company evaluated the Kissei License Agreement to determine whether it is a collaborative arrangement in the scope of ASC 808, Collaborative Arrangements (ASC 808). The Company concluded the Kissei License Agreement is a collaborative agreement under ASC 808, as the Kissei License Agreement involves a joint operating activity, each party is an active participant in the activities related to the Kissei License Agreement, and both parties are exposed to significant risks and rewards dependent upon the commercial success of the activities related to the Kissei License Agreement.

The Company determined the Kissei License Agreement contained two material components: (i) an exclusive license granted to Kissei to certain intellectual property rights in the Kissei Territory, for Kissei to develop and commercialize, but not manufacture, the Licensed Product for all uses in oncology; and (ii) the parties’ participation in the Global Development of the Licensed Product. The Company used the criteria specified in ASC 606 to determine which of the components of the Kissei License Agreement are performance obligations with a customer and concluded Kissei is the Company’s customer for the license and related activities in the Kissei Territory under ASC 606. The Global Development activities under the agreement does not present a transaction with a customer and the payments received by the Company for Global Development activities, including manufacturing, will be accounted for as a reduction of related expenses.

The Company evaluated the Kissei Territory specific license and related activities under ASC 606, as these transactions are considered transactions with a customer, and identified two material promises at the outset of the Kissei License Agreement, which consists of the following: (1) the exclusive license and (2) the manufacturing activities related to development and commercial supply of the Licensed Product in the Kissei Territory. The Company further evaluated the material promise associated with manufacturing activities related to development and commercial supply of the Licensed Products in the Kissei Territory. Given Kissei is not obligated to purchase any minimum amount or quantities of the development and commercial supply from the Company, the Company concluded, for the purpose of ASC 606, the provision of manufacturing activities related to development and commercial supply of the Licensed Product in the Kissei Territory was an option but not a performance obligation of the Company at the inception of the Kissei License Agreement and will be accounted for if and when exercised. The Company also concluded there is no separate material right in connection with the development and commercial supply of the licensed product, as the expected pricing was not issued at a significant and incremental discount. Therefore, the manufacturing activities were excluded as a performance obligation at the outset of the arrangement.

The Company evaluated the license under ASC 606 and concluded the license is a functional intellectual property license. The Company determined Kissei benefited from the license at the time of grant and, therefore, the related performance obligation was satisfied at a point in time. Additionally, the Company is entitled to development and regulatory milestones as well as sales milestones and royalties from Kissei upon future sales of the Licensed Product in the Kissei Territory. Future milestone payments are fully contingent as the risk of significant reversal will only be resolved depending on future development milestones, regulatory approval and sales level outcomes. The Company re-evaluates the likelihood of achieving future milestones at the end of each reporting period. The royalties are considered variable consideration and will be recognized as revenue as such sales occur. The sales-based royalties qualify for the royalty constrain exception and do not require an estimate of the future transaction price.

The Company recognized less than $0.1 million in license and collaboration revenue for each of thethree months ended March 31, 2026 and 2025.

9. Segment Disclosures

The Company operates as asingle operating segment. The Company's chief operating decision maker (CODM) is itschief executive officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated net income (loss) to assess financial performance and allocate resources. The CODM does not review assets in evaluating the results of the single segment and therefore, such information is not presented.

The following table presents selected financial information with respect to the Company's single operating segment for thethree months ended March 31, 2026 and 2025:

10. Common Stock

The Company is authorized to issue up to 700,000,000 shares of common stock at March 31, 2026 and December 31, 2025, of which 88,007,761 and 80,689,128 shares were issued and outstanding at March 31, 2026 and December 31, 2025, respectively.

Voting, dividend and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers and preferences of the holders of the preferred stock, of which there are none as of March 31, 2026 and December 31, 2025.

Dividends

The holders of common stock shall be entitled to receive dividends out of funds legally available therefore at such times and in such amounts as the board of directors may determine in its sole discretion.

Liquidation Rights

Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Company or deemed liquidation event of the Company, all of the remaining assets of the Company available for distribution to the stockholders shall be distributed among the holders of the common stock, pro rata based on the number of shares held by each such holder.

Reserved Shares

As of March 31, 2026, the Company reserved the following shares of common stock for issuance:

11. Stock-Based Compensation

In 2015, the Company established the 2015 Plan, under which the Company may grant options and restricted stock to its employees and certain non-employees. As of March 31, 2026, there were 437,361 shares of common stock subject to outstanding awards under the 2015 Plan. In 2022, the Company established the 2022 Plan, under which the Company may grant options, restricted stock units, restricted stock, stock appreciation rights, dividend equivalents and other stock and cash-based awards to its employees and certain non-employees. As of March 31, 2026, there were 3,096,076 shares of common stock subject to outstanding awards under the 2022 Plan.

On January 11, 2024, the Company’s board of directors and stockholders approved the 2024 Equity Incentive Plan (the 2024 Plan), which became effective on January 24, 2024. The 2024 Plan replaced the 2022 Plan, as the Company’s board of directors has determined to not make additional grants under the 2022 Plan following its initial public offering. However, the 2015 and 2022 Plans will continue to govern outstanding equity awards granted under the 2015 and 2022 Plans. The 2024 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors and consultants. The number of shares initially available for issuance under awards granted pursuant to the 2024 Plan is (1)8,246,565 shares, plus (2) any shares subject to outstanding awards under the 2015 and 2022 Plans as of the effective date of the 2024 Plan that become available for issuance under the 2024 Plan thereafter in accordance with its terms. As of March 31, 2026, there were 4,220,777 shares of common stock subject to outstanding awards and 7,309,113 shares of common stock remaining and available for issuance under the 2024 Plan.

The Company may grant options to purchase authorized but unissued shares of the Company’s common stock. Options granted under the 2015 Plan, 2022 Plan and 2024 Plan include incentive stock options that can be granted only to the Company’s employees and non-statutory stock options that can be granted to the Company’s employees, consultants, advisors and directors.

The exercise prices, vesting and other restrictions of the awards granted under the 2015 Plan, 2022 Plan and 2024 Plan are determined by the Board, except that no stock option may be issued with an exercise price less than the fair market value of the common stock at the date of the grant or have a term in excess of ten years. Options granted under the 2015 Plan, 2022 Plan and 2024 Plan are exercisable in whole or in part at any time subsequent to vesting.

Stock Options

The following table summarizes stock option activity for thethree months ended March 31, 2026 (in thousands, except share and per share amounts):

The aggregate intrinsic value is calculated as the difference between the exercise price of the stock options and the fair value of the Company's common stock. The aggregate intrinsic value of options exercised during the three months ended March 31, 2026 and 2025 was$19.6 million and$0.9 million, respectively.

The weighted-average grant-date fair value of the options granted was$39.90 and$27.30 per share for the three months ended March 31, 2026 and 2025, respectively. The aggregate grant-date fair value of options vested during the three months ended March 31, 2026 and 2025 was$6.8 million and$5.6 million, respectively.

The following table provides the assumptions used in determining the fair value of option awards for the three months ended March 31, 2026 and 2025:

The Company recorded stock-based compensation expense related to stock options of$6.0 million and$4.4 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, the Company had an aggregate$57.5 million of gross unrecognized stock-based compensation expense related to unvested options to be recognized over a weighted average period of 2.7 years.

Performance-Based Restricted Stock Units

A Performance Stock Unit (PSU) represents one equivalent share of the Company's common stock to be issued after achievement of the performance metrics specified in the grant. The following table summarizes the Company's PSU activity forthree months ended March 31, 2026:

The Company estimates the fair value of a PSU based upon the expected achievement of the performance metrics specified in the grant and the closing market price of the Company's common stock on the date of grant.

Stock-based compensation expense associated with these PSUs is recognized if achievement of the underlying performance condition is considered probable of achievement based on the Company’s best estimates. No stock-based compensation expense related to PSUs was recorded during thethree months ended March 31, 2026 and 2025. As of March 31, 2026, the Company had an aggregate$6.5 million of gross unrecognized stock-based compensation expense related to unvested PSUs to be recognized over a weighted average period of 1.2 years, including the expense attributable to PSUs for which achievement is not considered probable and no current expense is being recognized.

Stock-based compensation expense related to stock awards and the 2024 Employee Stock Purchase Plan (see Note 12) recorded in the accompanying statements of operations for the three months ended March 31, 2026 and 2025 was as follows (in thousands):

The Company has not recognized and does not expect to recognize in the near future, any tax benefit related to employee stock-based compensation expense as a result of the full valuation allowance related to its net deferred tax assets.

12. Employee Stock Purchase Plan

On January 11, 2024, the Company’s board of directors and stockholders approved the 2024 Employee Stock Purchase Plan (the ESPP), which became effective on January 24, 2024. The number of shares initially available for issuance pursuant to the ESPP is 812,242 shares. The ESPP provides for the sale of the Company's common stock to eligible employees at 85% of the fair market value of the Company's common stock at the commencement date of each offering period or the relevant date of purchase, whichever is lower. Payroll deductions are limited to 15% of the employee’s eligible compensation, subject to IRS limits. In addition, employees may not buy more than 100,000 shares during any purchase period or offering period. There were 39,060 shares purchased under the ESPP during the three months ended March 31, 2026, and 32,019 shares purchased under the ESPP during the three months ended March 31, 2025. As of March 31, 2026, there were approximately 1.5 million shares available for issuance under the ESPP.

The Company recorded stock-based compensation expense under the ESPP of approximately$0.5 million and$0.7 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, the Company had$1.3 million of gross unrecognized stock-based compensation expense under the ESPP to be recognized over a weighted average period of 1.6 years.

13. Debt

In connection with the Conversion Event, the Company assumed an unsecured promissory note held by Biovire (the Biovire Note) with an outstanding principal balance of $3.0 million. The Company determined that the carrying amount of the Biovire Note represented its fair value. The Biovire Note is due and payable on February 28, 2028 (Maturity Date) and accrues interest at the lesser of (i) the daily term SOFR rate plus 2.60% and (ii)25.0%, or the highest rate permitted by applicable law, and is payable monthly. The Company has the ability to repay the Biovire Note in full prior to the Maturity Date without penalty.

14. Net Loss Per Share Attributable to Common Stockholders

Basic and diluted net loss per share was calculated as follows (in thousands, except share and per share amounts):

The Company’s potentially dilutive securities, which include stock options and awards, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders at March 31, 2026 and 2025 because including them would have had an anti-dilutive effect:

15. Acquisition of Biovire

On July 20, 2025, the Company obtained control of the SPV through the Conversion Event, resulting in SafeGuard owning 100% of the membership interest of the SPV. As a result of the Conversion Event, the Company also indirectly obtained control of Biovire as the SPV owns 99.96% of the capital stock of Biovire. As a result of this change in control, purchase accounting was applied by the Company and the operations of Biovire are consolidated as of the effective date of the conversion. See footnote 1 for more information on the Note.

Biovire is a contract manufacturer specializing in the fill and finish of novel drugs and medical devices for pharmaceutical and biotech companies. Prior to becoming a majority-owned subsidiary, Biovire was a vendor to the Company and continues to provide clinical supply of cretostimogene used in the Company’s clinical trials. The acquisition provides the Company the ability to supply its requirements of cretostimogene during the remainder of its clinical trials.

Consideration was determined to be the fair value of the note receivable that was exchanged for the majority of shares of the SPV and Biovire. The acquisition was accounted for as a business combination using the acquisition method of accounting, under which the acquired assets, including intangible assets, and assumed liabilities were recognized at their estimated fair values as of July 20, 2025, with the excess of the fair value of consideration transferred over the fair value of the net assets acquired recognized as goodwill. The Company's unaudited condensed consolidated financial statements include the operating results of the SPV and Biovire from the date of acquisition through March 31, 2026.

The purchase price allocation is set forth in the table below and represents the Company’s fair value estimates related to the acquisition as of July 20, 2025.

The purchase price was allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based on their acquisition date estimated fair values. The carrying amount of accounts receivable and inventory acquired represented their fair value. Property and equipment were assigned a fair value of$16.6 million and will be amortized over a weighted average of 5.5 years. The identifiable intangible assets consist of trade names and trademarks and customer relationships which were each assigned fair values of approximately$0.3 million and will be amortized on a straight-line basis over their estimated useful lives of 10 years. The acquired property and equipment and intangible assets were valued utilizing either the relief from royalty method or the multi-period excess earnings method as deemed most applicable. These approaches require judgment, including those related to projected net cash flows, revenue growth rates, and the weighted average cost of capital used to discount the cash flows.

Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired in addition to liabilities assumed arising from the business combination. The Company believes the goodwill related to the acquisition was attributable to the expected synergies, value of the assembled workforce, and the collective experience of the management team with regards to its operations, customers, and industry.