Design Therapeutics, Inc.

1. Orga nization

Design Therapeutics, Inc. (the “Company”) was incorporated in Delaware in December 2017 and is based in Carlsbad, California. The Company is a clinical-stage biopharmaceutical company pioneering the research and development of GeneTAC® molecules, which are a novel class of small-molecule gene targeted chimera therapeutic candidates designed to be disease-modifying by addressing the underlying cause of diseases caused by inherited nucleotide repeat expansion mutations. The Company’s lead product candidate is in Friedreich ataxia (FA), its second product candidate is in Fuchs endothelial corneal dystrophy (FECD), its third product candidate is in myotonic dystrophy type-1 (DM1), and it is also advancing GeneTAC®programs to address other diseases.

Liquidity and Capital Resources

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred net operating losses since inception and had an accumulated deficit of$334.8 million as of June 30, 2026. The Company had cash, cash equivalents and investment securities of$207.4 million as of June 30, 2026, and has not generated positive cash flow from operations.

Management expects to incur net losses for the foreseeable future. There can be no assurance that the Company will ever earn revenues or achieve profitability, or if achieved, that they will be sustained on a continuing basis. In addition, the research, product development and clinical development activities as well as the commercialization of the Company's products, if approved, will require significant additional financing. The Company may be unable to secure such financing when needed, or if available, such financings may be under terms that are unfavorable to the Company or the current stockholders. If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations. The Company's currently available cash, cash equivalents and investment securities as of June 30, 2026 are sufficient to meet its anticipated cash requirements for more than 12 months following the date the financial statements are issued.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles and following the requirements of the United States Securities and Exchange Commission (“SEC”) for interim reporting. The Company's financial statements include all adjustments, consisting of only normal recurring adjustments, which in the opinion of management are necessary to present fairly the Company’s financial position as of the reporting date and results of operations and cash flows for the periods presented.

The preparation of the Company’s financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to accruals for research and development expenses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates.

Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued Accounting Standard Update (“ASU”) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to enhance transparency into the nature and function of expenses. The amendments require that on an annual and interim basis, entities disclose disaggregated operating expense information about specific expense categories. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15,

2027. Early adoption is permitted and the amendments may be applied either prospectively or retrospectively. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

2028. Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of stock options outstanding under the Company’s equity incentive plans and employee stock purchase rights under the Company’s 2021 Employee Stock Purchase Plan (“ESPP”), as applicable. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company's net loss position.

The following table sets forth the outstanding, potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:

4. Fair Value Measurements

Accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis at June 30, 2026 and December 31, 2025 (in thousands):

(1)

Included in cash and cash equivalents on the accompanying balance sheets.

Interest bearing money market accounts are valued at amortized cost, which approximates fair value. The carrying value of the Company’s cash, accounts payable and accrued liabilities are considered to be representative of their respective fair values due to the short-term nature of those instruments. The Company’s investment securities, which may include money market accounts, money market funds, certificates of deposits, U.S. Treasury securities, and high quality, marketable debt instruments of corporations and government sponsored enterprises, are measured at fair value in accordance with the fair value hierarchy. The Company obtains the fair value of its available-for-sale debt securities from a professional pricing service. Level 2 securities are valued using quoted market prices for similar instruments, non-binding market prices that are corroborated by observable market data and include our investments in marketable debt instruments of government sponsored enterprises. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis and no transfers between levels have occurred during the periods presented.

5. Investment Securities

The Company’s investment policy defines allowable investment securities and establishes guidelines relating to credit quality, diversification, and maturities of its investments to preserve principal and maintain liquidity. The Company’s investment securities consisted of the following at June 30, 2026 and December 31, 2025 (in thousands):

The Company reviews its investments at each reporting date to identify and evaluate whether a decline in fair value below the amortized cost basis of available-for-sale securities is due to credit-related factors and determines if such unrealized losses are the result of credit losses that require impairment. Factors considered in determining whether an unrealized loss is the result of a credit loss or other factors include the extent to which the fair value is less than the cost basis, any changes to the rating of the security by a rating agency, the financial condition and near-term prospects of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any adverse legal or regulatory events affecting the issuer or issuer’s industry, any significant deterioration in economic condition and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

There were 54 and 4 securities in an unrealized loss position at June 30, 2026 and December 31, 2025, respectively. The Company determined that unrealized losses on its available-for-sale investment securities were primarily attributable to changes in interest rates. Each security remained at a high credit quality rating. Further, there had been no adverse conditions noted for any of the issuers and the Company does not intend to sell any of the securities prior to maturity. As such, an allowance for credit losses has not been recognized as of June 30, 2026 or December 31, 2025.

The following tables present available-for-sale investments that were in an unrealized loss position as of June 30, 2026 and December 31, 2025, aggregated by security type and length of time in a continuous unrealized loss position (in thousands):

Accrued interest receivable on available-for-sale investment securities, included in “Prepaid expenses and other current assets” on the Company’s balance sheets, was $1.8 million and$1.7 million as of June 30, 2026 and December 31, 2025, respectively.

6. Balance Sheet Details

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

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

Accrued expenses and current liabilities consisted of the following (in thousands):

7. Segment Information

The Company manages the business activities at the consolidated level and operates inone operating and reportable segment. The Company’s CODM is itschief executive officer. The CODM primarily utilizes long-range financial projections and cash runway in order to allocate resources and to assess performance. As of June 30, 2026, the Company hasno revenue and all the Company’s long-lived assets were located within the United States. The CODM is regularly provided with the following significant segment expenses:

(1)

Other segment items included in Segment net loss includes professional services, consulting and other outside services expenses, depreciation expense, insurance, facilities and other overhead items.

8. Commitm ents and Contingencies

Contingencies

From time to time, the Company may become subject to claims or suits arising in the ordinary course of business. The Company accrues a liability for such matters when it is probable that the future expenditures will be made and such expenditures can be reasonably estimated. The Company had no such contingent liabilities as of June 30, 2026 or December 31, 2025.

9. License Agreements

In May 2024, the Company entered into a license agreement pursuant to which it received exclusive, worldwide, royalty-bearing, sublicensable rights to certain patents and technology to be used in the development and commercialization of certain products.

During the year ended December 31, 2025, the Company recorded $0.1 million to research and development expenses related to regulatory milestones, which is included in accrued expenses and other current liabilities as of June 30, 2026 and December 31, 2025. There were no additional payments or royalties recorded for the six months ended June 30, 2026. The Company may be obligated to make aggregate regulatory milestone payments of up to $0.8 million for each product incorporating licensed patent rights and pay a royalty on worldwide net sales on a product-by-product basis. The Company will recognize these milestone payments and royalties when paid or payable.

The Company may terminate the license agreement with 60 days’ written notice and each party may terminate the license agreement upon 30 days’ written notice for certain breaches of the agreement that remain uncured following 60 days’ notice to the other party of such breach. Unless terminated earlier by the parties, the term of the license agreement will continue until the last valid patent claim expires.

Wisconsin Alumni Research Foundation

In February 2019, the Company entered into a Human Therapeutics Exclusive License Agreement (the “License Agreement”) with the Wisconsin Alumni Research Foundation (“WARF”). Under the License Agreement, the Company licensed the exclusive, worldwide, royalty-bearing, sublicensable rights to certain WARF patents and the nonexclusive worldwide rights to certain know-how to develop and commercialize products for the prevention, diagnosis and treatment of disease. As consideration for the license, the Company agreed to pay an upfront fee of $0.3 million, which the Company immediately expensed as research and development expense in its statements of operations as there was no alternative future use for the license.

In 2022, pursuant to the License Agreement, the Company paid $0.1 million upon the acceptance of an Investigational New Drug Application in the United States. The Company will be required to make further aggregate milestone payments of up to $17.5 million upon achievement of certain other regulatory and commercial milestones. The Company may also be required to pay royalties based on annual net product sales in the low single digits on its or its sublicensees’ net product sales on a country-by-country and product-by-product basis, and is subject to a minimum royalty of $0.1 million per calendar year upon first commercial product sale. Further, the Company may be required to pay sublicense fees in the mid-single digits percentage for fees, royalties or other payments earned from the granting of sublicenses to the WARF patents and know-how. The Company will recognize these milestone payments and royalties when paid or payable. There were no additional payments or royalties recorded through June 30, 2026.

The Company is responsible for reimbursing WARF for costs incurred in connection with prosecuting and maintaining patent rights that are specific to the License Agreement. Expenses recognized in connection with legal patent fees under this License Agreement were immaterial for the three and six months ended June 30, 2026 and 2025.

The Company may terminate the License Agreement with 90 days written notice or for certain breaches of the agreement. WARF may terminate the License Agreement with 90 days written notice if first commercial sale does not occur before December 31, 2031. Unless terminated earlier by the parties, the term of the License Agreement will continue until the last licensed patent expires in all countries.

10. Stockholders’ Equity

Shelf Registration Statement

In May 2025, the Company filed a shelf registration statement on Form S-3 (the “2025 Shelf Registration Statement”). The 2025 Shelf Registration Statement permits: (i) the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $300.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination; and (ii) the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $100.0 million of our common stock that may be issued and sold under an“at-the-market” sales agreement (the “ATM Program”). The $100.0 million of common stock that may be issued and sold under the ATM Program is included in the $300.0 million of securities that may be issued and sold under the 2025 Shelf Registration Statement. During the six months ended June 30, 2026, the Company sold an aggregate of

2,006,550 shares of its common stock pursuant to the ATM Program for aggregate net proceeds of approximately $19.9 million. The Company hadno sales pursuant to the ATM Program during the three months ended June 30, 2026. As of June 30, 2026, the Company had $53.9 million available for future issuances of common stock pursuant to the ATM Program.

11. Stock-Based Compensation

Equity Incentive Award Plans

The number of shares of common stock available for issuance under the Company's 2021 Equity Incentive Plan automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to 5% of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Company’s board of directors. As of June 30, 2026, the total number of shares available for future issuance was 4,739,791.

The following table summarizes stock option activity for thesix months ended June 30, 2026:

Stock-based compensation expense has been reported in the Company's condensed statements of operations as follows (in thousands):

2021 Employee Stock Purchase Plan

The number of shares of common stock available for issuance under the Company's ESPP automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to the lesser of (i) 1% of the total number of shares of the Company’s common stock outstanding on the last day of the calendar month before the date of each automatic increase and (ii)1,200,000 shares; or a lesser number of shares determined by the Company’s board of directors. As of June 30, 2026, the Company had issued 791,235 shares of the Company's common stock under the ESPP and had 2,661,273 shares available for future issuance.

12. Related Party Transactions

Lease Agreement

In February 2021, the Company entered into a lease agreement with Crossing Holdings, LLC to rent laboratory and office space (the “Lease”). In March 2022, the Company entered into an amendment with Crossing Holdings, LLC amending the Lease for additional office space in the same building (the “Lease Amendment”). Dr. Pratik Shah and entities that he controls are the sole members of Crossing Holdings, LLC. In January 2026, the Lease was further amended (the “Second Lease Amendment”), which was approved by the Audit Committee of the Board of Directors of the Company in accordance with the Company’s Related Persons Transactions Policy, upon the sale of the leased premises to TREF V Hidden Valley Owner LLC on January 28, 2026. Following the effectiveness of the Second Lease Amendment, neither Crossing Holdings, LLC nor Dr. Pratik Shah has any personal interest in the Lease.

Rent and related operating expenses recognized by the Company under the Lease and Lease Amendment during the periods presented were as follows (in thousands):

Consulting Agreements

In January 2019, the Company entered into an agreement with the Marlinspike Group, LLC (“Marlinspike Group”) for research support, management, and business consulting services (the “2019 Consulting Agreement”). Further, Marlinspike Group provides the use of its office space in Carlsbad, California to the Company on an as-available basis from time to time pursuant to the agreement. The Company’s Chief Executive Officer and Chairperson of its board of directors is an executive officer of Marlinspike Group.

In March 2020, the 2019 Consulting Agreement was terminated and replaced with an amended consulting agreement (the “2020 Consulting Agreement”), which provides for similar services and use of office space for a monthly fee of $20,000. Pursuant to the terms of the 2020 Consulting Agreement, it shall remain in effect until otherwise terminated. Termination may occur at any time upon mutual agreement or unilaterally upon 30 days’ written notice. If the Company unilaterally terminates the 2020 Consulting Agreement for any reason other than cause, it would be subject to a $240,000 termination fee. There has been no termination and the Company cannot determine when, or if, such a termination will occur and hence has not recorded a liability for the fee.

Expenses recognized by the Company under the 2020 Consulting Agreement during the periods presented were as follows (in thousands):

13. Leases

The Company amended the Lease in January 2026 via the Second Lease Amendment, which extended the lease term through December 2029 and reduced the base rent commencing on January 28, 2026, with anoption to extend the lease term for a period of up tofour years. As a result of the Second Lease Amendment, the Company recorded a $1.3 million increase in its right-of-use asset and operating lease liabilities during the three months ended March 31, 2026. Future minimum lease payments, the weighted-average remaining lease term and discount rate for the Lease as of June 30, 2026 are as follows (in thousands):

Rent expense for each of the three months ended June 30, 2026 and 2025 was $0.2 million. Rent expense for thesix months ended June 30, 2026 and 2025 was $0.4 million and $0.5 million, respectively.