Xilio Therapeutics, Inc.

Comparison of the three months ended June 30, 2026 and 2025

The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025 (in thousands):

Collaboration and License Revenue

Collaboration and license revenue increased by $10.6 million from $8.1 million for the three months ended June 30, 2025 to $18.7 million for the three months ended June 30, 2026. The increase was due to an increase in collaboration and license revenue recognized under our collaboration and license agreements with AbbVie and Gilead.

The following table summarizes our research and development expenses for the three months ended June 30, 2026 and 2025 (in thousands):

Research and development expenses decreased by $0.8 million from $15.3 million for the three months ended June 30, 2025 to $14.6 million for the three months ended June 30, 2026. The changes in research and development expenses were primarily due to the following:

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other early programs and indirect research and development costs increased by $1.7 million, primarily driven by an increase in external expenses related to preclinical research and development activities, including costs related to our masked TCE programs targeting CLDN18.2 and PSMA+STEAP1 and our AbbVie collaboration;

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personnel-related costs increased by $0.8 million, primarily driven by a $0.6 million increase in salaries, bonuses and benefits due to higher research and development headcount and a $0.2 million increase in stock-based compensation;

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efarindodekin alfa costs decreased by $0.2 million, primarily driven by a decrease in clinical development activities related to our ongoing Phase 2 clinical trial;

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XTX501 costs decreased by $0.3 million, primarily driven by a $0.3 million decrease in manufacturing activities related to IND-enabling studies and a $0.2 million decrease in preclinical development activities, partially offset by a $0.2 million increase in clinical trial startup activities related to our Phase 1/2 clinical trial for XTX501; and

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vilastobart costs decreased by $2.8 million, primarily driven by a decrease in clinical development activities related to our Phase 1/2 clinical trial evaluating vilastobart in combination with atezolizumab.

The following table summarizes our general and administrative expenses for the three months ended June 30, 2026 and 2025 (in thousands):

General and administrative expenses increased by $0.5 million from $7.1 million for the three months ended June 30, 2025 to $7.6 million for the three months ended June 30, 2026. The changes in general and administrative expenses were primarily due to the following:

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personnel-related costs increased by $0.3 million, primarily driven by an increase in salary, severance and recruiting costs, partially offset by a decrease in discretionary bonus costs; and

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professional and consulting fees increased by $0.2 million, primarily driven by an increase in other professional costs.

The change in fair value of common stock warrant liabilities for the three months ended June 30, 2026 was due to a loss of $3.9 million resulting from the increase in the fair value of the common stock warrant liabilities between March 31, 2026 and June 30, 2026, which was primarily driven by an, increase in the price per share of our common stock.

Other income (expense), net, increased by $2.5 million from other expense of $1.4 million for the three months ended June 30, 2025 to other income of $1.1 million for the three months ended June 30, 2026. The increase in other income (expense), net was primarily due to an increase in interest income due to a higher average cash balance and the $2.3 million in issuance costs we incurred in connection with the June 2025 follow-on offering, which were allocated to the common stock warrant liabilities, for which there was no comparable cost for the three months ended June 30, 2026.

Comparison of the six months ended June 30, 2026 and 2025

The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025 (in thousands):

Collaboration and License Revenue

Collaboration and license revenue increased by $20.3 million from $11.0 million for the six months ended June 30, 2025 to $31.3 million for the six months ended June 30, 2026. The increase was due to an increase in collaboration and license revenue recognized under our collaboration and license agreements with AbbVie and Gilead.

The following table summarizes our research and development expenses for the six months ended June 30, 2026 and 2025 (in thousands):

Research and development expenses increased by $10.8 million from $23.6 million for the six months ended June 30, 2025 to $34.4 million for the six months ended June 30, 2026. The changes in research and development expenses were primarily due to the following:

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XTX501 costs increased by $5.4 million, primarily driven by a $2.6 million increase in manufacturing activities related to IND-enabling studies, a $1.6 million increase related to clinical trial startup activities for our Phase 1/2 clinical trial for XTX501 and a $1.0 million increase in preclinical development activities;

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other early programs and indirect research and development costs increased by $4.5 million, primarily driven by an increase in external expenses related to preclinical research and development activities, including costs related to our masked TCE programs targeting CLDN18.2 and PSMA+STEAP1 and our AbbVie collaboration;

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personnel-related costs increased by $2.2 million, primarily driven by a $1.6 million increase in salaries, bonuses and benefits due to higher research and development headcount and a $0.6 million increase in stock-based compensation;

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efarindodekin alfa costs increased by $0.2 million, primarily driven by an increase in clinical development activities related to our ongoing Phase 2 clinical trial; and

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vilastobart costs decreased by $1.5 million, primarily driven by a decrease in clinical development activities related to our Phase 1/2 clinical trial evaluating vilastobart in combination with atezolizumab.

The following table summarizes our general and administrative expenses for the six months ended June 30, 2026 and 2025 (in thousands):

General and administrative expenses decreased by $1.1 million from $15.6 million for the six months ended June 30, 2025 to $14.6 million for the six months ended June 30, 2026. The changes in general and administrative expenses were primarily due to a decrease of $1.0 million in legal fees and other professional costs.

The change in fair value of common stock warrant liabilities for the six months ended June 30, 2026 was due to a loss of $0.6 million resulting from the increase in the fair value of the common stock warrant liabilities between December 31, 2025 and June 30, 2026, which was primarily driven by an increase in the price per share of our common stock.

Other income (expense), net, increased by $3.2 million from other expense of $0.8 million for the six months ended June 30, 2025 to other income of $2.3 million for the six months ended June 30, 2026. The increase in other income (expense), net was primarily due to an increase in interest income due to a higher average cash balance, partially offset by the $2.3 million in issuance costs we incurred in connection with the June 2025 follow-on offering, which were allocated to the common stock warrant liabilities, for which there was no comparable cost for the three months ended June 30, 2026.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any of our product candidates, which are in preclinical or early clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have financed our operations primarily from proceeds raised through private placements of equity securities; sales of common stock in our IPO and through “at-the-market” offerings; the sale of prefunded warrants in our June 2025 and February 2026 follow-on offerings; the exercise of certain common stock warrants issued in connection with our June 2025 follow-on offering; development event payments under our co-funded clinical trial collaboration with Roche for vilastobart; and upfront and milestone payments under our collaboration and license agreements with AbbVie and Gilead. All of our programs are in early clinical or preclinical development. As a result, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for at least the next several years, if at all. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates, if approved. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve profitability. Even if we are able to generate revenue from product sales, we may not become profitable.

At-the-Market Offering Program

In March 2025, we filed a universal shelf registration statement on Form S-3 with the SEC to register for sale up to $250.0 million of our common stock, preferred stock, debt securities, units and warrants, which we may issue and sell from time to time in one or more offerings, which became effective on May 8, 2025 (333-285703). In March 2025, we entered into a sales agreement with Leerink Partners, LLC, under which we could initially issue and sell shares of our common stock from time to time at an aggregate offering price of up to $50.0 million. In February 2026, we filed a prospectus supplement to our prospectus dated May 8, 2025 (333-285793) to reduce the amount of common stock we may offer and sell under the sales agreement to an aggregate offering price of up to $9.5 million.

In May 2026, we filed a universal shelf registration statement on Form S-3 with the SEC to register for sale up to $250.0 million of our common stock, preferred stock, debt securities, units and warrants, which we may issue and sell from time to time in one or more offerings, which became effective on May 29, 2026 (333-295785), or the 2026 Form S-3. In May 2026, we filed a prospectus supplement to our prospectus in the 2026 Form S-3 to cover the offering, issuance and sale by us of up to a maximum of $14.5 million of our common stock that may be issued and sold from time to time under our sales agreement with Leerink.

During the three months ended June 30, 2026, we issued and sold 592,300 shares of our common stock pursuant to the sales agreement with Leerink at a weighted average price of $7.76 per share for aggregate gross proceeds of $4.6 million, before deducting underwriting discounts and commissions and any offering expenses.

Cash Flows

The following table provides information regarding our cash flows for each period presented (in thousands):

Operating Activities

Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support our business. We have historically experienced negative cash flows from operating activities as we invested in research and development of our product candidates, including preclinical studies, clinical trials, manufacturing and manufacturing process development. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges, which are generally due to stock-based compensation, depreciation and amortization, as well as changes in components of operating assets and liabilities, which are generally due to increased expenses and timing of vendor payments.

During the six months ended June 30, 2026, net cash used in operating activities of $41.1 million was primarily driven by net changes in operating assets and liabilities of $30.3 million and our net loss of $15.9 million, partially offset by $3.8 million of stock-based compensation expense, the $0.6 million loss recorded on the change in fair value of our common stock warrant liabilities and $0.6 million of depreciation and amortization expense.

During the six months ended June 30, 2025, net cash provided by operating activities of $14.5 million was primarily driven by net changes in operating assets and liabilities of $37.5 million, which includes the $49.1 million recorded as deferred revenue in connection with our collaboration, license and option agreement and stock purchase agreement with AbbVie, and net non-cash expenses of $6.1 million, partially offset by our net loss of $29.1 million.

Investing Activities

During the six months ended June 30, 2026 and 2025, net cash used in investing activities consisted of purchases of property and equipment.

Financing Activities

During the six months ended June 30, 2026, net cash provided by financing activities of $40.2 million primarily consisted of proceeds from the sale of prefunded warrants through a follow-on offering and proceeds from the sale and issuance of common stock through our ATM program.

During the six months ended June 30, 2025, net cash provided by financing activities of $52.2 million consisted of proceeds from the sale of prefunded warrants and common stock warrants through our June 2025 follow-on offering, proceeds from the sale and issuance of common stock to AbbVie in a private placement and proceeds from the sale and issuance of common stock through our ATM program.

Capital Requirements

We expect our future capital requirements to increase substantially over time in connection with our ongoing research and development activities, particularly as we advance our current and planned clinical development of our product candidates and maintain the research efforts and preclinical activities associated with our other existing programs and discovery platform. In addition, we expect to continue to incur additional costs associated with operating as a public company. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future.

Inflation generally affects us by increasing our cost of labor and certain services. We do not believe that inflation had a material effect on our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. However, the United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase it may affect our expenses, such as employee compensation and research and development charges due to, for example, increases in the costs of labor and supplies. Additionally, the biotechnology industry is subject to a competitive wage environment that may also increase our operating costs in the future.

As of June 30, 2026, we had cash and cash equivalents of $136.0 million. In the second quarter of 2026, we achieved a $6.0 million development milestone related to the collaboration agreement with AbbVie, which we received in the third quarter of 2026. Based on our current operating plans, we anticipate that our existing cash and cash equivalents as of June 30, 2026, together with the $6.0 million development milestone achieved under our AbbVie collaboration in the second quarter of 2026, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2028. This estimate excludes up to $36.2 million in additional gross proceeds in the second half of 2026 if all outstanding Series C warrants are exercised at their current exercise price and any potential additional milestone payments, option-related fees or other contingent payments under our collaboration and license agreements with AbbVie and Gilead, including up to $31.0 million in near-term milestones and option extension fees that could be achieved under the AbbVie collaboration through the first half of 2027.

In addition, we have based our estimates on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we anticipate. In addition, we expect our operating losses and negative operating cash flows to continue for the foreseeable future as we continue to advance our pipeline of novel, masked I-O molecules through preclinical and clinical development, maintain the infrastructure necessary to support these activities and continue to incur costs associated with operating as a public company.

Because of the numerous risks and uncertainties associated with product development, and because the extent to which we may enter into additional collaborations with third parties for the development of our product candidates is unknown, we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with advancing the research and development of our product candidates.

Our future capital requirements, both short-term and long-term, will depend on many factors, including, but not limited to:

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the scope, progress, results and costs of research and development for our current and future product candidates, including our current and planned clinical trials for our clinical-stage product candidates, efarindodekin alfa and XTX501, and ongoing preclinical development for our current and future product candidates;

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our ability to maintain our collaboration and license agreements with AbbVie and Gilead;

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the timing and amount of milestones, option-related fees and other contingent payments under our collaboration, license and option agreement with AbbVie for masked immunotherapies and our license agreement with Gilead for efarindodekin alfa, as well as the scope, costs and timing of our development obligations under these agreements;

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the potential receipt of up to $36.2 million in additional gross proceeds in the second half of 2026 if all of the outstanding Series C common stock warrants issued in connection with our June 2025 follow-on offering are exercised at their current exercise price of $10.50 per warrant;

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the scope, prioritization and number of our research and development programs;

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the costs of securing manufacturing materials for use in preclinical studies, clinical trials and, for any product candidates for which we receive regulatory approval, if any, commercial supply;

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the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property-related claims;

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the extent to which we may acquire or in-license other products, product candidates, technologies or intellectual property, as well as the terms of any such arrangements;

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the scope, costs, timing and outcome of regulatory review of our product candidates;

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the costs and timing of future commercialization activities for any of our product candidates for which we receive regulatory approval;

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the amount and timing of revenue, if any, received from commercial sales of any product candidates for which we receive regulatory approval;

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general economic conditions, including inflation and the imposition of new or revised global trade tariffs; and

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the costs of maintaining our operations and continuing to operate as a public company.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if ever. Accordingly, we will need to obtain substantial additional capital to achieve our business objectives.

Our expectation with respect to our ability to fund our currently planned operations is based on estimates that are subject to various risks and uncertainties. Our operating plan may change as a result of many factors currently unknown to management and there can be no assurance that our current operating plan will be achieved in the time frame anticipated by us, and we may exhaust our available capital resources sooner than we expect.

Adequate additional capital may not be available to us on acceptable terms, or at all. Market volatility resulting from adverse changes in domestic and international fiscal, monetary and other policies and political relations, regional or global conflicts, uncertainty around global economic conditions, instability in the financial markets, current or future pandemics or other factors could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or securities convertible into or exchangeable for equity, the ownership interest of our existing stockholders may be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. Additional debt and preferred equity, if available, may also involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require that we issue additional warrants, which could potentially dilute the ownership interest of our existing stockholders.