Avalyn Pharma Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended June 30,2026

OR

For the transition period from ______________________ to ______________________

Commission File Number:001-43251

Avalyn Pharma Inc.

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code: (206)707-0340

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No☒

As of August 10, 2026, the registrant had 44,333,095 shares of voting common stock, $0.001 par value per share, outstanding.

Table of Contents

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Quarterly Report, contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of preclinical studies, clinical trials, research and development costs, regulatory approvals, commercial strategy, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

•

the initiation, timing, progress and results of our current and future research and development programs, preclinical studies and clinical trials;

•

our ability to successfully complete our clinical trials;

•

our ability to advance any product candidates that we may identify and successfully complete any clinical studies, including the manufacture of any such product candidates;

•

our ability to quickly leverage programs within our target indications and to progress additional programs to further develop our pipeline;

•

the prevalence of certain diseases and conditions we intend to treat and the size of the market opportunity for our product candidates;

•

estimates of the number of patients with certain diseases and conditions we intend to treat and the number of patients that we will enroll in our clinical trials;

•

the likelihood of our clinical trials demonstrating safety and efficacy of our product candidates;

•

the timing of our investigational new drug application, or IND, submissions;

•

the implementation of our strategic plans for our business, programs and technology;

•

the scope of protection we are able to establish and maintain for intellectual property rights;

•

developments related to our competitors and our industry;

•

the success of competing therapies that are or may become available;

•

our ability to leverage the clinical, regulatory, and manufacturing advancements to accelerate our clinical trials and approval of product candidates;

•

our ability to meet future regulatory standards with respect to our product candidates, if approved;

•

our ability to identify and enter into future license agreements and collaborations;

•

our reliance on third parties to conduct clinical trials of our product candidates;

•

our reliance on third parties for the manufacture of our product candidates and our device related thereto;

•

regulatory developments in the United States and foreign countries;

•

our commercialization, marketing and manufacturing capabilities;

•

our expectations regarding the period during which we will qualify as an emerging growth company under the JOBS Act or a smaller reporting company;

•

our ability to attract and retain key scientific and management personnel; and

•

our anticipated cash runway, our financial performance, estimates of our expenses, capital requirements, and needs for additional financing.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” and elsewhere in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this Quarterly Report, whether as a result of any new information, future events or otherwise. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report and have filed with the U.S. Securities and Exchange Commission, or the SEC, is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Investment in our securities involves risk. You should carefully consider the following summary of what we believe to be the principal risks facing our business, in addition to the risks described more fully in Part II. Item 1A, “Risk Factors” in this Quarterly Report and other information included in this Quarterly Report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

If any of the following risks occurs, our business, financial condition and results of operations and future growth prospects could be materially and adversely affected, and the actual outcomes of matters as to which forward-looking statements are made in this report could be materially different from those anticipated in such forward-looking statements.

•

We are a clinical-stage biopharmaceutical company and have incurred significant operating losses since inception and anticipate that we will continue to incur significant operating losses for the foreseeable future. We may never achieve or maintain profitability.

•

We will need substantial additional funding. We may be unable to raise capital on acceptable terms, if at all, and, as a result, we may be required to delay, reduce, or eliminate our product development programs or commercialization efforts.

•

We are substantially dependent on the success of our lead candidates, AP01 and AP02. If we are unable to advance such product candidates into later-stage clinical development or unable to obtain regulatory approval and commercialize a therapy for the treatment of pulmonary fibrosis, or PF, or experience significant delays in doing so, our business will be materially harmed.

•

We are early in our development efforts. If we are unable to successfully develop, receive regulatory approval for and commercialize any product candidate or successfully develop any other product candidate or experience significant delays in doing so, our business will be substantially harmed.

•

Targeting PF with inhaled formulations of antifibrotic therapies is novel, and we do not know whether we will be able to successfully develop any inhaled products.

•

We have not yet completed all testing of any product candidate in clinical trials. Preclinical, interim, topline and preliminary results from our preclinical studies or clinical trials are not necessarily predictive of the results or analyses of such results of later clinical trials. If we cannot replicate the positive results from any preclinical studies or clinical trials of our current or potential future product candidates that have positive results, or if we suffer any other significant setbacks in our later clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our current or potential future product candidates.

•

If we experience delays or difficulties in the enrollment and/or retention of patients in clinical trials, our clinical development activities could be delayed or otherwise adversely affected, and our receipt of necessary regulatory approvals could be delayed or prevented.

•

We face substantial competition and we may not be able to compete successfully in this environment.

•

The market for our product candidates may be smaller than we estimate.

•

The results of clinical trials conducted at clinical trial sites outside the U.S. might not be accepted by the FDA, and data developed outside of a foreign jurisdiction similarly might not be accepted by such foreign regulatory authority.

•

We are dependent on licensed intellectual property rights pursuant to the PARI License Agreement relating to the PARI eFlow® Technology and eRapid® Nebulizer System, and we may in the future enter into additional intellectual property licensing agreements on which we could similarly become dependent.

•

We intend to deliver AP01 and AP02 and our other product candidates via a drug delivery device that will have its own regulatory, development, supply and other risks. Where approval of the drug product and device is sought under a single application, the increased complexity of the review process may delay approval.

•

If we are unable to obtain and maintain patent protection for any products we develop and for our technology, or if the scope of the patent protection obtained is not sufficiently broad, our competitors or other third parties could develop and commercialize products and technology similar or identical to ours, and our ability to commercialize any product candidates we may develop, and our technology may be adversely affected.

•

Even if any of our product candidates receive marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

•

We may encounter difficulties in managing our growth, which could disrupt our operations..

•

We rely on third parties to assist in conducting our clinical trials and preclinical studies, manufacture our product candidates and seek to establish collaborations on product development and commercialization plans.