Latigo Biotherapeutics, Inc.

Organization

Description of Business

Latigo Biotherapeutics, Inc. (the Company) is a clinical-stage biopharmaceutical company committed to developing innovative non-opioid pain medicines designed to rapidly and effectively stop the transmission of pain without the risk of addiction.

The Company was incorporated in Delaware in November 2018, under the name Desmond, Inc. In December 2019, the Company changed its name to Latigo Biotherapeutics, Inc. The Company is headquartered in Thousand Oaks, California.

Liquidity

The accompanying unaudited condensed financial statements have been prepared assuming the Company will continue as a going concern, which assumes that the Company will realize its assets and satisfy its liabilities in the normal course of business. The Company is subject to risks inherent in operating an early-stage biotechnology and pharmaceutical business. These risks include, but are not limited to, dependence on the development of marketable products, the ability to attract, retain, and motivate qualified personnel, rapid technological changes and the rapidly evolving nature of the biopharmaceutical industry.

As of September 30, 2026, the Company had cash and cash equivalents of$401.2 million which includes net proceeds of $364.4 million from its initial public offering (“IPO”) completed in August 2026. The Company has incurred net losses of$69.7 million and $71.6 million for the nine months ended September 30, 2026 and 2025, respectively. The net cash used in operating activities was$67.9 million and $62.6 million for the nine months ended September 30, 2026 and 2025, respectively.

The Company has incurred significant losses and negative cash flows from operations since its inception and expects to continue to incur substantial losses for the foreseeable future, and its ability to achieve and sustain profitability will depend on the successful development, approval, and commercialization of any product candidates it may develop, and on the achievement of sufficient revenue to support its cost structure. The Company may never achieve profitability and, unless and until it does, it will need to continue to raise additional capital.

The Company historically financed its operations primarily through the issuances of convertible promissory notes, demand notes and redeemable convertible preferred stock, and most recently, through sale of its common stock in its IPO.

The Company completed its IPO in August 2026, receiving net proceeds of approximately$364.4 million after deducting underwriting discounts, commissions, and offering expenses. As a result, the Company's existing cash and cash equivalents are sufficient to fund the Company's operating plans for at least the 12-month period following the date that these unaudited condensed financial statements and accompanying notes were issued. Accordingly, the prior substantial doubt about the Company's ability to continue as a going concern has been alleviated.

Summary of Significant Accounting Policies

Reverse Stock Split

On July 28, 2026 the Company amended its amended and restated certificate of incorporation to effect a 1-for-6.42441 reverse stock split of the Company’s common stock and redeemable convertible preferred stock (the Reverse Stock Split). The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock, redeemable convertible preferred stock, options to purchase common stock, and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented.

Initial Public Offering

In August 2026, the Company completed its IPO, pursuant to which the Company issued and sold 22,080,000 shares of its common stock at a public offering price of $18.00 per share (the IPO Price), including 2,880,000 additional shares of its common stock pursuant to the exercise in full by the underwriters of their option to purchase shares of common stock from the Company at the IPO Price. As a result, the Company received net proceeds of approximately $364.4 million, after deducting underwriting discounts, commissions and other offering expenses of approximately $33.1 million. Immediately prior to the closing of the IPO, the Company’s outstanding redeemable convertible preferred stock automatically converted into 41,155,082 shares of common stock.

Following the closing of the IPO, no shares of redeemable convertible preferred stock were authorized or outstanding. In connection with the completion of the IPO, on August 10, 2026, the Company’s certificate of incorporation was amended and restated to (i) authorize 999,999,999 shares of common stock, par value $0.0001 per share, which eliminates all references to the previously existing series of redeemable convertible preferred stock; and (ii) authorize 10.0 million shares of undesignated preferred stock, par value $0.0001 per share, that may be issued from time to time by the Company’s board of directors (Board of Directors) in one or more series.

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASUs) of the Financial Accounting Standards Board (FASB). Certain prior period amounts have been reclassified to conform the prior period presentation to the current period.

Unaudited Interim Condensed Financial Information

The condensed balance sheet as of December 31, 2025 was derived from the Company’s audited financial statements but does not contain all of the footnote disclosures from the annual financial statements. The accompanying unaudited interim condensed financial statements as of September 30, 2026 and for the three and nine months ended September 30, 2026 and 2025, have been prepared by the Company, pursuant to the rules and regulations of the SEC for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed financial statements should be read in conjunction with the audited financial statements as of and for the years ended December 31, 2025 and 2024, included in the Company’s prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (Securities Act) on August 7, 2026. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed financial position as of September 30, 2026 and condensed results of operations and comprehensive loss, condensed statements of redeemable convertible preferred stock and stockholders’ equity (deficit) and condensed cash flows for the three and nine months ended September 30, 2026 and 2025 have been made. The results of operations for the three and nine months ended September 30, 2026 are not necessarily indicative of the results of operations that may be expected for the full fiscal year.

Use of Estimates

The preparation of unaudited interim condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures reported in the unaudited interim condensed financial statements and accompanying notes. These estimates form the basis for judgments the Company makes about the carrying values of assets and liabilities that are not readily apparent from other sources. Management bases its estimates on historical experience and various other relevant assumptions believed to be reasonable under the circumstances. Significant estimates and assumptions reflected within these unaudited interim condensed financial statements include, but are not limited to, useful lives of property and equipment, the rate used in determining the present value of lease payments, fair value of assets and liabilities, research and development accruals, the valuation of the Company’s common stock and stock-based awards granted under the Company’s stock-based compensation plan, the valuation of the preferred stock tranche liability and the fair value of the change of control derivative liability associated with convertible notes, uncertain tax positions and the valuation allowance for deferred income tax assets. Actual results may differ from these estimates and assumptions.

Segment Information

The Company operates and manages its business as one reportable and operating segment. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and assess performance. The Company’s CODM is the Chief Executive Officer, who reviews financial information on a company-wide basis for purposes of allocating resources and assessing financial performance.

Concentration of Credit Risks

The Company is exposed to credit risk in the event of default by the financial institutions holding its cash and cash equivalents to the extent recorded in the balance sheet. Financial instruments, which potentially subject the Company to a concentration of credit risk, consist primarily of cash and cash equivalents. The Company invests its cash equivalents in money market funds. Cash and cash equivalents may be held in financial institutions in amounts that exceed federally insured limits, and the Company has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the pharmaceutical and biotechnology industry, including, but not limited to, the outcome of clinical trials, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technologies, compliance with government regulations, ability to secure additional capital to fund operations, and potential delays associated with the Company’s anticipated and planned trials. The Company is subject to a number of risks similar to other clinical stage biopharmaceutical companies, including, but not limited to, changes in any of the following areas that the Company believes could have a material adverse effect on its future financial position or results of operations: risks related to the successful discovery and development of its product candidates, ability to raise additional capital, development of new technological innovations by its competitors and delay or inability to obtain drug substance and finished drug product from the Company’s third-party contract manufacturers necessary for the Company’s product candidates, protection of intellectual property rights, litigation or claims against the Company based on intellectual property rights and regulatory clearance and market acceptance for any of the Company’s product candidates for which the Company receives marketing approval.

Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization of a product. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Moreover, the Company is subject to risks and uncertainties as a result of global business, political and macroeconomic events and conditions, including increasing financial market volatility and uncertainty, inflation, interest rate fluctuations, uncertainty with respect to the federal budget and debt ceiling and potential government shutdowns related thereto, potential instability in the global banking system, cybersecurity events, the impact of war or military conflict, including regional conflicts around the world, and public health pandemics. The extent to which business, political and macroeconomic factors, including increasing financial market volatility and uncertainty, will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

The preparation of unaudited interim condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited interim condensed financial statements and accompanying notes. The extent to which the increasing financial market volatility and uncertainty may directly or indirectly impact the unaudited interim condensed financial statements is highly uncertain and subject to change.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents are reported at fair value. At September 30, 2026 and December 31, 2025, the Company’s cash equivalents are in money market funds.

A reconciliation of cash, cash equivalents, and restricted cash reported in the Company's balance sheets to the amount reported within its statements of cash flows was as follows (in thousands):

Restricted cash is comprised of cash that is restricted as to withdrawal or use under the terms of certain contractual agreements. Restricted cash as of September 30, 2026 and December 31, 2025 consists of$0.2 million and $0.3 million, respectively, related to the Company’s lease of office space in San Francisco, California. Restricted cash balances are classified as current or non-current based on the expected duration of the restriction.

Property and Equipment, Net

Property and equipment is recorded at cost, less accumulated depreciation. Depreciation and amortization are computed using the straight-line method over the shorter of estimated useful lives of the assets or the respective lease term. The estimated useful life of each asset category is as follows:

Depreciation begins at the time the asset is placed in service. Maintenance and repairs are expensed as incurred. Upon sale or retirement of assets, the cost and related accumulated depreciation is removed from the balance sheet and the resulting gains and losses are reflected in the statements of operations and comprehensive loss.

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate over its remaining life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. There have been no impairments of the Company’s long-lived assets in the periods presented.

At inception of a contract, the Company determines whether an arrangement is or contains a lease. For each lease, the Company determines the classification as either an operating lease or a financing lease. Lease recognition occurs at the lease commencement date and lease liability amounts are determined based on the present value of lease payments over the lease term. The lease term may include options to extend or terminate the lease only when it is reasonably certain that the Company will exercise that option.

The Company uses its incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments if the Company’s leases do not provide an implicit rate. The Company determines its incremental borrowing rate based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Right-of-use (ROU) assets represent the Company's right to use underlying assets for the lease term and operating lease liabilities represent the Company's obligation to make lease payments under the lease. ROU assets are measured as the lease liability plus initial direct costs and prepaid lease payments, less lease incentives granted by the lessor.

The Company elected to apply the practical expedient of combining lease and non-lease components for the real estate lease asset class. Fixed lease payments on operating leases are recognized as lease expense over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed are recognized as incurred.

In addition, the Company elected the short-term lease practical expedient that allows the lessee to not record a lease liability and ROU asset for all leases with a term of 12 months or less.

As of September 30, 2026 and December 31, 2025, the Company did not have any material finance leases.

Redeemable Convertible Preferred Stock

Prior to its IPO, the Company recorded all shares of redeemable convertible preferred stock at their respective fair values on the dates of issuance, less issuance costs and, if applicable, net of preferred stock tranche liabilities. In the event of a deemed liquidation event, the holders of shares of redeemable convertible preferred stock then outstanding shall be entitled to be paid a certain liquidation preference out of the assets of the Company available for distribution to its stockholders. Redeemable convertible preferred stock was classified outside of stockholders’ equity (deficit) on the balance sheet as certain deemed liquidation events are not solely within the Company’s control.

Upon the closing of the Company's IPO, all shares of convertible preferred stock then outstanding automatically converted into an aggregate of 41,155,082 shares of common stock. Refer to Note 8 for additional information.

Preferred Stock Tranche Liability

The purchase agreements for the Company’s Series B redeemable convertible preferred stock provide the Company an obligation to issue additional shares of Series B redeemable convertible preferred stock in subsequent closings.

The Company's obligation to issue additional shares of Series B redeemable convertible preferred stock at a future date was determined to be a freestanding instrument that should be accounted for as a liability. At initial recognition, the Company recorded the preferred stock tranche liability on the balance sheet at fair value. The preferred stock tranche liability is subject to remeasurement at each subsequent reporting date until settled, with changes in fair value recognized as a component of other expense (income) in the statements of operations and comprehensive loss.

Immediately prior to the settlement of the preferred stock tranche liability in September 2025 the Company remeasured the preferred stock tranche liability. The preferred stock tranche liability was then settled and the Series B redeemable convertible preferred stock was recorded at fair value, less issuance costs.

Change of Control Derivative Liability

Prior to their conversion upon the IPO, the Series 2026A unsecured convertible promissory notes (the Convertible Notes) contained a change of control repayment premium that is required to be bifurcated from the debt host and accounted for separately as a derivative liability under ASC 815, Derivatives and Hedging. The change of control repayment premium required the Company to repay the noteholders in cash an amount equal to outstanding principal, unpaid accrued interest, and an additional premium equal to 100% of outstanding principal upon a change of control event. This feature was not clearly and closely related to the debt host because it provides for a repayment amount substantially in excess of par plus accrued interest and is contingently exercisable upon the occurrence of a corporate transaction event. The derivative liability was initially recognized at fair value, with an offsetting debt discount recorded as a reduction of the carrying amount of the Convertible Notes. See Note 7 for further discussion.

The fair value of the derivative liability was estimated using a scenario-based with-and-without analysis that compares the probability-weighted present value of the Convertible Notes including the change of control repayment premium with the probability-weighted present value of the Convertible Notes excluding that feature. The analysis considered multiple potential settlement scenarios, including an initial public offering, a qualified financing, a change of control, repayment at maturity and dissolution. Expected cash flows under each scenario are discounted using rates appropriate for the nature and risk of the applicable settlement scenario.

Prior to the Company’s IPO, the derivative liability was remeasured to fair value at each reporting period and the related change was reflected as a change in fair value of derivative liability on the condensed statements of operations and comprehensive loss. Immediately prior to the settlement of the Convertible Notes in connection with the IPO in August 2026, the derivative liability was remeasured to zero and derecognized.

Research and Development

Research and development costs are expensed as incurred. Research and development expenses consist primarily of costs related to research, design, development, clinical trials, regulatory activities, medical affairs activities, salaries and benefits of research and development personnel, and allocated facility-related expenses. Payments made prior to the receipt of goods and services to be used in research and development are deferred and recognized as expense in the period in which the related goods are received or services are rendered.

The Company has entered into various agreements with outsourced contract manufacturing and development vendors. The Company estimates accrued research and development expenses as of each balance sheet date based on facts and circumstances known at that time. At each balance sheet date, the Company confirms the accuracy of its estimates with internal personnel and external service providers, and makes adjustments, if necessary. Research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development services provided, but not yet invoiced, are included in accrued expenses on the balance sheets. If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly. Payments made under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered. To date, there have been no material adjustments to the Company’s estimates of accrued research and development expenses.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and benefits, including stock-based compensation expense; professional fees for legal, accounting, auditing, tax and consulting services; travel expenses; and facility-related expenses, which include expenses for rent and maintenance of facilities and other operating costs. The Company expenses all general and administrative expenses as incurred.

Stock-Based Compensation

The Company accounts for share-based payments at fair value. The grant date fair value of options granted is measured using the Black-Scholes option pricing model. Option awards vest based on the satisfaction of a service requirement and stock-based compensation expense is recorded on a straight-line basis over the applicable service period, which is generally four years. For performance-based stock options, the Company will assess the probability of performance conditions being achieved in each reporting period. The amount of stock-based compensation expense recognized in any one period related to performance-based stock options can vary based on the achievement or anticipated achievement of the performance conditions. Forfeitures are recognized in the period in which the forfeiture occurs.

The Company permits certain employees to exercise stock options prior to vesting. Shares issued upon early exercise are subject to a repurchase right that lapses as the underlying options vest. Proceeds received from early exercise of unvested options are recorded as a liability until the underlying shares vest, at which time the liability is reclassified to additional paid-in capital. The early exercise of options does not accelerate recognition of stock-based compensation expense.

Income Taxes

The Company utilizes the asset and liability approach to account for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that these assets may not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible.

The Company recognizes uncertain tax positions taken or expected to be taken on a tax return. Tax positions are initially recognized when it is more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and relevant facts. Judgment is required to evaluate uncertain tax positions. The evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of the audit, and effective settlement of audit issues.

The Company’s policy is to include penalties and interest expense related to income taxes as a component of income tax expense, as necessary.

Comprehensive Loss

Comprehensive loss represents all changes in stockholders’ equity (deficit) except those resulting from distributions to stockholders. There was no difference between net loss and comprehensive loss for the three and nine months ended September 30, 2026 and 2025.

Net Loss Per Share Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, redeemable convertible preferred stock, stock options, and common stock subject to repurchase related to unvested early exercise of stock options are considered potentially dilutive securities.

Basic and diluted net loss attributable to common stockholders per share is presented in conformity with the two-class method required for participating securities as the redeemable convertible preferred stock is considered a participating security because it participates in dividends with common stock. The Company also considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of all series of redeemable convertible preferred stock and the holders of early exercised shares subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share for those periods because the impact of potentially dilutive securities would be anti-dilutive.

Deferred Offering Costs

The Company’s deferred offering costs consist of legal, accounting and other general and administrative costs directly attributable to the Company’s IPO. In connection with the Company’s IPO in August 2026, offering costs of $5.2 million, including $3.3 million previously deferred, were charged against the IPO proceeds in additional paid-in capital in stockholders’ equity. As of September 30, 2026 and December 31, 2025, there wereno deferred offering costs, and all offering costs incurred in connection with the IPO had been paid in full as of September 30, 2026.

Accounting Pronouncements Not Yet Adopted

The Company is an “emerging growth company,” as defined in the Securities Act. Under the Jumpstart Our Business Startups Act of 2012, an emerging growth company has the option to adopt new or revised accounting guidance either (i) within the same periods as otherwise applicable to public business entities, or (ii) within the same time periods as non-public business entities, including early adoption when permissible. With the exception of accounting guidance the Company elected to early adopt, when permissible, the Company has elected to adopt new or revised accounting guidance within the same time periods as non-public business entities.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires that a public entity disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation and (d) intangible asset amortization included in each relevant expense caption presented on the face of the income statement. The standard also requires an entity to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively as well as disclose the total amount of selling expenses and, annually, the entity’s definition of selling expenses. ASU 2024-03 will be effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with either retrospective or prospective application. The standard allows for early adoption of these requirements; the Company is currently evaluating the disclosure impacts of its adoption.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. In accordance with the authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Financial instruments include cash and cash equivalents, accounts payable and accrued expenses that approximate fair value due to their relatively short maturities.

The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The carrying amounts of the Company’s financial instruments for the periods ended September 30, 2026 and December 31, 2025 approximate fair value due to their relatively short maturities. The change of control derivative liability was remeasured to zero and derecognized in August 2026 upon IPO.

Fair Value of Financial Assets

The following tables set forth the fair value of the Company's financial assets, which consist of cash equivalents, that were measured on a recurring basis (in thousands):

There has been no transfer between levels of the fair value measurement hierarchy during the periods presented.

Change of Control Derivative Liability

The fair value of the change of control derivative liability was estimated using a scenario-based analysis comparing the probability-weighted present value of the Convertible Notes with and without the bifurcated change of control premium feature. The Company employed a probability-weighted approach that evaluated multiple settlement scenarios, including automatic conversion upon an initial public offering, automatic conversion upon a qualified financing, contingent cash repayment upon a change of control event, repayment at maturity, and dissolution. For each scenario, the Company estimated the applicable settlement amount, discounted the expected settlement amount to the valuation date and applied a probability weighting. The fair value of the embedded derivative was determined as the difference between the probability-weighted value of the Convertible Notes with and without the change of control repayment premium.

The significant unobservable input used in the fair value measurement of the change of control derivative liability was the probability assigned to a change of control event occurring while the Convertible Notes remained outstanding, which was estimated at 15% as of the issuance date and as of June 30, 2026. As the IPO became imminent during the three months ended September 30, 2026, the probability of a change of control event was reassessed at 0%, because the IPO was virtually certain to occur before maturity and an IPO was excluded from the definition of a change of control. Accordingly, the fair value of the derivative liability immediately prior to the closing of the IPO waszero. Changes in this probability would have the most direct impact on the fair value of the derivative liability; an increase in the probability of a change of control would increase the fair value of the liability, while a decrease would reduce it.

The following provides a roll forward of the fair value of the change of control derivative liability measured at fair value on a recurring basis using Level 3 significant unobservable inputs (in thousands):

Preferred Stock Tranche Liability

The fair value of the preferred stock tranche liability was based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

The preferred stock tranche liability was valued as a forward contract. The value was determined using a probability-weighted present value calculation. In determining the fair value of the preferred stock tranche liability obligation, estimates and assumptions impacting the fair value included the per share estimated fair value of the Company’s Series B redeemable convertible preferred stock, discount rates, estimated time to tranche closing, and probability of the second tranche closing.

Upon settlement of the preferred stock tranche liability in September 2025, the fair value of a share of Series B redeemable convertible preferred stock was $10.54.

The following provides a roll forward of the fair value of the preferred stock tranche liability measured at fair value on a recurring basis using Level 3 significant unobservable inputs (in thousands):

Balance Sheet Components

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

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

Depreciation expense was$0.1 million and $0.2 millionfor the three and nine months ended September 30, 2026, respectively. Depreciation expense was$0.1 million and $0.2 million for the three and nine months ended September 30, 2025, respectively.

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

Leases

In June 2021, the Company entered into an operating lease for 7,638 square feet of office and research and development space in Thousand Oaks, California. The lease term is for approximately 5.3 years, with no renewal option.

In June 2025, the Company entered into a lease for 2,375 square feet of office space in San Francisco, California, that is set to expire on July 31, 2027.

On March 25, 2026, the Company entered into a First Amendment to the lease (the "Lease Amendment") to expand its existing leased office and laboratory space located in Thousand Oaks, California. Pursuant to the Lease Amendment, the Company expanded the leased premises to include an additional approximately 3,700 rentable square feet. The lease term for the expansion premises commenced on April 1, 2026, and the Lease Amendment extends the lease term to June 30, 2028. The Company remeasured the lease liability and right-of-use asset as of April 1, 2026, using an incremental borrowing rate of 12.62%, reflecting the increase in future lease payments resulting from the Lease Amendment. The remeasurement resulted in an increase of $1.0 million to the lease liability and a corresponding increase to the right-of-use asset.

Commitments and Contingencies

The Company enters into contracts in the normal course of business with various third parties for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts generally provide for termination upon notice. Payments due upon cancellation consist of payments for services provided or expenses incurred up to the date of cancellation and may include termination penalties or non-cancelable fees. Under such agreements, the exact amounts owed by the Company in the event of termination will be based on the timing of the termination and the exact terms of the agreement. If cancelled, these contracts are not anticipated to have a material effect on the Company’s financial condition, results of operations, or cash flows.

License Agreement with Lieber Institute, Inc.

In July 2020, the Company entered into a License Agreement with Lieber Institute, Inc. (d/b/a: Lieber Institute for Brain Development), or LIBD, which was subsequently amended in August 2020 and January 2022. Pursuant to the license agreement, LIBD granted to the Company a worldwide, exclusive, sub-licensable and royalty-bearing license, under certain patent and other intellectual property rights owned or controlled by LIBD, including patents claiming compounds for inhibiting Nav 1.8, to make, use, sell, offer to sell, import, research, develop, and commercialize products that contain any compound that is disclosed or claimed in any of the licensed patents or is developed by LIBD and is directed to or interacting with Nav 1.8, provided that such products are claimed by the licensed patents (Licensed Products) for any and all uses and applications, including all diagnostic, prophylactic and therapeutic uses. The Company has the right, subject to certain time limitations, to elect to expand its exclusive license to include LIBD’s patents and other intellectual property rights for new compounds discovered by LIBD that were not disclosed or claimed in the licensed patents as of July 2020 and that target or interact with Nav 1.8. Pursuant to the terms of the license agreement, the Company must use commercially reasonable efforts to develop a Licensed Product and commercialize such Licensed Product in each jurisdiction in which regulatory approval is obtained.

As consideration for the license and other rights granted to the Company by LIBD, on September 23, 2020 the Company issued 434,840 shares of Series A redeemable convertible preferred stock equal to a mid-single digit percentage of the Company’s equity capital, on a fully diluted basis, following the Company’s initial closing of the Series A redeemable convertible preferred stock financing.

The Company’s milestone and royalty payment obligations under the license vary depending upon whether the Licensed Product is covered by at least one valid claim of a licensed patent that is solely owned by LIBD, or a Sole Product, or the Licensed Product is only covered by valid claims of licensed patents that the Company jointly owns with LIBD, or a Joint Product. The Company has concluded its development candidate known as onzotrigine is a Joint Product. The Company has concluded it is not currently developing any Licensed Products that are Sole Products, and the Company does not have any current intentions to develop any Licensed Products that are Sole Products.

The Company has agreed to pay LIBD up to an aggregate of $48.5 million upon the achievement of pre-specified development and regulatory milestones with respect to the first Sole Product, up to an aggregate of $23.75 million for each subsequent Sole Product, and up to an aggregate of $95.0 million upon the achievement of pre-specified sales milestones with respect to all Sole Products.

For the first Joint Product, the Company has agreed to pay LIBD up to an aggregate of $4.0 million upon the achievement of pre-specified regulatory milestones, and up to an aggregate of $9.5 million upon the achievement of pre-specified sales milestones; the Company doesnot have any milestone payment obligations for subsequent Joint Products. No milestones have been achieved to date under this license agreement for any Licensed Product.

The Company must also pay LIBD royalties on the net sales of Licensed Products. The royalty rates for Sole Products are tiered and range from low- to mid-single-digit percentages, and the royalty rate for Joint Products is a low-single-digit percentage. The royalty payments are subject to reduction if, on a Licensed Product-by-Licensed Product and country-by-country basis, there are no valid patent claims covering the Licensed Product in such country or if the Company makes certain payments to third parties for intellectual property licenses, all subject to a customary royalty floor. The royalty term will terminate on a Licensed Product-by-Licensed Product and country-by-country basis on the latest of (i) a specified number of years after first commercial sale of such Licensed Product in such country, (ii) the expiration of the last valid claim of a licensed patent that covers such Licensed Product in such country and (iii) the earlier of expiration of regulatory exclusivity or the first commercial sale of a generic product referencing such Licensed Product in such country. If the Company sublicenses its rights to Sole Products or licensed patents solely owned by LIBD, then it must pay LIBD a low double-digit percentage of non-royalty sublicensing revenue received from sublicensees for rights to Sole Products and a low single-digit percentage of non-royalty sublicensing revenue from sublicensees for rights to Joint Products or jointly-owned patents.

The license agreement shall expire on a country-by-country and Licensed Product-by-Licensed Product basis upon the expiration of the royalty term for such Licensed Product in such country. Upon expiration of the royalty term with respect to a Licensed Product in a country, the Company will have a fully paid-up, irrevocable, perpetual license with respect to such Licensed Product in such country.

Either party may terminate the license agreement if the other party commits a material breach of the agreement and fails to cure that breach within the applicable specified period. The Company may terminate the license agreement in its entirety or on a country-by-country basis upon a specified prior notice period. LIBD may terminate the license agreement if the Company or its affiliate or sublicensee initiates an action challenging the validity or enforceability of any licensed patents or if the Company fails to use commercially reasonable efforts to develop or commercialize a Licensed Product for a specified period, does not submit a written diligence plan to LIBD for its approval and does not initiate such LIBD-approved plan to cure the failure within a specified period. Upon termination, all rights and licenses granted to the Company shall terminate and revert back to LIBD, and under certain circumstances LIBD will have an exclusive, time-limited right to negotiate the terms of a license to certain of the Company’s intellectual property, data and regulatory approvals for the Licensed Products.

As the Company determined that the acquired licensed technology had no alternative future use, no intangible asset was recognized on the balance sheet.

Legal Proceedings

In the ordinary course of business, the Company may be subject to legal proceedings, claims and litigation, as the Company operates in an industry susceptible to patent legal claims. The Company accounts for estimated losses with respect to legal proceedings and claims when such losses are probable and estimable. Legal fees are expensed in the period in which they are incurred. As of September 30, 2026, the Company was not a party to any material legal proceedings or claims andno liabilities were recorded for loss contingencies.

Indemnifications

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its officers and directors. In some cases, the indemnification will continue after the termination of the agreement.

The maximum potential amount of future payments that the Company could be required to make under these provisions is not determinable. The Company is not currently aware of any indemnification claims. Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements in these unaudited interim condensed financial statements.

Convertible Notes

In June 2026, the Company issued Convertible Notes to various holders in the aggregate principal amount of $35.0 million. The Company received gross cash proceeds of $35.0 million and incurred approximately $0.2 million of debt issuance costs.

The Convertible Notes were due and payable in full in June 2027, which is twelve months from the issuance date. The Convertible Notes accrued interest at the rate of 5.0% per annum, daily from the issuance date through the date of their settlement upon the Company’s IPO.

Upon completion of the Company’s IPO in August 2026, $35.2 million of the outstanding principal and unpaid accrued interest under the Convertible Notes automatically converted into 1,957,755 shares of the Company’s common stock at the IPO price of $18.00 per share.

Prior to their conversion upon the Company’s IPO, the Convertible Notes contained a change of control repayment premium that qualified as an embedded derivative under ASC 815, Derivatives and Hedging, and was bifurcated and accounted for separately. The issuance date estimated fair value of the derivative liability was $5.1 million, with an offsetting debt discount recorded as a reduction of the carrying amount of the Convertible Notes. The derivative liability was remeasured to fair value at June 30, 2026 and through the date of its conversion to common stock upon the Company’s IPO. There wasno change in the estimated fair value of the derivative liability from the issuance date through June 30, 2026. As the IPO became imminent during the three months ended September 30, 2026, the probability of a change of control occurring while the Convertible Notes remained outstanding was reassessed at 0%, and immediately prior to the closing of the IPO the fair value of the derivative liability was remeasured to zero. The Company recognized a gain of $5.1 million, presented as “Change in fair value of derivative liability” in the condensed statements of operations and comprehensive loss for thethree and nine months ended September 30, 2026, and the derivative liability was derecognized.

The debt discount and debt issuance costs allocated to the debt were presented as direct deductions from the principal amount of the Convertible Notes and were amortized to interest expense over the expected term of the Convertible Notes using the effective interest method. Interest expense on the Convertible Notes was $0.7 million and $0.9 million for the three and nine months ended September 30, 2026, respectively, consisting of contractual interest of $0.2 million in each period and amortization of debt discount and issuance costs of $0.5 million and $0.7 million, respectively. The contractual interest was settled in shares upon the IPO and is reflected as accrued interest in the table below. The amount presented in the statement of cash flows for the nine months ended September 30, 2026 as “Amortization of debt discount and issuance costs and non-cash interest expense” consists of the interest expense described above and debt issuance costs of less than $0.1 million allocated to the derivative liability. These issuance costs were expensed as incurred and are not included in interest expense, and the related cash payment is presented within financing activities.

Because the settlement required delivery of a variable number of shares with a value equal to a fixed monetary amount, the Company accounted for the settlement as an extinguishment of debt rather than a conversion. The Company recognized a loss on extinguishment of debt of $4.6 million in thethree and nine months ended September 30, 2026, calculated as follows (in thousands):

No Conver tible Notes were outstanding as of September 30, 2026.

Redeemable Convertible Preferred Stock

Immediately prior to the closing of the Company's IPO in August 2026, the Company’s outstanding redeemable convertible preferred stock automatically converted into 41,155,082 shares of common stock. Following the closing of the IPO, no shares of redeemable convertible preferred stock were authorized or outstanding.

The Company’s rede emable convertible preferred stock consisted of the following as of December 31, 2025 (in thousands, except share and per share amounts):

In January 2025, the Company entered into a Series B redeemable convertible preferred stock purchase agreement (the Series BPurchase Agreement), pursuant to which it issued a total of 9,896,006 shares of Series B redeemable convertible preferred stock at a price of $10.1050 per share for gross cash proceeds of $100.0 million and incurred aggregate issuance costs of $0.6 million in two closings in January and March 2025 (initial closing).

The Series B Purchase Agreement provided the Company an obligation to issue an additional 4,948,005 shares of Series B redeemable convertible preferred stock (preferred stock tranche liability) at a price of $10.1050 per share in a subsequent closing on or before September 30, 2025. Upon the initial closing of the Series B redeemable convertible preferred stock, the Company recorded a preferred stock tranche liability of $0.4 million. The fair value of the preferred stock tranche liability was allocated from the gross cash proceeds of $100.0 million of the Series B redeemable convertible preferred stock issuance, and the residual value was then allocated to the Series B redeemable convertible preferred stock.

In September 2025, pursuant to the terms outlined in the Series B Purchase Agreement and upon approval by the Board of Directors, the Company settled the preferred stock tranche liability, issuing 4,948,005 shares of Series B redeemable convertible preferred stock at a price of $10.1050 per share for gross cash proceeds of $50.0 million and incurred issuance costs of $0.1 million. As a result of this issuance, the preferred stock tranche liability of $2.1 million was settled and the Series B redeemable convertible preferred stock was recorded at its fair value of $52.1 million.

Common Stock

As of September 30, 2026 and December 31, 2025, the Company was authorized to issue 999,999,999 shares and 342,000,000 shares, respectively, of $0.0001 par value common stock. Common stockholders are entitled toone vote per share on all matters to be voted on by the stockholders of the Company and are entitled to dividends, if and when declared by the Board of Directors. Prior to the IPO, such rights were subject to the priority rights of holders of the redeemable convertible preferred stock. As of September 30, 2026 and December 31, 2025, no dividends were declared by the Company.

In August 2026, the Company completed its IPO. In connection with the Company's IPO, the Company issued and sold 22,080,000 shares of its common stock at the IPO Price, including 2,880,000 additional shares of its common stock pursuant to the exercise in full by the underwriters of their option to purchase shares of common stock from the Company at the IPO Price. As a result, the Company received approximately $364.4 million in net proceeds, after deducting underwriting discounts and commissions and other offering costs of approximately $33.1 million.

Immediately prior to the closing of the IPO, all outstanding shares of redeemable convertible preferred stock converted into 41,155,082 shares of common stock, and the Convertible Notes converted into 1,957,755 shares of common stock.

Common stock reserved for future issuance, on an as-converted to common stock basis, as of September 30, 2026 and December 31, 2025, consisted of the following:

Stock-Based Compensation

2019 Stock Plan

In 2019, the Company adopted the Latigo Biotherapeutics, Inc., 2019 Stock Plan (the 2019 Plan), which authorizes the Company to grant incentive stock options (ISOs), non-qualified stock options (NSOs) and the direct award or sale of shares to employees, directors and consultants of the Company. ISOs can only be granted to employees. The 2019 Plan is administered by the Board of Directors, or the Board of Directors may appoint a committee to which it delegates such administration.

The 2019 Plan shall terminate automaticallyten years after the date when the Board of Directors approved the most recent increase in the number of shares reserved under the 2019 Plan. As of December 31, 2025,1.6 million shares of common stock were available for future issuance pursuant to the 2019 Plan. No shares remained available for future issuance under the 2019 Plan as of September 30, 2026, as the 2019 Plan was replaced by the 2026 Equity Incentive Plan (the 2026 Plan), which is further discussed below. However, the 2019 Plan will continue to govern outstanding equity awards granted thereunder. The shares of common stock underlying any awards under the 2026 Plan and the 2019 Plan that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated (other than by exercise) will be added to the shares of the Company's common stock available for issuance under the 2026 Plan.

Option awards generally vest over afour-year period, with either 25% vesting on the first anniversary of the grant date and monthly thereafter or with monthly vesting over the four-year period. The exercise price of stock options granted under the 2019 Plan must be at least equal to the fair market value of the common stock on the date of grant. The term of option awards is determined by the Board of Directors and shall not exceed 10 years from grant date, or in the case of ISOs granted to a ten percent stockholder, the term is no more than 5 years from the grant date.

2026 Plan

In June 2026, the Board of Directors adopted the 2026 Equity Incentive Plan (the 2026 Plan), which was subsequently adopted by the Stockholders in July 2026. No awards were permitted to be granted under the 2026 Plan until the Company’s Registration Statement on Form S-1 was declared effective by the SEC on August 6, 2026 in connection with the Company’s IPO. The 2026 Plan allows for the issuance of equity-based and cash-based incentive awards to the Company's officers, employees, directors and consultants. The 2026 Plan is administered by the Board of Directors or a committee thereof (the Plan Administrator). The exercise prices, vesting and other restrictions are determined at the discretion of the Plan Administrator, subject to the provisions of the 2026 Plan.

The maximum number of shares of common stock that may be issued under the 2026 Plan is 14,611,431 shares, which is the sum of: (i)3,764,069 new shares, plus (ii)1,004,213 shares available for issuance under the 2019 Plan, plus (iii) up to 9,843,149 returning shares as such shares become available from time to time. The 2026 Plan provides that the number of shares reserved and available for issuance under the 2026 Plan will automatically increase on January 1st of each year, commencing on January 1, 2027 and ending on (and including) January 1, 2036, by an amount equal to the lesser of (i)5% of the total number of shares of Fully Diluted Capital Stock (as defined in the 2026 Plan) outstanding on December 31st of the preceding calendar year, or (ii) such smaller number of shares of Common Stock as the Board of Directors may designate prior to the applicable January 1st, subject to adjustment as provided in the 2026 Plan. As of September 30, 2026, 3,323,389 shares of common stock remained available for future issuance under the 2026 Plan.

2026 ESPP

In June 2026, the Board of Directors adopted the 2026 Employee Stock Purchase Plan (the 2026 ESPP), which was subsequently approved by the Company’s stockholders in July 2026 and became effective on August 5, 2026, the date immediately prior to the date the SEC declared the Company’s Registration Statement on Form S-1 effective. The 2026 ESPP initially reserved and authorized the issuance of up to a total of 627,345 shares of the Company’s common stock to participating employees. The 2026 ESPP provides that the number of shares reserved and available for issuance will be automatically increased on January 1st of each year, commencing on January 1, 2027 and ending on (and including) January 1, 2036, in an amount equal to the lesser of (i)1.0% of the total number of shares of Fully Diluted Capital Stock (as defined in the 2026 ESPP) outstanding on December 31st of the preceding calendar year, (ii)1,882,035 shares of Common Stock or (iii) such smaller number of shares of Common Stock as the Board of Directors may designate prior to the applicable January 1st. As of September 30, 2026, no shares were issued or sold under the 2026 ESPP.

The following tables summarize the Company’s option activity for the 2019 Plan and 2026 Plan for thenine months ended September 30, 2026 and 2025:

The weighted average grant-date fair value of options granted during the three and nine months ended September 30, 2026, was$12.60 per share and $7.70 per share, respectively. The total fair value of options granted during the three and nine months ended September 30, 2026 were$6.7 million and $14.5 million, respectively. The total fair value of options vested during thethree and nine months ended September 30, 2026, was$1.9 million and $7.2 million, respectively.

The weighted average grant-date fair value of options granted during the three and nine months ended September 30, 2025, was$3.81 per share and $3.92 per share, respectively. The total fair value of options granted during thethree and nine months ended September 30, 2025 were$0.9 million and $12.9 million, respectively. The total fair value of options vested during thethree and nine months ended September 30, 2025, was$3.1 million and $4.4 million, respectively.

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money at each reporting period. The aggregate intrinsic value of stock options exercised for the three and nine months ended September 30, 2026, was $0.7 million and $1.3 million, respectively. The aggregate intrinsic value of stock options exercised for thethree and nine months ended September 30, 2025 was $0.2 million.

Executive Officer and Director Grants

In February 2024, the Board of Directors approved the grant of a stock option award for approximately 0.1 million shares to a director, with vesting subject to the achievement of a performance condition related to the consummation of a deemed liquidation event. Subsequently, in January 2025, the Company determined that the performance condition was not achieved, and the stock option award was cancelled. Accordingly, no stock-based compensation expense was recognized in connection with this award.

In July and August 2024, the Board of Directors approved the grants of stock option awards for a total of approximately 2.8 million shares to three executive officers joining the Company, including the Chief Executive Officer, Chief Medical Officer and Chief Financial Officer. The Chief Executive Officer’s grant allows for early exercise of the stock options. In August 2024, the Board of Directors approved the early exercise of stock option awards for approximately 0.1 million shares related to the Chief Executive Officer’s grant. The cash proceeds received from the early exercise of $0.3 million were recorded as an early exercise liability in accrued expenses and other current liabilities until July 2025, when the underlying shares issued pursuant to early exercise of stock options fully vested and the related early exercise liability was reclassified in its entirety to additional paid-in capital, resulting in no further remaining liability balance.

In April 2025, the Board of Directors approved a total of 461,612 stock option awards to certain executive officers and a member of the Board of Directors. The stock option awards include vesting criteria subject to the achievement of performance-based conditions related to the second tranche closing of the Series B redeemable convertible preferred stock financing in addition to service conditions. The Company assessed the probability that the performance criteria would be met as of the grant date. The grant date fair value of the awards was $3.92 per share. In thethree and nine months ended September 30, 2026, the Company recognized expense for the stock options of $0.1 million and $0.3 million, respectively. In thethree and nine months ended September 30, 2025, the Company recognized expense for the stock options of $0.1 million and $0.2 million, respectively. As of September 30, 2026, there was $1.0 million of unamortized stock-based compensation related to the portion of stock options, which is expected to be recognized over a weighted average period of 2.34 years.

Stock Option Valuation

In determining the fair value of the options granted, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

Fair Value of Common Stock

The fair value of the shares of common stock underlying stock options has historically been determined by the Board of Directors. Prior to the IPO, in the absence of a public market for the Company’s common stock, the Board of Directors determined the fair value of the common stock at the time of grant of the option by considering a number of objective and subjective factors including important developments in the Company’s operations, valuations performed by independent third parties, sales of redeemable convertible preferred stock, actual operating results and financial performance, the conditions in the pharmaceutical and biotechnology industry and the economy in general, the stock price performance and volatility of comparable public companies and the lack of liquidity of the Company’s common stock, among other factors. Prior to the IPO, the Company considered the stay private scenario, mergers and acquisitions (M&A) scenario and IPO exit scenario. In the stay-private scenario, the subject company transaction method was used, which examines prior transactions in the same or related equity of the Company. Probability-weighted expected return method was utilized to capture the value attributable to the IPO outcomes and M&A outcome. A hybrid method was used to allocate equity value to common stock under the stay private, IPO and M&A scenarios. Subsequent to the IPO, the fair value of the Company’s common stock is determined based on the closing market price of the Company’s common stock on Nasdaq on the date of grant.

Expected Term

The expected term represents the period that the Company’s options granted are expected to be outstanding and is determined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term). The Company has very limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The Company will continue to apply this process until a sufficient amount of historical information regarding exercise patterns and post-vesting employment termination behavior becomes available.

Volatility

As the Company was not publicly traded prior to the IPO and does not have sufficient trading history after the IPO, the expected volatility for the Company’s stock options was determined by using an average of historical volatilities of selected industry peers deemed to be comparable to the Company’s business corresponding to the expected term of the awards.

Expected Dividends

The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The expected dividend yield is 0% as the Company has not paid and does not anticipate paying dividends on its common stock.

Risk-Free Rate

The risk-free rate assumption is based on the U.S. Treasury yield curve whose term is consistent with the expected term of the stock options.

The fair value of options granted during the three and nine months ended September 30, 2026 and 2025 was estimated using the following assumptions:

The following table summarizes the components of stock-based compensation expense recognized in the Company’s statements of operations and comprehensive loss (in thousands):

As of September 30, 2026, the total stock-based compensation expense related to stock options not yet recognized was$24.4 million, which is expected to be recognized over a weighted average period of 2.79 years.

Income Taxes

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate and, if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. No such adjustment was made as of September 30, 2026. The Company’s effective federal and state tax rate for the three and nine months ended September 30, 2026 and 2025 was 0%, and the Company didnot record any income tax expense or benefit during thethree and nine months ended September 30, 2026 and 2025, primarily as a result of estimated net operating losses for the fiscal year to date offset by the increase in the valuation allowance against its deferred tax asset. All losses before income taxes arose in the United States.

Net Loss Per Share

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

The Company’s potentially dilutive securities, which include redeemable convertible preferred stock and stock options, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following shares from the computation of diluted net loss per share attributable to common stockholdersas of September 30, 2026 and 2025, because including them would have had an anti-dilutive effect:

Segment Reporting

The accounting policies of the segment are the same as those described in Note 2. Summary of Significant Accounting Policies.

The Company operates asone operating and reportable segment. The Company’s CODM reviews and evaluates net loss to monitor budget versus actual results and to analyze cash flows for purposes of allocating resources and assessing financial performance. Segment assets provided to the CODM are consistent with those reported on the unaudited interim condensed balance sheets.

In addition to the significant expense categories included within net loss presented in the Company's statements of operations and comprehensive loss, disaggregated expenses were as follows (in thousands):

Related Party Transactions

The Company’s Chief Medical Officer ("CMO") owns an approximate 7.5% economic interest in Emerge Holdco, LLC, the ultimate parent entity of Lotus Clinical Research ("Lotus").

In August 2026, the Company entered into a Master Clinical Research Organization Agreement ("CRO Agreement") with Lotus in which Lotus agreed to provide clinical research and development services for one of the Company’s clinical studies.

Within the nine months ended September 30, 2026, the Company recognized $0.5 million in research and development expenses in connection with the CRO Agreement.

The Company’s prepaid expenses, accounts payable and accrued expenses as of September 30, 2026, related to the agreement are immaterial. The Company did not incur similar costs during the corresponding period in the prior year.

Subsequent Events

On November 3, 2026 ("Effective Date"), the Company's Board of Directors ("Board") appointed Todd N. Smith as President and Chief Executive Officer, succeeding Nima Farzan. Mr. Farzan resigned from the Board on the Effective Date.

In connection with the transition, the Company entered into a transition and separation agreement with Mr. Farzan ("Transition Agreement").

Under the Transition Agreement, Mr. Farzan will remain an employee of the Company through January 1, 2027, unless his employment is terminated earlier. Following the termination of his employment, the Company will retain Mr. Farzan as an independent consultant to provide transitional and advisory services through December 31, 2027 (the "Consulting Period"), unless the consulting arrangement is terminated earlier.

The Transition Agreement provides for certain severance and continuation of benefits. Mr. Farzan's outstanding equity awards will continue to vest during the remaining period of his employment and the time of the Consulting Period. The Company is currently evaluating the accounting treatment of the Transition Agreement and an estimate of the financial effect cannot be made.