PALISADE BIO, INC.
For the period ended Sep 30, 2026. Filed Nov 10, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 10, 2026
PALI$1.13-5.0%Stored close · as of Nov 10, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-10.
0001357459-26-000016
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-10.
0001357459-26-000024
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 85 previous paragraphs and 95 current paragraphs.
45 unchanged; 30 reworded; 18 added; 9 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (18)
Current report
Our development strategy is focused on establishing PALI-2108 as a potentially differentiated oral monotherapy, while exploring its potential for use in future combination regimens with complementary mechanisms of action. We believe PDE4 inhibition may offer opportunities to address multiple aspects of disease pathophysiology, including inflammation, mucosal injury and fibrosis.
Current report
Together, ASCENTRA-UC and ASCENTRA-CD are designed to evaluate the clinical efficacy, safety and pharmacology of PALI-2108 across the two major forms of IBD while generating data to inform subsequent clinical development and potential future therapeutic applications.
Current report
This differentiated drug-delivery approach is designed to provide sustained intestinal exposure to the active metabolite with the goal of enabling measurable systemic exposure with moderated peak plasma concentrations. We believe these pharmacologic characteristics may improve the therapeutic index of PDE4 inhibition and potentially mitigate tolerability limitations historically associated with systemic PDE4 inhibitors, including headache and gastrointestinal adverse events such as nausea and diarrhea.
Current report
Our Translational and Precision Medicine Approach
Current report
We are advancing a translational medicine strategy designed to characterize the molecular and pharmacologic effects of PALI-2108, identify biomarkers associated with treatment response and support the development of potentially more effective therapeutic approaches for patients with IBD.
Current report
Our research incorporates clinical data, intestinal tissue analyses, pharmacodynamics ("PD") measurements and multiomics datasets to investigate PDE4-associated inflammatory pathways and molecular responses to treatment. These efforts are intended to improve our understanding of the mechanism of action of PALI-2108, identify candidate biomarkers potentially associated with therapeutic response and inform future clinical development, including exploratory biomarker analyses in our Phase 2 clinical programs.
Current report
Our Phase 1 clinical program incorporated measurements of intestinal tissue cAMP signaling, inflammatory biomarkers and molecular profiling to evaluate treatment-associated PD effects. We are using these findings, together with broader translational research, to investigate candidate biomarker signatures that may support future patient stratification and treatment optimization.
Current report
In addition, we are evaluating complementary molecular pathways that may be suitable for future combination approaches with PALI-2108. We believe this integrated strategy may support both the continued development of PALI-2108 as a monotherapy and the identification of potential future oral combination therapies.
Current report
On August 7, 2025 and September 17, 2025, we announced positive results from the open-label exploratory Phase 1b UC patient cohort portion of the study. All five patients met criteria for clinical response during treatment, including two patients who achieved clinical remission, as measured by the Modified Mayo score. Exploratory assessments also identified improvements in inflammatory biomarkers and histologic measures. Although encouraging, these findings were obtained from a small, uncontrolled cohort and require confirmation in adequately powered randomized clinical trials.
Current report
We dosed our first patient in the ASCENTRA-UC clinical trial on October 27, 2026. Primary efficacy results for ASCENTRA-UC are expected in the fourth quarter of 2027.
Current report
ASCENTRA-CD is a global, multi-center, open-label, single-arm Phase 2 study designed to evaluate the efficacy, safety, tolerability, PK and PD of PALI-2108 in approximately 60 adults with moderate-to-severe CD. Patients will receive PALI-2108 orally once daily, with dose titration to the target dose of PALI-2108 30 mg. The study includes a 12-week induction phase followed by a 36-week maintenance phase.
Current report
The primary endpoint is endoscopic response at week 12, as measured by at least a 50% reduction from baseline in the Simple Endoscopic Score for Crohn’s Disease ("SES-CD"), based on blinded central endoscopic review. Key secondary endpoints at week 12 include clinical remission, endoscopic remission, PRO-2 remission (a patient-reported outcome of abdominal pain and stool frequency), clinical response and combined clinical remission and endoscopic response, with additional maintenance assessments through week 48.
Current report
The decrease in expense associated with the fair value of the contingent consideration obligation was driven by the recognition of an approximate $0.3 million non-cash loss on the fair value remeasurement of the contingent consideration obligation for the three months ended September 30, 2025, compared to an immaterial non-cash loss on the fair value remeasurement of the contingent consideration obligation for the three months ended September 30, 2026. Pursuant to the Giiant License Agreement, we owe Giiant certain payments upon the achievement of development milestones associated with PALI-2108. Concurrent with the expected dosing of our first patients in an exploratory Phase 1b cohort in FSCD, which occurred on October 16, 2025, we recognized an approximate $0.3 million non-cash loss in the three months ended September 30, 2025 with the fair value remeasurement of the associated contingent consideration liability.
Current report
Comparison of the nine months ended September 30, 2026 and 2025
Current report
The decrease in expense associated with the fair value of the contingent consideration obligation was driven by the recognition of an approximate $0.3 million non-cash loss on the fair value remeasurement of the contingent consideration obligation for the nine months ended September 30, 2025, compared to an immaterial non-cash loss on the fair value remeasurement of the contingent consideration obligation for the nine months ended September 30, 2026.
Current report
Contractual Obligations and Commitments
Current report
In the normal course of business, we enter into services agreements with CROs, CDMOs, and other third parties. These agreements generally provide for termination upon notice, with amounts owed based on the timing of termination and the terms of the agreement. The actual amounts and timing of payments under these agreements are uncertain and contingent upon the initiation and completion of the services to be provided.
Current report
Other than commitments disclosed in Note 9, Commitments and Contingencies, in Part 1 Item 1 of this Quarterly Report on Form 10-Q, we have no material non-cancellable commitments or contractual obligations.
Removed paragraphs (9)
Previous report
With a glucuronic acid-derived moiety, PALI-2108 is intended to limit absorption until activated by the colonic bacterium enzyme β-glucuronidase. We believe that localized bioactivation may help focus the effects of PALI-2108 where it would be most beneficial to a patient suffering from IBD.
Previous report
Our Precision Medicine Approach
Previous report
We are developing a biomarker-based patient selection approach that we believe may aid clinicians in identifying patients who may better respond to PALI-2108, thereby improving the rate of clinical response previously demonstrated with PDE4 inhibitors. Our approach involves the use of clinical and multiomics data from large patient populations to identify PDE4-related biomarkers that are correlated with IBD, its severity, and which are modified with local PDE4-inhibitor therapy in the colon. Based on our research, we have initiated the development of corresponding biomarker assays for these PDE4-related biomarkers that we expect to use in our future clinical studies with the aim of developing regulatory-approved tests for selecting potential responders to PALI-2108.
Previous report
On August 7, 2025 and September 17, 2025, we announced positive results from the open-label exploratory Phase 1b UC patient cohort portion of the study. This study also successfully met its primary endpoints of safety, tolerability, and PK. Although the results require validation in randomized, controlled clinical trials, all five of the patients in the exploratory Phase 1b UC patient cohort demonstrated clinical improvement during treatment.
Previous report
We continue to advance PALI-2108 development plans for the treatment of CD and we currently anticipate submitting an IND application to the FDA for a Phase 2 ASCENTRA-CD clinical trial in the second half of 2026. If cleared by the FDA, the Phase 2 ASCENTRA-CD clinical trial will evaluate the efficacy, safety, PK and PD of PALI-2108 in patients with moderately-to-severely active CD.
Previous report
Comparison of the six months ended June 30, 2026 and 2025
Previous report
License revenue
Previous report
Contractual Obligations
Previous report
We currently have no significant contractual obligations.
Reworded paragraphs (30)
Previous wording
Results of Operations — Analysis of our financial results comparing the three and six months ended June 30, 2026 and 2025.
Current wording
Results of Operations — Analysis of our financial results comparing the three and nine months ended September 30, 2026 and 2025.
Previous wording
We are a clinical-stage biopharmaceutical company developing next-generation prodrugs for patients with inflammatory and fibrotic diseases. Our lead clinical product candidate, PALI-2108, is being advanced into Phase 2 clinical trials as a treatment for patients living with inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC") and Crohn's disease ("CD"). Despite the availability of multiple biologic and small-molecule therapies, many patients with UC and CD do not achieve durable remission, lose response over time, or discontinue treatment because of safety or tolerability limitations. We believe PALI-2108 has the potential to address these limitations through once-daily oral dosing, targeted lower-intestinal bioactivation and broad PDE4-mediated anti-inflammatory activity.
Current wording
Despite the availability of multiple biologic and small-molecule therapies, many patients with UC and CD do not achieve durable remission, lose response over time, or discontinue treatment because of safety or tolerability limitations. We believe PALI-2108 has the potential to address these limitations through once-daily oral dosing, targeted lower-intestinal bioactivation, sustained pharmacologic exposure of its active metabolite, and broad phosphodiesterase-4 ("PDE4") mediated anti-inflammatory activity.
Previous wording
During the first half of 2026, we completed our Phase 1 clinical development program for PALI-2108 and advanced the program into Phase 2 development. In June 2026, the U.S. Food and Drug Administration ("FDA") cleared our Investigational New Drug Application (“IND”) for our global Phase 2 ASCENTRA-UC clinical trial, in which we expect to enroll our first patient in the second half of 2026. ASCENTRA-UC represents our first large, randomized, placebo-controlled clinical trial designed to evaluate the efficacy and safety of PALI-2108 in patients with moderately-to-severely active UC. In parallel, we are advancing plans for a Phase 2 clinical trial in CD and currently anticipate submitting an IND for that clinical trial in the second half of 2026. We believe these developments represent an important transition for the Company from early clinical evaluation into broader Phase 2 development across two IBD indications.
Current wording
During 2026, we completed our Phase 1 clinical development program for PALI-2108. In June 2026, the U.S. Food and Drug Administration ("FDA") cleared our Investigational New Drug (“IND”) application for ASCENTRA-UC, our global Phase 2 clinical trial, in which we dosed our first patient on October 27, 2026. ASCENTRA-UC represents our first large, randomized, double-blind, placebo-controlled clinical trial designed to evaluate the efficacy and safety of PALI-2108 in patients with moderately-to-severely active UC. In September 2026, the FDA cleared our IND for our global Phase 2 ASCENTRA-CD clinical trial in patients with moderate-to-severe CD.
Previous wording
Our lead clinical product candidate, PALI-2108, is a once-daily, oral prodrug designed for targeted delivery of phosphodiesterase-4 ("PDE4") inhibition to the terminal ileum and colon through local bacterial bioactivation. The prodrug is pharmacologically inactive until it reaches the lower intestine, where bacterial enzymes convert it into the active PDE4 inhibitor at sites of inflammation and fibrosis. This targeted activation strategy prevents absorption in the upper gut, enables sustained local exposure with controlled systemic distribution, and is engineered to reduce peak plasma levels, thereby improving the overall therapeutic index and reducing tolerability limitations such as diarrhea, nausea and headache that have constrained systemic PDE4 inhibitors.
Current wording
Our lead clinical product candidate, PALI-2108, is a novel, once-daily, orally administered microbiota-activated prodrug designed for targeted delivery of PDE4 inhibition to the terminal ileum and colon. The prodrug is designed to remain pharmacologically inactive until it reaches the lower intestine, where bacterial enzymes convert it into the active PDE4 inhibitor at sites of inflammation and fibrosis.
Previous wording
The Phase 1 clinical study of PALI-2108 consisted of a single-center study evaluating the safety, tolerability, pharmacokinetics (“PK”) and pharmacodynamics ("PD") of PALI-2108 in healthy volunteers, patients with UC and patients with fibrostenotic Crohn's disease ("FSCD"). The clinical study included five single ascending dose ("SAD") double-blind, placebo-controlled cohorts, four multiple ascending dose ("MAD") double-blind, placebo-controlled cohorts, a food effect ("FE") study, and open-label exploratory Phase 1b patient cohorts in UC and FSCD. In addition, to inform the dosing regimen selected for our planned Phase 2 study, we conducted a multiple-dosing, open-label study in three cohorts to evaluate safety, tolerability and PK in which each of the cohorts received a once-daily 15mg, 30mg or 45mg dosing over a ten-day dosing period. The Phase 1 clinical study of PALI-2108 enrolled and completed dosing in 106 subjects across all cohorts.
Current wording
The Phase 1 clinical study of PALI-2108 consisted of a single-center study evaluating the safety, tolerability, pharmacokinetics (“PK”) and PD of PALI-2108 in healthy volunteers, patients with UC and patients with fibrostenotic Crohn's disease ("FSCD"). The clinical study included five single ascending dose ("SAD") double-blind, placebo-controlled cohorts, four multiple ascending dose ("MAD") double-blind, placebo-controlled cohorts, a food effect ("FE") study, and open-label exploratory Phase 1b patient cohorts in UC and FSCD. In addition, to inform the dosing regimen selected for our Phase 2 study, we conducted a multiple-dosing, open-label study in three cohorts to evaluate safety, tolerability and PK in which each of the cohorts received a once-daily 15 mg, 30 mg or 45 mg dosing over a ten-day dosing period. The Phase 1 clinical study of PALI-2108 enrolled and completed dosing in 106 subjects across all cohorts.
Previous wording
On March 30, 2026, we announced positive results from the open-label exploratory Phase 1b FSCD patient cohort. The study demonstrated favorable safety and tolerability, robust PD target engagement in ileal tissue, and encouraging early signals of clinical activity. We believe these findings support the continued development of PALI-2108 as a potential first therapy for both the inflammatory and fibrotic components of CD.
Current wording
On March 30, 2026, we announced positive results from the open-label exploratory Phase 1b FSCD patient cohort. In five treated patients, exploratory endoscopic assessments demonstrated a mean reduction of approximately 47.5% in the Simple Endoscopic Score for Crohn's Disease ("SES-CD") following 14 days of treatment, with two patients meeting criteria for both endoscopic response and endoscopic remission. The study also demonstrated PD evidence consistent with intestinal PDE4 pathway engagement, including an approximately 43% increase in ileal tissue cAMP, together with changes in inflammatory cellular populations and exploratory biomarkers associated with tissue remodeling. The study demonstrated favorable safety and tolerability, robust PD target engagement in ileal tissue, and encouraging early signals of clinical activity. We believe these findings support the continued development of PALI-2108 as a potential first therapy for both the inflammatory and fibrotic components of CD.
Previous wording
On June 29, 2026, we announced that the FDA cleared our IND application for PALI-2108, enabling initiation of our global Phase 2 ASCENTRA-UC clinical trial.
Current wording
On June 29, 2026, we announced that the FDA cleared our IND application for PALI-2108, enabling initiation of our global Phase 2 ASCENTRA-UC clinical trial for the treatment of moderately-to-severely active UC.
Previous wording
Our ASCENTRA-UC clinical trial design is a multi-center, randomized, double-blind, placebo-controlled, dose-ranging Phase 2 clinical trial designed to evaluate the efficacy, safety, PK and PD of PALI-2108 in patients with moderately-to-severely active UC. The clinical trial is expected to enroll approximately 204 patients and evaluate two once-daily dose levels of PALI-2108, 15 mg and 30 mg, compared with placebo.
Current wording
ASCENTRA-UC is a global, multi-center, randomized, double-blind, placebo-controlled, dose-ranging Phase 2 clinical trial designed to evaluate the efficacy, safety, tolerability, PK and PD of PALI-2108 in approximately 204 patients with moderately-to-severely active UC. Patients will be randomized to receive either PALI-2108 15 mg, PALI-2108 30 mg, or placebo administered orally once daily. The study includes patients with prior exposure to advanced therapies, enabling evaluation across a clinically relevant UC population.
Previous wording
Pipeline Expansion into Phase 2 ASCENTRA-CD Clinical Trial of PALI-2108
Current wording
Global Phase 2 ASCENTRA-CD Clinical Trial of PALI-2108
Previous wording
We anticipate initiating patient enrollment in the ASCENTRA-UC clinical trial in the second half of 2026, with primary efficacy results expected in the second half of 2027.
Current wording
We anticipate initiating patient enrollment in the ASCENTRA-CD clinical trial in the first quarter of 2027, with primary efficacy results expected in the first quarter of 2028.
Previous wording
We generated no revenues from the sale of our product candidates for any of the periods presented. For each of the three and six months ended June 30, 2026, we recognized license revenue of approximately $0.5 million from the co-development and distribution agreement with Newsoara, a joint venture established by Biolead Medical Technology Limited, as amended, (the “Newsoara Co-Development Agreement”). For the three and six months ended June 30, 2025, we recognized no license revenue.
Current wording
We generated no revenues from the sale of our product candidates for any of the periods presented. For the nine months ended September 30, 2026, we recognized license revenue of approximately $0.5 million from the co-development and distribution agreement with Newsoara, a joint venture established by Biolead Medical Technology Limited, as amended, (the “Newsoara Co-Development Agreement”). For the three months ended September 30, 2026, and three and nine months ended September 30, 2025, we recognized no license revenue.
Previous wording
Our research and development expenses increased by approximately $5.7 million from approximately $1.7 million for the three months ended June 30, 2025 to approximately $7.4 million for the three months ended June 30, 2026. The increase is primarily attributable to an approximately $2.6 million increase in research and development employee-related expenses, and an approximately $3.1 million net increase in PALI-2108 program expenses.
Current wording
Our research and development expenses increased by approximately $9.2 million from approximately $1.4 million for the three months ended September 30, 2025 to approximately $10.6 million for the three months ended September 30, 2026. The increase is primarily attributable to an approximately $2.7 million increase in research and development employee-related expenses and an approximately $6.8 million net increase in PALI-2108 program expenses. These increases were partially offset by an approximately $0.3 million decrease in expenses associated with the fair value of the contingent consideration obligation pursuant to the research collaboration and license agreement, as amended (“Giiant License Agreement”) entered with Giiant Pharma, Inc. ("Giiant").
Previous wording
The increase in research and development employee-related expenses for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, was primarily due to an approximately $2.0 million increase in non-cash share-based compensation expense and an approximately $0.6 million increase in research and development salaries and benefits expense due to higher research and development headcount necessary to support our PALI-2108 development strategy.
Current wording
The increase in research and development employee-related expenses for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, was primarily due to an approximately $2.0 million increase in non-cash share-based compensation expense and an approximately $0.7 million increase in research and development salaries and benefits expense due to higher research and development headcount necessary to support our PALI-2108 development strategy.
Previous wording
We recognized PALI-2108 program expenses of approximately $4.4 million for the three months ended June 30, 2026, compared to PALI-2108 program expenses of approximately $1.2 million for the three months ended June 30, 2025. Included in these program expenses were (i) clinical operations costs, which increased from approximately $0.7 million for the three months ended June 30, 2025 to approximately $2.3 million for the three months ended June 30, 2026, (ii) preclinical and translational science expenses, which increased from an immaterial amount for the three months ended June 30, 2025 to approximately $1.0 million for the three months ended June 30, 2026, (iii) chemistry, manufacturing and controls ("CMC") expenses, which increased from approximately $0.4 million for the three months ended June 30, 2025 to approximately $0.8 million for the three months ended June 30, 2026, and (iv) other program expenses, which increased from an immaterial amount for the three months ended June 30, 2025 to approximately $0.3 million for the three months ended June 30, 2026.
Current wording
We recognized PALI-2108 program expenses of approximately $7.3 million for the three months ended September 30, 2026, compared to PALI-2108 program expenses of approximately $0.4 million for the three months ended September 30, 2025. Included in these program expenses were (i) clinical operations costs, which increased from approximately $0.3 million for the three months ended September 30, 2025 to approximately $5.0 million for the three months ended September 30, 2026, (ii) chemistry, manufacturing and controls ("CMC") expenses, which increased from approximately $0.2 million for the three months ended September 30, 2025 to approximately $1.0 million for the three months ended September 30, 2026, (iii) other program expenses, which increased from an immaterial amount for the three months ended September 30, 2025 to approximately $0.2 million for the three months ended September 30, 2026, and (iv) preclinical and translational science expenses, which increased from a credit of approximately $0.1 million for the three months ended September 30, 2025 to approximately $1.1 million for the three months ended September 30, 2026. Preclinical and translational science expenses for the three months ended September 30, 2025 includes a credit of approximately $0.2 million related to funds received by us from Giiant pursuant to the Giiant License Agreement, that did not recur in the three months ended September 30, 2026.
Previous wording
Our general and administrative expenses increased by approximately $6.6 million from approximately $2.5 million for the six months ended June 30, 2025 to approximately $9.1 million for the six months ended June 30, 2026. The increase was primarily as a result of (i) an approximately $5.4 million increase in general and administrative employee-related expenses due to an approximately $5.0 million increase in non-cash share-based compensation expense and an approximately $0.4 million increase in general and administrative salaries and benefits, (ii) an approximately $0.8 million increase in professional fees, primarily legal fees, (iii) an approximately $0.1 million increase in shareholder services expense due to the timing of our annual meeting of stockholders, which occurred in the second quarter of 2026 compared to the prior year's annual meeting of stockholders, which occurred in the fourth quarter of 2025, (iv) an approximately $0.1 million increase in patent-related costs, (v) an approximately $0.1 million increase in taxes and insurance, and (vi) an approximately $0.1 million increase in general corporate expenses.
Current wording
Our general and administrative expenses increased by approximately $3.6 million from approximately $1.5 million for the three months ended September 30, 2025 to approximately $5.1 million for the three months ended September 30, 2026. The increase was primarily as a result of (i) an approximately $3.1 million increase in general and administrative employee-related expenses driven by an approximately $2.9 million increase in non-cash share-based compensation expense and an approximately $0.2 million increase in general and administrative salaries and benefits, (ii) an approximately $0.4 million increase in professional fees, primarily legal fees, and (iii) an approximately $0.1 million increase in general operating costs.
Previous wording
Other income, net, for the three months ended June 30, 2026 and 2025 consists primarily of dividend income from our investments of excess cash in money market funds with maturities of three months or less. The increase of $1.1 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, is due to the increased investment of excess cash in money market accounts after the October 2025 Offering, which is further described below.
Current wording
Other income, net, for the three months ended September 30, 2026 and 2025 consists primarily of dividend income from our investments of excess cash in money market funds with maturities of three months or less. The increase of $1.0 million for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, is due to the increased investment of excess cash in money market accounts after the October 2025 Offering, which is further described below.
Previous wording
The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025 (in thousands):
Current wording
The following table summarizes our results of operations for the nine months ended September 30, 2026 and 2025 (in thousands):
Previous wording
During the three months ended June 30, 2026, we recognized license revenue of $0.5 million earned upon the achievement of a milestone under the Newsoara Co-Development Agreement. During the three months ended June 30, 2025, we recognized no license revenue.
Current wording
During the nine months ended September 30, 2026, we recognized license revenue of $0.5 million earned upon the achievement of a milestone under the Newsoara Co-Development Agreement. During the nine months ended September 30, 2025, we recognized no license revenue.
Previous wording
Our research and development expenses increased by approximately $11.2 million from approximately $2.6 million for the six months ended June 30, 2025 to approximately $13.8 million for the six months ended June 30, 2026. The increase is primarily attributable to (i) an approximately $5.0 million increase in research and development employee-related expenses, (ii) an approximately $6.1 million net increase in PALI-2108 program expenses, and (iii) an approximately $0.1 million net increase in legacy program expenses.
Current wording
Our research and development expenses increased by approximately $20.4 million from approximately $4.0 million for the nine months ended September 30, 2025 to approximately $24.4 million for the nine months ended September 30, 2026. The increase is primarily attributable to (i) an approximately $7.7 million increase in research and development employee-related expenses, (ii) an approximately $12.9 million net increase in PALI-2108 program expenses, and (iii) an approximately $0.1 million net increase in legacy program expenses. These increases were partially offset by an approximately $0.3 million decrease in expenses associated with the fair value of the contingent consideration obligation pursuant to the Giiant License Agreement.
Previous wording
The increase in research and development employee-related expenses for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily due to an approximately $4.0 million increase in non-cash share-based compensation expense and an approximately $1.0 million increase in research and development salaries and benefits expense due to higher research and development headcount necessary to support our PALI-2108 development strategy.
Current wording
The increase in research and development employee-related expenses for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily due to an approximately $6.0 million increase in non-cash share-based compensation expense and an approximately $1.7 million increase in research and development salaries and benefits expense due to higher research and development headcount necessary to support our PALI-2108 development strategy.
Previous wording
PALI-2108 program expenses were approximately $7.8 million for the six months ended June 30, 2026, compared to PALI-2108 program expenses of approximately $1.7 million for the six months ended June 30, 2025. Included in these program expenses were (i) clinical operations costs, which increased from approximately $1.8 million for the six months ended June 30, 2025 to approximately $3.4 million for the six months ended June 30, 2026, (ii) preclinical and translational science expenses, which increased from a credit of approximately $0.6 million for the six months ended June 30, 2025 to approximately $2.1 million for the six months ended June 30, 2026, (iii) CMC expenses, which increased from approximately $0.1 million for the six months ended June 30, 2025 to approximately $2.0 million for the six months ended June 30, 2026, and (iv) other program expenses, which increased from approximately $0.1 million for the six months ended June 30, 2025 to approximately $0.3 million for the six months ended June 30, 2026. The credit of approximately $0.6 million recognized in preclinical and translational science expenses for the six months ended June 30, 2025 relates to funds received by us from Giiant Pharma Inc. ("Giiant") pursuant to our research collaboration and license agreement with Giiant, that did not recur in the six months ended June 30, 2026.
Current wording
PALI-2108 program expenses were approximately $15.1 million for the nine months ended September 30, 2026, compared to PALI-2108 program expenses of approximately $2.2 million for the nine months ended September 30, 2025. Included in these program expenses were (i) clinical operations costs, which increased from approximately $2.1 million for the nine months ended September 30, 2025 to approximately $8.4 million for the nine months ended September 30, 2026, (ii) CMC expenses, which increased from approximately $0.6 million for the nine months ended September 30, 2025 to approximately $3.0 million for the nine months ended September 30, 2026, and (iii) other program expenses, which increased from approximately $0.1 million for the nine months ended September 30, 2025 to approximately $0.5 million for the nine months ended September 30, 2026, and (iv) preclinical and translational science expenses, which increased from a credit of approximately $0.6 million for the nine months ended September 30, 2025 to approximately $3.2 million for the nine months ended September 30, 2026. Preclinical and translational science expenses for the nine months ended September 30, 2025 includes a credit of approximately $0.8 million related to funds received by us from Giiant pursuant to the Giiant License Agreement, that did not recur in the nine months ended September 30, 2026.
Previous wording
Our general and administrative expenses increased by approximately $3.6 million from approximately $1.2 million for the three months ended June 30, 2025 to approximately $4.8 million for the three months ended June 30, 2026. The increase was primarily as a result of (i) an approximately $3.0 million increase in general and administrative employee-related expenses driven by an approximately $2.7 million increase in non-cash share-based compensation expense and an approximately $0.3 million increase in general and administrative salaries and benefits, (ii) an approximately $0.3 million increase in professional fees, primarily legal fees, (iii) an approximately $0.1 million increase in shareholder services expense due to the timing of our annual meeting of stockholders, which occurred in the second quarter of 2026 compared to the prior year's annual meeting of stockholders, which occurred in the fourth quarter of 2025, (iv) an approximately $0.1 million increase in patent-related costs, and (v) an approximately $0.1 million increase in taxes and insurance.
Current wording
Our general and administrative expenses increased by approximately $10.2 million from approximately $4.1 million for the nine months ended September 30, 2025 to approximately $14.3 million for the nine months ended September 30, 2026. The increase was primarily as a result of (i) an approximately $8.5 million increase in general and administrative employee-related expenses due to an approximately $7.9 million increase in non-cash share-based compensation expense and an approximately $0.6 million increase in general and administrative salaries and benefits, (ii) an approximately $1.2 million increase in professional fees, primarily legal fees, (iii) an approximately $0.2 million increase in patent-related costs, (iv) an approximately $0.1 million increase in taxes and insurance, and (v) an approximately $0.2 million increase in general corporate expenses.
Previous wording
Other income, net, was approximately $2.3 million for the six months ended June 30, 2026 compared to approximately $0.1 million for six months ended June 30, 2025. The increase was driven by dividend income from our investments of excess cash in money market funds with maturities of three months or less, which increased from approximately $0.1 million for the six months ended June 30, 2025 to approximately $2.3 million for six months ended June 30, 2026 due to the increased investment of excess cash in money market accounts after the October 2025 Offering.
Current wording
Other income, net, for the nine months ended September 30, 2026 and 2025 consists primarily of dividend income from our investments of excess cash in money market funds with maturities of three months or less. The increase of $3.1 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, is due to the increased investment of excess cash in money market accounts after the October 2025 Offering, which is further described below.
Previous wording
The October 2025 Offering, as further described below, significantly increased our available working capital and our ability to fund our operations into the foreseeable future. Based on our current operating plan and our cash and cash equivalents balance of $125.2 million as of June 30, 2026, management believes that we have sufficient capital to fund our operations through major clinical development milestones including a primary efficacy readout of our Phase 2 ASCENTRA-UC clinical trial that is expected in the second half of 2027 and a primary efficacy readout of our planned Phase 2 ASCENTRA-CD clinical trial that is expected in early 2028.
Current wording
The October 2025 Offering, as further described below, significantly increased our available working capital and our ability to fund our operations into the foreseeable future. Based on our current operating plan and our cash and cash equivalents balance of $113.6 million as of September 30, 2026, management believes that we have sufficient capital to fund our operations through major clinical development milestones including a primary efficacy readout of our Phase 2 ASCENTRA-UC clinical trial that is expected in the fourth quarter of 2027 and a primary efficacy readout of our Phase 2 ASCENTRA-CD clinical trial that is expected in the first quarter of 2028.
Previous wording
As of June 30, 2026, we had $125.2 million in cash, cash equivalents and restricted cash. The following table shows a summary of our cash flows for the six months ended June 30, 2026 and 2025 (in thousands):
Current wording
As of September 30, 2026, we had $113.7 million in cash, cash equivalents and restricted cash. The following table shows a summary of our cash flows for the nine months ended September 30, 2026 and 2025 (in thousands):
Previous wording
Cash used in operating activities was approximately $11.5 million for the six months ended June 30, 2026, which reflects an approximately $20.2 million net loss adjusted for (i) approximately $0.4 million of net cash outflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of an approximately $9.1 million non-cash expense recognized for stock-based compensation and related charges. The net cash outflow from operating assets and liabilities was primarily attributable to (i) a net cash outflow of approximately $1.0 million driven by the payment of annual employee cash bonuses in the period, partially offset by the current period employee cash bonus accrual, (ii) a net cash outflow of approximately $0.9 million driven by increased prepaid expenses and other current assets, due primarily to the timing of payments for certain services and deferred equity issuance costs recognized that are associated with our shelf registration statement filed in May of 2026, and (iii) the recognition of a $0.5 million accounts receivable for license revenue recognized for the achievement of a milestone under the Newsoara Co-Development Agreement, of which there was none at December 31, 2025. These cash outflows were partially offset by an approximately $2.0 million cash inflow from an increase in accounts payable and accrued liabilities as of June 30, 2026, compared to December 31, 2025, primarily due to higher preclinical and translational science and CMC expenses in the period.
Current wording
Cash used in operating activities was approximately $23.3 million for the nine months ended September 30, 2026, which reflects an approximately $34.8 million net loss adjusted for (i) approximately $2.6 million of net cash outflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of an approximately $14.1 million non-cash expense recognized for stock-based compensation and related charges. The net cash outflow from operating assets and liabilities was primarily attributable to (i) a net cash outflow of approximately $4.2 million from an increase in prepaid and other current assets and other noncurrent assets that was primarily attributable to prepaid research and development expenses of approximately $3.8 million recognized during the period, and the timing of payments for certain services, and (ii) a net cash outflow of approximately $0.5 million driven by the payment of annual employee cash bonuses in the period, partially offset by the current period employee cash bonus accrual. These cash outflows were partially offset by an approximately $2.1 million cash inflow from an increase in accounts payable and accrued liabilities as of September 30, 2026, compared to December 31, 2025, primarily due to higher PALI-2108 program expenses in the period.
Previous wording
Cash used in operating activities was approximately $4.2 million for the six months ended June 30, 2025, which reflects an approximately $5.0 million net loss adjusted for (i) approximately $0.6 million of net cash inflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of an approximately $0.1 million non-cash expense recognized for stock-based compensation and related charges, and an approximately $0.1 million non-cash expense related to the write-off of certain deferred equity issuance costs associated with our shelf registration statement that expired in April of 2025. The net cash inflow from operating assets and liabilities was primarily attributable to a net cash inflow of approximately $1.2 million from an increase in accounts payable and accrued liabilities as of June 30, 2025 compared to December 31, 2024, partially offset by net cash outflow of approximately $0.5 million driven by the payment of annual employee cash bonuses in six months ended June 30, 2025.
Current wording
Cash used in operating activities was approximately $7.7 million for the nine months ended September 30, 2025, which reflects an approximately $7.9 million net loss adjusted for (i) approximately $0.5 million of net cash outflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of (a) an approximately $0.3 million non-cash expense recognized for the fair value remeasurement of liabilities, mainly our contingent consideration liability, (b) an approximately $0.2 million non-cash expense recognized for stock-based compensation and related charges, (c) an approximately $0.1 million non-cash operating lease expense, and (d) an approximately $0.1 million non-cash expense related to the write-off of certain deferred equity issuance costs associated with our shelf registration statement that expired in April of 2025. The net cash outflow from operating assets and liabilities was primarily attributable to (i) a net cash outflow of approximately $0.5 million from an increase in prepaid and other current assets and other noncurrent assets that was due to the deferral of issuance costs in the amount of approximately $0.6 million associated with the equity offering that closed on October 2, 2025 and a significant prepaid research and development expense of approximately $0.4 million recognized in the period, (ii) a cash outflow of approximately $0.1 million driven by the payment of annual employee cash bonuses in the first quarter of 2025, and (iii) an approximately $0.1 million cash outflow related to payments of our operating lease. These net cash outflows were partially offset by an approximately $0.3 million cash inflow from an increase in accounts payable and accrued liabilities as of September 30, 2025 compared to December 31, 2024, primarily due to higher clinical trial-related expenses as a result of increased clinical trial activity, partially offset by lower accrued joint development expenses associated with the Giiant License Agreement.
Previous wording
For the six months ended June 30, 2026, cash provided by financing activities of approximately $3.3 million was primarily attributable to net cash proceeds of approximately $3.3 million from the issuance of our common stock to an investor and the issuance of our common stock in association with the Crohn's and Colitis Foundation Research Program Funding Agreement, both of which are described in Note 5, Stockholders' Equityin Part I Item 1 of this Quarterly Report on Form 10-Q, and net cash proceeds of approximately $0.2 million from the exercise of our common stock purchase warrants by certain investors. These cash proceeds were partially offset by the payment of equity issuance costs of approximately $0.1 million related to certain recently completed financings and payments of approximately $0.1 million made on our insurance financing arrangement, which expired in the second quarter of 2026 and was not renewed.
Current wording
For the nine months ended September 30, 2026, cash provided by financing activities of approximately $3.5 million was primarily attributable to net cash proceeds of approximately $3.5 million from the issuance of our common stock to an investor and the issuance of our common stock in association with the Crohn's and Colitis Foundation Research Program Funding Agreement, both of which are described in Note 5, Stockholders' Equityin Part I Item 1 of this Quarterly Report on Form 10-Q, and net cash proceeds of approximately $0.2 million from the exercise of our common stock purchase warrants by certain investors. These cash proceeds were partially offset by the payment of equity issuance costs of approximately $0.1 million related to certain recently completed financings and payments of approximately $0.1 million made on our insurance financing arrangement, which expired in the second quarter of 2026 and was not renewed.
Previous wording
For the six months ended June 30, 2025, cash used in financing activities of approximately $0.3 million was attributable to the payment of equity issuance costs of approximately $0.2 million, primarily related to our underwritten equity offering completed in December of 2024, and payments made on our insurance financing arrangement of approximately $0.1 million.
Current wording
For the nine months ended September 30, 2025, cash provided by financing activities of approximately $3.1 million was primarily attributable to net cash proceeds of approximately $3.5 million from the exercise of common stock warrants in conjunction with the July 2025 Warrant Inducement, partially offset by the payment of equity issuance costs of approximately $0.2 million in the period, primarily related to our underwritten equity offering completed in December of 2024, and payments made on our insurance financing arrangement of approximately $0.2 million.
Previous wording
We have incurred significant operating losses and negative cash flows from operations since our inception. To date, we have not been able to generate significant revenues nor achieve operating profitability. Based upon our cash and cash equivalents balance of $125.2 million as of June 30, 2026, we believe we have sufficient capital to fund our operations through major clinical development milestones including a primary efficacy readout of our Phase 2 ASCENTRA-UC clinical trial that is expected in the second half of 2027 and a primary efficacy readout of our planned ASCENTRA-CD clinical trial that is expected in early 2028. Notwithstanding, should our anticipated level of operations significantly change, we may require additional financing sooner than anticipated. Further, beyond the readout expected in early 2028, we will require additional financing to continue at our expected level of operations, which would include a potential Phase 3 clinical trial and possible commercialization of PALI-2108 for the treatment of UC and CD.
Current wording
We have incurred significant operating losses and negative cash flows from operations since our inception. To date, we have not been able to generate significant revenues nor achieve operating profitability. Based upon our cash and cash equivalents balance of $113.6 million as of September 30, 2026, we believe we have sufficient capital to fund our operations through major clinical development milestones including a primary efficacy readout of our Phase 2 ASCENTRA-UC clinical trial that is expected in the fourth quarter of 2027 and a primary efficacy readout of our Phase 2 ASCENTRA-CD clinical trial that is expected in the first quarter of 2028. Notwithstanding, should our anticipated level of operations significantly change, we may require additional financing sooner than anticipated. Further, beyond the readout expected in the first quarter of 2028, we will require additional financing to continue at our expected level of operations, which would include a potential Phase 3 clinical trial and possible commercialization of PALI-2108 for the treatment of UC and CD.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
We are a clinical-stage biopharmaceutical company developing next-generation oral therapies for immune-mediated and fibrotic diseases. Our lead clinical product candidate, PALI-2108, is in Phase 2 clinical trials as a treatment for patients living with inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC") and Crohn's disease ("CD").
Current report — wording carried from elsewhere
On September 22, 2026, we announced that the FDA cleared our IND application for PALI-2108, enabling initiation of our global Phase 2 ASCENTRA-CD clinical trial for the treatment of moderate-to-severe CD.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
During the six months ended June 30, 2026, we recognized license revenue of $0.5 million earned upon the achievement of a milestone under the Newsoara Co-Development Agreement. During the six months ended June 30, 2025, we recognized no license revenue.