Jade Biosciences, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on March 25, 2024. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those discussed in the section titled “Risk Factors” included under Part I, Item 1A and elsewhere in this Quarterly Report. See “Special Note Regarding Forward-Looking Statements” in this Quarterly Report.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission, or the SEC, on March 27, 2025. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those discussed in the section titled “Risk Factors” included under Part I, Item 1A and elsewhere in this Quarterly Report on Form 10-Q. See “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

Previous wording

We are a biopharmaceutical company. Our initial focus was on advancing AV 101, our dry powder inhaled formulation of imatinib for the treatment of pulmonary arterial hypertension, or PAH, a devastating disease impacting approximately 70,000 people in the United States and Europe. On June 17, 2024, we announced topline results from the Phase 2b portion of our Phase 2b/Phase 3 Inhaled Imatinib Pulmonary Arterial Hypertension Clinical Trial of AV-101, or IMPAHCT. Topline data showed that, while AV-101 was generally well tolerated across all dose groups, the study did not meet its primary endpoint for improvement in pulmonary vascular resistance compared to placebo for any of the studied doses or show meaningful improvements in the secondary endpoint of change in six minute walk distance. We also reviewed data from several additional secondary endpoints of the Phase 2b portion of IMPAHCT, which also failed to show meaningful improvements. Based upon these results and in agreement with the independent study advisory committee, we halted enrollment and shut down the Phase 3 portion of IMPAHCT as well as the long-term extension study. AV-101 for the treatment of PAH was our only product candidate in development. At this time, we do not intend to resume development of AV-101 or any other product candidates. In July 2024, we announced the decision to conduct a comprehensive review of strategic alternatives focused on maximizing shareholder value. We also engaged Wedbush Securities Inc. (Wedbush PacGrow) as our exclusive strategic financial advisor to assist in the process of exploring strategic alternatives, which may include but are not limited to, an acquisition, merger, reverse merger, business combination, liquidation or other transaction.

Current wording

We are a biopharmaceutical company. Our initial focus was on advancing AV-101, our dry powder inhaled formulation of imatinib for the treatment of pulmonary arterial hypertension, or PAH, a devastating disease impacting approximately 70,000 people in the United States and Europe. On June 17, 2024, we announced topline results from the Phase 2b portion of our Phase 2b/Phase 3 IMPAHCT. Topline data showed that, while AV-101 was generally well tolerated across all dose groups, the study did not meet its primary endpoint for improvement in pulmonary vascular resistance compared to placebo for any of the studied doses or show meaningful improvements in the secondary endpoint of change in six minute walk distance. We also reviewed data from several additional secondary endpoints of the Phase 2b portion of IMPAHCT, which

Previous wording

In June 2024, following our decision to halt further development of AV-101, we announced our plan to terminate nearly all of our workforce in the coming months, or the Workforce Reduction Plan. As of September 30, 2024, 46 individuals, or approximately 90% of our workforce, have been terminated. The affected individuals have been and will be provided severance benefits, including cash severance payments. Each affected individual’s eligibility for severance benefits is contingent upon entering into a separation agreement, which includes a general release of claims against our company. In connection with the Workforce Reduction Plan, we incurred costs (in consideration of releases) of approximately $6.4 million, which are primarily one-time severance benefits.

Current wording

In June 2024, following our decision to halt further development of AV-101, we announced our plan to terminate nearly all of our workforce in the coming months, or the Workforce Reduction Plan. As of March 31, 2025, 47 individuals, or approximately 92% of our workforce, have been terminated. The affected individuals have been and will be provided severance benefits, including cash severance payments. Each affected individual’s eligibility for severance benefits is contingent upon entering into a separation agreement, which includes a general release of claims against our company. In connection with the Workforce Reduction Plan, we incurred costs (in consideration of releases) of approximately $6.5 million, which are primarily one-time severance benefits.

Previous wording

In addition, in connection with the closing of the Merger, or the Closing, we expect to declare a cash dividend to our pre-Merger stockholders of approximately $65.0 million in the aggregate, or the Cash Dividend, provided such amount is subject to adjustment as set forth in the Merger Agreement.

Current wording

In addition, in connection with the closing of the Merger, or the Closing, we have declared a cash dividend, as further discussed below.

Previous wording

On October 30, 2024, Jade entered into a Securities Purchase Agreement, or the Purchase Agreement, with certain existing Jade stockholders and new investors, or the Investors. Pursuant to the Purchase Agreement, and subject to the terms and conditions thereof, Jade agreed to sell, and the Investors agreed to purchase, immediately prior to the consummation of the Merger, shares of Jade Common Stock and pre-funded warrants for an aggregate purchase price of approximately $300.0 million, or the Concurrent Investment, which reflects the conversion of the previously issued $95 million of convertible notes. The consummation of the Concurrent Investment is conditioned on the satisfaction or waiver of the conditions set forth in the Merger Agreement and in the Purchase Agreement. Shares of Jade Common Stock and pre-funded warrants issued pursuant to this financing transaction will be converted into shares of Aerovate Common Stock and pre-funded warrants to acquire shares of Aerovate Common Stock, in accordance with the Exchange Ratio and the Merger Agreement.

Current wording

the Merger, shares of Jade Common Stock and pre-funded warrants for an aggregate purchase price of approximately $300.0 million, or the Concurrent Investment, which reflects the conversion of the previously issued $95.0 million of convertible notes. The consummation of the Concurrent Investment is conditioned on the satisfaction or waiver of the conditions set forth in the Merger Agreement and in the Purchase Agreement. Shares of Jade Common Stock and pre-funded warrants issued pursuant to this financing transaction will be converted into shares of Aerovate Common Stock and pre-funded warrants to acquire shares of Aerovate Common Stock, in accordance with the Exchange Ratio and the Merger Agreement.

Previous wording

On April 5, 2023, we entered into an ATM Equity Offering SM Sales Agreement, or the Sales Agreement, with BofA Securities, Inc., or the Agent, pursuant to which we established an “at-the-market” offering program, or ATM Program, to sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of September 30, 2024, 3,462,721 shares have been sold under the Sales Agreement, generating $67.9 million of net proceeds after deducting commissions to the Agent and other offering costs. As of the date of this Quarterly Report on Form 10-Q, up to $6.0 million of shares of our common stock remain available for sale from time to time under the Sales Agreement.

Current wording

On April 5, 2023, we entered into an ATM Equity Offering SM Sales Agreement, or the Sales Agreement, with BofA Securities, Inc., or the Agent, pursuant to which we established an “at-the-market” offering program to sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of March 31, 2025, 3,462,721 shares have been sold under the Sales Agreement, generating $67.9 million of net proceeds after deducting commissions to the Agent and other offering costs. As of the date of this Quarterly Report on Form 10-Q, up to $6.0 million of shares of our common stock remain available for sale from time to time under the Sales Agreement.

Previous wording

candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:

Current wording

The successful development of any future product candidates is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that would be necessary to complete the potential development and commercialization of any future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of potential future product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:

Previous wording

General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll taxes, employee benefits, stock-based compensation and severance charges for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will decrease for the second half of 2024 as we decrease the size of our organization in connection with the Workforce Reduction Plan. Our future general and administrative expenses will be significantly dependent on our ability to successfully consummate the Merger, related audit and legal expenses and whether we decide to pursue any future product development efforts.

Current wording

General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll taxes, employee benefits, stock-based compensation and severance charges for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. Our general and administrative expenses decreased for 2025 as we decreased the size of our organization in connection with the Workforce Reduction Plan. Our future general and administrative expenses will be significantly dependent on our ability to successfully consummate the Merger, related audit and legal expenses and whether we decide to pursue any future product development efforts.

Previous wording

Other income for the three months ended September 30, 2024 was $1.2 million compared to $1.8 million for the three months ended September 30, 2023. The decrease of $0.6 million was due to interest earned on our cash and cash equivalents and short-term investments for the three months ended September 30, 2024.

Current wording

Other income for the three months ended March 31, 2025 was $0.9 million compared to $1.4 million for the three months ended March 31, 2024. The change of $0.6 million was due to interest earned on our cash and cash equivalents and short-term investments for the three months ended March 31, 2025.

Previous wording

From our inception through September 30, 2024, we have received aggregate net proceeds of $79.8 million from the sale of shares of our convertible preferred stock and $5.0 million from convertible promissory notes to related parties. In July 2021, we completed our initial public offering, or IPO, with aggregate net proceeds from the offering of $126.9 million, after deducting underwriting discounts, commissions and offering costs.

Current wording

From our inception through March 31, 2025, we have received aggregate net proceeds of $79.8 million from the sale of shares of our convertible preferred stock and $5.0 million from convertible promissory notes to related parties. In July 2021, we completed our IPO with aggregate net proceeds from the offering of $126.9 million, after deducting underwriting discounts, commissions and offering costs.

Previous wording

On October 30. 2024, we entered into the Merger Agreement pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub I will merge with and into Jade, with Jade surviving the first merger as the surviving corporation and as part of the same overall transaction, Jade will merge with and into Merger Sub II, with Merger Sub II continuing as our wholly owned subsidiary and the surviving corporation of the second merger. The closing of the Merger is subject to approval by our stockholders and the stockholders of Jade and other customary closing conditions. Our future operations are highly dependent on the success of the proposed Merger with Jade.

Current wording

On October 30, 2024, we entered into the Merger Agreement pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub I will merge with and into Jade, with Jade surviving the first merger as the surviving corporation and as part of the same overall transaction, Jade will merge with and into Merger Sub II, with Merger Sub II continuing as our wholly owned subsidiary and the surviving corporation of the second merger. The closing of the Merger is subject to customary closing conditions. Our future operations are highly dependent on the success of the proposed Merger with Jade.

Previous wording

On April 5, 2023, we entered into the Sales Agreement with the Agent, pursuant to which we can sell, from time to time, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of September 30, 2024, 3,462,721 shares have been sold under the Sales Agreement, generating $67.9 million of net proceeds after deducting commissions to the Agent and other offering costs. As of the date of this Quarterly Report on Form 10-Q, up to $6.0 million of shares of our common stock remain available for sale from time to time under the Sales Agreement.

Current wording

On April 5, 2023, we entered into the Sales Agreement with the Agent, pursuant to which we can sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of March 31, 2025, 3,462,721 shares have been sold under the Sales Agreement, generating $67.9 million of net proceeds after deducting commissions to the Agent and other offering costs. As of the date of this Quarterly Report on Form 10-Q, approximately $6.0 million of shares remain available for sale from time to time under our ATM Program.

Previous wording

As of September 30, 2024, we had cash and cash equivalents and short-term investments of $88.7 million. We expect our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations for at least twelve months from the date of filing this Quarterly Report on Form 10-Q. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Current wording

As of March 31, 2025, we had cash and cash equivalents and short-term investments of $76.2 million, We expect our existing cash, cash equivalents and short-term investments, fund our planned operations for at least twelve months from the filing date of this Quarterly Report on Form 10-Q. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Previous wording

In August 2021, we entered into a lease agreement, or the Waltham Lease, for approximately 5,000 square feet of office space in Waltham, Massachusetts. The base rent under the Waltham Lease is $43.00 per rentable square foot, or approximately $18,000 per month and is subject to scheduled annual increases of $1.00 per rentable square foot during the lease term. In January 2024, the Company entered into the First Amendment to the Waltham Lease resulting in the lease expiring on December 31, 2025, and an increase of $1.00 per rentable square foot during the additional lease term. In obtaining this lease extension, the Company no longer has the option to extend the Waltham Lease for one additional period of three years.

Current wording

In August 2021, we entered into a lease agreement, or the Waltham Lease, for approximately 5,000 square feet of office space in Waltham, Massachusetts. The base rent under the Waltham Lease is $43.00 per rentable square foot, or approximately $18,000 per month and is subject to scheduled annual increases of $1.00 per rentable square foot during the lease term. In January 2024, we entered into the First Amendment to the Waltham Lease resulting in the lease expiring on December 31, 2025, and an increase of $1.00 per rentable square foot during the additional lease term. In obtaining this lease extension, we no longer have the option to extend the Waltham Lease for one additional period of three years.

Previous wording

The following table sets forth a summary of the net cash flow activity for the nine months ended September 30, 2024 and 2023 (in thousands):

Current wording

The following table sets forth a summary of the net cash flow activity for the three months ended March 31, 2025 and 2024 (in thousands):

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2024 was $60.1 million, consisting primarily of our net loss incurred during the period of $64.2 million adjusted for non-cash charges of $10.1 million for stock-based compensation expense, $1.9 million of accretion on investments, $0.3 million of depreciation expense, and $4.4 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $0.1 million increase in prepaid expenses, a $0.8 million decrease in other assets, a $5.6 million decrease in accounts payable and accrued and other current liabilities, and a $0.5 million decrease in other liabilities.

Current wording

Net cash used in operating activities for the three months ended March 31, 2025 was $2.4 million, consisting primarily of our net loss incurred during the period of $2.5 million adjusted for non-cash charges of $1.2 million for stock-based compensation expense, $0.2 million of accretion on investments, and $1.0 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $0.3 million decrease in prepaid expenses and a $0.9 million decrease in accounts payable and accrued and other current liabilities.

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2023 was $42.0 million, consisting primarily of our net loss incurred during the period of $55.1 million adjusted for non-cash charges of $8.7 million for stock-based compensation expense, $2.1 million of accretion on investments, and $6.5 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $6.8 million increase in accounts payable and accrued and other current liabilities, a $0.1 million decrease in other assets, a $0.1 million decrease in other liabilities and a $0.1 million decrease in prepaid expenses.

Current wording

Net cash used in operating activities for the three months ended March 31, 2024 was $23.7 million, consisting primarily of our net loss incurred during the period of $23.2 million adjusted for non-cash charges of $4.2 million for stock-based compensation expense, $0.8 million of accretion on investments, and $3.9 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $2.1 million increase in prepaid expenses, a $0.4 million increase in other long term liabilities, and a $2.2 million decrease in accounts payable and accrued and other current liabilities.

Previous wording

Net cash provided by investing activities for the nine months ended September 30, 2023 of $6.2 million was comprised of purchases of short-term investments of $96.2 million, $0.1 million for purchases of property and equipment, offset by maturities of short-term investments of $102.5 million.

Current wording

Net cash provided by investing activities for the three months ended March 31, 2025 of $12.9 million was comprised of maturities of short-term investments.

Previous wording

Net cash provided by investing activities for the nine months ended September 30, 2024 of $42.9 million was comprised of purchases of short-term investments of $19.7 million, offset by maturities of short-term investments of $62.6 million.

Current wording

Net cash provided by investing activities for the three months ended March 31, 2024 of $8.8 million was comprised of purchases of short-term investments of $14.8 million, offset by maturities of short-term investments of $23.6 million.

Previous wording

There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2024, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.

Current wording

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2025, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Previous wording

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to “opt out” of such extended transition period, which means that when a

Current wording

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time public companies adopt the new or revised standard. The decision to opt out of the extended transition period under the JOBS Act is irrevocable.

Previous wording

We have reviewed all recently issued accounting pronouncements by the Financial Accounting Standards Board and other standard-setting bodies and have determined that such standards that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements, if adopted, or do not otherwise apply to our operations.

Current wording

We have reviewed all recently issued accounting pronouncements by the Financial Accounting Standards Board and other standard-setting bodies and have adopted all standards effective during the period, or have determined that such standards do not require adoption until a future date or do not otherwise apply to our operations.