Sionna Therapeutics, Inc.

1. Nature of the Business

Organization

Sionna Therapeutics, Inc. (the “Company”), formerly known as Sling Therapeutics, Inc., was incorporated in Delaware in August 2019 and is headquartered in Waltham, Massachusetts. The Company is a clinical-stage biopharmaceutical company on a mission to revolutionize the current treatment paradigm for cystic fibrosis (“CF”) patients by developing novel medicines that normalize the function of the cystic fibrosis transmembrane conductance regulator (“CFTR”) protein to deliver clinically meaningful benefit to CF patients.

Risks and Uncertainties

The Company is subject to a number of risks common to other companies in the biotechnology industry, including but not limited to, development by competitors of new technological innovations, risks of failure of preclinical studies and clinical trials, development and manufacturing of product candidates, obtaining regulatory approval for product candidates, competition from substitute products, the need to successfully commercialize and gain market acceptance of its product candidates, protection of proprietary technology, dependence on key personnel, the ability to attract and retain qualified employees, reliance on third party organizations compliance with government regulations, and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive clinical testing and regulatory approval, prior to commercialization. These efforts will require significant amounts of additional capital, adequate personnel 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.

Reverse Stock Split

On January 31, 2025, the Company effected a 1-for-1.4611 reverse stock split of its issued and outstanding shares of common stock, which also resulted in a proportional adjustment to the conversion price for each series of its convertible preferred stock and to the exercise prices of the outstanding stock options. The par value and authorized number of shares of common stock and redeemable convertible preferred stock were not adjusted as a result. All share and per share amounts for all periods presented in the condensed consolidated financial statements and notes thereto have been retroactively adjusted to reflect the effect of the reverse stock split.

Initial Public Offering

In February 2025, the Company completed its initial public offering ("IPO"), in which the Company sold an aggregate of 10,588,233 shares of its common stock at a public offering price of $18.00 per share and sold an additional 1,588,234 shares of its common stock to the underwriters of the IPO pursuant to the full exercise of their option to purchase additional shares, resulting in aggregate net proceeds of approximately $199.6 million, after deducting underwriter discounts, commissions and other offering expenses. Immediately prior to the closing of the IPO, the Company's outstanding redeemable convertible preferred stock automatically converted into 27,149,206 shares of common stock. Following the closing of the IPO, no shares of redeemable convertible preferred stock were outstanding.

Inconnection with the closing of the IPO, the Company's certificate of incorporation was amended and restated to authorize 500,000,000 shares of common stock, par value$0.001 per share, and 10,000,000 shares of preferred stock, par value$0.001 per share.

Liquidity and Going Concern

The Company has incurred annual net operating losses and has generated negative operating cash flows in every year since inception. As of September 30, 2025, the Company had an accumulated deficit of $235.9 million. The Company expects its operating losses to continue into the foreseeable future as it continues to pursue its research and development efforts.

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. The Company believes that its existing cash, cash equivalents and marketable securities of $325.0 million as of September 30, 2025, will be sufficient to allow the Company to fund operations beyond twelve months from the date that the financial statements are issued.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 2,“Summary of Significant Accounting Policies,” in the audited consolidated annual financial statements in the Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the Securities and Exchange Commission (“SEC”) on March 20, 2025 (the “Annual Report”). Since the date of those annual financial statements, there have been no changes to the Company’s significant accounting policies.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of September 30, 2025, and the condensed consolidated statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders’ equity (deficit) and statements of cash flows for the nine months ended September 30, 2025, and 2024, are unaudited. The condensed consolidated interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2025, and the results of its operations and its cash flows for the periods presented. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2025, and 2024, are also unaudited. The results for the three and nine months ended September 30, 2025, are not necessarily indicative of results to be expected for the year ending December 31, 2025, or for any other subsequent period.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740: Improvements to Income Tax Disclosures) (“ASU 2023-09”). ASU 2023-09 provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and incomes taxes paid information. For public companies, the amendments are effective for annual periods beginning after December 15, 2024, and should be applied prospectively. Early adoption is permitted. The Company has determined that the effects of adopting the amendments in ASU 2023-09 will not have a material impact on its consolidated financial position, the results of its operations, or related disclosures when such amendment is adopted.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses("ASU 2024-03"), which requires entities to disclose additional information about specific expense categories in the notes to the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. ASU 2024-03 may be applied retrospectively or prospectively. The Company is currently evaluating the effect of this update on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-07, Derivatives Scope Refinement, ("ASU 2025-07"). ASU 2025-07 creates a scope exception within ASC 815 for certain contracts with underlyings tied to a party's operations or activities (such as regulatory approval, clinical, or earnings milestones), which may cause some arrangements that previously met the derivative definition to no longer be accounted for as derivatives. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods, early adoption is permitted. Entities may adopt prospectively for new or modified contracts after the adoption date, or modified retrospectively for contracts outstanding at adoption with a cumulative-effect adjustment to opening retained earnings. The Company expects to adopt prospectively and does not expect a material impact, though this guidance may affect the accounting for future milestone-linked arrangements executed after adoption.

Tax Law Changes

On July 4, 2025, the United States Congress passed budget reconciliation bill H.R. 1, referred to as the One Big Beautiful Bill Act (“H.R. 1”), which introduced changes to U.S. federal tax law. A key provision of H.R. 1 includes a modification to the treatment of research and development ("R&D") expenditures under Section 174. As a result of the new legislation, the Company recorded a one-time adjustment in the third quarter of 2025 to expense the remaining unamortized R&D balance. The corresponding deferred tax impact was fully offset by the Company’s valuation allowance, and therefore did not result in a material impact on the Company’s financial results for the period.

3. Marketable Securities

The following tables summarize the amortized cost and estimated fair value of the Company’s current and noncurrent marketable securities (in thousands):

The Company has determined that there were no material changes in the credit risk, therefore the Company hasnot recognized any allowance for credit losses on its debt securities. As of September 30, 2025, the Company holds marketable securities with an aggregate fair value of $76.7 million that had remaining maturities between one and two years. All other securities had a contractual maturity of less than a year. There wereno realized gains or losses during the three and nine months ended September 30, 2025, or 2024.

4. Fair Value Measurements

The following tables present information about the Company’s financial instruments that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs the Company utilized to determine such fair value (in thousands):

During the three and nine months ended September 30, 2025, there were no transfers or reclassifications between fair value measurement levels of assets or liabilities. The carrying values of prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

5. Property and Equipment, net

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

Depreciation expense for the three months ended September 30, 2025 and 2024 was $0.1 million and $0.2 million, respectively. Depreciation expense was $0.5 million for the nine months ended September 30, 2025 and 2024.

6. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

7. Commitments and Contingencies

Operating Leases

The Company leases office space under a noncancelable operating lease. There have been no material changes to the Company’s lease during the nine months ended September 30, 2025. For additional information, see Note 7, “Leases,” in the audited consolidated annual financial statements in the Annual Report.

Legal Proceedings

The Company was not subject to any material legal proceedings as of September 30, 2025, and the Company is not aware of any material legal proceedings that are currently pending or threatened.

Other Contracts

The Company is party to various contracts with contract research organizations and contract manufacturing organizations that generally provide for termination on notice, with the exact amounts in the event of termination to be based on the timing of the termination and the terms of the agreement.

There were no contractual obligations arising from these arrangements as of September 30, 2025, and December 31, 2024.

Indemnification Agreements

In the ordinary course of business the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters arising out of the relationship between such parties and the Company. In addition, the Company has entered into indemnification agreements with members of its board of directors and senior management that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date however, the Company has not incurred any material costs as a result of such indemnifications nor experienced any losses related to them. As of September 30, 2025, the Company was not aware of any claims under indemnification arrangements and does not expect significant claims under indemnification arrangements and it has not accrued any liabilities related to such obligations.

8. License Agreements

The Company has entered into several license agreements with third parties that typically involve payments from the Company, including up-front payments, milestone payments and royalty payments. The terms and conditions as well as accounting analysis for the Company’s significant license agreements are described in Note 9, “License Agreements,” in the audited consolidated annual financial statements in the Annual Report. There have been no material changes to the terms and conditions, or accounting conclusions, previously disclosed in the Annual Report.

9. Stock-Based Compensation

2020 Stock Option and Grant Plan

The Company’s 2020 Stock Option and Grant Plan, as amended (the “2020 Plan”), provided for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the Board and consultants of the Company. As of the effective date of the 2025 Stock Option and Incentive Plan (the “2025 Plan”), and as of September 30, 2025, no shares remained available for future issuance under the 2020 Plan. Any options or other awards outstanding under the 2020 Plan remain outstanding and effective.

2025 Stock Option and Incentive Plan

In January 2025, the Board and the Company's stockholders adopted and approved the 2025 Plan, which became effective on February 5, 2025, the date immediately preceding the date that the registration statement on Form S-1 for the Company's IPO was declared effective by the SEC. The 2025 Plan initially reserved 5,060,000 shares of common stock for future issuances and is subject to automatic increases in the number of shares of common stock reserved for future issuances in accordance with the evergreen provisions in the 2025 Plan. The shares reserved for future issuance under the 2020 Plan ceased to be available for issuance at the time the 2025 Plan became effective. Any shares underlying outstanding stock awards granted under the 2020 Plan that subsequently expire or are repurchased, forfeited, cancelled, or withheld will return to the 2025 Plan and be reserved and available for issuance.

2025 Employee Stock Purchase Plan

In January 2025, the Board and the Company's stockholders adopted and approved the 2025 Employee Stock Purchase Plan (the "2025 ESPP"), which became effective on February 5, 2025, the date immediately preceding the date that the registration statement on Form S-1 for the Company's IPO was declared effective by the SEC. The 2025 ESPP initially reserved 390,127 shares of common stock for future issuance and is subject to automatic increases in the number of shares of common stock reserved for future issuances in accordance with the evergreen provisions in the 2025 ESPP. As of September 30, 2025, no offering periods had commenced under the 2025 ESPP.

Stock Option Activity

The following table summarizes the Company’s common stock option activity for the nine months ended September 30, 2025:

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

The weighted-average grant date fair value of options granted during the three and nine months ended September 30, 2025, was $15.38 per share and $12.84 per share, respectively. The total intrinsic value of stock options exercised for the three and nine months ended September 30, 2025 was $5.9 million and $6.0 million, respectively.

Stock-Based Compensation Expense

During the three and nine months ended September 30, 2025, and 2024, the Company recorded stock-based compensation in the accompanying condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

As of September 30, 2025, there was $32.0 million of unrecognized stock-based compensation expense for common stock option awards that are expected to be recognized over a weighted average period of 2.7 years. The stock-based compensation expense forrestricted common stock awards was de minimis and fully recognized during the three months ended June 30, 2025, when the final vesting conditions were met.

10. Segment Information

The following table presents segment net loss, including significant expense categories (in thousands):

(1)External research and development expenses consist primarily of costs paid to third-parties including contract research organizations ("CROs"), contract development and manufacturing organizations ("CDMOs"), consultants, advisors and lab-related vendors.

(2)Fees paid to licensors consists primarily of upfront and annual licensing fees paid pursuant to the Company's license agreements.

(3)General corporate and facility expenses consists primarily of professional services fees for legal, finance, human resources, in addition to information technology expenses and rent expense, net of sublease income.

(4)Other segment items consists primarily of interest income, partially offset by non-cash expenses, such as stock-based compensation and depreciation, and amortization of discounts and premiums on marketable securities.

11. Net Loss Per Share

The Company excluded the following shares from the computation of diluted net loss per share attributable to common stockholders as of September 30, 2025, and 2024, because including them would have had an anti-dilutive effect: