Gossamer Bio, Inc.

Note 1 -Description of Business

Gossamer Bio, Inc. (including its subsidiaries, referred to as "we," "us," "our,", or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of seralutinib for the treatment of pulmonary hypertension ("PH") including pulmonary arterial hypertension ("PAH") and PH associated with interstitial lung disease ("PH-ILD"). The Company was incorporated in the state of Delaware on October 25, 2015 (originally as FSG Bio, Inc.) and is based in San Diego, California.

The unaudited condensed consolidated financial statements include the accounts of Gossamer Bio, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions among the consolidated entity have been eliminated in consolidation.

Reverse Stock Split

On July 14, 2026, at a special meeting of stockholders, the Company’s stockholders approved a reverse stock split at one of thirty ratios to be selected by the Company’s board of directors, and in September 2026, the board of directors of the Company approved a reverse stock split at a ratio of one for every 80 shares previously held. The reverse split became effective on September 10, 2026. As a result of the reverse stock split, every 80 shares of the Company’s common stock issued or outstanding were automatically reclassified into one new share of common stock. Proportionate adjustments were also made to the exercise prices and the number of shares underlying the Company’s outstanding equity awards, as applicable, as well as to the number of shares issuable under the Company’s equity incentive plans and certain existing agreements. All share and per share data included in these financial statements reflects the stock split. All shares of our common stock, per-share data and related information included in this Quarterly Report on Form 10-Q have been retroactively adjusted as though the reverse stock split had been effected prior to all periods presented.

Liquidity and Going Concern

The Company has incurred significant operating losses since its inception. As of September 30, 2026, the Company had an accumulated deficit of $1,516.8 million. From the Company’s inception through September 30, 2026, the Company has funded its operations primarily through equity financings, convertible senior notes and the Chiesi Collaboration Agreement (as defined in Note 10 below).

The Company’s existing cash and cash equivalents are not sufficient to fund operating plans for at least one year from the issuance date of these financial statements. Accordingly, these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities, in the normal course of business, and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty.

If the Company is not able to obtain the required funding, through equity or debt financings, license agreements for seralutinib in domestic or foreign markets, or other means, or is unable to obtain funding on terms favorable to the Company, or there is an event of default affecting the Company’s 2027 Notes and 2030 Notes (each as defined below), there will be a material adverse effect on commercialization and development operations, and the Company's ability to execute its strategic development plan for future growth. If the Company cannot successfully raise additional funding and implement its strategic development plan, the Company may be forced to make further reductions in spending, including spending in connection with its clinical development, pre-commercialization activities, extend payment terms with suppliers, suspend or curtail planned operations or cease operations entirely. The Company has concluded that these circumstances and the uncertainties associated with the Company’s ability to obtain additional equity or debt financing on terms that are favorable to the Company, or at all, and otherwise succeed in its future operations raise substantial doubt about the Company’s ability to continue as a going concern. Management believes that it has sufficient working capital on hand to fund operations into the first quarter of 2027.

On March 16, 2026, the Company commenced a workforce reduction of 73 individuals, constituting approximately 46% of its workforce, to reduce its operating expenses. The Company's remaining management and employees will continue the development of seralutinib and explore potential regulatory paths forward. The workforce reduction was completed in September 2026. The Company recognized $6.1 million of charges associated with the workforce reduction in the first quarter of 2026.

Note 2 -Summary of Significant Accounting Policies

Basis of Presentation

The Company's accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions of the Securities and Exchange Commission (“SEC”) on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 17, 2026. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2025, has been derived from the audited consolidated financial statements at that date.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the Company’s condensed consolidated financial statements relate to accrued research and development expenses, convertible debt components, the fair value of the warrant liability and embedded derivative liability, stand-alone selling price of performance obligations and estimated collaboration expenses associated with the Company’s Chiesi Collaboration Agreement. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ from those estimates.

Segments

Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the chief operating decision-maker ("CODM") in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business asone operating segment. The identification of a single operating and reportable segment is consistent with the management approach as the CODM regularly reviews consolidated financial information for the purpose of assessing performance and allocating resources. See Note 11, "Segment Information" for more information.

Collaborative Arrangements

The Company assesses whether its licensing and other agreements are collaborative arrangements based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. For arrangements that the Company determines are collaborations, it identifies each unit of account, and then determines whether a customer relationship exists for that unit of account. If the Company determines a performance obligation within the collaborative arrangement to be with a customer, it applies its revenue recognition accounting policy. If a portion of a distinct bundle of goods or services within the collaborative arrangement is not with a customer, the Company applies recognition and measurement based on an analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational and consistently applied accounting policy election. To the extent the arrangement is within the scope of Accounting Standards Codification ("ASC") Topic 808, Collaborative Arrangements ("ASC 808"), the Company assesses whether aspects of the arrangement between the Company and the collaboration partner are within the scope of other accounting literature. If the Company concludes that some or all aspects of the arrangement represent a transaction with a customer, the Company accounts for those aspects of the arrangement within the scope of ASC Topic 606, Revenue from Contracts with Customers ("ASC 606"). See Note 10, "Significant Agreements and Contracts," for more information.

Revenue Recognition

The Company recognizes revenue when a customer obtains control of promised goods or services in a contract for an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. For contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. As part of the accounting for contracts with customers, the Company develops assumptions that require judgment to determine the standalone selling price of each distinct performance obligation identified in the contract. In addition, variable consideration such as milestone payments are evaluated to determine if they are constrained and, therefore, excluded from the transaction price. The Company then allocates the total transaction price proportionally to each distinct performance obligation based on their estimated standalone selling prices, unless an allocation exception applies. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective distinct performance obligation when (or as) the performance obligation is satisfied.

In a contract with multiple performance obligations, the Company must develop estimates and assumptions that require judgment to determine the underlying standalone selling price for each distinct performance obligation, which determines how the transaction price is allocated among the distinct performance obligations. The estimation of the stand-alone selling price(s) may include estimates regarding forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time. Any change made to estimated progress towards completion of a distinct performance obligation and, therefore, revenue recognized will be recorded as a change in estimate. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in a contract, the Company recognizes revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from the allocated transaction price. The Company evaluates the measure of progress at each reporting period and, if necessary, adjusts the measure of performance and related revenue or expense recognition as a change in estimate.

At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being reached. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or a collaboration partner’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or a collaboration partner’s control, such as operational developmental milestones and any related constraint, and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which will affect revenue from sale of licenses and revenue from contracts with collaborators in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative revenue from sale of licenses and revenue from contracts with collaborators in the period of adjustment.

For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and a license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied, or partially satisfied. To date, the Company has not recognized any royalty revenue from collaborative arrangements.

For arrangements that include cost-share reimbursements, the Company will recognize such payments when control of the related goods or services are transferred to the customer. Cost-sharing reimbursements are presented as revenue from contracts with collaborators.

Major Customer and Concentration of Credit Risk

During the nine months ended September 30, 2026, Chiesi was the Company's principal customer, accounting for 100% of its revenue. The Chiesi Collaboration Agreement was terminated upon the effectiveness of the Chiesi Rights Reacquisition Agreement on July 23, 2026. As of September 30, 2026, there were no outstanding accounts receivable balances due from Chiesi. Chiesi represented 100% of the Company's accounts receivable balance as of December 31, 2025.

The Company is exposed to concentration of credit risk through its financial instruments, primarily cash and cash equivalents. The Company’s cash and cash equivalents are maintained in financial institutions that management considers to be of high credit quality. Amounts on deposit with these financial institutions have and will continue to exceed federally-insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

5.00% Convertible Senior Notes due 2027 (the “2027 Notes”)

The Company accounted for the 2027 Notes under Accounting Standards Update (“ASU”) No. 2020-06, “Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2020-06”), which the Company adopted on January 1, 2022 using the modified retrospective approach, and accordingly reflected the 2027 Notes as a single liability instrument as if the embedded conversion feature had not been separated. The 2027 Notes were recorded in long-term liabilities at face value net of issuance costs. Following the Company’s May 2026 irrevocable election to settle all conversions of the 2027 Notes solely in cash, the embedded conversion option no longer qualified for the derivatives scope exception for contracts in the Company’s own equity and is accounted for as a bifurcated derivative liability measured at fair value, with changes in fair value recognized in earnings. The exchange and modification of the 2027 Notes completed in June 2026 are described in Note 5.

7.50% Convertible Senior Notes due 2030 (the “2030 Notes”)

The Company accounts for the 2030 Notes under Accounting Standards Codification (“ASC”) 470, Debt. The Company identified certain embedded features of the 2030 Notes that require bifurcation from the debt host and separate accounting as a derivative liability under ASC 815-15. The bifurcated derivative was initially recorded at fair value, with an offsetting discount to the carrying amount of the 2030 Notes and is subsequently remeasured at fair value each reporting period with changes in fair value recognized in earnings; the related discount is accreted to interest expense over the term of the 2030 Notes. The terms of the 2030 Notes, including the springing maturity feature and the resulting balance sheet classification, and the issuance of the 2030 Notes in the Exchange Offer, are described in Note 5.

Debt Modifications and Extinguishments

The Company first evaluates whether a debt exchange or amendment is within the scope of the troubled debt restructuring guidance in ASC 470-60, Troubled Debt Restructurings by Debtors, which applies when the Company is experiencing financial difficulty and the lender grants a concession. If the restructuring is not a troubled debt restructuring, the Company then evaluates the exchange or amendment under ASC 470-50, Debt - Modifications and Extinguishments, to determine whether it is accounted for as an extinguishment or as a modification. When an exchange is accounted for as an extinguishment, the existing debt is derecognized at its net carrying amount, the new instruments issued are recognized at fair value, and the difference is recognized as a gain or loss on extinguishment. When an amendment is accounted for as a modification, no gain or loss is recognized and the Company continues to account for the debt using the original effective interest rate. Direct costs incurred in a debt exchange are allocated to the instruments issued based on their respective accounting classification: costs allocable to equity-classified instruments reduce additional paid-in capital; costs allocable to debt reduce the carrying amount of the debt and are accreted to interest expense; and costs allocable to instruments measured at fair value through earnings are expensed as incurred.

Recent Accounting Pronouncements - Adopted

In July 2025, the Financial Accounting Standards Board ("FASB") issued ASU No. 2025-05, Credit Losses (Topic 326) -Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide all entities with a practical expedient to assume that the current conditions as of balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. The guidance is effective for all entities for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. Entities that use the practical expedient are required to apply the amendments prospectively. The adoption of ASU No. 2025-05 does not have a material impact on the Company's consolidated financial statements and related disclosures.

Recent Accounting Pronouncements - Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, as further clarified by ASU 2025-01, Income Statement - Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date, issued in January, 2025, which requires disaggregated disclosure of certain costs and expenses on an interim and annual basis. ASU No. 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The disclosure updates are required to be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact of adopting ASU No. 2024-03 on its consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements, to address suggestions received from stakeholders on the ASC and to make other incremental improvements to U.S. GAAP. The update represents changes to the ASC that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. ASU No. 2025-12 is effective for fiscal years beginning after December 15, 2026 and interim periods. The Company is currently evaluating the impact of adopting ASU No. 2025-12 on its consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270), which provides clarifications intended to improve the consistency and usability of interim disclosure requirements, including a comprehensive listing of required interim disclosures and a new disclosure principle for reporting material events occurring after the most recent annual period. The amendments do not change the underlying objectives of interim reporting but are designed to enhance clarity in application. ASU No. 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU No. 2025-11 on its consolidated financial statements and related disclosures.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future financial position, results of operations, cash flows or disclosures.

Net Income (Loss) Per Share

The Company follows the guidance in FASB ASC 260, Earnings per Share, which establishes standards regarding the computation of earnings per share ("EPS") by companies that have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings of a company. The guidance requires earnings to be hypothetically allocated between the common, preferred, and other participating stockholders based on their respective rights to receive non-forfeitable dividends, whether or not declared.

Basic net income is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Prefunded warrants are considered outstanding for the purposes of computing basic and diluted net loss per share because shares may be issued for little or no additional consideration and are fully vested and exercisable after the original issuance date of the pre-funded warrants. Diluted net income per share is computed by dividing the net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of warrants, options outstanding under the Company's stock option plans, options outstanding under the Company's stock purchase agreement and 2027 Notes, on an as converted basis.

The following table sets forth the computation of basic and diluted earnings (loss) per common share:

Concurrently with the Company's irrevocable election to settle the 2027 notes in cash, it also commenced the Exchange Offer which was completed on June 4, 2026.

The table below provides potentially dilutive securities not included in the calculation of the diluted net loss per share because to do so would be anti-dilutive (in common stock equivalent shares):

Note 3 -Balance Sheet Accounts and Supplemental Disclosures

Accrued Expenses and Other Current Liabilities

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

Note 4 -Fair Value Measurements and Available for Sale Investments

Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company classifies its cash equivalents and available-for-sale investments within Level 1 or Level 2. The fair value of the Company’s investment grade corporate debt securities and commercial paper is classified as Level 2 and determined using proprietary valuation models and analytical tools, which utilize market pricing or prices for similar instruments that are both objective and publicly available, such as matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, and offers. The valuation techniques used to measure the warrant liabilities and embedded derivative liabilities were determined based on Level 3 inputs not observable in the market and significant to the instruments' valuations.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the hierarchy for assets and liabilities measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025 (in thousands):

The Company did not reclassify any investments between levels in the fair value hierarchy during the periods presented.

Level 3 Fair Value Measurements

The warrant liability consists of the Initial Closing Pre-Funded Warrants, the obligation to issue the Second Closing Pre-Funded Warrants and the FDA Approval Warrants issued in connection with the August 2026 Private Placement.

As of September 30, 2026, the fair value of the warrant liability was estimated using a risk-neutral Monte Carlo simulation of the Company’s common stock price, modeled as geometric Brownian motion with daily time steps and 100,000 iterations. The significant unobservable inputs are the probabilities and expected timing of the FDA’s acceptance of the NDA for filing and of FDA approval, which are management’s estimates, and expected volatility, which is based on the Company’s historical stock price volatility. Management assumed that the requisite stockholder approval would be obtained, which occurred on October 27, 2026 (see Note 14). Other inputs include the Company’s common stock price, the risk-free interest rate and the dividend yield.

Fair Value of Other Financial Instruments

As of September 30, 2026 and December 31, 2025, the carrying amounts of the Company’s financial instruments, which include cash, prepaid and other current assets, interest receivable, accrued research and development expenses, accounts payable and accrued expenses and other current liabilities, approximate fair values because of their short-term maturities.

There wasno interest receivable as of September 30, 2026, and there was$0.3 million interest receivable as of December 31, 2025. Interest receivable is recorded as a component of prepaid expenses and other current assets on the condensed balance sheets.

As of September 30, 2026 and December 31, 2025, the fair value of the Company’s 2027 Notes was $12.1 million and $138.3 million, respectively. As of September 30, 2026, the fair value of the Company's 2030 Notes was $62.4 million. The fair value was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy. See Note 5, "Indebtedness," for more information.

Available for Sale Investments

The Company invests its excess cash in U.S. Treasury and agency securities, corporate debt securities, and commercial paper, which are classified as available-for-sale investments. These investments are carried at fair value and are included in the tables below. The Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors. Realized gains and losses are calculated using the specific identification method and recorded in other income, net in the Company's condensed consolidated statement of operations and comprehensive loss. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recover of their amortized cost basis.

There was no aggregate market value, cost basis, and gross unrealized gain and losses of available-for-sale investments by security type, classified in marketable securities as of September 30, 2026. The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in marketable securities as of December 31, 2025 is as follows (in thousands except securities amounts):

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are due to credit-related factors. The Company records an allowance for credit losses when unrealized losses are due to credit-related factors. Factors considered when evaluating available-for-sale investments for impairment include the severity of the impairment, changes in underlying credit ratings, the financial condition of the issuer, the probability that the scheduled cash payments will continue to be made and the Company’s intent and ability to hold the investment until recovery of the amortized cost basis. The Company intends and has the ability to hold its investments in unrealized loss positions until their amortized cost basis has been recovered. As of September 30, 2026 and December 31, 2025, there were no material declines in the market value of the Company’s available-for-sale investments due to credit-related factors.

There were no contractual maturities of available-for-sale debt securities, as of September 30, 2026.

The Company has the ability, if necessary, to liquidate any of its cash equivalents and marketable securities to meet its liquidity needs in the next 12 months.

Note 5 -Indebtedness

Exchange Offer and Consent Solicitation

On May 18, 2026, the Company commenced an exchange offer (the “Exchange Offer”) to exchange any and all of its 5.00% Convertible Senior Notes due 2027 issued pursuant to an indenture, dated as of May 21, 2020, and a first supplemental indenture, dated as of May 21, 2020 (together, the “2027 Notes Indenture”), for a pro rata portion of (i) up to $72.0 million in aggregate principal amount of its new 7.50% Convertible Senior Secured First Lien Notes due 2030, (ii) up to 3,970,588 shares of its common stock, par value $0.0001 per share (the “New Shares”) or, in lieu of issuing shares of common stock to the extent any investor would beneficially own greater than 9.99% of the outstanding common stock, prefunded warrants to purchase shares of Common Stock (the “Prefunded Warrants” and, together with the New Shares, the “Equity Securities”) and (iii) up to 1,875,000 warrants to purchase shares of its common stock (the “Purchase Warrants”). Simultaneously with the Exchange Offer, the Company solicited consents (the “Consent Solicitation”) from holders of the 2027 Notes to adopt certain amendments (the “Amendments”) to the 2027 Notes Indenture.

Additionally, on May 18, 2026, and as permitted by the 2027 Notes Indenture, the Company delivered an irrevocable notice of its election to settle all conversions of the 2027 Notes with a conversion date on or after May 18, 2026, solely in cash (the “Cash Settlement Election”). The Cash Settlement Election applied to all 2027 Notes, whether or not tendered in the Exchange Offer.

On June 4, 2026 (the “Early Settlement Date”), the Company completed the early settlement of the exchange of the 2027 Notes that were validly tendered on or before the early tender deadline of 5:00 p.m., New York City time, on June 2, 2026 (the “Extended Early Tender Date”) in the Exchange Offer. Pursuant to the early settlement of the Exchange Offer, $181,052,000 in aggregate principal amount of the 2027 Notes were validly tendered, accepted for exchange by the Company and subsequently cancelled (collectively, the “Early Tendered Notes”). Following such cancellation, $18,948,000 in aggregate principal amount of the 2027 Notes remain outstanding. On the Early Settlement Date, the Company issued (i) $65,174,000 in aggregate principal amount of 2030 Notes, (ii)3,176,881 New Shares, (iii)417,534 Prefunded Warrants and (iv)1,697,363 Purchase Warrants, in exchange for the validly tendered and accepted Early Tendered Notes. The Company also completed the Consent Solicitation and entered into a supplemental indenture (the “Supplemental Indenture”) to the 2027 Notes Indenture with Wilmington Trust, National Association, as trustee (the “2027 Notes Trustee”).

The Exchange Offer expired at 5:00 p.m., New York City time, on June 16, 2026. Because no additional 2027 Notes were validly tendered in the Exchange Offer following the Early Settlement Date and prior to the expiration of the Exchange Offer, $18,948,000 in aggregate principal amount of 2027 Notes remain outstanding following this Exchange Offer.

Cancellation of 2027 Notes Tendered in the Exchange Offer

The Company caused the Early Tendered Notes accepted for exchange to be delivered to the 2027 Notes Trustee for cancellation on the Early Settlement Date. There were no additional 2027 Notes accepted following the Early Settlement Date. The Company did not receive any cash proceeds from the Exchange Offer. In exchange for issuing the 2030 Notes, the New Shares, the Prefunded Warrants and the Purchase Warrants pursuant to the Exchange Offer, the Company received and cancelled 90.5% of the 2027 Notes.

2027 Notes

On May 21, 2020, the Company issued $200.0 million aggregate principal amount of the 2027 Notes. The 2027 Notes were registered pursuant to the Company’s shelf registration statement on Form S-3 filed with the SEC on April 10, 2020. The interest rate on the 2027 Notes is fixed at 5.00% per annum. Interest is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2020. The 2027 Notes will mature on June 1, 2027. The net proceeds from the offering, after deducting the underwriting discounts and commissions and other offering costs, were approximately $193.6 million.

Prior to the Cash Settlement Election, the 2027 Notes were convertible, at the holder’s option, only upon satisfaction of specified conditions (including a common stock sale-price condition, a notes trading-price condition, notice of redemption, or the occurrence of certain corporate events), and at any time on or after March 1, 2027, and the Company could elect to settle conversions in cash, shares, or a combination. The initial conversion rate was 0.7701 shares per $1,000 principal amount (an initial conversion price of approximately $1,298 per share), subject to adjustment.

On May 18, 2026, the Company made the Cash Settlement Election, following which all conversions of the 2027 Notes with a conversion date on or after that date are settled solely in cash, irrespective of whether the holder participated in the Exchange Offer. As a result, the embedded conversion option no longer qualified for the own-equity scope exception and, from that date, was bifurcated from the 2027 Notes and accounted for as a derivative liability measured at fair value, with changes in fair value recognized in earnings.

In June 2026, the Company completed the Exchange Offer, in which $181,052,000 aggregate principal amount (90.5%) of the 2027 Notes was tendered and extinguished. Following the Exchange Offer, $18,948,000 aggregate principal amount of 2027 Notes remains outstanding. Because the 2027 Notes mature on June 1, 2027, the remaining 2027 Notes are classified as a current liability as of September 30, 2026.

The Company recorded $0.4 million of the debt issuance costs related to the 2027 Notes as a reduction to the liability and amortizes these costs to interest expense over the term of the 2027 Notes. In June 2026, concurrently with the completion of the Exchange Offer, the remaining unamortized debt discount and issuance costs associated with the exchanged 2027 Notes in the amount of $1.0 million was offset against the gain on debt extinguishment discussed below.

Amendments to the 2027 Notes

Concurrently with the Exchange Offer, the Company solicited and obtained consents from holders of the 2027 Notes to adopt the Amendments to the 2027 Notes Indenture, which were effected through the Supplemental Indenture and eliminated substantially all restrictive covenants and certain events of default applicable to the 2027 Notes, including the $18,948,000 aggregate principal amount that remained outstanding following the Exchange Offer. The Amendments did not reduce the principal amount, reduce or defer the stated interest rate, or extend the maturity date of the remaining 2027 Notes.

The Company evaluated the Amendments under ASC 470-50 and determined that, because the contractual cash flows of the remaining 2027 Notes are unchanged, the present value of the cash flows under the amended terms is not at least 10% different from the present value of the remaining cash flows under the original terms, and the fair value of the embedded conversion feature was likewise unaffected. Accordingly, the Amendments are not substantially different from the original terms and are accounted for as a modification, rather than an extinguishment, of the remaining 2027 Notes. No consideration was exchanged with the holders of the remaining 2027 Notes and no gain or loss was recognized; the Company continues to account for those notes as a continuation of the original debt instrument at the existing effective interest rate. The bifurcated conversion derivative of the remaining 2027 Notes was not altered by the Amendments and continues to be measured at fair value through earnings.

2030 Notes

The 2030 Notes are secured, first lien obligations of the Company. The 2030 Notes will mature on July 1, 2030, unless earlier converted or repurchased in accordance with the terms of the 2030 Notes, provided that the 2030 Notes have a springing maturity date of March 2, 2027 (91 days prior to the stated maturity of the 2027 Notes) if more than $4.0 million of the 2027 Notes remain outstanding at such time. The 2030 Notes bear interest at a rate of 7.50% per annum from June 4, 2026, which interest will be payable in cash semi-annually in arrears on January 1 and July 1 of each year, starting on January 1, 2027.

The conversion rate for the 2030 Notes was initially set to a number of shares of common stock per $1,000 principal amount of New Convertible Notes equal to the quotient of $1,000 divided by a 10% premium to the Reference Price (as defined below), rounded to the nearest 1/10,000th of a share. The “Reference Price” was equal the greater of (i) $13.60 and (ii) the lower of (x) $27.20 and (y) the average of the daily volume-weighted average prices for theseven (7) consecutive VWAP trading days beginning on, and including, the VWAP trading day immediately following the Final Settlement Date. On July 1, 2026, the initial conversion rate for 2030 Notes was established as 66.8449 shares of the Company's common stock per $1,000 principal amount of the 2030 Notes, which represents a conversion price of approximately $14.96 per share of common stock, and the initial exercise price of its Purchase Warrants will be $27.20 per whole share of its common stock.

The 2030 Notes Indenture provided that prior to obtaining stockholder approval of certain proposals that would allow the issuance of common stock pursuant to the terms of the 2030 Notes, the Company was permitted to satisfy its obligations upon conversion of the 2030 Notes only in the form of cash settlement. On July 14, 2026, the Company’s stockholders approved such proposals. On July 1, 2026, the conversion rate was established at 66.8449 shares of common stock per $1,000 principal amount of the 2030 Notes. Following such stockholder approval, the Company is permitted to satisfy its obligations under the 2030 Notes with any settlement method it is otherwise permitted to elect, including by physical settlement in shares of common stock. Additionally, a holder of 2030 Notes was not permitted to convert its 2030 Notes at any time prior to the later of (a) the date the conversion rate has been determined and (b) the earlier of (1) the date of the special meeting at which the Company seeks stockholder approval of such proposals, whether or not such approvals are obtained and (2) the date that is 61 calendar days following the initial settlement date of the Offered Securities. A “make whole” premium will be payable on the 2030 Notes through an increase to the conversion rate in certain circumstances to compensate converting holders for interest that would have been payable to the maturity date.

The 2030 Notes Indenture includes incurrence-based negative covenants, including but not limited to, limitations on debt, limitations on liens and entry into restrictive agreements, limitations on mergers, consolidations or sales of all or substantially all assets, limitations on transactions with affiliates, limitations on restricted payments and investments, limitations on disposals of assets, limitations on foreign subsidiaries and limitations on impairment of security. The 2030 Notes Indenture also includes usual and customary affirmative covenants, including but not limited to, further assurance, payment of obligations, reporting, and compliance certificate. The 2030 Notes Indenture also contains a minimum liquidity covenant that requires the Company to maintain a minimum amount of liquidity of $40 million, tested monthly on the date that the compliance certificate for the applicable month will be delivered and commencing with the fiscal month ending June 30, 2026; provided that the minimum liquidity requirement will be reduced to (x) $20 million, upon completion of one or more equity raises with aggregate proceeds of at least $100 million, (y) $10 million, subject to satisfaction of condition (x) above and written notice from the FDA by December 1, 2026 that it has accepted for filing the Company’s new drug application and (z) $0, subject to satisfaction of conditions (x) and (y) above and completion of one or more equity raises with aggregate proceeds (including all proceeds under condition (x) above) of at least $150 million. The 2030 Notes Indenture contains other customary terms including with respect to events of default, amendments, defeasance, and satisfaction and discharge, and is governed by New York law.

Under certain circumstances and subject to conditions set forth in the 2030 Notes Indenture, the Company may elect to force a mandatory conversion of the 2030 Notes.

If certain corporate events constituting a fundamental change occur (which shall include, among other things, the acquisition by any person or group of more than 50% of the outstanding common stock of the Company or a delisting of the Company’s common stock), the Company shall offer to repurchase all of the outstanding 2030 Notes for cash at a repurchase price equal to 100% of the aggregate principal amount of the 2030 Notes then outstanding plus accrued and unpaid interest. As of September 30, 2026, the Company was in compliance with the covenants under the 2030 Notes.

2030 Notes - Maturity and Balance Sheet Classification

The 2030 Notes have a stated maturity of July 1, 2030. However, the 2030 Notes are subject to a springing maturity: if more than $4.0 million aggregate principal amount of the 2027 Notes remains outstanding on March 2, 2027, the maturity of the 2030 Notes accelerates to March 2, 2027. Because $18,948,000 aggregate principal amount of the 2027 Notes remained outstanding as of September 30, 2026, and is expected to remain outstanding on March 2, 2027, the springing maturity is expected to be triggered. Accordingly, the Company evaluated the classification of the 2030 Notes under ASC 470-10 and classified the 2030 Notes, net of the bifurcated derivative, as a current liability as of September 30, 2026.

2030 Notes - Embedded Derivative

The 2030 Notes contain an embedded conversion feature that requires bifurcation and separate accounting from the debt host pursuant to ASC 815. The conversion feature is accounted for as a derivative liability measured at fair value, with changes in fair value recognized in earnings. Because the Company is required to settle conversions of the 2030 Notes solely in cash until the requisite stockholder approval is obtained, the conversion feature does not qualify for equity classification under ASC 815-40 and is therefore accounted for as a bifurcated derivative. The bifurcated derivative was recorded at fair value on the Early Settlement Date, with an offsetting discount to the carrying amount of the 2030 Notes that is accreted to interest expense over their term.

Following the requisite stockholder approval, the Company is permitted to settle conversions of the 2030 Notes in cash, shares, or a combination thereof, at its election. However, the conversion feature includes an interest make-whole adjustment that delivers a variable number of shares determined by reference to the remaining scheduled interest through maturity. As a result, the conversion feature is not considered indexed to the Company's own stock. Accordingly, even in periods following the approval date, the conversion feature does not qualify for the equity classification under ASC 815-40 and continues to be bifurcated and accounted for as a derivative liability measured at fair value, with changes in fair value recognized in earnings. The fair value of the derivative liabilities was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

A summary of the changes in the fair value of the derivative liabilities Level 3 rollforward is as follows (in thousands):

Extinguishment of Debt

The Exchange Offer qualified as a debt extinguishment under ASC 470-50, Debt - Modifications and Extinguishments. Given the substantial doubt about the Company's ability to continue as a going concern disclosed in Note 1 – Liquidity and Going Concern, the Company evaluated the Exchange Offer under ASC 470-60, Troubled Debt Restructurings by Debtors, and concluded that the 2027 Note holders did not grant a concession within the meaning of ASC 470-60, because the total consideration received by the holders in exchange for the tendered 2027 Notes did not reflect a concession by them; accordingly, the transaction is accounted for under ASC 470-50 rather than ASC 470-60. The holders of the 2027 Notes tendered 90.5% of the 2027 Notes in exchange for a combination of the 2030 Notes, the New Shares, the Prefunded Warrants and the Purchase Warrants, resulting in a significant reduction of the Company’s outstanding debt.

The exchange of the tendered 2027 Notes for the 2030 Notes, the New Shares, the Prefunded Warrants and the Purchase Warrants was accounted for as a debt extinguishment as follows: (1) the aggregate fair value of the 2030 Notes, the New Shares, the Prefunded Warrants and the Purchase Warrants issued at the settlement date was recorded as a component of the reacquisition price; and (2) the Company recognized an extinguishment gain equal to the excess of the net carrying amount of the extinguished 2027 Notes over the reacquisition price, measured as the total fair value of the consideration transferred, comprising the aggregate fair value of the 2030 Notes, the New Shares, the Prefunded Warrants and the Purchase Warrants issued.

Gain on Debt Extinguishment

The Exchange Offer qualified as a debt extinguishment under ASC 470-50. Since the aggregate fair value of the 2030 Notes, the New Shares, the Prefunded Warrants and the Purchase Warrants issued in the Exchange Offer were less than the carrying amount of the exchanged 2027 Notes discussed above, the Company recorded a gain debt extinguishment of $43.8 million, included in the other income of the Company's condensed consolidated statement of operations and comprehensive loss.

Issuance Costs

The Company incurred total costs of approximately $9.0 million in connection with the Exchange Offer. Approximately $3.4 million was attributable to the equity-classified New Shares and Prefunded Warrants and reduced the initial carrying amount of those instruments through a charge to additional paid-in capital. The remaining approximately $5.6 million was attributable to the 2030 Notes, the liability-classified Purchase Warrants and the bifurcated conversion derivative. Of that amount, approximately $4.4 million attributable to the instruments measured at fair value through earnings (the Purchase Warrants and the bifurcated derivative) was expensed as incurred and included in other income (loss), and approximately $1.2 million attributable to the 2030 Notes was recorded as a reduction to their carrying value and is accreted to interest expense over the term of the 2030 Notes.

The net carrying amount of the 2027 Notes and 2030 Notes was as follows (in thousands):

(1) As of September 30, 2026, the principal amount includes the 2027 Notes' principal amount of $18.9 million remaining after the Exchange Offer and the 2030 Notes' principal amount of $65.2 million. As of December 31, 2025, the principal amount includes the 2027 Notes' principal amount outstanding prior to the Exchange Offer.

(2) The amount as of September 30, 2026 represents the unamortized embedded derivative in the 2030 Notes, recorded as a single derivative, bifurcated from the host and recorded as a discount in accordance with ASC 815. The Embedded Derivative discount is being amortized to interest expense over the term of the 2030 Notes.

(3) Upon closing of the Exchange Offer, unamortized debt issuance costs associated with the 2027 Notes in the amount of $0.9 million were written off to gain on debt extinguishment in the Company's condensed consolidated statement of operations and comprehensive loss for the quarter ended June 30, 2026.

The following table sets forth the interest expense recognized related to the 2027 and 2030 Notes (in thousands):

Note 6 -Licenses, Asset Acquisitions and Contingent Consideration

The following purchased assets were accounted for as asset acquisitions as substantially all of the fair value of the assets acquired were concentrated in a group of similar assets and/or the acquired assets were not capable of producing outputs due to the lack of employees and early stage of development. Because the assets had not yet received regulatory approval, the fair value attributable to these assets was recorded as in process research and development, or IPR&D, expenses in the Company’s condensed consolidated statements of operations and comprehensive loss.

The Company accounts for contingent consideration payable upon achievement of certain regulatory, development or sales milestones in such asset acquisitions when the underlying contingency is met.

License from Pulmokine, Inc. (Seralutinib)

On October 2, 2017, the Company entered into a license agreement with Pulmokine, Inc. under which it was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Pulmokine to develop and commercialize seralutinib and certain backup compounds for the treatment, prevention and diagnosis of any and all disease or conditions. On November 26, 2024, Pulmokine became a wholly owned subsidiary of XOMA Royalty Corporation. The

Company also has the right to sublicense its rights under the license agreement, subject to certain conditions. The assets acquired are in the early stages of the Food and Drug Administration ("FDA") approval process, and the Company intends to further develop the assets acquired through potential FDA approval as evidenced by the milestone arrangement in the contract. The development activities cannot be performed without significant cost and effort by the Company. The agreement will remain in effect from the effective date, unless terminated earlier, until, on a licensed product-by-licensed product and country-by-country basis, the later often years from the date of first commercial sale or when there is no longer a valid patent claim covering such licensed product or specified regulatory exclusivity for the licensed product in such country. The Company is obligated to make future development and regulatory milestone payments of up to $48.0 million, which includes a payment of $5.0 million due upon FDA acceptance for filing of our NDA for seralutinib in PAH,$5.0 million due upon initiation of a Phase 3 clinical trial in a second indication, commercial milestone payments of up to $45.0 million, and sales milestone payments of up to $190.0 million. The Company is also obligated to pay tiered royalties on sales for each licensed product, at percentages ranging from the mid-single digits to the high single-digits. In addition, if the Company chooses to sublicense or assign to any third parties its rights under the agreement with respect to a licensed product, or the Company’s seralutinib operating subsidiary undergoes a change of control, the Company must pay to Pulmokine a specified percentage of all revenue to be received in connection with such transaction. The Company made an upfront payment of $5.5 million in October 2017. The Company made a milestone payment of $5.0 million in connection with the initiation of the first Phase 2 clinical trial of seralutinib in January 2021 and made a milestone payment of $10.0 million, which was accrued in 2023, in connection with the initiation of the Phase 3 clinical trial of seralutinib in January 2024. The Company recognized these milestone payments as research and development expense on its condensed consolidated statements of operations and comprehensive loss. As of September 30, 2026, no other milestones had been accrued as the underlying contingencies had not yet been met.

Note 7 -Stockholders’ Equity

Common Stock

Each share of common stock is entitled toone vote. Common stock owners are entitled to dividends when funds are legally available and declared by the Company's board of directors.

Reverse Stock Split and Authorized Shares

The Company's authorized common stock has a par value of $0.0001 per share and consists of 50,000,000 shares as of September 30, 2026 and 8,750,000 shares as of December 31, 2025 (after giving effect to the reverse stock split);6,116,390 and 2,920,964 shares were issued and outstanding at September 30, 2026 and December 31, 2025, respectively.

On July 14, 2026, at a special meeting of stockholders, the Company’s stockholders approved a reverse stock split at one of thirty ratios to be selected by the Company’s board of directors, and an increase in the number of authorized shares of the Company’s common stock to 4,000,000,000 (prior to giving effect to the reverse stock split). Following such approval, on July 14, 2026, the Company filed a certificate of amendment to the Amended and Restated Certificate of Incorporation of the Company with the Secretary of State of the State of Delaware to increase the number of authorized shares of the Company’s common stock from 700,000,000 to 4,000,000,000 (in each case, prior to giving effect to the reverse stock split). On September 10, 2026, the Company effected a 1-for-80 reverse stock split of its common stock. The par value of the common stock was not adjusted as a result of the reverse stock split. The authorized number of shares of common stock was proportionately reduced from 4,000,000,000 to 50,000,000. The accompanying consolidated financial statements and notes to the consolidated financial statements give retroactive effect to the reverse stock split for all periods presented.

August 2026 Private Placement

On August 20, 2026, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain purchasers identified therein, including certain executive officers and directors of the Company, pursuant to which the Company agreed to issue and sell securities in a private placement comprisingtwo closings (collectively, the “Private Placement”). At the initial closing (the “Initial Closing”) on August 24, 2026, the Company issued pre-funded warrants (the “Initial Closing Pre-Funded Warrants”) for an aggregate purchase price of approximately $25.0 million. In connection with the acceptance by the United States Food and Drug Administration (the “FDA”) for filing of the Company’s New Drug Application (“NDA”) for seralutinib for the treatment of patients with PAH (the “NDA Acceptance Milestone”), subject to the NDA Acceptance Milestone occurring in 2026 and the satisfaction of customary closing conditions, the second closing (the"Second Closing") is anticipated to result in an additional $125.0 million in gross proceeds from the sale of pre-funded warrants (the “Second Closing Pre-Funded Warrants”). Purchasers in the Second Closing will receive milestone-based warrants for no additional consideration (the “FDA Approval Warrants”) and together with the Initial Closing Pre-Funded Warrants and Second Closing Pre-Funded Warrants, the “Warrants”) exercisable following FDA approval of the Company's NDA for seralutinib for the treatment of patients with PAH (the “FDA Approval Milestone”), for shares of common stock, or, in lieu thereof, pre- funded warrants, representing potential additional aggregate gross proceeds of approximately $100.0 million if exercised in full. If the Second Closing does not occur on or before December 31, 2026, the obligations of the Company and the purchasers relating to the Second Closing Pre-Funded Warrants and the FDA Approval Warrants will automatically terminate in accordance with the Purchase Agreement. The Purchase Agreement required the Company to obtain stockholder approval for the issuance of all shares of common stock issuable upon exercise of the Warrants. If the Initial Closing Pre-Funded Warrants, the Second Closing Pre-Funded Warrants, and the FDA Approval Warrants were exercised prior to stockholder approval, they would have been exercisable into 25,000 shares of Series A-1 Convertible Preferred Stock,125,000 shares of Series A-2 Convertible Preferred Stock, and 100,000 shares of Series A-3 Convertible Preferred Stock, respectively. Upon obtaining stockholder approval on October 27, 2026, the Initial Closing Pre-Funded Warrants would be exercisable into 2,233,742 shares of common stock, the Second Closing Pre-Funded Warrants are exercisable into common stock equal to approximately $125.0 million divided by the lesser of (i) $11.192 per share or (ii) the volume weighted average price per share of common stock for the five consecutive trading days ending on and including the trading day immediately prior to the Second Closing. The FDA Approval Warrants are exercisable into approximately 6.7 million shares of common stock determined as the aggregate exercise price of approximately $100.0 million divided by the exercise price of $14.96 per share, (or, in lieu thereof, pre-funded warrants), subject to the achievement of the FDA Approval Milestone.

No shares of preferred stock have been issued in connection with the Private Placement. On October 27, 2026 the Company obtained stockholder approval for the issuance of shares of common stock pursuant to the Purchase Agreement, including shares issuable upon exercise of the Initial Closing Pre-Funded Warrants, the Second Closing Pre-Funded Warrants and the FDA Approval Warrants and upon conversion of the applicable series of Preferred Stock. Following such approval, the Warrants issued or issuable in connection with the Private Placement are no longer exercisable into shares of preferred stock.

The Company determined that each of the three types of warrants were freestanding instruments and that the three types of warrants did not meet the requirements to be classified within equity and are classified as liabilities measured at fair value, with changes in fair value recognized in earnings. The gross proceeds of $25.0 million from the Initial Closing were less than the aggregate fair value of the Initial Closing, Second Closing, and FDA Approval Warrants of $121.2 million ($31.1 million, $45.2 million, and $44.9 million, respectively). The $96.2 million excess was recognized as a loss on issuance and offering costs of $2.2 million were expensed within other income (expense), of which $1.3 million was paid in cash and is included in net cash used in financing activities, in each case within the condensed consolidated statements of operations and comprehensive loss. The $96.2 million loss on issuance was partially offset by a $36.7 million gain on the remeasurement of the warrants from issuance through September 30, 2026, resulting in a net loss of $59.5 million included in remeasurement of warrant liability and an aggregate fair value of $84.5 million included in long-term warrant liability at fair value as of September 30, 2026. Remeasurement of warrant liability also includes gains on the Purchase Warrants of $3.0 million and $4.6 million for the three and nine months ended September 30, 2026, respectively; the difference between the periods is the $1.6 million gain recognized in the second quarter.

The Company estimated the fair value of these instruments as of August 2026 using a Monte Carlo simulation of its common stock price. The Initial Closing Pre-Funded Warrants, which have a nominal exercise price, were valued at the common stock price less the exercise price. The Second Closing Pre-Funded Warrants were valued as a forward contract: the simulated stock price at the expected date of the NDA Acceptance Milestone determined the number of warrants issued (based on the lower of a fixed price and the five-day volume-weighted average price) and the value of the shares received in excess of $125.0 million, weighted by management’s estimated probability of acceptance and discounted. The FDA Approval Warrants were valued at the expected date of FDA Approval Milestone as the greater of zero and the excess of the simulated stock price over the exercise price, adjusted for management’s estimated cumulative probability of acceptance and approval, weighted by that probability and discounted. Significant assumptions included expected volatility based on the Company’s historical volatility, risk-free rates, dividend rate, probabilities of NDA acceptance and FDA approval, and expected acceptance and approval dates. The probabilities and timing are unobservable inputs (Level 3).

A summary of the changes in the fair value of the August 2026 Private Placement warrant liability Level 3 rollforward is as follows (in thousands):

Note 8 -Equity Incentive Plans

2023 Employment Inducement Incentive Plan

In November 2023, the Company approved the 2023 Employment Inducement Incentive Plan (the "2023 Inducement Plan"). The terms of the 2023 Inducement Plan are substantially similar to the terms of the Company’s 2019 Incentive Award Plan (as described below) with the exception that incentive stock options may not be issued under the 2023 Inducement Plan and awards under the 2023 Inducement Plan may only be issued to eligible recipients under the applicable Nasdaq rules. The 2023 Inducement Plan was adopted without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the 2023 Inducement Plan may only be made to an employee who has not previously been an employee or member of the board of directors of the Company or any parent or subsidiary, or following a bona fide period of non-employment by the Company or a parent or subsidiary, if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary. The Company has initially reserved 84,528 shares of the Company’s common stock for issuance pursuant to awards granted under the 2023 Inducement Plan. As of September 30, 2026, an aggregate of 51,313 shares of common stock were available for issuance under the 2023 Inducement Plan. As of September 30, 2026 and December 31, 2025,32,039 and 60,132 shares of common stock, respectively, were subject to outstanding awards under the 2023 Inducement Plan.

2019 Equity Incentive Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Incentive Award Plan (the “2019 Plan”). The 2019 Plan became effective on February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or cash-based awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s subsidiaries. A total of 71,875 shares of common stock were approved to be initially reserved for issuance under the 2019 Plan. The number of shares that remained available for issuance under the 2017 Plan (as defined below) as of the effective date of the 2019 Plan were, and shares subject to outstanding awards under the 2017 Plan as of the effective date of the 2019 Plan that are subsequently canceled, forfeited or repurchased by the Company will be, added to the shares reserved under the 2019 Plan. The Company’s board of directors and stockholders approved an amendment and restatement to the 2019 Plan in 2025 to, among other things, increase the aggregate number of shares of common stock authorized for issuance under the 2019 Plan by 141,875 shares of common stock. In addition, the number of shares of common stock available for issuance under the 2019 Plan will be automatically increased on the first day of each calendar year during theten-year term of the 2019 Plan, beginning with January 1, 2026 and ending with January 1, 2035, by an amount equal to 5% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. As of September 30, 2026, an aggregate of 37,947 shares of common stock were available for issuance under the 2019 Plan. As of September 30, 2026 and December 31, 2025,1,671,861 and 559,254 shares of common stock, respectively, were subject to outstanding awards under the 2019 Plan.

On May 15, 2026, the Board approved an amendment and restatement of the 2019 Plan (the “Restated Plan”), to increase the number of shares of common stock authorized for issuance thereunder. The Restated Plan was effective on May 18, 2026, subject to the occurrence of the closing of the Exchange Offer and stockholder approval. On July 14, 2026, the Company’s stockholder approved the Restated Plan.

Pursuant to the Restated Plan, the number of shares reserved for issuance is equal to the sum of the following:

•The number of shares of common stock reserved for issuance under the existing 2019 Plan prior to the effective date of the Restated Plan (which was 865,475 shares); plus

•On the date following the closing date of the Exchange Offer, an increase equal to 899,567 shares; plus

•An annual increase on January 1 of each calendar year during the term of the Restated Plan commencing January 1, 2027 and ending on and including January 1, 2036, equal to the lesser of (A)5% of the Evergreen Fully-Diluted Shares Outstanding (as defined in the Restated Plan) on such date (rounded up to the nearest whole share) or (B) such number of shares of common stock determined by the plan administrator; plus

•Any outstanding awards under the Company’s 2017 Stock Incentive Plan (the “2017 Plan”) as of the effective date of the Restated Plan that become available after such date in accordance with the share counting provisions of the Restated Plan.

2019 Employee Stock Purchase Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Employee Stock Purchase Plan (the “ESPP”). The ESPP became effective as of February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. The ESPP permits participants to purchase common stock through payroll deductions of up to 20% of their eligible compensation. A total of 8,750 shares of common stock were approved to be initially reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will be automatically increased on the first day of each calendar year during the firstten years of the term of the ESPP, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 1% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. During the nine months ended September 30, 2026,15,831 shares were issued pursuant to the ESPP. As of September 30, 2026, an aggregate of 85,416 shares of common stock were available for issuance under the ESPP.

2017 Equity Incentive Plan

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) permitted the granting of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based awards. Subsequent to the adoption of the 2019 Plan, no additional equity awards can be made under the 2017 Plan. As of September 30, 2026 and December 31, 2025,23,433 and 24,404 shares of common stock, respectively, were subject to outstanding options under the 2017 Plan. As of September 30, 2026, no shares of restricted stock awards granted under the 2017 Plan were unvested.

Stock Options

The fair value of each employee and non-employee time-vested stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company uses its own volatility to the extent it has sufficient trading history, and for awards in which sufficient trading history is not available, a peer group is used to calculate the expected volatility. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield iszero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Effective March 19, 2026, and in accordance with the terms of the 2019 Plan, the Company's board of directors approved a stock option repricing (the “Option Repricing”) whereby the exercise price of each Eligible Option (as defined below) was immediately reduced to $36.16 per share, the closing stock price on March 19, 2026. For purposes of the Option Repricing, “Eligible Options” were 609,069 outstanding stock options as of March 19, 2026 (vested or unvested) granted under the 2019 Plan and held by those eligible employees of the Company identified by the Company's board of directors, including the Company’s executive officers. The reduced exercise price became effective immediately after the repricing. Except for the reduction in the exercise prices of the Eligible Options as described above, the Eligible Options will retain their existing terms and conditions as set forth in the 2019 Plan and the applicable award agreements.

The repricing resulted in $2.9 million of incremental cost, which was calculated using the Black-Scholes option-pricing model, of which $1.4 million of the incremental cost was recognized immediately, and $1.5 million of the incremental cost will be recognized on the straight-line basis over the remaining vesting period of the repriced options. The incremental cost is included in general and administrative expense and research and development expense on the condensed consolidated statements of operations and comprehensive loss.

The following table summarizes stock option activity during the nine months ended September 30, 2026:

The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s common stock price on September 30, 2026 and the exercise price of the stock options. The aggregate intrinsic value of stock options exercised was $0.3 million and $0.6 million during the nine months ended September 30, 2026 and 2025, respectively.

The weighted-average grant date fair value per share for the stock option grants, excluding re-granted stock options due to repricing, during the nine months ended September 30, 2026 and 2025 was $35.11 and $74.40, respectively.

The aggregate fair value of stock options that vested during the nine months ended September 30, 2026 and 2025 was $0.1 million and $7.8 million, respectively.

Warrants

On July 24, 2023, the Company completed a private placement of 1,623,368 shares of the Company’s common stock and accompanying warrants to purchase up to 405,842 shares of the Company's common stock at a combined purchase price of $130.50 per share and accompanying warrant, or with respect to any purchaser that was an officer, director, employee or consultant of the Company, $148.10 per share and accompanying warrant. Each warrant has an exercise price per share of $163.20, was immediately exercisable on the date of issuance and will expire five years from the closing of the private placement.

On June 4, 2026, in connection with the Exchange Offer, the Company issued 1,697,363 Purchase Warrants pursuant to a warrant agreement by and between the Company and Computershare, Inc., as warrant agent. The Company is permitted to satisfy its obligations under the Purchase Warrants by physical settlement in shares of common stock. Additionally, Purchase Warrants will be exercisable at any time from December 3, 2026 until June 4, 2031. The Purchase Warrants will be exercisable with a cash exercise price equal to the greater of (i) $27.20 and (ii) a 25% premium to the Reference Price, subject to adjustments. On July 1, 2026, the exercise price was established as $27.20. The number of shares of common stock issuable upon exercise of the Purchase Warrants is subject to customary anti-dilution adjustments in the event of stock dividends, stock splits, stock combinations, reclassifications, distributions and similar events, as well as adjustments in connection with certain degressive issuances at a price below the then-current strike price and a reduction to the strike price in connection with a fundamental change based on a Black-Scholes valuation of the Purchase Warrants. The Purchase Warrant Agreement includes a beneficial ownership limitation that provides that the holders may not exercise (nor may the Company allow the exercise of) the Purchase Warrants if, upon giving effect to such exercise, such exercise would cause the aggregate number of shares of common stock beneficially owned by the holder (together with its affiliates and any other persons whose beneficial ownership of common stock would be aggregated for the purposes of Section 13(d) of the Exchange Act)) to exceed 4.99% (or, at the holder’s election, up to 9.99%) of the total number of the then issued and outstanding shares of common stock; provided that any increase in such percentage will not be effective until the 61st day after such notice is delivered to the Company. The Purchase Warrant Agreement provides that the Company will prepare a resale registration statement with respect to the shares of common stock underlying the Purchase Warrants, subject to certain terms and exceptions.

The Company evaluated the Purchase Warrants for classification as a liability or equity under ASC 815-40. Because the Warrant Agreement required net-cash settlement of any exercise prior to obtaining the requisite stockholder approval, the Purchase Warrants failed to meet the equity-classification conditions in ASC 815-40-25-1(a) and 25-4(a)(1), regardless of indexation, and did not qualify for the scope exception in ASC 815-10-15-74(a). As of September 30, 2026, the Purchase Warrants were therefore classified as a derivative liability, measured at fair value with changes in fair value recognized in earnings. The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

The summary of the changes in the fair value of the warrant liabilities Level 3 rollforward is as follows (in thousands):

The requisite stockholder approval was obtained on July 14, 2026. Reassessing classification as of that date under ASC 815-40-35-8, the Company concluded the Purchase Warrants are indexed to the Company's own stock and satisfy the remaining equity-classification conditions in ASC 815-40-25-10, and reclassified them from a liability to equity at fair value as of that date, with no further remeasurement thereafter.

On June 4, 2026, in connection with the Exchange Offer, the Company issued 417,534 Prefunded Warrants that have an exercise price of $0.0001 per underlying share of common stock, exercisable via cashless exercise at any time after the date of issuance of such Prefunded Warrant, subject to the ownership limitations described below, and do not expire. The number of shares of common stock issuable upon exercise of each Prefunded Warrant is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock. In addition, the holders of the Prefunded Warrants are entitled to participate in pro rata distributions and purchase rights on the same basis as if they held the underlying shares of common stock, and in the event of a fundamental transaction, the holders will be entitled to receive, upon exercise, the same kind and amount of securities, cash or property as they would have received had they held the underlying shares immediately prior to such fundamental transaction. The Prefunded Warrants include a beneficial ownership limitation that provides that the holders may not exercise (nor may the Company allow the exercise of) such Prefunded Warrant if, upon giving effect to such exercise, such exercise would cause the aggregate number of shares of common stock beneficially owned by the holder (together with affiliates and any other persons whose beneficial ownership of common stock would be aggregated for the purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) to exceed 9.99% of the total number of the then issued and outstanding shares of common stock as determined in accordance with the terms of each Prefunded Warrant; provided that the Prefunded Warrant holder may decrease (or increase) such percentage to a percentage not in excess of 9.99%; provided further that any increase in such percentage will not be effective until the 61st day after notice of such increase is delivered to the Company.

Given that the warrants are indexed to the Company's shares of common stock (and otherwise meet the requirements to be classified in equity), the Company recorded the estimated fair value of the Prefunded Warrants as a component of additional paid-in capital on the Company's unaudited condensed consolidated balance sheets, as part of the accounting for the debt extinguishment.

During the nine months ended September 30, 2026, no warrants were exercised. As of September 30, 2026, there were 4,732,054 warrants outstanding, including 1,697,363 Purchase Warrants,2,651,276 Prefunded Warrants and 383,415 warrants issued in connection with the Company's private placement in July 2023.

Restricted Stock

Restricted stock grants include performance stock units ("PSUs") and restricted stock units ("RSUs").

The fair value of the PSUs is determined based on the closing market price of the Company's common stock on the grant date. Compensation expense for PSUs is recognized if and when the Company concludes that it is probable that the performance conditions will be achieved. The Company reassesses the probability of vesting at each reporting period for awards with performance conditions and adjusts compensation expense based on its probability assessment.

All PSUs vest in full upon the earlier of (i) the approval of an NDA for seralutinib or (ii) a Change in Control (as defined in the 2019 Plan), in either case on or prior to the fourth anniversary of the grant date, and subject to the participant not experiencing a termination of service prior to the applicable vesting date. In the event the PSUs have not vested on or prior to the fourth anniversary of the grant date due to the failure of either of the above events to occur, the PSUs will be forfeited on such date. As of September 30, 2026, the Company determined that the achievement of the performance condition of the PSUs is not probable, and therefore no compensation expense was recorded during the three and nine months ended September 30, 2026.

The summary of the Company’s restricted stock grants activity during the nine months ended September 30, 2026 is as follows:

Stock-Based Compensation Expense

Stock-based compensation expense has been reported in the Company’s condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

As of September 30, 2026, the total unrecognized compensation expense related to the unvested stock option awards granted was $37.3 million, which the Company expects to recognize over a weighted-average period of approximately 2.6 years.

As of September 30, 2026, the total unrecognized stock-based compensation expense related to the unvested restricted stock granted was $13.4 million, which the Company expects to recognize over a weighted-average period of approximately 2.1 years.

As of September 30, 2026, the total unrecognized compensation expense related to the ESPP was $0.6 million, which the Company expects to recognize over a weighted-average period of approximately 0.9 years.

Note 9 -Commitments and Contingencies

Leases

The Company previously leased certain office and laboratory space under a non-cancelable operating lease, which expired in January 2025.

On July 9, 2024, the Company entered into a lease agreement for office space located at 3115 Merryfield Row, Suite 120, San Diego, CA 92121, consisting of approximately 18,421 square feet. The term of the lease is 63 months commencing on August 1, 2024. The base rent is $109,605 per month effective October 1, 2024, and it is subject to a 3% annual increase every October. The lease expires on October 31, 2029 with an option for aone-year extension and an option to terminate on December 1, 2027 with the payment of a termination fee equal tofour months of the then-current base rent upon the termination date. As of September 30, 2026, the Company was not reasonably certain that it would exercise the extension options, and therefore did not include these options in the determination of the total operating lease term for accounting purposes.

Monthly rent expense is recognized on a straight-line basis over the term of the leases. The operating leases are included in the condensed consolidated balance sheets at the present value of the lease payments at an incremental borrowing rate of 7% for each of the initial leased space and expansion space and 12.4% for the office lease commenced on August 1, 2024 using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment as the leases do not provide an implicit rate.

As of September 30, 2026, the weighted average remaining lease term was 3.1 years and weighted average discount rate was 12.4%.

Lease costs were comprised of the following (in thousands):

Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended September 30, 2026 and 2025 was $0.3 million and $0.4 million, respectively. Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2026 and 2025 was $1.0 million and $1.5 million, respectively.

Gross future minimum annual rental commitments as of September 30, 2026, were as follows (in thousands):

Note 10 -Significant Agreements and Contracts

Chiesi Rights Reacquisition Agreement

On July 23, 2026, the Company and Chiesi entered into a rights reacquisition agreement (the “Rights Reacquisition Agreement”), which effectively terminated the Chiesi Collaboration Agreement (as defined below), including the license granted by the Company to Chiesi.

Under the Rights Reacquisition Agreement, the Company also assumed responsibility for further clinical development, manufacture, registration and commercialization of seralutinib for the treatment of pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung disease, including seralutinib and products or compounds containing seralutinib.

Chiesi granted the Company a worldwide, royalty-free, non-exclusive, sublicensable license under certain Chiesi Patent Rights (as defined in the Chiesi Collaboration Agreement), and a worldwide, royalty-free, non-exclusive, irrevocable license under certain Chiesi-controlled Know-How (as defined in the Chiesi Collaboration Agreement), in each case to develop, manufacture, and commercialize seralutinib. Chiesi agreed to (i) transfer and disclose to the Company certain Chiesi-controlled Know-How related to seralutinib, including manufacturing know-how, data and documentation, (ii) assign to the Company Chiesi’s interest in a jointly-owned combination-product patent, and (iii) assign to the Company the ZEMUVY trademark and domain-name portfolio.

Chiesi paid the Company an upfront payment of $5.0 million (the “Chiesi Amount”). The Company is also obligated to pay Chiesi up to $50.0 million in regulatory milestone payments with respect to seralutinib and up to $50.0 million in commercial milestone payments with respect to seralutinib, together with royalties of 10% on worldwide Net Sales of seralutinib up to a cap of $750.0 million.

As the Company had an existing revenue contract with Chiesi, the Company considered the contract modification and consideration payable to a customer guidance in ASC 606. The Company determined this bundled arrangement would be accounted for as a termination of the existing revenue contract and the creation of a new arrangement. No amounts paid or payable to Chiesi were recorded against revenue, as Chiesi is not a customer of the Company with respect to the Rights Reacquisition Agreement and the consideration payable to Chiesi does not exceed the fair value of the distinct assets reacquired.

Prior to the Rights Reacquisition Agreement, the Company had $37.1 million in contract liabilities related to deferred revenue balances associated with the Chiesi Collaboration Agreement, together with a $7.4 million contract asset representing unreimbursed development and commercial costs, including an estimate of $1.3 million for the period from July 1 through July 23, 2026, that is no longer recoverable from Chiesi because of the termination.

Upon the effectiveness of the Rights Reacquisition Agreement, the Company had no remaining performance obligations under the Chiesi Collaboration Agreement and recognized the $37.1 million of contract liabilities as revenue. The Company derecognized the $7.4 million contract asset, of which $5.0 million was settled by the Chiesi Amount received. The remaining $2.4 million of unreimbursed costs, which Chiesi was not required to reimburse, was recognized as IPR&D expense for the rights reacquired from Chiesi, which had no alternative future use. Total IPR&D expense for the three and nine months ended September 30, 2026 was $2.8 million, which also includes a $0.3 million milestone.

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Chiesi Collaboration Agreement

On May 3, 2024, the Company, GB002, Inc., a Delaware corporation and wholly-owned subsidiary of the Company, and Gossamer Bio 002 Ltd., a corporation organized and existing under the laws of Ireland and indirect wholly-owned subsidiary of the Company, entered into a global collaboration and license agreement (the “Chiesi Collaboration Agreement”) with Chiesi Farmaceutici S.p.A and Chiesi USA, Inc. (collectively, “Chiesi”). The Company concluded that there were four distinct performance obligations under the Chiesi Collaboration Agreement: the U.S. Territory license (as defined below), the ROW Territory license (as defined below), the research and development services of PAH clinical development and the research and development services of PH-ILD clinical development. Revenue associated with the licenses was recognized upon delivery in May 2024. In addition, the Company granted to Chiesi an option to purchase directly from the Company, on one or more occasions, up to an aggregate number of shares of the Company’s common stock (the “Equity Option”) such that immediately following such issuance, Chiesi’s beneficial ownership of the Company’s common stock shall not exceed 9.9% of the total number of issued and outstanding shares of the Company’s common stock.

The collaboration focused on the development and commercialization of seralutinib and licensed products including seralutinib and related licensed compounds (“Licensed Products”) in the U.S. (“U.S. Territory”) and the rest of the world (“ROW Territory”), for therapeutic, prophylactic and diagnostic uses in humans and animals, for the treatment of PAH and PH-ILD and other indications, as may be permitted under the Chiesi Collaboration Agreement.

Pursuant to the Chiesi Collaboration Agreement, the Company grantedtwo exclusive, sublicensable (with the Company’s consent required in the U.S. Territory for third party sublicenses) licenses to Chiesi under intellectual property rights controlled by the Company relating to seralutinib and Licensed Products, for the worldwide development, manufacture and commercialization of seralutinib and Licensed Products. The licenses granted to Chiesi were subject to retained rights of the Company for the worldwide development and manufacture of seralutinib and Licensed Products, commercialization of Licensed Products in the U.S. Territory, and performance of its obligations and exercise of its rights that may be set forth in the global development plan and U.S. commercialization plan, in each case in accordance with the Chiesi Collaboration Agreement.

The parties agreed to use commercially reasonable efforts to conduct development and commercialization activities in relation to seralutinib and Licensed Products, under the global development plan and U.S. commercialization plan in accordance with the timelines therein. The Company agreed to continue to lead global development of seralutinib in PAH and PH-ILD, and the parties were to equally share the costs for the activities included in the global development plan for all Licensed Products, with the exception of the PROSERA Phase 3 study, which the Company was to be solely responsible for conducting at the Company’s own cost and expense. With respect to each country in the ROW Territory, such obligation to equally share such development costs was to end when regulatory approval is received for a Licensed Product in such country.

With respect to U.S. Territory, the development costs incurred following regulatory approval was to continue to be shared equally. The Company agreed to lead potential commercialization for PAH and PH-ILD in the U.S. Territory, with both parties contributing 50 percent of commercial efforts, including performing 50 percent of the commercialization activities. Chiesi agreed to lead potential commercialization in the U.S. Territory in any additional indications, and Chiesi had the exclusive right to commercialize Licensed Products in the ROW Territory. Chiesi further agreed to use commercially reasonable efforts to commercialize Licensed Products in certain specified countries in the ROW Territory following receipt of regulatory approvals. Generally, the Company had the right to lead in manufacturing commercial supply of seralutinib and Licensed Products for the U.S. Territory for PAH and PH-ILD, and, subject to any existing obligations of the Company to third party manufacturers, Chiesi had the right to lead in manufacturing commercial supply of seralutinib and Licensed Products in the ROW Territory, in each case in accordance with the Chiesi Collaboration Agreement.

Pursuant to the Chiesi Collaboration Agreement, neither party nor its affiliates was permitted to develop or commercialize any compound or product throughout the term whose primary mechanism of action is inhibition of a tyrosine kinase for the treatment of PAH or PH-ILD in the U.S. Territory or ROW Territory, subject to certain restrictions for the European Union and United Kingdom.

In consideration and as reimbursement for the Company’s development costs, Chiesi agreed to pay the Company an up-front, nonrefundable payment of $160 million. Additionally, the Company was eligible to receive up to $146 million in regulatory milestones and $180 million in sales milestones. In the U.S. Territory, the parties agreed to share commercial profits and losses equally. In the ROW Territory, Chiesi agreed to pay the Company an escalating mid-to-high teens percentage royalty on net sales of Licensed Product for PAH and additional indications on a Licensed Product-by-Licensed Product and country-by-country basis with such payment obligations beginning on the first commercial sale of Licensed Product in such country and expiring on a country-by-country basis on the latest of (a) the expiration of a valid claim to the Company's patent right in such country, (b) the expiration of regulatory exclusivity, and (c) the date that is 10 years after the first commercial sale of such Licensed Product in such country.

Potential future payments for variable consideration, such as regulatory and commercial milestones, development costs, and profit sharing U.S. Territory would have been recognized when it becomes probable that, if recorded, a significant reversal will not take place. Potential future royalty payments will be recorded as revenue when the associated sales occur.

Unless earlier terminated, the Chiesi Collaboration Agreement was to remain in force until no Licensed Products are being developed or commercialized in the U.S. Territory and in the ROW Territory, on a country-by-country basis, until no royalty terms are in effect for all countries. Either party was able to terminate the Chiesi Collaboration Agreement for the other party’s material breach, subject to a specified notice and cure periods, or due to an insolvency event of the other party. In lieu of termination upon a party’s material breach due to non-payment of development costs within a specified time the non-breaching party may elect an alternative remedy which may involve modifications to their performance and payment obligations. The Company had the right to terminate by providing written notice in the event Chiesi or its affiliates or sublicensee brings a patent challenge and Chiesi does not take certain steps to withdraw from or cease supporting such challenge. Chiesi had the right to terminate the Chiesi Collaboration Agreement without cause upon prior written notice to the Company, subject to a notice period in which all rights to Licensed Products will revert back to the Company.

The Company concluded that progress towards completion of the research and development services performance obligation related to the Chiesi Collaboration Agreement is best measured in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses. The Company periodically reviews and updates the estimated collaboration expenses, when appropriate, which may adjust revenue recognized for the period. While such changes to the Company’s estimates have no impact on the Company’s reported cash flows, the amount of revenue recorded in the period could be materially impacted. The transaction price to be recognized as revenue from sale of licenses and revenue from contracts with collaborators under the Chiesi Collaboration Agreement consists of the one-time non-refundable and non-creditable development cost reimbursement payment and research and development costs. The transaction price was reduced by the fair value of the Equity Option.

The Chiesi Collaboration Agreement was terminated upon the effectiveness of the Rights Reacquisition Agreement on July 23, 2026.

Revenue Recognition

Prior to the termination of the Chiesi Collaboration Agreement on July 23, 2026, the Company determined the transaction price pursuant to the Chiesi Collaboration Agreement is equal to the one-time development cost reimbursement payment of $160.0 million less the fair market value of the Equity Option of $0.5 million. The price allocated for the Equity Option was determined to be at fair market value utilizing the Geometric Brownian Motion/Monte Carlo model and was considered a reduction in the transaction price. The transaction price was allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each distinct performance obligation. In estimating the stand-alone selling price for each distinct performance obligation, the Company developed assumptions that require judgment and included forecasted revenues or costs, expected development timelines, discount rates and probabilities of technical and regulatory success. A description of the distinct performance obligations identified under the Chiesi Collaboration Agreement, as well as the amount of revenue allocated to each distinct significant performance obligation, is as follows:

Licenses of Intellectual Property. The licenses to the Company’s intellectual property, bundled with the associated know-how, representstwo distinct performance obligations. The licenses and associated know-how were transferred to Chiesi in June 2024, therefore the Company recognized the full revenue related to these distinct performance obligations in the amount of $90.7 million during the year ended December 31, 2024 as revenue from sale of licenses on its consolidated statements of operations and comprehensive loss.

Research and Development Services. The progress towards completion oftwo distinct performance obligations related to PAH and PH-ILD research and development services for the Licensed Products is measured in an amount proportional to the research and development expenses incurred and the total estimated PAH and PH-ILD research and development expenses. In addition, the Company and Chiesi share equally in the costs of ongoing global seralutinib clinical development, with the exception of the PROSERA Phase 3 study, and the costs of commercialization in the U.S. The Company records the revenue from performing research and development services and the cost-sharing payments due from Chiesi as revenue from contracts with collaborators on its condensed consolidated statements of operations and comprehensive loss. For the three months ended September 30, 2026 and 2025, the Company recognized $38.3 million and $12.2 million, respectively, for the PAH and PH-ILD research and development performance obligations. For the nine months ended September 30, 2026 and 2025, the Company recognized $61.7 million and $31.3 million, respectively, for the PAH and PH-ILD research and development performance obligations. For the three months ended September 30, 2026 and 2025, the Company recognized $0.1 million and $1.1 million, respectively, for the PAH and PH-ILD commercialization activities. For the nine months ended September 30, 2026 and 2025, the Company recognized $2.8 million and $3.4 million, respectively, for the PAH and PH-ILD commercialization activities.As a result of the termination of the Chiesi Collaboration Agreement on July 23, 2026, the Company had no remaining research and development services performance obligations and recognized the entire remaining balance of contract liabilities (deferred revenue) of $37.1 million as revenue during the three months ended September 30, 2026.

Milestone Payments. As a result of the termination of the Chiesi Collaboration Agreement on July 23, 2026, the Company is no longer eligible to receive regulatory or sales milestones payments from Chiesi. No milestone payments were recognized during the three and nine months ended September 30, 2026 and 2025.

Royalties. As the licenses are deemed to be the predominant item to which sales-based royalties relate, the Company will recognize revenue when the related sales occur. No royalty revenue was recognized during the three and nine months ended September 30, 2026 and 2025.

The following table presents a summary of the activity in the Company's contract liabilities related to the Chiesi Collaboration Agreement (recorded as contract liabilities on the balance sheet) during the nine months ended September 30, 2026 and 2025 (in thousands):

As of September 30, 2026, the Company has no contract liabilities associated with the Chiesi Collaboration Agreement, as the remaining balance of $37.1 million was recognized as revenue upon the termination of the agreement on July 23, 2026.

The following table presents the Company's contract revenues from the Chiesi Collaboration Agreement disaggregated by timing of revenue recognition and excluding royalty revenue (in thousands):

Note 11 -Segment Information

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the CODM in making decisions regarding the allocation of resources and assessing performance. The Company's CODM is its chief executive officer. The Company views its operations and manages its business asone operating segment. The Company's operating segment derives its revenues from the Chiesi Collaboration Agreement. The CODM assesses performance for the Company's single operating segment and decides how to allocate resources based on research and development expenses incurred, which is a component of the Company's consolidated net loss as reported on the consolidated statement of operations and comprehensive loss. The measure of segment assets is reported on the balance sheet as total consolidated assets. Further, segment depreciation expense and segment asset additions are consistent with consolidated amounts reported within the consolidated statement of cash flows given the Company's operations are aggregated within a single reportable segment. The CODM uses research and development expenses and results of clinical trial activities completed to date to evaluate how to allocate the Company's resources to advance seralutinib.

Significant segment expenses which are regularly reported to the CODM for purposes of making decisions regarding the allocation of resources are included within the table below and are reconciled to consolidated net loss (in thousands):

(1) Other segment items include general and administrative expenses, which are provided to the CODM regularly, but are included within other segment items as they are not utilized as part of the decision making process as it relates to the allocation of resources. Further, R&D expenses for other terminated programs are also provided to the CODM. These costs include employee expenses, as well as allocations of consolidated overhead and stock compensation. Other segment items also include costs related to Respira (as defined in Note 13 below).

Note 12 -Income Taxes

The Company calculates the interim income tax provision in accordance with Accounting Standards Codification Topic 270, Interim Reporting, ("ASC 270"), and Topic 740, Accounting for Income Taxes, ("ASC 740"). At the end of each interim period, we estimate our annual effective tax rate and apply that rate to our ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur. Our annual effective tax rate from continuing operations was 0% for the three and nine months ended September 30, 2026 and 2025.

Note 13 -Investments in Variable Interest Entities

The Company reviews its investments in other entities to determine whether the Company is the primary beneficiary of a variable interest entity ("VIE"). The Company would be the primary beneficiary of the VIE and would be required to consolidate the VIE, if it has the power to direct the significant activities of the entity and the obligation to absorb losses or receive benefits from the entity that may be significant to the VIE.

On September 24, 2025, the Company entered into an option agreement with Prana Bio, Inc. (“Prana”) to acquire Prana and its wholly-owned subsidiary, Respira Therapeutics, Inc. ("Respira") via merger (the "Respira Merger Option"). The Company identified Prana as a VIE but does not consolidate Prana as the Company lacks the power to direct the activities that significantly impact the economic success of Prana. Pursuant to the agreement, the Company issued 31,250 shares of its common stock as consideration for the option grant and agreed to issue up to an additional 18,750 shares of common stock following the exercise of the option. Concurrent with the option agreement, the Company entered into a research funding agreement with Prana whereas the Company agreed to provide up to a total of $7.8 million to Respira to carry out chemistry, manufacturing, and controls (“CMC”) activities related to Respira’s RT234 drug program.

The Respira Merger Option was valued at $7.5 million based on the value of the 31,250 shares of common stock issued using the Company's share price as of September 24, 2025, which was $239.20 per share of common stock. The option value was recognized as IPR&D expense in the Company's condensed consolidated statements of operations and comprehensive loss.

The Company does not consolidate Respira as the Company lacks the power to direct the activities that significantly impact the economic success of Respira. The Company's maximum loss exposure to Prana, prior to the exercise of the option to acquire, is limited to the Respira Merger Option and cost reimbursements for certain research and development activities, which will be recognized as research and development expenses in the Company's condensed consolidated statements of operations and comprehensive loss as incurred.

Note 14 -Subsequent Events

The Company has evaluated all subsequent events and transactions through the filing date. Except as described below, there were no material events that impacted the condensed consolidated financial statements or disclosures.

Stockholder Approval of Share Issuances

On October 27, 2026, at the Company’s special meeting of stockholders, the Company’s stockholders approved, in accordance with Nasdaq Listing Rules 5635(c) and 5635(d), the potential issuance of shares of the Company’s common stock pursuant to the Purchase Agreement, including shares issuable upon (i) the exercise of the Initial Closing Pre-Funded Warrants, (ii) the exercise of the Second Closing Pre-Funded Warrants, (iii) the exercise of the FDA Approval Warrants, and (iv) the conversion of shares of Series A-1, Series A-2 and Series A-3 Convertible Preferred Stock that was issuable upon exercise of the Warrants, which issuances would, in the aggregate, exceed 20% of the number of shares of common stock issued and outstanding immediately prior to the Initial Closing (see Note 7).