Connect Biopharma Holdings Ltd

Previous wording

•Results of operations. This section provides a general description of our operating expenses, as well as an analysis of our results of operations presented in the accompanying consolidated statements of operations and comprehensive loss by comparing the results for the year ended December 31, 2024 to the results for the year ended December 31, 2023.

Current wording

•Results of operations. This section provides a description of our revenues and expenses, as well as an analysis of our results of operations presented in the accompanying consolidated statements of operations and comprehensive loss by comparing the results for the year ended December 31, 2025 to the results for the year ended December 31, 2024.

Previous wording

Connect Biopharma, headquartered in San Diego, California, is a clinical-stage biopharmaceutical company focused on advancing rademikibart, a potentially best-in-class next generation IL-4Rα antibody, to transform care in asthma and chronic obstructive pulmonary disease.

Current wording

Connect Biopharma, headquartered in San Diego, California, is a clinical-stage biopharmaceutical company dedicated to transforming care for asthma and COPD. The Company is advancing rademikibart, a next generation, potentially best-in-class antibody designed to target IL-4Rα.

Previous wording

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, accrued research and development expenses, and share-based compensation. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Current wording

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, accrued research and development expenses, and share-based compensation. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Previous wording

Our license and collaboration revenues have been generated through a collaborative development, manufacturing and commercialization agreement. The terms of the agreement include the license of intellectual property and associated know-how and the provision of other goods and services. Payments to us under a collaborative agreement typically include one or more for the following: non-refundable, upfront license fees; manufacturing supply services; milestone payments; and royalties on future product sales. We utilize key assumptions that require judgement to determine the stand-alone selling price for each performance obligation identified in the agreement, which may include revenue forecasts, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies. To date, our estimates have not differed materially from actual values. Because the amount of revenue recognized for each performance obligation is determined based upon its relative stand-alone price, changes in the estimated fair value of the stand-alone selling price for each performance obligation may result in a significant change to our revenue, which could materially affect our results of operations or financial position.

Current wording

Our license and collaboration revenues have been generated through a collaborative development, manufacturing and commercialization agreement. The terms of the agreement include the license of intellectual property and associated know-how and the provision of other goods and services. Payments to us under a collaborative agreement typically include one or more for the following: non-refundable, upfront license fees; manufacturing supply services; milestone payments; and royalties on future product sales. We utilize key assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the agreement, which may include revenue forecasts, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies. To date, our estimates have not differed materially from actual values. Because the amount of revenue recognized for each performance obligation is determined based upon its relative stand-alone price, changes in the estimated fair value of the stand-alone selling price for each performance obligation may result in a significant change to our revenue, which could materially affect our results of operations or financial position.

Previous wording

License and collaboration revenues for the year ended December 31, 2024 were $26.0 million for the upfront license fee, achievement of certain development milestones and cost reimbursements. There were no license and collaboration revenues for the year ended December 31, 2023.

Current wording

License and collaboration revenues for the year ended December 31, 2025 were $64,000 for cost reimbursements for clinical materials. License and collaboration revenues for the year ended December 31, 2024 were $26.0 million for the upfront license fee, achievement of certain development milestones and cost reimbursements.

Previous wording

We expect research and development expense to increase in 2025 to support our development efforts, primarily due to the two Phase 2 trials of rademikibart, which we expect to initiate in the first half of 2025. The lengthy process of completing our clinical trials and seeking regulatory approval for our Product Candidates requires the expenditure of substantial resources.

Current wording

We expect research and development expense to increase in 2026 to support our development efforts, including completion of the ongoing Phase 2 clinical trials of rademikibart. The lengthy process of completing our clinical trials and seeking regulatory approval for our Product Candidates requires the expenditure of substantial resources.

Previous wording

For the year ended December 31, 2024, other income, net was $7.0 million, compared to $7.1 million for the same period in 2023. Other income, net primarily consists of interest income earned on our cash, cash equivalents and short-term investments and funds received from government grants related to our development activities.

Current wording

For the year ended December 31, 2025, other income, net was $2.8 million, compared to $7.0 million for the same period in 2024. The decrease in other income, net was primarily due to a decrease in government subsidies and interest income earned on our invested cash balances.

Previous wording

Income tax expense is recognized based on the income tax rates in the following main tax jurisdictions where we operate. We are incorporated in the Cayman Islands, with subsidiaries in Hong Kong, the PRC, Australia and the U.S., and we are exempt from income tax in the Cayman Islands. There is no tax expense in Hong Kong, PRC or Australia as there was no estimated assessable profit that was subject to tax. Our U.S. entity is a service provider for the Hong Kong entity and as a result its cost-plus income is subject to taxation in the U.S. Income tax expense for the years ended December 31, 2024 and 2023 was $0.2 million and $0.1 million, respectively.

Current wording

Income tax expense is recognized based on the income tax rates in the following main tax jurisdictions where we operate. We are incorporated in the Cayman Islands, with subsidiaries in Hong Kong, the PRC, Australia and the U.S., and we are exempt from income tax in the Cayman Islands. There is no tax expense in Hong Kong, PRC or Australia as there was no estimated assessable profit that was subject to tax. Our U.S. entity is a service provider for the Hong Kong entity and as a result its cost-plus income is subject to taxation in the U.S. Income tax expense for both the years ended December 31, 2025 and 2024 was $0.2 million.

Previous wording

Our net cash used in operating activities for the year ended December 31, 2024 was $23.6 million, compared to $47.7 million for the same period in 2023. The decrease in net cash used in operating activities was primarily due to a decrease in net loss, adjusted for non-cash share-based compensation expense and accretion of discounts on our available-for-sale investments, partially offset by changes in our operating assets and liabilities.

Current wording

Our net cash used in operating activities for the year ended December 31, 2025 was $51.2 million, compared to $23.6 million for the same period in 2024. The increase in net cash used in operating activities was primarily due to an increase in net loss of $39.9 million and decrease in non-cash, share-based compensation expense of $3.0 million, partially offset by net changes in our operating assets and liabilities of $16.1 million.

Previous wording

Our net cash used in investing activities for the year ended December 31, 2024 was $3.5 million, compared to net cash provided by investing activities of $75.0 million for the same period in 2023. The decrease in cash provided by investing activities was primarily due to net purchases of short-term investments of $2.7 million for the year ended December 31, 2024, compared to net maturities of $72.1 million for the year ended December 31, 2023.

Current wording

Our net cash provided by investing activities for the year ended December 31, 2025 was $9.8 million, compared to net cash used in investing activities of $3.5 million for the same period in 2024. The increase in cash provided by investing activities was primarily due to net maturities of short-term investments of $10.3 million for the year ended December 31, 2025, compared to net purchases of $2.7 million for the year ended December 31, 2024.

Previous wording

Our net cash provided by financing activities for the year ended December 31, 2024 was $227,000, compared to $45,000 for the same period in 2023. The increase in cash provided by financing activities was primarily due to an increase in shares issued upon exercise of outstanding stock options.

Current wording

Our net cash provided by financing activities for the year ended December 31, 2025 was $1.1 million, compared to $0.2 million for the same period in 2024. The increase in cash provided by financing activities was mainly due to an increase in net proceeds from stock option exercises and purchases under the ESPP.

Previous wording

As of December 31, 2024, we had cash, cash equivalents and short-term investments of $93.7 million. Based on our current operating plan and projections, management believes that the Company’s existing cash, cash equivalents and short-term investments will be sufficient to meet the Company’s anticipated cash requirements for a period of at least one year from the date this Annual Report on Form 10-K is filed with the U.S. Securities and Exchange Commission.

Current wording

As of December 31, 2025, we had $44.3 million in cash, cash equivalents and short-term investments. In March 2026, we entered into a securities purchase agreement with a select group of institutional accredited investors to sell 6.1 million shares of our ordinary shares in a private placement (“Private Placement”). The gross proceeds from the Private Placement are $20.2 million, before deducting placement agent fees and other offering expenses. We estimate the placement agent fees and other offering expenses will be $1.6 million. The Private Placement is scheduled to close on or about March 31, 2026. Based on our current operating plans, we expect that our cash, cash equivalents and short-term investments, including the net proceeds from the Private Placement, will be sufficient to fund operations for a period of at least one year from the date this Annual Report on Form 10-K for the year ended December 31, 2025 is filed with the SEC.

Previous wording

Historically, we have financed our operations, including technology and product research and development, primarily through sales of our ordinary shares and ADSs, including our IPO that we completed on March 23, 2021 for total cash consideration of $219.9 million before underwriting discounts and commissions, and, through up-front payments, research funding and milestone payments under collaborative arrangements.

Current wording

Historically, we have financed our operations, including technology and product research and development, primarily through sales of our securities, including our IPO that we completed in March 2021 for total cash consideration of $219.9 million before underwriting discounts and commissions, and, through up-front payments, research funding and milestone payments under collaborative arrangements.

Previous wording

In February 2025, we relocated our corporate headquarters to a new location in San Diego, California. This operating lease for the new corporate headquarters is for 6,942 square feet of office space and expires on January 31, 2028. We have agreed to pay a basic annual rent for the additional office space that increases incrementally over the term of the lease from $0.3 million for the first 12 months of the lease (inclusive of certain rent abatements) to $0.4 million for the last 12 months of the lease, and such other amounts as set forth in the lease.

Current wording

In February 2025, we relocated our corporate headquarters to a new location in San Diego, California. This operating lease for the new corporate headquarters is for 6,942 square feet of office space and expires on January 31, 2028. We have agreed to pay a basic annual rent for the additional office space that increases incrementally over the term of the lease from $0.3 million for the first 12 months of the lease (inclusive of certain rent abatements) to $0.4 million for the last 12 months of the lease, and such other amounts as set forth in the lease. In addition, we have a lease for 25,476 square feet of laboratory and office space in Taicang, China, with a lease term that expires on April 30, 2026. As of December 31, 2025, we had total operating lease obligations of $0.8 million, with $0.4 million due in one year and $0.4 million due within two years.

Previous wording

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, monetization transactions, government contracts or other strategic transactions. To the extent that we raise additional capital through the sale of equity, ownership interests of existing holders of our ADSs and ordinary shares will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our ADSs or ordinary shares. If we raise additional funds through collaboration agreements, strategic alliances, licensing arrangements, monetization transactions, or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or Product Candidates or grant licenses on terms that may not be favorable to us or grant rights to develop and market products or Product Candidates that we would otherwise prefer to develop and market ourselves. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing that we raise may contain terms that are not favorable to us or our shareholders.

Current wording

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, monetization transactions, government contracts or other strategic transactions. To the extent that we raise additional capital through the sale of equity, ownership interests of existing holders of our ordinary shares will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our ordinary shares. If we raise additional funds through collaboration agreements, strategic alliances, licensing arrangements, monetization transactions, or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or Product Candidates or grant licenses on terms that may not be favorable to us or grant rights to develop and market products or Product Candidates that we would otherwise prefer to develop and market ourselves. Future debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or equity financing that we raise may contain terms that are not favorable to us or our shareholders.

Previous wording

There have been significant disruptions to global financial markets that have contributed to a general global economic slowdown. The resulting high inflation rates may materially affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results. High interest rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Additionally, the general consensus among economists suggests that we should expect a higher recession risk to continue over the next year, which, together with the foregoing, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations. Furthermore, such economic conditions have produced downward pressure on share prices. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates remain high or begin to rise again) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, consequences associated with geopolitical conflicts such as the ongoing wars involving Ukraine and Israel, the impact of any tariffs imposed by or on the U.S. or other matters impacting global trade, shifting priorities and policies within the U.S. federal government, worsening global macroeconomic conditions, and employee availability and wage increases, which may result in additional stress on our working capital resources. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.

Current wording

There have been significant disruptions to global financial markets that have contributed to a general global economic slowdown. The resulting high inflation rates may materially affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results. High interest rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Additionally, the general consensus among economists suggests that we should expect a higher recession risk to continue over the next year, which, together with the foregoing, could result in further economic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations. Furthermore, such economic conditions have produced downward pressure on share prices. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates remain high or begin to rise again) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, consequences associated with geopolitical conflicts such as the ongoing war involving Ukraine, the impact of any tariffs imposed by or on the U.S. or other matters impacting global trade, shifting priorities and policies within the U.S. federal government, worsening global macroeconomic conditions, and employee availability and wage increases, which may result in additional stress on our working capital resources. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.