Connect Biopharma Holdings Ltd

Previous wording

The following discussion and other parts of this quarterly report contain forward-looking statements within the meaning of Section 21E of the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding our strategy, future financial condition, future operations, research and development, potential of, and expectations for, our pipeline and technology platforms, the timing, potential of and expectations for planned clinical trials and preclinical studies, the timing and likelihood of regulatory filings and approvals for our product candidates, our ability to commercialize our product candidates, the potential benefits of collaborations, projected costs, prospects, plans, objectives of management, expected market size and growth for our potential products, the timing of availability of clinical data, program updates and data disclosures, and our plans for rademikibart, are forward-looking statements. These statements are often identified by the use of words such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “might”, “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. The forward-looking statements in this quarterly report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A under the heading “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Current wording

This Quarterly Report on Form 10-Q, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future events, future financial condition, revenues or performance, future operations, financing needs, business trends, research and development, potential of, and expectations for, our pipeline and technology platforms, the timing, potential of and expectations for planned clinical trials and preclinical studies, the timing and likelihood of regulatory filings and approvals for our product candidates, our ability to commercialize our product candidates, the potential benefits of collaborations, projected costs, prospects, plans, goals, objectives of management, expected market size and growth for our potential products, the timing of availability of clinical data, program updates and data disclosures, and our plans for rademikibart, are forward-looking statements. These statements may be identified by the use of words such as “aim,” “anticipate,” “assume,” “believe,” “commitments,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “might”, “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current assumptions, expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of substantial known and unknown risks, uncertainties and assumptions, including those described in Part I, “Item 1A. Risk Factors” of our 2025 Annual Report, Part II, “Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q and our other filings with the SEC. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results or outcomes, or the timing of such results or outcomes, could differ materially from those expressed or implied in the forward-looking statements. Given these risks, uncertainties and other important factors, you should not place undue reliance on these forward-looking statements. Except as required by applicable law, we do not plan…

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Previous wording

The following is a summary of significant developments affecting our business that occurred since the filing of our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2025, filed with the SEC on August 13, 2025 (“Q2 2025 Form 10-Q”). For additional information or for a more comprehensive discussion of our product candidate, rademikibart, see our 2024 Annual Report, our Quarterly Report on Form 10-Q for the three months ended March 31, 2025, filed with the SEC on May 15, 2025 (“Q1 2025 Form 10-Q”), and Q2 2025 Form 10-Q.

Current wording

The following is a summary of significant developments affecting our business that have occurred since the filing of our 2025 Annual Report. For a more comprehensive discussion of our product candidate, rademikibart, see our 2025 Annual Report.

Previous wording

Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. 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 disclosures. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, investments, accrued research and development expenses, income taxes 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

Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. 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 disclosures. We evaluate our estimates on an ongoing basis, including those related to revenue recognition and accrued research and development expenses. 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 critical accounting estimates and judgments are described within Item 7 of our 2024 Annual Report.

Current wording

During the three months ended March 31, 2026, there have been no material changes to our critical accounting estimates and judgments, as described within Item 7 of our 2025 Annual Report.

Previous wording

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

Current wording

Comparison of the Three Months Ended March 31, 2026 and 2025

Previous wording

For the three and nine months ended September 30, 2025, research and development expense was $11.1 million and $26.5 million, respectively, compared to $9.0 million and $23.0 million, respectively, for the same periods in 2024. The increase in research and development expense was primarily due to an increase in costs related to the development of rademikibart. During the second quarter of 2025, we initiated two rademikibart Phase 2 clinical trials in patients experiencing an acute exacerbation of asthma or COPD. This increase was partially offset by a decrease in non-cash, share-based compensation expenses.

Current wording

For the three months ended March 31, 2026, research and development expense was $15.0 million, compared to $6.6 million for the same period in 2025. The increase in research and development expense was primarily due to an increase in costs related to the development of rademikibart. During the second quarter of 2025, we initiated two rademikibart Phase 2 clinical trials in patients experiencing an acute exacerbation of asthma or COPD.

Previous wording

For the three and nine months ended September 30, 2025, other income, net was $0.5 million and $2.3 million, respectively, compared to $1.0 million and $6.2 million, respectively, for the same periods 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.

Current wording

For the three months ended March 31, 2026, other income, net was $0.3 million, compared to $1.2 million for the same period in 2025. 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

Our net cash used in operating activities for the nine months ended September 30, 2025 was $40.0 million, compared to $21.3 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 $33.6 million, partially offset by net changes in our operating assets and liabilities of $18.1 million.

Current wording

Our net cash used in operating activities for the three months ended March 31, 2026 was $16.0 million, compared to $10.0 million for the same period in 2025. The increase in net cash used in operating activities was primarily due to an increase in net loss of $9.1 million, partially offset by net changes in our operating assets and liabilities of $2.6 million.

Previous wording

Our net cash used in investing activities for the nine months ended September 30, 2025 was $1.2 million, compared to net cash provided by investing activities of $12.3 million for the same period in 2024. The decrease in cash provided by investing activities was primarily due to net purchases of short-term investments of $0.8 million for the nine months ended September 30, 2025, compared to net maturities of $12.8 million for the nine months ended September 30, 2024.

Current wording

Our net cash provided by investing activities for the three months ended March 31, 2026 was $6.0 million, compared to net cash used in investing activities of $20.6 million for the same period in 2025. The increase in cash provided by investing activities was primarily due to net maturities of short-term investments of $6.0 million for the three months ended March 31, 2026, compared to net purchases of short-term investments of $20.6 million for the three months ended March 31, 2025.

Previous wording

Our net cash provided by financing activities for the nine months ended September 30, 2025 was $0.4 million, compared to $0.1 million for the same period in 2024. The increase in net cash provided by financing activities was mainly due to an increase in net proceeds from stock option exercises and purchases under the ESPP.

Current wording

Our net cash provided by financing activities for the three months ended March 31, 2026 was $17.6 million, compared to $2,000 for the same period in 2025. The increase in net cash provided by financing activities was primarily due to the Private Placement which closed in March 2026.

Previous wording

As of September 30, 2025, we had cash, cash equivalents and short-term investments of $54.8 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 Quarterly Report on Form 10-Q is filed with the SEC.

Current wording

As of March 31, 2026, we had cash and cash equivalents of $46.0 million. Based on our current operating plan and projections, management believes that our existing cash and cash equivalents will be sufficient to meet our anticipated cash requirements for a period of at least one year from the date this Quarterly Report on Form 10-Q 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 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.

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 the Private Placement (as discussed below), 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

We have an operating lease for our corporate headquarters in San Diego, California for 6,942 square feet of office space, which 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.

Previous wording

In addition, we had 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 September 30, 2025, we had total operating lease obligations of $0.9 million, with $0.1 million due during the remainder of fiscal year 2025 and $0.8 million due within the following two to three years.

Current wording

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, 2027. As of March 31, 2026, we had total operating lease obligations of $0.7 million, with $0.3 million due during the remainder of fiscal year 2026 and $0.4 million due within the following two to three years.

Previous wording

We enter into agreements with clinical sites and clinical research organizations for the conduct of our clinical trials and contract manufacturing organizations for the manufacture and supply of preclinical, clinical and, eventually, commercial materials and drug product. We make payments to these clinical sites and clinical research organizations based in part on the number of eligible patients enrolled and the length of their participation in the clinical trials. Under certain of these agreements, we may be subject to penalties in the event that we prematurely terminate these agreements. At this time, due to the variability associated with clinical site agreements, contract research organization agreements and contract manufacturing agreements, we are unable to estimate with certainty the future costs we will incur. We intend to use our current financial resources to fund our obligations under these commitments.

Current wording

We enter into agreements with clinical sites and clinical research organizations for the conduct of our clinical trials and contract manufacturing organizations for the manufacture and supply of preclinical, clinical and, potential future, commercial materials and drug product. We make payments to these clinical sites and clinical research organizations based in part on the number of eligible patients enrolled and the length of their participation in the clinical trials. Under certain of these agreements, we may be subject to penalties in the event that we prematurely terminate these agreements. At this time, due to the variability associated with clinical site agreements, contract research organization agreements and contract manufacturing agreements, we are unable to estimate with certainty the future costs we will incur. We intend to use our current financial resources to fund our obligations under these commitments.

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 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 and a general adverse global macroeconomic environment. Unstable market and macroeconomic conditions may have serious adverse consequences on our business, financial condition and stock price. Any increase in 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 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, which, together with the foregoing, could result in further macroeconomic uncertainty and volatility in the capital markets in the near term, and could negatively affect our operations. Furthermore, such macroeconomic 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 impacts 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. Our costs, business, financial position and cash flows could also be impacted by other macroeconomic factors, including supply chain constraints, consequences associated with geopolitical conflicts such as the ongoing conflicts in Ukraine and in the Middle East, including the related volatility in the price of oil and other commodity prices, the impact of tariffs imposed by or on the U.S., as well as other tariff-related developments and other matters impacting global trade, shifting priorities and policies within the U.S. federal government and government agencies, government shutdowns, 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 potential future commercialization efforts.