Connect Biopharma Holdings Ltd

1. Organization and Business

Connect Biopharma Holdings Limited (“Connect,” “Connect Biopharma,” the “Company,” “we,” “us,” “our” and similar terms refer to Connect Biopharma Holdings Limited, together with its subsidiaries), headquartered in San Diego, California, is a clinical-stage biopharmaceutical company dedicated to transforming care for asthma and chronic obstructive pulmonary disease (“COPD”). The Company is advancing rademikibart, a next-generation, potentially best-in-class antibody designed to target interleukin-4-receptor alpha (“IL-4Rα”).

Connect Biopharma was incorporated in November 2015 in the Cayman Islands as an exempted company with limited liability. The Company completed its initial public offering in March 2021, and its ordinary shares, par value $0.000174 per share (“ordinary shares”), are listed on the Nasdaq Global Market under the symbol “CNTB”.

2. Liquidity and Going Concern

The Company has incurred significant net losses since its inception and expects to incur net losses for the foreseeable future. The Company expects to finance its cash needs through equity offerings, debt financings, collaborations, monetization transactions, government contracts, other strategic transactions, or any combination thereof. As of June 30, 2026, the Company had cash, cash equivalents and short-term investments of $31.5 million. Based on its current operating plan and projections, management believes that the Company’s 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 U.S. Securities and Exchange Commission (the “SEC”).

3. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial information and the applicable rules and regulations of the SEC for interim reporting. Accordingly, since they are interim statements, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for other quarters or the year ending December 31, 2026. The condensed consolidated balance sheet as of December 31, 2025 has been derived from the audited financial statements as of that date. These unaudited condensed consolidated financial statements and the notes thereto should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 31, 2026 (“2025 Annual Report”).

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its direct and indirect subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The following are the Company’s subsidiaries:

Directly Held

•Connect Biopharma HongKong Limited (“Connect HK”)

Indirectly Held

•Connect Biopharm LLC

•Connect Biopharma Australia PTY LTD

•Suzhou Connect Biopharma Co., Ltd. (“Connect SZ”)

•Connect Biopharma (Beijing) Co., Ltd.

•Connect Biopharma (Shanghai) Co., Ltd.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. The Company’s significant accounting policies that involve significant judgment and estimates include revenue recognition, investments, accrued research and development expenses, income taxes and share-based compensation. Actual results could differ materially from those estimates.

Fair Value of Financial Instruments

A company may elect to use fair value to measure financial instruments. If the use of fair value is elected, any upfront costs and fees related to the item such as debt issuance costs must be recognized in earnings and cannot be deferred. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. Unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings and any changes in fair value are recognized in earnings. The Company has elected to not apply the fair value option to its financial assets and liabilities.

Cash and cash equivalents, receivables, prepaid expenses, other assets, accounts payable and accrued expenses, are carried at cost, which is considered to be representative of their respective fair values because of the short-term maturity of these instruments. Available-for-sale investment securities are carried at fair value.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements & Disclosures, establishes a 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 for identical assets or liabilities.

•Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Accounts Receivable, Net

Accounts receivable are recorded at the invoice amount, net of an allowance for credit losses. The allowance for credit losses reflects accounts receivable balances that are believed to be uncollectible. In estimating the allowance for credit losses, the Company considers: (1) its historical experience with collections and write-offs; (2) the credit quality of its customers and any recent or anticipated changes thereto; (3) the outstanding balances and past due amounts from its customers; and (4) reasonable and supportable forecast of economic conditions expected to exist throughout the contractual term of the receivable.

As of June 30, 2026 and December 31, 2025, the Company determined that an allowance for credit losses was not required. For the three and six months ended June 30, 2026 and 2025, the Company did not have any material write-offs of accounts receivable balances.

Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of ordinary shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of ordinary shares and ordinary share equivalents outstanding for the period determined using the treasury share method. For purposes of this calculation, stock options and employee share purchase rights are considered to be ordinary share equivalents and are included in the calculation of diluted net loss per share only when their effect is dilutive.

Because the Company incurred a net loss for the three and six months ended June 30, 2026 and 2025, the following ordinary share equivalents were not included in the computation of net loss per share because their effect would be anti-dilutive (in thousands):

Significant Accounting Policies

A complete description of the Company’s significant accounting policies are disclosed in Note 3 in the 2025 Annual Report.

Recent Accounting Pronouncements

Adopted

In September 2025, the FASB issued Accounting Standards Update (“ASU”) No. 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides all entities with a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC Topic 606, Revenue Recognition (“Topic 606”). Under ASU 2025-05, an entity is required to disclose whether it has elected to use the practical expedient. An entity that makes the accounting policy election is required to disclose the date through which subsequent cash collection are evaluated. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. On January 1, 2026, the Company adopted the provisions of ASU 2025-05 on a prospective basis and elected to apply the practical expedient for current accounts receivables and contract assets arising from transactions under Topic 606. The adoption of ASU 2025-05 did not have a material impact on the Company’s results of operations, financial condition or related disclosures.

Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”). ASU 2024-03 requires that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The prescribed categories include purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion. ASU 2024-03 may be applied either prospectively or retrospectively and is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2024-03 on its disclosures.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities(“ASU 2025-10”). ASU 2025-10 establishes the accounting for government grants received by business entities, including guidance for (1) a grant related to an asset and (2) a grant related to income. The provisions of ASU 2025-10 can be applied on either a modified prospective or modified retrospective approach. The amendments in ASU 2025-10 are effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the impact of ASU 2025-10 on its condensed consolidated financial statements and related disclosures.

4. Fair Value Measurements

The Company measures cash, cash equivalents and short-term investments at fair value on a recurring basis. The fair values of such assets were as follows (in thousands):

The Company has not transferred any investment securities between the three levels of the fair value hierarchy.

As of June 30, 2026, cash equivalents included $13.4 million of available-for-sale securities with contractual maturities of three months or less and short-term investments included $4.5 million of available-for-sale securities with contractual maturities of three months to one year. As of December 31, 2025, cash equivalents included $21.4 million of available-for-sale securities with contractual maturities of three months or less and short-term investments included $6.0 million of available-for-sale securities with contractual maturities of three months to one year. The money market funds as of June 30, 2026 and December 31, 2025 are included in cash and cash equivalents on the unaudited condensed consolidated balance sheets.

The Company’s cash equivalents and short-term investment securities are classified within the fair value hierarchy as defined by authoritative guidance. The Company’s investment securities classified as Level 1 are valued using quoted market prices. The Company obtains the fair value of its Level 2 financial instruments from third-party pricing services. The pricing services utilize industry standard valuation models whereby all significant inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, bids, offers, or other market-related data, are observable. The Company validates the prices provided by the third-party pricing services by reviewing their pricing methods and matrices and obtaining market values from other pricing sources. After completing the validation procedures, the Company did not adjust or override any fair value measurements provided by these pricing services as of June 30, 2026 or December 31, 2025. The Company does not have any investments classified as Level 3.

5. Balance Sheet Details

Available-for-Sale Investments

The following is a summary of the Company’s available-for-sale investments (in thousands):

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are the result of credit losses. Impairment is assessed at the individual security level. Factors considered in determining whether a loss resulted from a credit loss or other factors include the Company’s intent and ability to hold the investment until the recovery of its amortized cost basis, the extent to which the fair value is less than the amortized cost basis, the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, any adverse legal or regulatory events affecting the issuer or issuer’s industry, and any significant deterioration in economic conditions.

The Company does not intend to sell the investment in unrealized loss position and it is unlikely that the Company will be required to sell the investment before the recovery of its amortized cost basis. Based on its evaluation, the Company determined its credit losses related to its available-for-sale securities were immaterial at June 30, 2026 and December 31, 2025.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The Company regularly monitors and evaluates the realizable value of its available-for-sale investment securities. The Company did not recognize any impairment losses for the three and six months ended June 30, 2026 or 2025.

Unrealized gains and losses associated with the Company’s investments are reported in accumulated other comprehensive loss. For the three and six months ended June 30, 2026, the Company recorded $1,000 and $5,000, respectively, in net unrealized losses associated with its available-for-sale investments. For the three and six months ended June 30, 2025, the Company recorded $6,000 and $7,000, respectively, in net unrealized losses associated with its available-for-sale investments.

Realized gains and losses associated with its investments, if any, are reported in the statements of operations and comprehensive loss. The Company didnot recognize any realized gains or losses during the three and six months ended June 30, 2026 or 2025.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

6. License and Collaboration Agreement

Simcere License Agreement

On November 21, 2023 (the “Effective Date”), Connect HK and Connect SZ (“Licensor”) entered into an exclusive license and collaboration agreement (the “License Agreement”) with Simcere Pharmaceutical Co., Ltd. (“Simcere” or “Licensee”), a subsidiary of Simcere Pharmaceutical Group Ltd., to develop and commercialize rademikibart in Greater China.

Simcere has been granted exclusive rights to develop, manufacture, and commercialize rademikibart for all indications in Greater China, including mainland China, Hong Kong, Macau, and Taiwan (the “Territory”), while Connect retains rights in all other markets. Under the License Agreement, Connect was required to complete all of rademikibart’s ongoing clinical trials and related analysis in the Territory in atopic dermatitis (“AD”), while the Licensee is responsible for rademikibart’s new drug application for AD in China and will also conduct and be responsible for the costs of all future clinical studies in all additional disease indications for rademikibart in Greater China.

As consideration for the rights granted to Simcere under the License Agreement, Simcere paid the Licensor a non-refundable, non-creditable up-front fee of approximately $21 million. Simcere is also required to make milestone payments to the Licensor upon the achievement of certain development, regulatory and commercial milestones (“Milestones”), initially totaling up to $123 million. In 2024, the Company received approximately $5 million in Milestone payments from Simcere for the achievement of certain development Milestones. In 2025, one time-based Milestone in the amount of approximately $8 million lapsed because it was not achieved by the deadline set forth in the License Agreement. During the second quarter of 2026, one regulatory-based Milestone in the amount of approximately $7 million was achieved and one time-based Milestone in the amount of approximately $4 million lapsed because it was not achieved by the deadline set forth in the License Agreement. Accordingly, as of June 30, 2026, the Company is eligible to receive remaining Milestone payments up to an aggregate amount of approximately $99 million. The achievement of these Milestones is dependent upon the timing and success of future development, regulatory and commercial activities to be completed by Simcere. Simcere is also required to make payments for cost reimbursements related to certain development activities, including supply of material for clinical development. The License Agreement additionally provides that Simcere is obligated to pay Licensor royalties at tiered percentage rates up to low double-digit percentages on net sales of the licensed product in the Territory.

The term of the License Agreement is coterminous with the period up to which sales-based royalty payments shall be made, which is approximately 12 years after commercialization of the licensed compound. After this period, the license is considered fully paid and Simcere can continue to exploit the rights in the license in the Territory.

Revenue Recognition

The Company evaluated the License Agreement which provides Simcere with the right to use the Company’s intellectual property in the Territory. The Company concluded that the License Agreement was subject to Topic 606 because the Company viewed the License Agreement as a contract with a customer as the activities were central to its business operations. As such, the Company assessed the terms of the License Agreement and identified four performance obligations for the license to research, develop, manufacture and commercialize rademikibart in the Territory. Thefour performance obligations identified include: (i) transfer of the intellectual property and know-how; (ii) transfer of the current manufacturing process; (iii) development and transfer of a new manufacturing process; and (iv) completion of certain rademikibart development services.

At inception of each arrangement that includes milestone payments, the Company evaluates where 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. At the Effective Date, the Company determined the transaction price to be $25 million, which is comprised of (i) a $21 million upfront payment for the grant of license to the Licensee and (ii) $4 million of cost reimbursement upon delivery of certain clinical trial reports. All other milestones are considered to be constrained at the Effective Date because these milestones are not within the control of the Company and therefore these milestones are not included in the transaction price.

When an intellectual property license is determined to be a predominant promise in the arrangement, sales-based milestone payments and royalties are recognized at the later of when the associated performance obligation has been satisfied or when the sales occur. For cost reimbursements related to the supply of material for clinical development, the Company recognizes revenue when Simcere obtains control of the goods. For the three and six months ended June 30, 2026, the Company recognized $2.8 million and $2.9 million, respectively, in revenue under the License Agreement primarily related to the achievement of a regulatory-based Milestone in the amount of approximately $7 million, partially offset by cost sharing for certain development activities in the amount of approximately $4 million. The cost sharing was deemed to be consideration payable to a customer and was accounted for as a reduction to revenue in accordance Topic 606. For the three and six months ended June 30, 2025, the Company recognized $48,000 in revenue under the License Agreement related to cost reimbursements for clinical materials.

Allocation of the Transaction Price

The transaction price is generally allocated to the identified performance obligations based on the relative stand-alone selling price estimated for each distinct performance obligation. However the Company has allocated certain regulatory and development milestone payments only to certain specific performance obligation(s) where the terms of such payments relate specifically to the Company’s efforts to satisfy the respective performance obligation, and provided that such allocation is consistent with the objective that transaction price is allocated to each performance obligation in order to reflect the consideration to which the Company expects to be entitled to receive in exchange for satisfying those performance obligations. The Company allocated the $25.0 million transaction price based on relative stand-alone selling prices of each performance obligation as $23.8 million for the license, $0.1 million for the transfer of the current manufacturing process, $0.2 million for development and transfer of a new manufacturing process, and $0.9 million for completion of certain rademikibart development services. The Company developed the estimated stand-alone selling price for the license using a discounted cash flows model, which is an income approach. In estimating the stand-alone selling price for each performance obligation, the Company developed assumptions that require judgment and included forecasted revenues, expected development timelines, discount rates, probabilities of technical and regulatory success and costs for manufacturing clinical supplies.

The Company utilizes judgment to assess when control of the goods and services transfers to Simcere, to determine whether the 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. When recognizing revenue over time, the Company evaluates the measure of progress each reporting period and, if necessary, adjusts the progress of performance and related revenue recognition.

The Company expects to recognize the transaction price, at a point in time or over the expected performance period of each respective performance obligation. The Company began recognizing revenue from the License Agreement once the Company had substantially completed the transfer of the intellectual property and know-how to Simcere. The revenue associated with the transfer of the intellectual property and know-how and transfer of the current manufacturing process were recognized at a point in time upon successful completion of each obligation during 2024. The Company recognized the revenue associated with the transfer of a new manufacturing process at a point in time upon successful completion of the obligation in the first quarter of 2026. For the performance obligation to complete certain development services, the

Company recognized the transaction price over the expected performance period using an input method. To measure the progress of this obligation, the Company used the cost-to-cost basis approach to estimate the percentage of completion as this method provides the most faithful depiction of the Company’s performance in transferring control of the services promised to Simcere and represents the Company’s best estimate of the period of the obligation. The performance obligation related to certain rademikibart development services was completed in 2024.

Milestone Payments

The Licensor is entitled to development milestones under the License Agreement and certain regulatory milestone payments which are paid upon receipt of regulatory approvals within the Territory.

At the end of each reporting period, the Company will re-evaluate the probability of achievement of each milestone and any related constraint, and if necessary, adjust its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect the reported amount of license and collaboration revenues in the period of adjustment.

Royalties

As the license is deemed to be the predominant item to which sales-based royalties relate, the Company will recognize revenue when the related sales occur.

Contract Assets and Liabilities

As of June 30, 2026, the Company hadno contract assets or liabilities related to the License Agreement. As of December 31, 2025, the Company hadno contract assets and $0.2 million in contract liabilities related to the upfront fee received under the License Agreement. During the six months ended June 30, 2026, the remaining $0.2 million of the contract liability was recognized as revenue, which was included in the contract liability balance at the beginning of the year.

7. Commitments and Contingencies

Legal Proceedings

From time to time, the Company may be a party to litigation or subject to claims in the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. The Company was not a party to any material litigation and did not have contingency reserves established for any liabilities as of June 30, 2026 or December 31, 2025.

8. Leases

The Company has an operating lease for 6,942 square feet of office space for its corporate headquarters in San Diego, California, with a lease term that expires on January 31, 2028. In the first quarter of 2025, the Company recognized an initial right-of-use (“ROU”) lease asset of $0.9 million and a lease liability of $0.9 million related to this space in San Diego, California.

The Company also has an operating lease for 25,476 square feet of laboratory and office space in Taicang, China. In March 2026, the Company amended the lease to extend the term forone year until April 30, 2027. In the first quarter of 2026, the Company recognized an ROU lease asset of $0.1 million and a lease liability of $0.1 million related to the lease amendment.

As of June 30, 2026 and December 31, 2025, the weighted average remaining lease term was 1.5 years and 2.0 years, respectively, and the weighted average discount rate used to determine the operating lease liability was 7.8% and 8.1%, respectively.

During the three months ended June 30, 2026 and 2025, the Company recognized $106,000 and $121,000, respectively, of operating lease expense and the Company paid $111,000 and $88,000, respectively, for its operating leases.

During the six months ended June 30, 2026 and 2025, the Company recognized $212,000 and $246,000, respectively, of operating lease expense and the Company paid $220,000 and $163,000, respectively, for its operating leases.

Annual future minimum lease payments as of June 30, 2026 are as follows (in thousands):

9. Shareholders’ Equity

Private Placement

In March 2026, the Company entered into a securities purchase agreement with a select group of institutional accredited investors to sell 6,130,000 shares of its ordinary shares in a private placement at a price of $3.25 per share with respect to any purchaser that is not owned or controlled by an individual who is an officer, director, employee or consultant of the Company (“Private Placement”). The net proceeds from the Private Placement were $18.6 million (gross proceeds of $20.2 million, net of $1.6 million in placement agent fees and other offering expenses). The Private Placement closed on March 31, 2026. In May 2026, the Company filed a registration statement with the SEC to register for resale 6,130,000 ordinary shares. The registration statement was declared effective on June 1, 2026.

The Private Placement was led by the Company’s largest current investor, Panacea Venture, which purchased ordinary shares in the Private Placement totaling $4.0 million. James Huang, a member of the Company’s Board, is the sole owner of Panacea Innovation Limited, which is the sole owner of Panacea Venture.

Statutory Reserves

In accordance with the People’s Republic of China (“PRC”) regulations and the articles of association of the companies registered in the PRC, companies are required to set aside 10% of their net profit for the year, offsetting any prior year losses, to the statutory surplus reserve fund as determined under the relevant PRC accounting standards. When the balance of such reserve reaches 50% of the entity’s registered capital, any further appropriation is optional. As of June 30, 2026, the Company has not made any profit appropriations to the reserve fund, as all of its subsidiaries in the PRC were in an accumulated loss position.

Under PRC laws and regulations, there are restrictions on the Company’s PRC subsidiaries with respect to transferring certain of their net assets to the Company either in the form of dividends, loans, or advances. As of June 30, 2026 and December 31, 2025, restricted net assets including paid-in capital and statutory reserve funds of the Company’s PRC subsidiaries was $15.6 million and $15.7 million, respectively.

10. Equity Incentive Plans

Equity Compensation Plan Activity

The following table summarizes all stock option plan activity for the six months ended June 30, 2026:

In accordance with the Company’s Non-Employee Director Compensation Program, certain non-employee directors elected to receive fully vested shares in lieu of all or a portion of their 2026 annual cash board retainers. Accordingly, fully vested ordinary shares were granted to these directors for their service as a director during the first and second quarters of 2026. The number of shares received in lieu of cash was calculated by dividing the applicable value of the equity by the average closing price of the Company’s ordinary shares over the 30 consecutive days immediately preceding the last day of the quarter, rounded down to the nearest whole share. On March 31, 2026 and June 30, 2026, the Company granted certain non-employee directors 7,877 and 10,456 fully vested ordinary shares, respectively. The weighted-average grant date fair value of these shares was $2.48.

Share-based Compensation

The following table summarizes share-based compensation expense related to share-based payment awards granted pursuant to all of the Company’s equity compensation arrangements (in thousands):

As of June 30, 2026, there was $11.4 million of total unrecognized compensation cost related to non-vested, share-based payment awards granted under all of the Company’s equity compensation plans. Total unrecognized compensation cost will be adjusted for forfeitures. The Company expects to recognize this compensation cost over a weighted-average period of 2.5 years.

The following are the weighted-average assumptions for stock options:

The weighted-average fair value of options granted was $2.02 and $0.64 for the six months ended June 30, 2026 and 2025, respectively.

The following are the weighted-average assumptions for purchase rights under the ESPP:

11. Income Taxes

For the three and six months ended June 30, 2026, the Company recorded income tax expense of $60,000 and $108,000, respectively, compared to $55,000 and $109,000, respectively, for the same periods in 2025. The Company’s effective tax rate for the three and six months ended June 30, 2026 was (0.3)%, compared to (0.4)% and (0.5)%, respectively, for the same periods in 2025. The effective tax rate for all periods was primarily driven by the full valuation allowance maintained against the Company’s deferred tax assets.

For the three and six months ended June 30, 2026, the Company’s provision for income taxes was based on its worldwide estimated annualized effective tax rate, except for (1) jurisdictions for which a loss is expected for the year and no benefit can be realized for those losses, (2) jurisdictions for which forecasted pre-tax income or loss cannot be estimated, and (3) the tax effect of discrete items occurring during the period. The tax for jurisdictions for which a forecast cannot be estimated is based on actual taxes and tax reserves for the quarter.

Under the provisions of ASC 740, Income Taxes, the determination of the Company’s ability to recognize its deferred tax assets requires an assessment of both negative and positive evidence. The evidence evaluated by the Company included operating results during the most recent three-year period and future projections, with more weight given to historical results than expectations of future profitability, which are inherently uncertain. Certain entities’ net losses in recent periods represented sufficient negative evidence to require a valuation allowance against its net deferred tax assets. Due to the uncertainties surrounding the Company’s ability to generate future taxable income and consequently realize such deferred tax assets, a full valuation allowance has been established. This valuation allowance will be evaluated periodically and could be reversed partially or totally if business results sufficiently improve to support realization of deferred tax assets.

As of June 30, 2026, unrecognized tax benefits were $1.4 million, of which none would affect the effective tax rate, if recognized. It is the Company’s policy to classify accrued interest and penalties to unrecognized tax benefits in the provision for income taxes. There wereno accrued interest or penalties as of June 30, 2026 or December 31, 2025. During the three and six months ended June 30, 2026, there were no material changes to the disclosures regarding uncertain tax positions included in the Company’s 2025 Annual Report.

12. Segment Reporting

The Company operates inone operating segment: treatment of respiratory diseases. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the Chief Operating Decision-Maker (the “CODM”), the Company’s Chief Executive Officer, in making decisions regarding resource allocation and assessing performance. The CODM utilizes the Company’s consolidated financial forecast, which includes product development roadmaps, as a key input to resource allocation. The CODM makes decisions on resource allocation, assesses performance of the business, and monitors budget versus actual results using the Company’s operating expenses, cash burn and cash runway.

The following table provides significant segment expenses, other segment items, reported segment net loss and a reconciliation of segment net loss to the Company’s total consolidated net loss for the three and six months ended June 30, 2026 and 2025 (in thousands):

The Company’s long-lived tangible assets, as well as the Company’s ROU lease assets recognized on the condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025 were located as follows: $0.5 million and $0.7 million, respectively, in the U.S. and $3.6 million and $3.8 million, respectively, in the PRC.