ALUMIS INC

Previous wording

The following discussion and analysis of our financial condition and results of operations and the unaudited interim condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Prospectus dated June 27, 2024, filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”), with the Securities and Exchange Commission (the “SEC”) on June 28, 2024. This discussion and analysis and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. See also the section titled “Special Note Regarding Forward-Looking Statements.”

Current wording

The following discussion and analysis of our financial condition and results of operations and the unaudited interim condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes thereto as of and for the year ended December 31, 2024 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in the Annual Report on Form 10-K filed with the SEC on March 19, 2025. This discussion and analysis and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. See also the section titled “Special Note Regarding Forward-Looking Statements.”

Previous wording

We are a clinical stage biopharmaceutical company with an initial focus on developing our two Tyrosine Kinase 2 (“TYK2”) inhibitors: ESK-001, a second-generation inhibitor that we are developing to maximize target inhibition and optimize tolerability, and A-005, a central nervous system (“CNS”) penetrant molecule. ESK-001 has demonstrated significant therapeutic effect in our Phase 2 program in patients with PsO, which we define as moderate-to-severe plaque psoriasis (“PsO”), and is currently being evaluated in an additional Phase 2 clinical trial in patients with systemic lupus erythematosus (“SLE”), for which we expect to report results in 2026. With the favorable results in our Phase 2 clinical trial in PsO, we have initiated our Phase 3 ONWARD clinical program, which consists of two parallel Phase 3 clinical trials of ESK-001 in this indication and for which we expect to report topline results in the first half of 2026. In addition, the open-label extension (“OLE”) of our Phase 2 clinical trial in PsO remains ongoing. TYK2 genetic mutations are associated with a strong protective effect in multiple sclerosis, motivating us to develop our second product candidate, A-005, as a CNS-penetrant, allosteric TYK2 inhibitor for neuroinflammatory and neurodegenerative diseases. In April 2024, we initiated our Phase 1 program of A-005 in healthy volunteers and expect to report initial results by the end of 2024.

Current wording

We are a clinical stage biopharmaceutical company with an initial focus on developing our two Tyrosine Kinase 2 (“TYK2”) inhibitors: ESK-001, a second-generation inhibitor that we are developing to maximize target inhibition and optimize tolerability, and A-005, a central nervous system (“CNS”) penetrant molecule. ESK-001 has demonstrated significant therapeutic effect in our Phase 2 program in patients with moderate-to-severe plaque psoriasis (“PsO”), and is currently being evaluated in an additional Phase 2 clinical trial in patients with systemic lupus erythematosus (“SLE”), for which we expect to report results in 2026. With the favorable results in our Phase 2 clinical trial in PsO, we have initiated our Phase 3 ONWARD clinical program, which consists of two parallel Phase 3 clinical trials of ESK-001 in this indication and for which we expect to report topline results early in the first quarter of 2026. These parallel Phase 3 clinical trials also include one long-term extension (“LTE”) study, ONWARD3. In addition, the open-label extension (“OLE”) of our Phase 2 clinical trial in PsO remains ongoing. TYK2 genetic mutations are associated with a strong protective effect in multiple sclerosis, motivating us to develop our second product candidate, A-005, as a CNS-penetrant, allosteric TYK2 inhibitor for neuroinflammatory and neurodegenerative diseases. In April 2024, we initiated our Phase 1 program of A-005 in healthy volunteers and reported initial results in December 2024.

Previous wording

Since our inception, we have devoted substantially all of our efforts to organizing our company, hiring personnel, business planning, acquiring and developing our product candidates, performing research and development, conducting preclinical studies and clinical trials, establishing and protecting our intellectual property portfolio, raising capital and providing general and administrative support for these activities. We do not have any products approved for sale and have not generated any revenue from product sales. We expect to continue to incur significant and increasing expenses and increasing substantial losses for the foreseeable future as we continue our development of and seek regulatory approvals for our product candidates and commercialize any approved products, seek to expand our product pipeline and invest in our organization. Our ability to achieve and sustain profitability will depend on our ability to successfully develop, obtain regulatory approval for and commercialize our product candidates. There can be no assurance that we will ever earn revenue or achieve profitability, or if achieved, that the revenue or profitability will be sustained on a continuing basis.

Current wording

Since our inception, we have devoted substantially all of our efforts to organizing our company, hiring personnel, business planning, acquiring and developing our product candidates, performing research and development, conducting preclinical studies and clinical trials, establishing and protecting our intellectual property portfolio, raising capital and providing general and administrative support for these activities. We do not have any products approved for sale and have not generated any revenue from product sales. We expect to continue to incur significant and increasing expenses and increasing substantial losses for the foreseeable future as we continue our development of and seek regulatory approvals for our product candidates and commercialize any approved products, seek to expand our product pipeline and invest in our organization. Our ability to achieve and sustain profitability will depend on our ability to successfully develop, obtain regulatory approval for and commercialize our product candidates. There can be no assurance that we will ever achieve profitability, or if achieved, that the revenue or profitability will be sustained on a continuing basis.

Previous wording

To date, we have primarily funded our operations with proceeds from sales of shares of our common stock and redeemable convertible preferred stock and the issuance of convertible promissory notes in private placements. In July 2024, we closed our initial public offering (the “IPO”) and a Concurrent Private Placement (defined below) and received $233.3 million in

Current wording

To date, we have primarily funded our operations with proceeds from sales of shares of our common stock and redeemable convertible preferred stock and the issuance of convertible promissory notes in private placements. In July 2024, we closed our IPO and the Concurrent Private Placement and received $233.3 million in net proceeds, after deducting underwriting discounts and commissions and offering expenses payable by the Company. As of March 31, 2025, we had $208.7 million in cash, cash equivalents and marketable securities.

Previous wording

We have incurred significant operating losses and negative cash flows since our inception. Our net loss for the three months ended September 30, 2024 and 2023 was $93.1 million and $43.4 million, respectively. Our net loss for the nine months ended September 30, 2024 and 2023 was $199.5 million and $115.7 million, respectively. As of September 30, 2024, we had an accumulated deficit of $563.8 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development efforts, including acquisitions of in-process research and development assets, and, to a lesser extent, from general and administrative costs associated with our operations. Our net losses and operating losses may fluctuate from quarter to quarter and year to year depending primarily on the timing of acquisition of any new product candidates, the timing of our preclinical studies and clinical trials, our other research and development expenses, and the timing and amount of any milestone or royalty payments due under our existing or future license agreements. In addition, we have incurred and will continue to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer liability insurance costs, investor and public relations costs, and other expenses that we did not incur as a private company.

Current wording

with our research and development efforts, including acquisitions of in-process research and development assets, and, to a lesser extent, from general and administrative costs associated with our operations. Our net losses and operating losses may fluctuate from quarter to quarter and year to year depending primarily on the timing of acquisition of any new product candidates, the timing of our preclinical studies and clinical trials, our other research and development expenses, and the timing and amount of any milestone or royalty payments due under our existing or future license agreements. In addition, we have incurred and will continue to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer liability insurance costs, investor and public relations costs, and other expenses that we did not incur as a private company.

Previous wording

We do not have any products approved for sale and have not generated any revenue from product sales since our inception. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates and commercialize our products or enter into collaboration agreements with third parties. Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we may never achieve or sustain profitability and, unless and until we are able to develop and commercialize our product candidates, we will need to continue to raise additional capital. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through public or private equity or debt financings, or potentially other capital sources, such as collaboration or licensing arrangements with third parties or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise capital as and when

Current wording

from product sales, if ever, we expect to finance our operations through public or private equity or debt financings, or potentially other capital sources, such as collaboration or licensing arrangements with third parties or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise capital as and when needed, or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our product candidates or scale back or terminate our pursuit of new in-licenses and acquisitions.

Previous wording

In connection with the IPO, an existing investor and a holder of more than 5% of our capital stock, purchased an additional 2,500,000 shares of our common stock at the IPO price per share for total gross and net proceeds of $40.0 million in a private placement transaction (the “Concurrent Private Placement”). The closing of the Concurrent Private Placement was contingent on the closing of the IPO. The sale of such shares is not registered under the Securities Act, and as such, the shares may not be offered or sold absent registration or an applicable exemption from registration. The shares sold in connection with the Concurrent Private Placement are subject to existing resale registration rights and are subject to a 180-day lock-up agreement with the underwriters in the IPO. The Concurrent Private Placement closed on July 17, 2024.

Current wording

On July 1, 2024, we completed our IPO, pursuant to which we issued and sold 13,125,000 shares of our common stock at $16.00 price per share to the public. Net proceeds from the IPO were $193.3 million, after deducting underwriting discounts and commissions and other offering costs totaling $16.7 million. In connection with the IPO, an existing investor and a holder of more than 5% of our capital stock, purchased an additional 2,500,000 shares of our common stock at the IPO price per share for total gross and net proceeds of $40.0 million in a private placement transaction. The closing of the Concurrent Private Placement was contingent on the closing of the IPO. The sale of such shares is not registered under the Securities Act, and as such, the shares may not be offered or sold absent registration or an applicable exemption from registration. The shares sold in connection with the Concurrent Private Placement are subject to existing resale registration rights. The Concurrent Private Placement closed on July 17, 2024.

Previous wording

Unfavorable conditions in the economy in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including, rising inflation, tensions in U.S.-China relations, the U.S. Federal Reserve raising interest rates, recent and potential future disruptions in access to bank deposits and lending commitments due to bank failures and the effects of the ongoing geopolitical conflicts in Ukraine and Israel and the surrounding areas, have led to economic uncertainty and volatility globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. Moreover, negative macroeconomic conditions could adversely impact our ability to obtain financing in the future on terms acceptable to us, or at all. In addition, the geopolitical instability and related sanctions could continue to have significant ramifications on global financial markets, including volatility in the U.S. and global financial markets. To date, the macroeconomic trends discussed above have not had a material adverse impact on our business, financial condition or results of operations. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.

Current wording

and geopolitical stability (for example, related to the ongoing conflicts in Ukraine and Israel and the surrounding areas). Further, the United States and other countries have imposed and may continue to impose new trade restrictions and export regulations, have levied tariffs and taxes on certain goods, and could significantly increase tariffs on a broad array of goods. For example, the current Trump administration has proposed or enacted tariffs and substantial changes to trade policies, which could adversely affect our business, including imposing tariffs on certain foreign products, most recently from China, that have and may result in retaliatory tariffs on U.S. goods and services. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. Moreover, negative macroeconomic conditions could adversely impact our ability to obtain financing in the future on terms acceptable to us, or at all. To date, the macroeconomic trends discussed above have not had a material adverse impact on our business, financial condition or results of operations. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.

Previous wording

We have acquired and may continue to acquire the rights to develop and commercialize new product candidates. Upfront and milestone payments are accrued for and expensed as in process research and development (“IPR&D”) assets expense when the achievement of the milestone is probable up to the point of regulatory approval and, absent obtaining such approval, have no alternative future use. Milestone payments made after a product’s regulatory approval will be capitalized and amortized over the remaining useful life of the related product.

Current wording

We have acquired and may continue to acquire the rights to develop and commercialize new product candidates. Upfront and milestone payments are accrued for and expensed as in process research and development assets expense when the achievement of the milestone is probable up to the point of regulatory approval and, absent obtaining such approval, have no alternative future use. Milestone payments made after a product’s regulatory approval will be capitalized and amortized over the remaining useful life of the related product.

Previous wording

We expense research and development costs as incurred. Costs of certain activities are recognized based on an evaluation of the progress to completion of specific tasks. However, payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as research and development prepaid expenses on our consolidated balance sheets. The capitalized amounts are recognized as expense as the goods are delivered or services are performed. Since our inception and through September 30, 2024, our external research and development expenses were primarily related to the discovery and advancement of programs under our TYK2 platform, including our two most advanced product candidates, ESK-001 and A-005. We use internal resources primarily for managing our research, process development, manufacturing and clinical development activities. In particular, with respect to internal costs, we deploy our personnel across all of our research and development activities as our employees work across multiple programs, and therefore the costs cannot be allocated to a particular product candidate or research program. In 2023, we began tracking external costs by program.

Current wording

delivered or services are performed. Since our inception and through March 31, 2025, our external research and development expenses were primarily related to the discovery and advancement of programs under our TYK2 platform, including our two most advanced product candidates, ESK-001 and A-005. We use internal resources primarily for managing our research, process development, manufacturing and clinical development activities. In particular, with respect to internal costs, we deploy our personnel across all of our research and development activities as our employees work across multiple programs, and therefore the costs cannot be allocated to a particular product candidate or research program.

Previous wording

We expect that our general and administrative expenses will increase substantially in the future as a result of expanding our operations, including hiring personnel, preparing for potential commercialization of our product candidates and facility occupancy costs. We also expect an increase in costs associated with being a public company, including costs related to accounting, audit, legal, consulting fees, regulatory and tax-related services associated with maintaining compliance with applicable Nasdaq and SEC requirements, additional director and officer insurance costs, and investor and public relations costs.

Current wording

We expect that our general and administrative expenses will increase substantially in the future as a result of expanding our operations, including hiring personnel, preparing for potential commercialization of our product candidates and facility occupancy costs, and integrating ACELYRIN’s operations, if the Merger closes. We also expect an increase in costs associated with being a public company, including costs related to accounting, audit, legal, consulting fees, regulatory and tax-related services associated with maintaining compliance with applicable Nasdaq and SEC requirements, additional director and officer insurance costs, and investor and public relations costs.

Previous wording

In May 2023 and in March 2024, in connection with our redeemable convertible preferred stock financings, we issued options to purchase additional shares of redeemable convertible preferred stock at a specified price, which were accounted for as derivative liabilities. Changes in fair value of these derivative liabilities were included in the other income (loss) in the condensed consolidated statement of operations and comprehensive loss for each reporting period until the derivatives were exercised or expired.

Current wording

In March 2024, in connection with our redeemable convertible preferred stock financings, we issued options to purchase additional shares of redeemable convertible preferred stock at a specified price, which were accounted for as derivative liabilities. Changes in fair value of these derivative liabilities were included in the other income (loss) in the condensed consolidated statement of operations and comprehensive loss for each reporting period until the derivatives were exercised or expired.

Previous wording

The following tables summarize our results of operations for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Current wording

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024 (dollars in thousands):

Previous wording

The following tables summarize our external and internal research and development expenses for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Current wording

The following table summarizes our external and internal research and development expenses for the three months ended March 31, 2025 and 2024 (dollars in thousands):

Previous wording

CRO, CMO and clinical trials expenses increased by $21.4 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to a $15.7 million increase in CRO and clinical trial expenses due to the timing and progression of our clinical trials for ESK-001 and A-005 and a $5.7 million increase in CMC expenses associated with manufacturing of clinical supplies to support our trials.

Current wording

trial and CRO expenses related to the progression of our clinical trials for ESK-001 and A-005 and an increase in CMO expenses associated with manufacturing of clinical supplies to support our trials.

Previous wording

Professional consulting services increased by $1.0 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, due to services to support our clinical trial for ESK-001.

Current wording

Professional consulting services expenses increased by $2.9 million, to $6.4 million for the three months ended March 31, 2025, from $3.5 million for the three months ended March 31, 2024, due to services to support our clinical trial for ESK-001 and other research programs.

Previous wording

Personnel-related expenses increased by $5.8 million, to $13.8 million for the nine months ended September 30, 2024, from $8.0 million for the nine months ended September 30, 2023, primarily due to increased headcount and included an increase in stock-based compensation expense of $3.6 million resulting from additional stock options granted, which included awards granted under the 2024 Performance Option Plan.

Current wording

Personnel-related costs increased by $8.6 million, to $17.7 million for the three months ended March 31, 2025, from $9.1 million for the three months ended March 31, 2024, primarily due to increased research and development headcount, and included an increase in stock-based compensation expense of $2.3 million resulting from additional stock options granted, which included awards granted under the 2024 POP.

Previous wording

The following table summarizes our external costs by program for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Current wording

The following table summarizes our external costs by program for the three months ended March 31, 2025 and 2024 (dollars in thousands):

Previous wording

Personnel-related expenses increased by $3.5 million, to $6.4 million for the three months ended September 30, 2024, from $2.9 million for the three months ended September 30, 2023, primarily due to increased headcount and included an increase in stock-based compensation expense of $2.5 million resulting from additional stock options granted, which included awards granted under the 2024 Performance Option Plan.

Current wording

Personnel-related expenses increased by $3.9 million, to $7.4 million for the three months ended March 31, 2025, from $3.5 million for the three months ended March 31, 2024, primarily due to increased general and administrative headcount, and included an increase in stock-based compensation expense of $2.1 million resulting from additional stock options granted, which included awards granted under the 2024 POP.

Previous wording

Total other income (expense), net increased by $4.9 million, to $5.3 million other income, net for the three months ended September 30, 2024, from $0.4 million other income, net for the three months ended September 30, 2023. Total other income (expense), net increased by $0.4 million, to $2.7 million other income, net for the nine months ended September 30, 2024, from $2.3 million other income, net for the nine months ended September 30, 2023.

Current wording

Other income (expense), net increased by $4.8 million, to $2.6 million other income, net for the three months ended March 31, 2025, from $2.3 million other expense, net for the three months ended March 31, 2024.

Previous wording

Interest income increased by $4.3 million, to $5.3 million for the three months ended September 30, 2024, from $1.0 million for the three months ended September 30, 2023, primarily as a result of higher balances of cash equivalents and marketable securities.

Current wording

Interest income increased by $1.8 million, to $2.6 million for the three months ended March 31, 2025, from $0.9 million for the three months ended March 31, 2024, primarily as a result of higher balances of cash equivalents and marketable securities.

Previous wording

We recognized a change in fair value of a derivative liability loss of $0.6 million and $0.1 million for the three and nine months ended September 30, 2023, respectively, related to the derivative liability recognized in connection with our Series B-2 redeemable convertible preferred stock financing entered into in May 2023. The derivative liability was re-measured at fair value and settled in October 2023, when we closed the second tranche of the Series B-2 financing. See Note 3 to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Current wording

We recognized a change in fair value of a derivative liability loss of $3.1 million for the three months ended March 31, 2024 related to the derivative liability recognized in connection with our Series C redeemable convertible preferred stock financing entered into in March 2024. The derivative liability was re-measured at fair value and settled in May 2024, when we closed the second tranche of the Series C financing. See Note 3 to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Previous wording

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. To date, we have primarily funded our operations with proceeds from sales of shares of our common stock and redeemable convertible preferred stock and the issuance of convertible promissory notes in private placements and, more recently, from our IPO and Concurrent Private Placement.

Current wording

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. To date, we have primarily funded our operations with proceeds from sales of shares of our common stock, including in our IPO and Concurrent Private Placement, proceeds from sales of redeemable convertible preferred stock, the issuance of convertible promissory notes in private placements and, most recently, an upfront payment related to our Collaboration Agreement with Kaken.

Previous wording

We believe that our existing cash, cash equivalents and marketable securities of $361.9 million as of September 30, 2024, will be sufficient to meet our operating and capital requirements for at least 12 months from the date of issuance of this Quarterly Report on Form 10-Q. We have based this estimate on our current assumptions, which may prove to be wrong, and we may exhaust our available capital resources sooner than we expect. We will need to raise significant additional capital to fund ongoing research and development activities and maintain future operations. We plan to monitor expenses and may raise additional capital through a combination of public and private equity, debt financings, strategic alliances, and licensing arrangements. Our ability to access capital when needed is not assured and, if capital is not available to us when, and in the amounts, needed, on the terms which are favorable, we could be required to delay, scale back, or abandon some or all of our planned development programs and other operations, which could materially harm our business, financial condition and results of operations.

Current wording

Based on our current operating plan, our existing cash, cash equivalents and marketable securities of $208.7 million as of March 31, 2025, will not be sufficient to meet our operating and capital requirements for at least 12 months from the date of issuance of the unaudited condensed consolidated financial statements included in Part I. Item 1. of this Quarterly Report on Form 10-Q and there is substantial doubt about our ability to continue as a going concern. We expect to continue to incur substantial losses for the foreseeable future, and our transition to profitability will depend upon successful development, approval and commercialization of our product candidates and upon achievement of sufficient revenues to support our cost structure. We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates. We may never achieve profitability, and unless we do and until then, we will need to continue to raise additional capital. We will need to raise significant additional capital to fund ongoing research and development activities and maintain future operations. We plan to monitor expenses and may raise additional capital through a combination of public and private equity, debt financings, strategic alliances, and licensing arrangements. Our ability to access capital when needed is not assured and, if capital is not available to us when, and in the amounts, needed, on the terms which are favorable, we could be required to delay, scale back, or abandon some or all of our planned development programs and other operations, which could materially harm our business, financial condition and results of operations.

Previous wording

Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs and, to a lesser extent, general and administrative expenditures. We anticipate that we will continue to incur significant and increasing expenses for the foreseeable future as we continue to advance our product candidates, expand our corporate infrastructure, including the costs associated with being a public company, further our research and development initiatives for our product candidates, and incur costs associated with potential commercialization. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.

Current wording

Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs and, to a lesser extent, general and administrative expenditures. We anticipate that we will continue to incur significant and increasing expenses for the foreseeable future as we continue to advance our product candidates, expand our corporate infrastructure, including the costs associated with being a public company, further our research and development initiatives for our product candidates, and incur costs associated with potential commercialization. In addition, we anticipate committing substantial capital resources to the transactions contemplated by the Merger Agreement and, assuming the consummation of those transactions, the anticipated integration and development activities related to the acquired ACELYRIN business. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.

Previous wording

We do not have any products approved for sale and have not generated any revenue from product sales since our inception. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval

Current wording

We do not have any products approved for sale and have not generated any revenue from product sales since our inception. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates and commercialize our products or enter into collaboration agreements with third parties. Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we

Previous wording

for one or more of such product candidates and commercialize our products or enter into collaboration agreements with third parties. Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we may never achieve or sustain profitability and, unless and until we are able to develop and commercialize our product candidates, we will need to continue to raise additional capital. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through public or private equity or debt financings, or potentially other capital sources, such as collaboration or licensing arrangements with third parties or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise capital as and when needed, or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our product candidates or scale back or terminate our pursuit of new in-licenses and acquisitions.

Current wording

may never achieve or sustain profitability and, unless and until we are able to develop and commercialize our product candidates, we will need to continue to raise additional capital. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through public or private equity or debt financings, or potentially other capital sources, such as collaboration or licensing arrangements with third parties or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise capital as and when needed, or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our product candidates or scale back or terminate our pursuit of new in-licenses and acquisitions.

Previous wording

The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes our cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

Previous wording

Net cash used in operating activities was $180.3 million and $96.2 million for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

Net cash used in operating activities was $80.4 million and $44.3 million for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2024 was due to our net loss for the period of $199.5 million partially offset by changes in non-cash items totaling $18.9 million and operating assets and liabilities of $0.3 million. Non-cash items included $13.1 million related to stock-based compensation expense, $5.4 million related to the change in fair value of the derivative liability and $2.3 million related to depreciation and amortization, partially offset by net accretion of discounts on marketable securities of $2.0 million. The changes in operating assets and liabilities primarily includes an increase of $7.2 million in research and development accrued expenses, an increase of $5.3 million in accounts payable and a $0.4 million increase in other accrued expenses and current liabilities, partially offset by an increase of $9.6 million in research and development prepaid expenses, an increase of $1.6 million in other prepaid expenses and other assets and a decrease of $1.5 million in operating lease liabilities.

Current wording

Net cash used in operating activities for the three months ended March 31, 2025 was due to our net loss for the period of $99.0 million partially offset by changes in operating assets and liabilities of $11.5 million and non-cash items totaling $7.1 million. Non-cash items included $7.0 million related to stock-based compensation expense, $0.8 million related to depreciation and amortization and $0.3 million related to non-cash lease expense, partially offset by net accretion of discounts on marketable securities of $1.0 million. The changes in operating assets and liabilities primarily includes an increase of $5.6 million in research and development accrued expenses, an increase of $5.0 million in other accrued expenses and current liabilities, an increase of $2.6 million in deferred revenue, a decrease of $0.6 million in other prepaid expenses and other assets, a decrease of $0.6 million in research and development prepaid expenses, partially offset by a decrease of $2.2 million in accounts payable and a decrease of $0.6 million in operating lease liabilities.

Previous wording

Net cash used in operating activities for the nine months ended September 30, 2023 was primarily due to our net loss for the period of $115.7 million, partially offset by changes in operating assets and liabilities of $10.4 million and non-cash items of $9.0 million. Non-cash items primarily include $6.0 million related to stock-based compensation expense and $2.0 million related to non-cash lease expense. The changes in operating assets and liabilities primarily included a decrease of $3.6 million in research and development prepaid expenses, an increase of $3.3 million in research and development accrued expenses, and an increase of $2.6 million in accounts payable.

Current wording

Net cash used in operating activities for the three months ended March 31, 2024 was due to our net loss for the period of $49.8 million, and changes in operating assets and liabilities of $0.9 million. The cash used in operating activities was partially offset by non-cash items of $6.5 million, of which $3.1 million is related to the change in fair value of the derivative liability and $2.7 million is related to stock-based compensation expense. The changes in operating assets and liabilities primarily include a decrease of $3.2 million in other accrued expenses and current liabilities, primarily related to bonuses payout, and an increase of $2.9 million in research and development prepaid expenses, partially offset by an increase of $5.7 million in accounts payable, primarily due to timing of payments to our CROs and CMOs related to our ongoing clinical trials.

Previous wording

Net cash provided by investing activities for the nine months ended September 30, 2023 of $64.6 million was related to proceeds from maturities of marketable securities of $76.3 million, partially offset by purchases of marketable securities of $8.3 million and purchases of property and equipment of $3.3 million.

Current wording

Net cash provided by investing activities for the three months ended March 31, 2025 of $39.4 million was related to proceeds from maturities of marketable securities of $64.0 million, partially offset by purchases of marketable securities of $24.5 million.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 of $144.7 million was related to purchases of marketable securities of $185.4 million and purchases of property and equipment of $1.4 million, partially offset by proceeds from maturities of marketable securities of $42.0 million.

Current wording

Net cash used in investing activities for the three months ended March 31, 2024 of $18.8 million was related to purchases of marketable securities of $19.7 million, partially offset by maturities of marketable securities of $1.0 million.

Previous wording

Net cash provided by financing activities for the nine months ended September 30, 2023 of $60.0 million was primarily related to net proceeds of $59.8 million from the issuance of our Series B-2 and Series B-2A redeemable convertible preferred stock and related derivative liability, net of issuance costs.

Current wording

Net cash provided by financing activities for the three months ended March 31, 2024 of $129.1 million was primarily related to net proceeds from the issuance of our Series C redeemable convertible preferred stock financing.

Previous wording

Under our stock purchase agreement to acquire FronThera U.S. Holdings, Inc. and its wholly owned subsidiary, FronThera U.S. Pharmaceuticals LLC, we are obligated to pay contingent consideration of up to an aggregate of $120.0 million based on the achievement of specified clinical and approval milestones, for up to an aggregate of $70.0 million payable for clinical milestones, and for up to an aggregate of $50.0 million payable for approval milestones, all related to technology acquired under the agreement. We incurred and made a $37.0 million milestone payment in 2022 for the first administration of ESK-001 to a patient enrolled in a Phase 2 clinical trial of ESK-001, which was recorded as research and development expenses in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2022. In July 2024, we met a milestone in connection with the first administration of ESK-001 to a patient enrolled in a Phase 3 clinical trial of ESK-001 and made a $23.0 million milestone payment in August 2024, which was recorded as research and development expense in the consolidated statement of operations and comprehensive loss for the three months ended September 30, 2024. No other milestones were achieved or probable as of September 30, 2024.

Current wording

On March 5, 2021, we entered into a stock purchase agreement to acquire FronThera U.S. Holdings, Inc. and its wholly owned subsidiary, FronThera U.S. Pharmaceuticals LLC. The transaction was accounted for as an asset acquisition. Under the agreement, we are obligated to pay contingent consideration of up to an aggregate of $120.0 million based on the achievement of specified clinical and approval milestones, for up to an aggregate of $70.0 million payable for clinical milestones, and for up to an aggregate of $50.0 million payable for approval milestones, all related to technology acquired under the agreement. In the year ended December 31, 2022, we incurred and made a $37.0 million milestone payment for the first administration of ESK-001 to a patient enrolled in a Phase 2 clinical trial of ESK-001, which was recorded in research and development expenses in the consolidated statement of operations and comprehensive loss. In July 2024, we met a milestone in connection with the first administration of ESK-001 to a patient enrolled in a Phase 3 clinical trial of ESK-001 and made a $23.0 million milestone payment in August 2024, which was recorded in research and development expenses in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2024. No other milestones were achieved or were probable of being achieved as of March 31, 2025.

Previous wording

We have an operating lease for office and laboratory space in South San Francisco, California. As of September 30, 2024, we had total lease payment obligations under non-cancelable leases of $31.1 million, including $1.2 million payable through December 31, 2024. See Note 7 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

We have operating lease arrangements for office and laboratory space in South San Francisco, California. As of March 31, 2025, we had total undiscounted lease payment obligations under non-cancelable leases of $48.8 million, including $4.5 million payable through December 31, 2025. See Note 8 to our unaudited condensed consolidated financial statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q.

Previous wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported expenses during the reporting period. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in the Prospectus. If actual results or events differ materially from the estimates and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. There have been no significant changes to our critical accounting policies from those described in the Prospectus.

Current wording

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported expenses during the reporting period. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in the Annual Report on Form 10-K filed with the SEC on March 19, 2025. If actual results or events differ materially from the estimates and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. Significant changes to our critical accounting policies from those described in the Annual Report on Form 10-K are described below.

Previous wording

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation exemptions to the requirements for (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of (a) the last day of the fiscal year (A) following the fifth anniversary of the completion of our IPO, (B) in which we have total annual gross revenues of at least $1.235 billion or (C) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock and non- voting common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Current wording

Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation exemptions to the requirements for (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of (a) the last day of the fiscal year (A) following the fifth anniversary of the completion of our IPO, (B) in which we have total annual gross revenues of at least $1.235 billion or (C) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock and non- voting common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or(b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.