Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report") and with our audited financial statements and the notes thereto for the year ended December 31, 2025 included in our Annual Report on Form 10-K for the year ended December 31, 2025 (our "Annual Report"). This discussion and analysis and other parts of this Quarterly Report contain forward-looking statements based upon our current plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, strategies, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this Quarterly Report. You should carefully read the "Risk Factors" section of this Quarterly Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see "Special Note Regarding Forward-Looking Statements." Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

We are a clinical-stage biotechnology company dedicated to the discovery and development of small molecule precision medicines for patients with neurological or psychiatric disorders. Our foundational science has elucidated complexities of neuronal receptor biology and enables us to map and target certain neuronal receptor complexes. Neuronal receptors are complex assemblies of proteins, comprising receptor principal subunits and their receptor associated proteins ("RAPs"), the latter of which play crucial roles in regulating receptor expression and function. We believe that our deep expertise in RAP biology provides an opportunity for us to interrogate previously inaccessible targets and develop neurological and psychiatric drugs that are specific for receptor variants and neuroanatomical regions associated with certain diseases. Most neuroactive drugs lack this specificity, often resulting in undesired and intolerable side effects. Leveraging our expertise, we are developing a portfolio of precision product candidates that we believe has the potential to transform the standard of care of many neurological and psychiatric disorders.

Our founders have made pioneering discoveries related to the function of RAPs in the brain. Their findings form the basis of our RAP technology platform, which enables a differentiated approach to generate precision small molecule product candidates with the potential to overcome many limitations of conventional neurology drug discovery. RAP-219, our most advanced product candidate, is an AMPA receptor ("AMPAR") negative allosteric modulator ("NAM"). RAP-219 is designed to achieve neuroanatomical specificity through its selective targeting of a RAP known as TARPγ8, which is associated with the neuronal AMPARs. Whereas AMPARs are distributed widely in the central nervous system ("CNS"), TARPγ8 is expressed only in discrete regions, including the neocortex and mesial temporal lobe, where focal onset seizures ("FOS") often originate. By contrast, TARPγ8 has minimal expression in the hindbrain, where drug effects are often associated with adverse events. As such, we believe RAP-219 has the potential for a differentiated profile as compared to traditional neuroscience medications. Due to the role of AMPA biology in various neurological disorders and our precision approach of selectively targeting TARPγ8, we believe RAP-219 has pipeline-in-a-product potential and we are evaluating it as a potentially transformational treatment for patients with FOS, primary generalized tonic-clonic seizures ("PGTCS"), and bipolar mania.

Several Phase 1 trials in RAP-219 have been conducted in healthy adult volunteers, including a single ascending dose ("SAD") trial; a multiple ascending dose ("MAD") trial; a second MAD trial ("MAD-2"), to assess alternative dosing regimens that may accelerate time to reach therapeutic exposure; a positron emission tomography ("PET") trial, which utilized a companion PET radiotracer to confirm brain target receptor occupancy ("RO") and brain region specificity across a range of dosing and exposure levels.

In September 2025, we announced positive topline results from our Phase 2a proof-of-concept trial of RAP-219 in adult patients with drug-resistant FOS. The trial met its primary and secondary endpoints. The trial demonstrated a statistically significant reduction in long episodes ("LEs") - an objective electrographic biomarker for clinical seizure reduction - compared with baseline over the 8-week treatment period. In the trial, RAP-219 also demonstrated a statistically significant and clinically meaningful reduction in clinical seizures compared with baseline. RAP-219 was generally well tolerated. In December 2025, we presented post-hoc analysis from the Phase 2a proof-of-concept trial showing treatment with RAP-219 had consistent effects in the first (weeks 1-4) and second (weeks 5-9) four-week segments of the treatment period. This demonstrates that there was a rapid onset of efficacy, and a consistent reduction in LEs, and a consistent, clinically meaningful reduction in clinical seizures throughout the 8-week treatment period. Following 8-weeks of RAP-219 treatment in the Phase 2a trial, patients entered an 8-week follow-up period to assess the durability effect on LEs and clinical seizures. In April 2026, we presented results from the 8-week follow-up period. Based on pharmacokinetic ("PK") data collected across the Company's Phase 1 and Phase 2 trials and further supported by population PK modeling, RAP-219 is now estimated to have a 22-day half-life, compared to the prior reported estimate of 14 days. Due to the long half-life, plasma concentrations of RAP-219 remained within the receptor occupancy therapeutic levels over the 8-week follow-up period, resulting in sustained biomarker and clinical responses consistent with the 8-week treatment period. In the first four weeks of follow-up (weeks 9-12), RAP-219 showed even greater reductions in LEs and clinical seizures than were observed during the 8-week treatment period. Clinically meaningful improvements over baseline continued through the second four weeks of follow-up (weeks 13-16).

In late 2025, we initiated an open-label long term safety trial to allow patients enrolled in our Phase 2a proof-of-concept trial in drug-resistant FOS to resume taking RAP-219. Data from the open-label trial is expected in the fourth quarter of 2026. In December 2025, we received U.S. Food and Drug Administration ("FDA") feedback from an end-of-Phase 2 meeting supporting advancement into two Phase 3 trials of RAP-219 in patients with drug-resistant FOS. We initiated the Phase 3 program in the second quarter of 2026.

We are also expanding our epilepsy portfolio into PGTCS, the most common type of generalized seizure and an important next step in addressing unmet need in patients with seizure disorders. With proof-of-concept established in FOS, we plan to initiate a Phase 3 trial in PGTCS in the first half of 2027.

We believe RAP-219 also has therapeutic potential in bipolar disorder. Our Phase 2 proof-of-concept trial in bipolar mania is progressing well and topline results are expected in October 2026. Additionally, we have modified the trial's statistical analysis plan and increased target enrollment, enabling the trial to potentially be considered as confirmatory evidence of effectiveness. Following completion of the Phase 2 trial, and subject to the results, we plan to engage with the FDA in an end-of-Phase 2 meeting to align on the design of a potential Phase 3 program to support a New Drug Application for the treatment of bipolar mania.

We also previously submitted an Investigational New Drug ("IND") application to the FDA for initiation of a Phase 2 proof-of-concept trial in RAP-219 for the treatment of diabetic peripheral neuropathic pain ("DPNP"), which was placed on clinical hold by the FDA in the fourth quarter of 2024. Following further interactions with the FDA, the FDA removed its clinical hold on the DPNP IND in December 2025. We are deferring further investment in the RAP-219 DPNP program at this time to prioritize our α6ß4 program, which we believe has significant potential in chronic pain and migraine, as described below.

Additionally, we continue to develop a long-acting injectable ("LAI") formulation of RAP-219. We believe an LAI formulation has the potential to improve patient adherence and expand the potential clinical utility across all of the RAP-219 indications. IND-enabling activities are underway and initial Phase 1 PK data is expected in 2027.

We also have two advanced discovery-stage nicotinic acetylcholine receptor ("nAChR") programs stemming from our RAP technology platform. nAChRs have been clinically validated in patient-reported neuropathic pain and our first advanced discovery-stage nAChR program comprises agonists of the α6ß4 nAChR. α6ß4 nAChRs are selectively expressed in sensory neurons, and the α6 subunit has human genetic validation in chronic pain. We have initiated IND-enabling activities for our α6ß4 nAChR agonist development candidate, RAP-641, directed at a genetically validated precision target that we are pursuing as a potential novel non-opiate, non-CNS approach for chronic pain and migraine. The second advanced discovery-stage nAChR program comprises modulators of the α9α10 nAChR. Third-party preclinical genetic data suggest that this nAChR could be an attractive target in treating hearing and vestibular disorders. We continue to leverage our RAP technology platform to discover additional product candidates that we believe have the potential to provide transformative benefits for large patient populations with neurological or psychiatric diseases.

We have incurred significant operating losses in each year since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of any product candidates we may develop. Our net losses were $56.6 million and $26.7 million for the three months ended June 30, 2026 and 2025, respectively, and $76.5 million and $50.8 million for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, we had an accumulated deficit of $311.7 million. We expect our expenses and operating losses will increase substantially as we:

In addition, we have several preclinical and clinical development, regulatory, and commercial milestone payment obligations under our licensing arrangements. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our preclinical studies, clinical trials and our expenditures on other research and development activities.

We do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our potential future product candidates, which will not be for at least the next several years, if ever. If we obtain regulatory approval for any of our potential future product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate significant revenue from sales of our potential future product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. See the section titled "-Liquidity and Capital Resources" included elsewhere in this Quarterly Report. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market potential future product candidates that we would otherwise prefer to develop and market ourselves.

We believe that our existing cash, cash equivalents, and short-term investments will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2029. See the sections titled "-Liquidity and Capital Resources" and "Risk Factors-Risks Related to Our Limited Operating History, Financial Condition and Need for Additional Capital" included elsewhere in this Quarterly Report.

License and Collaboration Agreements

Option and License Agreement with Janssen Pharmaceutical NV

In August 2022, we entered into an option and license agreement with Janssen Pharmaceutical NV, as amended on April 3, 2023, April 18, 2023, May 2, 2023, October 2, 2023, and April 9, 2024 (collectively, the "Janssen License"), under which we received an exclusive option to obtain from Janssen (a) a worldwide exclusive license for the research, development, and commercialization of transmembrane TARPγ8 AMPAR products for the diagnosis, treatment, prophylaxis or palliation of any disease or condition in humans or other animals (the "Field") and (b) an assignment of certain patents related to TARPγ8, in each case of (a)-(b), subject to certain retained rights by Janssen. Pursuant to the Janssen License, we also received a worldwide, royalty-free, non-exclusive license (exclusive under certain joint patents) for the research, development, and commercialization of certain neuronal nicotinic acetylcholine ("nACh") products in the Field.

We made a non-refundable, non-creditable upfront payment of $1.0 million to Janssen after we entered into the Janssen License. In October 2022, we exercised the option and paid a non-refundable, non-creditable option fee of $4.0 million to Janssen. If we succeed in developing and commercializing TARPγ8 products, Janssen will be eligible to receive (i) up to $76.0 million in development milestone payments and up to $40.0 million sales milestone payments for the product containing the lead TARPγ8 development candidate, and (ii) up to $25.0 million in development milestone payments and up to $42.0 million sales milestone payments for other TARPγ8 products containing a non-lead TARPγ8 development candidate.

Janssen is also eligible to receive (a) royalties ranging from mid to high-single digit percentages on worldwide net sales of any products containing a TARPγ8 development candidate and (b) royalties ranging from low to mid-single digit percentages for other TARPγ8 products that do not contain a TARPγ8 development candidate, in each case of (a) and (b), subject to potential reductions following the expiration of valid claims and regulatory exclusivity covering such TARPγ8 products, the launch of certain generic products and the application of certain anti-stacking reductions for third party intellectual property payments, subject to a customary reduction floor. The royalties for any TARPγ8 product will expire on a country-by-country basis upon the latest to occur of (i) the expiration of all valid patent claims covering such product in such country, (ii) the expiration of all regulatory exclusivities in such country, and (iii) a specified number of years following the first commercial sale of such product in such country. The Janssen License provides us with certain other exclusive rights with respect to small molecules with activity against TARPγ8 and nACh.

We have the right to terminate the Janssen License for any or no reason upon providing prior written notice to Janssen upon ninety (90) days' prior written notice to Janssen. Either party may terminate the license agreement in its entirety for the other party's material breach if such party fails to cure the breach or upon certain insolvency events involving the other party.

NeuroPace Master Services Agreement and Statements of Work

In November 2023, we entered into a master services agreement (the "NeuroPace Agreement") with NeuroPace Inc. ("NeuroPace"), the manufacturer and distributor of the responsive neurostimulation ("RNS") system. Pursuant to the NeuroPace Agreement and in accordance with statement of work agreements entered into from time to time, NeuroPace provides us with certain services with respect to data from the RNS systems used in our clinical trials. The NeuroPace Agreement also grants us a royalty-free, worldwide, exclusive, non-transferable license to all data collected by the RNS systems in our RAP-219 clinical trials in drug-resistant focal onset seizures and the outcomes of algorithms that are applied to such data, as well as the ability to publish the outcomes of algorithms, subject to certain conditions. The consideration we will pay to NeuroPace for such services is set out in each statement of work agreement.

Concurrently with the execution of the NeuroPace Agreement, the parties also entered into an initial statement of work, as amended in March 2024, and a second statement of work, as amended in February 2026 (collectively, the "NeuroPace SOWs"), under the NeuroPace Agreement, pursuant to which NeuroPace agreed to provide services related to our RAP-219 Phase 2a clinical trial and open-label long term safety trial in RAP-219 for FOS, including, among other things, clinical trial readiness support, identification of potential patients satisfying the enrollment criteria and RNS system data reporting and data analysis. Pursuant to the payment schedule set out in the NeuroPace SOWs, we will pay NeuroPace an aggregate of up to $5.8 million over a period of approximately four years in connection with NeuroPace's provision of services and achievement of certain patient enrollment and deliverable milestones. As of June 30, 2026, we have incurred cumulative expenses of $4.7 million on both NeuroPace SOWs.

Tenacia Collaboration and License Agreement

On March 6, 2026, we entered into a License Agreement (the "Tenacia License Agreement") with Tenacia Biotechnology (Hong Kong) Co., Ltd. ("Tenacia"). The arrangement provides Tenacia with the exclusive rights to develop and commercialize our product candidate, RAP-219 in mainland China, Hong Kong, Macau and Taiwan (each, a "Market" and collectively, the "Tenacia Territory"). We retain exclusive rights to RAP-219 outside the Tenacia territory.

Under the terms of the Tenacia License Agreement, we granted to Tenacia an exclusive license to use certain intellectual property for the development and commercialization of RAP-219 and products containing RAP-219 across indications, including focal onset seizures ("FOS") and bipolar mania. See Note 11 - License and Collaboration Agreement for a description of the key terms of the Tenacia License Agreement.

Under the terms of the Tenacia License Agreement, we received a $20.0 million non-refundable upfront payment. Additionally, to the extent Tenacia commercializes any licensed products containing RAP-219, we are eligible to receive up to $308.0 million in contingent sales-based milestone payments and tiered royalty payments ranging from the mid-single digits to the mid-teens based on a percentage of net sales, subject to customary reductions and offsets.

Components of Results of Operations

Revenue

We have not generated any revenue from the sale of products since inception and do not expect to generate any revenue from the sale of products for several years, if ever. As discussed above and in Note 11 - License and Collaboration Agreement to our condensed consolidated financial statements, we entered into the Tenacia License Agreement in March 2026. We recognized $20.0 million of collaboration revenue from the Tenacia License Agreement during the six months ended June 30, 2026.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the development and research of our clinical and pre-clinical potential future product candidates. Our research and development expenses include:

Our primary focus since inception has been the development of RAP-219. Our research and development costs consist primarily of personnel-related costs and external costs, such as fees paid to Contract Manufacturing Organizations ("CMOs"), Contract Research Organizations ("CROs") and consultants in connection with our non-clinical studies, preclinical studies and clinical trials. We expense all research and development costs in the periods in which they are incurred. Because we are working on multiple research and development programs at one time, we track many of our external expenses on a program-by-program basis. We do not allocate personnel-related costs or other indirect costs to specific product development programs because these costs are deployed across multiple programs and, as such, are not separately classified.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher and more variable development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in the near term as we advance RAP-219 through clinical development, pursue regulatory approval of RAP-219, continue to discover and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts, including the associated manufacturing activities.

Upfront and milestone payments made are accrued for and expensed when the achievement of the milestone is probable up to the point of regulatory approval. Milestone payments made upon regulatory approval will be capitalized and amortized over the remaining useful life of the related product.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

A change in the outcome of any of these variables with respect to the development of any of our product candidates or potential future product candidate could mean a significant change in the costs and timing associated with the development of that product candidate or potential future product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate would be required for the completion of clinical development of a product candidate or potential future product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development. We may never obtain regulatory approval for any of our product candidates, and, even if we do, drug commercialization takes several years and millions of dollars in development costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits, and stock-based compensation charges for those individuals in executive, finance, human resources, facility operations, and other administrative functions. Other costs include legal fees relating to intellectual property and corporate matters, professional fees for auditing, accounting, tax and consulting services, office and information technology costs, insurance costs, and facilities, depreciation and other selling, general and administrative expenses, which include direct or allocated expenses for rent and maintenance of facilities and utilities.

We anticipate that our selling, general and administrative expenses will increase for the foreseeable future to support development of product candidates and our continued research activities. These increases will likely include additional costs related to the hiring of additional personnel and fees paid to outside consultants, among other expenses. We also anticipate increased expenses related to audit, accounting, legal, regulatory, and tax-related services associated with maintaining compliance with The Nasdaq Global Market ("Nasdaq") and SEC requirements, director and officer insurance premiums, and investor relations costs associated with operating as a public company.

Other Income

Interest Income

Interest income consists of interest earned from our cash, cash equivalents and short-term and long term investments.

Income Taxes

For the three and six months ended June 30, 2026 and 2025, we recorded no income tax provision. As of June 30, 2026 and December 31, 2025, we recorded a full valuation allowance of our net deferred tax assets, as we believed it was more likely than not we would not be able to utilize our deferred tax assets prior to their expiration.

Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each year or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating losses ("NOLs"), carryforwards and tax credits will be not realized. As of December 31, 2025, we had federal NOL carryforwards of approximately $46.1 million and state NOL carryforwards of approximately $15.1 million, respectively. Federal losses have an indefinite carryforward period, but can only offset 80% of federal taxable income in a given year. Losses for state purposes begin to expire in 2043. As of December 31, 2025, we also had federal and state tax research and development credit carryforwards of approximately $8.0 million and $3.2 million, respectively, to offset future tax liabilities, which begin to expire in 2042 and 2037, respectively. As of December 31, 2025, we had no unrecognized tax benefits.

On July 4, 2025, new U.S tax legislation was signed into law (known as the "One Big Beautiful Bill Act" or "OBBBA") which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. The impacts of OBBBA are not expected to be material to the 2026 consolidated balance sheet or statements of operations and comprehensive loss.

Results of Operations

Comparison of the three months ended June 30, 2026 and 2025

The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025:

Operating Expenses

Research and Development Expenses

Research and development expenses were $51.4 million for the three months ended June 30, 2026, as compared to $22.7 million for the three months ended June 30, 2025. The increase of $28.7 million consisted of the following:

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $9.4 million for the three months ended June 30, 2026, as compared to $6.8 million for the three months ended June 30, 2025. The increase of $2.6 million consisted of the following:

Other Income

Other income was $4.2 million for the three months ended June 30, 2026, as compared to $2.8 million for the three months ended June 30, 2025. The $1.4 million increase was driven by increased interest income due to the increased cash, cash equivalent and short-term investments balances for most of the three months ended June 30, 2026 due to proceeds from the September 2025 Offering.

Income Taxes

For each of the three months ended June 30, 2026 and 2025, we recorded an income tax provision of zero.

Comparison of the six months ended June 30, 2026 and 2025

The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025:

Collaboration Revenue

Collaboration revenue was $20.0 million for the six months ended June 30, 2026 as a result of revenue recognized related to the non-refundable upfront fee received pursuant to the Tenacia License Agreement. Through June 30, 2026, no milestones have been achieved and no royalties have been earned.

Operating Expenses

Research and Development Expenses

Research and development expenses were $84.1 million for the six months ended June 30, 2026, as compared to $42.3 million for the six months ended June 30, 2025. The increase of $41.9 million consisted of the following:

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $20.9 million for the six months ended June 30, 2026, as compared to $14.4 million for the six months ended June 30, 2025. The increase of $6.5 million consisted of the following:

Other Income

Other income was $8.5 million for the six months ended June 30, 2026, as compared to $5.8 million for the six months ended June 30, 2025. The $2.7 million increase in interest income was due to the increased cash, cash equivalent and short-term investments balances for most of the six months ended June 30, 2026 due to proceeds from the September 2025 Offering.

Income Taxes

For each of the six months ended June 30, 2026 and 2025, we recorded an income tax provision of zero.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception in February 2022, our revenue has been generated from payments received pursuant to collaboration agreements and we have incurred significant operating losses and negative cash flows from operations. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates and pipeline. Further, we expect to continue to incur additional costs associated with operating as a public company. Historically, we have funded our operations with proceeds from the sale of convertible notes, convertible preferred stock, and the issuance of common stock in our IPO, concurrent private placement, September 2025 Offering, and collaboration agreements. As of June 30, 2026, we had cash, cash equivalents and short-term investments of $436.1 million, excluding our restricted cash.

We previously entered into a common stock sales agreement (the "Sales Agreement"), dated July 1, 2025, by and between the Company and Leerink Partners LLC and Cantor Fitzgerald & Co., acting as sales agents, which established an at-the-market offering program pursuant to which we may offer and sell shares of our common stock from time to time (the "ATM Program").

In March 2026, we filed an automatic shelf registration statement on Form S-3ASR (the "2026 Registration Statement"), containing (i) a base prospectus, which covers the offering, issuance and sale from time to time in one or more offerings of an indeterminate amount of common stock, preferred stock, debt securities, warrants and/or units; and (ii) a sales agreement prospectus for the offering and issuance and sale of up to a maximum aggregate offering price of $150.0 million of common stock, to be issued pursuant to the Sales Agreement. As of June 30, 2026, we have not sold any shares pursuant to our ATM program. As market conditions permit, we may offer and sell securities under the 2026 Registration Statement, including through the ATM Program, in order to fund our operations or provide additional liquidity.

In addition to our existing cash, cash equivalents and marketable securities, we expect to receive research and development reimbursements and are eligible to earn development and commercial milestone payments and royalties under our license agreement with Tenacia. Our ability to earn these milestone payments and the timing of earning these payments is dependent upon the outcome of agreed upon research and development and commercialization activities and is uncertain at this time.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

Operating Activities

During the six months ended June 30, 2026, operating activities used $54.5 million of cash, resulting primarily from our net loss of $76.5 million, partially offset by $14.2 million of non-cash stock-based compensation expense, changes in operating assets and liabilities of $6.0 million, $0.4 million of non-cash depreciation expense, and $1.2 million of non-cash lease expense. The $6.0 million change in operating assets and liabilities is primarily driven by a $1.4 million decrease in operating lease liabilities, a decrease in other assets of $0.3 million due to the movement of an upfront long-term prepaid clinical trial payment from long-term to short term, and a decrease in accounts payable of $1.4 million due to timing of payments to vendors, partially offset by increases in accrued expenses of $11.1 million due to increased clinical trial costs, an increase in prepaid expenses and other current assets of $2.3 million, primarily due to recognition of advanced payments on contracts related to our clinical trials, and an increase to accounts receivable of $0.3 million for reimbursable costs related to the Tenacia License Agreement.

During the six months ended June 30, 2025, operating activities used $45.3 million of cash, resulting primarily from our net loss of $50.8 million, non-cash accretion of investments in marketable securities of $0.5 million, and changes in operating assets and liabilities of $3.8 million, partially offset by $8.4 million of non-cash stock-based compensation expense, $0.5 million of non-cash depreciation expense, and $0.9 million of non-cash lease expense. The $3.8 million change in operating assets and liabilities is primarily driven by an increase in prepaid expenses and other current assets of $5.1 million, primarily due to advanced payments on new contracts related to our clinical trials, a $0.1 million decrease in operating lease liabilities, partially offset by increases in accounts payable of $1.2 million and accrued expenses of $0.8 million due to timing of payments to vendors, and an increase in other assets of $0.5 million primarily due to the payment of the security deposit for our new corporate headquarters lease.

Investing Activities

During the six months ended June 30, 2026, net cash provided by investing activities was $63.5 million, primarily consisting of maturities of short-term investments of $123.5 million and sales of short-term investments of $10.1 million, partially offset by purchases of short-term investments of $70.0 million.

During the six months ended June 30, 2025, net cash provided by investing activities was $43.6 million, primarily consisting of maturities of short-term investments of $100.0 million, partially offset by purchases of short-term investments of $56.1 million and purchases of property and equipment of $0.3 million.

Financing Activities

During the six months ended June 30, 2026, net cash provided by financing activities was $1.9 million, primarily consisting of proceeds from exercise of stock options of $2.4 million, offset by payment of deferred offering costs of $0.5 million in connection with the preparation and filing of the 2026 Registration Statement.

During the six months ended June 30, 2025, net cash used in financing activities was $0.1 million, primarily consisting of deferred offering costs in connection with the preparation and filing of the Registration Statement and the ATM Program.

Future Funding Requirements

As of June 30, 2026, we had cash, cash equivalents and short-term investments of $436.1 million, excluding our restricted cash. As of the issuance date of the condensed consolidated financial statements for the six months ended June 30, 2026, we expect that our cash, cash equivalents and short-term investments will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months from the issuance of the condensed consolidated financial statements. We believe that our existing cash, cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2029. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. However, our forecast for the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. Additionally, the process of conducting preclinical studies and testing potential future product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain. We will need to raise substantial additional capital in the future.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our preclinical studies and the current and future clinical trials of our product candidates. Our funding requirements and timing and amount of our operating expenditures will depend on many factors, including:

Until such time, if ever, as we can generate substantial product revenue to support our cost structure, we expect to finance our cash needs through equity offerings, debt financings, or other capital sources, potentially including collaborations, licenses, and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Additional 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 funds through collaborations, license arrangements, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or potential future product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional funds through equity or debt financings, or through other sources when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates and potential future product candidates even if we would otherwise prefer to develop and market such potential future product candidates ourselves.

Contractual Obligations and Commitments

Leases

As of the June 30, 2026, we had future minimum operating lease payments under non-cancelable leases of $11.6 million related to leases we have recognized on our condensed consolidated balance sheet, which included existing laboratory and office leases and the new corporate headquarters lease that commenced June 1, 2025 in Boston, Massachusetts. The future minimum operating lease payments under these non-cancelable leases are due over a weighted average remaining lease term of 4.2 years.

Option and License Agreement with Janssen Pharmaceutical NV

We made an upfront non-refundable, non-creditable payment of $1.0 million to Janssen after we entered into the Janssen License. In October 2022, we exercised the option and made a non-refundable, non-creditable option fee of $4.0 million to Janssen. If we succeed in developing and commercializing TARPγ8 products, Janssen will be eligible to receive (i) up to $76.0 million in development milestone payments and up to $40.0 million sales milestone payments for the product containing the lead TARPγ8 development candidate and (ii) up to $25.0 million in development milestone payments and up to $42.0 million sales milestone payments for the other products containing a non-lead TARPg8 development candidate. We are also required to pay tiered royalties related to the TARPγ8 development candidate of a mid to high single-digit percentage on worldwide net sales and tiered royalties related to the TARPγ8 products that do not contain a TARPγ8 development candidate of low to mid single-digit percentages on annual net sales of the products covered by the license.

NeuroPace Master Services Agreement and Statements of Work

In connection with the execution of the NeuroPace Agreement, the parties also entered into an initial statement of work, as amended in March 2024, and a second statement of work, as amended in February 2026, (collectively, the "NeuroPace SOWs") under the NeuroPace Agreement, pursuant to which NeuroPace agreed to provide services related to the RAP-219 Phase 2a proof-of-concept clinical trial and planned open-label long term safety trial in RAP-219 for FOS, including, among other things, clinical trial readiness support, identification of potential patients satisfying the enrollment criteria and RNS system data reporting and data analysis. Pursuant to the payment schedule set out in the NeuroPace SOWs, the Company will pay NeuroPace an aggregate of up to $5.8 million over a period of approximately four years in connection with NeuroPace's provision of services and achievement of certain patient enrollment and deliverable milestones. The Company has incurred cumulative expenses of $4.7 million on the NeuroPace SOWs through June 30, 2026.

Apart from the contracts with payment commitments that we have documented above, we have entered into contracts in the normal course of business with CROs, CMOs and other third parties for preclinical research studies and testing, clinical trials and manufacturing services. These contracts do not contain any minimum purchase commitments and are cancelable by us upon prior notice and, as a result, are not included in the table of contractual obligations and commitments above. Payments due upon cancellation consist only of payments for services provided and expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation.

Critical Accounting Polices and Estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of expenses incurred during the reporting periods. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and expenses that are not readily apparent from other sources. We evaluate our estimates and judgments on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

For information regarding our critical accounting policies and estimates, please refer to Note 2 - "Summary of Significant Accounting Policies" contained in our Annual Report. The critical accounting policy below supplements the critical accounting policies discussed in our Annual Report.

Revenue Recognition

We recognize revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), Topic 606, Revenue Recognition ("ASC 606"). Accordingly, we recognize revenue following the five step model prescribed under Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers: (i) Identify the contract(s) with the customer, (ii) Identify the promised goods and/or services in the contract and determine which promised goods and/or services represent performance obligations, (iii) Measure the transaction price, (iv) Allocate the transaction price to the performance obligations in the contract and (v) Recognize revenue when (or as) each performance obligation is satisfied. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract and use judgment in the determination of the transaction price and the application of the constraint. The determination of standalone selling price has not had a significant impact on the accounting for our revenue arrangements given the nature of the performance obligations. We have also not been required to apply significant judgment in determining the transaction price given the nature of the variable consideration and the application of the constraint.

Emerging Growth Company and Smaller Reporting Company Status

The Jumpstart Our Business Startups Act of 2012 permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to "opt out" such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to "opt out" of such extended transition period or (ii) no longer qualify as an emerging growth company. As a result of this election, our condensed consolidated financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

A company remains an emerging growth company until as late as the end of the fiscal year following the fifth anniversary of its initial public offering, although circumstances could cause a company to lose that status earlier, including if it is deemed to be a "large accelerated filer," which occurs when the market value of its common stock that is held by non-affiliates exceeds $700 million as of the prior June 30 unless it remains eligible to use the "smaller reporting company" requirements under the revenue test in Rule 12b-2 of the Exchange Act, or if it has total annual gross revenue of $1.235 billion or more during any fiscal year before that time, in which cases it would no longer be an emerging growth company as of the following December 31, or if it issues more than $1.0 billion in non-convertible debt during any three-year period before that time, in which case it would no longer be an emerging growth company immediately. We could be an emerging growth company until as late as December 31, 2029, but we expect to lose that status earlier since the aggregate market value of our shares of common stock held by non-affiliates exceeded $700 million on the last business day of our second quarter in 2026.

We are also a "smaller reporting company" as defined in the Exchange Act, and have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies. However, since the aggregate market value of our shares of common stock held by non-affiliates exceeded $700 million on the last business day of our second quarter in 2026, beginning with our Quarterly Report on Form 10-Q for the quarter ended March 31, 2027, we will no longer be eligible to use the scaled disclosure accommodations available to smaller reporting companies and will become subject to additional disclosure requirements.

Recent Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2-"Summary of Significant Accounting Policies" to our condensed consolidated financial statements included elsewhere in this Quarterly Report.