Sellas Life Sciences Group Inc.

03/19/2026 | Press release | Distributed by Public on 03/19/2026 14:01

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this Management's Discussion and Analysis is to better allow our investors to understand and view our company from management's perspective. We are providing an overview of our business and strategy including a discussion of our financial condition and results of operations. You should read the following discussion in conjunction with the consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements within the meaning of federal securities laws. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in such forward-looking statements, including those discussed in the section "Risk Factors" in Part I - Item 1A of this Annual Report on Form 10-K.
Overview
We are a late-stage clinical biopharmaceutical company focused on the development of novel therapeutics for a broad range of cancer indications. Our product candidates currently include galinpepimut-S, or GPS, a peptide immunotherapy directed against the Wilms tumor 1, or WT1, antigen, and SLS009 (formerly GFH009), a highly selective small molecule cyclin-dependent kinase 9, or CDK9, inhibitor.
Galinpepimut-S, or GPS: Highly Novel and Engineered Immunotherapy Targeting the WT1 Antigen
Our lead product candidate, GPS, is a cancer immunotherapeutic agent licensed from Memorial Sloan Kettering Cancer Center, or MSK, that targets the WT1 protein, which is present in 20 or more cancer types. Based on its mechanism of action as a directly immunizing agent, GPS has potential as a monotherapy or in combination with other immunotherapeutic agents to address a broad spectrum of hematologic, or blood, cancers, and solid tumor indications.
We have an ongoing open label randomized Phase 3 clinical trial, the REGAL study, for GPS monotherapy in patients with acute myeloid leukemia, or AML, in the maintenance setting after achievement of second complete remission, or CR2, following successful completion of second-line antileukemic therapy. Patients are randomized to receive either GPS or best available treatment, or BAT. We expect this study will be used as the basis for submission of a Biologics License Application, or BLA, subject to a statistically significant and clinically meaningful trial outcome and agreement with the U.S. Food and Drug Administration, or the FDA. The primary endpoint of the REGAL study is overall survival, or OS. We planned to enroll approximately 125 to 140 patients at approximately 95 clinical sites in North America, Europe and Asia with a planned interim safety, efficacy and futility analysis after 60 events (deaths). In March 2024, we announced the completion of enrollment. In December 2024, we announced that the pre-specified threshold of 60 events (deaths) per the protocol had been reached, triggering the interim analysis to be conducted by the Independent Data Monitoring Committee, or IDMC. In January 2025, we announced that the IDMC had completed pre-specified interim analysis of the REGAL study and had recommended that the study continue without modifications. The next and final analysis will be conducted once 80 events (deaths) are reached. In December 2025, we announced that our contract research organization informed us that the pooled number of events was 72 as of December 26, 2025. We remain blinded to all efficacy and survival data outcomes and, as no outcomes analyses were performed and no statistical penalty has been incurred, this one-time update on the aggregate number of events does not impact future statistical analyses. Because the final analysis is event driven, it is difficult to predict with any certainty and it may occur at a different time than currently expected. We will announce the 80th event when it occurs.
In December 2020, we entered into an exclusive license agreement, or the 3D Medicines Agreement, with 3D Medicines Inc., or 3D Medicines, a China-based biopharmaceutical company developing next-generation immuno-oncology drugs, for the development and commercialization of GPS, as well as the Company's next generation heptavalent immunotherapeutic GPS+, which is at preclinical stage, across all therapeutic and diagnostic uses in mainland China, Hong Kong, Macau and Taiwan, which we refer to as Greater China. We have retained sole rights to GPS and GPS+ outside of Greater China. In November 2022, we announced that we had agreed with 3D Medicines for 3D Medicines to participate in the REGAL study through the inclusion of approximately 20 patients from mainland China. In December 2022, we entered into a Side Letter Agreement with 3D Medicines, or Side Letter, which together with the 3D Medicines Agreement, details the terms and conditions of 3D Medicines' participation in the REGAL study. Although the REGAL study has completed enrollment as announced in March 2024, in accordance with the predetermined statistical analysis plan, 3D Medicines may still enroll patients in mainland China. The timing of such participation and patient enrollment by 3D Medicines, if at all,
cannot be predicted with certainty. As of December 31, 2025, we have received an aggregate of $10.5 million in upfront and milestone payments under our license agreement with 3D Medicines, or the 3D Medicines Agreement, and a total of $191.5 million in potential future development, regulatory and sales milestones, not including future royalties, remains under the license agreement, which milestones are variable in nature and not under our control. In December 2023, we announced that we had commenced a binding arbitration proceeding against 3D Medicines to resolve a dispute regarding, among other things, the trigger and payment of relevant milestone payments due to us under the 3D Medicines Agreement. See Item 3. Legal Proceedings.
GPS was granted Orphan Drug Designations, or ODD, from the FDA, as well as orphan medicines designations from the European Medicines Agency, or EMA, in AML, malignant pleural mesothelioma, or MPM, and multiple myeloma, or MM, as well as Fast Track designations for AML, MPM, and MM from the FDA. In October 2024, the FDA granted Rare Pediatric Disease, or RPD, designation to GPS for the treatment of pediatric AML.
SLS009, or Tambiciclib: Highly Selective Next Generation CDK9 Inhibitor
On March 31, 2022, we entered into an exclusive license agreement, or the GenFleet Agreement, with GenFleet Therapeutics (Shanghai), Inc., or GenFleet, a clinical-stage biotechnology company developing cutting-edge therapeutics in oncology and immunology, that grants rights to us for the development and commercialization of SLS009, a highly selective small molecule CDK9 inhibitor, across all therapeutic and diagnostic uses worldwide, except for Greater China.
CDK9 activity has been shown to correlate negatively with overall survival in a number of cancer types, including hematologic cancers, such as AML and lymphomas, as well as solid cancers, such as osteosarcoma, pediatric soft tissue sarcomas, melanoma, endometrial, lung, prostate, breast and ovarian. As demonstrated in preclinical and clinical data, to date, SLS009's high selectivity has the potential to reduce toxicity as compared to older CDK9 inhibitors and other next-generation CDK9 inhibitors currently in clinical development and to potentially be more efficacious.
We completed a Phase 1 dose-escalating clinical trial in the United States and China for SLS009 in mid-2023 and reported positive safety and efficacy data for both patient cohorts, that is relapsed and/or refractory AML and refractory lymphoma. We also established in the trial a recommended Phase 2 dose, or RP2D, of 60 mg once weekly or 30 mg twice weekly for AML and 100 mg once weekly for lymphomas.
In the second quarter of 2023, we commenced an open label, single arm, multi-center Phase 2a clinical trial with SLS009 in combination with venetoclax and azacitidine, or aza/ven, in patients with AML who failed or did not respond to treatment with venetoclax-based therapies. The trial is evaluating safety, tolerability, and efficacy at two dose levels of SLS009, 45 mg once weekly, and 60 mg once weekly or 30 mg twice a week, in combination with aza/ven. In December 2024, we announced positive data from the first 3 cohorts in the Phase 2a trial.
In July 2025, we announced that the Phase 2 trial of SLS009 in r/r AML met all primary endpoints and received FDA guidance to advance into a first-line therapy study. The overall response rate, or ORR, in 54 evaluable patients was 33% across all cohorts and dose levels, 40% for the 30 mg BIW dose level, and 44% in the 30 mg BIW dose among patients with myelodysplasia-related molecular mutations, or AML MR, all exceeding the pre-specified ORR threshold of 20%. The highest efficacy was observed among patients with ASXL1 mutations, with an ORR of 50% (9/18) at 30 mg BIW dose levels, and AML MR with Myelomonocytic/Myelomonoblastic markers, or M4/M5 per FAB classification, patients with an ORR of 50% (6/12). The median overall survival, or mOS, reached 8.9 months in patients with AML MR and 8.8 months in patients r/r to venetoclax-based regimens at a 30 mg BIW dose level, surpassing the historical benchmark of ~2.4 months. SLS009 was well-tolerated with no new safety signals observed. No dose-limiting toxicities were observed across all dose levels.
Following a productive end of Phase 2 meeting, the FDA recommended that we proceed into a clinical trial to include newly diagnosed, first-line AML patients eligible for aza/ven therapy, where the FDA noted clinical benefit might be greatest. The randomized 80-patient Phase 2 clinical trial is currently ongoing and began enrollment in the first quarter of 2026. The clinical trial will include two groups: predictive biomarker cohort (newly diagnosed patients unlikely to benefit from standard aza/ven therapy based on molecular profiling) and early venetoclax resistance cohort (patients who initiate treatment with aza/ven, but demonstrate confirmed lack of any response after two treatment cycles).
In January 2026, we announced that we entered into an agreement with IMPACT-AML, a European collaborative initiative dedicated to advancing innovative treatments for patients with AML. Under the agreement,
the IMPACT-AML network will conduct a clinical study evaluating SLS009, enabling access to multiple European clinical sites and patients. IMPACT-AML is a pan-European project and builds an inclusive clinical network (STREAM platform) that connects patients, clinicians, and researchers to test novel AML therapies and improve patient outcomes. It is part of the prestigious EU Mission Cancer program and a top-tier scientific cluster. The IMPACT-AML project is led by a consortium of major research and clinical institutions in Europe, including IRST (IRCCS Istituto Romagnolo per lo Studio dei Tumori "Dino Amadori"), the University of Bologna, IIS LA FE (Health Research Institute Hospital La Fe), several European AML collaborative groups, and supranational organizations under the umbrella of the European Leukemia Net (ELN), as well as various university hospitals across Europe. By leveraging IMPACT-AML's existing infrastructure and expertise, we expect to expand European patient access to SLS009 in a highly cost-efficient manner while supporting broader participation across the clinical program.
In November 2024, we announced data from preclinical studies identifying ASXL1 mutation as key predictor of SLS009 in response to solid cancers.
In May 2025, we announced data for pediatric acute lymphoblastic leukemia, or ALL, patients derived xenografts, or PDX. The experiment conducted and funded by the National Institute of Health, or NIH, through through the NCI Pediatric Preclinical in Vivo Testing, or PIVOT, program, included 27 patient-derived ALL tumors from pediatric patients. Tumors were xenografted in mice in two groups, vehicle control arm and SLS009 arm. Mice were treated with a fractionated dose once per week for six consecutive weeks. Treatment was well tolerated. For all models, median survival was approximately tripled in the SLS009 arm, compared to vehicle control arm. SLS009 demonstrated delayed progression in 25/27 (93%) models and more than two times longer time to progression in 15/27 (56%) of ALL models. In addition, there were complete responses, or CR, in two models and in one of the two models CR was maintained after the treatment had been completed until the end of the study (four months). Among seven KMT2A rearranged models, time to progression was extended in all seven models, and in six out of seven (86%) time to progression was more than doubled.
For SLS009, the FDA granted Orphan Drug Product designations in AML and peripheral T-cell lymphoma, or PTCL, and Fast Track designations for r/r AML and r/r PTCL. The FDA granted RPD designation to SLS009 for the treatment of pediatric acute lymphoblastic leukemia, or ALL, in June 2024 and the FDA granted RPD designation to SLS009 for the treatment of pediatric AML in July 2024. Also, the European Medicines Agency granted Orphan Drug Designation for SLS009 in AML and in PTCL in June 2024 and July 2024, respectively.
Components of Results of Operations
Research and Development
Research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred. These expenses include:
•expenses incurred under agreements with clinical research organizations, or CROs, as well as investigative sites and consultants that conduct our preclinical studies and clinical trials;
•manufacturing and clinical drug supply expenses;
•outsourced professional scientific development services;
•employee-related expenses, which include salaries, benefits and stock-based compensation;
•payments made under our license agreements, under which we acquired certain intellectual property;
•expenses relating to certain regulatory activities, including filing fees paid to regulatory agencies;
•laboratory materials and supplies used to support our research activities; and
•allocated expenses, utilities and other facility-related costs.
The successful development of our current and future product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from, any current or future product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the
duration and cost of our clinical trials, which vary significantly over the life of a project as a result of many factors, including:
•the number and geographical location of clinical sites included in the trials;
•the length of time required to enroll suitable patients;
•the number and geographical location of patients that ultimately participate in the trials;
•the number of doses patients receive;
•the duration of patient follow-up;
•the results of clinical trials;
•the expenses associated with manufacturing and clinical drug supply;
•the receipt of marketing approvals; and
•the commercialization of current and future product candidates.
Research and development activities are central to our business model. Oncology product candidates in the later stages of clinical development generally have higher development costs than those in the earlier stages of clinical development, primarily due to the increased size and duration of the later-stage clinical trials. We expect our research and development expenses to increase for the foreseeable future as we conduct and complete our ongoing early and late-stage clinical trials, initiate additional clinical trials, and expand regulatory activities associated with the preparation and submission of regulatory filings.
Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals. We may never succeed in achieving regulatory approval for any of our current or future product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or target indications or focus on others. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expense
General and administrative expenses consist principally of salaries and related costs for personnel in executive, administrative, finance and legal functions, including stock-based compensation, travel expenses and recruiting expenses, fees for outside legal counsel, and director and officer insurance premiums. Other general and administrative expenses include facility related costs, patent filing and prosecution costs, professional fees for business development, accounting, consulting, legal and tax-related services associated with maintaining compliance with our Nasdaq listing and SEC reporting requirements, investor relations costs, and other expenses associated with being a public company.
If and when we believe that regulatory approval of a product candidate appears likely, we anticipate that an increase in general and administrative expenses will occur as a result of our preparation for commercial operations, particularly as it relates to the sales and marketing of such product candidate. Oncology product commercialization may take several years and millions of dollars in development costs.
Non-Operating Income
Non-operating income consists of interest income. Interest income primarily reflects interest earned from our cash and cash equivalents.
Results of Operations for the Years Ended December 31, 2025 and 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (amounts in thousands):
Year ended December 31,
2025 2024 Change
Operating expenses:
Research and development $ 16,022 $ 19,096 $ (3,074)
General and administrative 12,252 12,417 (165)
Total operating expenses 28,274 31,513 (3,239)
Loss from operations (28,274) (31,513) 3,239
Non-operating income 1,411 632 779
Net loss $ (26,863) $ (30,881) $ 4,018
Further analysis of the changes and trends in our operating results are discussed below.
Research and Development
Research and development expenses were $16.0 million for the year ended December 31, 2025 compared to $19.1 million for the year ended December 31, 2024. The following table summarizes our research and development expenses for the years ended December 31, 2025 and 2024 (amounts in thousands):
Year ended December 31,
2025 2024 Change
External clinical trial expenses:
GPS 4,257 6,669 (2,412)
SLS009 3,486 4,469 (983)
Employee related expenses 3,045 2,808 237
Stock-based compensation 434 347 87
Clinical and regulatory consulting 2,024 2,495 (471)
Manufacturing and clinical drug supply 2,093 1,742 351
Facilities and other 683 566 117
Total research and development expenses $ 16,022 $ 19,096 $ (3,074)
The decrease in research and development expenses of approximately $3.1 million was primarily attributable to the following:
•$2.4 million of decreased external clinical trial expenses related to GPS primarily driven by the completion of enrollment in the REGAL study in the first quarter of 2024;
•$1.0 million of decreased external clinical trial expenses related to SLS009 primarily driven by the completion of enrollment in our Phase 2a trial in the current period;
•$0.5 million of decreased clinical consulting costs driven by the completion of enrollment in the REGAL study in the first quarter of 2024; partially offset by
•$0.4 million of increased manufacturing costs as we prepare for a potential BLA filing for GPS following final analysis of the REGAL study;
•$0.4 million of increased employee related expenses, stock-based compensation, and facilities and other research and development costs combined.
We anticipate that our research and development expenses will increase in the future as we continue to prepare for a potential BLA filing for GPS following the upcoming final analysis of the REGAL study and proceed into a randomized Phase 2 clinical trial to include newly diagnosed, front-line AML patients for SLS009.
General and Administrative
General and administrative expenses were $12.3 million for the year ended December 31, 2025 compared to $12.4 million for the year ended December 31, 2024. The $0.1 million decrease was primarily attributable to a $0.8 million decrease in employee related expenses which was driven by the recognition of a $1.1 million one-time severance charge in the prior period partially offset by a $0.3 million increase in non-cash stock-based compensation and a $0.7 million increase in legal fees.
Non-Operating Income
Non-operating income of $1.4 million and $0.6 million for the years ended December 31, 2025 and 2024, respectively, was related to interest income earned from our cash and cash equivalents.
Liquidity and Capital Resources
We did not generate any revenue from product sales in the years ended December 31, 2025 and 2024. Through December 31, 2025, we have only generated licensing revenue from the 3D Medicines Agreement. Since inception, we have incurred net losses, used net cash in our operations, and have funded substantially all of our operations through proceeds of the sale of equity securities and convertible notes.
Sources of Liquidity
On October 24, 2025, we entered into a Warrant Inducement Agreement, or the October 2025 Inducement, with an institutional investor and holder of certain existing warrants to cash exercise (i) warrants to purchase 6,514,658 shares of common stock at an exercise price of $1.535 per share, previously issued in March 2024, or the March 2024 Warrants, and (ii) warrants to purchase 15,849,056 shares of common stock at an exercise price of $1.325 per share, previously issued in August 2024, or the August 2024 Warrants. The March 2024 Warrants and the August 2024 Warrants were exercised at their original issuance exercise price plus $0.125 per share of common stock in accordance with Nasdaq rules. In consideration of the investor's agreement to exercise the March 2024 Warrants and the August 2024 Warrants, we agreed to issue new warrants to the investor to purchase up to 22,363,714 shares of common stock at an exercise price of $2.00 per share, or the October 2025 Warrants, which are exercisable immediately and will expire on the five year anniversary of issuance. The net proceeds to us from the October 2025 Inducement were approximately $29.1 million, after deducting financial advisory fees and related transaction expenses.
On September 10, 2025, we entered into a Warrant Inducement Agreement, or the September 2025 Inducement, with an institutional investor and holder of certain existing warrants to cash exercise warrants to purchase 19,685,040 shares of common stock, previously issued in January 2025, or the January 2025 Warrants, at the original issuance exercise price of $1.20 per share. In consideration of the investor's agreement to exercise the January 2025 Warrants, we agreed to issue new warrants to the Investor to purchase up to 19,685,040 shares of common stock at an exercise price of $1.88 per share, or the September 2025 Warrants, which are exercisable immediately and will expire on the five and one half anniversary of issuance. The net proceeds to us from the September 2025 Inducement were approximately $22.0 million, after deducting financial advisory fees and related transaction expenses.
On January 29, 2025, we consummated a registered direct offering, or the January 2025 Registered Direct Offering, with an institutional investor priced at-the-market under Nasdaq rules, pursuant to which we agreed to issue and sell 8,200,000 shares of common stock and 11,485,040 pre-funded warrants exercisable for shares of common stock, together with accompanying warrants to purchase up to 19,685,040 shares of common stock. Each share of common stock and accompanying common warrant were sold together at a combined offering price of $1.27, and each pre-funded warrant and accompanying common warrant were sold together at a combined offering price of $1.2699. The common warrants have an exercise price of $1.20 per share. The net proceeds to us from the January 2025 Registered Direct Offering were approximately $23.1 million, after deducting the placement agents' fees and related offering expenses.
During the year ended December 31, 2025, the Company received approximately $12.6 million in proceeds from the exercise of 16.8 million warrants exercisable for shares of common stock at an exercise price of $0.75 per share. Subsequent to December 31, 2025, the Company received an additional $42.6 million in proceeds from the exercise of 26.4 million warrants at a weighted-average exercise price of approximately $1.61 per share.
In December 2020, together with our wholly-owned subsidiary, SLSG Limited, LLC, we entered into the 3D Medicines Agreement pursuant to which we granted 3D Medicines a sublicensable royalty-bearing license under certain intellectual property owned or controlled by us, to develop, manufacture and have manufactured, and commercialize GPS and heptavalent GPS product candidates for all therapeutic and other diagnostic uses in the 3DMed Territory. As of December 31, 2025, we have received $10.5 million in upfront payments and certain technology transfer and regulatory milestones. A total of $191.5 million in potential future development, regulatory, and sales milestones, not including future royalties, remains under the 3D Medicines Agreement as of December 31, 2025, which milestones are all variable in nature and not under our control. In December 2023, we commenced a binding arbitration proceeding against 3D Medicines, which involves, among other things, the trigger and payment of certain milestone payments due to us. See Part I, Item 3. Legal Proceedings.
Funding Requirements
As of December 31, 2025, we had an accumulated deficit of $275.0 million, cash and cash equivalents of $71.8 million and restricted cash and cash equivalents of $0.1 million. In addition, we had current liabilities of $7.0 million as of December 31, 2025. We expect that our cash and cash equivalents, together with the $42.6 million in proceeds from warrant exercises received subsequent to December 31, 2025, will be sufficient to fund our current planned operations for at least the next twelve months from the date of issuance of these financial statements, although we may pursue additional capital resources through public or private equity or debt financings or by entering into additional license agreements or collaborations with other companies.
Management's expectations with respect to its ability to fund current planned operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management's estimates, we may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. There is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If we are unable to obtain additional funding on a timely basis, we may be forced to significantly curtail, delay, or discontinue one or more of its planned research and development programs or be unable to expand our operations or otherwise prepare for the potential regulatory approval and commercialization of its product candidates, assuming positive data.
Our future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of any additional financings, (ii) our ability to complete revenue-generating partnerships with pharmaceutical and biotechnology companies, (iii) the success of our research and development activities, (iv) the development of competitive therapies by other biotechnology and pharmaceutical companies, and, ultimately, (v) regulatory approval and market acceptance of our product candidates.
Components of Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents
The following table provides a reconciliation of the components of cash, cash equivalents, restricted cash, and restricted cash equivalents reported in our consolidated balance sheets to the total of the amount presented in the consolidated statements of cash flows (in thousands):
December 31,
2025 2024
Cash and cash equivalents $ 71,793 $ 13,886
Restricted cash and cash equivalents 100 100
Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 71,893 $ 13,986
Restricted cash and cash equivalents of $0.1 million as of December 31, 2025 and 2024 relates to certificates of deposit maintained on hand with our financial institutions as collateral for our corporate credit cards.
Cash Flows
The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2025 and 2024 (in thousands):
Year ended December 31,
2025 2024
Net cash (used in) provided by:
Operating activities $ (28,389) $ (35,402)
Financing activities 86,296 46,758
Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 57,907 $ 11,356
Net Cash Used in Operating Activities
Net cash used in operating activities of $28.4 million during the year ended December 31, 2025 was primarily attributable to our net loss of $26.9 million and a $4.1 million change in our operating assets and liabilities, partially offset by non-cash charges of $2.6 million. The net change in our operating assets and liabilities is due to a decrease in accounts payable and accrued expenses and other current liabilities of approximately $2.5 million, an increase in prepaid expenses and other assets of approximately $1.0 million, and a decrease in operating lease liabilities of approximately $0.6 million. Non-cash charges were driven by approximately $2.0 million in non-cash stock-based compensation expense and $0.6 million in non-cash lease expense.
Net cash used in operating activities of $35.4 million during the year ended December 31, 2024 was primarily attributable to our net loss of $30.9 million and a $6.6 million change in our operating assets and liabilities, partially offset by various net non-cash charges of $2.1 million. The net change in our operating assets and liabilities is due to a decrease in accrued expenses and other current liabilities of approximately $2.2 million, a decrease in accounts payable of approximately $2.1 million, an increase in prepaid expenses and other assets of $1.8 million, and a decrease in operating lease liabilities of approximately $0.5 million. Net non-cash charges were driven by approximately $1.5 million in non-cash stock-based compensation expense and $0.6 million in non-cash lease expense.
Net Cash Flow from Financing Activities
We generated $86.3 million of net cash from financing activities for the year ended December 31, 2025, which was due to $51.0 million in aggregate net proceeds received from the September 2025 Warrant Inducement and October 2025 Warrant Inducement, $23.1 million in net proceeds received from the January 2025 Registered Direct Offering, $12.6 million in proceeds received from the exercise of warrants, and $0.1 million in proceeds received from the issuance of common stock under our employee stock purchase plan, partially offset by $0.5 million to satisfy tax withholding on vesting of restricted stock units.
We generated $46.8 million of net cash from financing activities for the year ended December 31, 2024, which was due to $46.2 million in aggregate net proceeds received from the January 2024 Offering, the March 2024 Registered Direct Offering, and the August 2024 Registered Direct Offering, and $0.6 million in proceeds received from the exercise of warrants, $0.1 million in aggregate net proceeds received from the issuance of common stock under our employee stock purchase plan, partially offset by $0.1 million to satisfy tax withholding on vesting of restricted stock units.
Contractual Obligations and Other Commitments
Leases
Our lease commitments reflect payments due under our lease agreement for our office space in New York, New York that expires in September 2027. As of December 31, 2025, our contractual commitment for our lease was $1.1 million, which will be paid over the remaining term of the lease. For additional information on our leases and timing of future payments, please read Note 6, Leases, to the consolidated financial statements included in this Form 10-K.
Other Commitments
We acquire product candidates still in development and enter into research and development arrangements with third parties that often require milestone and royalty payments to the third-party contingent upon the
occurrence of certain future events linked to the success of the product candidate in development. Milestone payments may be required, contingent upon the successful achievement of an important point in the development life-cycle of the pharmaceutical product (e.g., approval of the product for marketing by a regulatory agency). We also typically will need to make royalty payments based upon a percentage of the sales of the product candidate in the event that regulatory approval for marketing is obtained. Because of the contingent nature of these payments, they are not included in the table of contractual obligations.
These arrangements may be material individually and, in the event that multiple milestones are reached in the same period, the aggregate charge to expense could be material to the results of operations in any one period. In addition, these arrangements often give us the discretion to terminate development of the product candidate, which would allow us to avoid making the contingent payments; however, we are unlikely to cease development if the product candidate successfully achieves clinical testing objectives.
We enter into contracts in the normal course of business with various third parties for clinical trials, manufacturing, and other services and products for operating purposes. These contracts provide for termination upon notice. Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. These payments have not been included separately within these contractual and other obligations disclosures.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of our consolidated financial statements and related disclosures requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reported period. We base such estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.
While our significant accounting policies are described in more detail in the notes to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
We record revenue in accordance with Accounting Standard Codification, or ASC, Topic 606, Revenue From Contracts with Customers. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. 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 Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and we assess 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.
Development, Regulatory and Sales Milestones and Other Payments
At the inception of each arrangement that includes regulatory or development milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue
reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of us or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. We evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
For arrangements that include sales-based royalties, including milestone payments upon first commercial sales and milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, we have not recognized any royalty revenue resulting from any of our licensing arrangements.
Goodwill
Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized but is subject to an annual impairment test. We have a single reporting unit and all goodwill relates to that reporting unit.
We perform our annual goodwill impairment test at the reporting unit level on October 1 of each fiscal year or more frequently if changes in circumstances or the occurrence of events suggest that an impairment exists. Goodwill is evaluated for impairment using the simplified test of goodwill impairment as defined by the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2017-04. Under the guidance, goodwill impairment is measured by the amount by which the carrying value of a reporting unit exceeds its fair value, without exceeding the carrying amount of goodwill allocated to that reporting unit. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit's goodwill is less than the carrying value of the reporting unit's goodwill.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers require advance payments; however, some invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to:
•Vendors in connection with clinical development activities;
•the production of clinical trial materials;
•CROs in connection with clinical trials; and
•investigative sites in connection with clinical trials.
We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid accordingly.
Although we do not expect its estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.
Stock-Based Compensation
We measure stock options granted to employees and non-employee directors based on the estimated grant date fair value and recognize compensation expense on a straight-line basis over the requisite service period, which is typically the vesting period. We recognize forfeitures as they occur. We estimate the fair value of stock options on the date of grant using the Black-Scholes model. The Black-Scholes model requires us to make certain assumptions regarding: (i) the expected volatility in the market price of our shares; (ii) dividend yield; (iii) risk-free interest rates; and (iv) the period of time employees are expected to hold the award prior to exercise (referred to as the expected term). As a result, if we revise our assumptions and estimates, our stock-based compensation expense could change.
Our expected volatility is based on the historical volatility of our publicly traded common stock. The expected term of stock options is estimated using the "simplified method" for employees and non-employee directors, allowed under SEC Staff Accounting Bulletin No. 110, which assumes that stock options will be exercised evenly from vesting to expiration, as we have limited historical information from which to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.
We recognize compensation expense for restricted stock units, or RSUs, based on the price of our shares at the grant date on a straight-line basis over the vesting period. The expense relating to RSUs that contain both a service condition and a performance condition is estimated and adjusted on a quarterly basis based upon our assessment of the probability that the performance condition would be met. As a result, if we revise such assessment, our stock-based compensation expense could change.
Recent Accounting Pronouncements
See Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of recent accounting pronouncements applicable to our consolidated financial statements.
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