Sionna Therapeutics Inc.
03/02/2026 | Press release | Distributed by Public on 03/02/2026 06:20
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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 consolidated financial statements and related notes and other financial information included elsewhere in this Annual Report. This discussion and analysis and other parts of this Annual Report contain forward-looking statements based upon our current plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, 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 Annual Report. You should carefully read the "Risk Factors" section of this Annual Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Also see the section titled "Cautionary 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. For convenience of presentation, some of the numbers have been rounded in the text below.
Overview
We are a clinical-stage biopharmaceutical company on a mission to revolutionize the current treatment paradigm for cystic fibrosis ("CF") by developing novel medicines that normalize the function of the cystic fibrosis transmembrane conductance regulator ("CFTR") protein to deliver clinically meaningful benefit to people with CF. Our goal is to deliver differentiated medicines for people with CF that can restore their CFTR function to as close to normal as possible by directly stabilizing CFTR's nucleotide binding domain 1 ("NBD1"). We believe stabilizing NBD1 is central to unlocking dramatic improvements in clinical outcomes and quality of life for people with CF. We are also advancing a portfolio of complementary CFTR modulator candidates designed to work synergistically with our NBD1 stabilizers to improve CFTR function, as seen in preclinical models.
We believe our robust pipeline provides multiple potential pathways to achieve our mission, either through development of an NBD1 stabilizer and a complementary modulator in combination with each other to produce a proprietary dual combination, or an NBD1 stabilizer administered in combination with the standard of care for CF. While we have prioritized development of a proprietary dual combination, we believe both development pathways offer attractive commercial opportunities.
In June 2025, we announced positive topline data from our two randomized, double-blinded, placebo-controlled Phase 1 clinical trials evaluating SION-719 and SION-451, our lead NBD1 stabilizer product candidates, in healthy volunteers, and our plans to advance both compounds to the next phase of clinical development. The trials assessed the safety, tolerability, and pharmacokinetics ("PK") of single and multiple ascending doses of each product candidate, as well as food effect and tablet bioequivalence.
Both SION-719 and SION-451 were generally well tolerated in these trials, with no serious adverse events, treatment emergent adverse events that led to discontinuation of drug, or dose-limiting toxicities observed. The Phase 1 data also supported the use of a tablet formulation in future trials and indicated that both compounds could be dosed in a fed or fasted state. Both NBD1 stabilizers met target exposure thresholds. Based on the Phase 1 data and our preclinical CF human bronchial epithelial ("CFHBE") model, we believe our NBD1 stabilizers have the potential to provide clinically meaningful benefit to people with CF when SION-719 is administered as an add-on to the standard of care or when SION-451 is used in proprietary dual combinations with one of our complementary modulators.
In October 2025, we announced the initiation of a Phase 2a proof-of-concept trial in CF patients evaluating SION-719 as an add-on to the standard of care. The Phase 2a trial, called PreciSION CF, is
designed to evaluate the safety, tolerability, and PK of SION-719 when administered with the standard of care for CF, Vertex Pharmaceuticals, Inc.'s Trikafta, and to assess change in CFTR function as measured by sweat chloride levels. Additionally, in August 2025, we announced the initiation of a Phase 1 dual combination trial in healthy volunteers evaluating SION-451 in dual combinations with each of SION-2222 and SION-109, two of our complementary CFTR modulators. The trial will evaluate the safety, tolerability, and PK of varying doses of the dual combinations and will inform selection of a dual combination for further development. Topline data from both trials are anticipated in mid-2026.
Liquidity and Financial Condition
Since our inception, we have funded our operations primarily with proceeds from private placements of convertible preferred stock and through net proceeds from our IPO. During 2025, we completed our IPO and raised aggregate net proceeds of $199.6 millionfrom the sale of 12,176,467shares of common stock, which included 1,588,234 shares of common stock sold pursuant to the underwriters' full exercise of their option to purchase additional shares. As of December 31, 2025,we have raised aggregate net proceeds of $530.0 million. We have not generated any revenue from product sales or other sources.
Due to our significant research, development and manufacturing expenditures, we have accumulated substantial losses and negative cash flows since our inception, including net losses of $75.3 million and $61.7 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $256.4 million.
We expect our expenses and operating losses will increase substantially as we:
•continue to advance the clinical development of our current and future product candidates;
•continue to advance our research activities and seek to discover and develop additional product candidates to expand our pipeline;
•pursue regulatory approvals for any current or future product candidates that successfully complete clinical trials;
•continue to utilize third parties to manufacture our product candidates;
•continue to develop, maintain, expand, enforce, defend and protect our intellectual property portfolio (including intellectual property obtained through license agreements) and provide reimbursement of third-party expenses related to our patent portfolio;
•attract, hire and retain additional qualified personnel;
•add operational, financial and management information systems;
•undertake pre-commercial activities, and scale-up external commercial-scale manufacturing capabilities, to commercialize any current or future product candidates which may obtain regulatory approval;
•ultimately establish a sales, marketing and distribution infrastructure to commercialize any current or future product candidates which may receive regulatory approval; and
•incur additional audit, legal, regulatory, tax and other expenses associated with being a public company.
In addition, we have several clinical development, regulatory, and commercial milestones, as well as royalty 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 ongoing and planned clinical trials and our expenditures on other research and development activities.
We do not have any products approved for sale and have not generated any revenue from product sales. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our current or any future product candidates, which we expect will take a number of years or may never occur. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings or other capital sources, potentially including collaborations, licenses or other strategic
arrangements. See the section titled "-Liquidity and Capital Resources." We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates, or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Due to the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of increased expenses or the timing of when, or if, we will be able to achieve or maintain profitability. Even if we generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of December 31, 2025, we had cash, cash equivalents and marketable securities of $310.3 million. Based upon our current operating plans, we believe that our existing cash, cash equivalents and marketable securities, will be sufficient to fund our operations into 2028. 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. In addition, we could utilize our available capital resources sooner than we expect. 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 Annual Report.
License and Collaboration Agreements
Below is a summary of the key terms for certain of our license and collaboration agreements. For a more detailed description of these agreements, see the section titled "Business-License and Collaboration Agreements."
Sanofi License Agreement
In December 2019, we entered into a license agreement, which has been subsequently amended (as amended, the "Sanofi License Agreement"), with Sanofi, pursuant to which we have been granted an exclusive, worldwide, sublicensable, royalty-bearing license to develop and commercialize products using the licensed compounds and know-how for CFTR modulator therapies. The licensed and derived rights are being utilized in SION-719, SION-109 and SION-451.
As initial consideration for the license, we paid a non-refundable, upfront payment of $1.5 million, as well as a reimbursement of $0.3 million for Sanofi's research and development expenses, which was previously recorded as research and development expense because the acquired license represented in-process research and development with no alternative future use. In addition, we are required to pay Sanofi a total of up to $40.0 million upon achievement of certain late-stage developmental and commercial milestones. As of December 31, 2025, no milestones were achieved. We are also required to pay royalties to Sanofi in the low single-digit percentage range based on net sales of licensed products, subject to customary reductions and offsets. Such royalty payments shall be reduced for products covered by derived patents.
CFF Payment Agreement
In December 2019, we entered into a payment agreement (the "CFF Payment Agreement") with the Cystic Fibrosis Foundation ("CFF"), pursuant to which we agreed to provide CFF with compensation in exchange for the grant of, or forbearance from exercising, certain of CFF's rights existing under the license agreement, by and between CFF (through an assignment by Cystic Fibrosis Foundation Therapeutics, Inc.) and Genzyme Corporation, an affiliate of Sanofi (the "CFFT-Genzyme Agreement"). Under the CFF Payment Agreement, we are obligated to compensate CFF in connection with our development and commercialization of licensed products under the Sanofi License Agreement.
As initial consideration for CFF's grant of, and forbearance from exercising, its rights under the CFFT-Genzyme Agreement, we paid an upfront fee of $0.2 million and issued CFF shares of our preferred stock, valued at $1.0 million, which were previously recorded as research and development expenses. In addition, we agreed to pay CFF a sub-teen double-digit percentage of any amounts paid by us to Sanofi under the Sanofi
License Agreement, other than milestone, royalty or reimbursement payments. We are required to pay CFF a total of up to $40.0 million upon achievement of certain late-stage developmental and commercial milestones. As of December 31, 2025, no milestones were achieved. We are also required to pay revenue-shares of royalty payments to CFF in the low single-digit percentage range based on net sales of licensed products, subject to customary reductions and offsets. Such milestone and royalty payments shall be reduced for products covered by derived patents. Further, a side letter was executed between us and Sanofi, which clarifies the relationship between us, Sanofi and CFF, under which we are obligated to pay Sanofi 20% of the milestones it would have been obligated to pay CFF, net of the milestone amounts it is obligated to pay under the Sanofi License Agreement.
AbbVie License Agreement
In July 2024, we entered into a license agreement (the "AbbVie License Agreement") with AbbVie, pursuant to which we have been granted a license to research, develop and commercialize certain CFTR compounds. The licensed rights are directed, among other things, to three clinical-stage CFTR modulator therapies: SION-2222, SION-2851 and SION-3067. The license granted to us under the AbbVie License Agreement is subject to certain preexisting rights held by AbbVie and Galapagos NV ("Galapagos"). In particular, certain of the licensed patents and other intellectual property rights were developed by or on behalf of Galapagos and are sublicensed to us subject to the terms of the second amended and restated collaboration agreement between Galapagos and AbbVie in October 2018 (the "Galapagos License Agreement"), as amended by a side letter between Galapagos and AbbVie in July 2024.
As initial consideration for the license, we paid a non-refundable, upfront payment of $5.0 million and issued shares of our common stock with a fair value of $8.6 million to AbbVie. We determined that the AbbVie License Agreement represented an asset acquisition as it did not meet the definition of the business. We recorded the total initial consideration of $13.6 million as research and development expense during the year ended December 31, 2024, because the acquired license represented in-process research and development with no alternative future use. In addition, we are required to pay AbbVie a total of up to $360.0 million upon achievement of certain development and commercial milestones, consisting of up to $70.0 million in late-stage development milestones and up to $290.0 million in commercial milestones. We are also required to pay royalties to AbbVie in the low to mid single-digit percentage range based on net sales of licensed products, subject to customary reductions and offsets.
In addition, we are required to pay AbbVie up to $130.0 million in commercial and sales-based milestone payments, mid to high single-digit royalties on the licensed products or other payments due to Galapagos pursuant to the Galapagos License Agreement, to the extent such payments are triggered by our use of the licensed rights owned by Galapagos under the AbbVie License Agreement. There were no milestones achieved under the AbbVie License Agreement and Galapagos License Agreement as of December 31, 2025.
Components of Results of Operations
Revenue
To date, we have not generated any revenue. In the future, we may generate revenue from product sales from any approved product, which approval we do not expect to occur for at least the next several years, if ever, as well as collaboration or license agreements we may enter into with respect to our current or future product candidates. We cannot predict if, when or to what extent we will generate revenue as we may never succeed in obtaining regulatory approval for any of our product candidates. If we fail to complete preclinical and clinical development of our current or future product candidates or fail to obtain regulatory approval for any that successfully complete clinical trials, our ability to generate future revenues, and our results of operations and financial position would be adversely affected.
Operating Expenses
Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses.
Research and Development Expenses
Research and development expenses consist primarily of costs associated with the preclinical and clinical development of our current and potential future product candidates. In particular, our research and development expenses include:
•personnel-related costs, including salaries, payroll tax, bonuses, benefits and stock-based compensation for employees engaged in research and development functions;
•the costs to acquire in-process research and development with no alternative future use acquired in an asset acquisition;
•external expenses, including expenses incurred under arrangements with third parties, such as contract research organizations ("CROs"), contract development and manufacturing organizations ("CDMOs"), consultants and our scientific advisors;
•the cost of manufacturing our product candidates, including costs for laboratory supplies, research materials and reagents;
•facility costs, depreciation and other expenses, which include direct and allocated expenses; and
•the cost of obtaining and maintaining patent and trade secret protection for our product candidates.
We recognize research and development costs in the periods in which they are incurred. Most of our research and development expenses have been related to identifying and developing our product candidates. Typically, external expenses are recognized based on an evaluation of the progress to completion of specific tasks using information obtained from (i) internal personnel regarding the services that have been performed on the Company's behalf and estimating the associated cost incurred for those services or (ii) information provided to us by our service providers as of each reporting date. Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses, which are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered, or the services rendered. Significant judgments and estimates are made in determining the accrued or prepaid expense balances at the end of any reporting period.
External costs represent a significant portion of our research and development expenses, which we track on a program-by-program basis following the nomination of a product candidate. Our internal research and development expenses consist primarily of personnel-related expenses, including stock-based compensation expenses and allocated expenses. We do not track our internal research and development expenses on a program-by-program basis as they either relate to early-stage research expenses, such as lab supplies or our personnel expenses, consulting fees or other costs that are deployed across multiple programs.
Product candidates in later stages of development generally have higher development costs than those in earlier stages resulting from larger and more complex clinical trials, manufacturing scale-up and an increase in research and development headcount to oversee these activities. As a result, management expects that our research and development expenses will increase substantially over the next several years as we potentially advance our product candidates into later-stage development efforts.
Our future development costs may vary significantly based on a variety of factors, including:
•the timing, complexity and progress of preclinical and clinical development activities;
•the number and scope of preclinical and clinical programs we decide to pursue;
•the extent to which we in-license or acquire other product candidates and technologies to further develop our pipeline;
•the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to domestic and foreign regulatory authorities;
•receipt of marketing approvals, if any, from applicable regulatory authorities;
•the development of commercial-scale manufacturing and distribution processes for our current and any future product candidates;
•our ability to obtain, maintain and protect patent, trade secret protection and regulatory exclusivity for our product candidates, both in the U.S. and internationally;
•our ability to successfully recruit and retain additional employees;
•the timing and amount of milestones, royalties or other payments we must make to our licensing partners; and
•the commercialization of our product candidates, if and when approved.
A change in the outcome of any of these variables with respect to the development of any current or future product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the U.S. Food and Drug Administration ("FDA") or another regulatory authority were to delay a planned start of a clinical trial or require us to conduct clinical trials beyond those that we currently anticipate would be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. We do not have control over many of these factors, including certain aspects of clinical development, the regulatory submissions process, potential threats to our intellectual property rights and general political and economic conditions that may negatively impact our business in the future. 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.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll tax, bonuses, benefits and stock-based compensation charges for those individuals in executive, legal, finance, human resources, business development, information technology and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for auditing, accounting, tax and consulting services. Lastly, corporate overhead expenses such as information technology, insurance, facilities, and depreciation that are not allocated to the Company's research and development activities are included in general and administrative expenses. We recognize general and administrative expenses in the periods in which they are incurred.
We anticipate that our general and administrative expenses will increase in the future to support our increased research and development activities, pre-commercial preparation activities for our product candidates and any future product candidates and, if any product candidate receives marketing approval, commercialization activities. These increases will likely include increased 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 and regulatory services associated with public company reporting and compliance, director and officer insurance premiums, investor and public relations costs and other administrative and professional services associated with operating as a public company.
Interest Income
Interest income consists primarily of interest earned and the amortization of discount or premiums on our cash equivalents and marketable securities. Interest income increased in 2025 primarily due to the investment of proceeds from our IPO. We expect interest income to decrease in future periods as our investment balances are reduced through operating activities.
Other Income
Other income consists of sublease income through our subleasing agreement which is further discussed within Note 7, "Leases" in our consolidated financial statements included elsewhere in this Annual Report.
Income Taxes
Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each period or for our earned 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 loss carryforwards and tax credits will not be realized.
As of December 31, 2025 and 2024, we had $148.0 million and $65.6 million of federal net operating loss ("NOL") carryforwards, and $155.4 million and $68.2 million of state NOL carryforwards, respectively. The federal NOLs are not subject to expiration and the state NOLs begin to expire in 2045. These loss carryforwards are available to reduce future federal taxable income, if any. As of December 31, 2025 and 2024, we have recorded a full valuation allowance against our net deferred tax assets.
Results of Operations
Comparison of Years Ended December 31, 2025 and 2024
The following table summarizes our results of operations (in thousands):
| Year Ended December 31, | Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | $ | 60,263 | $ | 57,288 | $ | 2,975 | |||||||||||
| General and administrative | 28,719 | 13,268 | 15,451 | ||||||||||||||
| Total operating expenses | 88,982 | 70,556 | 18,426 | ||||||||||||||
| Loss from operations | (88,982) | (70,556) | (18,426) | ||||||||||||||
| Other income: | |||||||||||||||||
| Interest income | 13,295 | 8,170 | 5,125 | ||||||||||||||
| Other income | 419 | 698 | (279) | ||||||||||||||
| Total other income: | 13,714 | 8,868 | 4,846 | ||||||||||||||
| Net loss | $ | (75,268) | $ | (61,688) | $ | (13,580) | |||||||||||
Research and Development Expenses
The following table summarizes our research and development expenses (in thousands):
| Year Ended December 31, | Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Direct research and development expenses by program: | |||||||||||||||||
|
NBD1 and combination development programs(1)
|
$ | 32,865 | $ | 22,065 | $ | 10,800 | |||||||||||
|
Complementary modulator programs(2)
|
5,781 | 6,531 | (750) | ||||||||||||||
| Unallocated research and development expenses: | |||||||||||||||||
| Personnel-related (including stock-based compensation) | 14,668 | 9,128 | 5,540 | ||||||||||||||
| Other R&D related costs | 4,616 | 3,334 | 1,282 | ||||||||||||||
| Facility, lab and depreciation | 2,333 | 2,591 | (258) | ||||||||||||||
| IPR&D acquisition related costs | - | 13,639 | (13,639) | ||||||||||||||
| Total research and development expenses | $ | 60,263 | $ | 57,288 | $ | 2,975 | |||||||||||
(1)NBD1 and combination development program costs include NBD1 stabilizer activities and development of our proprietary combination therapy.
(2)Complementary modulator program costs include manufacturing expenses for the complementary modulators.
Research and development expenses increased by $3.0 million to $60.3 million for the year ended December 31, 2025, from $57.3 million for the year ended December 31, 2024. The increase in research and development expenses was primarily due to:
•direct research and development expenses increased by $10.1 million primarily due to an increase in clinical programs and combination development activities; and
•unallocated research and development expenses decreased by $7.1 million primarily due to IPR&D acquisition costs incurred in connection with our license agreement with AbbVie of $13.6 million in the third quarter of 2024, partially offset by a $5.5 million increase in personnel-related expenses including stock-based compensation, driven by an increase in the size of our workforce to support our clinical pipeline, and a $1.3 million increase in other R&D related costs, primarily driven by the use of third parties.
General and Administrative Expenses
The following table summarizes our general and administrative expenses (in thousands):
| Year Ended December 31, | Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Personnel-related (including stock-based compensation) | $ | 18,898 | $ | 7,842 | $ | 11,056 | |||||||||||
| Professional services & fees | 7,858 | 3,889 | 3,969 | ||||||||||||||
| Facility and depreciation | 1,963 | 1,537 | 426 | ||||||||||||||
| Total general and administrative expenses | $ | 28,719 | $ | 13,268 | $ | 15,451 | |||||||||||
General and administrative expenses increased by $15.5 million to $28.7 million for the year ended December 31, 2025, from $13.3 million for the year ended December 31, 2024. The increase in general and administrative expenses was primarily due to:
•$11.1 million increase in personnel-related expenses including stock-based compensation, driven by an increase in the size of our workforce; and
•$4.0 million increase in fees related to the use of third parties, including consultants and professional service organizations.
Interest Income
Interest income increased by $5.1 million to $13.3 million for the year ended December 31, 2025, from $8.2 million for the year ended December 31, 2024, primarily driven by an increased investment in debt securities due to the proceeds received from the initial public offering.
Other Income
Other income was $0.4 million and $0.7 million for the years ended December 31, 2025, and 2024, respectively, due to sublease income in connection with our subleasing agreement.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates and any future product candidates. As such, we expect our research and development and general and administrative costs will continue to increase significantly, including the costs associated with operating as a public company. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings or strategic agreements.
As of December 31, 2025, we had $310.3 million in cash, cash equivalents and marketable securities.
Cash Flows
The following table sets forth a summary of the net cash flow activity (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash used in operating activities | $ | (66,297) | $ | (52,787) | |||||||
| Net cash used in investing activities | (118,749) | (126,913) | |||||||||
| Net cash provided by financing activities | 205,710 | 178,967 | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 20,664 | $ | (733) | |||||||
Operating Activities
For the year ended December 31, 2025, net cash used in operating activities was $66.3 million primarily due to our net loss of $75.3 million and changes in operating assets and liabilities of $2.7 million, partially offset by $11.6 million of non-cash charges related to stock-based compensation, depreciation, non-cash operating lease expense and amortization of discounts on marketable securities.
For the year ended December 31, 2024, net cash used in operating activities was $52.8 million primarily due to our net loss of $61.7 million and changes in operating assets and liabilities of $3.1 million, partially offset by $12.0 million of non-cash charges related to stock-based compensation, depreciation, non-cash operating lease expense and amortization of discounts on marketable securities.
Investing Activities
Net cash used in investing activities was $118.7 million during the year ended December 31, 2025, which was primarily driven by purchases of marketable securities of $325.0 million and purchases of property and equipment of $0.4 million, partially offset by maturities of marketable securities of $206.7 million.
Net cash used in investing activities was $126.9 million during the year ended December 31, 2024, which was primarily driven by purchases of marketable securities for $182.8 million, partially offset by maturities of marketable securities of $56.0 million.
Financing Activities
Net cash provided by financing activities was $205.7 million during the year ended December 31, 2025, primarily due to net proceeds of $202.1 million received when the Company closed its IPO plus exercise proceeds totaling $3.6 million.
Net cash provided by financing activities was $179.0 million during the year ended December 31, 2024, during which time the Company closed its Series C Financing.
Future Funding Requirements
As of December 31, 2025, we had cash, cash equivalents and marketable securities of $310.3 million. Based upon our current operating plans, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations into 2028. 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, conducting preclinical studies and 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.
Our future funding requirements will depend largely on:
•the type, number, scope, progress, expansions, results, costs and timing of, discovery, preclinical studies and clinical trials of our current and future product candidates;
•the costs and timing of manufacturing for our current and future product candidates and commercial manufacturing;
•the costs, timing and outcome of regulatory review of our current and future product candidates;
•the timing and amount of milestones, royalties, or other payments we may be required to make to third parties, including Sanofi, CFF and AbbVie, and the terms and timing of establishing and maintaining any other similar arrangements we may enter in the future;
•the legal costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;
•our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company;
•the costs associated with hiring additional personnel and consultants as our clinical and pre-commercial activities increase;
•the costs and timing of establishing or securing sales and marketing capabilities if any current or future product candidate is approved;
•our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;
•the financial terms of any such agreement that we may enter into, including if we in-license or acquire additional product candidates or intellectual property; and
•costs to add additional operational, financial, clinical, quality and management information systems.
We have no committed sources of capital. 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 or other strategic 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, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. In addition, debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional funds through a strategic agreement, we may have to grant rights to develop and market our current and future product candidates even if we would otherwise prefer to develop and market such product candidates ourselves. 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, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts.
Contractual Obligations and Commitments
Research and Development and Manufacturing Agreements
We enter into contracts in the ordinary course of business with CROs, CDMOs and other vendors to assist in the research and development activities and other services and products for operating purposes. These contracts generally provide for termination at any time upon a certain amount of prior notice.
Leases
In May 2022, we executed a non-cancelable operating lease in Waltham, Massachusetts (the "Waltham Lease") to rent out 24,051 square feet of laboratory and office space and relocated our headquarters to Waltham in January 2023. Total expected cash payments in connection with the Waltham Lease will be $9.7 million over the term of the agreement ending in 2030. This excludes our share of facility operating expenses, real-estate taxes and other costs that are reimbursable to the landlord under the lease. For additional information regarding the lease obligations see Note 7, "Leases" in our consolidated financial statements included elsewhere in this Annual Report.
License Agreements
Our agreements with certain third parties to license intellectual property include potential milestone fees, sublicense fees and royalty fees. The milestone fees are dependent upon the development of products using the intellectual property licensed under the arrangements and contingent upon the achievement of development or regulatory approval milestones, as well as commercial milestones. These potential obligations are contingent upon the occurrence of future events and the timing and likelihood of such potential obligations are not known with certainty. For further information regarding these agreements, please see "Business-Licenses and Collaboration Agreements."
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States of America.The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements and accompanying notes. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and judgments on an ongoing basis. 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 that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 2, "Summary of Significant Accounting Policies" in our consolidated financial statements included elsewhere in this Annual Report, we believe that our critical accounting estimates are as follows.
Research and Development Expenses and Accruals
In preparing the consolidated financial statements, we are required to estimate our accrued research and development expenses as of each balance sheet date. 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. This process involves reviewing open contracts, communicating with internal 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 the actual cost. We periodically confirm the accuracy of our estimates with our service providers and make adjustments, if necessary. The majority of our service providers invoice in arrears for services performed or when contractual milestones are met. The financial terms of agreements with these service providers are subject to negotiation, vary from contract-to-contract and may result in uneven payment flows. In circumstances where amounts have been paid in excess of costs incurred, we record a prepaid expense.
Contingent developmental and regulatory milestone payments will be recognized when the milestone is achieved, and commercial milestones, such as sales-based milestone payments, and royalties will be recognized when the underlying sale(s) occur.
Although we do not expect our estimates to be materially different from amounts incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts incurred.
Stock-Based Compensation Expense
We measure all stock options and other stock-based awards granted to employees, directors and non-employees based on their fair value on the date of the grant. We recognize compensation expense for awards to employees and directors over the requisite service period, which is generally the vesting period of the respective award. Compensation expense for awards to non-employees with service-based vesting conditions is recognized in the same manner as if we had paid cash in exchange for the goods or services, which is generally over the vesting period of the award. Our stock-based payments include stock options and grants of restricted common stock awards. For stock-based awards with service-based vesting conditions, we recognize compensation expense using the straight-line method. The fair value of each restricted common stock award is estimated on the date of grant based on the fair value of our common stock on that same date. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option and our expected dividend yield. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require judgment to develop. See Note 12, "Stock-based Compensation" in our consolidated financial statements included elsewhere in this Annual Report for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted for the years ended December 31, 2025 and 2024. For awards to non-employees, the expected term of the option is equal to the contractual term of the non-employees' service agreement.
Determination of Fair Value of Common Stock Valuations
Prior to the completion of our IPO, there was no public market for our common stock. As a result, the estimated fair value of our common stock was determined by our board of directors as of the date of each option grant with input from management, considering our most recently available third-party valuations of common stock, and our board of directors' assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants' Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, including the option pricing method and the probability-weighted expected return method. These methodologies required the use of significant management judgment and assumptions.
Since completion of our IPO in February 2025, the fair value of our common stock has been determined based on the closing market price of our common stock on the date of equity grant.
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" in our consolidated financial statements included elsewhere in this Annual Report.
Emerging Growth Company and Smaller Reporting Company Status
We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We may take advantage of these exemptions until we are no longer an emerging growth company. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until the time that we are no longer an "emerging growth company."
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a "large accelerated filer" under the rules of the SEC, which means, among other things, the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We are also a "smaller reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until for so long as either (i) our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
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