Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") on March 6, 2025. This discussion includes forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results may differ materially from management's expectations as a result of various factors, including, but not limited to, those discussed in the section titled "Risk Factors" in this report. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "may," "plans," "potential" "predicts," "projects," "should," "will," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update or revise any forward-looking statements to reflect new information or future events, even if new information comes available in the future. You should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.

Overview

We are a clinical-stage immunology-based biopharmaceutical company focused on discovering, developing and commercializing novel therapies for patients living with inflammatory and immunological diseases. Our lead drug candidate, RPT904, is a half-life extended monoclonal antibody ("mAb") designed to bind free human immunoglobin E ("IgE"), a key driver of several allergic diseases.

In December 2024, we entered into an exclusive license agreement (the "Jemincare License Agreement") with Shanghai Jemincare Pharmaceutical Co., Ltd ("Jemincare"), a subsidiary of Jiangxi Jemincare Group Co., Ltd., under which we have exclusive rights to develop and commercialize RPT904 worldwide, excluding mainland China, Hong Kong, Macau and Taiwan (together, the "Jemincare Territory"). We believe RPT904 could offer patients a potentially improved therapeutic option compared to omalizumab (Xolair®), an anti-IgE antibody approved for asthma, chronic spontaneous urticaria ("CSU"), chronic rhinosinusitis with nasal polyps and food allergy. In a Phase 1 clinical trial conducted by Jemincare comparing RPT904 and omalizumab, the median half-life of RPT904 was more than two times that of omalizumab at the same dose, and RPT904 demonstrated deeper and more sustained reduction of free IgE and higher total IgE accumulation compared to omalizumab at the same dose. We plan to pursue clinical development of RPT904 initially in food allergy and CSU.

Our oncology drug candidate, tivumecirnon, is an oral small-molecule C-C motif chemokine receptor 4 ("CCR4") antagonist designed to selectively inhibit the migration of immunosuppressive regulatory T cells ("Treg") into tumors. Data from a Phase 2 trial of patients with advanced checkpoint-naïve non-small cell lung cancer ("NSCLC") treated with tivumecirnon in combination with the checkpoint inhibitor pembrolizumab showed greater confirmed objective response rate and progression free survival than what has historically been demonstrated by pembrolizumab monotherapy. We hold worldwide rights to tivumecirnon, with the exception of the exclusive license (the "Hanmi License Agreement") granted to Hanmi Pharmaceutical Ltd. ("Hanmi") in Korea, mainland China, Hong Kong, Macau and Taiwan (together, the "Hanmi Territory"). We are seeking a partner to further develop tivumecirnon outside the Hanmi Territory.

Zelnecirnon, our small molecule CCR4 antagonist for inflammatory disease, was being evaluated in two randomized, placebo-controlled Phase 2 clinical trials in asthma and atopic dermatitis ("AD"). Both trials were placed on clinical hold by the U.S. Food and Drug Administration ("FDA") in February 2024 due to a serious adverse event ("SAE") of liver failure in one patient in the AD trial, and we subsequently closed both trials. In November 2024, based on feedback from the FDA, we ceased development of zelnecirnon. We are currently pursuing different novel CCR4 antagonists that we believe may have improved safety margins.

Reverse Stock Split

On June 16, 2025, we effected a 1-for-8 reverse stock split of our shares of common stock, $0.0001 par value per share (the "Reverse Stock Split"), pursuant to an amendment of our Amended and Restated Certificate of Incorporation approved by our stockholders at the 2025 Annual Meeting. All share and per-share data in this Quarterly Report on Form 10-Q have been retroactively adjusted to account for the Reverse Stock Split for all periods presented. Proportionate adjustments have been made to the number of shares of common stock underlying our outstanding equity awards and pre-funded warrants, the number of shares issuable under our equity incentive plans, and other existing agreements, as well as the corresponding exercise price of outstanding equity awards and pre-funded warrants. The Reverse Stock Split did not affect the par value of the common stock.

Geopolitical and Macroeconomic Developments

Recent geopolitical and macroeconomic events have led to disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally. As a result of these factors and other geopolitical and macroeconomic developments described in this Quarterly Report on Form 10-Q, our business and results of operations may be adversely affected.

Although we did not see a significant financial impact to our business operations as a result of recent geopolitical and macroeconomic developments during the six months ended June 30, 2025, there may be potential impacts to our business in the future that are highly uncertain and difficult to predict such as disruptions or restrictions in our supply chain, disruption or restrictions on our employees' ability to travel, disruptions to or delays in planned or ongoing clinical trials, third-party manufacturing supply and other operations, interruptions or delays in the operations of the FDA or other regulatory authorities, and continued fluctuations in inflation and interest rates, which may increase the cost of conducting business activities or cause changes in availability and cost of credit and impact our ability to raise capital and conduct business development activities. The ultimate impact of these geopolitical and macroeconomic developments, as well as any lasting effects on our business, is highly uncertain and subject to continued change, and we recognize that macroeconomic and geopolitical factors may continue to present challenges for us.

Financial Overview

Since commencing operations in 2015, we have devoted substantially all of our efforts and financial resources to building our research and development capabilities and establishing our corporate infrastructure. As a result, we have incurred net losses since inception. As of June 30, 2025, we had an accumulated deficit of $649.4 million. We incurred net losses of $34.8 million and $58.2 million for the six months ended June 30, 2025 and 2024, respectively. We do not expect to generate product revenue unless and until we obtain approval for the commercialization of a drug candidate, and we cannot assure you that we will ever generate significant product revenue or profits.

Since inception, we have financed our operations primarily through the sale of equity securities. In December 2024, we sold through a private placement to a select group of accredited investors 12,500,000 shares of common stock at a price of $6.80 per share and pre-funded warrants to purchase up to 9,556,500 shares of common stock at a purchase price of $6.7992 per pre-funded warrant, resulting in net proceeds of $143.0 million, after deducting offering expenses (the "Private Placement"). Each pre-funded warrant has an exercise price of $0.0008 per share. Additionally, in August 2023, we filed with the SEC and the SEC declared effective, a shelf registration statement on Form S-3 related to the sale and issuance of up to $450 million of our securities, including up to $150 million of shares of common stock that may be offered and sold from time to time in one or more "at-the-market" offerings pursuant to a Controlled Equity OfferingSMSales Agreement (the "ATM Sales Agreement") with Cantor Fitzgerald & Co. and Leerink Partners LLC. During the six months ended June 30, 2025, we did not sell any shares of common stock under the ATM Sales Agreement. As of June 30, 2025, there were up to $140.6 million of shares of common stock available for future issuance under the ATM Sales Agreement. As of June 30, 2025, we had cash and cash equivalents and marketable securities of $168.9 million and working capital of $159.8 million.

We expect to incur substantial expenditures in the foreseeable future as we expand our pipeline and advance our drug candidates through clinical development, undergo the regulatory approval process and, if our drug candidates are approved, launch commercial activities.

We will need substantial additional funding to support our continuing operations and pursue our development strategy. Until we can generate significant revenue from sales of our drug candidates, if ever, we expect to finance our operations through equity or debt financings or other capital sources, including potential collaborations with other companies, or other strategic transactions. Adequate funding may not be available to us on acceptable 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 our drug candidates or delay our efforts to expand our product pipeline. We may also be required to sell or license to other parties rights to develop or commercialize our drug candidates that we would prefer to retain.

Components of Operating Results

Research and Development Expenses

We expense both internal and external research and development costs as such expenses are incurred. We track the external research and development costs incurred for each of our drug candidates. However, we do not track our internal research and development costs by drug candidate, as the related efforts and their costs are typically spread across multiple drug candidates.

We account for non-refundable advance payments for goods or services that will be used in future research and development activities as expenses when the goods have been received or when the service has been performed rather than when the payment is made.

Clinical trial costs are a component of research and development expenses. We expense costs for our clinical trial activities performed by third parties, including clinical research organizations ("CROs") and other service providers, as they are incurred, based upon estimates of the work completed over the life of the individual study in accordance with the associated agreements. We use information received from our personnel and outside service providers to estimate the clinical trial costs incurred.

External research and development expenses consist primarily of costs incurred for the development of our drug candidates and include:

Internal research and development costs include:

Our research and development expenses decreased during the quarter ended June 30, 2025 compared to the quarter ended June 30, 2024 due to the early closure of the zelnecirnon clinical trials and termination of the zelnecirnon program. However, we expect to devote substantial resources towards research and development during the next few years as we seek to conduct clinical trials for RPT904 and advance other programs into clinical development, which we expect to result in increased research and development expenditures as compared to our 2024 research and development expenses, excluding the $35.0 million upfront license fee for RPT904. Predicting the timing or the final cost to complete our clinical program or validation of our manufacturing and supply processes is difficult and delays may occur because of many factors.

General and Administrative Expenses

General and administrative expenses consist principally of personnel-related costs, including payroll and stock-based compensation for personnel in executive, finance, human resources, business and corporate development and other administrative functions; professional fees for legal, consulting and accounting services; rent and other facilities costs; depreciation and other general operating expenses not otherwise classified as research and development expenses.

We expect to continue to incur expenses to support our continued operations as a public company, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq Global Market, insurance expenses, investor relations expenses, audit fees, professional services and general overhead and administrative costs. If we are no longer deemed to be a smaller reporting company, we expect that we will incur increased expenses to support our continued operations as a public company.

Other Income, Net

Our cash and cash equivalents and marketable securities are invested in money market funds, corporate debt securities, commercial paper and U.S. government agency securities. Other income, net, consists primarily of interest earned on our cash and cash equivalents and marketable securities.

Critical Accounting Policies, Significant Judgments and Use of Estimates

Our condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience 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 value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2025, as compared to the critical accounting policies and estimates disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 6, 2025. Our significant accounting policies are also described in "Summary of Significant Accounting Policies" in Note 2 of the accompanying condensed financial statements.

Results of Operations

Comparison of the Three Months Ended June 30, 2025 and 2024

The following table summarizes our results of operations for the periods indicated (in thousands):

Research and Development Expenses

Research and development expenses decreased $10.3 million, or 45%, to $12.3 million for the three months ended June 30, 2025 from $22.6 million for the three months ended June 30, 2024. The decrease in research and development expenses was primarily due to decreases of $7.0 million in development costs related to zelnecirnon, $0.8 million in development costs related to tivumecirnon, $2.9 million in personnel costs, $0.5 million in lab supplies costs, $0.8 million in non-cash stock-based compensation expense and $0.4 million in facilities costs, partially offset by increases of $1.9 million in development costs related to RPT904 and $0.2 million in development costs for early-stage programs.

The following is a comparison of research and development expenses for the three months ended June 30, 2025 and 2024 (in thousands):

*: percentage not meaningful

As previously noted, we do not track our internal research and development expenses by drug candidate, as the related efforts and their costs are typically spread across multiple drug candidates.

General and Administrative Expenses

General and administrative expenses increased $0.5 million, or 8%, to $7.2 million for the three months ended June 30, 2025 from $6.7 million for the three months ended June 30, 2024. The increase in general and administrative expenses was primarily due to increases of $0.4 million in consulting costs, and $0.1 million in facilities costs.

Other Income, Net

Other income, net increased $0.2 million, or 13%, to $1.9 million for the three months ended June 30, 2025 from $1.7 million for the three months ended June 30, 2024. The increase was driven primarily by an increase in interest income due to higher invested cash balances for the three months ended June 30, 2025.

Comparison of the Six Months Ended June 30, 2025 and 2024

The following table summarizes our results of operations for the periods indicated (in thousands):

*: percentage not meaningful

Research and Development Expenses

Research and development expenses decreased $23.0 million, or 49%, to $24.4 million for the six months ended June 30, 2025 from $47.4 million for the six months ended June 30, 2024. The decrease in research and development expenses was primarily due to decreases of $14.6 million in development costs related to zelnecirnon, $1.7 million in development costs related to tivumecirnon, $6.5 million in personnel costs, $1.2 million in lab supplies costs, $1.6 million in non-cash stock-based compensation expense and $0.7 million in facilities costs, partially offset by increases of $2.9 million in development costs related to RPT904 and $0.3 million in development costs for early-stage programs.

The following is a comparison of research and development expenses for the six months ended June 30, 2025 and 2024 (in thousands):

*: percentage not meaningful

As previously noted, we do not track our internal research and development expenses by drug candidate, as the related efforts and their costs are typically spread across multiple drug candidates.

General and Administrative Expenses

General and administrative expenses were $14.4 million for each of the six months ended June 30, 2025 and 2024. General and administrative expenses were flat primarily due to the decreases of $0.2 million in personnel costs, offset by an increase of $0.2 million in facilities costs.

Other Income, Net

Other income, net increased $0.3 million, or 9%, to $4.0 million for the six months ended June 30, 2025 from $3.7 million for the six months ended June 30, 2024. The increase was driven primarily by an increase in interest income due to higher invested cash balances for the six months ended June 30, 2025.

Liquidity and Capital Resources; Plan of Operations

Since inception, we have financed our operations primarily through the sale of equity securities. In December 2024, we closed the Private Placement, resulting in net proceeds of $143.0 million, after deducting offering expenses. During the year ended December 31, 2024, we sold 45,665 shares of common stock under the ATM Sales Agreement for net proceeds of $9.0 million, after deducting sales agent commissions and other offering related costs. As of June 30, 2025, up to $140.6 million of shares of common stock remained available for future issuance under the ATM Sales Agreement. As of June 30, 2025, we had cash and cash equivalents and marketable securities of $168.9 million and working capital of $159.8 million. Our cash equivalents and marketable securities consist of commercial paper, corporate bonds and U.S. government agency securities. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view towards liquidity and capital preservation. Since inception, we have incurred net losses and negative cash flows from operations.

As of June 30, 2025, we had an accumulated deficit of $649.4 million. In addition, we expect to incur substantial additional costs in order to conduct research and development activities necessary to develop and commercialize our drug candidates. Additional capital will be needed to undertake these activities and we intend to raise such capital through the issuance of additional equity or debt, strategic alliances with other companies or other sources of financing. However, if such capital is not available at adequate levels or on acceptable terms, we could be required to significantly reduce operating expenses and delay or reduce the scope of, or eliminate, some of our development programs. We believe our current cash and cash equivalents and marketable securities will be sufficient to fund our anticipated level of operations through at least the next 12 months following the filing date of this Quarterly Report on Form 10-Q.

We will continue to require additional capital to develop our drug candidates and fund operations for the foreseeable future. We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:

Additionally, the global financial markets have recently experienced, and may in the future experience, significant disruptions due to various macroeconomic factors, including among other things, the impact of ongoing overseas conflicts and other economic factors such as tariffs and escalating trade tensions, resulting in a general global economic slowdown. If these disruptions and slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could in the future negatively affect our ability to pursue our business strategy. See "Risk Factors" for additional risks associated with our substantial capital requirements.

If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any equity or debt financing may contain terms that are not favorable to us or our stockholders. If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to other parties rights to develop or commercialize our drug candidates that we would prefer to retain.

On May 21, 2025, we received a notification letter from the Nasdaq Listing Qualifications Department of The Nasdaq Stock Market LLC ("Nasdaq") notifying us that the average closing bid price of our shares of common stock was below the minimum closing bid price of $1.00 per share during the last 30 consecutive trading days (the "Notice"), as required for continued listing on the Nasdaq under Rule 5450(a)(1) of the Nasdaq's Listing Rules (the "Rules").

The Notice had no immediate impact on the listing of our common stock, which continued to be listed and traded on Nasdaq subject to our continued compliance with the other listing requirements of the Rules. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we had 180 calendar days, or until November 17, 2025 (the "Compliance Date") to cure the deficiency and regain compliance with the minimum bid price (subject to additional time periods for which we may be eligible). To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days before the Compliance Date.

On June 16, 2025, we effected the Reverse Stock Split. One of the purposes of the Reverse Stock Split was to maintain the listing of our common stock on The Nasdaq Global Market. As a result of the Reverse Stock Split, on June 20, 2025, we were notified by NASDAQ that we had regained compliance with the Rules.

Summary Condensed Statements of Cash Flows

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):

Cash Used in Operating Activities

Net cash used in operating activities was $63.7 million for the six months ended June 30, 2025, reflecting a net loss of $34.8 million and changes in operating assets and liabilities of $38.2 million, including the $35.0 million payment for the upfront license fee to Jemincare, partially offset by non-cash charges primarily for depreciation, amortization, non-cash operating lease expense and stock-based compensation expense totaling $9.3 million.

Net cash used in operating activities was $55.2 million for the six months ended June 30, 2024, reflecting a net loss of $58.2 million and changes in operating assets and liabilities of $7.8 million, partially offset by non-cash charges primarily for depreciation, amortization, non-cash operating lease expense and stock-based compensation expense totaling $10.8 million.

Cash (Used in) Provided by Investing Activities

Cash used in investing activities was $64.3 million for the six months ended June 30, 2025, primarily from the purchases of marketable securities of $138.7 million, partially offset by the proceeds from maturities of marketable securities of $74.4 million.

Cash provided by investing activities was $35.1 million for the six months ended June 30, 2024, primarily from the proceeds from maturities of marketable securities of $69.2 million, partially offset by the purchases of marketable securities of $34.0 million and purchase of property and equipment for $0.1 million.

Cash Provided by Financing Activities

Net cash provided by financing activities was $0.2 million for the six months ended June 30, 2025 from net proceeds from our employee stock plans. Net cash provided by financing activities was $9.7 million for the six months ended June 30, 2024, consisting of $9.0 million of net proceeds from the sale of shares under the ATM Sales Agreement and $0.7 million of net proceeds from our employee stock plans.

Material Cash Requirements

Our cash requirements in the ordinary course of business have not materially changed from those disclosed under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Material Cash Requirements" in our Annual Report on Form 10-K for the year ended December 31, 2024, filed on March 6, 2025 with the SEC.

Smaller Reporting Company Status

We are a smaller reporting company as defined in the Exchange Act. We may take advantage of certain of the scaled disclosures available to smaller reporting companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and will be able to take advantage of these scaled disclosures for so long as (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.