Lenz Therapeutics Inc.

03/24/2026 | Press release | Distributed by Public on 03/24/2026 14:10

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 following discussion and analysis provides information that our management believes is relevant to an assessment and understanding of LENZ' consolidated results of operations and financial condition. The discussion should be read together with the audited consolidated financial statements and the accompanying notes to those statements that are included elsewhere in this Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. LENZ's actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" as set forth in Part I, Item 1A of this Annual Report on Form 10-K.
Unless otherwise indicated or the context otherwise requires, references in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" section to "LENZ OpCo," "LENZ," "the Company," "we," "us," "our" and other similar terms refer to the business and operations of LENZ OpCo prior to the Merger and to LENZ and its consolidated subsidiary following the Merger.
While the legal acquirer in the Merger was Graphite, for financial accounting and reporting purposes under U.S. GAAP, LENZ OpCo was the accounting acquirer and the Merger was accounted for as a "reverse recapitalization." A reverse recapitalization (i.e., a capital transaction involving the issuance of stock by Graphite for LENZ OpCo's stock) does not result in a new basis of accounting, and the consolidated financial statements of the combined entity represent the continuation of the consolidated financial statements of LENZ OpCo in many respects. Accordingly, the consolidated assets, liabilities and results of operations of LENZ OpCo became the historical consolidated financial statements of the combined company, and Graphite's assets, liabilities and results of operations were consolidated with those of LENZ OpCo beginning on the acquisition date. Operations prior to the Merger will be presented as those of LENZ OpCo in future reports. Graphite's assets and liabilities were measured and recognized at their fair values as of the closing of the Merger.
Overview
We are a commercial pharmaceutical company focused on the commercialization of VIZZ®(aceclidine ophthalmic solution) 1.44%, the first and only FDA-approved aceclidine-based eye drop for the treatment of presbyopia, a condition impacting an estimated 1.8 billion people globally and 128 million people in the United States ("U.S."). We are commercializing VIZZ in the U.S. and continue to establish licensing partnerships internationally to provide access to VIZZ globally. We believe that a once-daily pharmacological eye drop that can effectively and safely improve near vision throughout the full workday, without the need for reading glasses, is a highly attractive commercial product with an estimated U.S. market opportunity in excess of $3 billion. It is our goal to successfully commercialize VIZZ, and we have assembled an executive team with extensive clinical and commercial experience to execute this goal and become the category leader.
VIZZ (aceclidine ophthalmic solution) 1.44% is a once-daily eye drop developed to restore clear near vision for up to 10 hours. VIZZ is powered by aceclidine, highlighted by its differentiated mechanism of action as a predominantly pupil-selective miotic that interacts with the iris, with minimal ciliary muscle stimulation. VIZZ contracts the iris sphincter muscle resulting in a pinhole effect and uniquely achieves a sub-2mm pupil that extends depth of focus to significantly improve near vision without causing a myopic shift. Aceclidine, the sole active ingredient in VIZZ, is a new chemical entity ("NCE") in the U.S. and its FDA approval marks a global first in the treatment of presbyopia. VIZZ has patent protection until 2044 in the U.S., at a minimum, due to a robust intellectual property portfolio underpinned by issued patents.
On July 31, 2025, the FDA approved VIZZ, making it the first and only aceclidine-based product approved by the FDA. VIZZ has five years of NCE exclusivity in the U.S., expiring in July 2030. The Company commercially launched VIZZ in the U.S. in August 2025, with direct-to-eye care professional sales and marketing activities initiated immediately upon approval. Professional product sample distribution by the sales force to optometrists and ophthalmologists and commercial product shipments to customers via our e-pharmacy partner were initiated in October 2025, and product became broadly available in retail pharmacies beginning in November 2025.
Financial Overview
As of December 31, 2025, we had $292.3 million of cash, cash equivalents, restricted cash, and marketable securities. We believe that our existing cash, cash equivalents and marketable securities as of December 31, 2025 will allow us to continue to commercialize VIZZ, and will be sufficient to fund the Company to positive operating cash flow. We have incurred net losses in each year since inception, and as of December 31, 2025, we had an accumulated deficit of $227.1
million. These losses have resulted principally from costs incurred in connection with research and development activities and selling, general and administrative costs associated with our operations. We expect to continue to incur significant expenses related to product sales, marketing, manufacturing, and distribution of VIZZ as we are in the early stages of commercialization, and additional costs associated with being a public company, including audit, legal, regulatory and tax-related services associated with maintaining compliance with an exchange listing and SEC requirements. As a result of these and other factors, while we believe that our existing cash, cash equivalents and marketable securities as of December 31, 2025 will fund the Company to positive operating cash flow, it is possible that we may require additional financing to fund our operations and planned growth.
Since our inception, we have financed our operations primarily through public offerings of our common stock, proceeds from the Merger, and private placements of our common stock and convertible preferred stock. Concurrent with the closing of the Merger on March 21, 2024, we completed a private placement (the "March 2024 PIPE Financing") of 3,559,565 shares of common stock for an aggregate gross purchase price of $53.5 million. Additionally, on July 17, 2024, we completed a private placement (the "July 2024 PIPE Financing") with Ridgeback Capital Investments, L.P. of 1,578,947 shares of common stock for an aggregate gross purchase price of $30.0 million. As of December 31, 2025, we have sold an aggregate of 3,618,634shares of common stockunder the sales agreement with TD Securities (USA) LLC (the "Sales Agreement"), resulting in net proceeds to the Company of $147.7 million. As of December 31, 2025, the Company had no remaining capacity under the Sales Agreement.
License and Distribution Agreements
CORXEL License and Collaboration Agreement
In April 2022, we entered into a License and Collaboration Agreement with CORXEL Pharmaceuticals (formerly known as Ji Xing Pharmaceuticals Hong Kong Limited) ("CORXEL") granting CORXEL an exclusive license (the "CORXEL License" formerly referred to as the "Ji Xing License") to certain of our intellectual property rights to develop, use, import, and sell products containing LNZ100 (commercially known as VIZZ in the U.S.) ("Products") for use in the treatment of presbyopia in humans in mainland China, Hong Kong Special Administrative Region, Macau Special Administrative Region, and Taiwan (collectively, "Greater China"). We also granted CORXEL (i) the right to negotiate in good faith and enter into agreements to purchase Products from us for clinical and commercial uses at cost plus a negotiated percentage and (ii) the right of first negotiation to obtain a regional license from us on other products we might develop outside of the field of presbyopia for commercialization in Greater China.
We received nonrefundable, non-creditable upfront payments totaling $15.0 million as initial consideration under the CORXEL License during the year ended December 31, 2022. In addition, we received $5.0 million upon submission of the New Drug Application ("NDA") for VIZZ to the National Medical Products Administration ("NMPA") in Greater China for the treatment of presbyopia and another $5.0 million upon FDA approval of VIZZ during the year ended December 31, 2025. We are also eligible to receive (i) up to an additional $85.0 million in regulatory and sales milestone payments, (ii) tiered, escalating royalties in the range of 5% to 15% on net sales of Products in Greater China by CORXEL, its affiliates and sublicensees, and (iii) tiered, deescalating royalties in the range of 15% to 5% of sublicensing income received by CORXEL prior to the regulatory approval of the first Product in Greater China.
The $15.0 million upfront payments allocated to that single performance obligation was recognized on execution of the CORXEL License during the year ended December 31, 2022. During the year ended December 31, 2025, the first regulatory milestone under the CORXEL License was achieved upon submission of the NDA for VIZZ to the NMPA. A second regulatory milestone under the CORXEL License was achieved upon FDA approval of VIZZ. We recognized revenue and received payment totaling $10.0 million for the achievement of both regulatory milestones during the year ended December 31, 2025. No other contractual milestones were met under the CORXEL License during the years ended December 31, 2025 or 2024.
On October 27, 2024, CORXEL and the Company announced positive topline data from the Phase 3 JX07001 clinical trial of VIZZ in patients with presbyopia in China. In this China Phase 3 safety and efficacy trial, VIZZ achieved the primary endpoint and key secondary endpoints, with statistically significant three-lines or greater improvement in Best Corrected Distance Visual Acuity ("BCDVA") at near, without losing one-line or more in distance visual acuity.
Lotus Pharmaceutical Co., LTD. License and Commercialization Agreement
On May 7, 2025, we entered into a license and commercialization agreement providing an exclusive license (the "Lotus License") to certain of our intellectual property to commercialize VIZZ for the treatment of presbyopia in humans in the Republic of Korea, the Kingdom of Thailand, Republic of the Philippines, the Socialist Republic of Vietnam, Malaysia,
Negara Brunei Darussalam, the Republic of Indonesia, and the Republic of Singapore (collectively, "Southeast Asia"). Under the terms of the Lotus License, we received a $5.0 million nonrefundable, non-creditable upfront payment, and are eligible to receive up to $120.0 million of regulatory and commercial milestone payments, as well as tiered, escalating royalties in the range of 10% to 20% on future net sales in Southeast Asia.
Laboratoires Théa License and Commercialization Agreement
On July 7, 2025, we entered into a license and commercialization agreement providing an exclusive license (the "Théa License") to register and commercialize VIZZ for the treatment of presbyopia in Canada. Under the terms of the Théa License, we received a $2.5 million nonrefundable, non-creditable upfront payment, and are eligible to receive up to $67.5 million in regulatory and commercial milestone payments, as well as tiered, escalating royalties in the range of 10% to 20% on future net sales in Canada.
Lunatus Global Medical Supplies Distribution Agreement
On January 2, 2026, we entered into a distribution agreement appointing an exclusive distributor for VIZZ in the United Arab Emirates, Kingdom of Saudi Arabia, Kuwait, Qatar, Bahrain, Oman, Jordan, Lebanon, and Iraq (collectively, the "Middle East") (the "Lunatus Distribution Agreement"). Under the terms of the Lunatus Distribution Agreement, we received a nonrefundable, non-creditable upfront payment, and are eligible to receive regulatory and commercial milestone payments and a per unit fee for each unit sold to Lunatus for distribution in the Middle East, pending regulatory approval.
Key Trends and Factors Affecting Comparability Between Periods
•The commercial launch of VIZZ in July 2025 resulted in the recognition of product sales, net and associated cost of sales during the year ended December 31, 2025. There were no product sales, net or cost of sales recognized prior to the commercial launch of VIZZ. We expect product sales, net and associated cost of sales to increase in 2026 as we continue to execute the commercial launch of VIZZ. License revenue increased during the year ended December 31, 2025 relative to the year ended December 31, 2024 as a result of upfront payments received under the Lotus and Théa Licenses, as well as the achievement of two regulatory milestones under the CORXEL License. We may generate future revenue from additional license and collaboration agreements to commercialize VIZZ outside the U.S.
•Our selling, general and administrative expenses increased in 2025, relative to 2024, as we have built a cross-functional commercial team consisting of marketing, commercial operations and an 88-territory sales force, and will continue to strategically support our sales and commercial infrastructure with capabilities designed to scale when necessary to support the commercialization of VIZZ. We expect such expenses to continue to increase for the foreseeable future due to the recent launch of our direct-to-consumer ("DTC") marketing campaign and the expansion of our sales force.
•Our research and development costs decreased during the year ended December 31, 2025, relative to the comparative period in 2024 primarily due to FDA approval of VIZZ during the year ended December 31, 2025. On a prospective basis subsequent to FDA approval on July 31, 2025, certain expenses that were historically classified as research and development expenses were and will be prospectively classified into sales, general and administrative expenses, including certain medical affairs and chemistry, manufacturing and controls expenses that indirectly support VIZZ. We expect our research and development costs will further decrease in 2026, relative to 2025, given the FDA approval of VIZZ.
Recent Developments
Broad Market Availability of VIZZ
On September 30, 2025, we announced the availability of VIZZ via initiation of product sample distribution by the sales force to optometrists and ophthalmologists nationwide. Commercial product shipments were initiated to customers in October 2025 through our ePharmacy partner, and product availability in retail pharmacies followed in November 2025.
Launch of Direct-to-Consumer Marketing Campaign
On January 14, 2026, we announced the launch of "Make it VIZZable", the VIZZ consumer campaign with award-winning actor, producer and publisher, Sarah Jessica Parker ("SJP") as a brand ambassador for VIZZ. As part of the campaign, SJP
will detail her own experiences with age-related blurry near vision and the ways in which VIZZ has made a real difference in her life.
Lotus New Drug Application Submissions
On December 1, 2025, we announced that Lotus submitted an NDA to the Ministry of Food and Drug Safety for the review and approval of VIZZ, for the treatment of presbyopia in adults in South Korea. This represented the first submission for approval under the Lotus License. In the first quarter of 2026, Lotus submitted NDAs for the review and approval of VIZZ in Thailand and Singapore.
Submission of Marketing Authorization Application to European Medicines Agency
On March 10, 2026, we announced the submission of a Marketing Authorization Application ("MAA") to the European Medicines Agency ("EMA") for the review and approval of VIZZ. If approved, the EMA's positive opinion would serve as a foundational step toward making VIZZ available to the millions of Europeans living with age-related blurry near vision. The submission of the MAA in Europe represents the fifth ex-U.S. regulatory submission for VIZZ.
Basis of Presentation
The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the balance sheets and statements of operations and comprehensive loss presented herein. The following discussion and analysis are based on our audited financial statements and related notes thereto, which we have prepared in accordance with U.S. GAAP. You should read the discussion and analysis together with such audited financial statements and the related notes thereto.
Components of Statements of Operations and Comprehensive Loss
Revenue
Product Sales, net
Beginning in the fourth quarter of 2025, we have generated revenue from sales of VIZZ, which are recorded net of invoice discounts for prompt payment and distribution service fees, product returns and other incentives.
License Agreements
We have generated revenue related to various license and collaboration agreements, and in the future may generate revenue from payments received under our current license and collaboration agreements or additional licenses, commercialization and distribution agreements we may enter into with respect to VIZZ.
Operating Expenses
Cost of Sales
Cost of sales consists of direct and indirect costs related to the manufacturing and distribution of VIZZ, including raw materials, third-party manufacturing costs, packaging services, and freight costs. Cost of sales also includes period costs related to certain operations personnel and inventory adjustment charges. The Company began capitalizing inventory costs upon FDA approval of VIZZ in July 2025. Prior to FDA approval of VIZZ, manufacturing and other inventory costs were recorded to research and development expenses, resulting in zero cost inventory. Cost of sales of VIZZ will increase on a per unit basis after zero cost inventory is sold, which we expect to sell during 2026.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, business development, sales and marketing, human resources and other corporate functions. Other selling, general and administrative expenses include marketing and advertising costs to support our 88-territory sales force, professional fees for legal, tax and business consulting services, public company related expenses such as audit fees and insurance costs, intellectual property and patent costs, facility costs and travel costs. Subsequent to the FDA approval of VIZZ, selling, general and administrative expenses also include salaries and related benefits and stock-based compensation costs related to our quality assurance, regulatory, supply chain and operations, and medical affairs functions.
Research and Development
Research and development expenses, which consisted primarily of costs associated with our product research and development efforts, were expensed as incurred. Research and development expenses consisted primarily of: (i) employee related costs, including salaries, benefits and share-based compensation expense for employees engaged in research and development activities; (ii) third-party contract costs relating to research, formulation, manufacturing, nonclinical studies and clinical trial activities; (iii) external costs of outside consultants who assist with technology development, regulatory affairs, clinical development and quality assurance prior to FDA approval; and (iv) allocated facility-related costs.
Costs for certain activities, such as nonclinical studies and clinical trials were generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators.
Other Income, net
Other income, net consists of interest income earned on cash, cash equivalents, and short-term investments, changes in the fair value of long-term investments due to observable price changes in orderly transactions for an identical or similar investment, and the change in fair value of preferred stock warrants liability. Upon completion of the Merger, the preferred stock warrants became exercisable into shares of common stock and will no longer continue to be remeasured at each reporting date.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
The following table presents the results of operations for the periods indicated (amounts in thousands, except percentages):
Year Ended December 31,
2025 2024 $ Change % Change
Product sales, net $ 1,588 $ - $ 1,588 N/A
License revenue 17,500 - 17,500 N/A
Cost of sales 418 - 418 N/A
Selling, general and administrative expenses
91,138 28,809 62,329 216 %
Research and development expenses 18,670 29,801 (11,131) (37) %
Other income, net 9,513 8,842 671 8 %
Product Sales, net
Product sales, net were initiated during the year ended December 31, 2025 due to the FDA approval of VIZZ in July 2025 and subsequent product sales beginning in October 2025. Product sales, net for the year ended December 31, 2025 were primarily driven by approximately 20,000 paid prescriptions filled. The Company had no product sales during the year ended December 31, 2024.
License Revenue
License revenue increased during the year ended December 31, 2025 due to revenue recognized from the upfront payments under the Lotus and Théa Licenses, and the achievement of two regulatory milestones under the CORXEL License. There was no license revenue during the year ended December 31, 2024.
Cost of Sales
Cost of sales increased during the year ended December 31, 2025 due to cost of sales recognized in connection with sales of VIZZ. There was no cost of sales during the year ended December 31, 2024.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $62.3 million, or 216%, to $91.1 million for the year ended December 31, 2025 compared to $28.8 million for the year ended December 31, 2024. Increases in the comparative period included $31.3 million in employee salaries and related expenses due to a rise in headcount, including the hiring of our 88-territory sales force, $20.5 million in pre-commercial and commercial marketing, advertising and sales infrastructure as we prepared for and executed the commercial launch of VIZZ and initiated the associated DTC marketing campaign, $3.9
million in chemistry and control and regulatory related expenses which were classified as selling, general and administrative expenses subsequent to FDA approval, $2.9 million in travel expenses primarily related to our sales force and $2.8 million in other corporate overhead.
Research and Development Expenses
Research and development expenses incurred for the year ended December 31, 2025 were primarily incurred to further refine the manufacturing process for VIZZ, while research and development expenses incurred for the year ended December 31, 2024 were substantially all related to the development of VIZZ in our INSIGHT and CLARITY trials.
Research and development expenses decreased $11.1 million, or 37%, to $18.7 million for the year ended December 31, 2025 compared to $29.8 million for the year ended December 31, 2024. The decrease was primarily driven by a $12.1 million decrease in clinical and nonclinical research expense for our clinical trials, and a $2.4 million decrease in contract regulatory consulting expenses associated with the prior period preparation and filing of our NDA for VIZZ, and a $1.0 million decrease in employee salaries and related expenses. The decrease was partially offset by a $4.0 million increase in contingent product manufacturing costs incurred prior to FDA approval.
Other Income, net
Other income, net for the year ended December 31, 2025, was $9.5 million, compared to $8.8 million for the year ended December 31, 2024. The increase was primarily driven by additional interest income earned on our cash, cash equivalents, and marketable securities of $1.2 million as a result of an overall increase in cash on-hand in 2025 over the comparative period. During the year ended December 31, 2024, we recorded a $1.0 million charge due to an increase in the fair value of the preferred stock warrants liability, resulting in a non-recurring, non-cash charge at the close of the Merger, and $1.3 million in other income related to an increase in the fair value of the Company's equity investment without a readily determinable fair value.
Liquidity and Capital Resources
Sources of Liquidity
As of December 31, 2025, we had $292.3 million of cash, cash equivalents, restricted cash, and marketable securities. We have incurred net losses in each year since inception and as of December 31, 2025, we had an accumulated deficit of $227.1 million. Our net losses were $82.1 million and $49.8 million for the years ended December 31, 2025 and 2024, respectively. These losses have resulted principally from costs incurred in connection with research and development activities and selling, general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses in the early stages of the commercialization of VIZZ, including costs related to product sales, marketing, manufacturing, and distribution.
From inception through December 31, 2025, we received funding of $13.0 million from our initial seed financing, $47.0 million from the sale of Series A Convertible Preferred Stock, $10.0 million from the sale of Series A-1 Convertible Preferred Stock, gross proceeds of $83.5 million from the sale of Series B Convertible Preferred Stock, approximately $117.8 million in cash and cash equivalents from the Merger, approximately $53.5 million in gross cash proceeds from the March 2024 PIPE Financing, and $30.0 million in gross cash proceeds from the July 2024 PIPE Financing.
On April 4, 2025, we entered into a Sales Agreement (the "Sales Agreement") with TD Securities (USA) LLC ("TD Cowen") under which we may offer and sell up to $150.0 millionof shares of our common stock from time to time through an "at the market" offering program under which TD Cowen will act as sales agent. Under the Sales Agreement, we will set the parameters for the sale of shares, including the number or dollar amount of shares to be issued, the time period during which sales are requested to be made, limitations on the number or dollar amount of shares that may be sold in any one trading day and any minimum price below which sales may not be made. Subject to the terms and conditions of the Sales Agreement, TD Cowen may sell the shares by methods deemed to be an "at the market" offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. We have no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement. The shares will be issued pursuant to the Company's shelf registration statement on Form S-3, including the prospectus supplement contained therein, which was declared effective by the SEC on April 14, 2025. During the year ended December 31, 2025, we sold an aggregate of 3,618,634 shares of common stock at a weighted-average price of $41.45 under the Sales Agreement, resulting in net proceeds of $147.7 million, utilizing the full capacity of the Sales Agreement.
Funding Requirements
We believe that our cash, cash equivalents, and marketable securities as of December 31, 2025 will allow us to continue to build infrastructure and commercialize VIZZ, and such funds are anticipated to fund the Company to positive operating cash flow. This belief is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than expected. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than currently anticipated, and we may need to seek additional funds sooner than planned.
Our future capital requirements will depend on many factors, including but not limited to:
•costs associated with maintaining and expanding a sales, marketing, and distribution infrastructure to commercialize VIZZ;
•our ability to generate positive operating cash flow from sales of VIZZ;
•the costs of commercial manufacturing of VIZZ;
•the costs, timing, and outcome of any additional regulatory review of VIZZ;
•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 terms and timing of establishing and maintaining licenses and other similar arrangements;
•our ability to achieve sufficient market acceptance and adequate market share and revenue for VIZZ; and
•costs associated with any products or technologies that we may in-license or otherwise acquire or develop.
We intend to evaluate financing opportunities from time to time, and our ability to obtain financing will depend, among other things, on our development efforts, business plans, operating performance and the condition of the capital markets at the time we seek financing. We cannot be assured that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity or equity-linked securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, and our stockholders may experience dilution. If we raise additional funds through the incurrence of indebtedness, then we may be subject to increased fixed payment obligations and could be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business.
Cash Flows
The following table summarizes our cash flows for the years presented (amounts in thousands):
Year Ended December 31,
2025 2024
Net cash (used in) provided by:
Operating activities $ (69,170) $ (59,391)
Investing activities (75,668) (154,479)
Financing activities 149,745 199,002
Net increase (decrease) in cash and cash equivalents $ 4,907 $ (14,868)
Net Cash Used in Operating Activities
Net cash used in operating activities primarily results from net loss adjusted for non-cash expenses, changes in working capital components, costs to manufacture VIZZ and employee-related expenditures. Cash flows from operating activities will continue to be impacted by commercialization activities for VIZZ, and will also be impacted by any potential future revenue from commercialization activities and licensing or distribution arrangements. Cash flows will also continue to be affected by other operating and general administrative activities.
For the year ended December 31, 2025, cash used in operating activities was $69.2 million and resulted from a net loss of $82.1 million, in addition to cash outflows of $3.0 million in prepaid expenses and other current assets primarily due to an increase in deposits related to our DTC marketing campaign, and $4.3 million from inventory purchases. The decrease in operating cash flows was offset by a $10.9 million increase in accounts payable and accrued liabilities due to the launch of our DTC marketing campaign, and $9.5 million in non-cash adjustments primarily driven by share-based compensation expense.
For the year ended December 31, 2024, cash used in operating activities was $59.4 million and resulted from a net loss of $49.8 million, in addition to a $11.7 million cash outflow from the payment of accounts payable and accrued liabilities associated with the Merger and accrued clinical activities, offset by $3.5 million in non-cash adjustments primarily driven by share-based compensation expense and the change in the fair value of preferred warrants.
Net Cash Used in Investing Activities
Cash used in investing activities for the year ended December 31, 2025 was $75.7 million, primarily due to $280.8 million of purchases of marketable securities, and partially offset by $206.0 million in proceeds from maturities of marketable securities.
Cash used in investing activities for the year ended December 31, 2024 was $154.5 million, primarily due to $241.9 million of purchases of marketable securities, and partially offset by $87.9 million in proceeds from maturities of marketable securities.
Net Cash Provided by Financing Activities
For the year ended December 31, 2025, cash provided by financing activities was $149.7 million, primarily driven by $147.7 million in net proceeds from common stock sold under the Sales Agreement and $2.0 million in net cash proceeds from exercises of stock options and issuances of common stock under the employee stock purchase plan.
For the year ended December 31, 2024, cash provided by financing activities was $199.0 million and includes $117.8 million in cash and cash equivalents acquired in the Merger, $53.5 million in gross cash proceeds from the March 2024 PIPE Financing, $30.0 million in gross cash proceeds from the July 2024 PIPE Financing, and approximately $4.0 million in net cash proceeds from exercises of stock options.
Material Cash Requirements from Contractual Obligations
In February 2022, we entered into a lease for 2,930 square feet of office space in Del Mar, California. In March 2023, we entered into a lease amendment for a 647 square feet expansion of our office space at the same facility. The term of the lease, as amended, is forty-eight months from the original commencement date, terminating March 31, 2026, unless terminated sooner. In April 2024, we entered into a lease for 9,795 square feet of office space in Solana Beach, California. The term of the lease is thirty-nine months from the commencement date of July 1, 2024, ending September 30, 2027. See Note 8 to our consolidated financial statements included in this Annual Report on Form 10-K for further details related to our office leases.
We also have contracts with various suppliers and manufacturing companies to supply the active pharmaceutical ingredient used in VIZZ, and manufacture the drug product used in the regulatory process and clinical trials. The scope of the services under these contracts can be modified and the contracts cancelled by us upon written notice. In the event of a cancellation, the company would be liable for the cost and expenses incurred to date as well as any close out costs of the service arrangement.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of the financial condition and results of operations is based on our consolidated financial statements included in this Annual Report on Form 10-K, which have been prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of expenses during the periods presented. We believe that the estimates, judgments and assumptions are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. To the extent there are material differences between these estimates, judgments or assumptions and
actual results, our consolidated financial statements will be affected. Historically, revisions to our estimates have not resulted in a material change to our consolidated financial statements.
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included in this Annual Report on Form 10-K, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
Product Sales, net
To date, product sales, net has consisted of sales of VIZZ to (i) certain wholesalers (who in turn sell VIZZ to retail pharmacies) and (ii) directly to patients through the our e-pharmacy partner. Product sales, net is recognized net of reserves for variable components, including but not limited to distribution service fees, prompt pay discounts and product returns. These variable components are reassessed each reporting period, and adjustments are recorded on a cumulative catch-up basis, which affects product sales, net in the period of adjustment. The actual amounts of variable consideration ultimately received may differ from our estimates. To date, actual amounts have not differed materially from our estimates.
Share-Based Compensation Expense
Share-based compensation expense represents the cost of the grant date fair value of equity awards recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis. We estimate the fair value of equity awards using the Black-Scholes option pricing model and recognize forfeitures as they occur. Estimating the fair value of equity awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, is affected by assumptions regarding a number of variables, including the risk-free interest rate, the expected stock price volatility, the expected term of stock options, the expected dividend yield and the fair value of the underlying common stock on the date of grant. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. We determine the inputs and assumptions to the Black-Scholes option pricing model in the following manner:
Fair Value of Common Stock-The fair market value of our common stock is based on its closing price as reported on the date of grant on the primary stock exchange on which our common stock is traded, adjusted for special dividends, if any.
Expected Term-The Company uses the simplified method as prescribed by the Securities and Exchange Commission Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.
Expected Volatility-Given our limited historical stock price volatility data, we derived the expected volatility from the average historical volatilities over a period approximately equal to the expected term of comparable publicly traded companies within our peer group that were deemed to be representative of future stock price trends as we have limited trading history for our common stock. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.
Risk-Free Interest Rate-The risk-free interest rate is based on a U.S. Treasury instrument whose term is consistent with the expected term of the stock options.
Expected Dividend Yield-The expected dividend yield is based on the Company's historical and expected dividend payouts. The Company has historically paid no dividends, other than the special dividend paid by Graphite immediately prior to the close of the Merger, and does not anticipate dividends to be paid in the future.
Other Company Information
Jumpstart Our Business Startups Act ("JOBS Act")
We are an emerging growth company, as defined in the JOBS Act, and we may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the initial public offering of Graphite's common stock (i.e., December 31, 2026). For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company disclosure and reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. Accordingly, the information we
disclose in our SEC filings may not be comparable with the information stockholders receive from other public companies in which they may hold stock.
Additionally, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Prior to the Merger, Graphite elected to use, and we intend to continue to use, this extended transition period for complying with certain or new or revised accounting standards until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of Graphite's initial public offering (i.e., December 31, 2026), (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, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period, or (iii) if we affirmatively and irrevocably opt out of the extended transition period provided by the JOBS Act.
We are also a "smaller reporting company" because the market value of our stock held by non-affiliates was less than $700 million as of June 30, 2025 and the Company's annual revenue was less than $100 million during the fiscal year ended December 31, 2024. We may continue to be a smaller reporting company in any given year if either (i) the market value of our stock held by non-affiliates is less than $250 million as of June 30 in the most recently completed fiscal year or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million as of June 30 in the most recently completed fiscal year. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
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