Avidity Biosciences Inc.

11/10/2025 | Press release | Distributed by Public on 11/10/2025 15:13

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

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 in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q and with our audited financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations, both of which are contained in our annual report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission, or SEC, on February 27, 2025.
Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategies and plans, the planned completion and timing of the transactions contemplated by the Merger Agreement or the Separation and Distribution Agreement (each as defined in Notes to Unaudited Condensed Consolidated Financial Statements - Note 10 - Subsequent Events of this quarterly report), research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned preclinical studies and clinical trials for our product candidates, the timing and likelihood of regulatory filings and approvals for our product candidates, the timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated product development efforts, inflationary pressures, and the ongoing hostilities outside the United States on our business, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," or the negative of these terms or other comparable terminology. These forward-looking statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, "Risk Factors." The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Overview
We are a biopharmaceutical company committed to delivering a new class of RNA therapeutics called Antibody Oligonucleotide Conjugates, or AOCs. Our proprietary AOC platform is designed to combine the specificity of monoclonal antibodies, or mAbs, with the precision of RNA therapeutics to target the root cause of diseases previously untreatable with such therapeutics. Our pipeline currently has three programs in potentially registrational trials. Delpacibart zotadirsen, or del-zota (formerly AOC 1044), is designed for people living with Duchenne muscular dystrophy, or DMD, and is currently in development with the ongoing Phase 2 EXPLORE44 Open-Label Extension (EXPLORE44-OLE™) study. Del-zota is specifically designed for people with mutations amenable to exon 44 skipping, or DMD44, and is the first of multiple AOCs we are developing for DMD. Delpacibart etedesiran, or del-desiran (formerly AOC 1001), is designed to treat people with myotonic dystrophy type 1, or DM1, and is currently in development with the global Phase 3 HARBOR™ trial and ongoing HARBOR Open-Label Extension (HARBOR-OLE™) trial. Delpacibart braxlosiran, or del-brax (formerly AOC 1020), is the first investigational therapy designed to directly target DUX4 in people living with facioscapulohumeral muscular dystrophy, or FSHD, and is currently in development in the registrational fully enrolled ongoing FORTITUDE™ biomarker cohort in the Phase 1/2 FORTITUDE trial, the Phase 2 FORTITUDE Open-Label Extension (FORTITUDE-OLE™) trial and the Phase 3 FORTITUDE-3™ (formerly known as FORWARD™) trial. Del-desiran, del-brax and del-zota have all been granted Orphan Designation by the FDA and the European Medicines Agency, or EMA, and Fast Track Designation by the FDA. In addition, the FDA has granted del-desiran and del-zota Breakthrough Therapy designation and granted del-zota Rare Pediatric Disease designation. Del-desiran has also been granted Orphan Drug Designation by the Japan Ministry of Health, Labour and Welfare (MHLW).
Recent Developments - Merger Agreement with Novartis AG and Spin-Off
On October 25, 2025, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Novartis AG, a company limited by shares (Aktiengesellschaft) incorporated under the laws of Switzerland, which we refer to as Novartis or Parent, and Ajax Acquisition Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent, or Merger Sub, pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into us, and we will survive the Merger as an indirect wholly owned subsidiary of Parent, which we refer to as the Merger.
In connection with the Merger, we, Bryce Therapeutics, Inc. (which will be renamed prior to the Effective Time (as defined below)), a newly formed Delaware corporation and wholly owned subsidiary of ours, or SpinCo, and Parent (with respect to certain sections specified therein) entered into a Separation and Distribution Agreement, dated October 25, 2025, or the Separation and Distribution Agreement, pursuant to which, on the terms and subject to the conditions set forth in the Separation and Distribution Agreement, prior to the effective time of the Merger, or the Effective Time: (i) we will effect a pre-closing reorganization, or the Pre-Closing Reorganization, which will result in SpinCo owning, assuming or retaining all assets and liabilities held by us and our subsidiaries related to our early stage precision cardiology programs and certain collaboration agreements, and us owning, assuming or retaining all other assets and liabilities; and (ii) thereafter, we will either (a) distribute to our stockholders as of the record date for the Spin-Off Distribution, as may be determined by the Company Board or a committee of the Company Board (the Distribution Record Date), on a pro rata basis, all of the issued and outstanding shares of SpinCo common stock, par value $0.001 per share, or SpinCo Common Stock, at a ratio of 1 share of SpinCo Common Stock per 10 shares of our common stock, with SpinCo continuing its existence as a separate and independent company, or the Spin-Off Distribution or (b) subject to Parent's written consent, consummate a sale of SpinCo to a third party in accordance with the terms of the Merger Agreement, or a Permitted Third Party Sale, subject to the terms and conditions specified in the Merger Agreement and the Separation and Distribution Agreement. Following completion of the transactions contemplated by the Separation and Distribution Agreement, or the Spin-Off, we will have no continuing ownership interest in SpinCo. The Spin-Off also includes certain assets of the Company that trigger a right of first negotiation, or the ROFN, with an existing collaboration partner of ours that was notified concurrently with our announcement of our entry into the Merger Agreement.
The parties expect the Merger, the Spin-Off and the other transactions contemplated by the Merger Agreement to close in the first half of 2026. In the event the Merger Agreement is terminated, under specified circumstances, we will be required to pay Parent a termination fee of $450 million. The Merger Agreement further provides that Parent will be required to pay us a reverse termination fee of $600 million in the event the Merger Agreement is terminated by either Parent or the Company under certain circumstances. Refer to Note 10, "Subsequent Events" to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for further details.
Delpacibart zotadirsen (del-zota) for the treatment of DMD44:
Del-zota is currently being studied for the treatment of people living with DMD44 and is the first of multiple AOCs we are developing for DMD. Del-zota is designed to deliver phosphorodiamidate morpholino oligomers, or PMOs, to skeletal muscle and heart tissue to specifically skip exon 44 of dystrophin mRNA to enable production of near full-length functional dystrophin. Del-zota is currently in Phase 2 development as part of the ongoing Phase 2 EXPLORE44-OLE™ study in people living with DMD44.
In October 2025, we completed a positive pre-BLA meeting with the FDA and aligned on a clear path forward for a planned BLA submission for potential accelerated approval of del-zota. This BLA submission is planned for 2026.
We plan to submit to the FDA amendments to the IND for del-zota to generate certain additional data which we will include in our BLA submission.
In October 2025, Kevin M. Flanigan, M.D., Nationwide Children's Hospital, presented del-zota data at four or five months, as compared to placebo from the completed EXPLORE44® trial in participants living with DMD44, at the 30th Annual International Congress of the World Muscle Society. As part of our exploratory analysis, this early data showed trends toward functional improvement in the EXPLORE44 study, with trends across EXPLORE44 and EXPLORE44-OLE continuing after one year of treatment compared to the PRO-DMD-01 database analyzed by Analysis Group®, or DMD44 natural history.
In September 2025, we reported positive topline and functional del-zota data from a total of 17 participants (12 ambulatory and 5 non-ambulatory) in the EXPLORE44 trial®. Participants treated continuously with del-zota for approximately one year began treatment in EXPLORE44 and continued into EXPLORE44-OLE™. Data demonstrated reversal of disease progression and unprecedented improvement compared to baseline and DMD44 natural history (Nat Hx) across multiple functional measures. Treated participants demonstrated statistically significant increases of approximately 25 percent of normal in dystrophin production and restored total dystrophin up to 58 percent of normal. Creatine kinase (CK) levels rapidly reduced by greater than 80 percent compared to baseline and were sustained at near normal levels throughout the duration of evaluation with participants followed for up to 16 months. Additionally, 50 percent of participants had CK levels within the normal range at one year of treatment.
Given the study design, some participants received 5 mg/kg once every six weeks (Q6W) and some received 10 mg/kg once every eight weeks during EXPLORE44. All participants were transitioned to the 5 mg/kg (Q6W) dosing schedule during EXPLORE44-OLE. Not all participants could complete all assessments. Functional data from these pooled dosing cohorts for del-zota-treated participants, compared to DMD44 natural history, demonstrated:
•4-Stair Climb (4SC): Improved from baseline by 2.1 seconds. In contrast, the natural history group declined from baseline by 2.7 seconds (DMD44 Nat Hx N=22; del-zota N=10).
•10-Meter Walk/Run Test (10mWRT): Improved from baseline by 0.7 seconds. In contrast, the natural history group declined from baseline by 1.5 seconds (DMD44 Nat Hx N=22; del-zota N=10).
•Time to Rise from Floor (TTR): Improved from baseline by 3.2 seconds. In contrast, the natural history group declined from baseline by 1.6 seconds (DMD44 Nat Hx N=19; del-zota N=6).
•North Star Ambulatory Assessment (NSAA): Remained stable. In contrast, the natural history group declined from baseline by 2.4 points (DMD44 Nat Hx N=20; del-zota N=10).
•Performance of Upper Limb (PUL2): Improved from baseline by 1.5 points. In contrast, the natural history group declined from baseline by 0.7 points. Similar PUL improvements were seen in both ambulatory and non-ambulatory participants (DMD44 Nat Hx N=27; del-zota N=17).
Safety and tolerability data were assessed from 39 participants in the ongoing EXPLORE44-OLE study, as of June 2025. Del-zota continued to demonstrate favorable long-term safety and tolerability results. Most treatment emergent adverse events (TEAEs) were mild or moderate with the most common TEAEs (occurring in greater than 3 participants) being upper respiratory tract symptoms, diarrhea, fall, back pain and headache. One participant discontinued from EXPLORE44-OLE following an event of hypersensitivity.
In July 2025, we announced the FDA granted Breakthrough Therapy designation to del-zota for the treatment of DMD44.
Delpacibart etedesiran (del-desiran) for the treatment of myotonic dystrophy type 1 (DM1):
Del-desiran is currently being studied in the global Phase 3 HARBOR™ trial and ongoing HARBOR-OLE™ trial in people living with DM1. The Phase 2 MARINA-OLE™ trial has concluded. As of October 2025, participants who completed the MARINA-OLE trial and provided their consent, have transitioned to the HARBOR-OLE trial. Prior to initiation of the HARBOR trial, Avidity aligned with global regulators, including the FDA, on the registrational path for del-desiran. Del-desiran is designed to address the underlying genetic cause of DM1 by reducing levels of a disease-related mRNA called DMPK. Del-desiran consists of a proprietary mAb that binds to the transferrin receptor 1 (TfR1) conjugated with an siRNA targeting DMPK mRNA. Data presented in March 2024 from the MARINA-OLE trial showed reversal of disease progression in people living with DM1 across multiple endpoints including video hand opening time (vHOT) as a measure of hand function and myotonia, muscle strength and activities of daily living when compared to END-DM1 natural history study population over one year.
The global Phase 3 HARBOR trial is a randomized, placebo-controlled, double-blind pivotal study evaluating del-desiran in 159 people (age 16 to 65 years) living with DM1. The trial is being conducted at 34 sites globally. Patients are administered either del-desiran or placebo (1:1) every eight weeks. The trial is designed to assess the multiple key functional aspects of DM1. The primary endpoint is vHOT, a measurement of myotonia, which is the hallmark symptom of DM1. Key secondary endpoints include muscle strength as measured by hand grip strength and quantitative muscle testing (QMT) total score, and activities of daily living as measured by DM1-Activ, a patient reported outcome (PRO) scale to assess the impact of del-desiran on the
multi-systemic nature of the DM1 disease. All study participants, regardless of whether they receive active treatment or placebo, have the option to enroll into the HARBOR-OLE trial where all patients will receive active drug administered every eight weeks. The HARBOR-OLE trial is designed to assess the long-term safety, tolerability, and efficacy of del-desiran for the treatment of DM1.
We plan to submit to the FDA a protocol amendment for the HARBOR trial, which amendment will move the data cutoff date and related items from 30 weeks to 54 weeks. This change is a significant opportunity for patients and the HCP community as it will demonstrate the long-term efficacy and safety benefits of del-desiran. We believe that a larger safety database and longer efficacy data at 54 weeks will increase likelihood of demonstrating a treatment effect in a slowly progressing disease on multiple endpoints.
In July 2025, we announced the Phase 3 HARBOR trial is fully enrolled with a total of 159 participants enrolled. We remain on track to deliver multiple updates from the del-desiran program, including:
•Expected publication of data analyses from the completed Phase 1/2 MARINA trial in the fourth quarter of 2025.
•54-week topline data readout from global Phase 3 HARBOR study expected in the second half of 2026.
Delpacibart braxlosiran (del-brax) for the treatment of facioscapulohumeral muscular dystrophy (FSHD):
Del-brax is currently being studied in the registrational fully enrolled ongoing Biomarker Cohort in the Phase 1/2 FORTITUDE trial, the Phase 2 FORTITUDE-OLE trial and the FORTITUDE-3 (formerly known as FORWARD™) global confirmatory Phase 3 trial in participants living with facioscapulohumeral muscular dystrophy (FSHD). Del-brax is designed to address the underlying cause of FSHD, which is caused by the aberrant expression of a gene called double homeobox 4 or DUX4. Del-brax consists of a proprietary mAb that binds to the transferrin receptor 1 (TfR1) conjugated with an siRNA targeting DUX4 mRNA.
In June 2025, we announced multiple milestones for the del-brax program including FDA alignment on accelerated and full approval pathways for del-brax, and initiation of our global confirmatory Phase 3 FORTITUDE-3 study in FSHD. In addition, we shared positive topline Phase 1/2 FORTITUDE data from the del-brax dose escalation cohorts. Topline del-brax data, compared to placebo, demonstrated:
•Consistent improvement of functional mobility and muscle strength as measured by 10-Meter Walk-Run Test (10MWRT), Timed Up and Go (TUG) and Quantitative Muscle Testing (QMT)
•Consistent improvement in multiple measures of quality of life as measured by patient reported outcomes;
•Rapid and significant reductions in levels of KHDC1L or cDUX, a DUX4-regulated circulating biomarker, and creatine kinase, a biomarker of muscle damage; and
•Favorable long-term safety and tolerability with most adverse events (AEs) mild or moderate, with no related serious or severe adverse events and no discontinuations.
In March 2025, we announced that enrollment was completed for the del-brax biomarker cohort with a total of 51 participants enrolled.
Topline data from the FORTITUDE biomarker cohort is expected in the second quarter of 2026 and the FORTITUDE 3 data readout and global regulatory submissions are expected in 2028.
FORTITUDE™ and FORTITUDE-OLE™ trials
The FORTITUDE™ trial is a randomized, placebo-controlled, double-blind, Phase 1/2 clinical trial designed to evaluate single and multiple doses of del-brax in 90 participants with facioscapulohumeral muscular dystrophy (FSHD). The two dose escalation cohorts in FORTITUDE (N=39) evaluated the safety, tolerability, pharmacokinetics, and pharmacodynamics of del-brax administered intravenously. Though the Phase 1/2 trial is not statistically powered to assess functional benefit, it explores the clinical activity of del-brax including measures of functional mobility and muscle strength as well as patient reported outcomes and quality of life measures, as well as changes in in key biomarkers including KHDC1L or cDUX, a DUX4-regulated circulating biomarker.
Two dose escalation cohorts evaluated 2 mg/kg or 4 mg/kg of del-brax every 13 weeks with a booster dose at 6 weeks in the first three months of the study versus placebo and informed the dose and dose regimen of del-brax for registrational studies. We have identified 2 mg/kg of del-brax every six weeks as the dose for the
registrational studies, FORTITUDE Biomarker Cohort and FORTITUDE-3 Phase 3 study. Participants who complete FORTITUDE have the option to enroll in the ongoing FORTITUDE-OLE study evaluating the long-term safety and tolerability of del-brax.
FORTITUDE Biomarker Cohort
The ongoing biomarker cohort in the FORTITUDE trial (N=51) assesses the impact of del-brax 2 mg/kg administered intravenously every six weeks versus placebo for 12 months in people living with FSHD, ages 16-70. The primary endpoint of the biomarker cohort is reduction of KHDC1L, or cDUX, a novel DUX4-regulated circulating biomarker discovered by Avidity in collaboration with Stephen Tapscott, M.D., Ph.D., Professor of Human Biology and Clinical Research at the Fred Hutchinson Cancer Center. We have aligned with the FDA on the use of cDUX as a surrogate endpoint to support a potential submission for accelerated approval of del-brax.
Global Phase 3 FORTITUDE-3™ Study
FORTITUDE-3™is a global, confirmatory Phase 3, randomized, placebo-controlled, double-blind, 18-month study designed to evaluate del-brax in approximately 200 people (ages 16-70) living with FSHD. The trial is being conducted at approximately 45 global sites including in the U.S., Canada, Europe and Japan. Patients will be administered either 2 mg/kg of del-brax or placebo (1:1) intravenously every six weeks. The Phase 3 FORTITUDE-3 study is designed to be a confirmatory study to support potential full approval of del-brax. FORTITUDE-3 is assessing the impact of del-brax on key FSHD-related endpoints that measure functional mobility (10-Meter Walk-Run test, or 10 MWRT, and Timed Up and Go, or TUG), strength (quantitative muscle testing, or QMT, total score), patient-reported outcomes (PROs) and decrease in KHDC1L, or cDUX, a novel, DUX4-regulated circulating biomarker. All study participants, regardless of whether they receive active treatment or placebo, will have the option to enroll into an open-label extension trial where all participants will receive del-brax.
Company Advancements
We are advancing and expanding our innovative AOC pipeline to develop potential treatment options for people living with rare diseases across a wide range of therapeutic areas. Our first AOC programs are from our rare neuromuscular disease franchise where we have leveraged our deep experience with oligonucleotide therapeutics, modulation of RNA processes, antibody engineering and conjugation and drug delivery techniques. We have now expanded beyond rare neuromuscular disorders and into precision cardiology, advancing two wholly-owned precision cardiology development candidates targeting rare genetic cardiomyopathies - AOC 1072 targeting PRKAG2 (Protein Kinase AMP-activated non-catalytic subunit Gamma 2) Syndrome and AOC 1086 targeting PLN (phospholamban) cardiomyopathy.
We continue to execute on our global commercial infrastructure development as we plan for three potential successive product launches for DMD, DM1 and FSHD starting in 2026 and transition to the next stage as we advance our AOC technology in rare neuromuscular and precision cardiology, and next-generation innovations. In addition to our own internal research programs, we continue to explore the full potential of our AOC platform through collaborations and partnerships, including programs in immunology, cardiology and other select indications outside of muscle.
Since our inception in 2012, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, developing our proprietary AOC platform, identifying potential product candidates, establishing our intellectual property portfolio, conducting research, preclinical and clinical studies, preparing for potential commercial activities, and providing other general and administrative support for these operations. We have not generated any revenue from product sales. We are currently building our capabilities to support potential launches of product candidates currently in clinical development and to potentially operate as a commercial organization. In June 2020, we completed our initial public offering, or IPO, and have since raised capital through additional public offerings and private placements, and under collaboration and research license agreements.
We have incurred operating losses in each year since inception. Our net losses were $322.3 million and $212.2 million for the years ended December 31, 2024 and 2023, respectively, and $447.5 million for the nine months ended September 30, 2025. As of September 30, 2025, we had an accumulated deficit of $1.3 billion. We expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned preclinical studies and clinical trials, continue our research and development activities, utilize third parties to manufacture our product candidates and related raw materials, hire additional personnel and protect
our intellectual property. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our preclinical studies and clinical trials and our expenditures on other research and development activities, as well as the generation of any collaboration and services revenue.
Based upon our current operating plans, we believe that our existing cash, cash equivalents and marketable securities of approximately $1.9 billion (as of September 30, 2025) will be sufficient to fund our operations for at least 12 months from the date of the filing of this Form 10-Q. While we may generate revenue under our current and/or future collaboration agreements, we do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses, and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Research Collaboration with Bristol Myers Squibb Company
In November 2023, we entered into (i) a Research Collaboration and License Agreement, or the BMS Collaboration Agreement, to expand on the research with MyoKardia for up to five targets utilizing our proprietary AOC platform technology and (ii) a Securities Purchase Agreement with BMS, or the BMS Purchase Agreement, for the purchase by BMS in a private placement of 5,075,304 shares of our common stock at a purchase price of $7.8813 per share, for an aggregate purchase price of approximately $40 million. We refer to the BMS Collaboration Agreement and the BMS Purchase Agreement together as the "BMS Agreements." Under the terms of the BMS Agreements, we received approximately $100 million upfront, which includes a $60 million cash payment under the terms of the BMS Collaboration Agreement, and approximately $40 million for the purchase of our common stock under the terms of the BMS Purchase Agreement. We are also eligible to receive up to approximately $1.35 billion in research and development milestone payments, up to approximately $825 million in commercial milestone payments, and tiered royalties from high single digits to low double-digits on net sales. We are responsible for our own research collaboration costs incurred under the agreement, subject to a cumulative spending limit of $40 million. BMS will fund all future clinical development, regulatory and commercialization activities coming from this collaboration.
Research Collaboration with Eli Lilly and Company
In April 2019, we entered into a Research Collaboration and License Agreement, or the Lilly Agreement, with Eli Lilly and Company, or Lilly, for the discovery, development and commercialization of AOC products in immunology and other select indications on a worldwide basis. Under the Lilly Agreement, we and Lilly will collaborate on preclinical research and discovery activities for such products, with Lilly being responsible for funding the cost of such activities by both parties. Lilly will also lead the clinical development, regulatory approval and commercialization of all such products, at its sole cost. We granted Lilly an exclusive, worldwide, royalty-bearing license, with the right to sublicense, under our technology to research, develop, manufacture, and sell products containing AOCs that are directed to up to six mRNA targets. We retain the right to use our technology to perform our obligations under the agreement and for all purposes not granted to Lilly. Lilly paid us an upfront license fee of $20.0 million in 2019, and we are eligible to receive up to $60.0 million in development milestone payments per target, up to $140.0 million in regulatory milestone payments per target and up to $205.0 million in commercialization milestone payments per target. We are eligible to receive a tiered royalty ranging from the mid-single to low-double digits from Lilly on worldwide annual net sales of licensed products, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. In August 2025, Lilly paid us $10.0 million as the result of the achievement of a clinical development milestone under the Lilly Agreement for a collaboration target.
Components of Results of Operations
Revenue
Our revenue to date has been derived from payments received under our license and research collaboration agreements, including revenue from reimbursements of services, as well as a combination of upfront payments and, milestone payments under our current and/or future collaboration agreements. We do not expect to generate any revenue from the sale of products unless and until such time that our product candidates have advanced through clinical development and regulatory approval, if ever. We expect that any revenue we generate, if at all, will fluctuate from quarter-to-quarter as a result of the timing and amount of payments relating to such services and milestones and the extent to which any of our products are approved and successfully commercialized. If we fail to complete preclinical and clinical development of product candidates or obtain regulatory approval for our product candidates, our ability to generate future revenues and our results of operations and financial position would be adversely affected.
Operating Expenses
Research and Development
Research and development expenses consist of costs associated with our research and development activities, including our discovery and research efforts, and the preclinical and clinical development of our product candidates. Our research and development expenses include:
•external costs, including expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturers, consultants and our scientific advisors; and
•internal costs, including;
◦employee-related expenses, including salaries, benefits, and stock-based compensation;
◦the costs of laboratory supplies and acquiring, developing, and manufacturing preclinical study materials; and
◦facilities, information technology and depreciation, which include direct and allocated expenses for rent and maintenance of facilities and depreciation of leasehold improvements and equipment.
Research and development costs, including costs reimbursed under collaboration agreements, are expensed as incurred, with reimbursements of such amounts being recognized as revenue. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.
At any one time, we are working on multiple programs. Our internal resources, employees and infrastructure are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs.
We expect our research and development expenses to increase for the foreseeable future as we continue to conduct ongoing research and development activities, advance preclinical research programs toward clinical development, including IND-enabling studies, and conduct clinical trials. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming, and can vary significantly for each product candidate and development program. We may never succeed in achieving marketing approval for any of our product candidates.
We anticipate we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to preclinical and clinical results, regulatory developments, ongoing assessments as to each program's commercial potential, and our ability to maintain or enter into new collaborations, to the extent we determine the resources or expertise of a collaborator would be beneficial for a given program. If the Merger is not completed, we will need to raise substantial additional capital in the future. In addition, we cannot forecast which development programs may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our development costs may vary significantly based on factors such as:
•the number and scope of clinical, preclinical and IND-enabling studies;
•per patient trial costs;
•the number of trials required for approval;
•the number of sites included in the trials;
•the countries in which the trials are conducted;
•the length of time required to enroll eligible patients;
•the number of patients that participate in the trials;
•the number of doses that patients receive;
•the drop-out or discontinuation rates of patients;
•potential additional safety monitoring requested by regulatory agencies;
•the duration of patient participation in the trials and follow-up;
•the cost and timing of manufacturing our product candidates;
•the various phases of development of our product candidates; and
•the efficacy and safety profiles of our product candidates.
General and Administrative
General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits, and stock-based compensation, for employees in our executive, finance, accounting, legal, business development, and other support functions. Other general and administrative expenses include allocated facility, information technology, and depreciation related costs not otherwise included in research and development expenses, and professional fees for auditing, tax, intellectual property, and legal services. Costs related to filing and pursuing patent applications are recognized as general and administrative expenses as incurred since recoverability of such expenditures is uncertain.
We expect our general and administrative expenses will increase for the foreseeable future to support our increased research and development activities, commercial readiness initiatives, and other corporate activities.
Other Income (Expense)
Other income (expense) consists primarily of interest earned on our cash, cash equivalents, and marketable securities.
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2025 and 2024
The following table summarizes our results of operations for the periods presented (in thousands):
Three Months Ended September 30, Change Nine Months Ended September 30, Change
2025 2024 2025 2024
Revenue $ 12,475 $ 2,336 $ 10,139 $ 17,895 $ 7,924 $ 9,971
Research and development expenses 154,948 77,197 77,751 392,563 207,968 184,595
General and administrative expenses 46,333 23,273 23,060 116,797 57,902 58,895
Other income 14,364 17,736 (3,372) 43,935 37,901 6,034
Revenue
Revenue increased by $10.1 million and $10.0 million for the three and nine months ended September 30, 2025 as compared to the same periods in 2024, primarily due to the recognition of a $10.0 million milestone under the Lilly Agreement.
Research and Development Expenses
The following tables illustrate the components of our research and development expenses for the periods presented (in thousands):
Three Months Ended September 30, Change Nine Months Ended September 30, Change
2025 2024 2025 2024
External costs:
Del-desiran $ 25,930 $ 15,578 $ 10,352 $ 62,839 $ 33,719 $ 29,120
Del-brax 23,483 6,900 16,583 55,732 20,831 34,901
Del-zota 11,669 8,671 2,998 34,122 19,591 14,531
Other programs 6,607 1,158 5,449 19,171 3,582 15,589
Unallocated 39,919 16,330 23,589 95,316 49,895 45,421
Total external costs 107,608 48,637 58,971 267,180 127,618 139,562
Internal costs:
Employee-related expenses 40,434 22,823 17,611 105,174 63,713 41,461
Facilities, lab supplies and other 6,906 5,737 1,169 20,209 16,637 3,572
Total internal costs
47,340 28,560 18,780 125,383 80,350 45,033
Total research and development expenses $ 154,948 $ 77,197 $ 77,751 $ 392,563 $ 207,968 $ 184,595
Research and development expenses increased by $77.8 million for the three months ended September 30, 2025 as compared to the same period in 2024, primarily due to increased external costs associated with the progression of clinical trials and preclinical studies, including $21.6 million in higher manufacturing costs related to the production of monoclonal antibodies used across programs, as well as higher internal costs including $17.6 million in higher personnel costs. Similarly, research and development costs increased by $184.6 million for the nine months ended September 30, 2025 as compared to the same period in 2024, due to increased external costs associated with the progression of clinical trials and preclinical studies, including $41.6 million in higher manufacturing costs related to the production of monoclonal antibodies used across programs, as well as higher internal costs including $41.5 million in higher personnel costs.
General and Administrative Expenses
General and administrative expenses increased by $23.1 million for the three months ended September 30, 2025 as compared to the same period in 2024, primarily due to $11.4 million in higher personnel costs and $7.4 million in higher professional fees to support our expanded operations. Similarly, general and administrative expenses increased by $58.9 million for the nine months ended September 30, 2025 as compared to the same period in 2024, primarily due to $29.1 million in higher personnel costs and $19.1 million in higher professional fees to support our expanded operations.
Other Income
Other income decreased by $3.4 million for the three months ended September 30, 2025 as compared to the same period in 2024, primarily due to due to lower interest income earned on marketable securities investments and cash and cash equivalent balances. Other income increased by $6.0 million for the nine months ended September 30, 2025 as compared to the same period in 2024, respectively, due to higher interest income earned on marketable securities investments and cash and cash equivalent balances.
Liquidity and Capital Resources
Sources of Liquidity
On August 9, 2024, we entered into a sales agreement (the 2024 Sales Agreement) with TD Securities (USA) LLC (the 2024 Sales Agent). Under the 2024 Sales Agreement, we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $400.0 million through the 2024 Sales Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the 2024 Sales Agent. We are not obligated to sell, and the 2024 Sales Agent is not obligated to buy or sell, any shares of common stock under the 2024 Sales Agreement. During the three and nine months ended September 30, 2025, we sold 5,646,583 shares of common stock pursuant to the 2024 Sales Agreement, and received net proceeds of $185.5 million, after deducting offering-related transaction costs and commissions of $4.8 million, at an average price of $33.69 per share.
On September 15, 2025, we completed an underwritten public offering of 17,250,000 shares of our common stock at a public offering price of $40.00 per share. Net proceeds from the offering were approximately $651.4 million, after deducting underwriting discounts and offering expenses of $38.6 million. The shares sold in the offering were registered pursuant to our shelf registration statement on Form S-3, which became automatically effective upon filing on May 9, 2024.
Other sources of capital to fund our operations include potential revenue pursuant to the BMS Collaboration Agreement and the Lilly Agreement. In August 2025, Lilly paid us $10.0 million as the result of the achievement of a clinical development milestone under the Lilly Agreement for a collaboration target.
Future Capital Requirements
As of September 30, 2025, we had cash, cash equivalents and marketable securities of $1.9 billion. Based upon our current operating plans, we believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least 12 months from the date of the filing of this Form 10-Q. However, our forecast of 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. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain. In addition, the Merger Agreement contains restrictions on our issuance of shares of our common stock, subject to certain exceptions described therein.
If the Merger is not completed, our future capital requirements are difficult to forecast and will depend on many factors, including but not limited to:
•the type, number, scope, progress, expansions, results, costs, and timing of discovery, preclinical studies, and clinical trials of our product candidates that we are pursuing or may choose to pursue in the future;
•the costs and timing of manufacturing for our product candidates and commercial manufacturing if any product candidate is approved;
•the costs, timing, and outcome of regulatory review of our product candidates;
•the terms and timing of establishing and maintaining collaborations, licenses, and other similar arrangements;
•the costs of obtaining, maintaining, and enforcing our patents and other intellectual property rights;
•the costs associated with hiring additional personnel and consultants as we continue to grow our company;
•the timing and amount of the milestone or other payments made to us under current or future research and collaboration agreements;
•the costs and timing of establishing or securing sales and marketing capabilities if any 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; and
•costs associated with any products or technologies that we may in-license or acquire.
While we may generate revenue under our current and/or future collaboration agreements, we do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we do not expect will occur in the immediate term, and may never occur. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Accordingly, if the Merger is not completed, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings, or other capital sources, including current and potential future collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Cash Flows
The following table summarizes our cash flows for the periods presented (in thousands):
Nine Months Ended September 30, Change
2025 2024
Net cash provided by (used in):
Operating activities $ (480,668) $ (200,999) $ (279,669)
Investing activities (245,253) (790,029) 544,776
Financing activities 856,076 1,178,633 (322,557)
Effect of exchange rate on cash, cash equivalents and restricted cash 138 - 138
Net increase in cash, cash equivalents and restricted cash
$ 130,293 $ 187,605 $ (57,312)
Operating Activities
Net cash used in operating activities of $480.7 million and $201.0 million for the nine months ended September 30, 2025 and 2024, respectively, consisted primarily of cash used to fund our operations related to the development of del-desiran, del-brax, del-zota, and other potential programs. The increase in cash used in our operations is primarily due to increased research and development costs as well as general and administrative expenses as described under "Results of Operations" above.
Investing Activities
Net cash used in investing activities of $245.3 million for the nine months ended September 30, 2025 consisted primarily of $1,096.9 million for purchases of marketable securities due to investing the proceeds from the issuance of common stock, as well as the reinvestment of proceeds from matured marketable securities, and $7.8 million in purchases of property and equipment, offset by $862.6 million of proceeds from maturities of marketable securities. Net cash used in investing activities of $790.0 million for the nine months ended September 30, 2024 consisted of $1.1 billion for purchases of marketable securities and $3.2 million in purchases of property and equipment, offset by $349.7 million of proceeds from maturities of marketable securities.
Financing Activities
Net cash provided by financing activities of $856.1 million for the nine months ended September 30, 2025 consisted of $837.4 million in net proceeds from sales of our common stock and $18.7 million in proceeds from the issuance of common stock under employee incentive equity plans. Net cash provided by financing activities of $1.2 billion for the nine months ended September 30, 2024 consisted primarily of $1.0 billion in net proceeds from sales of our common stock, $141.4 million in net proceeds from the sale of pre-funded warrants in a
private placement, and $36.2 million in proceeds from the issuance of common stock under employee incentive equity plans.
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue and expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. As of September 30, 2025, there have been no material changes to our critical accounting estimates from those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates," included in our annual report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 27, 2025.
Contractual Obligations and Commitments
In April 2024, we entered into a sublease agreement to rent office and laboratory space for our corporate headquarters. The sublease commenced in August 2025, with total aggregate future lease commitments under the sublease agreement of approximately $79.2 million. In March 2025, we exercised the option to rent an additional 80,000 square feet in an adjacent available building under the amended sublease agreement with Turning Point Therapeutics, Inc. Total aggregate future lease commitments attributable to the option under the amended sublease agreement are approximately $53.7 million.
In August 2025, we entered into a manufacturing agreement with a Contract Manufacturing Organization (CMO) for the manufacturing of the Company's drug substances, conjugated drug substances, and drug products. The manufacturing agreement requires the Company to meet minimum purchase obligations on an annual basis, beginning in 2026 and ending in 2028. The total aggregate amount of future unconditional minimum purchase obligations under the manufacturing agreement is approximately $621.6 million, subject to foreign currency changes, annual price increases, other adjustments, and payments for certain costs and net of the nonrefundable reservation fees.
Refer to Note 7, "Commitments and Contingencies" to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for further details of our commitments.
Except for the sublease agreement and manufacturing agreement, as of September 30, 2025, there have been no material changes outside the ordinary course of our business to the contractual obligations we reported in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations and Commitments," included in our annual report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 27, 2025.
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