Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

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Orchestra BioMed, Inc., our wholly owned subsidiary, was incorporated in Delaware in 2017 and completed a recapitalization and mergers with Caliber Therapeutics, Inc., a Delaware corporation that has, among other things, the rights to the Virtue SAB product candidate and BackBeat Medical, Inc., a Delaware Corporation that has, among other things, the rights to the AVIM Therapy product candidate, in 2018. Orchestra BioMed, Inc. completed the conversions of Caliber Therapeutics, Inc. to Caliber Therapeutics, LLC, a Delaware limited liability company, and BackBeat Medical, Inc. to BackBeat Medical, LLC, a Delaware limited liability company, in 2019.

Recent Developments

On January 9, 2026, Haemonetics Corporation ("Haemonetics"), a global medical technology company focused on delivering innovative solutions designed to improve patient outcomes, announced its acquisition of Vivasure Medical Limited ("Vivasure"), a Galway, Ireland-based company pioneering next-generation technology for percutaneous vessel closure. Vivasure was a strategic holding of ours prior to its acquisition. In connection with the closing of the transaction, we can receive up to $10.7 million of proceeds in 2026 associated with the transaction. In January, we received the initial upfront payment of $4.7 million and the remainder may be received in 2026 based on the achievement of a milestone. We may receive additional proceeds in the future associated with revenue earnouts based on the achievement of certain milestones.

Components of Our Results of Operations

Partnership Revenue

To date, our partnership revenues have related to the Terumo Agreement described below. In future periods, partnership revenues may also include revenues related to the Exclusive License and Collaboration Agreement, dated as of September 30, 2022, by and among, Orchestra BioMed, Inc., BackBeat Medical, LLC and Medtronic, discussed in Note 4 to the Consolidated Financial Statements.

Orchestra BioMed, Inc. entered into the Terumo Agreement in June 2019 and has determined that the arrangement represents a contract with a customer and is therefore in scope of ASC 606, Revenues from Contracts with Customers("ASC 606"). Under the Terumo Agreement, Orchestra BioMed, Inc. received an upfront payment of $30.0 million in 2019 and an equity commitment of up to $5.0 million of which $2.5 million was invested in June 2019 as part of the Orchestra BioMed, Inc. Series B-1 financing and $2.5 million was invested in June 2022 as part of the Orchestra BioMed, Inc. Series D-2 financing.

We recorded the $30.0 million non-refundable, upfront payment received in 2019 from Terumo within deferred revenue and were recognizing the upfront payment over time based on a proportional performance model based on the costs incurred to date relative to the total costs expected to be incurred through the completion of the development of the Coronary ISR indication, for which we were primarily responsible.

On October 28, 2025, we entered into a termination and right of first refusal agreement (the "Termination and ROFR Agreement") with Terumo with respect to Virtue SAB. The Termination and ROFR Agreement, which supersedes and terminates the Terumo Agreement, grants Terumo a right of first refusal ("ROFR") to acquire the rights, or enter a distribution arrangement, with respect to Virtue SAB for the treatment of coronary artery disease, in exchange for an upfront payment of $10.0 million. In connection with the Termination and ROFR Agreement, on November 7, 2025, Terumo invested an additional $20.0 million in Orchestra BioMed through our Series A Preferred Stock, which is convertible into common stock in the future, subject to certain conditions, at a minimum of $12 per share. Pursuant to the terms of the Termination and ROFR Agreement, Orchestra BioMed, Inc. has no further performance obligations under the Terumo Agreement and therefore recognized the remaining amounts of deferred revenue. We recognized $30.0 million in cumulative partnership revenues from 2019 through December 31, 2025. In addition to recognizing the remainder of the deferred revenue, partnership revenue for the year ended December 31, 2025 included $10.0 million in consideration for the ROFR and $7.4 million associated with the premium above the fair market value of the Series A Preferred Stock.

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In June 2022, Orchestra BioMed, Inc. entered into the Medtronic Agreement for the development and commercialization of AVIM Therapy for the treatment of pacemaker-indicated patients with uncontrolled HTN despite the use of anti-hypertensive medications. On July 31, 2025, Orchestra BioMed, Inc., our wholly owned subsidiary BackBeat Medical, LLC, and Medtronic entered into an amendment to the Medtronic Agreement, which became effective on August 4, 2025 (the "Medtronic Agreement Amendment"), to provide, among other things, a development and commercialization framework for future AVIM-therapy integration into a dual-chamber leadless pacemaker. Pursuant to the Medtronic Agreement Amendment, we will be required, among other things, to reimburse Medtronic for certain expenses incurred in connection with the integration of AVIM-therapy into Medtronic's dual-chamber leadless pacemaker, up to a specified cap.

We have determined that the arrangement is a collaboration within the scope of ASC 808, Collaborative Arrangements("ASC 808"). In addition, we concluded that Medtronic is a customer for a good or service that is a distinct unit of account, and therefore, the transactions inthe Medtronic Agreement, as amended pursuant to the Medtronic Agreement Amendment (the "Amended Medtronic Agreement"), should be accounted for under ASC 606. Through December 31, 2025, there have been no amounts recognized as revenue under the Amended Medtronic Agreement.

Product Revenue

Product revenues related to sales of FreeHold's intracorporeal organ retractors and such revenues are recognized at a point-in-time upon the shipment of the product to the customer given payment terms are typically 30 days. FreeHold products are currently only sold in the United States.

Cost of Product Revenue and Gross Margin

Cost of product revenue consists primarily of costs of finished goods components for use in FreeHold's products and assembled, warehoused and inventoried by a third-party vendor. We expect the cost of finished goods product revenue to increase in absolute terms as our revenue grows.

Our gross margin has been, and will continue to be, affected by a variety of factors, including finished goods manufactured component parts, as well as the cost to assemble and warehouse the FreeHold product finished goods inventory.

Research and Development Expenses

Research and development expenses consist of applicable personnel, consulting, materials and clinical study expenses. Research and development expenses include:

Research and development costs are expensed as incurred. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical studies. In the future, we expect research and development expenses to increase in absolute dollars as we continue to develop new products, enhance existing products and technologies, initiate clinical studies, manufacture drug supply for internal research and development and clinical trial supply and perform activities related to obtaining additional regulatory approvals. We do not track expenses by product candidate, unless tracking such expenses is required pursuant to the revenue recognition model for a collaborative arrangement.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of personnel-related expenses, including salaries, benefits, bonus, travel and stock-based compensation. Other selling, general and administrative expenses include professional services fees, including legal, audit investor/public relations, and insurance costs, outside consultants costs, employee recruiting and training costs, and non-income taxes. Moreover, we incur and expect to continue to incur additional expenses associated with operating as a public company, including legal, accounting, insurance, exchange listing and U.S. Securities and Exchange Commission ("SEC") compliance, and investor relations expenses. We expect annual selling, general and administrative expenses to continue to increase as weconduct additional clinical trials and expand our operations as a public company.

Interest (Expense) Income, Net

Interest (expense) income, net reflects the income generated from marketable securities during the year. Interest expense is attributable to loan interest and interest related to the Royalty Purchase Agreement.

On July 31, 2025, we entered into a revenue participation right purchase and sale agreement (the "Royalty Purchase Agreement") with Ligand Pharmaceuticals Incorporated ("Ligand"). Under the terms of the Royalty Purchase Agreement, in exchange for payment of $35.0 million (the "Investment Amount"), less certain reimbursable expenses, Ligand acquired the right to receive tiered royalty payments from us (the "Royalty Interest") with respect to revenue (including certain licensing revenue) received by us in a calendar year in connection with worldwide net product sales, or other product revenue received by, by us and our licensees ("Annual Net Sales") of (a) AVIM Therapy (the "Primary Product") and (b) Virtue SAB (the "Secondary Product" and together with the Primary Product, the "Products") in the field of coronary artery treatment. At execution of the Royalty Purchase Agreement, our estimate of this total interest expense resulted in an effective annual interest rate of approximately 23.1%. This estimate contains significant assumptions that impact both the amount recorded at execution and the interest expense that will be recognized over the royalty period. We will periodically assess the estimated amounts due and payable to Ligand and to the extent the amount or timing of such payments is materially different than the original estimates, an adjustment will be recorded prospectively to increase or decrease interest expense. There are a number of factors that could materially affect the amount and timing of the royalty payments to be paid by us to Ligand and, correspondingly, the amount of interest expense recorded by us.

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On November 6, 2024 (the "LSA Closing Date"), we and certain of our subsidiaries (collectively, the "Borrower") entered into a Loan and Security Agreement, by and among the Borrower, the several banks and other financial institutions or entities party thereto, as lenders (collectively, the "Hercules Lenders"), and Hercules Capital, Inc. ("Hercules"), as administrative agent and collateral agent for itself and the Hercules Lenders, as amended by that certain First Amendment to Loan and Security Agreement dated as of December 30, 2024 ( "2024 LSA"). Prior to July 31, 2025, the 2024 LSA provided a secured term loan facility of up to $50.0 million available in up to four tranches (collectively, the "Term Loans"), with the first tranche of $15.0 million drawn on the LSA Closing Date, and a second and third tranche of up to an aggregate of $15.0 million available upon achievement of certain performance and financing milestones. Additionally, we had access to a fourth tranche of $20.0 million subject to future approval. On July 31, 2025, the Borrower, the Hercules Lenders and Hercules entered into the Second Amendment to the 2024 LSA, which, amended the 2024 LSA to, among other things, (i) delay the initial date upon which we must begin amortizing term loans under the 2024 LSA from (a) December 1, 2026 (with amortization payments delayed to as late December 1, 2027 if certain conditions were met) to (b) July 1, 2027 (with amortization payments delayed to as late as January 1, 2028 if certain conditions are met); (ii) increase by $15.0 million (from $20.0 million to $35.0 million) the amount that that may be borrowed by us in the discretion of the lender's investment committee's and (iii) eliminate our ability to draw up to $15.0 million if certain milestones are achieved. The Term Loan has a maturity date of November 6, 2028 and accrues interest at a floating per annum rate equal to the greater of (i) (x) the "prime rate" as reported in The Wall Street Journal plus (y) 2.0%, and (ii) 9.50%. Refer to Note 16 - "Debt Financing"to our Consolidated Financial Statements.

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Change in the fair value of derivative liability

In November 2025, we sold 200,000 shares of Series A Preferred Stock at a purchase price equal to $100.00 per share for gross proceeds of $20.0 million. We concluded that certain conversion and redemption features meet the requirements to be separately accounted for as a bifurcated derivative. As a result, we bifurcated the Series A Preferred Stock between (i) the host contract, which was accounted for within mezzanine equity, and (ii) the bifurcated derivative liabilities related to those conversion and redemption features. The bifurcated derivatives are remeasured to fair value at each reporting period with changes in fair value recorded in the consolidated statement of operations and comprehensive loss.

Loss on Fair Value of Strategic Investments

The loss on fair value of strategic investments represents a change in the fair value of our investment in common stock holdings of a previously publicly-held company. The common stock held represented equity securities with a readily determinable fair value and were required to be measured at fair value at each reporting period using readily determinable pricing available on a securities exchange, in accordance with the provisions of ASU 2016-01.

Results of Operations

Comparison of the Years Ended December 31, 2025 and 2024

The following table presents our statement of operations data for the years ended December 31, 2025 and 2024, and the dollar and percentage change between the two periods (in thousands):

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Partnership Revenue

Partnership revenue increased by $30.9 million, or approximately 1539%, to $32.9 million in the year ended December 31, 2025 from $2.0 million for the year ended December 31, 2024. Partnership revenue relates partially to the recognition of the combined performance obligation for the license granted to Terumo and the ongoing research and development services over the estimated performance period for the Virtue SAB coronary ISR indication, using a proportional performance model, based on the costs incurred relative to the total estimated costs of the research and development services. Partnership revenue primarily relates to our entering into the Termination and ROFR Agreement with Terumo on October 28, 2025, for which we received $30.0 million in exchange for providing a ROFR and issuing Series A Preferred Stock to Terumo. The Termination and ROFR Agreement superseded and terminated the Terumo Agreement, and we no longer have any performance obligations under the Terumo Agreement. In addition to recognizing the remainder of the deferred revenue, partnership revenue for the year ended December 31, 2025 included $10.0 million in consideration for the ROFR and $7.4 million associated with the premium above the fair market value of the Series A Preferred Stock.

Prior to the termination of the Terumo Agreement, as of each quarterly reporting date, we evaluated our estimates of the total costs expected to be incurred through the completion of the combined performance obligation and updated our estimates as necessary. For the year ended December, 31, 2025, the termination of the Terumo Agreement resulted in the conclusion of the related performance obligations and therefore, resulted in the recognition of the remaining deferred revenue. For the year ended December 31, 2024, the expenses incurred related to the Terumo Agreement were $12.5 million. The estimated total costs associated with the Terumo Agreement through completion increased by approximately 5.0% as of December 31, 2024, as compared to the estimates as of December 31, 2023.

Product Revenue

Product revenue decreased by $22,000, or approximately 3%, to $611,000 in the year ended December 31, 2025 from $633,000 for the year ended December 31, 2024.

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Product revenue primarily consisted of the sale of FreeHold Duo and Trio intracorporeal organ retractors and revenue is recognized when product is shipped to customers. The decrease in product revenue was due to a decrease in the purchase volume. There were no changes to the per unit sale price in either period between the periods presented.

Cost of Product Revenue

Cost of product revenue decreased by $14,000, or approximately 7%, to $190,000 in the year ended December 31, 2025 from $204,000 for the year ended December 31, 2024. The decrease was primarily due to lower sales volume of FreeHold Duo and Trio intracorporeal organ retractors.

Research and Development Expenses

The following table summarizes our research and development expenses for the years ended December 31, 2025 and 2024 (in thousands):

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Research and development expenses increased by $15.4 million, or approximately 36%, to $58.2 million for the year ended December 31, 2025 from $42.8 million for the year ended December 31, 2024. This is primarily due to an increase in support of ongoing work to advance the BACKBEAT study and to advance Virtue SAB into the Virtue Trial, which commenced in October 2025. The increase included an increase of $4.9 million in clinical development costs, an increase in personnel-related expenses of $6.6 million due to increased headcount and consulting costs, an increase of $2.8 million in non-clinical development costs associated with research and development program costs, supplies, and testing, and an increase in stock-based compensation of $1.1 million.

The total research and development expenses summarized above include $14.3 million for the year ended December 31, 2025 and $12.3 million for the year ended December 31, 2024 related to the Terumo Agreement. The increase of $2.0 million is due to increased expense activity related to the Terumo Agreement during the 2025 period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $3.0 million, or approximately 12%, to $26.9 million for the year ended December 31, 2025, from $23.9 million of expense for the year ended December 31, 2024. The increase primarily resulted from an increase of $1.9 million in accounting, finance, legal, marketing, investor relations and public relations expenses, an increase in personnel-related expenses of $871,000 due to increased headcount and consulting costs, and an increase of $220,000 in stock-based compensation.

Interest (Expense) Income, Net

Interest (expense) income, net, decreased by $4.5 million, or approximately 134%, to $1.1 million of expense for the year ended December 31, 2025 from $3.4 million of income for the year ended December 31, 2024. The net interest expense in the 2025 period consisted primarily of monthly interest expense resulting from the 2024 LSA and the Royalty Purchase Agreement partially offset by interest earned from marketable securities. The net interest income in the 2024 period consisted primarily of interest earned from marketable securities. The decrease in interest (expense) income, net resulted from interest expense related to the Royalty Purchase Agreement, which was not in place during 2024.

Change in the fair value of derivative liability

The derivative liability of the Series A Preferred Stock was remeasured to a fair value of $2.7 million as of December 31, 2025. We recognized a gain of $254,000 for the year ended December 31, 2025, primarily driven by decreases in our stock price compared to initial measurement at issuance.

Loss on Fair Value of Strategic Investments

No gain or loss on fair value of strategic investments was recognized for the year ended December 31, 2025 as compared to a loss of $68,000 for the year ended December 31, 2024 related to the change in fair value in our common stock holdings of a previously publicly-held company.

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Liquidity and Capital Resources

Overview

From inception through December 31, 2025, we have incurred significant operating losses and negative cash flows from our operations. Our net losses were $52.7 million and $61.0 million for the years ended December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $362.6 million. We have funded our operations primarily through the issuance of common stock, convertible preferred stock, and warrants, as well as proceeds from the Business Combination, the prior Terumo Agreement and the ROFR and Termination Agreement, borrowings under debt arrangements, the sale of future revenues, and to a lesser extent, revenue from FreeHold products. As of December 31, 2025, we have raised a cumulative total of $356.5 million in gross proceeds. We had $106.5 million in cash and cash equivalents and marketable securities at December 31, 2025, comprised of $34.7 million in cash and cash equivalents and $71.8 million in marketable securities. Cash and cash equivalents consisted primarily of bank deposits and money market funds while short-term marketable securities consisted primarily of our investments in corporate debt securities. Future committed cash receipts expected in April 2026 include $20.0 million from the Medtronic Loan Agreement, and an additional $15.0 million from Ligand pursuant to the Royalty Purchase Agreement. On January 9, 2026, Haemonetics closed on an acquisition of Vivasure in which we can receive up to $10.7 million of proceeds in 2026 made up of approximately $4.7 million upfront and approximately $6.0 million in a first milestone payment.

Funding Requirements

We intend to prioritize spending on our two flagship product candidates and expect operating expenses to increase accordingly as we focus on continued execution of the BACKBEAT study for AVIM Therapy and ramp up execution of the recently initiated Virtue Trial for Virtue SAB. The additional investment will primarily support clinical study costs as well as other research and development activities.

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Based on internally prepared budget estimates that reflect our operating priorities, we anticipate that our Cash and cash equivalents, Marketable securities, proceeds received subsequent to December 31, 2025 but prior to the filing of this Annual Report on Form 10-K, expected future proceeds from contractual financing commitments and other potential future proceeds described below are sufficient to fund our operations into the fourth quarter of 2027. The amount and timing of our future funding requirements may change from this current estimate and are dependent on many factors, including the cost and pace of execution of clinical studies and research and development activities, the strength of results from clinical studies and other research, development and manufacturing efforts, as well as the receipt of payments under the Royalty Purchase Agreement and the Medtronic Loan Agreement, and receipt of additional expected funds under the terms of the sale of Vivasure to Haemonetics. There are no assurances that any of these factors will be favorable to us, and we may need to seek additional sources of liquidity to meet our funding requirements earlier than current estimates, including the issuance of new equity, and/or other financing structures. In this regard, as of the date of this Annual Report on Form 10-K, we may sell up to $92.4 million of shares of our common stock under the sales agreement we entered into with TD Securities (USA) LLC (the "Sales Agreement").

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Our future viability is dependent on our ability to raise additional capital to finance our operations. Our inability to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. There can be no assurance that our current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

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As noted above, the sale of our common stock pursuant to the Resale Registration Statement may result in a decline in the value of our common stock, which may make it more difficult and more dilutive to the existing holders of our common stock to raise funds from the sale of our equity securities.

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Cash Flows

The following table summarizes our cash flow data for the periods indicated (in thousands):

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Comparison of the Years Ended December 31, 2025 and 2024

Net Cash Flows from Operating Activities

Net cash used in operating activities for the year ended December 31, 2025 was $49.0 million and primarily consisted of our net loss of $52.7 million, partially offset by non-cash charges of $14.1 million and changes in net operating assets and liabilities of $10.4 million. Our non-cash charges primarily consisted of stock-based compensation of $12.0 million and $2.0 million in non-cash interest expense in liability related to the Royalty Purchase Agreement. The net change in operating assets and liabilities was primarily due to a decrease in deferred revenue of $15.4 million, partially offset by an increase in accounts payable, accrued expenses, and other liabilities of $4.9 million.

Net cash used in operating activities for the year ended December 31, 2024 was $50.6 million and primarily consisted of our net loss of $61.0 million, partially offset by non-cash charges of $11.2 million and changes in net operating assets and liabilities of $765,000. Our non-cash charges primarily consisted of stock-based compensation of $10.6 million and $1.0 million in acquired in-process research and development, partially offset by $1.5 million related to accretion and interest of marketable securities. The net change in operating assets and liabilities was primarily due to an increase in accounts payable, accrued expenses, and other liabilities of $3.0 million, partially offset by an increase in prepaid expenses and other assets of $1.1 million, a decrease in deferred revenue of $2.0 million, and a decrease in operating lease liabilities of $652,000.

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Net Cash Flows from Investing Activities

Net cash (used in) provided by investing activities for the year ended December 31, 2025 was $26.9 million, which primarily consisted of the purchase of $76.3 million of marketable securities and $489,000 paid for purchases of property and equipment, partially offset by the sale of $49.9 million of marketable securities.

Net cash provided by investing activities for the year ended December 31, 2024 was $13.1 million, which primarily consisted of the sale of $86.6 million of marketable securities, partially offset by the purchase of $72.6 million of marketable securities, and $600,000 paid for an asset acquisition, net of cash acquired.

Net Cash Flows from Financing Activities

Net cash provided by financing activities of $88.3 million for the year ended December 31, 2025 primarily consisted of $57.8 million of proceeds from the sale of common stock and the pre-funded warrants, net of issuance costs and $20.0 million of proceeds from the sale of future royalties, $12.6 million of proceeds from the issuance of Series A Preferred Stock, partially offset by $1.6 million used to settle taxes associated with the vesting of restricted stock units.

Net cash provided by financing activities of $29.2 million for the year ended December 31, 2024 was primarily attributable to the proceeds of $15.0 million, net of issuance costs, from the at-the-market offering under the Open Market Sale Agreement^SMwith Jefferies LLC and proceeds from the 2024 LSA with Hercules of $15.0 million. For additional information, see Note 16 to the Consolidated Financial Statements - "Debt Financing."

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Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2025 (in thousands):

We enter into agreements in the normal course of business with clinical research organizations for work related to clinical trials and with vendors for preclinical studies and other services and products for operating purposes, which are cancelable at any time by us, generally upon 30 days prior written notice. These payments are not included in the above table of contractual obligations and commitments.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of the financial statements in conformity with U.S. GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis, including estimates related to the total costs expected to be incurred though the completion of the combined performance obligation of the Terumo Agreement, effective interest expense related to the Royalty Purchase Agreement, research and development prepayments, accruals and related expenses and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

We believe that the accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. For further information, see Note 2 to the Consolidated Financial Statements - "Summary of Significant Accounting Policies."

Revenue Recognition

We recognize revenue under the core principle according to ASC 606 to depict the transfer of control to our customers in an amount reflecting the consideration we expect to be entitled to. In order to achieve that core principle, we apply the following five step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when a performance obligation is satisfied.

Our revenues have historically been comprised of partnership revenues under the Terumo Agreement related to the development and commercialization of Virtue SAB, and product revenue from the sale of FreeHold's intracorporeal organ retractors.

Partnership Revenues

To date, our partnership revenues have related to the Terumo Agreement described below. Pursuant to the terms of the Termination and ROFR Agreement, the Terumo Agreement was terminated on October 24, 2025. In future periods, partnership revenues may also include revenues related to the Medtronic Agreement, discussed in Note 4 to the Consolidated Financial Statements.

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Orchestra BioMed, Inc. entered into the Terumo Agreement as further described in Note 3 to the Consolidated Financial Statements. We assessed whether the Terumo Agreement fell within the scope of ASC 808 based on whether the arrangement involved joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. We determined that the Terumo Agreement did not fall within the scope of ASC 808. We then analyzed the arrangement pursuant to the provisions of ASC 606 and determined that the arrangement represents a contract with a customer and is therefore within the scope of ASC 606.

The promised goods or services in the Terumo Agreement included (i) license rights to our intellectual property and (ii) research and development services. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer. Promised goods or services are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources or (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct in the Terumo Agreement, we considered factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own or whether the required expertise is readily available.

We estimated the transaction price for the Terumo Agreement performance obligations based on the amount expected to be received for transferring the promised goods or services pursuant to the Terumo Agreement. The consideration included both fixed consideration and variable consideration. At the inception of the Terumo Agreement, as well as at each reporting period, we evaluated the amount of potential payment and the likelihood that the payments would be received. We utilized either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method better predicts the amount expected to be received. If it was probable that a significant revenue reversal would not occur, the variable consideration was included in the transaction price.

The Terumo Agreement had contained development and regulatory milestone payments. At contract inception and at each reporting period, we evaluated whether the milestones were considered probable of being reached and estimated the amount to be included in the transaction price using the most likely amount method. If it was probable that a significant revenue reversal would not occur, the associated milestone value was included in the transaction price. At the end of each subsequent reporting period, we re-evaluated the probability of achievement of such development milestones and any related constraint, and if necessary, adjusted our estimate of the overall transaction price. Any such adjustments were recorded on a cumulative catch-up basis, which affected partnership revenues and earnings in the period of adjustment.

We had determined that intellectual property that was licensed to Terumo and the research and development services to be provided to support the premarket approval by the FDA for the ISR indication represented a combined performance obligation that was satisfied over time and that the appropriate method of measuring progress for purposes of recognizing revenues relates to a proportional performance model that measures the proportional performance based on the costs incurred to date relative to the total costs expected to be incurred through the completion of the performance obligation. We had evaluated the measure of progress at each reporting period and, if necessary, adjusted the measure of performance and related revenue recognition.

We had received payments from Terumo based on billing schedules established in the contract. Such billings for milestone related events had 10-day terms from the date the milestone was achieved, royalty payments were 20-day terms after the close of each quarter, any optional services were 20 days after receipt of an invoice and sales of SirolimusEFR were within 30 days after receipt of the shipping invoices. Upfront payments were recorded as deferred revenue upon receipt or when due until we perform our obligations under these arrangements. Amounts were recorded as accounts receivable when the right to consideration was unconditional.

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On October 28, 2025, we entered into the Termination and ROFR Agreement with Terumo with respect to Virtue SAB. The Termination and ROFR Agreement, which supersedes and terminates the Terumo Agreement, grants Terumo a ROFR to acquire the rights, or enter a distribution arrangement, with respect to Virtue SAB for the treatment of coronary artery disease, in exchange for an upfront payment of $10.0 million. In connection with the Termination and ROFR Agreement, Terumo invested an additional $20.0 million in Orchestra BioMed through our Series A Preferred Stock, which is convertible into common stock in the future, subject to certain conditions, at a minimum of $12 per share. Pursuant to the terms of the Termination and ROFR Agreement, we have no further performance obligations under the Terumo Agreement and therefore recognized the remaining amounts of deferred revenue. We recognized $30.0 million in cumulative partnership revenues from 2019 through December 31, 2025. In addition to recognizing the remainder of the deferred revenue, partnership revenue for the year ended December 31, 2025 included $10.0 million in consideration for the ROFR and $7.4 million associated with the premium above the fair market value of the Series A Preferred Stock.

In June 2022, Orchestra BioMed Inc., BackBeat Medical, LLC and Medtronic entered into the Medtronic Agreement for the development and commercialization of AVIM Therapy for the treatment of pacemaker-indicated patients with uncontrolled HTN despite the use of anti-hypertensive medications. We determined that the arrangement is a collaboration within the scope of ASC 808. In addition, we concluded Medtronic is a customer for a good or service that is a distinct unit of account, and therefore the transactions in the Medtronic Agreement should be accounted for under ASC 606. Through December 31, 2025, there have been no amounts recognized as revenue under the Medtronic Agreement.

Product Revenues

Product revenues related to sales of FreeHold's intracorporeal organ retractors are recognized at a point-in-time upon the shipment of the product to the customer, and there are no significant estimates or judgments related to estimating the transaction price. The product revenues consist of a single performance obligation, and the payment terms are typically 30 days. Product revenues are recognized solely in the United States.

Research and Development Prepayments, Accruals and Related Expenses

We incur costs of research and development activities conducted by our third-party service providers, which include the conduct of preclinical and clinical studies. We are required to estimate our prepaid and accrued research and development costs at each reporting date. These estimates are made as of the reporting date of the work completed over the life of the individual study in accordance with agreements established with our service providers. We determine the estimates of research and development activities incurred at the end of each reporting period through discussion with internal personnel and outside service providers, as to the progress or stage of completion of trials or services, as of the end of the reporting period, pursuant to contracts with the third parties and the agreed upon fees to be paid for such services. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are accepted by us or the services are performed. Accruals are recorded for the amounts of services provided that have not yet been invoiced.

Royalty purchase agreement

On July 31, 2025, we entered into the Royalty Purchase Agreement with Ligand. Under the terms of the Royalty Purchase Agreement, in exchange for the Investment Amount, less certain reimbursable expenses, Ligand acquired from us the right to receive Royalty Interest with respect to revenue (including certain licensing revenue) received by us in a calendar year in connection with Annual Net Sales of our Products in the field of coronary artery treatment.

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Pursuant to the Royalty Purchase Agreement, the Investment Amount shall be paid in two tranches: (i) $20.0 million was paid on August 4, 2025 (the "Ligand Closing") and (ii) $15.0 million is payable on May 1, 2026 (the "Second Installment"), provided certain conditions have been met. In repayment of the Investment Amount, we will remit 17.0% of revenues related to the Products until an annual total of $17.0 million has been remitted to Ligand, thereafter we will remit (a) 4.0% of revenues related to the Primary Product in the field of hypertension treatment and (b) 4.0% of revenues related to the Secondary Product in the field of coronary artery treatment. In addition, under the terms of the Royalty Purchase Agreement, unless and until Ligand pays the Second Installment, Ligand shall only be entitled to 57.1% of the amounts it would otherwise be due under the Royalty Purchase Agreement. However, regardless of whether the Second Installment has been paid, under the terms of the Royalty Purchase Agreement, the percentages referenced in the second sentence of this paragraph will incrementally increase from 17.0% and 4.0% up to 20.0% and 7.0%, respectively, if we do not achieve certain enrollment milestones relating to the BACKBEAT clinical study through January 1, 2027.

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We accounted for the sale of royalty revenues to Ligand, pursuant to the Royalty Purchase Agreement, in accordance with ASC 470, Debt, which addresses situations in which an entity receives cash from an investor in return for an agreement to pay the investor a specified percentage of the revenue from a contractual right. We classified the proceeds received from the sale to Ligand as debt as we determined that it had significant continuing involvement in the generation of the cash flows to Ligand. Interest related to the Royalty Purchase Agreement is recognized utilizing the effective interest method over the estimated term. When the Second Installment is received, it will also be recorded as a liability related to the sale of future royalties when they are received and amortized under the effective interest method over the estimated remaining term of the Royalty Purchase Agreement.

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As of the Ligand Closing, our estimate of this total interest expense associated with the Royalty Interest resulted in an effective annual interest rate of approximately 23.1%. This estimate contains significant assumptions that impact both the amount recorded at execution and the interest expense that will be recognized over the royalty period. We will periodically assess the estimated amounts due and payable to Ligand and to the extent that the amount or timing of such payments is materially different than the original estimates, an adjustment will be recorded prospectively to the consolidated statements of operations and comprehensive loss. There are a number of factors that could materially affect the amount and timing of the royalty payments to be paid by us to Ligand and, correspondingly, the amount of interest expense recorded by us.

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Series A Preferred Stock

On November 7, 2025, we entered into a preferred stock purchase agreement, pursuant to which we agreed to issue 200,000 shares of our Series A Preferred Stock at a price per share equal to $100.00 for an aggregate amount of $20.0 million. The Series A Preferred Stock contains certain conversion and redemption features. We utilized an option pricing valuation to determine the fair value of the Series A Preferred Stock at issuance. The valuation incorporated Level 3 inputs in the fair value hierarchy including the expected life of Series A Preferred Stock, expected volatility, and discount rate as well as probability-weighted outcomes. Assumptions used in the valuation also take into account the contractual terms as well as the quoted price of our common stock in an active market. Significant changes in any of these inputs in isolation would result in significant changes to the fair value measurement.

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Derivative Liability

In connection with the issuance of the Series A Preferred Stock, we evaluated the instruments for any features that must be bifurcated and separately accounted for as embedded derivatives. We concluded that certain conversion and redemption features meet the requirements to be separately accounted for as a bifurcated derivative. The Series A Preferred Stock was accounted for as mezzanine equity in accordance with ASC 480, Distinguishing Liabilities from Equity ("ASC 480")and the embedded conversion and redemption features were separated from the host instrument and recognized as a derivative liability with the change in fair value at each reporting period end recognized in the consolidated statements of operations and comprehensive loss.

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We performed a "with-and-without" scenario analysis to determine the fair value of the derivative liability by comparing the value of the Series A Preferred Stock including the bifurcated embedded derivatives to the value of the Series A Preferred Stock excluding them. We utilized an option pricing valuation with the expected life of Series A Preferred Stock, expected volatility, and discount rate as significant inputs as well as probability-weighted outcomes. Assumptions used in the valuation also take into account the contractual terms as well as the quoted price of our common stock in an active market. Significant changes in any of those inputs in isolation would result in significant changes to the fair value measurement.

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Stock-Based Compensation

We account for share-based payments at fair value. The fair value of stock options is measured using the Black-Scholes option-pricing model and the fair value of restricted stock is measured based on the fair value of our common stock underlying the award as of the grant date, described further below. For share-based awards that vest subject to the satisfaction of a service requirement, the fair value measurement date for stock-based compensation awards is the date of grant and the expense is recognized on a straight-line basis, over the vesting period. We account for forfeitures as they occur.

We classify stock-based compensation expense in our consolidated statements of operations and comprehensive loss in the same manner in which the award recipients' payroll costs are classified or in which the award recipients' service payments are classified.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model, which is based on the assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment and estimation by management.

During the years ended December 31, 2025 and 2024, stock-based compensation was $12.0 million and $10.6 million, respectively. As of December 31, 2025, we had approximately $13.3 million of total unrecognized stock-based compensation, which we expect to recognize over a weighted-average period of approximately 2.3 years.

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Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, "Summary of Significant Accounting Policies,"to the Consolidated Financial Statements.

Smaller Reporting Company Status

We are a "smaller reporting company" as defined in the Exchange Act. As a smaller reporting company, we will continue to not be required to comply with the auditor attestation requirements of Section 404(a) of the Sarbanes-Oxley Act of 2002 as long as (a) our annual revenue is less than $100.0 million during the most recently completed fiscal year and (b) the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million as of the last business day of the second quarter of such fiscal year. We may also take advantage of certain reduced disclosure requirements as a smaller reporting company, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will be able to take advantage of these scaled disclosures for so long as (i) the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or (ii)(a) our annual revenue is less than $100.0 million during the most recently completed fiscal year and (b) the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million as of the last business day of the second quarter of such fiscal year.