Tourmaline Bio Inc.

08/13/2025 | Press release | Distributed by Public on 08/13/2025 05:36

Quarterly Report for Quarter Ending June 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 (i) our unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and (ii) the audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 2024 and the related 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 filed with the Securities and Exchange Commission ("SEC") on March 13, 2025 (our "Annual Report").
This discussion and analysis and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements as a result of several factors, including those set forth under "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q. See also the section titled "Special Note Regarding Forward-Looking Statements."
Overview
We are a late-stage clinical biotechnology company focused on developing transformative medicines that dramatically improve the lives of patients with life-altering immune and inflammatory diseases. In doing so, we seek to identify and develop medicines that have the potential to establish new standards-of-care in areas of high unmet medical need.
Our initial product candidate is pacibekitug, a fully human monoclonal antibody that selectively binds to interleukin-6 ("IL-6"), a key proinflammatory cytokine involved in the pathogenesis of many autoimmune and inflammatory disorders. The anti-IL-6 and anti-IL-6 receptor ("IL-6R") antibody class ("IL-6 class") has over two decades of clinical and commercial experience treating over a million patients with a variety of autoimmune and inflammatory diseases. To date, four anti-IL-6 or anti-IL-6R antibodies have been approved in the United States ("U.S."). These four anti-IL-6 or anti-IL-6R antibodies together generated more than $3.5 billion in global sales in 2024.
Pacibekitug is a long-acting anti-IL-6 antibody which we believe has best-in-class properties including a high binding affinity to IL-6, long half-life, and low observed immunogenicity. These characteristics may allow pacibekitug to achieve substantial IL-6 pathway suppression with relatively low amounts of drug exposure, potentially enabling delivery in a convenient, low volume, infrequently administered, subcutaneous injection.
We are pursuing two strategic paths for pacibekitug, the first of which is cardiovascular inflammation. We believe pacibekitug has the potential to transform the standard of care for patients living with high risk of cardiovascular disease by targeting key inflammatory pathways driving cardiovascular disease. Atherosclerotic cardiovascular disease ("ASCVD") is a leading cause of death globally. Preventing major adverse cardiovascular events ("MACE"), such as death, nonfatal myocardial infarction or nonfatal stroke, has the potential to significantly reduce global cardiovascular disease burden. IL-6 has been identified as a promising drug target for addressing the risk of MACE in ASCVD, and multiple external Phase 3 cardiovascular outcome trials investigating IL-6 blockade are ongoing. We believe that pacibekitug potentially offers a meaningfully enhanced product profile to these competitor programs with a potential for subcutaneous dosing once every three months.
As previously announced in January 2024, we have reached alignment with the U.S. Food and Drug Administration (the "FDA") on our ASCVD clinical development program, including our Phase 2 TRANQUILITY trial evaluating the reduction of high sensitivity C-reactive protein ("hs-CRP"), a validated biomarker for inflammation, with quarterly and monthly dosing of pacibekitug in patients with elevated hs-CRP and chronic kidney disease. In March 2024, the FDA cleared our Investigational New Drug application ("IND") related to our ASCVD clinical development program. The Phase 2 TRANQUILITY trial commenced in April 2024 and completed over-enrollment in December 2024.
In May 2025, we reported positive topline data from the ongoing Phase 2 TRANQUILITY trial. Rapid, deep, and durable reductions in hs-CRP through Day 90 were achieved across all pacibekitug arms with high statistical significance as compared to placebo (p<0.0001 for all arms). Based upon these results, pacibekitug became the first and only IL-6 inhibitor known to demonstrate deep hs-CRP reductions with quarterly dosing in a clinical trial, achieving >85% hs-CRP reductions from baseline in the 50 mg quarterly arm. The overall incidence rates of adverse events and serious adverse events in the
pacibekitug groups were comparable to placebo through the data extract date of April 23, 2025. Tourmaline continues to make progress in the planning for a potential Phase 3 cardiovascular outcomes trial in ASCVD.
Additionally, we have nominated abdominal aortic aneurysm ("AAA") as an additional indication within our cardiovascular inflammation disease focus. We completed a successful pre-IND interaction with the FDA in the second quarter of 2025 and have reached alignment with the agency on our plans to conduct a Phase 2 proof-of-concept trial in AAA, including the design of the study and the use of multi-modality imaging. We plan to initiate this Phase 2 proof-of-concept trial in AAA in the second half of 2025.
Our second strategic path is thyroid eye disease ("TED"). TED is an autoimmune disease characterized by autoantibody-mediated activation of the tissues surrounding the eye, causing inflammation and disfigurement which can be sight-threatening in severe cases. We have identified a substantial body of published clinical observations characterizing the beneficial off-label use of currently marketed IL-6 pathway inhibitors, namely Actemra® (tocilizumab), an anti-IL-6R monoclonal antibody, in reducing inflammation, eye-bulging, and levels of autoantibodies in patients with TED. However, no formal, industry-sponsored development effort studying the IL-6 class for the treatment of TED has been completed to date. We are currently evaluating pacibekitug in a pivotal Phase 2b trial in first-line TED, which we refer to as the spiriTED trial. We initiated the spiriTED trial in September 2023 and expect to report topline data in early 2026.
We continue to identify additional indication opportunities for pacibekitug and evaluate new in-licensing and acquisition opportunities for assets that we believe have standard-of-care changing potential for patients with immune and inflammatory diseases.
Since our inception, we have funded our operations primarily through the sale of convertible preferred stock, the Reverse Merger and Pre-Merger Financing Transaction, each as defined and outlined further below, and the January 2024 Offering, as defined and described in Note 7, "Common Stock and Preferred Stock", to our unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q. As of June 30, 2025, we had total cash, cash equivalents and investments of $256.4 million.
Due to our significant research and development expenditures, we have accumulated substantial losses since our inception, including net losses of $46.1 million and $30.8 million for the six months ended June 30, 2025 and 2024, respectively. In addition, we had an accumulated deficit of $181.3 million as of June 30, 2025. We expect to incur additional losses in the future as we expand our research and development activities.
Reverse Merger with Talaris and Pre-Merger Financing Transaction
On June 22, 2023, privately-held Tourmaline Sub, Inc. (formerly Tourmaline Bio, Inc., "Legacy Tourmaline") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Talaris Therapeutics, Inc. ("Talaris"), a publicly traded company, and Terrain Merger Sub, Inc., a direct, wholly owned subsidiary of Talaris ("Merger Sub"). On October 19, 2023, Legacy Tourmaline completed the merger with Talaris in accordance with the terms of the Merger Agreement, pursuant to which, among other matters, Merger Sub merged with and into Legacy Tourmaline, with Legacy Tourmaline surviving as a wholly owned subsidiary of Talaris (such transaction, the "Reverse Merger"). The Reverse Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Immediately prior to the effective time of the Reverse Merger, Talaris effected a 1-for-10 reverse stock split of its common stock.
Pursuant to the terms of the Merger Agreement, immediately prior to the effective time of the Reverse Merger, each share of Legacy Tourmaline's Series A convertible preferred stock was converted into a share of Legacy Tourmaline common stock. At the effective time of the Reverse Merger, Talaris issued an aggregate of approximately 15,877,090 shares of common stock to Legacy Tourmaline's stockholders, based on an exchange ratio of 0.07977 shares of common stock for each share of Legacy Tourmaline's capital stock, including those shares of Legacy Tourmaline's common stock issued upon the conversion of the Series A convertible preferred stock and those shares of Legacy Tourmaline's common stock issued in the Pre-Merger Financing Transaction (as described below), resulting in approximately 20,336,741 shares of common stock of the combined company being issued and outstanding immediately following the effective time of the Reverse Merger. In connection with the Reverse Merger, the Amended and Restated Investor Rights Agreement, dated May 2, 2023, between Tourmaline and certain of its stockholders and the Amended and Restated Investors' Rights Agreement, dated September 22, 2020, between Talaris and certain of its stockholders, were terminated.
Immediately prior to the completion of the Reverse Merger, pursuant to a securities purchase agreement, Legacy Tourmaline issued 4,092,035 shares (as effected by the exchange ratio described above) of Legacy Tourmaline's common stock in a private placement for gross proceeds of $75.0 million (the "Pre-Merger Financing Transaction").
In connection with the completion of the Reverse Merger, Talaris changed its name from "Talaris Therapeutics, Inc." to "Tourmaline Bio, Inc.," Legacy Tourmaline changed its name to "Tourmaline Sub, Inc.," and we began conducting the business conducted by Legacy Tourmaline. On June 30, 2024, Tourmaline Sub, Inc. was merged with and into Tourmaline Bio, Inc., with Tourmaline Bio, Inc. as the surviving entity.
License Agreements
Pfizer License Agreement
On May 3, 2022, we entered into a License Agreement (the "Pfizer License Agreement") with Pfizer Inc. ("Pfizer"), pursuant to which we obtained an exclusive, sublicensable, royalty-bearing, worldwide right to use and license under certain know-how for the development, commercialization and manufacture of PF-04236921 (now known as pacibekitug) and any pharmaceutical or biopharmaceutical product incorporating such compound for the treatment, diagnosis, or prevention of any and all diseases, disorders, illnesses and conditions in humans and animals. In consideration for the license and other rights we received under the Pfizer License Agreement, we paid Pfizer an upfront payment of $5.0 million and granted Pfizer 7,125,000 Series A preferred units of Tourmaline Bio, LLC, the predecessor of Legacy Tourmaline (which subsequently converted to 7,125,000 shares of our Series A preferred stock) at $1.00 per share for aggregate consideration of approximately $7.1 million, with such shares representing 15% of all of our capital stock on a fully-diluted basis at the time of issuance.
As additional consideration for the license, we are obligated to pay Pfizer up to $128.0 million upon the achievement of specific development and regulatory milestones. We are also obligated to pay Pfizer up to $525.0 million upon the first achievement of specific sales milestones. We are obligated to pay Pfizer a marginal royalty rate in the low double digits (less than 15%), subject to specified royalty reductions. The royalty term, on a Product-by-Product and country-by-country basis, begins on the first commercial sale of such Product and expires upon the later of twelve years following the date of the first commercial sale or the expiration of regulatory exclusivity protecting such Product. In the event we complete a Significant Transaction (as defined in the Pfizer License Agreement), we will be obligated to pay Pfizer a one-time payment in the low-eight digits (up to $20.0 million); the amount of such payment is based on the timing of the transaction.
The Pfizer License Agreement expires, unless earlier terminated, upon the last to expire royalty term, and at such time our license will become fully paid-up, irrevocable and perpetual. Each party has the right to terminate the Pfizer License Agreement in its entirety in the event of a material breach if the breaching party fails to cure such breach within a specified cure period after written notice. Pfizer may terminate the Pfizer License Agreement on a Product-by-Product and country-by-country basis if we have materially breached our diligence obligations. Each party has the right to terminate the Pfizer License Agreement in the event of a bankruptcy event. We have the right to terminate the Pfizer License Agreement at our convenience in its entirety or on a country-by-country basis (except with respect to the major market countries identified therein) upon a specified notice period based on the time of the termination.
As of June 30, 2025, we do not owe any amounts under the Pfizer License Agreement, and no royalties or milestone payments have been paid to date under the Pfizer License Agreement.
Lonza License Agreement
In May 2022, we entered into the Lonza License Agreement with Lonza Sales AG ("Lonza"), pursuant to which we obtained a worldwide, non-exclusive, sublicensable (subject to certain conditions) license under certain know-how to market, sell, offer for sale, distribute, import and export products containing pacibekitug ("Product"). We also obtained a non-exclusive, sublicensable (subject to certain conditions) license under certain licensed know-how to use, develop, and manufacture (including have manufactured in accordance with the terms of the Lonza License Agreement) the Product at premises approved by Lonza.
In consideration for the licenses and other rights we received under the Lonza License Agreement, we are obligated to pay Lonza a royalty in the low-single digits on the Net Sales (as defined in the Lonza License Agreement) of Product, and the royalty rate shall be based on the entity manufacturing the drug substance contained in the Product. Royalties are payable on a Product-by-Product basis and a country-by-country basis for ten years following the first commercial sale of a Product
in a certain country. In addition, we may owe Lonza a low six figure annual fee following the occurrence of a specified event depending on which entity manufactures the drug substance, all as specified in the Lonza License Agreement.
The Lonza License Agreement shall continue in full force and effect unless terminated in accordance with the terms of the Lonza License Agreement. Each party shall have the right to terminate the Lonza License Agreement in its entirety in the event of a breach by the other party if the breach is irremediable or the breaching party fails to cure such breach within a specified cure period after written notice. Each party shall have the right to terminate the Lonza License Agreement in the event of a bankruptcy event of the other party. We shall have the right to terminate the Lonza License Agreement at its convenience upon a specified notice period. Lonza shall have the right to terminate the Lonza License Agreement in the event of a change of control of our company or we contest the secret or substantial nature of the licensed know-how.
As of June 30, 2025, we do not owe any amounts under the Lonza License Agreement, and no royalty payments or other fees have been paid to date under the Lonza License Agreement.
Macroeconomic Considerations
Worldwide economic conditions remain uncertain and we continue to monitor the impact of macroeconomic conditions, including those related to inflation and fluctuations in interest rates, financial and credit market fluctuations, international trade relations and tariffs, global health crises, and global geopolitical conflicts such as the war in Ukraine and hostilities in the Middle East. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.
Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, consequences associated with global geopolitical conflicts, and employee availability and wage increases, which may result in additional stress on our working capital resources.
Financial Operations Overview
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If our development efforts are successful and result in commercialization of pacibekitug or any future product candidates or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from product sales, payments from such collaboration or license agreements or a combination thereof.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs related to our clinical trials, costs related to manufacturing material for clinical and preclinical studies, and other costs incurred for the development of our product candidate, pacibekitug. Research and development expenses include:
•personnel-related costs, including salaries, bonuses, benefits and stock-based compensation expenses for employees engaged in research and development functions;
•payments to third parties in connection with the research and development of pacibekitug and any future product candidates, including agreements with third parties such as contract research organizations ("CROs"), clinical trial sites and consultants;
•the cost of manufacturing products for use in our clinical and preclinical studies, including payments to contract development and manufacturing organizations ("CDMOs") and consultants; and
•payments to third parties in connection with the preclinical development of pacibekitug and any future product candidates, including for outsourced professional scientific development services, consulting research and collaborative research.
Research and development expenses also include the cost of in-process research and development ("IPR&D") assets purchased in asset acquisition transactions. IPR&D assets are expensed as incurred if the asset has not yet received regulatory approval and does not have an alternative future use. Acquired IPR&D payments are immediately expensed in the period in which they are incurred and have historically included upfront payments as well as shares of our capital stock. Research and development costs incurred after the acquisition of IPR&D assets are expensed as incurred.
We recognize research and development expenses in the periods in which they are incurred. 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. External expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. We utilize CROs for research and development activities and CDMOs for manufacturing activities and we do not have our own laboratory or manufacturing facilities. Therefore, we have no material facilities expenses attributed to research and development.
Product candidates in later stages of development generally have higher development costs than those in earlier stages. As a result, management expects that our research and development expenses will increase substantially over the next several years as we advance our product candidate, pacibekitug, and any future product candidates into larger and later-stage clinical trials, work to discover and develop additional product candidates, seek to expand, maintain, protect and enforce our intellectual property portfolio, and hire additional research and development personnel.
The successful development of pacibekitug and any future product candidates is highly uncertain, and management does not believe it is possible at this time to accurately project the nature, timing and estimated costs of the efforts necessary to complete the development of, and obtain regulatory approval for, pacibekitug and any future product candidates. To the extent pacibekitug and any future product candidates continue to advance into larger and later-stage clinical trials, our expenses will increase substantially and may become more variable. The duration, costs and timing of development of pacibekitug and any future product candidates are subject to numerous uncertainties and will depend on a variety of factors, including:
•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 activate clinical sites and recruit, screen, and enroll eligible patients;
•the number of patients that participate in the trials;
•the length of hospitalization of patients in clinical trials;
•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 pacibekitug and any future product candidates;
•the phase of development of pacibekitug and any future product candidates;
•the efficacy and safety profile of pacibekitug and any future product candidates;
•the timing and progress of nonclinical and clinical development activities;
•the number and scope of preclinical and clinical programs we decide to pursue;
•raising necessary additional funds;
•the progress of the development efforts of parties with whom we may enter into collaboration arrangements;
•our ability to maintain our current development program and to establish new ones;
•our ability to establish new licensing or collaboration arrangements;
•the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
•the receipt and related terms of regulatory approvals from applicable regulatory authorities;
•the availability of drug substance and drug product for use in production of pacibekitug and any future product candidates;
•the development of commercial scale manufacturing and distribution processes for pacibekitug and any future product candidates;
•establishing and maintaining agreements with third-party manufacturers for commercial manufacturing, if we pursue a third-party manufacturing strategy outside of the U.S, and if pacibekitug and any future product candidates are approved;
•our ability to obtain and maintain patents, trade secret protection and regulatory exclusivity, both in the U.S. and internationally;
•our ability to protect our rights in our intellectual property portfolio;
•our ability to successfully recruit and retain employees;
•the commercialization of pacibekitug and any future product candidates, if and when approved;
•obtaining and maintaining third-party insurance coverage and adequate reimbursement;
•the acceptance of pacibekitug and any future product candidates, if approved, by patients, the medical community and third-party payors;
•evolving standards of care in target indications;
•competition with other marketed or development-stage products; and
•a continued acceptable safety profile of our therapies following approval, if and when approved.
A change in the outcome of any of these variables with respect to the development of pacibekitug or any future product candidates could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for our product candidate or any future product candidates.
General and Administrative Expenses
General and administrative expenses primarily consist of salaries, bonuses, benefits, and stock-based compensation expense for personnel in operational, finance, and administrative functions; professional fees for legal, consulting, accounting, and audit services; recruiting costs; travel expenses; technology costs; and insurance premiums. General and administrative expenses also include corporate facility costs, including rent, utilities, depreciation, and maintenance. We recognize general and administrative expenses in the periods in which they are incurred.
We expect that our general and administrative expenses will increase in the future to support our continued research and development activities, pre-commercial preparation activities for our product candidate and any future product candidates and, if any product candidate receives marketing approval, commercialization activities. Going forward, we expect to
continue to incur expenses associated with being a public company, including expenses related to accounting, audit, legal, public company reporting and compliance, director and officer insurance, investor and public relations, and other administrative and professional services.
Other Income, Net
Other income, net is primarily comprised of interest and investment income on our cash equivalents and investments.
Results of Operations
Comparison of the Three Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations for the three months ended June 30, 2025 and 2024:
Three Months Ended
June 30,
(in thousands)
2025 2024
$ Change
Operating expenses:
Research and development $ 19,634 $ 15,734 $ 3,900
General and administrative 6,340 6,237 103
Total operating expenses 25,974 21,971 4,003
Loss from operations (25,974) (21,971) (4,003)
Other income, net 2,882 4,484 (1,602)
Net loss $ (23,092) $ (17,487) $ (5,605)
Research and Development Expenses
Research and development expenses increased by $3.9 million from $15.7 million for the three months ended June 30, 2024 to $19.6 million for the three months ended June 30, 2025. The increase in research and development expenses was primarily attributable to the following:
•$3.0 million of increased clinical trial expenses related to our TRANQUILITY and spiriTED trials;
•$1.5 million of increased routine toxicology study expenses;
•$1.3 million of increased payroll-related costs, including $0.4 million of increased stock-based compensation expense, attributable to an increase in headcount;
•$0.6 million of increased research and development consulting expenses; and
•$0.3 million of increased medical affairs expenses.
These increases were partially offset by $2.7 million of decreased chemistry, manufacturing, and controls costs due to timing of the production of drug substance and drug product for use in our clinical trials.
General and Administrative Expenses
General and administrative expenses increased by $0.1 million from $6.2 million for the three months ended June 30, 2024 to $6.3 million for the three months ended June 30, 2025. The increase in general and administrative expenses was primarily attributable to $0.5 million of increased payroll-related costs, including $0.3 million of increased stock-based
compensation expense, partially offset by $0.3 million of decreased consulting expenses and $0.1 million of decreased legal, audit, and tax expenses.
Other Income, Net
Other income, net decreased by $1.6 million from $4.5 million for the three months ended June 30, 2024 to $2.9 million for the three months ended June 30, 2025. The decrease in other income, net was primarily attributable to a $1.8 million decrease in investment income, partially offset by a $0.3 million increase in interest income.
Comparison of the Six Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations for the six months ended June 30, 2025 and 2024:
Six Months Ended June 30,
(in thousands)
2025 2024
$ Change
Operating expenses:
Research and development $ 39,892 $ 27,110 $ 12,782
General and administrative 12,313 12,378 (65)
Total operating expenses 52,205 39,488 12,717
Loss from operations (52,205) (39,488) (12,717)
Other income, net 6,143 8,690 (2,547)
Net loss $ (46,062) $ (30,798) $ (15,264)
Research and Development Expenses
Research and development expenses increased by $12.8 million from $27.1 million for the six months ended June 30, 2024 to $39.9 million for the six months ended June 30, 2025. The increase in research and development expenses was primarily attributable to the following:
•$6.8 million of increased clinical trial expenses related to our TRANQUILITY and spiriTED trials;
•$3.9 million of increased payroll-related costs, including $0.9 million of increased stock-based compensation expense, attributable to an increase in headcount;
•$3.0 million of increased routine toxicology study expenses;
•$1.1 million of increased research and development consulting expenses; and
•$0.6 million of increased medical affairs expenses.
These increases were partially offset by $2.8 million of decreased chemistry, manufacturing, and controls costs due to timing of the production of drug substance and drug product for use in our clinical trials.
General and Administrative Expenses
General and administrative expenses decreased by $0.1 million from $12.4 million for the six months ended June 30, 2024 to $12.3 million for the six months ended June 30, 2025. The decrease in general and administrative expenses was primarily attributable to $1.3 million of decreased consulting expenses and $0.3 million of decreased legal expenses. These decreases were partially offset by $1.5 million of increased payroll-related costs, including $0.7 million of increased stock-based compensation expense.
Other Income, Net
Other income, net decreased by $2.5 million from $8.7 million for the six months ended June 30, 2024 to $6.1 million for the six months ended June 30, 2025. The decrease in other income, net was primarily attributable to a $3.1 million decrease in investment income, partially offset by a $0.6 million increase in interest income.
Liquidity and Capital Resources
Sources of Liquidity
Since inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidate and any future product candidates. We expect that our research and development and general and administrative costs will continue to increase significantly, including in connection with conducting clinical trials and potentially manufacturing for our product candidate and any future product candidates to support commercialization and providing general and administrative support for our operations, including the cost associated with operating as a public company. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.
Since our inception, we have funded our operations primarily with outside capital, including proceeds from the sale of Series A convertible preferred stock, the Pre-Merger Financing Transaction and the January 2024 Offering, having raised aggregate gross proceeds of approximately $359.7 million as of the date hereof. However, we have incurred significant recurring losses, including net losses of $46.1 million and $30.8 million for the six months ended June 30, 2025 and 2024, respectively. In addition, we have an accumulated deficit of $181.3 million as of June 30, 2025.
As of June 30, 2025, we had $256.4 million in cash, cash equivalents and investments. Based upon our current operating plan, we believe that our working capital will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2027. We have based this estimate on assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect.
November 2024 ATM Sales Agreement
In November 2024, we entered into a Sales Agreement (the "ATM Sales Agreement") with Leerink Partners LLC ("Leerink"), as sales agent, under which we may offer and sell, from time to time, shares of our common stock (the "ATM Shares"), through Leerink (the "ATM Offering"). In November 2024, we filed a registration statement on Form S-3 (the "Shelf Registration Statement"), including a base prospectus and sales agreement prospectus, with the SEC, for the issuance and sale of up to $100.0 million of shares of our common stock under the ATM Sales Agreement. Under the ATM Sales Agreement, Leerink may sell the ATM Shares by methods deemed to be an "at the market offering" as defined in Rule 415(a)(4) promulgated under the Securities Exchange Act of 1934, as amended. We may sell the ATM Shares in amounts and at times to be determined by us from time to time subject to the terms and conditions of the ATM Sales Agreement, but we have no obligation to sell any of the ATM Shares in the ATM Offering.
As of June 30, 2025, we have not sold any shares of our common stock pursuant to the ATM Offering. We may offer and sell ATM shares at an aggregate offering price of up to the remaining $100.0 million available under the ATM Offering.
Future Capital Requirements
Since inception, we have not generated any revenue from product sales. Management does not expect to generate any meaningful product revenue unless and until we obtain regulatory approval of and commercialize our product candidate and any future product candidates, and management does not know when, or if, that will occur. Until we can generate significant revenue from product sales, if ever, we will continue to require substantial additional capital to develop our product candidate and any future product candidates and fund operations for the foreseeable future. Management expects our expenses to increase in connection with our ongoing activities as described in greater detail below. We are subject to all the risks incident in the development of new biopharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may harm our business.
In order to complete the development of pacibekitug and any future product candidates and to build the sales, marketing and distribution infrastructure that management believes will be necessary to commercialize product candidates, if approved, we will require substantial additional capital. Accordingly, until such time that we can generate a sufficient amount of revenue from product sales or other sources, if ever, management expects to seek to raise any necessary additional capital through private or public equity or debt financings, loans or other capital sources, which could include income from collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. To the extent that we raise additional capital through equity financings or convertible debt
securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our own common stock, make certain investments or engage in merger, consolidation, licensing, or asset sale transactions. If we raise capital through collaborations, partnerships, and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market themselves. We may be unable to raise additional capital from these sources on favorable terms, or at all. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the U.S. and worldwide resulting from recent bank failures, other general macroeconomic conditions and otherwise. The failure to obtain sufficient capital on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to delay, reduce or curtail our research, product development or future commercialization efforts. We may also be required to license rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Management cannot provide assurance that we will ever generate positive cash flow from operating activities.
Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our capital requirements. Our future funding requirements will depend on many factors, including:
•the scope, timing, progress, results, and costs of researching and developing pacibekitug, and conducting larger and later-stage clinical trials;
•the scope, timing, progress, results, and costs of researching and developing other product candidates that we may pursue;
•the costs, timing, and outcome of regulatory review of pacibekitug and any future product candidates;
•the costs of future activities, including product sales, medical affairs, marketing, manufacturing, and distribution, for pacibekitug and any future product candidates for which we receive marketing approval;
•the costs of manufacturing commercial-grade products and sufficient inventory to support commercial launch;
•the revenue, if any, received from commercial sales of our products, should any of our product candidates and any future product candidates receive marketing approval;
•the cost and timing of attracting, hiring, and retaining skilled personnel to support our operations and continued growth;
•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•our ability to establish, maintain, and derive value from collaborations, partnerships or other marketing, distribution, licensing, or other strategic arrangements with third parties on favorable terms, if at all;
•the extent to which the profile of marketed or development stage competing products affects the clinical and commercial potential of our products;
•the extent to which we acquire or in-licenses other product candidates and technologies, if any; and
•the costs associated with operating as a public company.
A change in the outcome of any of these or other factors with respect to the development of pacibekitug and any of our future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional capital to meet the capital requirements associated with such operating plans.
As described above, if we progress pacibekitug through clinical development and, if approved, commercialize it, we may be required to pay Pfizer up to $128.0 million upon the achievement of specific development and regulatory milestones and up to $525.0 million upon the first achievement of specific sales milestones. Upon commercialization, we would also be obligated to pay Pfizer and Lonza royalties on product sales, as outlined in more detail above.
Cash Flows
The following table provides information regarding our cash flows for the six months ended June 30, 2025 and 2024:
Six Months Ended June 30,
(in thousands)
2025 2024
Net cash (used in) provided by:
Operating activities $ (41,943) $ (32,930)
Investing activities 42,244 (199,000)
Financing activities 616 161,352
Netincrease (decrease) in cash, cash equivalents and restricted cash
$ 917 $ (70,578)
Cash Used in Operating Activities
Net cash used in operating activities for the six months ended June 30, 2025 was $41.9 million, compared to net cash used in operating activities of $32.9 million for the six months ended June 30, 2024. Net cash used in operating activities increased by $9.0 million primarily due to the overall growth in our operations, including increased headcount and clinical trial activities.
Cash Provided by Investing Activities
Net cash provided by investing activities for the six months ended June 30, 2025 was $42.2 million, compared to net cash used in investing activities of $199.0 million for the six months ended June 30, 2024. This change from net cash used in investing activities to net cash provided by investing activities was primarily due to maturities of investments during the six months ended June 30, 2025.
Cash Provided by Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2025 was $0.6 million, compared to net cash provided by financing activities of $161.4 million for the six months ended June 30, 2024. Net cash provided by financing activities during the six months ended June 30, 2025 was primarily comprised of net proceeds from the exercise of stock options whereas net cash provided by financing activities during the six months ended June 30, 2024 was primarily comprised of net proceeds received from the January 2024 Offering.
Contractual Obligations and Commitments
Research and Development and Manufacturing Agreements
We enter into agreements with certain vendors for the provision of goods and services, which includes manufacturing services with CDMOs and development and clinical trial services with CROs. These agreements may include certain provisions for purchase obligations and termination obligations that could require payments for the cancellation of committed purchase obligations or for early termination of the agreements. The amount of the cancellation or termination payments vary and are based on the timing of the cancellation or termination and the specific terms of the agreement. These obligations and commitments are not separately presented.
Pfizer License Agreement
In May 2022, we entered into the Pfizer License Agreement. We have not included milestone or royalty payments or other contractual payment obligations under the Pfizer License Agreement as the timing and amount of such obligations are unknown or uncertain and are contingent upon the initiation and successful completion of future activities. See "License Agreements-Pfizer License Agreement" included above for further details on the Pfizer License Agreement.
Critical Accounting Policies and Critical Accounting Estimates
Our financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of the financial statements and related disclosures requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management evaluates estimates and assumptions on a periodic basis. Our actual results may differ from these estimates.
For a description of critical accounting policies that require significant judgments and estimates during the preparation of our financial statements, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Critical Accounting Estimates" and Note 2, "Basis of Presentation and Summary of Significant Accounting Policies", to our consolidated financial statements contained in our Annual Report. There have been no significant changes to our critical accounting policies from those disclosed in our Annual Report.
Recently Issued and Adopted Accounting Pronouncements
See Note 2, "Basis of Presentation and Summary of Significant Accounting Policies", to our condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently adopted and recently issued accounting pronouncements.
Emerging Growth Company and Smaller Reporting Company Status
In April 2012, the Jumpstart Our Business Startups Act of 2012 ("JOBS Act") was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" ("EGC") can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended ("Securities Act"), for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for new or revised accounting standards during the period in which we remain an emerging growth company; however, we may adopt certain new or revised accounting standards early to the extent allowed by the standard.
We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.235 billion in annual revenue; (ii) the date we qualify as a "large accelerated filer," with at least $700.0 million of equity securities held by non-affiliates; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (iv) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue was less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Tourmaline Bio Inc. published this content on August 13, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on August 13, 2025 at 11:36 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]