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 our unaudited condensed financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial information and related notes included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission, or the SEC, on March 31, 2025, or the Annual Report.

Except for the historical financial information contained herein, the matters discussed in this Quarterly Report on Form 10-Q may be deemed to contain forward-looking statements that reflect our plans, estimates and beliefs. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, words such as "may," "expect," "anticipate," "estimate," "intend," "plan" and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.

Our actual results could differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those risks identified under Part II, Item 1A. Risk Factors of our 2024 Annual Report.

Overview

On October 10, 2024, we announced our continued progress and evaluation of our internally developed small molecule oral obesity program. The aim of this program is to develop a drug for obesity with a differentiated profile relative to currently marketed and in development oral and injectable products.

We have also operated as a clinical-stage oncology-focused cell therapy company developing adoptive TCR-T cell therapy, designed to treat multiple solid tumor types in large cancer patient populations with unmet clinical needs. On August 14, 2023, we announced a strategic reprioritization of our business and wind down of our TCR-T Library Phase 1/2 Trial.

In connection with the reprioritization, we reduced our workforce during the third and fourth quarters of 2023, and we continue working to reduce costs in order to extend our cash runway. We continue to explore strategic alternatives, including, but not limited to, an acquisition, merger, reverse merger, sale of assets, strategic partnerships, capital raises or other transactions.

We have not generated any product revenue and have incurred significant net losses in each year since our inception. For the six months ended June 30, 2025, we had a net loss of $2.1 million, and as of June 30, 2025, we have incurred approximately $922.6 million of accumulated deficit since our inception in 2003. We expect to continue to incur significant operating expenditures and net losses for the foreseeable future.

Small Molecule Oral Obesity Program

We are advancing our internally developed, preclinical small molecule program for the treatment of obesity and related metabolic disorders. This program focuses on discovering and developing novel, orally administered therapeutics with the potential for a differentiated and complementary profile compared to currently available therapies. While other pipeline therapies for obesity explore alternative hormonal pathways such as amylin or dual GIP/GLP-1 receptor agonism, our approach is focused on a non-hormonal mechanism of action. The program seeks to develop an oral therapeutic with the potential to address certain limitations of existing hormonal therapies, including the potential for preservation of lean muscle mass during weight loss and an improved tolerability profile.

During the fourth quarter of 2024, we engaged a contract development and manufacturing organization (CDMO) to synthesize active pharmaceutical ingredients (APIs) for our product candidates. We have since initiated a portfolio of preclinical studies to evaluate these product candidates. Initial in vitro characterization studies conducted by a contract research organization (CRO) encountered methodological issues related to the assay, which prevented the generation of conclusive data. This CRO has since completed the necessary method development to resolve these issues, and these studies are being repeated. In parallel, we have conducted an in vivo pharmacokinetic (PK) study of our product candidate ALN1003 and have initiated a pilot in vivo proof-of-concept (PoC) study of ALN1003 in a diet-induced obesity (DIO) mouse model.

Collectively, these ongoing studies are designed to assess our candidates' effects on key biological pathways implicated in metabolic disease, including receptor binding, lipid accumulation, food consumption, weight loss, and the expression of genes related to thermogenesis and energy expenditure. We anticipate initial data from these ongoing in vitro and in vivo studies will be available no later than the fourth quarter of 2025. These data are intended to inform the future development strategy for our product candidates and guide indication selection.

The advancement of this program is subject to numerous risks and uncertainties inherent in early-stage drug development. Subject to favorable data from these preclinical studies and our ability to secure additional capital, we plan to advance a selected development

candidate into formal investigational new drug (IND)-enabling studies. We intend to actively explore strategic financing and collaboration opportunities to fund the continued development of this program.

Historical Development and Achievements in Cancer Therapeutics

We previously focused on developing TCR-T cell therapies for solid tumors using our non-viral Sleeping Beauty platform and hunTR® TCR discovery platform. Key milestones included:

In August 2023, however, due to substantial development costs and a challenging financing environment, we announced a strategic reprioritization, including the wind-down of our TCR-T Library Phase 1/2 Trial and cessation of further clinical development of TCR-T programs. This involved:

As a result, research and development expenses related to cancer programs have significantly declined, from $11.7 million for the six months ended June 30, 2023, to $0.3 million for the same period in 2025, reflecting the shift away from active oncology development.

We are actively exploring strategic alternatives to maximize stockholder value, including but not limited to acquisitions, mergers, reverse mergers, asset sales, strategic partnerships, or capital raises. These may involve monetizing cancer-related assets, such as out-licensing the TCR library or hunTR platform. We have engaged Cantor Fitzgerald & Co. as a strategic advisor for this process. However, there are no assurances that any transaction will be consummated, and failure to do so could lead to further operational curtailment or dissolution. Our primary focus has shifted to our preclinical small-molecule obesity and metabolic disorder program, with ongoing preclinical in vitroand in vivo studies.

Nasdaq Shareholders Equity Deficiency Notice

On April 7, 2025, the Company received a notice (the "Notice") from the Listing Qualifications staff of Nasdaq notifying the Company that the Company's stockholders equity as reported in its Annual Report on Form 10-K for the period ended December 31, 2024 (the "2024 10-K"), did not satisfy the continued listing requirements under Nasdaq Listing Rule 5550(b)(1) for the Nasdaq Capital Market, which requires that a listed company's stockholder equity be at least $2.5 million. In its 2024 10-K, the Company reported stockholders' equity of $2.1 million, and, as a result, does not currently satisfy Nasdaq Listing Rule 5550(b)(1).

The Notice has no immediate effect on the Company's listing on the Nasdaq Capital Market. In accordance with Nasdaq rules, the Company has 45 calendar days from the date of the notification to submit a plan to regain compliance with Nasdaq Listing Rule 5550(b)(1) to Nasdaq. The Company submitted a compliance plan within 45 days of the date of the notification, as required, and is evaluating available options to resolve the deficiency and regain compliance.

On May 22, 2025, the Company submitted its compliance plan to Nasdaq and is currently awaiting a response. If the compliance plan is accepted, Nasdaq may grant the Company an extension of up to 180 calendar days from the date of the notice, or until October 4, 2025, to evidence compliance with the rule. The Company is evaluating and pursuing available options to address the deficiency and regain compliance.

Results of Operations

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Royalty Revenue

Royalty revenue during the three months ended June 30, 2025 and 2024 were as follows:

Research and Development Expenses

Research and development expenses during the three months ended June 30, 2025 and 2024 were as follows:

Research and development expenses for the three months ended June 30, 2025 increased by $5,000 when compared to the three months ended June 30, 2024, primarily due to an increase in consulting fees incurred in pursuit of our obesity program.

General and Administrative Expenses

General and administrative expenses during the three months ended June 30, 2025 and 2024 were as follows:

General and administrative expenses for the three months ended June 30, 2025 decreased by $136,000 as compared to the three months ended June 30, 2024, primarily due to a decrease in insurance costs, filing fees, bank fees and travel costs due to our downsized operations.

Other Income

Other income during the three months ended June 30, 2025 and 2024 were as follows:

Other income, net, for the three months ended June 30, 2025 decreased by $18,000 as compared to the three months ended June 30, 2024, primarily due to reduced interest cash reserves, corresponding to the reduced cash balances quarter over quarter.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Royalty Revenue

Royalty revenue during the six months ended June 30, 2025 and 2024 were as follows:

Research and Development Expenses

Research and development expenses during the six months ended June 30, 2025 and 2024 were as follows:

Research and development expenses for the six months ended June 30, 2025 increased by $255,000 when compared to the six months ended June 30, 2024, primarily due to an increase of $200,0000 related to regulatory submissions as part of our wind-down clinical activities and consulting fees incurred in pursuit of our obesity program.

General and Administrative Expenses

General and administrative expenses during the six months ended June 30, 2025 and 2024 were as follows:

General and administrative expenses for the six months ended June 30, 2025 decreased by $1,004,000 as compared to six months ended June 30, 2024, primarily due to a $200,000 decrease in employee-related expenses as a result of lower salaries and employee related costs, a $400,000 decrease in consulting expenses and a $400,000 decrease in insurance cost, filing fees, bank fees and travel costs and bank fees due to our downsized operations.

Other Income

Other income during the six months ended June 30, 2025 and 2024 were as follows:

Other income, net, for the six months ended June 30, 2025 decreased be $58,000 as compared to the six months ended June 30, 2024, primarily due to reduced interest income from our cash reserves, as our reduced cash reserves quarter over quarter.

Liquidity and Capital Resources

Liquidity

Sources of Liquidity

We have not generated any revenue from product sales and have only generated nominal royalty revenue. Since inception, we have incurred net losses and negative cash flows from our operations.

To date, we have financed our operations primarily through public offerings of our common stock, private placements of our convertible and preferred equity securities, term debt and collaborations.

Given our current development plans and cash management efforts, we anticipate that our cash resources will be sufficient to fund operations into the first quarter of 2026. Our ability to continue operations after our current cash resources are exhausted depends on our ability to obtain additional financing, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in our focus and direction of our research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are not available when required, management may need to curtail its development efforts and planned operations to conserve cash.

We operated at a loss since inception in 2003 and have no significant recurring revenue from operations. We anticipate that losses will continue for the foreseeable future. As of June 30, 2025, our accumulated deficit was approximately $922.6 million. Our working capital as of June 30, 2025 was $2.6 million, consisting of $3.7 million in current assets and $1.1 million in current liabilities. Our actual cash requirements may vary materially from those planned because of a number of factors, including changes in the focus, direction and pace of our development programs.

As of June 30, 2025, we had approximately $2.9 million of cash and cash equivalents. In light of our 2023 announced strategic reprioritization and the ensuing streamlining and cost efficiency efforts, we anticipate our cash resources will be sufficient to fund our operations into the first quarter of 2026. In order to continue our operations beyond our forecasted runway, including, if necessary, to continue to explore strategic alternatives, we will need to raise additional capital. Aside from the equity line of credit, we have no committed sources of additional capital at this time. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate. Management does not know whether additional financing will be on terms favorable or acceptable to us when needed, if at all. If adequate additional funds are not available when required, we may be unable to persist as a going concern for sufficient time to identify or execute on any strategic alternatives.

Based on the current cash forecast, management has determined that our present capital resources will not be sufficient to fund our planned operations for at least one year from the issuance date of the condensed financial statements, which raises substantial doubt as to our ability to continue as a going concern. This forecast of cash resources and planned operations is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors.

Series A-1 Preferred Stock

In April 2025, we entered into a Subscription Agreement, with an accredited investor, pursuant to which we sold 500 shares of Series A-1 Convertible Preferred Stock, par value of $0.001 per share (the "Series A-1 Preferred Stock"), at a price per share of $1,000 (the "Preferred Offering") for an aggregate purchase price of $500,000. The Preferred Offering also relates to the offering of the shares of our common stock (the "Common Stock") issuable upon the conversion of or otherwise pursuant to the terms of the Series A-1 Preferred Stock).

In connection therewith, we filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series A-1 Convertible Preferred Stock, designating 1,000 shares of preferred stock as our Series A-1 Preferred Stock.

Series A-1 Preferred Stock together with the aggregate accrued or accumulated and unpaid dividends thereon, is convertible, at any time at option of the holder, into shares of Common Stock at initial fixed "Conversion Price" of $2.76 per share, subject to customary anti-dilution provisions. Prior thereto, the holders of Series A-1 Preferred Stock are entitled to receive dividends at a rate of 10% per annum, payable in shares of Series A-1 Preferred Stock, if and when declared by the Board of Directors. In addition, to the extent any other dividends or distributions are declared for holders of the common stock, the holders of Series A-1 Preferred Stock have participation rights on an as-converted basis. The holders of Series A-1 Preferred Stock are entitled to vote, together as a single class, on any and all matters presented to our stockholders for their action on an as-converted basis, a number of votes equal to the number of shares of common stock into which the shares of Series A-1 Preferred Stock are convertible under the terms of the Certificate of Designation.

Securities Purchase Agreement for Registered Direct Offering

In June 2025, we entered into a Securities Purchase Agreement with certain institutional investors, pursuant to which we agreed to sell (i) 338,725 shares of common stock at a purchase price of $3.36 per share and (ii) 271,674 pre-funded warrants to purchase common stock at a purchase price of $3.359 per warrant share, in a registered direct offering. In connection therewith, we received net proceeds totaling $1,911,000 after deduction of transaction related expenses. Subsequent thereto and through June 30, 2025, a total of 96,500 the prefunded warrants were exercised at $0.001 per share, resulting in the issuance of 96,500 shares of common stock. Subsequent to June 30, 2025, an aggregate of 112,875 prefunded warrants were exercised resulting in the issuance of an additional 112,875 shares of common stock.

Series A-2 Preferred Stock

In June 2025, we entered into a subscription agreement with certain accredited investors, pursuant to which we sold, in a private placement, 850 shares of Series A-2 Convertible Preferred Stock, par value $0.001 per share, at a price of $1,000 per share, for aggregate gross proceeds of $850,000.

In connection therewith, we filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series A-2

Convertible Preferred Stock, designating 1,000 shares of preferred stock as our Series A-2 Preferred Stock.

Series A-2 Preferred Stock, together with the aggregate accrued or accumulated and unpaid dividends thereon, is convertible, at any time at the option of the holder, into shares of Common Stock at an initial fixed "Conversion Price" of $4.49 per share, subject to customary anti-dilution provisions. Prior thereto, the holders of Series A-2 Preferred Stock are entitled to receive dividends at a rate of 10% per annum, payable in shares of Series A-2 Preferred Stock, if and when declared by the Board of Directors. In addition, to the extent any other dividends or distributions are declared for holders of the Common Stock, the holders of Series A-2 Preferred Stock have participation rights on an as-converted basis. The holders of Series A-2 Preferred Stock are entitled to vote, together as a single class, on any and all matters presented to our stockholders for their action on an as-converted basis, a number of votes equal to the number of shares of Common Stock into which the shares of Series A-2 Preferred Stock are convertible under the terms of the Certificate of Designation.

Cash Flows

The following table summarizes our net decrease in cash and cash equivalents for the six months ended June 30, 2025 and 2024:

Net cash flows used in operating activities for the six months ended June 30, 2025 was $1,473, as compared to net cash used in operating activities of $3,598 for the six months ended June 30, 2024. The decrease in net cash used in operating activities was primarily related to reductions in our net loss, offset by an increase in timing of accounts payable and accrued expenses.

The net cash flows from financing activities for the six months ended June 30, 2025 was $3,261 as compared to $0 for the six months ended June 30,2024. The financing activity was directly attributable to proceeds from the issuance of common stock and prefunded warrants, the sale of Series A-1 Preferred Stock, and the sale of Series A-2 Preferred Stock.

Capital Resources

Operating Leases

As of June 30, 2025, we have no lease commitments, other than a short-term lease.

Royalty and License Fees

In June 2022, Solasia Pharma K. K., or Solasia, announced that darinaparsin had been approved for relapsed or refractory Peripheral T-Cell Lymphoma by the Ministry of Health, Labor and Welfare in Japan. During the six months ended June 30, 2025 and 2024, the Company earned $2 and $6, respectively, in royalty revenues on net sales under the Solasia License and Collaboration Agreement. During the three months ended June 30, 2024, the Company earned $4, in royalty revenues on net sales under the Solasia License and Collaboration Agreement. No such royalty revenues were earned in the three months ended June 30, 2025.