Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q (the "Quarterly Report") and our audited financial statements and notes thereto and the related Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission ("SEC") on March 9, 2026 (the "Annual Report"). Unless otherwise indicated, all references in this Quarterly Report to "Spruce," the "company," "we," "our," "us" or similar terms refer to Spruce Biosciences, Inc. and its consolidated subsidiary.

Forward-Looking Statements

In addition to historical financial information, this Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are based upon current expectations and involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "should," "will" or the negative of these terms or other similar expressions.

Forward-looking statements include, but are not limited to, statements regarding: the timing of our planned biologics license application ("BLA") submission for TA-ERT and the potential for, and timing of, U.S. Food and Drug Administration ("FDA") acceptance, priority review and accelerated approval; the initiation, design, enrollment and timing of our planned TrAnsform confirmatory study and expanded access program; our manufacturing and supply plans; the anticipated commercial launch of TA-ERT, if approved; our potential receipt and sales of one or more priority review vouchers; the Separation of Adrenyx and the planned Distribution and its anticipated timing and benefits; the availability of additional funding under the Avenue Loan Agreement, as amended; our expected cash needs, funding requirements and ability to continue as a going concern; and the effects of tariffs and macroeconomic conditions on our business. Forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Overview

We are a late-stage biopharmaceutical company focused on developing and commercializing novel therapies for neurological disorders with significant unmet medical need. We focus on diseases with high unmet medical need and clear biology for treatment, for which there are either no approved therapies treating the underlying disease or suboptimal treatment options. We were incorporated in April 2016. In November 2026, we entered into a separation and distribution agreement (the "Separation Agreement") to separate our CRHX-101 (formerly SPR202) program into Adrenyx Biosciences, Inc. ("Adrenyx"), our wholly-owned subsidiary, and to distribute all outstanding shares of Adrenyx to our stockholders. See "Separation of Adrenyx and Planned Distribution" below.

Since inception, we have focused primarily on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting nonclinical and clinical development of, and manufacturing development for, our product candidates. Since November 2024 we have shifted our focus to the development of tralesinidase alfa enzyme replacement therapy ("TA-ERT"), an investigational treatment for mucopolysaccharidosis type IIIB ("MPS IIIB"), or Sanfilippo Syndrome Type B. In October 2025, TA-ERT received breakthrough therapy designation from the FDA for the treatment of Sanfilippo Syndrome Type B. TA-ERT has also received Rare Pediatric Disease Designation and Fast Track Designation from the FDA and Orphan Drug Designation in the United States and the European Union ("EU"). We anticipate submitting a BLA seeking accelerated approval of TA-ERT for the treatment of Sanfilippo Syndrome Type B in December 2026. In the second quarter of 2026, we completed two pre-BLA meetings with the FDA, in which the FDA generally agreed with our proposed approach to the overall content and format of the BLA and indicated that our analytical comparability strategies following the transfer of TA-ERT manufacturing to a global biologics contract manufacturer appeared reasonable to support the BLA. We completed the first drug product process performance qualification ("PPQ") batch in July 2026 and expect to complete the second PPQ batch in December 2026. Currently, there is no FDA-approved therapy for the treatment of MPS IIIB, and disease management consists of limited palliative care.

We have no products approved for commercial sale and have not generated any product revenue to date, and we continue to

incur significant research and development and other expenses related to our ongoing operations. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development of TA-ERT and our other current and future product candidates.

Since inception, we have incurred significant losses and negative cash flows from operations. During the nine months ended September 30, 2026 and 2025, we incurred net losses of $52.5 million and $24.3 million, respectively, and used $44.6 million and $26.9 million of cash in operations, respectively. As of September 30, 2026, we had an accumulated deficit of $341.7 million, and we do not expect positive cash flows from operations for the foreseeable future. We expect to continue to incur significant and increasing losses for the foreseeable future, and our net losses may fluctuate significantly from period to period, depending on the timing of expenditures on our planned research and development activities.

As of September 30, 2026, we had cash and cash equivalents of $87.7 million. Since inception through September 30, 2026, we have raised aggregate gross proceeds of $432.6 million, including $103.5 million from our initial public offering in October 2020, $116.0 million from the sale of our redeemable convertible preferred stock, $109.1 million from private placement financings (including the August 2026 private placement), $69.0 million from the April 2026 underwritten public offering, $20.0 million from the issuance of debt, and $15.0 million upfront payment from Kaken Pharmaceutical Co., Ltd. received in April 2023.

Without alternative financing or proceeds from other strategic alternatives, we believe that based on our current operating plan, our cash and cash equivalents of $87.7 million as of September 30, 2026 will be insufficient to fund our planned operations and debt obligations for at least 12 months following the issuance date of these condensed consolidated financial statements included elsewhere in this Quarterly Report.

We expect our expenses will increase significantly in connection with our ongoing activities, as we:

In November 2025, the SEC declared effective a registration statement on Form S-3 (the "Shelf Registration"), covering the sale of up to $300.0 million of our securities. Also, in March 2026, we entered into an Open Market Sales AgreementSM (the "Sales Agreement") with Jefferies LLC ("Jefferies") pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal. As of September 30, 2026, we have not issued any shares of common stock under the Sales Agreement.

On April 22, 2026, we closed our previously announced underwritten public offering of 1,150,000 shares of our common stock at a public offering price of $50.00 per share and pre-funded warrants to purchase up to 50,000 shares of our common stock at a public offering price of $49.99 per pre-funded warrant (which equals the public offering price per share of common stock, less the $0.01 per share exercise price of each pre-funded warrant). In addition, we granted the underwriters a 30-day option to purchase up to 180,000 additional shares of common stock at the public offering price, less underwriting discounts and commissions, which was exercised in full. The net proceeds to us from the offering, after deducting underwriting discounts and commissions and offering expenses payable by us, were $64.4 million.

On August 7, 2026, we entered into a Stock Purchase Agreement with the National MPS Society and the Cure Sanfilippo Foundation (the "Purchasers"), pursuant to which we sold and issued to the Purchasers 121,203 shares of common stock in a private

placement transaction. The purchase price was $45.38 per share of common stock. The net proceeds to us, after deducting offering expenses payable by us, were $5.5 million. The proceeds will be used to partially fund our planned open-label, single-arm expanded access program to provide TA-ERT for the treatment of MPS IIIB in children.

Global economic and business activities continue to face widespread macroeconomic uncertainties, including global trade disputes, labor shortages, declines in consumer confidence, inflation and monetary supply shifts, recession risks, potential disruptions from the ongoing wars in Ukraine and the Middle East and related sanctions, declines in economic growth, tariffs and related legal challenges, U.S. federal government shutdowns and the risk of future lapses in appropriations, and uncertainty about economic stability.

The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Reverse Stock Split

We effected a one-for-seventy-five (1:75) reverse stock split of our outstanding common stock (the "Reverse Stock Split") on August 4, 2025.

All of the outstanding common stock share numbers (including shares of common stock subject to our options), share prices, exercise prices and per share amounts contained in the financial statements have been retroactively adjusted in the financial statements to reflect this Reverse Stock Split for all periods presented.

Separation of Adrenyx and Planned Distribution

On November 6, 2026, our board of directors approved a plan to separate our CRHX-101 program into Adrenyx (the "Separation") and we and Adrenyx entered into a separation and distribution agreement. We currently intend to distribute all of the outstanding shares of Adrenyx common stock to our stockholders on a pro rata basis (the "Distribution"), in a transaction that is intended to result in two independent public companies, although our board of directors has not yet approved the Distribution or set a record date for the Distribution. This transaction is intended to enable Adrenyx to pursue distinct strategic priorities, establish independent capital structures and offer investors separate investment opportunities.

Also on November 6, 2026, Adrenyx entered into a secured convertible note purchase agreement with a leading institutional biotechnology investor, pursuant to which Adrenyx may issue secured convertible promissory notes in an aggregate principal amount of up to $10.0 million, of which $5.0 million in aggregate principal amount was issued at the initial closing and which are secured by substantially all assets of Adrenyx. Adrenyx is required to use the proceeds of these notes to develop and commercialize the CRHX-101 program and for its other general corporate purposes. The Company is not permitted to use any such proceeds to fund its own operations, and these notes are neither secured by any assets of the Company nor guaranteed by the Company. The notes are automatically convertible into Conversion Securities upon the closing of a qualified equity financing raising aggregate gross proceeds of $37.5 million, at a conversion price equal to 90% of the per-unit price issued to investors in such financing, or certain other financings of Adrenyx.

In connection with the Separation, we will provide certain services to Adrenyx for a period of up to 12 months following the Distribution, subject to extension, compensated by Adrenyx as provided in the transition services agreement. The Distribution is expected to be completed in the first half of 2027, with a private placement of Adrenyx equity securities expected to be completed in connection with the Distribution, subject to the satisfaction or waiver of certain conditions. See Note 13 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Material Agreements

Loan Agreement with Avenue

On January 7, 2026 (the "Avenue Closing Date"), we entered into a Loan and Security Agreement (the "Avenue Loan and Security Agreement") and a Supplement to the Loan and Security Agreement (together with the Avenue Loan and Security Agreement, the "Avenue Loan Agreement"), with Avenue Capital Management II, L.P., as administrative agent and collateral agent (the "Agent") and Avenue Venture Opportunities Fund II, L.P., as lender (the "Lender", together with the Agent, "Avenue").

The Avenue Loan Agreement makes available to us term loans in an aggregate principal amount of up to $50.0 million with (i) $15.0 million funded within 5 business days after the Avenue Closing Date ("Tranche 1"), (ii) up to $10.0 million to be made available to us between March 1, 2026 and September 30, 2026, subject to, among other things, our achievement of a key regulatory milestone related to our development of TA-ERT for the treatment of MPS IIIB ("Tranche 2") and (iii) up to $15.0 million to be made available to us between September 1, 2026 and March 31, 2027, subject to, among other things, our achievement of an additional key regulatory milestone with respect to our development of TA-ERT for the treatment of MPS IIIB ("Tranche 3"). The Lender may make additional term loans of up to an additional $10.0 million (the "Discretionary Tranche 4" and collectively with Tranche 1, Tranche 2

and Tranche 3, the "Avenue Loans"), to be funded between October 1, 2027 and June 30, 2028, subject to, among other things, (i) our achievement of a certain commercial milestone and (ii) the mutual written agreement of us and the Lender (upon the Lender's investment committee approval). The Avenue Loans bear interest at an annual rate equal to the greater of (x) the sum of 5.25% plus the prime rate as reported in The Wall Street Journal and (y) 12.25%. The Avenue Loans are secured by a lien on and security interest in all of our assets, including intellectual property, subject to agreed exceptions. The maturity date of the Avenue Loans is July 1, 2029 (the "Avenue Maturity Date"). The Avenue Loan Agreement does not contain any minimum cash requirement or other financial covenants. As of September 30, 2026, the outstanding principal was $15.0 million under Tranche 1. No amounts had been drawn under Tranche 2 as of September 30, 2026, and the original availability period for Tranche 2 expired on September 30, 2026.

We will make interest only payments on the Avenue Loans until the 12-month anniversary of the Avenue Closing Date, subject to (i) a 6-month extension, so long as at least $5.0 million from Tranche 2 has been funded and (ii) an additional 12-month extension if we achieve the Tranche 3 milestone. The Avenue Loan principal is repayable in equal monthly installments from the end of interest only period to the Avenue Maturity Date. Because no portion of Tranche 2 was funded as of September 30, 2026, the 6-month extension of the interest-only period under the original terms of the Avenue Loan Agreement was not available as of that date. Pursuant to the Avenue Amendment described below, the interest-only period was extended through March 31, 2027, and, unless the interest-only period is further extended, monthly principal payments will commence in April 2027.

We may, at our option at any time, prepay the Avenue Loans in their entirety by paying the then-outstanding principal balance and all accrued and unpaid interest on the Avenue Loans, subject to a prepayment fee equal to (i) 3.0% of the principal amount outstanding if the prepayment occurs on or prior to the first anniversary following the Avenue Closing Date, (ii) 2.0% of the principal amount outstanding if the prepayment occurs after the first anniversary following the Avenue Closing Date, but on or prior to the second anniversary following the Avenue Closing Date, and (iii) 1.0% of the principal amount outstanding if the prepayment occurs after the second anniversary following the Avenue Closing Date. We will pay a final payment of 4.0% of the aggregate commitment amounts for Tranche 1, Tranche 2 and Tranche 3, which shall be increased to include the commitment amount of Discretionary Tranche 4 upon the funding of such tranche, on the earlier of (x) the Avenue Maturity Date and (y) the date that we prepay all of the outstanding principal amount of the Avenue Loans in full. On the Avenue Closing Date, we paid to the Lender a commitment fee of $0.4 million.

The Avenue Loan Agreement contains customary representations, warranties and covenants, including covenants by us limiting, among other things, additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes. The Avenue Loan Agreement provides for events of default customary for term loans of this type, including but not limited to non-payment, breaches or defaults in the performance of covenants, insolvency, bankruptcy and the occurrence of a material adverse effect on us. After the occurrence of an event of default, the Agent may (i) accelerate payment of all obligations, impose an increased rate of interest, and terminate the Lender's commitments under the Avenue Loan Agreement and (ii) exercise any other right or remedy provided by contract or applicable law, including a foreclosure on our assets.

The Avenue Loan Agreement includes a subjective acceleration clause under which the Agent may declare an event of default upon the occurrence of circumstances that could reasonably be expected to have a material adverse effect, as defined in the agreement. As of the issuance date of these condensed consolidated financial statements, Avenue has not declared an event of default, and we have determined that acceleration under this provision is not probable. Accordingly, the Avenue Loans continue to be classified based on their scheduled repayment terms. If Avenue were to determine that a material adverse effect has occurred, all outstanding obligations could become immediately due and payable.

Amendment to Avenue Loan Agreement

On November 6, 2026, we entered into an amendment to the Avenue Loan Agreement (the "Avenue Amendment"), which, among other things, (i) increased the amount available under Tranche 2 to up to $15.0 million, which may be drawn in a minimum amount of $5.0 million and in increments of $2.5 million between January 1, 2027 and March 31, 2027, subject to the satisfaction of certain conditions and to earlier expiration in certain circumstances; (ii) amended Tranche 3 to be available between July 1, 2027 and December 31, 2027, made Tranche 3 discretionary and subject to the approval of the Lender's investment committee at the time of any draw, and provided that the amount of Tranche 3 will be reduced by the amount of any Tranche 2 borrowings in excess of $10.0 million, such that the aggregate commitment amount under Tranche 1, Tranche 2 and Tranche 3 remains unchanged; and (iii) extended the interest-only period through March 31, 2027 and provided that the interest-only period may be further extended through October 31, 2027 (an interest-only period of 21 months, compared to 18 months under the original terms of the Avenue Loan Agreement) and, thereafter, through October 31, 2028 (an interest-only period of 33 months), in each case subject to the satisfaction of certain conditions. In connection with the Avenue Amendment, which also included Avenue's consent to the Separation, including the release of Avenue's lien on the assets contributed to Adrenyx, we amended that certain warrant to purchase up to $3.2 million worth of shares of the Company's common stock issued to Avenue on March 9, 2026 (the "Avenue Warrant") to increase the number of shares of common stock issuable thereunder by 5,000 shares, with no change to the exercise price of $50.00 per share. Also in connection with the Avenue Amendment, Adrenyx issued a warrant to Avenue for 69,000 shares of Adrenyx common stock (the

"Adrenyx Avenue Warrant") at an exercise price of the lower of $17.53 or the lowest effective price per share of any equity offering of Adrenyx's common stock after the warrant's issuance and prior to June 30, 2027.

Components of Results of Operations

Operating Expenses

We classify operating expenses into two main categories: (i) research and development expenses and (ii) general and administrative expenses.

Research and Development Expenses

Our research and development expenses consist of external and internal expenses incurred in connection with our research activities and development programs.

These expenses include:

To date, these expenses have been incurred primarily to develop TA-ERT. We expect that these expenses will primarily consist of personnel costs, expenses for the conduct of clinical trials, manufacturing costs for clinical drug supply, and in-process research and development. We expect that significant additional spending will be required to progress TA-ERT through clinical development and potential regulatory approval and advancing our other investigational product candidates through clinical and nonclinical development.

Research and development expenses are recognized as they are incurred, including licenses of intellectual property that have no alternative future use at the time of the acquisition. If deposits are required by external vendors, a portion of the deposit is included as a prepaid expense until the activity has been performed or when the goods have been received to amortize the deposit to expense in the statements of operations and comprehensive loss.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits, and stock-based compensation expense, for executive, finance, and other administrative functions. General and administrative expenses also include legal fees, professional fees, insurance costs, facility costs not otherwise included in research and development expenses, and public company expenses such as costs associated with compliance with the rules and regulations of the SEC, and those of the Nasdaq Stock Market LLC listing rules.

We expect that our general and administrative expenses will continue to increase in the foreseeable future as additional administrative personnel and services are required to manage these functions of a public company, and as we advance TA-ERT through potential regulatory approval.

Interest Expense

Interest expense consists of interest incurred and non-cash amortization of debt discount and issuance costs in connection with our debt.

Interest and Other Income, Net

Interest and other income, net primarily consists of interest income earned on our cash and cash equivalents.

Change in Fair Value of Warrant and Conversion Option Liabilities

Change in fair value of warrant and conversion option liabilities consists of the change in the fair value of the warrant liability and debt conversion option.

Results of Operations

Comparisons of the Three and Nine Months Ended September 30, 2026 and 2025

The following table summarizes our results of operations for the periods presented (in thousands):

Research and Development Expenses

The following table sets forth research and development expenses for the periods presented (in thousands):

Research and development expenses increased by $13.1 million during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The increase in clinical development expenses of $3.9 million was primarily related to increased expenses for TA-ERT of $4.4 million, offset by the discontinuation of the tildacerfont CAH development program of $0.5 million. The increase in manufacturing expenses of $7.6 million was primarily related to TA-ERT. There was also an increase in personnel related costs of $1.3 million, of which $0.3 million was related to an increase in stock-based compensation expense.

Research and development expenses increased by $22.5 million during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The increase in clinical development expenses of $4.7 million was primarily related to increased expenses for TA-ERT of $14.0 million, offset by lower one-time product acquisition related costs of $5.7 million for CRHX-101 and the discontinuation of the tildacerfont CAH development program of $3.5 million. The increase in manufacturing expenses of $16.1 million was primarily related to TA-ERT. There was also an increase in personnel related costs of $1.2 million, of which $1.0 million was related to an increase in stock-based compensation expense.

We anticipate that research and development expenses will increase into the foreseeable future as we advance TA-ERT through an anticipated biologics license application submission in December 2026 and potential FDA approval.

For a description of the terms of our license agreements, see Note 7 to our unaudited condensed consolidated financial statements "License Agreements" presented elsewhere in this Quarterly Report.

General and Administrative Expenses

General and administrative expenses increased by $2.6 million during the three months ended September 30, 2026 compared to the three months ended September 30, 2025 primarily due to an increase in personnel related costs of $1.4 million, of which $0.4

million was related to an increase in stock-based compensation expense, and an increase in professional fees of $1.1 million, of which $0.8 million was related to the planned separation of the CRHX-101 program.

General and administrative expenses increased by $4.6 million during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 primarily due to an increase in personnel related costs of $2.4 million, of which $0.8 million was related to an increase in stock-based compensation expense, and an increase in professional fees of $1.9 million, of which $0.8 million was related to the planned separation of the CRHX-101 program.

Interest Expense

Interest expense increased by $1.2 million during the three months ended September 30, 2026 compared to the three months ended September 30, 2025 and increased by $2.9 million during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 due to an increase in our debt and its related interest rate and an increase in the related amortization of debt discount and issuance costs.

Interest and Other Income, Net

Interest and other income, net increased by $0.7 million during the three months ended September 30, 2026 compared to the three months ended September 30, 2025 and increased by $1.4 million during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 primarily due to higher money market fund balances.

Change in Fair Value of Warrant and Conversion Option Liabilities

Change in fair value of warrant and conversion option liabilities increased by $0.5 million during the three months ended September 30, 2026 compared to the three months ended September 30, 2025 and increased by $0.4 million during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. In the prior periods, the change in fair value was for pre-funded warrants issued to HBM Alpha Therapeutics, Inc. In the current periods, the change in fair value relates to warrants and the conversion option under the Avenue Loan Agreement.

Liquidity and Capital Resources

Liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations. We anticipate that we will continue to incur net losses for the foreseeable future. As of September 30, 2026 and December 31, 2025, we had an accumulated deficit of $341.7 million and $289.2 million, respectively. As of September 30, 2026 and December 31, 2025, we had cash and cash equivalents of $87.7 million and $48.9 million, respectively.

Since inception through September 30, 2026, we have raised aggregate gross proceeds of $432.6 million, including $103.5 million from our initial public offering in October 2020, $116.0 million from the sale of our redeemable convertible preferred stock, $109.1 million from private placement financings (including the August 2026 private placement), $69.0 million from the April 2026 underwritten public offering, $20.0 million from the issuance of debt, and $15.0 million upfront payment from Kaken Pharmaceutical Co., Ltd. received in April 2023.

On August 7, 2026, we entered into a Stock Purchase Agreement with the National MPS Society and the Cure Sanfilippo Foundation, pursuant to which we agreed to sell and issue 121,203 shares of our common stock in a private placement transaction. The purchase price per share was $45.38 per share. The net proceeds to us, after deducting offering expenses payable by us, were $5.5 million. The proceeds will be used to partially fund our expanded access program, which was initiated in November 2026.

Without alternative financing or proceeds from other strategic alternatives, we believe that based on our current operating plan, our cash and cash equivalents of $87.7 million as of September 30, 2026 will be insufficient to fund our planned operations and debt obligations for at least 12 months following the issuance date of these condensed consolidated financial statements included elsewhere in this Quarterly Report. These conditions raise substantial doubt about our ability to continue as a going concern.

Until we can generate sufficient revenue, if ever, to fund our operations, we will need to finance future cash needs through sales of one or more priority review vouchers, if received, public or private equity offerings, license agreements, debt financings or restructurings, collaborations, strategic alliances and marketing or distribution arrangements, and there can be no assurance that such arrangements will be available to us on a timely basis, or, if available, will be available on terms acceptable to us.

Shelf Registration and Sales Agreement

In November 2025, the SEC declared effective the Shelf Registration covering the sale of up to $300.0 million of our securities. Also, in March 2026, we entered into the Sales Agreement with Jefferies, pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal (the "ATM Offering"). We have also filed a prospectus supplement with the SEC in

connection with the ATM Offering under the Shelf Registration. Upon delivery of an issuance notice and subject to the terms and conditions of the Sales Agreement, Jefferies may sell the shares at market prices by any method deemed to be an "at the market offering" as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through The Nasdaq Capital Market, the existing trading market for our common stock. As of September 30, 2026, we have not issued any shares of common stock pursuant to the Sales Agreement. We have agreed to pay Jefferies commissions for its services of acting as agent of 3.0% of the gross proceeds from the sale of the shares pursuant to the Sales Agreement. We have also agreed to provide Jefferies with customary indemnification and contribution rights.

Funding Requirements

To date, we have not generated any product revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval and commercialize TA-ERT or any other current or future product candidates, and we do not know when, or if at all, that will occur. We will continue to require additional capital to develop and launch TA-ERT and fund operations for the foreseeable future. Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our clinical development programs, and to a lesser extent, general and administrative expenses.

At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, TA-ERT or any of our other current or future product candidates. We expect our research and development expenses to increase significantly in the foreseeable future as we continue to invest in activities related to the clinical development and commercialization of TA-ERT and as we pursue regulatory approval of TA-ERT for the treatment of MPS IIIB. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and we may never succeed in achieving regulatory approval for TA-ERT in patients with MPS IIIB.

We may seek to raise capital through sales of one or more priority review vouchers, if received, equity or debt financings, collaborative agreements, potentially including agreements to out-license rights to develop and commercialize TA-ERT, or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:

If we raise additional funds by issuing equity securities, our stockholders will experience dilution. If we raise additional capital through debt financing, we may be subject to covenants that restrict our operations including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments, and engage in certain merger, consolidation, or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from macroeconomic events, global trade disputes, labor shortages, declines in consumer confidence, inflation and monetary supply shifts, recession risks, potential disruptions from the wars in Ukraine and the Middle East and related sanctions, declines in economic growth, tariffs and related legal challenges, and uncertainty about economic stability. If the equity and credit markets continue to deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the development or commercialization of our product candidates or other research and development initiatives. We also could be required to seek collaborators for our product candidates and any future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to our product candidates and any future product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.

The amount and timing of our future funding requirements will depend on many factors including the pace and results of our development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Material Cash Requirements

As of September 30, 2026, future payments of principal and interest on the Avenue Loans, which matures in July 2029, were $19.5 million. For a description of the terms of the Avenue Loans, including the Avenue Amendment, see the sections titled "Material Agreements - Loan Agreement with Avenue" and "Material Agreements - Amendment to Avenue Loan Agreement" above.

As of September 30, 2026, the total undiscounted lease payments for our non-cancelable operating lease for office space, which terminates in February 2028 unless renewed, was $0.5 million.

We enter into contracts in the normal course of business with third-party contract manufacturing organizations and CROs for clinical trials, nonclinical studies, drug substance and product manufacturing and other services for operating purposes. These contracts are generally cancelable by us upon prior written notice after a certain period, except for certain contracts with contract manufacturing organizations containing minimum purchase obligations. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. As of September 30, 2026, total noncancelable obligations under these arrangements were $22.1 million.

We have also entered into license and collaboration agreements under which we are obligated to make aggregate milestone payments upon the achievement of specified milestones as well as royalty payments. As of September 30, 2026, we were unable to estimate the timing or likelihood of achieving these milestones or generating future product sales. For a description of the terms of our license and collaboration agreements, see Note 7 to our unaudited condensed consolidated financial statements "License Agreements" presented elsewhere in this Quarterly Report.

Summary Statements of Cash Flows

The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for the periods presented below (in thousands):

Operating Activities

Net cash used in operating activities increased by $17.7 million during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 primarily due to increased manufacturing and clinical development activities for TA-ERT offset by the receipt of $2.6 million related to the Allievex Purchase Agreement due to the completed Allievex bankruptcy proceedings.

For a description of the terms of our license agreements, see Note 7 to our unaudited condensed consolidated financial statements "License Agreements" presented elsewhere in this Quarterly Report.

Investing Activities

For the nine months ended September 30, 2026, net cash used in investing activities was related to purchase of property and equipment.

Financing Activities

For the nine months ended September 30, 2026, net cash provided by financing activities was $83.5 million, consisting primarily of net proceeds from the April 2026 Public Offering of $64.4 million, net proceeds from the August 2026 Private Placement of $5.5 million and net proceeds from the Avenue Loans of $14.0 million.

For the nine months ended September 30, 2025, net cash used in financing activities was $1.2 million, consisting of principal payments on debt of $1.2 million.

Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses, as well as the related disclosure of contingent assets and liabilities as of the date of the financial statements. Our estimates are based on our historical experience and on various other factors that we believe are 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. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting estimates are described in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates" in the Annual Report. During the nine months ended September 30, 2026, there were no changes to our critical accounting estimates from those discussed in the Annual Report.