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

Item 2. 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 together with our unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (Quarterly Report) and the audited financial statements and related notes thereto as of and for the year ended December 31, 2024 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC), on February 27, 2025. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the "Risk Factors" section of this Quarterly Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Furthermore, past operating results are not necessarily indicative of results that may occur in future periods.

Overview

We are an innovative clinical-stage biopharmaceutical company developing a broad pipeline of novel immunotherapies by applying our proprietary technologies to our Tumor Activated T Cell Engager (TRACTr), Tumor Activated Immunomodulator (TRACIr), and Adaptive Immune Response Modulator (ARM) platforms. The TRACTr platform produces T cell engagers (TCEs) with a tumor antigen-binding domain and a CD3 T cell binding domain, while the TRACIr platform produces bispecifics with a tumor antigen-binding domain and a costimulatory CD28 binding domain. The goal of both platforms is to provide cancer patients with safe and effective therapeutics that direct and guide their immune system to eradicate tumors while minimizing safety concerns. Our initial focus is on developing a novel class of TRACTr therapeutics designed to target clinically validated TCE drug targets, but overcome liabilities associated with prior generations of TCEs. While TCE therapeutics have displayed potent anti-tumor activity in hematological cancers, developing TCEs to treat solid tumors has faced challenges due to the limitations of prior TCE technologies, namely (i) on-target healthy tissue immune activation that contributes to cytokine release syndrome (CRS) and healthy tissue toxicity and (ii) poor pharmacokinetics (PK) leading to short half-life. Our first clinical candidate, JANX007, is a prostate-specific membrane antigen or PSMA-TRACTr and is being investigated in a Phase 1 clinical trial in adult subjects with metastatic castration-resistant prostate cancer (mCRPC). In December 2024, we announced updated interim clinical data for JANX007 which displayed meaningful and prolonged PSA drops, encouraging anti-tumor activity, a favorable safety profile including CRS and treatment-related adverse events (TRAEs) primarily limited to Cycle 1 and lower grades, and PK consistent with the TRACTr mechanism-of-action. In May 2025, we provided updated results from the patients reported in December 2024 which displayed a consistent durability and safety profile that supported the initiation of Phase 1b expansion studies. Our second clinical candidate, JANX008, is an epidermal growth factor receptor or EGFR-TRACTr and is being studied in a Phase 1 clinical trial for the treatment of multiple solid cancers including colorectal carcinoma, squamous cell carcinoma of the head and neck, non-small cell lung cancer, renal cell carcinoma, small cell lung cancer, pancreatic ductal adenocarcinoma and triple-negative breast cancer. The first patient for this trial was dosed in April 2023 and in February 2024 we announced positive early data for JANX008 that displayed anti-tumor activity in multiple tumor types with low-grade CRS and predominantly low-grade TRAEs. The Adaptive Immune Response Modulator (ARM) platform builds upon our expertise to redesign bispecific TCEs to overcome the limitations of conventional TCEs in autoimmune diseases and oncology. This platform aims to create differentiated product candidates that have a large safety window, off-the-shelf format positioning for higher dosing, rapid development and potential for improved performance. The lead program, a CD19-ARM, has displayed rapid, deep and durable B-cell depletion in periphery and tissues with a prolonged memory B cell reset while maintaining a large safety window in non-human primates, supporting a potentially differentiated profile. We are also generating a number of additional TRACTr, TRACIr and ARM programs for potential future development.

We were incorporated in June 2017. To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, business development, raising capital, developing and optimizing our technology platform, identifying potential product candidates, undertaking research and development for our lead programs, establishing and enhancing our intellectual property portfolio and providing general and administrative support for these operations. All of our product candidates and research programs other than JANX007 and JANX008 are in preclinical development, and none have been approved for commercial sale. We have never generated any revenue from product sales and have incurred net losses each year since we commenced operations. We have funded our operations primarily with the net proceeds from the issuance of convertible promissory notes, the issuance of convertible preferred stock, the exercise of common stock options, proceeds from our initial public offering (IPO), the issuance of common stock and pre-funded common stock warrants in public and/or underwritten offerings and amounts received under a collaboration agreement with Merck Sharp & Dohme Corp. (Merck).

We have incurred operating losses since our inception and have not yet generated any product revenue. Our net losses were $81.7 million and $48.8 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had an accumulated deficit of $319.4 million.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on a variety of factors including the timing and scope of our clinical and preclinical studies and our expenditures on other research and development activities and the timing of any revenue recognition under our collaboration agreement with Merck. We expect our expenses and operating losses will increase substantially and that we will continue to incur significant losses for the foreseeable future as we conduct our ongoing and planned research and development activities and conduct preclinical studies and clinical trials, hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company.

We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates, which will not be for many years, if ever. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially grants, collaborations, licenses or other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates or to our platform technologies that we would otherwise prefer to develop and market ourselves. Based on our current operating plan, we believe that our existing cash, cash equivalents and short-term investments, will be sufficient to meet our anticipated operating expenses and capital expenditure requirements through at least the next 12 months, following the date of this Quarterly Report.

Our Research Collaboration with Merck

In December 2020, we entered into a research collaboration and exclusive license agreement with Merck to develop TRACTr product candidates that are distinct from those in our internally developed pipeline (the Merck Agreement). Merck has the right to select up to two collaboration targets (each a Collaboration Target) related to next generation T cell engager immunotherapies for the treatment of cancer. Merck selected the first Collaboration Target upon execution of the agreement and selected the second Collaboration Target in May 2022. Merck received an exclusive worldwide license for each selected target and intellectual property from the collaboration. In return, we are eligible to receive up to $500.5 million per target in upfront and milestone payments, plus royalties on sales of the products derived from the collaboration. Merck provided research funding under the collaboration through August 2024, after which our research services for both collaboration targets were completed.

Risks and Uncertainties

Global economic and business activities continue to face widespread geopolitical and macroeconomic uncertainties, including those associated with public health crises, bank failures, inflation and monetary supply shifts, recent and changing tariff policy announcements, tariffs, trade tensions and retaliatory measures by other countries, supply chain disruptions, recession risks and potential disruptions from the Russia-Ukraine conflict, the war in the Middle East and related sanctions. Inflation generally affects us by increasing our salaries and fees paid to third-party contract service providers. We have considered potential impacts arising from the risks and uncertainties as described above and have not experienced any material disruption to our operations to date.

Financial Operations Overview

Revenues

To date, we have not generated any revenues from the commercial sale of any products, and we do not expect to generate revenues from the commercial sale of any products for the foreseeable future, if ever. We recognized $10.0 million and $10.6 million of revenue under the Merck Agreement for the nine months ended September 30, 2025 and 2024, respectively.

Research and Development

To date, our research and development expenses have related primarily to direct and indirect expenses in connection with the development of our TRACTr, TRACIr and ARM platforms, discovery efforts and preclinical and clinical development of our product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

Our direct research and development expenses include:

Our indirect research and development expenses include:

We anticipate that our research and development expenses will substantially increase for the foreseeable future as we continue the development of our TRACTr, TRACIr and ARM platforms and the discovery and development of product candidates under our TRACTr, TRACIr and ARM platforms.

We cannot determine with certainty the timing of initiation, the duration or the completion costs of clinical trials and preclinical studies of product candidates due to the inherently unpredictable nature of preclinical and clinical development. Preclinical and clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate's commercial potential. We will need to raise substantial additional capital in the future. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

General and Administrative

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant general and administrative expenses include facility-related costs, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities; legal fees relating to intellectual property and corporate matters; professional fees for accounting, tax and consulting services; insurance costs; and other operating costs. We anticipate that our general and administrative expenses will increase for the foreseeable future as we continue to increase our general and administrative headcount to support our continued research and development activities and, if any of our product candidates receive marketing approval, commercialization activities. We also anticipate increased expenses associated with operating as a public company, including expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs.

Other Income

Other income consists of interest income on our cash and cash equivalents and short-term investments.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024 (in thousands)

Collaboration Revenue

Collaboration revenues were $10.0 million and $0.4 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $9.6 million was primarily due to the achievement of a developmental milestone related to the First Collaboration Target under the Merck Agreement in August 2025.

Research and Development Expense

The following table summarizes our direct and indirect research and development expenses for the three months ended September 30, 2025 and 2024 (in thousands):

Research and development expenses were $34.6 million and $18.6 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $16.0 million was primarily due to increases in preclinical stage programs and other direct unallocated costs of $10.0 million, which was primarily attributable to manufacturing costs. Additional increases included indirect costs as a result of increased compensation costs of $4.0 million, direct costs related to the development of JANX007 of $1.6 million and direct costs related to the development of JANX008 of $0.4 million.

General and Administrative Expense

General and administrative expenses were $10.6 million and $17.7 million for the three months ended September 30, 2025 and 2024, respectively. The decrease of $7.1 million was primarily due to a decrease in stock-based compensation expense, which was driven by the modification of a former executive and director's equity awards in 2024.

Other Income

Other income was $10.9 million and $7.8 million for the three months ended September 30, 2025 and 2024, respectively. The increase of $3.1 million was due to an increase in cash and cash equivalents and short-term investments resulting in increased interest income.

Comparison of the Nine Months Ended September 30, 2025 and 2024 (in thousands)

Collaboration Revenue

Collaboration revenues were $10.0 million and $10.6 million for the nine months ended September 30, 2025 and 2024, respectively. The decrease of $0.6 million was primarily due to an increase in milestone revenue under the Merck Agreement, offset by the completion of our research activities under the Merck Agreement in August 2024.

Research and Development Expense

The following table summarizes our direct and indirect research and development expenses for the nine months ended September 30, 2025 and 2024 (in thousands):

Research and development expenses were $94.3 million and $47.6 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $46.7 million was primarily due to increases in preclinical stage programs and other direct unallocated costs of $24.8 million, indirect costs as a result of increased compensation costs of $13.5 million, direct costs related to the development of JANX007 of $7.5 million and direct costs related to the development of JANX008 of $0.9 million.

General and Administrative Expense

General and administrative expenses were $30.9 million and $32.8 million for the nine months ended September 30, 2025 and 2024, respectively. The decrease of $1.9 million was primarily due to a decrease in stock-based compensation of $3.9 million as a result of incremental stock-based compensation expense taken in 2024 due to the modification of a former director and executive officer's equity awards. This was offset by increases in compensation costs of $1.4 million and other general and administrative costs of $0.6 million.

Other Income

Other income was $33.6 million and $21.0 million for the nine months ended September 30, 2025 and 2024, respectively. The increase of $12.6 million was due to an increase in cash and cash equivalents and short-term investments resulting in increased interest income.

Liquidity and Capital Resources

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses and negative cash flows for the foreseeable future. As of September 30, 2025, we had cash, cash equivalents, restricted cash and short-term investments of $989.8 million. Inclusive in this amount is $0.8 million of restricted cash that is not available for current use.

In May 2023, we entered into an ATM Equity OfferingSMSales Agreement (Sale Agreement) with BofA Securities, Inc. (BofA) to sell shares of our common stock, from time to time, through an "at the market offering" program having an aggregate offering price of up to $150.0 million through which BofA would act as sales agent. In February 2024, we delivered written notice to BofA that we were suspending and terminating the prospectus related to the shares of our common stock issuable pursuant to the terms of the Sale Agreement. In May 2024, we filed a shelf registration statement on Form S-3ASR which included a new prospectus which covers the offering, issuance and sale of up to a maximum aggregate offering price of $150.0 million of our common under the Sale Agreement. As of September 30, 2025, $150.0 million of common stock remained available for sale under the Sale Agreement.

In March 2024, we closed an underwritten offering of 5,397,301 shares of our common stock and pre-funded warrants to purchase 1,935,483 shares of common stock at an exercise price of $0.001 per share. The shares of common stock were sold at a price of $46.50 per share and the pre-funded common stock warrants were sold at a price of $46.499 per pre-funded common stock warrant, resulting in gross proceeds of $341.0 million. Fees related to the offering included underwriting discounts, commissions, and offering expenses in the aggregate amount of $20.9 million, resulting in net proceeds of $320.1 million.

The registration statement on Form S-3ASR that we filed in May 2024 provides us with the ability to offer an unlimited amount of certain securities, including shares of our common stock, from time to time. The specific terms of any offering under the shelf registration statement are established at the time of such offering.

In December 2024, we closed an underwritten offering of 6,150,793 shares of our common stock and pre-funded warrants to purchase 238,095 shares of common stock at an exercise price of $0.001 per share. The shares of common stock were sold at a price of $63.00 per share and the pre-funded common stock warrants were sold at a price of $62.999 per pre-funded common stock warrant, resulting in gross proceeds of $402.5 million. Fees related to the offering included underwriting discounts, commissions, and offering expenses in the aggregate amount of $24.6 million, resulting in net proceeds of $377.9 million.

The following summarizes our cash flows for the periods indicated (in thousands):

Operating Activities

Net cash used in operating activities of $53.7 million for the nine months ended September 30, 2025 was primarily due to our net loss of $81.7 million and a change in operating assets and liabilities and other non-cash charges of $2.7 million, adjusted for $30.7 million of stock-based compensation expense. Net cash used in operating activities of $27.1 million for the nine months ended September 30, 2024 was primarily due to our net loss of $48.8 million and a change in operating assets and liabilities and other non-cash charges of $5.1 million, adjusted for $26.8 million of stock-based compensation expense.

Investing Activities

Net cash used in investing activities of $330.5 million for the nine months ended September 30, 2025 was primarily due to $329.6 million of net purchases of short-term investments and by our purchase of property and equipment of $0.9 million. Net cash used in investing activities of $291.9 million for the nine months ended September 30, 2024 was primarily due to $291.6 million of net purchases of short-term investments and by our purchase of property and equipment of $0.3 million.

Financing Activities

Net cash provided by financing activities of $2.0 million for the nine months ended September 30, 2025 was primarily due to proceeds from stock option exercises and shares issued under our employee stock purchase plan (ESPP) of $2.3 million, adjusted for issuance costs paid in connection with an underwritten offering in December 2024 of $0.3 million. Net cash provided by financing activities of $326.6 million for the nine months ended September 30, 2024 was primarily due to proceeds from the issuance of common stock and pre-funded common stock warrants, net of issuance costs, of $320.1 million and proceeds from stock option exercises and shares issued under our ESPP of $6.5 million.

Funding Requirements

Based on our current operating plan, we believe that our existing cash, cash equivalents and short-term investments, will be sufficient to meet our anticipated operating expenses and capital expenditure requirements through at least the next 12 months, following the date of this Quarterly Report. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

Our future capital requirements will depend on many factors, including:

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, including potentially grants, collaborations, licenses or other similar arrangements. To the extent that we raise additional capital through the sale of equity 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, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Contractual Obligations and Commitments

In April 2021, we entered into a cell line license agreement (Cell Line License Agreement) with WuXi Biologics (Hong Kong) Limited (WuXi Biologics). According to the terms of the Cell Line License Agreement, if we do not engage WuXi Biologics or its affiliates to manufacture the therapeutic products produced through the use of the cell line licensed by WuXi Biologics under the Cell Line License Agreement (WuXi Biologics Licensed Products) for our commercial supplies, we are required to make royalty payments to WuXi Biologics in an amount equal to a low single-digit percentage of specified portions of net sales of WuXi Biologics Licensed Products manufactured by a third-party manufacturer. We have the right (but not the obligation) to buy out our remaining royalty obligations with respect to each WuXi Biologics Licensed Product by paying WuXi Biologics a one-time payment in an amount ranging from low single digit million dollars to a maximum of $15.0 million (Buyout Option). The royalty obligations will remain in effect during the term of the Cell Line License Agreement so long as we have not exercised the Buyout Option. See the section within Item 1 of Part I, "Notes to Unaudited Condensed Financial Statements - Note 3 - Commitments and Contingencies" of this Quarterly Report for additional information.

In October 2021, we entered into a noncancelable agreement to lease office and laboratory space in San Diego, California (Torrey Plaza Lease) with aggregate payments of approximately $38.0 million over the 126-month term of the lease. The Torrey Plaza Lease commenced in July 2022. See the section within Item 1 of Part I, "Notes to Unaudited Condensed Financial Statements - Note 3 - Commitments and Contingencies" of this Quarterly Report for additional information. In June 2025, we entered into a noncancelable agreement to sublease additional office space in San Diego, California through January 2028.

We enter into contracts in the normal course of business with various third parties for preclinical and clinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts provide for termination upon notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to estimates to complete the performance obligations and the estimated transaction price for collaboration revenues, accruals for research and development expenses and estimates used in valuing our equity awards for stock-based compensation expense. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be 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. Actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies are those accounting principles generally accepted in the United States that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. For a description of our critical accounting policies, see Item 1 of Part I, "Notes to Unaudited Condensed Financial Statements - Note 1 - Organization and Summary of Significant Accounting Policies" of this Quarterly Report and the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" contained in our Annual Report on Form 10-K, filed with the SEC on February 27, 2025. There have not been any material changes to the critical accounting policies discussed therein during the nine months ended September 30, 2025.