Yarrow Bioscience Inc.
11/13/2026 | Press release | Distributed by Public on 11/13/2026 06:52
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 the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 ("Quarterly Report") and our audited financial statements and notes thereto included in our Current Report on Form 8-K/A filed with the Securities and Exchange Commission (the "SEC") on August 13, 2026. As used in this Quarterly Report, unless the context otherwise requires, all references to the "Company," "we," "us," "our," and similar references refer: (1) following the completion of the Merger (as defined below), to Yarrow Bioscience, Inc. (the "Combined Company" or "Yarrow") and our subsidiaries and (2) prior to the completion of the Merger, to VYNE Therapeutics Inc. ("VYNE") and its subsidiaries.
Company overview
We are a clinical-stage biotechnology company focused on developing transformative therapies to treat autoimmune thyroid diseases. Our lead product candidate, YB-101 (also known as GenSci098), is a humanized, monoclonal antibody targeting the thyroid-stimulating hormone receptor ("TSHR"), which we plan to develop for the treatment of Graves' disease ("GD") and thyroid eye disease ("TED"). Both GD and TED are serious and poorly treated autoimmune diseases in which autoantibodies against TSHR attack and overstimulate the receptor, leading to a wide spectrum of thyroidal and extra-thyroidal clinical sequelae.
YB-101 was designed to selectively bind to TSHR and block autoantibody-induced receptor activation, thereby directly inhibiting the pathogenic activity of thyroid-stimulating autoantibodies that drive disease progression in GD and TED as well as the biological pathway responsible for hyperthyroidism and orbitopathy. We believe that this novel and targeted approach represents a potential breakthrough for patients with GD and TED and has the potential to address an important unmet need for therapies with differentiated risk-benefit profiles.
In December 2025, we in-licensed from Changchun Genescience Pharmaceutical Company, Ltd. ("GenSci") the exclusive rights to develop YB-101 for the treatment of GD and TED outside Greater China. Our development strategy is to advance YB-101 in GD and explore a clinical development plan for TED with the goal of becoming the first company to commercialize an anti-TSHR antibody in the United States and other territories outside Greater China. YB-101 is currently being evaluated by GenSci in an ongoing Phase 1 single ascending dose ("SAD") and multiple ascending dose ("MAD") trial in patients with TED in China. Data from the MAD portion of the trial are expected in the second half of 2027. We submitted the GenSci SAD clinical data to the U.S. Food and Drug Administration ("FDA") as part of the new investigational new drug application to support the initiation of a GD trial by Yarrow in the United States, which was cleared by the FDA in March 2026. We also submitted an application for Fast Track designation for YB-101 in GD to the FDA in March 2026 and received notice of Fast Track designation from the FDA on May 20, 2026. In addition, third-party clinical data from two SAD trials of another anti-TSHR antibody, K1-70, further support the therapeutic potential of targeting TSHR in patients with GD and TED. In June 2026, we initiated a combined Phase 2a/Phase 2b trial of YB-101 in patients with GD, with or without concurrent TED. Data from the Phase 2a portion of the trial are expected in the second half of 2027.
The Merger
The Merger Agreement
On July 27, 2026 (the "Closing Date"), we consummated the previously announced transaction (the "Closing") pursuant to an Agreement and Plan of Merger and Reorganization, dated as of December 17, 2025, which was amended on January 30, 2026 (as amended, the "Merger Agreement"), pursuant to which, among other matters, Yellow Merger Sub Corp., a direct, wholly owned subsidiary of VYNE, merged with and into Yarrow Bioscience, Inc., a private Delaware corporation ("Pre-Merger Yarrow"), with Pre-Merger Yarrow surviving as a wholly owned subsidiary of VYNE and the surviving corporation of the merger (the "Merger"). The Combined Company is led by Pre-Merger Yarrow's management team and certain VYNE management and is focused on developing transformative therapies for autoimmune thyroid diseases.
Concurrent with the execution of the Merger Agreement, Pre-Merger Yarrow entered into a Series A preferred stock purchase agreement with certain institutional and accredited investors pursuant to which such persons invested in and purchased an aggregate of 14,516,188 shares of Pre-Merger Yarrow Series A convertible preferred stock at a purchase price of $6.89 per share for aggregate gross proceeds to Pre-Merger Yarrow of $100.0 million.
Concurrent with the execution of the Merger Agreement, Pre-Merger Yarrow also entered into a securities purchase agreement (the "Securities Purchase Agreement") with certain investors pursuant to which Pre-Merger Yarrow issued and sold to investors, immediately prior to the Merger, shares of Pre-Merger Yarrow common stock, par value $0.0001 per share (the
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"Yarrow Common Stock"), or, in lieu thereof, pre-funded warrants to purchase shares of Yarrow Common Stock (each, a "Yarrow Pre-Funded Warrant") for gross proceeds of approximately $100.0 million (the "Yarrow Pre-Closing Financing"). At the effective time of the Merger, (i) shares of Yarrow Common Stock issued in the Yarrow Pre-Closing Financing converted into shares of VYNE common stock in accordance with the Exchange Ratio (as defined below) and (ii) Yarrow Pre-Funded Warrants converted into pre-funded warrants to purchase shares of VYNE common stock, subject to adjustment as set forth in the Merger Agreement and the form of pre-funded warrant. The proceeds from the Yarrow Pre-Closing Financing are expected to advance the Combined Company's pipeline and will be used for research and development, business development, working capital, and other general corporate purposes.
On the Closing Date, we completed the Merger. In connection with the completion of the Merger, Pre-Merger Yarrow changed its name from "Yarrow Bioscience, Inc." to "Yarrow Bioscience Operating Company Corp.," VYNE changed its name to "Yarrow Bioscience, Inc." and the current business of Pre-Merger Yarrow became the primary business of the Combined Company.
On the Closing Date, VYNE issued an aggregate of 2,130,731 shares of its common stock to Pre-Merger Yarrow's stockholders (after giving effect to the 1-for-50 reverse stock split of VYNE common stock in connection with the Merger), based on the exchange ratio of 0.7171 shares of VYNE common stock for each share of Yarrow Common Stock (the "Exchange Ratio"), including those shares of Yarrow Common Stock issued upon the conversion of Pre-Merger Yarrow's preferred stock and those shares of Yarrow Common Stock issued in the Yarrow Pre-Closing Financing. In addition, Pre-Merger Yarrow's outstanding and unexercised pre-funded warrants to purchase shares of Pre-Merger Yarrow's common stock and certain shares of Pre-Merger Yarrow's common stock (including shares issued upon the conversion of Pre-Merger Yarrow's preferred stock and shares issued in the Yarrow Pre-Closing Financing) were converted to 25,590,346 pre-funded warrants to purchase shares of VYNE common stock on the existing terms and conditions and outstanding options to purchase shares of Yarrow Common Stock were converted into 2,002,285 options to purchase shares of VYNE common stock on the existing terms and conditions (including with respect to vesting and accelerated vesting).
The Merger has been accounted for as a reverse recapitalization in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). Under this method of accounting, Pre-Merger Yarrow is deemed to be the accounting acquirer for financial reporting purposes. This determination is primarily based on the fact that, immediately following the Merger: (i) Pre-Merger Yarrow's stockholders owned a substantial majority of the voting rights in the Combined Company; (ii) Pre-Merger Yarrow's largest stockholder retained the largest interest in the Combined Company; (iii) Pre-Merger Yarrow designated the initial members of the board of directors of the Combined Company; and (iv) Pre-Merger Yarrow's executive management team and certain of VYNE's management became the management team of the Combined Company. Historical common stock figures of Pre-Merger Yarrow have been retroactively restated based on the Exchange Ratio.
Unless otherwise indicated, all share and per share amounts presented in this Quarterly Report and the unaudited condensed consolidated financial statements included herein have been retroactively adjusted to reflect the Exchange Ratio and, where applicable, the reverse stock split for all periods presented.
On August 10, 2026, we received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC ("Nasdaq") providing that we had regained compliance with the minimum bid price requirement and that Nasdaq considers this matter closed.
Business and macroeconomic conditions
Uncertainty in the global economy presents significant risks to our business. We are subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including inflation, interest rates, financial market volatility and uncertainty, the impact of war or military conflict, including the wars in Ukraine and the Middle East, rising tensions between China and Taiwan and the response thereto, public health pandemics, global trade policy volatility, such as tariffs, and supply chain disruptions. Adverse effects of these large macroeconomic conditions have been prevalent in many of the areas where we, our contract research organizations ("CROs"), suppliers or third-party business partners conduct business and as a result, we have experienced disruptions and may continue to experience more pronounced disruptions in our operations. In addition, financial markets have experienced a period of high volatility due to these macroeconomic factors. The persistence of this volatility may impact our ability to engage in capital market activities and adequately fund our operations. As of the filing date of this Quarterly Report, the extent to which these macroeconomic events and conditions may impact our financial condition, results of operations or liquidity is uncertain. The effect of these macroeconomic events and conditions may not be fully reflected in our results of operations and overall financial performance until future periods. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section
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captioned "Risk Factors" in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, filed with the SEC on August 13, 2026.
Development and license agreements
GenSci License Agreement
On December 15, 2025, GenSci and Yarrow entered into an exclusive license agreement (the "GenSci License Agreement"), pursuant to which Yarrow obtained from GenSci an exclusive, royalty-bearing license to develop, manufacture, and commercialize YB-101 (also known as GenSci098), an antibody targeting the TSHR, outside Greater China for all fields of use, including the treatment of GD and TED. GenSci retained rights to exploit these assets in Greater China. Under the GenSci License Agreement, and subject to limited exceptions in which GenSci will perform certain development activities outside Greater China, Yarrow is responsible for all development and commercialization activities for YB-101 outside Greater China. GenSci is obligated to provide Yarrow with clinical data relating to YB-101 that exists as of the effective date in connection with the initial know-how transfer. Additionally, each party is obligated to provide the other party with certain clinical data generated by that party during the development of YB-101 as part of the ongoing information exchange.
More specifically, clinical data generated by GenSci will be shared with Yarrow for inclusion in global safety reports and regulatory submissions by Yarrow to global health authorities including the FDA. Yarrow is the manager of the YB-101 global safety database responsible for the maintenance, compilation and submission of required safety reports to global health authorities including the FDA; as a result, data sharing between Yarrow and GenSci will continue during the term of the GenSci License Agreement. Yarrow does not currently anticipate outsourcing preclinical or clinical research to GenSci but could consider doing so in the future. Manufacturing data generated by GenSci related to the manufacturing and testing of YB-101 will be shared with Yarrow on an ongoing basis to support global regulatory filings related to manufacturing.
Exclusivity
Subject to customary exceptions, during the term of the GenSci License Agreement, neither Yarrow (with respect to activities outside Greater China) nor GenSci (with respect to activities in Greater China), nor their respective affiliates, may directly or indirectly clinically develop or commercialize specified categories of antibodies directed to TSHR.
Financial consideration
Under the GenSci License Agreement, GenSci received an upfront payment of $70.0 million. GenSci is also eligible to receive up to approximately $1.295 billion in additional contingent payments based on GenSci's completion of the manufacturing technology transfer, GenSci's achievement of a development milestone, as well as Yarrow's achievement of development, regulatory approval, and commercial sales-based milestones. Specifically, GenSci is eligible to receive up to approximately $100 million in contingent payments based on the achievement of specified clinical development milestones by Yarrow or GenSci, including a $50 million near-term development milestone, as applicable, and up to $150 million in contingent payments based on Yarrow's achievement of specified regulatory approval milestones. In addition, GenSci is eligible to receive tiered royalties ranging from the low teens to the low-mid teens on annual net product sales outside Greater China during the applicable royalty term. The royalty term for a licensed product in a given country commences upon the first commercial sale of the licensed product in that country and continues until the latest of: (a) the expiration of the last royalty-bearing valid claim of the licensed patents covering the licensed product in that country; (b) the tenth anniversary of the first commercial sale of the licensed product in that country; and (c) the expiration of all regulatory exclusivity for the licensed product in that country. The expected expiry of the last-to-expire royalty payment obligation is January 20, 2046.
Termination
The GenSci License Agreement will remain in effect until the expiration of all royalty terms. Either party may terminate the GenSci License Agreement for an uncured material breach or insolvency of the other party. GenSci may terminate the GenSci License Agreement in the event of a specified patent challenge by Yarrow or its affiliates or if Yarrow ceases all development activities outside Greater China for a substantial period of time prior to achieving a specified regulatory approval milestone. Following a specified near-term triggering event, Yarrow may terminate the GenSci License Agreement for convenience upon providing the required notice.
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Components of operating results
Operating expenses
Research and development expenses
Our research and development expenses for the three and nine months ended September 30, 2026 were $5.3 million and $11.5 million, respectively.
Research and development expenses consist primarily of:
•expenses incurred in connection with the clinical development of YB-101 and development of any future product candidates we may identify, including under future agreements with third parties, such as consultants and contractors; and
•personnel-related expenses, including salaries, bonuses, benefits and equity-based compensation expense.
Our primary focus since inception has been the identification and development of our pipeline product candidates. We expense research and development costs as incurred. Our research and development expenses to date primarily consist of external costs, such as to CROs and the upfront payment made to GenSci under the GenSci License Agreement. See "Note 6 - GenSci agreement" to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for further details on the GenSci License Agreement.
We expect our research and development costs to increase in future years as we advance clinical development for YB-101 and any other future product candidates.
Due to the nature of research and development, the expected costs are inherently uncertain and may vary significantly from our current expectations.
General and administrative expenses
Our general and administrative expenses for the three and nine months ended September 30, 2026 were $5.5 million and $8.8 million, respectively.
Our general and administrative expenses consist primarily of:
•personnel-related expenses including salaries, bonuses, related benefits, and stock-based compensation expense for personnel in executive, finance, and administrative functions;
•professional fees for legal, consulting, accounting, and audit services; and
•facility, insurance, travel, information technology and other administrative costs.
We recognize general and administrative expenses in the periods in which they are incurred. We expect that our general and administrative expenses will increase substantially for the foreseeable future as we increase our headcount to support the expected growth. We also expect to incur increased expenses associated with operating as a public company, including increased costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with SEC requirements, additional director and officer insurance costs, and investor and public relations costs. We also expect to incur additional intellectual property-related expenses as we file patent applications to protect innovations arising from our research and development activities.
Other income, net
Other income, net primarily consists of interest earned on our cash and cash equivalents.
In addition, VYNE previously licensed the rights to Finacea foam to LEO Pharma A/S ("LEO Pharma") in exchange for certain royalty payments. Finacea foam was not part of the MST Franchise that was sold in January 2022. On June 11, 2026, LEO Pharma informed VYNE of its decision to terminate its license agreement for Finacea foam effective as of December 31, 2026. Any remaining royalties are recognized as other income when the product is sold by LEO Pharma.
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Income taxes and net operating loss carryforwards
Our effective tax rates were 0% for both the three and nine months ended September 30, 2026. We maintained a full valuation allowance against our federal and state net deferred tax assets, as we do not expect to generate sufficient taxable income in the foreseeable future to realize those deferred tax assets.
Results of operations for the three and nine months ended September 30, 2026
Because Pre-Merger Yarrow was incorporated on October 3, 2025, there are no comparable prior-year periods and, accordingly, the discussion below does not include a comparison to the three and nine months ended September 30, 2025.
The following table summarizes our statement of operations for the periods presented (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||
| 2026 | 2026 | ||||||||||
| Operating expenses: | |||||||||||
| Research and development | $ | 5,277 | $ | 11,461 | |||||||
| General and administrative | 5,466 | 8,839 | |||||||||
| Total operating expenses | 10,743 | 20,300 | |||||||||
| Operating loss | (10,743) | (20,300) | |||||||||
| Other income/(expenses): | |||||||||||
| Interest income | 925 | 1,225 | |||||||||
| Other income, net | 94 | 94 | |||||||||
| Total other income, net | 1,019 | 1,319 | |||||||||
| Net loss | $ | (9,724) | $ | (18,981) | |||||||
Research and development expenses
Research and development expenses were $5.3 million and $11.5 million for the three and nine months ended September 30, 2026, respectively.
For the three months ended September 30, 2026, the expenses consisted primarily of $4.3 million in clinical and external development costs for YB-101 and $0.8 million in employee-related costs.
For the nine months ended September 30, 2026, the expenses consisted primarily of $9.4 million in clinical and external development costs for YB-101 and $1.9 million in employee-related costs.
General and administrative expenses
General and administrative expenses were $5.5 million and $8.8 million for the three and nine months ended September 30, 2026, respectively.
For the three months ended September 30, 2026, the expenses consisted of $1.5 million in employee-related costs, $1.5 million in professional and consulting fees, and other costs of $2.5 million primarily consisting of transaction expenses associated with the Merger.
For the nine months ended September 30, 2026, the expenses consisted of $2.8 million in employee-related costs, $3.4 million in professional and consulting fees, and $2.6 million in other costs primarily consisting of transaction expenses associated with the Merger.
Other income/(expenses)
Total other income, net for the three and nine months ended September 30, 2026 was $1.0 million and $1.3 million, respectively, and consisted primarily of interest income.
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Liquidity and capital resources
Since inception, we have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of products for several years, if at all. We expect to incur significant expenses and operating losses for the foreseeable future as we advance clinical development of YB-101. To date, we have funded our operations primarily with proceeds from the sale of Pre-Merger Yarrow's Series A convertible preferred stock, the Yarrow Pre-Closing Financing of $100.0 million completed immediately prior to the Closing of the Merger and our underwritten public offering completed in September 2026 (the "September 2026 Offering").
Our ability to raise additional capital may also be adversely impacted by global economic conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from bank failures, other general macroeconomic conditions and otherwise. The failure to obtain sufficient capital on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to delay, reduce or curtail our research or product development efforts. We cannot provide assurance that we will ever generate positive cash flow from operating activities.
Funding requirements
As of September 30, 2026, we had cash and cash equivalents of $268.9 million. We estimate that our existing cash and cash equivalents as of September 30, 2026 will be sufficient to enable us to fund operations into 2030, including completion of our Phase 2a/2b trial in patients with GD and preparatory work for our next planned TED study. We have based this estimate on assumptions that may prove to be wrong. Our operating plan may change as a result of many factors currently unknown to us and we could exhaust our available capital resources sooner than we expect.
Our funding requirements and timing and amount of our operating expenditures will depend on many factors, including, but not limited to:
•the rate of progress in our clinical development of YB-101 and future research and development and discovery-related development of future product candidates;
•the scope, progress, results and costs of product candidates and discovery-related activities and preclinical studies for those product candidates;
•our ability to successfully file investigational new drug applications or comparable foreign applications and obtain authorization to commence our planned clinical trials or future clinical trials;
•the costs of enrollment and successful completion of clinical trials;
•the costs necessary to pursue positive results from our future clinical trials that support a finding of safety and effectiveness and an acceptable risk-benefit profile in the intended populations;
•the costs of hiring research and development, clinical, manufacturing and commercial personnel;
•the costs of adding operational, financial and management information systems and personnel;
•the costs necessary to obtain regulatory approvals, if any, for any approved products in the United States and other jurisdictions, and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where approval is obtained;
•the costs of developing, maintaining and enhancing sustainable, scalable, reproducible and transferable clinical and commercial-scale cGMP capabilities through a third party or our own manufacturing facility for our product candidates;
•the costs and timing of future commercialization activities, including establishing sales, marketing and distribution infrastructure to commercialize any product candidates, for any of our product candidates for which we receive regulatory approval;
•the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
•the costs and timing of preparing, maintaining, expanding, enforcing, defending and protecting our intellectual property rights and protection or regulatory exclusivity for any products we may develop and defending any intellectual property-related claims;
•the timing and payment of milestone, royalty or other payments we must make pursuant to our existing and potential future collaborations and licensing arrangements with third parties;
•the costs we incur in maintaining business operations;
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•the costs associated with being a public company, including costs of audit, legal, regulatory and tax-related services associated with maintaining compliance with an exchange listing and SEC requirements, director and officer insurance premiums and investor and public relations costs;
•the effect of competing technological and market developments; and
•the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates.
Identifying potential programs and product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Additional debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute your ownership interest.
If we raise additional funds through strategic collaborations or licensing 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. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourselves.
For more information as to the risks associated with our future funding needs, see the section captioned "Risk Factors" in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, filed with the SEC on August 13, 2026.
Equity offerings
At-the-market equity offering program
On August 13, 2026, we entered into an amended and restated sales agreement (the "A&R Sales Agreement") with TD Securities (USA) LLC as sales agent ("TD Cowen"), which amended and restated the sales agreement, dated March 1, 2024, between VYNE and Cowen and Company, LLC. Under the A&R Sales Agreement, we may offer and sell, from time to time at our sole discretion, shares of common stock through TD Cowen in an at-the-market offering having an aggregate offering price up to $50.0 million. The compensation to TD Cowen for sales of common stock sold pursuant to the A&R Sales Agreement will be an amount up to 3.0% of the gross proceeds of any shares of common stock sold under the A&R Sales Agreement. We did not sell any shares of common stock under the A&R Sales Agreement during the nine months ended September 30, 2026.
September 2026 Offering
On September 10, 2026, we entered into an underwriting agreement with Jefferies LLC, TD Cowen and Guggenheim Securities, LLC, as the representatives of the underwriters named therein (the "Underwriters"), to issue and sell 6,634,615 shares of common stock at a public offering price of $26.00 per share, which includes 865,384 shares of common stock issued pursuant to the Underwriters' exercise in full of an option (the "Option") to purchase additional shares at the public offering price, less the underwriting discounts and commissions.
The net proceeds from the September 2026 Offering, including proceeds from the exercise in full of the Option by the Underwriters, were $161.7 million, after deducting the Underwriters' discounts and commissions and offering expenses payable by us. The September 2026 Offering closed on September 14, 2026.
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Cash flows
The following table summarizes our cash flows for the nine months ended September 30, 2026:
| Nine Months Ended September 30, | |||||
| (in thousands) | 2026 | ||||
| Net cash used in operating activities | $ | (96,030) | |||
| Net cash provided by financing activities | 265,001 | ||||
| Net increase in cash, cash equivalents and restricted cash | $ | 168,971 | |||
Net cash used in operating activities
During the nine months ended September 30, 2026, net cash used in operating activities was $96.0 million, which was primarily due to the $70.0 million upfront payment under the GenSci License Agreement, which was included in accrued expenses at December 31, 2025 and the net loss of $19.0 million adjusted for non-cash stock-based compensation expense of $1.5 million. The remainder of the cash used in operations was driven by changes in operating assets and liabilities.
Net cash provided by financing activities
During the nine months ended September 30, 2026, net cash provided by financing activities was $265.0 million and consisted of proceeds from the Yarrow Pre-Closing Financing, cash acquired in connection with the reverse recapitalization and proceeds from the September 2026 Offering.
Critical accounting policies, significant judgments and use of estimates
Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. 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. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
Research and development contract costs accruals
We record the costs associated with research and development as incurred. These costs are a significant component of our research and development expenses, with a substantial portion of our ongoing research and development activities conducted by third-party service providers, including CROs and contract manufacturing organizations ("CMOs").
We accrue for expenses resulting from payments due under agreements with CROs, CMOs, and other outside service providers for which payment flows do not match the periods over which materials or services are provided to us. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with GenSci, CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. We make significant judgments and estimates in determining the accrual balance in each reporting period. In the event advance payments are made to GenSci, a CRO, a CMO, or outside service provider, the payments will be recorded as a prepaid asset which will be expensed as the contracted services are performed. Changes in these estimates that result in material changes to our accruals could materially affect our results of operations. For the periods presented, we have not experienced any material deviations between accrued and actual research and development expenses.
Stock-based compensation
We measure stock-based awards granted to employees, directors, and non-employees in the form of stock options to purchase shares of common stock, based on their fair value on the date of grant using the Black-Scholes model. Compensation expense for those awards is recognized using the straight-line method over the requisite service period, which is generally the vesting period of the respective award for employees. Compensation expense for awards to non-employees with service-based vesting
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conditions is recognized in the same manner as if we had paid cash in exchange for the goods or services, which is generally over the vesting period of the award. We account for forfeitures as they occur. We classify our stock-based compensation expenses in the same manner in which the award recipient's payroll costs are classified or in which the award recipient's service payments are classified.
Prior to the Merger, the fair value of the Company's common stock was estimated by the Company's board of directors, with input from management considering the most recently available third-party valuation of the Company's common stock. Following the Merger, the fair value of the Company's common stock is based on the closing price of the common stock on The Nasdaq Capital Market on the date of grant. The Black-Scholes model also uses assumptions measured on the date of grant for the volatility, the expected term, the risk-free interest rate for a period that approximates the expected term of our stock-based awards and our expected dividend yield. We have historically been a private company and lack company-specific historical and implied volatility information of our stock. Therefore, we estimate our expected stock volatility based on the historical volatility of a representative group of public companies in the biotechnology industry for a term equal to the remaining time of the expected term. The expected term of our stock options has been determined utilizing the "simplified" method for awards that qualify as "plain-vanilla" stock options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the expected term of the options on the date of measurement. We have estimated a 0% dividend yield based on the expected dividend yield and the fact that we have not paid, and do not expect to pay, any cash dividends in the foreseeable future, other than the previously disclosed special cash dividend paid by VYNE to its stockholders prior to the Closing of the Merger. See "Note 9 - Stock-based compensation" to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for information concerning certain of the specific assumptions we used in applying the Black-Scholes model to determine the estimated fair value of our stock options granted in the periods presented.
Off-balance sheet arrangements
We are not party to any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Recently issued and adopted accounting pronouncements
See "Newly issued and recently adopted accounting pronouncements" in "Note 2 - Significant accounting policies" to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for a discussion of recently adopted accounting pronouncements and accounting pronouncements not yet adopted, and their expected impact on our financial position and results of operations.
Yarrow Bioscience Inc. published this content on November 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 13, 2026 at 12:53 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]