Braveheart Bio Inc.
09/08/2026 | Press release | Distributed by Public on 09/08/2026 14:08
Quarterly Report for Quarter Ending June 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 interim condensed financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report and with our audited financial statements and related notes for the year ended December 31, 2025 included in our final prospectus dated August 5, 2026 filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the "Securities Act"). References to the "Company," "Braveheart," "Braveheart Bio," "we," "our," "us," or similar terms refer to Braveheart Bio, Inc. This discussion and analysis and other parts of this Quarterly Report contains forward-looking statements based upon our current plans and strategy for our business that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially from those described in, anticipated in or implied by these forward-looking statements as a result of various factors, including those set forth under the headings "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" elsewhere in this Quarterly Report.
Overview
Braveheart Bio, Inc. is a clinical-stage biopharmaceutical company focused on developing therapies for patients with hypertrophic cardiomyopathy ("HCM") and other serious cardiovascular diseases. Our lead product candidate, BHB-1893, is a next-generation oral small-molecule cardiac myosin inhibitor ("CMI") that we are developing for the treatment of obstructive HCM ("oHCM") and non-obstructive HCM ("nHCM"). Our goal is to improve the treatment options for these patients by enhancing speed of onset, depth of gradient response, systolic safety, and reversibility, and reducing prescribing complexity.
Cardiac myosin inhibition is a clinically validated therapeutic approach in symptomatic oHCM. However, currently approved therapies require complex dose titration and frequent echocardiographic monitoring, which can create operational burden and limit adoption. Based on preclinical and clinical data generated to date, we believe BHB-1893 has the potential to offer a differentiated product profile, including rapid onset of action, predictable pharmacokinetics, limited drug-drug interactions, and a low left ventricular ejection fraction cost.
We plan to advance BHB-1893 through global Phase 3 development in both oHCM and nHCM. We have initiated LIONHEART-HCM, a Phase 3, multi-region, multi-center, randomized, double-blind, active-comparator-controlled trial to evaluate the efficacy and safety of BHB-1893 compared to metoprolol in adults with symptomatic obstructive hypertrophic cardiomyopathy. We plan to initiate NOBLEHEART-HCM, a global Phase 3 trial in nHCM in the first half of 2027. We hold exclusive rights to develop, manufacture and commercialize BHB-1893 worldwide, excluding Mainland China, Hong Kong, Macau and Taiwan, under an exclusive license agreement (the "Exclusive License Agreement") with Jiangsu Hengrui Pharmaceuticals Co., Ltd. ("Hengrui").
Since inception, we have devoted substantially all of our resources to organizing our company, hiring personnel, business planning, acquiring rights to BHB-1893, conducting research and development activities, advancing clinical trials, and establishing our operational infrastructure. We do not have any products approved for sale and have not generated any revenue from product sales. We expect to continue to incur significant and increasing expenses and increasing substantial losses for the foreseeable future as we continue our development of and seek regulatory approvals for BHB-1893, seek to commercialize BHB-1893, if approved, seek to expand our product pipeline, and invest in our organization. Our ability to achieve and sustain profitability will depend on our ability to successfully develop, obtain regulatory approval for, and commercialize our product candidate. There can be no assurance that we will ever earn revenues or achieve profitability, or if achieved, that the revenues or profitability will be sustained on a continuing basis.
To date, we have primarily funded our operations with proceeds from sales of shares of our common stock and redeemable convertible preferred stock in private placements. Through June 30, 2026, we had received aggregate gross proceeds of $185.1 million from sales of shares of our common stock and redeemable convertible preferred stock. On August 7, 2026, we completed our initial public offering ("IPO"), in which we sold 24,437,500 shares of our common stock, including the full exercise of the underwriters' additional option, at a public offering price of $18.00 per share, resulting in aggregate net proceeds of approximately $404.5 million, after deducting underwriter discounts, commissions and other estimated offering expenses.
We have incurred significant operating losses and negative cash flows from operations since our inception. Our net loss for the six months ended June 30, 2026 and 2025, was $29.3 million and $0.5 million, respectively. As of June 30, 2026, we had an accumulated deficit of $95.9 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and, to a lesser extent, from general and administrative costs associated with our operations. Our net losses and operating losses may fluctuate from quarter to quarter and year to year depending primarily on the timing of acquisition of any new product candidates, the timing of our preclinical studies and clinical trials, our other research and development expenses, and the timing and amount of any milestone or royalty payments due under the Exclusive License Agreement with Hengrui (as defined below) and future license agreements. In addition, following the closing of the IPO, we expect to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer liability insurance costs, investor and public relations costs, and other expenses that we did not incur as a private company. We anticipate that our expenses will increase significantly in connection with our ongoing activities, particularly if and as we:
•continue to progress the development of BHB-1893 into later stage clinical development;
•explore additional indications for our existing product candidate;
•hire additional clinical, quality control, and scientific personnel;
•obtain, maintain, expand, and protect our intellectual property rights, including defending against any claims by third parties that we have infringed, misappropriated, or otherwise violated any intellectual property of any such third party;
•make royalty, milestone, or other payments under the Exclusive License Agreement, and any future, license or collaboration agreement;
•seek to identify, acquire, or in-license new technologies or product candidates;
•seek regulatory and marketing approvals for any of our current or future product candidates that successfully complete clinical trials, if any;
•procure manufacturing and supply chain capacity for our current or future product candidates, including commercial manufacturing readiness and scale-up;
•experience any delays, challenges, or other issues associated with the clinical development of our current or future product candidates, including with respect to our regulatory strategies;
•establish a sales, marketing, and distribution infrastructure to commercialize any product candidates for which we obtain marketing approval; and
•add operational, legal, financial, and management information systems and personnel to support our product development, clinical execution, and planned future commercialization efforts, as well as to support our transition to a public company.
Because of the numerous risks and uncertainties associated with therapeutic product development, we may never achieve or sustain profitability and, unless and until we are able to develop and commercialize our current or future product candidates, we will need to continue to raise additional capital. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through public or private equity or debt financings, or potentially other capital sources, such as collaboration or licensing arrangements with third parties or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. 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 additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, 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 capital as and when needed, or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our current or future product candidates or scale back or terminate our pursuit of new in-licenses and acquisitions.
As of June 30, 2026, we had $122.8 million in cash and cash equivalents. On August 7, 2026, we completed our IPO, resulting in aggregate net proceeds of approximately $404.5 million, after deducting underwriting discounts and commissions and offering expenses payable by us. Based on our current operating plan, we believe that our existing cash and cash equivalents, together with the net proceeds from our IPO , will be sufficient to fund our projected operating expenses and capital expenditure requirements into 2029. We have based this estimate on our current assumptions, which may prove to be wrong, and we may exhaust our available capital resources sooner than we expect.
We currently have no sales, marketing, or commercialization capabilities. However, we intend to build the necessary sales, marketing, and commercialization capabilities and infrastructure over time as our product candidate advances through clinical development. We expect to spend a significant amount in development and marketing costs prior to obtaining regulatory and marketing approval of our current or future product candidates. We expect that our expenses and capital requirements will increase substantially in the near- to mid-term as we continue our late-stage development efforts for BHB-1893; and add clinical, scientific, sales and marketing, operational, and financial personnel, including personnel to support our product development and potential future commercialization activity.
Hengrui Pharmaceuticals Exclusive License Agreement
In September 2025, we entered into an Exclusive License Agreement (the "Exclusive License Agreement") with Hengrui under which Hengrui granted us an exclusive, royalty-bearing and sublicensable license to develop, commercialize, manufacture, and otherwise exploit products containing Hengrui's cardiac myosin inhibitor HRS-1893 and other related compounds (the "Licensed Products") for any and all uses worldwide outside of Mainland China, Hong Kong, Macau and Taiwan (the "Territory") and a non-exclusive, royalty-bearing and sublicensable license to develop and manufacture the Licensed Products outside of the Territory solely for the development or commercialization of such Licensed Products in the Territory.
Pursuant to the terms of the Exclusive License Agreement, Hengrui received a $32.5 million upfront payment and 32,500,000 shares of non-voting Series A redeemable convertible preferred stock as consideration at an original price of $1.00 per share. We separately calculated the fair value of the non-voting Series A redeemable convertible preferred stock and the corresponding fair value of the non-voting Series A redeemable convertible preferred stock issued was $0.79 per share, representing total equity consideration of $25.7 million. Hengrui is also potentially eligible to receive additional payments (i) up to $23.0 million upon achievement of certain technology transfer and development milestones and (ii) up to $1.0 billion upon achievement of certain commercial milestones. in addition to tiered royalties on a Licensed Product-by-Licensed Product basis and country-by-country basis ranging from 5% to 10%, on total annual net sales of each such Licensed Product and will be compensated for ongoing program expenses. We will assume full responsibility for future development and commercialization expenses.
The acquisition of the exclusive license pursuant to the Exclusive License Agreement was accounted for as an in-process research and development asset acquisition. As the acquired technology did not have an alternative use, the total consideration of $58.2 million was recorded as in-process research and development expense in the statement of operations and comprehensive loss at the inception of the license agreements. Milestone payments are contingent consideration and are recognized in the period the obligation is resolved. Royalties will be recognized as cost of sales when products are sold and royalties are payable. The technology transfer milestone for $3.0 million was completed in December 2025, and recorded within accrued expenses and other current liabilities in the balance sheet as of December 31, 2025. As of June 30, 2026, this milestone has been paid. The manufacturing technology transfer milestone for $6.0 million was completed in March 2026, and has been paid as of June 30, 2026. For a more detailed description of the Exclusive License Agreement, see the section titled "Business-Hengrui License Agreement," included in our IPO final prospectus dated August 5, 2026 filed with the SEC.
Reverse Stock Split
In connection with our IPO, on July 29, 2026, we effected a 1-for-4.38 reverse stock split of our issued and outstanding shares of common stock. Accordingly, all share and per share amounts for all periods presented in this section have been adjusted retroactively, where applicable, to reflect this reverse stock split.
Components of Results of Operations
Operating Expenses
Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses.
Research and Development
Research and development expenses consist of external and internal costs primarily related to acquiring our product candidate pipeline and technologies, and clinical development of our product candidate.
External costs include:
•costs associated with acquiring technology and intellectual property licenses that have no alternative future uses and costs incurred under in-license or assignment agreements, including milestone payments;
•costs incurred in connection with the clinical development of our product candidate, including under agreements with CROs, CMOs, and other third parties that conduct clinical trials and manufacture clinical supplies, product candidates, and components on our behalf; and
•costs for third-party professional research and development consulting services.
Internal costs include:
•research and development personnel-related costs, including salaries, benefits, travel and meals expenses, and stock-based compensation expense; and
•allocated facilities and other overhead costs, including software, computer supplies and accessories, and other miscellaneous expenses.
We expense research and development costs as incurred. Costs of certain activities are recognized based on an evaluation of the progress to completion of specific tasks. However, payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our balance sheets. The capitalized amounts are recognized as expense as the goods are delivered or as related services are performed. Since our inception and through June 30, 2026, substantially all of our third-party expenses were related to the development of BHB-1893. We use internal resources primarily for managing our process development, manufacturing, and clinical development activities. We deploy our personnel across all of our research and development activities and, as our employees work across multiple programs, we do not currently track our costs by product candidate indication.
We expect our research and development expenses to increase substantially for the foreseeable future as we advance our product candidate through Phase 3 clinical trials, pursue regulatory approval of our product candidate, build our operational and commercial capabilities for supplying and marketing our products, if approved, and expand our pipeline of product candidates. We expect to incur significant manufacturing costs as our CMOs develop scaled commercial manufacturing processes. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our current or future product candidates may be affected by a variety of factors, including the safety and efficacy of such product candidates, clinical data, investment in our clinical programs, competition, manufacturing capability, and commercial viability. We may never succeed in achieving regulatory approval for any of our current or future product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion of costs of our research and development projects or if, when, and to what extent we will generate revenue from the commercialization and sale of our current or future product candidates, if approved by the FDA and other applicable regulatory authorities.
Our future research and development costs may vary significantly based on factors such as:
•the scope, timing, progress, costs, and results of our ongoing development of BHB-1893 as well as for potential discovery, preclinical, and clinical development activities for future product candidates;
•the amount and timing of any milestone payment due under the Exclusive License Agreement with Hengrui, or any future license or collaboration agreement;
•the number of patients that participate in our clinical trials, and per participant clinical trial costs;
•the number and duration of clinical trials required for approval of our product candidate;
•the number of sites included in our clinical trials, and the locations of those sites;
•delays or difficulties in adding trial sites and enrolling participants in our clinical trials;
•patient drop-out or discontinuation rates;
•potential additional safety monitoring requested by regulatory authorities;
•the phase of development of our product candidate;
•the efficacy and safety profile of our product candidate;
•the timing, receipt, and terms of any approvals from applicable regulatory authorities including the FDA and non-U.S. regulators, including whether we are permitted to accelerate the development of BHB-1893 for patients with HCM and related conditions;
•maintaining a continued acceptable safety profile of our product candidate following approval, if approved;
•changes in the competitive outlook;
•the extent to which we establish additional strategic collaborations or other arrangements; and
•the impact of any interruptions to our operations or to those of the third parties with whom we work.
A change in the outcome of any of these variables with respect to the development of our product candidate could significantly change the costs and timing associated with the development of the product candidate.
General and Administrative
Our general and administrative expenses consist primarily of personnel-related costs, legal and consulting services, including those relating to intellectual property and corporate matters, and allocated overhead, including software, computer supplies and accessories, insurance, and other miscellaneous expenses. Personnel-related costs include salaries, annual bonuses, benefits, recruiting fees, travel and meal expenses, and stock-based compensation for our general and administrative personnel.
We expect that our general and administrative expenses will increase substantially in the future as a result of expanding our operations, including hiring personnel, preparing for potential commercialization of our product candidate, and facility occupancy costs, as well as various incremental costs associated with operating as a public company. We expect that our costs will increase related to legal, audit, accounting, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements as well as director and officer insurance costs, investor and public relations costs, and other expenses that we did not incur as a private company. We also expect to increase the size of our administrative function to support the growth of our business.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income and gains or losses from exchange rate changes on transactions denominated in currencies other than the U.S. dollar. Interest income consists of interest earned on money market funds.
Deemed Dividends Upon Issuance of Redeemable Convertible Preferred Stock
Deemed dividends upon issuance of redeemable convertible preferred stock consists of the amount by which the estimated fair value of the issued shares exceeded the per share purchase price.
Income taxes
As of December 31, 2025, we recorded a full valuation allowance of our deferred tax asset position of $13.8 million as we believe it was more likely than not that we would not be able to utilize our deferred tax assets.
As of December 31, 2025, we had federal net operating loss carryforwards of $4.3 million, and no state net operating loss carryforward. All of our federal net operating loss carryforwards can be carried forward indefinitely, but are limited to 80% utilization against future taxable income each year.
As of June 30, 2026, there have been no material changes to our tax positions as compared to December 31, 2025.
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the three and six months ended June 30, 2026 and 2025 (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
|
June 30, 2026 |
June 30, 2025 |
June 30, 2026 |
June 30, 2025 |
||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
|
Research and development
|
$ | 11,125 | $ | - | $ | 22,039 | $ | - | |||||||||||||||
|
In-process research and development
|
- | 354 | - | 448 | |||||||||||||||||||
|
General and administrative
|
4,757 | 27 | 8,892 | 32 | |||||||||||||||||||
|
Total operating expenses
|
15,882 | 381 | 30,931 | 480 | |||||||||||||||||||
|
Loss from operations
|
(15,882) | (381) | (30,931) | (480) | |||||||||||||||||||
| Other income | |||||||||||||||||||||||
|
Interest income
|
889 | - | 1,660 | - | |||||||||||||||||||
|
Other income
|
5 | - | 3 | - | |||||||||||||||||||
|
Total other income
|
$ | 894 | $ | - | $ | 1,663 | $ | - | |||||||||||||||
|
Net loss
|
$ | (14,988) | $ | (381) | $ | (29,268) | $ | (480) | |||||||||||||||
| Deemed dividends upon issuance of redeemable convertible preferred stock | $ | (3,615) | $ | - | $ | (3,615) | $ | - | |||||||||||||||
| Net loss attributed to common stockholders | $ | (18,603) | $ | (381) | $ | (32,883) | $ | (480) | |||||||||||||||
Research and Development Expenses
The following table summarizes our research and development expenses for the three and six months ended June 30, 2026, and 2025 (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
|
June 30, 2026 |
June 30, 2025 |
June 30, 2026 |
June 30, 2025 |
||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| External research and development expense: | |||||||||||||||||||||||
| Clinical trial expenses | $ | 3,781 | $ | - | $ | 4,703 | $ | - | |||||||||||||||
| Manufacturing expenses | 2,311 | - | 2,958 | - | |||||||||||||||||||
| Outside research and development services | 1,801 | - | 2,964 | - | |||||||||||||||||||
| License milestone expenses | - | - | 6,000 | - | |||||||||||||||||||
| Internal research and development expense: | |||||||||||||||||||||||
| Personnel-related costs | 3,031 | - | 5,043 | - | |||||||||||||||||||
| Facilities | 76 | - | 147 | - | |||||||||||||||||||
| Other | $ | 125 | $ | - | $ | 224 | $ | - | |||||||||||||||
| Total research and development expense | $ | 11,125 | $ | - | $ | 22,039 | $ | - | |||||||||||||||
Research and development expense for the three and six months ended June 30, 2026 was $11.1 million and $22.0 million, respectively. The six-month expense was comprised of $6.0 million in Hengrui license milestone expenses incurred during the first quarter of 2026, $5.0 million in personnel-related costs, $7.7 million in clinical and manufacturing expenses to support BHB-1893 oHCM Phase 3 study start-up activities, $3.0 million in outside research and development support services, and $0.3 million in other research and development expenses primarily related to allocated rent, software subscriptions and other IT-related matters. The three-month expense was comprised of $6.1 million in clinical and manufacturing expenses to support BHB-1893 oHCM Phase 3 study start-up activities, $3.0 million in personnel-related costs, $1.8 million in outside research and development support services, and $0.2 million in other research and development expenses primarily related to allocated rent, software subscriptions and other IT-related matters. There was no research and development expense incurred during the three or six months ended June 30, 2025, as the Company's research and development efforts did not begin until late 2025.
In-Process Research and Development Expenses
In-process research and development expense was zero for the three and six months ended June 30, 2026, as the Hengrui license acquisition occurred in 2025. In-process research and development expense was $0.4 million for the three and six months ended June 30, 2025, which related to transaction costs incurred in connection with that license.
General and Administrative Expenses
General and administrative expense for the three and six months ended June 30, 2026 was $4.8 million and $8.9 million, respectively. During both the three and six months ended June 30, 2026, expenses were comprised primarily of personnel-related costs, consultant costs to support the Company's increased operations and business development, legal costs for general counsel and patent services, and other general and administrative expenses primarily related to allocated rent, insurance and software subscriptions. General and administrative expense for the three and six months ended June 30, 2025 was nominal, related to legal costs as the Company's operations did not begin until late 2025.
Total Other Income (Expense), Net
Total other income for the three and six months ended June 30, 2026 was $0.9 million and $1.7 million, respectively, from the recognition of interest income from our cash invested in money market funds. There was no other income or other expense for the three or six months ended June 30, 2025.
Liquidity, Capital Resources and Capital Requirements
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. From inception, we have primarily funded our operations from sales of shares of our common stock and redeemable convertible preferred stock in private placements.
As of June 30, 2026, we had $122.8 million in cash and cash equivalents. On August 7, 2026, we completed our IPO, resulting in aggregate net proceeds of approximately $404.5 million, after deducting underwriting discounts and commissions and offering expenses payable by us. On a pro forma basis, giving effect to the receipt of those net proceeds as if the IPO had closed on June 30, 2026, we would have had approximately $527.3 million in cash and cash equivalents as of that date. Based on our current operating plan, we estimate that our existing cash and cash equivalents, together with the net proceeds from our IPO completed during the third quarter of 2026, will be sufficient to fund our projected operating expenses and capital expenditure requirements into 2029. We have based this estimate on our current assumptions which may prove to be wrong, and we may exhaust our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with therapeutic product development, we may never achieve or maintain profitability and, unless and until we are able to commercialize our product candidate, if ever, we will continue to be dependent upon equity financing, debt financing, and other forms of capital raises. If we are unable to raise capital as and when needed or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our product candidate or scale back or terminate our pursuit of new in-licenses and acquisitions.
Future Funding Requirements
Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our product candidate, and to a lesser extent, general and administrative expenditures. We anticipate that we will continue to incur significant and increasing expenses for the foreseeable future as we continue to advance our product candidate, expand our corporate infrastructure, including the costs associated with being a public company, further our research and development initiatives for our current or future product candidates, and incur costs associated with potential commercialization. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business.
Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses, and prepaid expenses.
Our future funding requirements will depend on many factors, including the following:
•the timing, scope, progress, and results of our preclinical studies and clinical trials for our current or future product candidates;
•the number, scope, and duration of clinical trials required for regulatory approval of our current or future product candidates;
•the outcome, timing, and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities for our current or future product candidates, including any requirement to conduct more studies or generate additional data beyond that which we currently expect would be required to support an NDA;
•the cost of manufacturing clinical and commercial supplies as well as scale up of our current or future product candidates;
•the increase in the number of our employees and expansion of our physical facilities to support growth initiatives;
•our ability to maintain existing, and establish new, strategic collaborations, licensing, or other arrangements, including the Exclusive License Agreement with Hengrui, and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty, or other payments due under any such agreement; the cost of filing and prosecuting our patent applications, and maintaining and enforcing our patents and other intellectual property rights;
•the extent to which we acquire or in-license other product candidates and technologies;
•the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against our current or future product candidates;
•the effect of competing technological and market developments;
•the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our current or future product candidates for which we receive marketing approval;
•the amount of revenue, if any, received from commercial sales of our current or future product candidates, should any candidates receive marketing approval;
•our implementation of various computerized informational systems and efforts to enhance operational systems;
•the costs associated with being a public company; and
•the impact of economic uncertainty and geopolitical tensions, which may exacerbate the magnitude of the factors discussed above.
Furthermore, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures.
Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through public or private equity or debt financings, or potentially other capital sources, such as collaboration or licensing arrangements with third parties or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. 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 additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, 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 capital as and when needed or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our product candidate or scale back or terminate our pursuit of new in-licenses and acquisitions.
Cash Flows
Comparison of the Six Months Ended June 30, 2026 and 2025
The following summarizes our cash flows for the periods indicated (in thousands):
|
Six Months Ended June 30, 2026 |
Six Months Ended June 30, 2025 |
||||||||||
| (unaudited) | |||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | (22,136) | $ | - | |||||||
| Investing activities | (3,028) | - | |||||||||
| Financing activities | 58,834 | 2 | |||||||||
| Net increase in cash and cash equivalents | $ | 33,670 | $ | 2 | |||||||
Operating Activities
Net cash used in operating activities for the six months ended June 30, 2026 of $22.1 million was primarily due to our net loss for the period of $29.3 million, offset by $2.9 million in non-cash items, including $2.8 million of non-cash stock-based compensation expense and $0.1 million of depreciation and amortization, and $4.3 million of changes in operating assets and liabilities. The changes in operating assets and liabilities include a $0.4 million increase in prepaid expenses and other current assets, partially offset by a $0.9 million increase in accounts payable, a $3.9 million increase in accrued expenses and other current liabilities, and a $0.1 million decrease in operating lease right-of-use asset and lease liabilities. The operating cash activity during the six months ended June 30, 2025 was comprised of a $0.5 million net loss, offset by $0.4 million in non-cash in-process research and development expense and $0.1 million net increase in operating liabilities.
Investing Activities
Cash used in investing activities for the six months ended June 30, 2026 was $3.0 million related to the cash payment of the Hengrui license technology transfer milestone that had been accrued as of December 31, 2025. There was no investing activity for the six months ended June 30, 2025.
Financing Activities
Cash provided by financing activities for the six months ended June 30, 2026 was $58.8 million, primarily related to net proceeds from our Series A redeemable convertible preferred stock financing of $59.6 million, partially offset by $0.8 million in payments of deferred offering costs. Cash provided by financing activities for the six months ended June 30, 2025 was nominal, from proceeds from the issuance of founders stock.
Contractual Obligations and Commitments
We enter into contracts in the normal course of business with suppliers, CROs, CMOs, clinical trial sites, and the like. These agreements provide for termination at the request of either party generally with less than one-year notice and, therefore, we believe that our non-cancelable obligations under these agreements are not material. We do not currently expect any of these agreements to be terminated and did not have any non-cancelable obligations under these agreements as of June 30, 2026 and December 31, 2025.
We have milestones, royalties, and/or other payments due under our Exclusive License Agreement with Hengrui. See Note 3 to our unaudited interim condensed financial statements. The technology transfer milestone for $3.0 million was completed in 2025 and recorded within accrued expenses and other current liabilities in the balance sheet as of December 31, 2025, and was paid as of June 30, 2026. The manufacturing technology transfer milestone for $6.0 million was completed in March 2026, and has been paid as of June 30, 2026.
Leases
As of December 31, 2025, we had no lease obligations. As of June 30, 2026, we have one operating lease agreement for subleased office space located in San Francisco, California. The sublease, which commenced in January 2026, has a term of 24 months, and our total remaining rent commitments under the sublease agreement are $0.6 million throughout the lease term. In addition to base rent, we pay our share of operating expenses and taxes.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations, or cash flows is disclosed in Note 2 to our unaudited interim condensed financial statements.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with 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. On an ongoing basis, we evaluate our estimates and judgments, including but not limited to those related to accrued research and development costs, the fair value of redeemable convertible preferred stock and common stock and stock-based compensation expense, the valuation of deferred tax assets, and uncertain income tax positions. These estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates and assumptions could occur in the future. 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. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.
Although our significant accounting policies are described in more detail in Note 2 to our unaudited interim condensed financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses, including those related to clinical trials and product candidate manufacturing. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the services when we have not yet been invoiced or otherwise notified of actual costs. Our service providers invoice us in arrears or require prepayments for services performed, as well as on a pre-determined schedule or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to:
•vendors in connection with preclinical and clinical development activities;
•CROs in connection with clinical trials; and
•CMOs in connection with the process development and scale-up activities and the production of preclinical and clinical trial materials.
Costs for clinical trials and manufacturing activities are recognized based on an evaluation of our vendors' progress towards completion of specific tasks, using data such as participant enrollment, clinical site activations or information provided to us by our vendors regarding their actual costs incurred. Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services were performed. We determine accrual estimates through reports from and discussions with applicable personnel and outside service providers as to the progress or state of completion of studies, or the services completed. Our estimates of accrued expenses as of each balance sheet date are based on the facts and circumstances known at the time. Costs that are paid in advance of performance are deferred as a prepaid expense and amortized over the service period as the services are provided.
Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses. However, due to the nature of estimates, we cannot assure that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.
Asset Acquisitions and Acquired In-Process Research and Development Expenses
We measure and recognize asset acquisitions that are not deemed to be business combinations based on the cost to acquire the asset or group of assets, which includes transaction costs. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire in-process research and development ("IPR&D") with no alternative future use is recognized as expense on the acquisition date.
Contingent consideration in asset acquisitions payable in the form of cash is recognized in the period the obligation is resolved. Such amounts are expensed or capitalized based on the nature of the associated asset at the date the related contingency is resolved.
We concluded that the exclusive license acquired from Hengrui in September 2025 represented an asset acquisition of IPR&D assets with no alternative future use. We further concluded that the arrangement did not qualify as a business combination because substantially all of the fair value of the assets acquired was concentrated in a single asset.
Stock-Based Compensation Expense
Stock-based compensation expense related to the stock-based awards granted to employees, consultants and Board members is measured at the grant date based on the fair value of the award. Compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period. We use the straight-line method to record the expense of awards with service-based vesting conditions. We account for forfeitures of stock-based awards as they occur rather than applying an estimated forfeiture rate to stock-based compensation expense. We recognize share-based compensation expense for awards with performance conditions when it is probable that the condition will be met, and the award will vest.
We estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing model. Restricted stock awards are valued at the difference between the common stock price and price paid for the restricted stock award. This model requires the use of highly subjective assumptions to determine the fair value of each stock-based award, including:
•Fair value of common stock. See the subsection titled "-Determination of Fair Value of Common Stock" below.
•Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The expected term for our stock options was calculated based on the weighted-average vesting term of the awards and the contract period, or simplified method.
•Expected volatility. Since we are not yet a public company and do not have any trading history for our common stock, the expected volatility was estimated based on the average historical volatilities of common stock of comparable publicly traded entities over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their size, stage of their life cycle, or area of specialty. We will continue to apply this process until enough historical information regarding the volatility of our stock price becomes available.
•Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term of the awards.
•Expected dividend yield. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.
See Note 8 to our unaudited interim condensed financial statements for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the periods presented.
Stock-based compensation expense for employees and non-employees is reflected in the statements of operations and comprehensive loss as follows:
|
Three Months Ended June 30, 2026 |
Six Months Ended June 30, 2026 |
Three Months Ended June 30, 2025 |
Six Months Ended June 30, 2025 |
||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Options | $ | 0.2 | $ | 0.1 | $ | - | $ | - | |||||||||||||||
| RSAs | 2.6 | 0.9 | - | - | |||||||||||||||||||
| Total | $ | 2.8 | $ | 1.0 | $ | - | $ | - | |||||||||||||||
As of June 30, 2026 there was $4.6 million of total unrecognized stock-based compensation expense related to our granted options, which we expect to recognize over a remaining weighted-average period of 3.7 years. As of June 30, 2026 there was $7.5 million, of total unrecognized stock-based compensation expense related to outstanding RSAs, which we expect to recognize over a remaining weighted-average period of 3.0 years. We expect to continue to grant equity-based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.
Determination of Fair Value of Common Stock
As there has been no public market for our common stock prior to the IPO, the estimated fair value of our common stock underlying our stock-based awards has been determined by our board of directors as of each option grant date with input from management, considering our most recently available third-party valuations of common stock and our board of directors' assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants' Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the Practice Aid).
In accordance with the Practice Aid, we determined the hybrid method was the most appropriate method for determining the fair value of our common stock based on our stage of development and other relevant factors. A hybrid of the scenario-based method (SBM) and the OPM, where the OPM is used to allocate value in one or more scenarios. The hybrid method utilized considered two scenarios using a weighting between the OPM scenario and a common stock equivalent (CSE) scenario. The CSE method values each class of equity on an as-converted basis, considering the number of common stock equivalents represented by each class. This method may also be referred to as the fully-diluted method or as-converted method, and ties to the fully diluted (post-money) equity value for the business based on the most recent financing round. The CSE method assumes that there is a de minimis likelihood of an equity value at exit that results in a payoff to the liquidation preferences for the preferred stock; that is, it assumes that the only possible exit scenarios result in either a value (a) $0 for all equity holders or (b) all equity holders receiving the same amount per share on an as converted basis. The OPM is a forward-looking method that considers the current equity value and then allocates that value to the various classes of equity considering a continuous distribution of outcomes, rather than focusing on distinct future scenarios. The current value of the common stock under each scenario is then probability weighted to arrive at an indication of value for the common stock. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock.
We had a third-party valuation performed as of September 3, 2025, which resulted in a valuation of our common stock of $1.93 per share. Given our recent financing transactions and progress toward an IPO, we further utilized a hybrid approach to value our equity on January 15, 2026, February 25, 2026 and May 27, 2026, which resulted in valuations of our common stock of $2.28 per share, $2.41 per share, and$3.07 per share, respectively. All per share values presented reflect the 1-for-4.38 reverse stock split of our issued and outstanding shares of common stock effected on July 29, 2026.
In addition to considering the results of independent third party valuations, our board of directors considered various objective and subjective factors to determine the fair value of common stock as of each grant date, including:
•the prices at which we sold shares of our preferred stock and the superior rights, preferences and privileges of our preferred stock relative;
•to those of our common stock at the time of each grant;
•the progress of our research and development programs, including the status of preclinical studies and clinical trials for our product candidate;
•our stage of development and our business strategy, and material risks related to our business;
•external market conditions affecting the biotechnology industry and trends within the biotechnology industry;
•the competitive landscape for our product candidate;
•our financial position, including cash on hand, and our historical and forecasted performance and operating results;
•the lack of an active public market for our common stock and our preferred stock;
•the likelihood of achieving a liquidity event, such as an initial public offering (IPO) or a sale of our company, given prevailing market conditions; and
•the economy in general.
We also performed a retrospective review of common stock fair value when preparing for our financial statements audits and considered the amount of time between the independent third-party valuation dates and the grant dates. We performed an interpolation of the fair value between the two valuation dates if we concluded that a significant change in valuation had occurred between the previous valuation and the grant date due to significant business or market events. The incremental stock-based compensation expense recorded as a result of the retrospective review was insignificant.
The assumptions underlying these valuations represented management's best estimate, which involved inherent uncertainties and the application of management's judgment. As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could be materially different.
Once a public trading market for our common stock has been established in connection with the completion of the IPO, it will no longer be necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for granted stock options and other such awards we may grant, as the fair value of our common stock will be based on the quoted market price of our common stock.
Off-Balance Sheet Arrangements
During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined in the rules and regulations of the SEC.
Emerging Growth Company Status and Smaller Reporting Company Status
We qualify as an "emerging growth company," as defined in the Jumpstart Our Business Startup Act of 2012 (the "JOBS Act"). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include: (i) being permitted to present only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosures; (ii) reduced disclosure about our executive compensation arrangements; (iii) not being required to hold advisory votes on executive compensation or to obtain stockholder approval of any golden parachute arrangements not previously approved; (iv) an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and (v) an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor's report on the financial statements.
We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of the IPO; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in our unaudited interim condensed financial statements. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. Additionally, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, while we are an emerging growth company we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies. As a result of this election, our financial statements may not be comparable to those of other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.
We are also a "smaller reporting company" as defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We may continue to be a smaller reporting company even after we are no longer an "emerging growth company". We may take advantage of certain of the scaled disclosures available to smaller reporting companies, including an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, and will be able to take advantage of these scaled disclosures for so long as our common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. We may continue to be a smaller reporting company until the end of the fiscal year following the determination that we no longer meet the requirements necessary to be considered a smaller reporting company.
Braveheart Bio Inc. published this content on September 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on September 08, 2026 at 20:09 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]