Annual Report for Fiscal Year Ending December 31, 2024 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with the audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements based upon our current plans, expectations and beliefs that involve risks, uncertainties and assumptions. Our actual results may differ materially from those described in or implied by these forward-looking statements as a result of many factors, including those set forth under the section titled "Risk Factors" and in other parts of this Annual Report on Form 10-K.

Overview

We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel cell penetrating peptide ("CPP") technology platform. Our lead product candidate, nomlabofusp (nomlabofusp is the International Nonproprietary Name and the United States Adopted Name for CTI-1601), is a subcutaneously administered, recombinant fusion protein intended to deliver tissue frataxin ("FXN"), an essential protein, to the mitochondria of patients with Friedreich's ataxia ("FA"). FA is a rare, progressive, and fatal disease in which patients are unable to produce sufficient FXN due to a genetic abnormality. Currently, there are no treatment options that address the core deficit of FA, low levels of FXN. Nomlabofusp represents the first potential therapy designed to systemically increase FXN levels in patients with FA.

We believe that our CPP platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, has the potential to enable the treatment of other rare and orphan diseases. We intend to use our proprietary platform to target additional orphan indications characterized by deficiencies in or alterations of intracellular content or activity.

Since our inception, we have devoted substantially all of our resources to developing nomlabofusp, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, raising capital, developing sales and marketing capacities, and providing general and administrative support for such operations.

Nomlabofusp Program Update

We have completed two Phase 1 clinical trials and a Phase 2 dose exploration trial, and have an ongoing Phase 2 OLE trial in patients with FA and an ongoing PK run-in study in adolescent patients with FA.

In May 2021, we reported positive top-line data from our Phase 1 FA program after completing dosing of the single ascending dose ("SAD") trial in December 2020 and of the multiple ascending dose ("MAD") trial in March 2021. Data from these trials demonstrated proof-of-concept by showing that daily subcutaneous injections of nomlabofusp for up to 13 days resulted in dose-dependent increases in FXN levels from baseline compared to placebo in all evaluated tissues (buccal cells, skin, and platelets). There were no serious adverse events associated with either the MAD or SAD trials.

In May 2023, we reported preliminary unblinded top-line data from the 25 mg cohort of our Phase 2 four-week, placebo-controlled, dose exploration trial of nomlabofusp in FA patients. Data from the cohort indicated nomlabofusp was generally well tolerated and showed increases in FXN levels from baseline compared to placebo in all evaluated tissues (skin and buccal cells) at day 14.

In July 2023, the FDA cleared initiation of a second cohort (50 mg) of our four-week, placebo-controlled, Phase 2 dose exploration trial of nomlabofusp in patients with FA and the initiation of our OLE trial with daily dosing of 25 mg.

In February 2024, we reported positive top-line data and successful completion of the Phase 2 dose exploration study. Nomlabofusp was generally well tolerated throughout the four-week treatment periods, had a predictable pharmacokinetic profile and led to dose dependent increases in FXN levels in all evaluated tissues (skin and buccal cells) after daily dosing of 14 days followed by every other day dosing until day 28 in the 25 mg and 50 mg cohorts. Participants in the 25 mg (n=13) and 50 mg (n=15) cohorts were randomized 2:1 to receive subcutaneous injections of nomlabofusp or placebo. Patients who completed treatment in our Phase 2 dose exploration study or who previously completed a prior clinical trial of nomlabofusp are eligible to screen and possibly participate in the OLE study.

In March 2024, we dosed the first patient in our OLE trial, evaluating daily subcutaneous injections of 25 mg of nomlabofusp self-administered or administered by a caregiver. The OLE study will evaluate the safety and tolerability, pharmacokinetics, and frataxin levels in peripheral tissues as well as other exploratory

pharmacodynamic markers (lipid profiles and gene expression data) following long-term subcutaneous administration of nomlabofusp. In addition, following the completion of enrollment, as well as at least one participant completing one year of dosing, clinical assessments collected during the study will be compared to data from a matched control arm derived from participants in the Friedreich's Ataxia Clinical Outcome Measures Study ("FACOMS") database.

On May 30, 2024, we announced that the FDA's Center for Drug Evaluation and Research ("CDER") had selected nomlabofusp as one of a few programs for participation in the Support for Clinical Trials Advancing Rare Disease Therapeutics ("START") Pilot Program. The objective of the program is to accelerate the development of drugs for rare diseases that lead to significant disability or death by facilitating frequent advice and regular communication with the FDA staff to expedite the review process of biologics and drugs.

In September 2024, we received access to the Medicines and Healthcare Regulatory Agency ("MHRA") Innovative Licensing and Access Pathway ("ILAP") for the treatment of adults and children with FA. The ILAP is facilitating patient access to novel treatments by accelerating time to market through opportunities for enhanced engagements with UK regulatory authorities and other stakeholders. Along with the receipt of the ILAP designation, nomlabofusp has already been granted orphan drug designations in the U.S. and the European Union (the "EU"), and access to the PRIME scheme in the EU.

In December 2024, we reported positive initial data from our ongoing OLE study. This data included safety, FXN levels, clinical, pharmacokinetic data and dose escalation:

Also in December 2024, we announced that we were increasing the dose in the OLE to 50 mg of nomlabofusp daily for then currently enrolled and all future OLE study participants. In March 2025, we announced that our Safety Monitoring Team has deemed anaphylaxis as an adverse drug reaction likely associated with nomlabofusp and therefore, we expect to see additional reactions. To reduce the risk of allergic reactions, including anaphylaxis, we amended the OLE protocol to administer premedication for the first month of dosing. The OLE study is ongoing with seven sites activated and participants continuing to enroll. All study participants are currently receiving the 50 mg dose of nomlabofusp. We plan to provide an update on OLE data on at least 30 to 40 study participants, some of whom have been receiving nomlabofusp for more than a year, in September 2025.

In January 2025, we initiated dosing of adolescents (12-17 years old) in a PK run-in study for pediatric patients with FA. Study participants in the PK run-in study are randomized 2:1 to receive either nomlabofusp at a weight-base dose expected to match the PK of adults receiving the 50 mg dose, or placebo, daily for seven days. Following assessment of safety and PK data, participants will be eligible to screen for the OLE study. The data from this cohort is expected to be presented during the nomlabofusp program update in September 2025.

In March 2025, we announced that FDA stated in written correspondence associated with a meeting through the START pilot program that they are open to considering the use of FXN concentration as a reasonably likely surrogate endpoint ("RLSE") and the acceptability of FXN's use as an RLSE would ultimately be a matter of review of the data in a future marketing application. FDA recommended focusing on assessments of skin FXN concentrations rather than buccal FXN concentrations due to more consistent sampling and less variability. FDA acknowledged that data we recently submitted appear to support a relationship between increased FXN concentrations in skin cells and relevant tissues such as the heart, dorsal root ganglion and skeletal muscle. FDA

also acknowledged that the nonclinical studies we submitted were performed at relevant human doses. FDA also suggested that we consider exploring the relationship between increases in FXN in skin and changes in pharmacodynamic (PD) markers such as lipid profiles and/or clinical measures to provide additional support for the use of FXN as an RLSE. We plan to continue discussions with FDA regarding the adequacy of the safety data set for a BLA submission seeking accelerated approval targeted for year-end 2025.

Additionally, we have obtained feedback from both FDA and EMA on the global Phase 3 study protocol and we are on track to initiate the study by mid-2025 with potential sites in the U.S., E.U., U.K, Canada, and Australia.

Financing Activities, Including Recent Material Financings

We have funded our operations to date primarily with proceeds from sales of common stock, proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents, marketable securities and restricted cash upon the merger with Zafgen, Inc. ("Zafgen") and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC.

In February 2024, we completed an underwritten public offering in which we issued and sold 19,736,842 shares of our common stock at a public offering price of $8.74 per share. We received net proceeds of approximately $161.8 million after deducting underwriting discounts, commissions and other offering expenses.

In May 2024, we entered into a Sales Agreement (the "ATM Agreement") with Guggenheim Securities, LLC in connection with the establishment of an "at-the-market" offering program providing for the sale of up to an aggregate of $100 million of shares of our common stock from time to time. To date, we have made no sales under the ATM agreement.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles ("GAAP"). The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, costs and expenses, and related disclosures. We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate these estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.

Research and Development Expense

Costs for certain research and development activities, such as manufacturing, non-clinical studies and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators, and accordingly, are considered an area of significant judgment and management's review of manufacturing, non-clinical and clinical expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel and outside vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. We work with vendors and suppliers to ensure that our estimates of our research and development expenses are reasonable. We expect to increase our investment in research and development in order to advance nomlabofusp through additional clinical trials. As a result, we expect that our research and development expenses will continue to increase in the foreseeable future as we pursue clinical development of nomlabofusp and/or any other product candidates we develop.

Stock Compensation Expense

We measure all stock-based awards granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. The assumptions used in our option-pricing model represent management's best estimates. These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management's judgment, and thus are inherently subjective. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

Prior to May 28, 2020, we were a private company and lacked company-specific historical and implied volatility information for our common stock. Prior to January 1, 2023, the Company estimated its expected common stock price volatility solely based on the historical volatility of publicly traded peer companies with comparable

characteristics including enterprise value, risk profiles and position within the industry. Beginning on January 1, 2023, the Company began blending its historical data starting in June 2020 (following its merger with Zafgen in 2020) with its historical peer group. We regularly evaluate our peer group to assess changes in circumstances where identified companies may no longer be similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. We expect to continue to do so until we have full historical data regarding the volatility of our own traded stock price.

The expected term of our stock options has been determined utilizing the "simplified" method for awards that qualify as "plain-vanilla" options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield considers the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future.

Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method. We account for forfeitures as they occur.

We classify stock-based compensation expense in our consolidated statements of operations and comprehensive loss 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.

Financial Operations Overview

Revenue

To date, we have not generated any revenue from product sales, and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts result in clinical success and regulatory approval or collaboration agreements with third parties for our product candidates, we may generate revenue from those product candidates or collaborations.

Operating Expenses

The majority of our operating expenses since inception have consisted primarily of research and development activities, and general and administrative costs.

Research and Development Expenses

Research and development expenses, which consist primarily of costs associated with our product research and development efforts, are expensed as incurred. Research and development expenses consist primarily of:

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical and commercial development of nomlabofusp, or any other product candidates we develop. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of clinical trials and development of nomlabofusp or any other product candidates we develop will depend on a variety of factors, including:

A change in the outcome of one or more of these variables with respect to the development of a product candidate could significantly change the costs, timing and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct additional non-clinical or clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, consisting of salaries, related benefits and stock-based compensation, costs related to our executive, finance, information technology, and costs related to other administrative functions. General and administrative expenses also include insurance expenses and professional fees for auditing, tax, and legal services, including legal expenses to pursue patent protection for our intellectual property. We expect that our general and administrative expenses will increase in the foreseeable future as we hire additional employees to implement, improve and scale our operational, financial, commercial and management systems.

Results of Operations

The following commentary is a discussion and analysis of our financial condition as of December 31, 2024 and results of operations and cash flows for the year ended December 31, 2024 compared to the year ended December 31, 2023 and should be read in conjunction with the consolidated financial statements and accompanying notes.

Comparison of the years ended December 31, 2024 and 2023

The following table summarizes our results of operations for the years ended December 31, 2024 and 2023:

		Year Ended December 31,
										Increase
		2024				2023				(Decrease)
		(in thousands)
Statement of Operations Data:
Operating expenses:
Research and development		$	73,278			$	27,670			$	45,608
General and administrative			17,612				14,088				3,524
Total operating expenses			90,890				41,758				49,132
Loss from operations			(90,890	)			(41,758	)			(49,132	)
Other income, net			10,286				4,809				5,477
Net loss		$	(80,604	)		$	(36,949	)		$	(43,655	)

Research and development expenses

Research and development expenses for the twelve months ended December 31, 2024 increased $45.6 million compared to the twelve months ended December 31, 2023 due to continued and increased clinical development of

nomlabofusp and related regulatory and bioanalysis. The increase in research and development expenses was primarily driven by an increase of $36.1 million in nomlabofusp manufacturing costs including production scale-up, costs and manufacturing costs related to producing drug product doses to be used in ongoing and planned clinical trials, an increase of $4.5 million in personnel expense due to increased clinical, regulatory, quality and manufacturing headcount, an increase of $1.3 million of professional fees related to regulatory, quality, medical, and clinical consulting costs, an increase of $1.2 million in clinical costs primarily associated with the OLE study which began dosing patients in the first quarter of 2024, an increase of $1.0 million in stock compensation costs associated with the incremental 2024 grants for existing and new employees, an increase of $0.9 million related to our participation in the Friedreich's Ataxia Research Alliance's ("FARA's") TRACK-FA Neuroimaging Consortium conducting a natural history study designed to establish disease-specific neuroimaging biomarkers to track disease progression in the brain and spinal cord and provide a basis for utilizing these biomarkers in clinical trials, an increase of $0.3 million in internal lab costs related primarily to gene expression and lipid studies and an increase of $0.2 million in facility costs associated with the new lab space.

General and administrative expenses

General and administrative expenses for the twelve months ended December 31, 2024 increased $3.5 million compared to the twelve months ended December 31, 2023. The increase in general and administrative expenses was primarily driven by an increase of $1.5 million in professional fees primarily related to consulting costs related to commercial activity and other public company related expenses, an increase of $1.4 million in personnel expense due to increased headcount, an increase of $0.4 million of other expense related to computer software, information technology services and recruiting and an increase of $0.2 million in stock compensation costs associated with 2024 grants to existing and new employee grants.

Other income, net

Other income, net was $10.3 million of income in the twelve months ended December 31, 2024 compared to $4.8 million in the twelve months ended December 31, 2023. The increase primarily relates to interest income on a higher investment base and higher investment yields on that base during the current period.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from our operations. We have devoted substantially all of our resources to developing nomlabofusp, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, capital raising, and providing general and administrative support for such operations.

The following table summarizes our sources and uses of cash for each of the periods presented below:

		Year Ended December 31,
		2024				2023
		(in thousands)
Net cash used in operating activities		$	(70,760	)		$	(33,459	)
Net cash provided by (used in) investing activities			(85,387	)			33,353
Net cash provided by financing activities			161,883				30
Net increase (decrease) in cash, cash equivalents and restricted cash		$	5,736			$	(76	)

Net cash used in operating activities

During the year ended December 31, 2024, net operating activities used $70.8 million of cash, resulting from our net loss of $80.6 million, adjusted for noncash expenses of $3.7 million, and changes in our operating assets and liabilities provided cash of $6.2 million. Our net loss was attributed to operating expenses of $90.9 million, offset by other income (net) of $10.3 million. The change in operating assets and liabilities was primarily due to an increase in accounts payable, an increase in accrued expenses and offset by an increase in prepaid assets, all associated with increasing expenditures and development activity.

During the year ended December 31, 2023, operating activities used $33.5 million of cash, resulting from our net loss of $36.9 million, adjusted for noncash expenses of $6.0 million, and changes in our operating assets and liabilities resulting in a use of cash of $2.5 million. Our net loss was attributed to operating expenses of $41.8

million, offset by other income (net) of $4.8 million. The change in operating assets and liabilities was primarily due to a decrease in accounts payable and accrued expenses and an increase in prepaid assets.

Net cash provided by (used in) investing activities

During the year ended December 31, 2024, investing activities used $85.4 million of net cash, resulting from purchases of $227.9 million in marketable securities, which was offset by $143.0 million of maturities and sales of marketable securities.

During the year ended December 31, 2023, investing activities provided $33.4 million of net cash, resulting from $134.8 million of maturities and sales of marketable securities, which was offset by purchases of $101.2 million in marketable securities.

Net cash provided by financing activities

During the year ended December 31, 2024, financing activities provided $161.9 million of cash primarily from an offering of common stock.

During the year ended December 31, 2023, financing activities provided less than $0.1 million of cash from the exercise of stock options and warrants.

Operating Capital Requirements

We have not yet commercialized any products and do not expect to generate revenue from the commercial sale of any products for several years, if at all.

We have to date incurred net losses. We incurred net losses of approximately $80.6 million and $36.9 million for the twelve months ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $269.2 million and a cash, cash equivalents and marketable securities balance of $183.5 million, excluding restricted cash of $0.6 million.

Losses have resulted principally from costs incurred in connection with research and development activities, and general and administrative costs associated with the development of nomlabofusp and our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we expect to continue to incur expenses in connection with our ongoing activities, if and as we:

In February 2024, we completed an underwritten public offering in which we issued and sold 19,736,842 shares of our common stock and received net proceeds of approximately $161.8 million after deducting underwriting discounts, commissions and other offering expenses. We anticipate that our current cash, cash equivalents and marketable securities will fund operations into the second quarter of 2026. If we encounter unexpected delays in our clinical trials or if there are other unanticipated changes to our operating plan from our current assumptions that negatively impact our operations, we may reduce expenditures in order to further extend our existing cash resources. Until we can generate substantial revenue, if ever, we expect to seek additional funding through a combination of public or private equity offerings, debt/royalty financings, collaborations, strategic alliances and licensing arrangements or other sources. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, minimum cash balances, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our

business. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, if at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, or we do not have sufficient authorized shares, we may be required to delay, limit, or eliminate the development of business opportunities and our ability to achieve our business objectives, our competitiveness, and our business, financial condition, and results of operations will be materially adversely affected. We could also be required to seek funds through arrangements with collaborative partners, strategic alliances or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. In addition, geopolitical tensions, volatility of capital markets, and other adverse macroeconomic events, including those due to inflationary pressures, rising interest rates, bank instability and the ability of the U.S. government to manage federal debt limits, as well as the potential impact of health crises on the global financial markets may reduce our ability to access capital, which could negatively affect our liquidity and ability to continue as a going concern.

If we are unable to obtain sufficient funding when needed and/or on acceptable terms, we may be required to significantly curtail, delay or discontinue one or more of our research and development programs, the manufacture of clinical and commercial supplies, product portfolio expansion and/or pre commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. Certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

Recently Issued Accounting Pronouncements

Please read Note 2 to our audited consolidated financial statements included in Part IV, Item 15, of this Annual Report for a description of recent accounting pronouncements applicable to our business.

Other Company Information

None.