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

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report, and our audited financial statements and notes thereto as of and for the year ended December 31, 2024 included in our Annual Report on Form 10-K filed on March 21, 2025 with the U.S. Securities and Exchange Commission (the "SEC").

Our common stock, par value $0.01 per share (the "Common Stock") is traded on the NYSE American exchange under the symbol "ARMP." We are headquartered in Los Angeles, California, and we have a research and development facility (the "McConnell Facility") to support advancing phage products from discovery to the clinic. The facility is also equipped with approximately 10,000 square feet of licensed current good manufacturing practice ("cGMP") drug manufacturing suites enabling the production, testing and release of clinical trial material.

Statements contained in this Quarterly Report that are not statements of historical fact are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements concerning product development plans, commercialization of our products, the expected market opportunity for our products, the use of bacteriophages and synthetic phages to kill bacterial pathogens, having resources sufficient to fund our operations into the first quarter of 2026, future funding sources, general and administrative expenses, clinical trial and other research and development expenses, costs of manufacturing, costs relating to our intellectual property, capital expenditures, the expected benefits of our targeted phage therapies strategy, the potential market for our products, tax credits and carry-forwards, and litigation-related matters. Words such as "believe," "anticipate," "plan," "expect," "intend," "will," "goal," "potential" and similar expressions are intended to identify forward-looking statements, though not all forward-looking statements necessarily contain these identifying words. These statements are subject to risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024, filed on March 21, 2025 with the SEC, and under Item 1A, "Risk Factors" and elsewhere in this Quarterly Report. These forward-looking statements speak only as of the date on which they were made, and we undertake no obligation to update any forward-looking statements.

Overview

We are a clinical-stage biotechnology company focused on the development of high-purity, pathogen-specific bacteriophage therapeutics for the treatment of antibiotic-resistant and difficult-to-treat bacterial infections using our proprietary bacteriophage-based technology. We have completed three Phase 2 clinical trials to date. We see bacteriophages as a potentially safer and effective alternative to antibiotics and an essential response to the growing bacterial resistance to current classes of antibiotics. Bacteriophages or "phages" have a powerful and highly differentiated mechanism of action that enables binding to and killing of specific targeted bacteria while uniquely preserving the normal human microbiome or "healthy bacteria". This is in direct contrast to traditional broad-spectrum antibiotics which can alter the human microbiome increasing susceptibility to opportunistic pathogens, such as Clostridium difficile. We believe that phages represent a promising means to effectively treat bacterial infections as an alternative to broad-spectrum antibiotics, especially for patients with bacterial infections resistant to current standard of care therapies, including the multidrug-resistant or "superbug" strains of bacteria. We are a leading developer of clinical-stage phage therapeutics of high purity, and believe we are uniquely positioned to address the growing worldwide threat of antibiotic-resistant bacterial infections.

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We are combining our proprietary approach and expertise in identifying, characterizing and developing both naturally occurring and engineered (synthetic) bacteriophages with our proprietary phage-specific host-engineered cGMP manufacturing capabilities to advance a target pipeline of high-quality bacteriophage product candidates for late-stage clinical development. Our optimized manufacturing processes significantly increase phage titers and improve production efficiency with the goal of ensuring commercial viability.

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We remain committed to our mission to evaluate phage-based therapeutics in randomized controlled clinical trials that evaluate safety and efficacy required to support potential regulatory approval and commercialization of our phage products as alternatives to traditional antibiotics, providing a potential method of treating patients suffering from drug-resistant and difficult-to-treat bacterial infections. To date, we have completed three critical Phase 2 trials, utilizing two distinct phage cocktails against two different bacterial pathogens with the potential to treat chronic pulmonary disease complicated by bacterial infection, as well as acute systemic bacterial infection. In October 2025, we announced positive results from our Phase 2a diSArm study evaluating our intravenous bacteriophage cocktail candidate AP-SA02 for the treatment of complicated SAB, which demonstrated statistically significant improvement in clinical response rates and favorable tolerability. We believe these results support advancing AP-SA02 into a pivotal Phase 3 trial. We continue to advance our two lead candidates, referred to as AP-PA02 and AP-SA02, to address both chronic and acute bacterial infections.

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Pseudomonas aeruginosa Phage Product Candidate, AP-PA02

Clinical Development of AP-PA02 in Cystic Fibrosis: Completed Phase 1b/2a Study

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Our first phage candidate, inhaled AP-PA02, is focused primarily on the treatment of chronic pulmonary infections due to Pseudomonas aeruginosa ("P. aeruginosa"). On October 14, 2020, we received the approval to proceed from the U.S. Food and Drug Administration (the "FDA") for our Investigational New Drug ("IND") application for AP-PA02. In the first quarter of 2023, we announced positive topline results from the completed "SWARM-P.a." study - a Phase 1b/2a, multicenter, double-blind, randomized, placebo-controlled, single ascending dose and multiple ascending dose clinical trial to evaluate the safety and tolerability of inhaled AP-PA02 in subjects with cystic fibrosis ("CF") and chronic pulmonary P. aeruginosa infection. Data indicate that AP-PA02 was well-tolerated with a treatment emergent adverse event profile similar to placebo. Pharmacokinetics findings confirm that AP-PA02 can be effectively delivered to the lungs through nebulization with minimal systemic exposure, with single ascending doses and multiple ascending doses resulting in a proportional increase in exposure as measured in induced sputum. AP-PA02 exposures were generally consistent across subjects. Additionally, bacterial levels of P. aeruginosa in the sputum measured at several timepoints suggest improvement in bacterial load reduction for subjects treated with AP-PA02 at the end of treatment as compared to placebo after ten days of dosing. In addition, a correlation was seen between increasing phage dose (higher AP-PA02 exposures) and reduction in the bacterial load, supporting the biologic plausibility of a bacterial specific mechanism of action and creating the opportunity for phage as a therapeutic alternative to inhaled antibiotics. This study was supported by the CFF, which granted us a Therapeutics Development Award of $5.0 million. We received the full award's amount, including the final payment of $0.3 million, in January 2024. Following the promising Phase 1b/2a results of favorable safety and tolerability profile and plausible mechanism of action, an additional confirmatory Phase 2 trial was initiated in non-cystic fibrosis bronchiectasis ("NCFB") patients with similar chronic pulmonary disease with infections due to P. aeruginosa.

Clinical Development of AP-PA02 in Non-Cystic Fibrosis Bronchiectasis: Completed Phase 2 Study

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On February 22, 2022, Armata announced that it had received from the FDA the approval to proceed for our IND application for AP-PA02, in a second indication, NCFB. On December 19, 2024, Armata announced encouraging results from the completed "Tailwind" study - a Phase 2 multicenter, double-blind, randomized, placebo-controlled study to evaluate the safety, phage kinetics, and efficacy of inhaled AP-PA02 in subjects with NCFB and chronic pulmonary P. aeruginosa infection. Data indicated that inhaled AP-PA02 provides a durable reduction of P. aeruginosa in the lung, with a favorable safety and tolerability profile. The Tailwind study was conducted in two cohorts running in parallel: subjects in one cohort (cohort A) received inhaled AP-PA02 as monotherapy, while subjects in another cohort (cohort B) received inhaled AP-PA02 in combination with inhaled anti-pseudomonal antibiotic treatment. Subjects in both cohorts were dosed at home by nebulization with study drug administered every 12 hours for 10 days and were followed for approximately four weeks after receiving their last dose of study drug. The primary efficacy endpoint was the reduction in P. aeruginosa colony forming units ("CFUs") in lung sputum at one week following completion of dosing (day 17) compared to baseline. Per the statistical analysis plan, efficacy analysis of each independent cohort showed no significant difference between subjects treated with AP-PA02 and placebo due to small numbers of subjects in each cohort. Notably, a post-hoc intent-to-treat analysis (n=33 active and n=15 placebo; all subjects from both cohorts) demonstrated a statistically significant reduction of P. aeruginosa CFUs in the lung at day 17 (AP-PA02 vs. placebo;

P=0.05). The reduction in P. aeruginosa CFUs persisted two weeks following completion of dosing with AP-PA02 when compared with placebo at day 24 (AP-PA02 vs. placebo; P=0.015). Additionally, paired analysis of P. aeruginosa CFU density at baseline compared to day 10 (P=0.03), day 11 (P=0.01), day 17 (P=0.003) and day 24 (P=0.018) was significant in the AP-PA02-treated cohort. We believe the data suggest that AP-PA02 alone is as effective as the combination therapy of phage and antibiotics in reducing P. aeruginosa CFUs in the lung. Additionally, approximately one-third of subjects treated with phage monotherapy exhibited at least a 2-log CFU reduction in P. aeruginosa compared to no reduction in placebo treated subjects. Safety data indicate that inhaled AP-PA02 was well-tolerated with treatment-emergent adverse events mild and self-limiting. There was one possibly related serious adverse event that was linked to an acute pulmonary event requiring hospitalization that was responsive to antibiotics. We believe the safety and tolerability of AP-PA02 offers a promising profile for treating chronically infected NCFB patients.

Results from the Phase 2 Tailwind study demonstrate the potential of Armata's high-purity phage cocktail, AP-PA02, as a new monotherapy treatment alternative for chronic pulmonary disease caused by P. aeruginosa infection, including drug-resistant bacteria, and indicate the potential for phage therapy to reduce reliance on chronic antibiotic use. The Phase 2 Tailwind study represents the second successful clinical trial for AP-PA02, Armata's lead pulmonary candidate, which was first evaluated in people with cystic fibrosis in the Phase 1b/2a SWARM-P.a. trial that completed in 2023. We believe the learnings on dose-schedule regimens gained from the two completed Phase 2 studies position us to define a safe and promising biologic correlation for a Phase 3 definitive trial to evaluate inhaled AP-PA02 as an alternative to antibiotics in chronic pulmonary P. aeruginosa infection.

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Contingent upon securing sufficient additional funding, we may at the appropriate time in the future resume clinical development of AP-PA02 for NCFB, which may include the execution of a definitive Phase 3 clinical trial. We are also actively exploring potential strategic partnerships as a means to further advance this important program.

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Additional Clinical Indications for AP-PA02

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The current Pseudomonas phage cocktail formulated for inhalation (AP-PA02) is prepared with the same high potency and purity of our injectable phage cocktail for S. aureus (AP-SA02). Based on the AP-SA02 clinical findings, we are exploring the potential development of our Pseudomonas phage cocktail for acute ventilator-associated pneumonia and severe infections due to multidrug-resistant P. aeruginosa.

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Staphylococcus aureus Phage Product Candidate, AP-SA02

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Clinical Development of AP-SA02 in Bacteremia: Completed Phase 1b/2a Study

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In parallel to developing novel phage therapeutics that target chronic bacterial infections, we have an acute bacterial infection clinical development plan focused on Staphylococcus aureus ("S. aureus") bacteremia, a difficult-to-treat and often life-threatening human infection that can result in high morbidity and mortality and for which bacterial resistance to antibiotics is growing.

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We believe a key advantage of our phage manufacturing expertise is the purity profiles of our phage products, including AP-SA02, our phage product candidate for S. aureus; this has enabled us to pursue treatment of complicated S. aureus bacteremia, where repetitive intravenous ("IV") dosing is required. On November 17, 2021, we announced that we had received approval from the FDA to proceed with our IND application for AP-SA02.

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On May 19, 2025, we announced positive topline data from the Phase 1b/2a diSArm study of intravenously administered AP-SA02 in complicated S. aureus bacteremia. The diSArm study (NCT05184764) was a Phase 1b/2a, multicenter, randomized, double-blind, placebo-controlled, multiple ascending dose escalation study of the safety, tolerability, and efficacy of intravenous AP-SA02 in addition to best available antibiotic therapy ("BAT") compared to BAT alone (placebo) for the treatment of adults with complicated SAB. All doses of AP-SA02 were dosed intravenously every six hours for five days. The primary clinical efficacy endpoint for the Phase 2a portion of the diSArm study was clinical outcome (responder rate) in subjects with complicated bacteremia, measured at (i) Test of Cure ("TOC") for AP-SA02, defined as one week following the end of IV treatment with AP-SA02 (day 12), (ii) TOC for BAT, defined as one week following the end of IV BAT, and (iii) end of study ("EOS"), defined as four weeks following the end of IV BAT.

Clinical outcome was evaluated by both the blinded site investigators and a blinded Clinical Efficacy Adjudication Committee (the "CEAC") in the intent-to-treat ("ITT") population.

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Safety and efficacy were assessed in the ITT population, which included all subjects (n=50) who received at least one dose of AP-SA02 or placebo. The Phase 2a study enrolled and dosed 42 patients, with 29 randomized to AP-SA02 in addition to BAT and 13 to placebo (BAT alone). Methicillin-resistant S. aureus ("MRSA") was the causative pathogen in ~38% of both the AP-SA02 and placebo groups.

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AP-SA02 was well-tolerated with no serious adverse events related to the study drug. Two subjects had adverse events that were possibly related to the study drug: one with transient liver enzyme elevation and one with hypersensitivity that resolved with discontinuation of vancomycin.

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A statistically significant increase in clinical response rate was observed at TOC for AP-SA02 (day 12) in AP-SA02 treated subjects (88%; 21/24) versus placebo (58%; 7/12) (p = 0.047) as assessed by blinded site investigators, and 83% (20/24) in the AP-SA02 group versus 58% (7/12) in the placebo group as assessed by the blinded CEAC. At TOC for BAT and at EOS, 100% of the AP-SA02 treated subjects had clinically responded (p = 0.017) versus 25% of placebo subjects considered non-responsive due to either relapse or treatment failure, consistent with the non-responder rate reported in the literature for recent phase 3 trials. Of note, the clinical response with AP-SA02 occurred regardless of whether subjects were infected with methicillin-sensitive S. aureus ("MSSA") or MRSA. All subjects infected with MRSA and treated with AP-SA02 and BAT cleared their infection by TOC for BAT with no evidence of relapse through EOS, as compared to the relapse rate of BAT alone as noted above. Supporting the investigator assessment, clinical outcome was assessed by the CEAC, who agreed that subjects who received placebo had a 22% and 25% non-responder rate at TOC with BAT and at EOS, respectively, while 100% of the subjects who received AP-SA02 clinically responded (p = 0.025: TOC BAT; p = 0.020: EOS).

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Additionally, patients treated with AP-SA02 showed trends toward rapid normalization of key predictors of mortality and complications in SAB including C-reactive protein and interleukin-10, shorter time to negative blood culture, quicker time to resolution of signs and symptoms at the infection site, shorter intensive care unit and hospital utilization.

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Defined and reproducible laboratory derived stable genomic variants present in AP-SA02 drug product may provide an immediate advantage, enabling rapid, strain-specific response to each patient's S. aureus isolate. These characterized variants can expand from as little as 2% to dominance when infecting certain patient isolates in vitro, highlighting that these variants are favored for their enhanced ability to infect those clinical strains and the importance of integrating this diversity into Armata's phage cocktail from the outset. This inherent flexibility may be central to achieving optimal therapeutic efficacy in the clinic.

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Conclusions:

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On October 22, 2025, we highlighted the positive results from our Phase 2a diSArm clinical study of AP-SA02 in an oral presentation at IDWeek 2025^TM. The abstract, titled, "A Phase 2a Randomized, Double-Blind, Controlled Trial of the Efficacy and Safety of an Intravenous (IV) Bacteriophage Cocktail (AP-SA02) vs. Placebo in Combination with Best Available Antibiotic Therapy (BAT) in Patients with Complicated Staphylococcus aureus Bacteremia," was accepted as a late-breaking abstract for oral presentation, and was presented by Dr. Loren G. Miller, M.D., M.P.H., Professor of Medicine, David Geffen School of Medicine at UCLA, Chief, Division of Infectious Diseases at Harbor-UCLA Medical Center and the Lundquist Institute.

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The results from our Phase 1b/2a diSArm study are an important step forward in our effort to confirm the potent antimicrobial activity of phage therapy and the completion of the study represents a significant milestone in the development of AP-SA02, moving us one step closer to introducing an effective new treatment option to patients suffering from complicated SAB. This is the first clear evidence in a randomized controlled trial of the efficacy of phage against a serious systemic pathogen that is responsible for significant morbidity and mortality in the United States.

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Findings from the Phase 1b/2a study, including the favorable safety and tolerability profile of AP-SA02, inform the design of a larger definitive efficacy study to demonstrate superiority of AP-SA02 in treating complicated SAB, and form the basis for an end-of-Phase-2 meeting with the FDA which the Company plans to hold in the second half of 2025. Subject to review and feedback from the FDA, we are committed to developing a superiority pivotal trial focused on phage as an alternative to broad-spectrum antibiotics and/or antibiotic sparing to decrease the utilization of broad-spectrum antibiotics and their detrimental impact on the normal human microbiome.

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On June 15, 2020, we entered into an agreement (the "MTEC Agreement") with the Medical Technology Enterprise Consortium ("MTEC"), pursuant to which we received a $15.0 million award and entered into a multi-year program administered by the U.S Department of Defense through MTEC and managed by the Naval Medical Research Command ("NMRC") - Naval Advanced Medical Development ("NAMD") with funding from the Defense Health Agency and Joint Warfighter Medical Research Program. This award has been used to partially fund the Phase 1b/2a, multicenter, randomized, double-blind, placebo-controlled dose escalation study to assess the safety, tolerability and efficacy of our phage-based candidate, AP-SA02, for the treatment of adults with S. aureus (the "diSArm" study) and to support activities required for an end-of-Phase 2 meeting with the FDA. On September 29, 2022, the MTEC Agreement was modified to increase the total award by $1.3 million to $16.3 million and extend the term into the second half of 2024. On July 29, 2024, the MTEC Agreement was modified to increase the total award by $5.3 million to $21.6 million and extend the term into the third quarter of 2025. On April 29, 2025, we received $4.65 million of additional non-dilutive award funding through MTEC, thereby increasing the total MTEC award to $26.2 million, and the MTEC Agreement was modified to extend the term to September 30, 2025. On July 2, 2025, the MTEC Agreement was modified to extend the term to March 31, 2026.

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Additional Clinical Indications for AP-SA02

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On August 1, 2022, we announced FDA approval to proceed with our IND application for AP-SA02 in a second indication, prosthetic joint infections ("PJI") with S. aureus. We had planned to initiate a Phase 1b/2a trial; however, in light of the growing concerns of both PJI and wound infections, we are considering revising the protocol to include both indications. Driven by data from the bacteremia study, and with sufficient funding, we may in the future initiate a Phase 1b/2a trial to assess the safety and tolerability of intravenous and intra-articular AP-SA02 as an adjunct to standard of care antibiotics in adults undergoing treatment of periprosthetic joint infections and/or wound infections caused by S. aureus.

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The following chart summarizes the status of our phage product candidate development programs and partners.

We have incurred net losses since our inception and our operations to date have been primarily limited to research and development and raising capital. As of September 30, 2025, we had an accumulated deficit of $377.2 million. We currently expect to use our existing cash and cash equivalents for the focused research and development of our current product candidates and for working capital and other general corporate purposes. We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the development of and seeking to obtain regulatory approval for our product candidates. We do not expect to generate product revenue unless and until we successfully complete development and obtain marketing approval for at least one of our product candidates. We may also use a portion of our existing cash and cash equivalents for the potential acquisition of, or investment in, product candidates, technologies, formulations or companies that complement our business, although we have no current understandings, commitments or agreements to do so.

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Our existing cash and cash equivalents of $14.8 million as of September 30, 2025 will not be sufficient to enable us to complete all necessary development of any potential product candidates and fund our operations for the next 12 months from the date the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q are issued. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. Accordingly, we will be required to obtain further funding through one or more other public or private equity offerings, debt financings, collaboration, strategic financing, grants or government contract awards, licensing arrangements or other sources. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and potential disruptions to, and volatility in, financial markets in the United States and worldwide. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on acceptable terms, we may be required to defer, reduce or eliminate significant planned expenditures, restructure, curtail or eliminate some or all of our development programs or other operations, dispose of assets, enter into arrangements that may require us to relinquish rights to certain of our product candidates, technologies or potential markets, file for bankruptcy or cease operations altogether. Any of these events could have a material adverse effect on our business, financial condition and results of operations and result in a loss of investment by our stockholders.

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Recent Events

August 2025 Credit Agreement

On August 11, 2025, we entered into a credit and security agreement (the "August 2025 Credit Agreement") for a loan in the aggregate amount of $15.0 million (the "August 2025 Loan") with Innoviva. The August 2025 Loan bears interest at an annual rate of 14.0% and matures on January 11, 2029. Principal and accrued interest are payable at maturity. Repayment of the August 2025 Loan is guaranteed by our domestic subsidiaries, and the loan is secured by substantially all of our assets and the subsidiary guarantors.

MTEC Agreement Modification

On July 2, 2025, the MTEC Agreement was modified to extend the term to March 31, 2026. We will continue to recognize additional grant and award revenue until the full amount of the amended award is utilized.

Results of Operations

Comparison of three and nine months ended September 30, 2025 and 2024 (in thousands):

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Grant and Award Revenue

We recognized $1.2 million and $3.0 million of grant and award revenue during the three months ended September 30, 2025 and 2024, respectively, which represents MTEC's share of the costs incurred for our AP-SA02 program for the treatment of SAB.

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We recognized $3.8 million and $3.9 million of grant and award revenue during the nine months ended September 30, 2025 and 2024, respectively, which represents MTEC's share of the costs incurred for our AP-SA02 program for the treatment of SAB.

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Research and Development

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

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Research and development expenses decreased by $3.7 million, from $9.5 million for the three months ended September 30, 2024 to $5.8 million for the three months ended September 30, 2025.

Research and development expenses decreased by $8.3 million, from $26.0 million for the nine months ended September 30, 2024 to $17.7 million for the nine months ended September 30, 2025.

Clinical trial costs decreased by $2.7 million, from $3.2 million for the three months ended September 30, 2024, to $0.5 million for the three months ended September 30, 2025. The decrease is primarily attributable to a $1.6 million decrease in AP-PA02 NCFB trial costs and a $1.1 million decrease in SA study costs.

Clinical trial costs decreased by $5.8 million, from $7.6 million for the nine months ended September 30, 2024, to $1.8 million for the nine months ended September 30, 2025. The decrease is primarily attributable to a $5.2 million decrease in AP-PA02 NCFB trial costs, a $0.4 decrease in SA study costs, and a $0.2 million decrease in the CF study.

Other external research and development costs decreased by $0.4 million from $1.0 million for the three months ended September 30, 2024 to $0.6 million for the three months ended September 30, 2025. The decrease was primarily due to a decrease of $0.3 million in consulting expenses and a decrease of $0.1 million in other costs related to the AP-PA02 NCFB and SA studies nearing completion.

Other external research and development costs decreased by $0.8 million from $2.7 million for the nine months ended September 30, 2024 to $1.9 million for the nine months ended September 30, 2025. The decrease was primarily due to a decrease of $0.8 million in consulting expenses.

Our expenses by product and by project for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):

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* Expenses not allocated by projects include consultants, laboratory supplies and outsourced services expenses.

Personnel-related costs, including employee payroll and related expenses, decreased by $0.6 million, from $2.9 million for the three months ended September 30, 2024 to $2.3 million for the three months ended September 30, 2025. This decrease was mainly driven by a $0.6 million decrease in incentive compensation, salaries and wages, vacation and insurance due to a reduction in personnel.

Personnel-related costs, including employee payroll and related expenses, decreased by $1.4 million, from $8.3 million for the nine months ended September 30, 2024 to $6.9 million for the nine months ended September 30, 2025. This decrease was mainly driven by a $1.6 million decrease in incentive compensation, salaries and wages, vacation and insurance due to a reduction in personnel as we maximize efficiency for product development. This decrease was partially offset by a $0.2 million increase in stock-based compensation expense and employee training expenses.

Facilities and overhead costs remained consistent at $2.4 million for the three months ended September 30, 2024 and for the three months ended September 30, 2025.

Facilities and overhead costs decreased by $0.2 million, from $7.3 million for the nine months ended September 30, 2024 to $7.1 million for the nine months ended September 30, 2025 mainly due to a decrease of $0.3 million in lease expense partially offset by a $0.1 million increase in depreciation and other variable facility costs.

General and Administrative

General and administrative expenses were $3.1 million and $3.2 million for the three months ended September 30, 2025 and 2024, respectively. The decrease of $0.1 million is primarily related to a decrease in personnel-related costs.

General and administrative expenses were $8.9 million and $9.9 million for the nine months ended September 30, 2025 and 2024, respectively. The decrease of $1.0 million is primarily related to a decrease of $1.0 million in consulting fees as we continue to streamline and increase in-house expertise and a decrease of $0.6 million in stock-based compensation expense, partially offset by an increase of $0.6 million in personnel-related costs other than stock-based compensation expense.

Interest Income

Interest income for the three months ended September 30, 2025 and 2024 was $0.1 million and $0.3 million, respectively, and related to interest earned on our money market fund investments.

Interest income for the nine months ended September 30, 2025 and 2024 was $0.3 million and $0.6 million, respectively, and related to interest earned on our money market fund investments.

Interest Expense

We recognized interest expense of $4.3 million and $2.9 million for the three months ended September 30, 2025 and 2024 respectively. The increase is primarily related to increased debt balances as compared to the prior year period. Interest expense related to the interest expenses and the amortization of debt discount and issuance costs for the 2023 Loan, 2024 Loan, March 2025 Loan, and August 2025 Loan. Stated interest is accrued and is payable at the maturity of the 2023 Loan, 2024 Loan and March 2025 Loan in March 2026, and the August 2025 Loan in January 2029.

We recognized interest expense of $11.8 million and $7.5 million for the nine months ended September 30, 2025 and 2024 respectively. The increase is primarily related to increased debt balances as compared to the prior year period. Interest expense related to the interest expenses and the amortization of debt discount and issuance costs for the 2023 Loan, 2024 Loan, March 2025 Loan and August 2025 Loan. Stated interest is accrued and is payable at the maturity of the 2023 Loan, 2024 Loan and March 2025 Loan in March 2026, and the August 2025 Loan in January 2029.

Change in Fair Value of the Convertible Loan

We recognized a loss of $14.6 million and gain of $6.9 million on the change in the fair value of the Convertible Loan for the three months ended September 30, 2025 and 2024, respectively.

We recognized a loss of $15.2 million and a gain of $17.3 million on the change in the fair value of the Convertible Loan for the nine months ended September 30, 2025 and 2024, respectively.

The Convertible Loan received from Innoviva in January 2023 and amended in July 2023, November 2024, and March 2025 is accounted for at fair value using a weighted probability of various settlement scenarios of the Convertible Loan during its term discounted to each reporting date. Conversion option scenarios are valued using an option pricing model with significant assumptions and estimates such as volatility, expected term and risk-free interest rates.

Liquidity, Capital Resources and Financial Condition

We have incurred net losses since our inception and have negative operating cash flows. Our cash and cash equivalents of $14.8 million as of September 30, 2025 will not be sufficient to fund our operations for the next 12 months from the date of issuance of our condensed consolidated financial statements for the nine months ended September 30, 2025. We plan to control our expenses and to raise additional capital through a combination of public and private equity, debt financing, strategic alliances, and grant and award arrangements. These circumstances raise substantial doubt about our ability to continue as a going concern. While management believes this plan to raise additional funds will alleviate the conditions that raise substantial doubt, these plans are not entirely within our control and cannot be assessed as being probable of occurring. We may not be able to secure additional financing in a timely manner or on favorable terms, if at all.

On August 11, 2025, we entered into the August 2025 Credit Agreement for a loan in the aggregate amount of $15.0 million. The August 2025 Loan bears interest at an annual rate of 14.0% and matures on January 11, 2029. Principal and accrued interest are payable at maturity. Repayment of the August 2025 Loan is guaranteed by our domestic subsidiaries, and the loan is secured by substantially all of our assets and the subsidiary guarantors.

On March 12, 2025, we entered into the March 2025 Credit Agreement for the March 2025 Loan in an aggregate amount of $10.0 million. The March 2025 Loan bears interest at an annual rate of 14.0% and matures on March 12, 2026. Principal and accrued interest are payable at maturity. Repayment of the March 2025 Loan is guaranteed by our domestic subsidiaries, and the loan is secured by substantially all of our assets and the subsidiary guarantors. Concurrently with the execution of the March 2025 Credit Agreement, we entered into amendments to (i) the Convertible Loan and Convertible Credit Agreement, (ii) the 2023 Loan and 2023 Credit Agreement, and (iii) the 2024 Loan and 2024 Credit Agreement, which, among other things, extended the maturity date of the Convertible Loan, 2023 Loan and 2024 Loan, respectively, to March 12, 2026.

On July 29, 2024, we amended the MTEC Agreement and increased the amount of the award by $5.3 million to a total of $21.6 million. We will recognize grant and award revenue from the third quarter of 2024 until the full amount of the amended award is utilized.

On April 29, 2025, we received $4.65 million of additional non-dilutive award funding through MTEC, thereby increasing the total MTEC award to $26.2 million, and the MTEC Agreement was modified to extend the term to September 30, 2025. On July 2, 2025, the MTEC Agreement was modified to extend the term to March 31, 2026. We will continue to recognize additional grant and award revenue until the full amount of the amended award is utilized.

Future Capital Requirements

We will need to raise additional capital in the future to continue to fund our operations. Our future funding requirements will depend on many factors, including:

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We may seek to raise capital through a variety of sources, including:

Any additional fundraising efforts may divert our management team from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Our ability to raise additional funds will depend, in part, on the success of our product development activities, including our targeted phage therapies strategy and any clinical trials we initiate, regulatory events, our ability to identify and enter into in-licensing or other strategic arrangements, and other events or conditions that may affect our value or prospects, as well as factors related to financial, economic and market conditions, many of which are beyond our control. We cannot be certain that sufficient funds will be available to us when required or on acceptable terms. If we are unable to secure additional funds on a timely basis or on acceptable terms, we may be required to defer, reduce or eliminate significant planned expenditures, restructure, curtail or eliminate some or all of our development programs or other operations, dispose of technology or assets, pursue an acquisition of our company by a third party at a price that may result in a loss on investment for our stockholders, enter into arrangements that may require us to relinquish rights to certain of our product candidates, technologies or potential markets, file for bankruptcy or cease operations altogether. Any of these events could have a material adverse effect on our business, financial condition and results of operations, increase the risk of insolvency and loss of investment by our stockholders. To the extent that additional capital is raised through the sale of equity or convertible loan securities, the issuance of such securities could result in dilution to our existing stockholders. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the United States and worldwide.

Cash Flows

The following table summarizes our sources and uses of cash for the periods presented (in thousands):

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Cash Flows Used in Operating Activities

Net cash used in operating activities was $19.1 million and $29.6 million for the nine months ended September 30, 2025 and 2024, respectively.

Cash used in operating activities in the nine months ended September 30, 2025 was primarily due to our net loss for the period of $49.5 million, adjusted by non-cash items of $31.8 million and a decrease of $1.4 million in our net operating assets and liabilities. The non-cash items consist of $15.2 million related to a loss from change in fair value of the Convertible Loan, $11.7 million of non-cash interest expense on the 2023 Loan, 2024 Loan, March 2025 Loan, and August 2025 Loan, $2.0 million related to stock-based compensation expense, $1.1 million related to depreciation expense and $1.8 million related to change in right-of-use asset. The decrease in our net operating assets and liabilities

was primarily due to a decrease of $0.4 million in accrued compensation, a decrease of $0.8 million in the operating lease liability, and an increase of $0.2 million in prepaid expenses and other assets.

Cash used in operating activities in the nine months ended September 30, 2024 was primarily due to our net loss for the period of $21.5 million, adjusted by non-cash items of $4.8 million and a decrease of $3.3 million in our net operating assets and liabilities. Thenon-cash items consist of $17.3 million related to a gain from change in fair value of convertible debt, $7.5 million of non-cash interest expense on the 2023 Loan and the 2024 Loan, $2.5 million related to stock-based compensation expense, $1.5 million related to change in right-of-use asset and $0.9 million related to depreciation expense. The decrease in our net operating assets and liabilities was primarily due to a decrease of $4.2 million in operating lease liability related to lease payments and payments for the construction of office and laboratory and manufacturing space at our new leased facility in Los Angeles, CA, a decrease of $2.0 million in accounts payable and accrued liabilities, an increase of $0.8 million in accrued compensation, and a decrease of $2.1 million in prepaid expenses and other current assets.

Cash Flows Used in Investing Activities

Net cash used in investing activities was $0.5 million and $2.0 million for the nine months ended September 30, 2025 and 2024, respectively, which is attributable to purchases of laboratory and manufacturing equipment for the new office, laboratory and manufacturing space at our leased facility in Los Angeles, California.

Cash Flows from Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2025 was $25.0 million, which consisted primarily of proceeds from issuance of term debt.

Cash provided by financing activities for the nine months ended September 30, 2024 was $34.9 million, which consisted primarily of proceeds from issuance of term debt, net of issuance costs of less than $0.1 million, and proceeds from exercise of stock options of $0.1 million.

Off-Balance Sheet Arrangements

As of September 30, 2025, we did not have off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Management's discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate estimates and assumptions, including but not limited to those related to convertible debt, stock-based compensation expense, accruals for research and development costs, lease assets and liabilities, the valuation of deferred tax assets, valuation of uncertain income tax positions, impairment of goodwill and intangible assets and impairment of long-lived assets. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Refer to Note 3 to the consolidated financial statements and critical accounting policies and estimated included in our Form 10-K filed with the SEC on March 21, 2025. There were no material changes to our critical accounting policies from December 31, 2024.