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 together with our unaudited condensed consolidated financial statements and related notes, included in "Part I. Item 1. Financial Statements" of this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions, that are based on the beliefs of our management. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the "Risk Factors" section of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, as well as our Amendment No. 2 to Current Report on Form 8-K filed with the SEC on July 30, 2026. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to the "Company," "Quince," "we," "us," and "our" refer to Quince Therapeutics, Inc. and its consolidated subsidiaries, including Orphai Therapeutics, for periods after the Orphai Acquisition.

Unless otherwise indicated, all share and per share information has been retroactively adjusted to reflect the 1-for-10 reverse stock split of our common stock that became effective on April 10, 2026 (the "April 2026 Reverse Stock Split") and the 1-for-20 reverse stock split of our common stock that became effective on June 29, 2026 (the "June 2026 Reverse Stock Split" and, together with the April 2026 Reverse Stock Split, the "Reverse Stock Splits").

Overview

We are a clinical-stage biopharmaceutical company developing a novel disease modifying therapeutic to address the significant unmet medical need associated with pulmonary disorders with few, if any, treatment options available.

On May 18, 2026, we completed the acquisition of Orphai Therapeutics, LLC, a clinical-stage biotechnology company developing a novel disease modifying therapeutic to address the significant unmet medical need associated with pulmonary disorders with few, if any, treatment options available, in accordance with the terms of the Agreement and Plan of Merger, dated May 17, 2026 (the "Merger Agreement"), by and among the Company, Orphai, and the other parties thereto (the "Orphai Acquisition"). The acquisition brought into our pipeline Orphai's lead asset, LAM-001, a proprietary investigational inhaled dry powder formulation of rapamycin whose differentiated characteristics may permit treatment of pulmonary conditions associated with dysfunctional mammalian target of rapamycin activity.

Under the terms of the Merger Agreement, we assumed options to purchase Orphai common stock and were converted into options to purchase an aggregate of 1,308,804 shares of common stock, which options are subject to exercise restrictions prior to obtaining approval during a special meeting of stockholders. In addition, we issued to holders of Orphai warrants (the "Acquisition Warrants") to purchase an aggregate of 10,964.505 shares of Series C Preferred Stock (or 570,169 shares on an as-converted-to-common basis, and without giving effect to any beneficial ownership limitations), at an exercise price of $996.90 per share of Series C Preferred Stock (or $19.17 per share on an as-converted-to-common basis, as adjusted for the June 2026 Reverse Stock Split).

On May 18, 2026, concurrent with the Orphai Acquisition, we entered into a securities purchase agreement (the "May 2026 Securities Purchase Agreement") for a private placement financing with new and returning investors to raise up to $187.0 million in gross proceeds, which includes $115.0 million in gross upfront proceeds, net of $11.4 million of offering costs, commissions, legal and other expenses for net proceeds from the offering of $103.6 million and up to an additional approximately $72.0 million upon exercise of accompanying warrants (with an additional up to $11.0 million in gross proceeds available upon the exercise of warrants issued to former Orphai stockholders), in which the investors were issued approximately 144,200.633 shares of our Series C non-voting convertible preferred stock (the "Series C Preferred Stock") (convertible into an aggregate of 7,498,447 shares of common stock, without giving effect to any beneficial ownership limitations) at a price of $797.50 per share and accompanying warrants (the "Financing Warrants") to purchase up to 72,100.322 shares of Series C Preferred Stock (or 3,749,231 shares on an as-converted-to-common basis and without giving effect to any beneficial ownership limitations) at an exercise price of $996.90 per share (or $19.17 per share on an as-converted-to-common basis, as adjusted for the June 2026 Reverse Stock Split) (the "May 2026 Financing"). For

additional information on the Orphai Acquisition and the May 2026 Financing, see Note 3 to our unaudited condensed consolidated financial statements.

Following the acquisition, our lead product candidate is LAM-001. We are currently evaluating the use of LAM-001 as a treatment for patients with pulmonary hypertension associated with interstitial lung disease ("PH-ILD") and for patients with bronchiolitis obliterans syndrome post lung transplant ("BOS"), both severe, progressive and often life-threatening indications with few therapeutic alternatives of significant clinical benefit. In our recently completed Phase 2a trial, which enrolled patients with pulmonary arterial hypertension as well as patients with PH-ILD and sarcoidosis associated pulmonary hypertension ("SAPH"), LAM-001 achieved clinically relevant improvement across multiple established endpoints, including pulmonary vascular resistance, six-minute walking distance and functional class. A Phase 2b trial of LAM-001 is ongoing, evaluating 75 patients with PH-ILD, with data expected in the first quarter of 2028. A fully enrolled Phase 2 trial of LAM-001 in BOS is currently ongoing, with results anticipated in the first quarter of 2027. In addition, we expect to initiate a Phase 2 trial to evaluate the use of LAM-001 as a treatment for sarcoidosis-associated pulmonary hypertension in late 2026, with data expected in the fourth quarter of 2028.

Prior to the Orphai Acquisition, our business was focused on developing our proprietary Autologous Intracellular Drug Encapsulation ("AIDE") technology for the treatment of Ataxia-Telangiectasia ("A-T") through our encapsulated dexamethasone sodium phosphate encapsulated in patient's own red blood cells ("eDSP") product candidate. In January 2026, we completed our pivotal Phase 3 NEAT clinical trial of eDSP for the treatment of A-T. As previously disclosed, the primary endpoints of the NEAT trial did not reach statistical significance. Based on the results of the NEAT trial, we determined that we would no longer continue development of eDSP in this or other therapeutic indications, and we are currently considering next steps for the eDSP program and our other assets.

Financial Overview

We have incurred net losses from operations since our inception. As of June 30, 2026, we had an accumulated deficit of $500.0 million. While we generated a net income in the three months ended March 31, 2026, we do not expect to generate product revenue unless and until we obtain marketing approval for and commercialize a product candidate, and we cannot assure you that we will ever generate significant revenue or profits. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate clinical trials of, and potentially seek marketing approval for, our product candidates. In addition, we expect to continue to incur significant costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses.

Components of Results of Operations

Operating Expenses

Our operating expenses since inception have consisted primarily of R&D activities and G&A costs.

Research and Development Expenses

Our research and development expenses consist of expenses incurred in connection with the research and development of our research programs. These expenses include payroll and personnel expenses, including stock-based compensation, for our research and product development employees, laboratory supplies, product licenses, consulting costs, contract research, regulatory, quality assurance, preclinical and clinical expenses, allocated rent, facilities costs and depreciation. We expense both internal and external research and development costs as they are incurred. Non-refundable advance payments and deposits for services that would be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as an expense as the related services are performed.

We anticipate that our research and development expenses will increase from current levels due to the Orphai Acquisition and the increase in headcount as the size of our business and research and development operations grows to support additional research and development activities.

General and Administrative

General and administrative expenses consist principally of personnel-related costs, including payroll and stock-based compensation, for personnel in executive, finance, human resources, business and corporate development, and other administrative functions, professional fees for legal, consulting, insurance and accounting services, allocated rent and other facilities costs, depreciation, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses will increase from current levels due to the Orphai Acquisition and the increase in headcount as the size of our business and research and development operations grows to support additional research and development activities.

Acquired in-process research and development

Acquired in-process research and development expense consists of the fair value of in-process research and development ("IPR&D") acquired in connection with the Orphai Acquisition. As the acquired in-process research and development was determined to have no alternative future use, it was expensed on the acquisition date, in accordance with ASC 730. We do not expect to recognize acquired in-process research and development expense in future periods unless we complete additional acquisitions.

Gain on Orphai Acquisition

Gain on Orphai Acquisition represents the excess of the fair value of the net assets acquired, including IPR&D acquired, and net liabilities assumed in connection with the Orphai Acquisition over the fair value of consideration transferred, recognized as of the acquisition date.

Intangible Asset Impairment Charge

Finite-lived intangible asset consists primarily of the tradename and is amortized on a straight-line basis over their estimated useful lives. Indefinite lived intangible assets are not amortized. Intangible assets related to IPR&D acquired in a business combination or an acquisition that are used in IPR&D shall be considered indefinite lived until the completion or abandonment of the associated research and development efforts. IPR&D is not amortized but is tested for impairment annually or when events or circumstances indicate that the fair value may be below the carrying value of the asset. If the carrying value of the assets is not expected to be recovered, the assets are written down to their estimated fair values. As a result of the clinical readout of the Phase 3 NEAT study in January 2026, which led us to discontinue development of eDSP, several of the assumptions used in determining the initial fair value changed including expected cash flows and thus triggered the need for an interim impairment assessment. As a result, the fair value was determined to be significantly below its carrying value and we recognized a total impairment charge of $67.8 million for for indefinite and finite-lived intangible assets during the six months ended June 30, 2026.

Fair Value Adjustment for Contingent Consideration

We record fair value adjustment for contingent consideration primarily due to the expected timing of achieving various milestones, and the passage of time related to the contingent consideration earnout resulting from the acquisition of EryDel on October 20, 2023 (the "EryDel Acquisition"). Changes in the fair value of the contingent consideration obligations may result from changes in probability assumptions with respect to the likelihood of achieving the various contingent payment obligations. As a result of the clinical readout of the Phase 3 NEAT study in January 2026, which led us to discontinue development of eDSP, the criteria for the contingent consideration payments will not be met, resulting in the related liability being reduced to zero.

Fair Value Adjustment for Debt

We record fair value adjustment for debt primarily due to the passage of time and the interest accrued for the loan with the European Investment Bank ("EIB"). In March 2026, the EIB agreed to a full settlement of all obligations associated with the loan with a single payment of 4.8 million euros ($5.5 million) which was paid on March 30, 2026.

Fair Value Adjustment for Warrants

We record fair value adjustment for warrant liability calculated using the Black-Scholes option pricing model, adjustments are due to changes in our stock price, the expected term, volatility, risk-free interest rate, and expected dividends.

Warrant Issuance Costs

Warrant issuance costs consist of expenses incurred in connection with the Financing Warrants, which are classified as liabilities.

Interest Income

Interest income consists primarily of interest earned on our short-term investments portfolio.

Other Income (Expense), net

Other income (expense), net consists primarily of the effects of foreign currency exchange rates.

Critical Accounting Estimates

For a description of our significant accounting policies, see Note 2 to our unaudited condensed consolidated financial statements.

Of our policies, the following are considered critical to an understanding of our condensed consolidated financial statements as they require the application of subjective and complex judgment, involving critical accounting estimates and assumptions impacting our condensed consolidated financial statements:

For a discussion about the other critical accounting estimates and assumptions impacting our condensed consolidated financial statements, see the Critical Accounting Estimates section within MD&A of our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 10, 2026.

Results of Operations

Comparison of the three months ended June 30, 2026 to the three months ended June 30, 2025

The following sets forth our results of operations for the three months ended June 30, 2026 and 2025 (in thousands, except for percentages):

Research and Development Expenses (in thousands, except for percentages):

Research and development expenses were $5.5 million for the three months ended June 30, 2026, compared to $6.6 million for the three months ended June 30, 2025, a decrease of $1.1 million.

The costs for eDSP development decreased by $5.4 million compared to the same period from the prior year due to the ramping down related to our Phase 3 NEAT clinical trial and Open-Label Extension Clinical Trial ("OLE") as well as a gain on the settlement of accounts payable. This decrease was primarily due to a gain on settlement of accounts payable of $1.1 million, as well as a decrease in clinical trial costs of $3.5 million, a decrease in eDSP consulting of $1.1 million, and a decrease in manufacturing costs of $0.2 million, offset by an increase of R&D expenses of $0.5 million related to the reserve and adjustment for R&D tax credits.

The costs for LAM-001 development increased by $0.8 million during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, due to the Orphai Acquisition as a result of the start-up costs of LAM-001.

Our personnel related costs increased by $3.6 million during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, mainly as a result of an increase of $2.7 million in allocated stock-based compensation costs and a $0.9 million increase in other personnel related expenses, including costs related to Orphai Acquisition and severance costs related to personnel separation.

General and Administrative Expenses

General and administrative expenses increased by $13.3 million to $16.6 million for the three months ended June 30, 2026, from $3.3 million for the three months ended June 30, 2025. The increase in general and administrative expenses was primarily due to $9.1 million in allocated stock-based compensation and personnel related expenses primarily due to the assumptions of the Orphai historical options upon acquisition, an increase of $4.4 million in consulting and professional costs related to activities related to restructuring and the Orphai Acquisition, offset by $0.2 million related to other professional and administrative costs.

Fair Value Adjustment for Contingent Consideration

For the three months ended June 30, 2026, the fair value adjustment for contingent consideration decreased by $0.5 million as we recorded a fair value adjustment for contingent consideration as a result of the clinical readout of the Phase 3 NEAT study in January 2026.

Fair Value Adjustment for Debt

For the three months ended June 30, 2026, the fair value adjustment for the debt decreased by $0.5 million primarily due to the settlement of the loan with the EIB in March 2026.

Fair Value Adjustment for Warrants

For the three months ended June 30, 2026, we recorded an increase of $9.0 million fair value adjustment for warrants primarily due to the issuance of the Acquisition and Financing Warrants, exercise of the Pre-Funded Warrants, cancellation of the Common warrants, and changes in the price of the underlying stock.

Interest Income

Interest income increased by $0.3 million for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. The change was due to increased yields on our investment portfolio and increased average balances.

Other Expense, net

Other income (expense), net increased by $0.2 million for the three months ended June 30, 2026 primarily due to unrealized gains from foreign currency translation.

Income Tax Expense

We recorded a tax expense of $75 thousand and $67 thousand for the three months ended June 30, 2026 and 2025, respectively. The tax expense was primarily due to the current-period Italian income tax expense.

Comparison of the six months ended June 30, 2026 to the six months ended June 30, 2025

The following sets forth our results of operations for the six months ended June 30, 2026 and 2025 (in thousands, except for percentages):

Research and Development Expenses (in thousands, except for percentages):

Research and development expenses were $12.3 million for the six months ended June 30, 2026, compared to $14.7 million for the six months ended June 30, 2025, a decrease of $2.4 million.

The costs for eDSP development decreased by $7.9 million compared to the same period from the prior year due to the ramping down related to our Phase 3 NEAT clinical trial and OLE as well as a gain on the settlement of accounts payable. This decrease was primarily due to a gain on settlement of accounts payable of $3.7 million as well as a decrease in clinical trial costs of $5.3 million, a decrease in eDSP consulting of $1.5 million, and a decrease in manufacturing costs of $0.6 million, offset by an increase of R&D expenses of $3.2 million related to the reserve and adjustment for R&D tax credits.

The costs for LAM-001 development increased by $0.8 million during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, due to the Orphai Acquisition as a result of the start-up costs of LAM-001.

Personnel related costs increased by $4.3 million during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, mainly as a result of an increase of $2.9 million in allocated stock-based compensation costs and a $1.4 million increase in other personnel related expenses, including costs related to Orphai Acquisition and severance costs related to personnel separation.

General and Administrative Expenses

General and administrative expenses increased by $12.8 million to $20.9 million for the six months ended June 30, 2026, from $8.1 million for the six months ended June 30, 2025. The increase in general and administrative expenses was primarily due to $8.5 million in allocated stock-based compensation and personnel related expenses primarily due to the assumptions of the Orphai historical options upon acquisition, and an increase of $4.3 million in consulting and professional costs related to the restructuring activities.

Intangible Asset Impairment Charge

During the six months ended June 30, 2026, we conducted an impairment analysis of our intangible asset IPR&D and tradename that resulted from the EryDel Acquisition in October 2023. We conducted a quantitative analysis which resulted in our fair value being significantly below our current carrying value due to the assumptions changing as a result of the Phase 3 NEAT study in January 2026. As a result of the analyses, we recorded a non-cash intangible asset impairment charge of $67.8 million for the six months ended June 30, 2026.

Fair Value Adjustment for Contingent Consideration

For the six months ended June 30, 2026, we recorded a $64.3 million fair value adjustment for contingent consideration as a result of the clinical readout of the Phase 3 NEAT study in January 2026.

Fair Value Adjustment for Debt

For the six months ended June 30, 2026, we recorded a $12.2 million fair value adjustment for the debt primarily due to the settlement of the loan with the EIB in March 2026.

Fair Value Adjustment for Warrants

For the six months ended June 30, 2026, we recorded an increase of $40.1 million in fair value adjustment for warrants primarily due to timing of issuance of the Acquisition and Financing Warrants and change in the price of our common stock.

Interest Income

Interest income increased by $27 thousand for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. The change was due to increased yields on our investment portfolio and increased average balances.

Other Income (Expense), net

Other income (expense), net increased by $2.0 million for the six months ended June 30, 2026, primarily due to unrealized gains from foreign currency translation.

Income Tax Benefit (Expense)

We recorded $5.3 million of tax benefit for the six months ended June 30, 2026 and tax expense of $0.1 million for the six months ended June 30, 2025. The tax benefit was primarily related to discrete release of uncertain tax position liabilities associated with certain intellectual property following changes in facts and circumstances in the six months ended June 30, 2026 that affected the valuation of the intellectual property.

Liquidity and Capital Resources

We have not generated any revenue and we have never been profitable. To date, we have financed our operations primarily through the issuance and sale of our securities. From inception through June 30, 2026, we received net proceeds of approximately $345.7 million from the issuance of redeemable convertible preferred stock, convertible promissory notes, common warrants, pre-funded warrants, and common stock.

We have incurred net losses from operations since our inception. As of June 30, 2026, we had an accumulated deficit of $500.0 million. While we generated a net income in the three months ended March 31, 2026, we do not expect to generate product revenue unless and until we obtain marketing approval for and commercialize a product candidate, and we cannot assure you that we will ever generate significant revenue or profits. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate clinical trials of, and potentially seek marketing approval for, our product candidates. In addition, we expect to continue to incur significant costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses. The timing and amount of our operating expenditures will depend largely on:

We evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that our unaudited condensed consolidated financial statements are issued.

Concurrent with the Orphai Acquisition, in May 2026, we completed the May 2026 Financing, providing $115.0 million in upfront proceeds, with the potential to receive up to an additional $72.0 million in gross proceeds upon the exercise of the Financing Warrants (with an additional up to $11.0 million in gross proceeds available upon the exercise of warrants issued to former Orphai stockholders). The Series C Preferred Stock is subject to automatic conversion into common stock upon the third business day following our receipt of stockholder approval in accordance with Nasdaq Listing Rules, subject to certain beneficial ownership limitations. The Certificate of Designation of Preferences, Rights and Limitations of the Series C Non-Voting Convertible Preferred Stock (the "Certificate of Designation") provides that, at any time following the earlier of (i) stockholder approval or (ii) six months after the initial issuance of the Series C Preferred Stock, if we fail to timely deliver shares of common stock to a converting holder in accordance with the terms of the Certificate of Designation, such holder may require us to pay cash in an amount equal to the fair value of the undelivered shares. As a result, we concluded that the proceeds received from the May 2026 Financing cannot be relied upon to mitigate conditions that raise substantial doubt because the availability of those proceeds is subject to conditions that are not

entirely within our control. The conversion of the Series C Preferred Stock into common stock and therefore removal of the requirement to make cash payment based on the value of the undelivered shares is subject to the vote of our stockholders.

Our ability to satisfy these potential cash settlement obligations associated with the Series C Preferred Stock is not entirely within our control, as it is contingent on, among other things, our ability to obtain stockholder approval and to deliver shares of common stock upon conversion within the timeframes required by the Certificate of Designation. If we are unable to obtain stockholder approval in a timely manner, or are otherwise unable to timely deliver shares of common stock upon conversion, holders who submit conversion notices after the applicable trigger date could require us to make significant cash payments that could substantially reduce our available cash resources. Factoring in these potential cash payments, based on our current operating plan, we believe that our cash and cash equivalents balance will not be sufficient to fund operations and capital expenditures for at least the twelve months following the issuance of our unaudited condensed consolidated financial statements. Accordingly, we concluded that substantial doubt about our ability to continue as a going concern continues to exist within one year after the date our financial statements are available to be issued.

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

Our cash, cash equivalents, and marketable debt securities are held in a variety of deposit accounts, interest-bearing accounts, U.S government securities, debt securities in government-sponsored entities, and money market funds. Cash in excess of immediate requirements, if any, is invested with a view toward liquidity and capital preservation, and we seek to minimize the potential effects of concentration and credit risk. Our cash equivalents and short-term investments are held in money market funds and government agency obligations.

Until such time, if ever, as we can generate product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

Financing

Equity Financing

ATM Program

On December 18, 2024, we entered into a Controlled Equity OfferingSM Sales Agreement, with Cantor Fitzgerald & Co. and H.C. Wainwright & Co., LLC (the "Agents"), relating to the sale of shares of our common stock. In accordance with the terms of this agreement, we could offer and sell up to $21.9 million of shares of common stock. In October 2025, we increased the total amount available under the ATM program to $75.0 million.

During the three and six months ended June 30, 2026, we utilized our ATM program to raise net proceeds of approximately $5.4 million and $20.3 million by issuing 125,500 shares and 526,435 shares of common stock, respectively. As of June 30, 2026, $47.5 million remained available to be sold under the ATM program.

May 2026 Private Placement

On May 18, 2026, concurrent with the Orphai Acquisition, we entered into the May 2026 Securities Purchase Agreement for a private placement financing with new and returning investors to raise up to $187.0 million in gross proceeds, which includes $115.0 million in upfront proceeds and up to an additional approximately $72.0 million upon exercise of the Financing Warrants, in which the investors were issued approximately 144,200.633 shares of Series C Preferred Stock (convertible into an aggregate of 7,498,447 shares of common stock, without giving effect to any beneficial ownership limitations) at a price of $797.50 per share and Financing Warrants to purchase up to 72,100.322 shares of Series C Preferred Stock (or 3,749,231 shares, on an as-converted-to-common basis and without giving effect to any beneficial ownership limitations) at an exercise price of $996.90 per share (or $19.17 per share on an as-converted-to-common basis, as adjusted for the June 2026 Reverse Stock Split). For additional information on the May 2026 Financing, see Note 10 to our unaudited condensed consolidated financial statements.

June 2025 Private Placement

On June 12, 2025, we entered into a Securities Purchase Agreement (the "June 2025 Securities Purchase Agreement"), with certain institutional investors (the "Investors") and certain members of our management (together with the Investors, the "Purchasers") pursuant to which we issued and sold to the Purchasers in a private placement (the "Private Placement"): (i) 33,360 shares (the "Shares") of our common stock, (ii) pre-funded warrants (the "Pre-Funded Warrants") to purchase up to an aggregate of 10,000 shares of common stock, and (iii) accompanying warrants to purchase up to an aggregate of 43,360 shares of common stock (the "Common Warrants"), for aggregate gross proceeds of approximately $11.5 million (excluding up to approximately $10.4 million of aggregate gross proceeds that may be received in the future upon the cash exercise in full of the Common Warrants issued in the Private Placement), before deducting placement agent fees and other expenses payable by us. Each Share and each Pre-Funded Warrant sold pursuant to the Securities Purchase Agreement was accompanied by one Common Warrant. The combined purchase price of each Share and accompanying Common Warrant was $265.00 (which included $25.00 per Common Warrant in accordance with the rules and regulations of Nasdaq). The combined purchase price of each Pre-Funded Warrant and accompanying Common Warrant was $264.80 (equal to the combined purchase price per Share and accompanying Common Warrant, minus $0.20).

Debt

In connection with the acquisition of EryDel on October 20, 2023, we guaranteed the EIB Loan. The EIB Loan was amended and restated as of the acquisition date. The EIB Loan provided for maximum borrowings of 30.0 million euro through four tranches; tranche A, 3.0 million euro; tranche B, 7.0 million euro; tranche C, 10.0 million euro; and tranche D, 10.0 million euro. Each tranche was subject to conditions precedent related to our business and capitalization. Only tranches A and B were drawn. All amounts under tranche A and B were payable on their maturity date of August 2026. Interest accrued at fixed rates for each tranche and both principal and interest was payable on the maturity date for each tranche (with the exception of 2% cash interest which was accrued and payable

quarterly during fiscal year 2025 pursuant to the terms of the Amendment (as defined below), which correspondingly reduced the deferred interest rate accruing during such period). The fixed rates ranged from 7.0% to 9.0% per annum.

On March 27, 2026, we entered into a loan settlement agreement (the "Settlement Agreement") with the EIB in connection with the EIB loan. Pursuant to the Settlement Agreement, effective immediately upon our payment of 4.8 million euros ($5.5 million), our outstanding obligations to the EIB were settled in full and all of our obligations were satisfied and discharged.

Cash Flows

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):

Operating Activities

Net cash used in operating activities decreased by $5.5 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to lower operating payments driven by decreased clinical development activities. Net cash used in operating activities was $26.5 million for the six months ended June 30, 2026. Cash used in operating activities was primarily due to our net loss of $39.6 million for the period, adjusted for $23.0 million of non-cash items, including $67.8 million non-cash impairment on intangible assets, $64.3 million change in the fair value of contingent consideration liabilities, $59.0 million acquired in-process research and development from the Orphai Acquisition, $35.6 million change in the fair value of warrants, $13.4 million in stock-based compensation, $12.2 million change in the fair value of the EIB Loan, $3.7 million in gain on settlement of accounts payable, and a net increase in our operating assets of $1.1 million and a net increase in our accounts payable, and accrued expenses and other current liabilities of $8.9 million.

Investing Activities

Cash provided by investing activities was $20.0 million for the six months ended June 30, 2026, primarily related to the proceeds from maturities of short-term investments of $12.0 million and the net cash assumed in the Orphai Acquisition of $8.0 million.

Cash provided by investing activities was $16.9 million for the six months ended June 30, 2025, primarily related to the maturities of short-term investments of $31.0 million, and the purchase of investments of $13.8 million.

Financing Activities

Cash provided by financing activities was $118.4 million for the six months ended June 30, 2026, which consisted of $103.6 million of proceeds from the issuance of Series C Preferred Stock and Financing Warrants pursuant to the May 2026 Private Placement, $20.3 million from the issuance of common stock in connection with the ATM offerings, offset by the repayment of debt of $5.5 million.

Cash used in financing activities was $14.5 million for the six months ended June 30, 2025, which consisted of gross proceeds of $11.5 million from the issuance of common stock, common warrants, and pre-funded warrants in connection with June 2025 Private Placement, $2.9 million from the issuance of common stock in connection with the ATM offerings, and $0.2 million from the exercise of stock options in the period.

Contractual Obligations and Commitments

Our contractual obligations primarily consist of our obligations under non-cancellable operating leases and other purchase obligations.

We enter into contracts in the normal course of business with third party contract organizations for clinical trials, non-clinical studies and testing, manufacturing, and other services and products for operating purposes. The amount and timing of the payments under these contracts varies based upon the timing of the services. We have recorded accrued expense of approximately $3.9 million in our condensed consolidated balance sheets for expenditures incurred by these vendors as of June 30, 2026. Our cancellable future operating expense commitments based on existing contracts as of June 30, 2026 is $2.5 million. These obligations will be satisfied in the normal course of business, but generally no longer than 12 months. In March 2026, we entered into a Settlement Agreement with the EIB to settle our outstanding obligations in full with a single payment of 4.8 million euros ($5.5 million). Following such payment, all of our obligations to the EIB were satisfied and discharged. Additionally, in March 2026, it was determined that the criteria for the contingent consideration payouts will not be met, resulting in the related liability being reduced to zero. As of June 30, 2026, the fair value of warrants issued in connection with the June 2025 and May 2026 private placements is $6.3 million.

In addition, our future capital requirements will depend on, among other things, the timing of stockholder approval of the Company Stockholders Matters (as defined in the Merger Agreement as the "Parent Stockholder Matters") and the potential cash settlement obligations that may arise if we are unable to timely deliver shares of our common stock upon conversion of the Series C Preferred Stock issued in connection with the Orphai Acquisition and the May 2026 Financing. The Series C Preferred Stock is subject to automatic conversion into common stock upon the third business day following our receipt of stockholder approval in accordance with Nasdaq Listing Rules, subject to certain beneficial ownership limitations. The Certificate of Designation of Preferences, Rights and Limitations of the Series C Non-Voting Convertible Preferred Stock (the "Certificate of Designation") provides that, at any time following the earlier of (i) stockholder approval or (ii) six months after the initial issuance of the Series C Preferred Stock, if we fail to timely deliver shares of common stock to a converting holder in accordance with the terms of the Certificate of Designation, such holder may require us to pay cash in an amount equal to the fair value of the undelivered shares.

Our ability to satisfy these potential cash settlement obligations is not entirely within our control, as it is contingent on, among other things, our ability to obtain stockholder approval and to deliver shares of common stock upon conversion within the timeframes required by the Certificate of Designation. If we are unable to obtain stockholder approval in a timely manner, or are otherwise unable to timely deliver shares of common stock upon conversion, holders who submit conversion notices after the applicable trigger date could require us to make significant cash payments that could substantially reduce our available cash resources.

Additionally, even following stockholder approval, certain holders may be unable to convert their Series C Preferred Stock due to the application of beneficial ownership limitations. Shares of Series C Preferred Stock that are not converted in the automatic conversion on account of beneficial ownership limitations will remain outstanding until converted at the option of the applicable holders, and the cash settlement provisions described above would apply to any failure to timely deliver conversion shares in connection with any such optional conversion.