Werewolf Therapeutics Inc.
07/31/2026 | Press release | Distributed by Public on 07/31/2026 05:11
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and uncertainties of cash flows from operations and from outside resources, so as to allow investors to better view our company from management's perspective. The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and our Annual Report on Form 10-K for the year ended December 31, 2025, or the 2025 Annual Report, that was filed with the United States Securities and Exchange Commission, or SEC, on March 27, 2026. In addition to historical information, the discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report, including those factors set forth in the section entitled "Cautionary Note Regarding Forward-Looking Statements and Industry Data" and in the section entitled "Risk Factors" in Part II, Item 1A of this Quarterly Report. You should carefully read the section entitled "Risk Factors" in Part II, Item 1A of this Quarterly Report.
Overview
We are an innovative biopharmaceutical company pioneering the development of therapeutics engineered to stimulate the body's immune system for the treatment of cancer and other immune-mediated conditions. We have leveraged our proprietary PREDATOR platform to design conditionally activated molecules that stimulate both adaptive and innate immunity with the goal of addressing the limitations of conventional proinflammatory immune therapies. Our molecules, which we refer to as INDUKINE and INDUCER molecules, are intended to activate selectively in the tumor microenvironment, or TME. Our most advanced product candidates, WTX-124 and WTX-330, are systemically delivered, conditionally activated Interleukin-2 and Interleukin-12, respectively, INDUKINE molecules for the treatment of multiple tumor types.
The Phase 1/1b clinical trial of WTX-124 is expected to be completed in the fourth quarter of 2026. Additional funding will be required to initiate any further development, which could include a registration-enabling trial. We are currently seeking a strategic partnership for the further development of WTX-124.
The dose- and regimen-determining Part A of the Phase 1b/2 clinical trial of WTX-330 is expected to be completed in the fourth quarter of 2026. Additional funding will be required to further develop WTX-330, which could include sequential administration of WTX-330 and WTX-124 that may provide a novel development path in poorly immunogenic tumors. We are currently seeking a strategic partnership for the further development of WTX-330.
Recent Developments
Asset Purchase Agreement; Termination of Collaboration Agreement
On May 6, 2026, or the Closing, we entered into an asset purchase agreement, or the Purchase Agreement, with Jazz Pharmaceuticals Ireland Limited, a corporation organized under the laws of Ireland, or Jazz. In April 2022, we entered into a global collaboration and license agreement, or the Collaboration Agreement, with Jazz under which Jazz acquired exclusive global development and commercialization rights to JZP898, as well as products containing certain isolated recombinant polypeptides comprising IFNα that meet specified criteria (each such product, a Licensed Product). Subject to the terms and conditions of the Purchase Agreement, we sold to Jazz, which we refer to as the Asset Sale, our program, or the 898 Program, for the development, manufacturing, commercialization, use and other exploitation of the Licensed Product. Pursuant to the Purchase Agreement and related ancillary agreements, in consideration for all material assets, properties, rights and interests used or held for use in the conduct of the 898 Program, Jazz paid us upfront consideration of $21.0 million, and has agreed to pay an additional $2.0 million contingent upon the consent to the partial assignment of a certain license agreement, as and to the extent such agreement relates to the conduct of the 898 Program. Jazz also assumed certain liabilities of ours relating to the 898 Program arising after the Closing.
During the six months ended June 30, 2026, we recognized revenue of $21.0 million due to the change in the overall transaction price of the Collaboration Agreement as a result of entering into the Purchase Agreement.
In the future, our ability to generate revenue from the Purchase Agreement will depend on successfully completing the conditions necessary to receive payment of the $2.0 million contingent payment. There can be assurances of the timing of when we will receive the $2.0 million contingent payment, or at all.
Previously, we were eligible to receive up to $515.0 million in development and regulatory milestones, and up to $740.0 million in sales-based milestones for all Licensed Products upon meeting certain conditions under the Collaboration Agreement. Effective as of the Closing, the Collaboration Agreement was terminated, and as a result, we are no longer eligible to receive payment for meeting the conditions of the development and regulatory milestones or sales-based milestones for any Licensed Products.
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Loan Repayment
On May 6, 2026, we entered into a letter agreement providing for the repayment by us of all amounts owed under the loan and security agreement, dated May 2, 2024, or the K2HV Loan Agreement, by and among us, the lenders from time to time party hereto, or the Lenders, K2 HealthVentures LLC, or K2HV, as administrative agent for the Lenders, and ANKURA TRUST COMPANY, LLC, as collateral trustee for secured parties, or the Collateral Trustee. On May 6, 2026, upon payment by us of $31.4 million, all of our indebtedness and obligations to the Collateral Trustee and the Lenders under the Loan Agreement and any other related loan and collateral security documents was deemed paid and discharged in full. During the six months ended June 30, 2026, we recognized a loss on the extinguishment of debt in the amount of $3.4 million, primarily due to the write off of unamortized debt issuance costs and the unaccreted balance of the final fee payable under the K2HV Loan Agreement.
Strategic Review
In February 2026, we adopted a restructuring plan to extend our capital resources, or the 2026 Restructuring, in connection with initiating a process to explore a full range of strategic alternatives to advance our promising platform and drug development pipeline to maximize stockholder value. We have engaged Piper Sandler & Co., or Piper Sandler, to serve as exclusive financial advisor to assist in the strategic review process. Measures contemplated during the strategic review process include the Asset Sale and may also include, among other options, a sale of our company, a business combination or merger, a sale of our assets, licensing or collaboration arrangements, or other strategic transactions. There can be no assurance that the strategic review process will result in any agreement or transaction that will enhance stockholder value, or any agreement or transaction at all.
As part of the 2026 Restructuring, our board of directors approved a reduction in force in February 2026, representing 64% of our workforce, to better align our resources with our pursuit of strategic alternatives. In May 2026, an additional reduction in force occurred, representing 36% of our workforce at that time. As a result of the 2026 Restructuring, we recognized costs of $5.7 million during the six months ended June 30, 2026 consisting of severance payments, retention bonuses, employee benefits and related taxes, stock-based compensation, and contract termination costs. We estimate that we will incur approximately $0.8 million in additional costs to complete the 2026 Restructuring, which is expected to be completed by the end of 2026. Our estimate of costs we expect to incur and the expected timing of when the 2026 Restructuring will be completed are subject to a number of assumptions, and actual results may differ. We may also incur additional costs, including, but not limited to, potential impairment charges not currently contemplated that may occur as a result of, or that are associated with the 2026 Restructuring.
Financial Operations Overview
Revenue
Historically, all our revenue has been generated from the Collaboration Agreement with Jazz. In June 2024, we satisfied the last material performance obligation required of us under the Collaboration Agreement. Accordingly, we did not recognize revenue related to the Collaboration Agreement during the six months ended June 30, 2025.
In May 2026, we entered into the Purchase Agreement with Jazz. We recognized $21.0 million in revenue during the six months ended June 30, 2026 related to the Purchase Agreement.
In the future, our ability to generate revenue from the Purchase Agreement will depend on successfully completing the conditions necessary to receive payment of the $2.0 million contingent payment. There can be assurances of the timing of when we will receive the $2.0 million contingent payment, or at all.
Effective as of the Closing, the Collaboration Agreement was terminated.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, and include:
•salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;
•expenses incurred under agreements with third parties that conduct research, preclinical and clinical activities on our behalf;
•costs of outside consultants, including their fees, stock-based compensation and related travel expenses;
•costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; and
•facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of performance of the individual arrangements, which may differ from the pattern of billings incurred, and are reflected in our condensed consolidated financial statements as prepaid or accrued research and development expenses.
We typically use our employee and infrastructure resources across our development programs. We track external development costs by product candidate or development program, but generally we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates.
Our external development costs were as follows:
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| WTX-124 | $ | 1,941 | $ | 4,573 | $ | 3,115 | $ | 9,368 | |||||||||||||||
| WTX-330 | 776 | 1,758 | 2,190 | 3,212 | |||||||||||||||||||
| WTX-1011 | - | - | 71 | - | |||||||||||||||||||
| WTX-2022 | - | - | 50 | - | |||||||||||||||||||
| WTX-712 | - | 17 | 6 | 104 | |||||||||||||||||||
| WTX-921 | - | 31 | - | 40 | |||||||||||||||||||
| WTX-518 | - | 1 | - | 2 | |||||||||||||||||||
| Pre-development candidates | 1,064 | 1,063 | 1,725 | 1,644 | |||||||||||||||||||
|
Total external development costs
|
$ | 3,781 | $ | 7,443 | $ | 7,157 | $ | 14,370 | |||||||||||||||
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Research and development activities have historically been central to our business model. We expect our research and development costs will decrease in the near future as we explore strategic alternatives available to advance our platform and drug development pipeline.
The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. We cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete development of our current or future product candidates, if any. The actual probability of success for our product candidates will depend on a variety of factors, including:
•the outcome of our strategic review process;
•the scope, rate of progress and expenses of our research activities as well as any preclinical studies and clinical trials, including our Phase 1/1b clinical trial for WTX-124 and the Phase 1b/2 clinical trial for WTX-330, as well as other research and development activities;
•establishing an appropriate safety profile;
•successful enrollment in and completion of clinical trials;
•whether our product candidates show safety and efficacy in our clinical trials;
•receipt of marketing approvals from applicable regulatory authorities;
•establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
•obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
•commercializing product candidates, if and when approved, whether alone or in collaboration with others; and
•continued acceptable safety profile of the products following any regulatory approval.
A change in the outcome of any of these variables with respect to the development of our current and future product candidates would significantly change the costs and timing associated with the development of those product candidates, and we may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development activities.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel in our executive, finance, people operations, business development, legal, information technology and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, audit, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
At this time, we cannot reasonably estimate the nature, timing, and estimated costs associated with the efforts that will be necessary to complete our strategic review process.
Other Expense
Interest Income
Interest income consists of interest earned from cash and cash equivalents invested in money market funds.
Interest Expense
Interest expense represents interest incurred from our loan and security agreement, or the K2HV Loan Agreement, with K2 HealthVentures LLC, or K2HV, and non-cash interest expense related to the amortization of debt issuance costs.
Loss on Extinguishment of Note Payable
Loss on extinguishment of note payable represents the residual financial impact of notes payable to lenders, specifically the extinguishment of the K2HV Loan Agreement in May 2026.
Other Income, Net
Other income, net primarily consists of the unrealized gain or loss recognized on the change in fair value of the derivative liability associated with the K2HV Loan Agreement.
Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations:
|
Three Months Ended June 30, |
$ Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
|
(in thousands)
|
|||||||||||||||||
| Revenue: | |||||||||||||||||
| Collaboration revenue | $ | 21,000 | $ | - | $ | 21,000 | |||||||||||
|
Operating expenses:
|
|||||||||||||||||
|
Research and development
|
6,162 | 13,143 | (6,981) | ||||||||||||||
|
General and administrative
|
7,680 | 4,399 | 3,281 | ||||||||||||||
|
Total operating expenses
|
13,842 | 17,542 | (3,700) | ||||||||||||||
|
Operating income (loss)
|
7,158 | (17,542) | 24,700 | ||||||||||||||
| Other expense: | |||||||||||||||||
| Interest income | 277 | 850 | (573) | ||||||||||||||
| Interest expense | (475) | (1,301) | 826 | ||||||||||||||
| Loss on extinguishment of note payable | (3,354) | - | (3,354) | ||||||||||||||
| Other income, net | 64 | 11 | 53 | ||||||||||||||
| Total other expense | (3,488) | (440) | (3,048) | ||||||||||||||
|
Net income (loss)
|
$ | 3,670 | $ | (17,982) | $ | 21,652 | |||||||||||
Revenue
During the three months ended June 30, 2026, we recognized $21.0 million in revenue related to the Purchase Agreement with Jazz. No revenue was recognized during the three months ended June 30, 2025.
Research and Development Expenses
The following table summarizes our research and development expenses:
|
Three Months Ended June 30, |
$ Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
|
(in thousands)
|
|||||||||||||||||
| Clinical trial costs | $ | 2,613 | $ | 4,201 | $ | (1,588) | |||||||||||
| Facility costs | 1,102 | 776 | 326 | ||||||||||||||
| Contract research organization | 1,087 | 1,190 | (103) | ||||||||||||||
| Personnel | 1,026 | 3,750 | (2,724) | ||||||||||||||
| Manufacturing | 81 | 2,052 | (1,971) | ||||||||||||||
| Lab consumables | 81 | 1,045 | (964) | ||||||||||||||
| Other | 172 | 129 | 43 | ||||||||||||||
| Total research and development expenses | $ | 6,162 | $ | 13,143 | $ | (6,981) | |||||||||||
Research and development expenses for the three months ended June 30, 2026 were $6.2 million compared to $13.1 million for the three months ended June 30, 2025. The decrease of $7.0 million was primarily due to:
•$1.6 million of decreased clinical trial costs, driven by lower patient and site monitoring costs as we approach the completion of the Phase 1/1b clinical trial of WTX-124 and the Phase 1b/2 clinical trial of WTX-330, both of which are expected to be completed in the fourth quarter of 2026;
•$2.7 million of decreased personnel costs, driven primarily by cost savings recognized during the three months ended June 30, 2026 as result of the reductions in force that were completed in February and May 2026; and
•a net decrease of $2.7 million across all other research and development activities. This decrease was due to our decision to significantly curtail our research and development spending in order to conserve our capital resources that
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may be necessary in our pursuit of strategic alternatives. Decreases of $3.0 million across the remaining research and development activities were partially offset by an increase in facility and other costs of $0.4 million due to higher depreciation expense recognized during the three months ended June 30, 2026 as a result of a change in the estimated useful lives of our property and equipment, as well as net losses recognized on the sale and disposal of property and equipment during the period.
General and Administrative Expenses
The following table summarizes our general and administrative expenses:
|
Three Months Ended June 30, |
$ Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
|
(in thousands)
|
|||||||||||||||||
| Professional services | $ | 4,844 | $ | 1,325 | $ | 3,519 | |||||||||||
| Personnel | 1,840 | 2,095 | (255) | ||||||||||||||
| Facility costs | 492 | 326 | 166 | ||||||||||||||
| Corporate insurance | 260 | 264 | (4) | ||||||||||||||
| Information technology costs | 150 | 196 | (46) | ||||||||||||||
| Other | 94 | 193 | (99) | ||||||||||||||
|
Total general and administrative expenses
|
$ | 7,680 | $ | 4,399 | $ | 3,281 | |||||||||||
General and administrative expenses were $7.7 million for the three months ended June 30, 2026 compared to $4.4 million for three months ended June 30, 2025. The increase of $3.3 million was primarily due to:
•$3.5 million of increased professional services fees, driven by an increased reliance on external legal counsel, consultants, and advisors engaged to assist us in our strategic review process; and
•$0.2 million of increased facility costs due to higher depreciation expense recognized during the three months ended June 30, 2026 as a result of a change in the estimated useful lives of our property and equipment.
These increases were partially offset by a decrease of $0.3 million in personnel costs, driven primarily by cost savings recognized during the three months ended June 30, 2026 as result of the reductions in force that were completed in February and May 2026.
Interest Income
Interest income was $0.3 million for the three months ended June 30, 2026 compared to $0.9 million for the three months ended June 30, 2025. This decrease in interest income was primarily the result of lower balances in money market accounts during the three months ended June 30, 2026 compared to the three months ended June 30, 2025.
Interest Expense
Interest expense was $0.5 million for the three months ended June 30, 2026, compared to $1.3 million for the three months ended June 30, 2025. This decrease in interest expense was due to the extinguishment of the K2HV Loan Agreement in May 2026.
Loss on Extinguishment of Note Payable
The extinguishment of the K2HV Loan Agreement in May 2026 resulted in a one-time loss of $3.4 million for the three months ended June 30, 2026. No similar activity occurred during the three months ended June 30, 2025.
Other Income, Net
Other income, net for the three months ended June 30, 2026 and 2025 primarily consists of the gains recognized for the change in fair value of the derivative liability associated with the K2HV Loan Agreement during each period.
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Comparison of the Six Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations:
|
Six Months Ended June 30, |
$ Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (in thousands) | |||||||||||||||||
| Revenue: | |||||||||||||||||
| Collaboration revenue | $ | 21,000 | $ | - | $ | 21,000 | |||||||||||
|
Operating expenses:
|
|||||||||||||||||
|
Research and development
|
14,343 | 26,263 | (11,920) | ||||||||||||||
|
General and administrative
|
12,770 | 9,270 | 3,500 | ||||||||||||||
|
Total operating expenses
|
27,113 | 35,533 | (8,420) | ||||||||||||||
|
Operating loss
|
(6,113) | (35,533) | 29,420 | ||||||||||||||
| Other expense: | |||||||||||||||||
| Interest income | 710 | 1,847 | (1,137) | ||||||||||||||
| Interest expense | (1,843) | (2,564) | 721 | ||||||||||||||
| Loss on extinguishment of note payable | (3,354) | - | (3,354) | ||||||||||||||
| Other income, net | 738 | 179 | 559 | ||||||||||||||
| Total other expense | (3,749) | (538) | (3,211) | ||||||||||||||
| Net loss | $ | (9,862) | $ | (36,071) | $ | 26,209 | |||||||||||
Revenue
During the six months ended June 30, 2026, we recognized $21.0 million in revenue related to the Purchase Agreement with Jazz. No revenue was recognized during the six months ended June 30, 2025.
Research and Development Expenses
The following table summarizes our research and development expenses:
|
Six Months Ended June 30, |
$ Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
|
(in thousands)
|
|||||||||||||||||
| Personnel | $ | 4,961 | $ | 8,081 | $ | (3,120) | |||||||||||
| Clinical trial costs | 4,805 | 6,993 | (2,188) | ||||||||||||||
| Facility costs | 1,728 | 1,581 | 147 | ||||||||||||||
| Contract research organization | 1,495 | 1,862 | (367) | ||||||||||||||
| Manufacturing | 857 | 5,515 | (4,658) | ||||||||||||||
| Lab consumables | 278 | 1,987 | (1,709) | ||||||||||||||
| Other | 219 | 244 | (25) | ||||||||||||||
| Total research and development expenses | $ | 14,343 | $ | 26,263 | $ | (11,920) | |||||||||||
Research and development expenses for the six months ended June 30, 2026 were $14.3 million compared to $26.3 million for the six months ended June 30, 2025. The decrease of $11.9 million was primarily due to:
•$3.1 million of decreased personnel costs, driven primarily by cost savings recognized during the six months ended June 30, 2026 as result of the reductions in force that were completed in February and May 2026;
•$2.2 million of decreased clinical trial costs, driven by lower patient and site monitoring costs as we approach the completion of the Phase 1/1b clinical trial of WTX-124 and the Phase 1b/2 clinical trial of WTX-330, both of which are expected to be completed in the fourth quarter of 2026; and
•a net decrease of $6.6 million across all other research and development activities. This decrease was due to our decision to significantly curtail our research and development spending in order to conserve our capital resources that may be necessary in our pursuit of strategic alternatives. Decreases of $6.8 million across the remaining research and development activities were partially offset by an increase in facility costs of $0.1 million due to
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higher depreciation expense recognized during the six months ended June 30, 2026 as a result of a change in the estimated useful lives of our property and equipment.
General and Administrative Expenses
The following table summarizes our general and administrative expenses:
|
Six Months Ended June 30, |
$ Change | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| (in thousands) | |||||||||||||||||
| Professional services | $ | 6,470 | $ | 2,462 | $ | 4,008 | |||||||||||
| Personnel | 4,388 | 4,745 | (357) | ||||||||||||||
| Facility costs | 887 | 657 | 230 | ||||||||||||||
| Corporate insurance | 520 | 537 | (17) | ||||||||||||||
| Information technology costs | 326 | 367 | (41) | ||||||||||||||
| Other | 179 | 502 | (323) | ||||||||||||||
| Total general and administrative expenses | $ | 12,770 | $ | 9,270 | $ | 3,500 | |||||||||||
General and administrative expenses were $12.8 million for the six months ended June 30, 2026 compared to $9.3 million for the six months ended June 30, 2025. The increase of $3.5 million was primarily due to:
•$4.0 million of increased professional services fees, driven by an increased reliance on external legal counsel, consultants, and advisors engaged to assist us in our strategic review process; and
•$0.2 million of increased facility costs due to higher depreciation expense recognized during the six months ended June 30, 2026 as a result of a change in the estimated useful lives of our property and equipment.
These increases were partially offset by:
•$0.4 million of decreased personnel costs, driven primarily by cost savings recognized during the six months ended June 30, 2026 as result of the reductions in force that were completed in February and May 2026; and
•$0.4 million of decreased costs across all other general and administrative activities as the result of cost savings initiatives implemented during the period leading up and during six months ended June 30, 2026.
Interest Income
Interest income was $0.7 million for the six months ended June 30, 2026 compared to $1.8 million for the six months ended June 30, 2025. This decrease in interest income was primarily a result of lower balances in money market accounts during the six months ended June 30, 2026 compared to the six months ended June 30, 2025.
Interest Expense
Interest expense was $1.8 million for the six months ended June 30, 2026 compared to $2.6 million for the six months ended June 30, 2025. This decrease in interest expense was due to the extinguishment of the K2HV Loan Agreement in May 2026.
Loss on Extinguishment of Note Payable
The extinguishment of the K2HV Loan Agreement in May 2026 resulted in a one-time loss of $3.4 million for the six months ended June 30, 2026. No similar activity occurred during the six months ended June 30, 2025.
Other Income, Net
Other income, net for the six months ended June 30, 2026 and 2025 primarily consists of the gains recognized for the change in fair value of the derivative liability associated with the K2HV Loan Agreement during each period.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception in 2017, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company; business planning; raising capital; developing and optimizing our platform technology; identifying potential product candidates; enhancing our intellectual property portfolio; undertaking research, preclinical studies, and clinical trials; and enabling manufacturing for our development programs. Our net loss was $9.9 million for the six months ended June 30, 2026. As of June 30, 2026, we had cash and cash equivalents of $22.0 million and an accumulated deficit of $485.3 million. As we have no products that are approved for sale, we have not generated any revenue from product sales to date, and we do not
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expect to generate any such revenue for the foreseeable future, if at all. Instead, we have financed our operations primarily through aggregate cash proceeds from convertible promissory notes, private placements of our convertible preferred stock, our initial public offering, payments from Jazz under the Collaboration Agreement and the Purchase Agreement, sales of common stock through our at-the-market program, and the drawdown of our term loans. We expect to incur substantial operating losses and negative cash flows from operations for the foreseeable future. There is substantial doubt about our ability to continue as a going concern for at least twelve months from the date these condensed consolidated financial statements are issued in this Quarterly Report, and we expect continuing operations beyond the near term will require additional liquidity.
In February 2026, we initiated the 2026 Restructuring and a process to explore a full range of strategic alternatives to advance our promising platform and drug development pipeline to maximize stockholder value. We engaged Piper Sandler to serve as exclusive financial advisor to assist in the strategic review process. Measures contemplated during the strategic review process include the Asset Sale and may also include, among other options, a sale of our company, a business combination or merger, a sale of our assets, licensing or collaboration arrangements, or other strategic transactions. There can be no assurance that the strategic review process will result in any agreement or transaction that will enhance stockholder value, or any agreement or transaction at all.
As part of the 2026 Restructuring, our board of directors approved a reduction in force, representing 64% of our workforce, to better align our resources with our pursuit of strategic alternatives. In May 2026, an additional reduction in force occurred, representing 36% of our workforce at that time. As a result of the 2026 Restructuring, we have recognized restructuring costs of $5.7 million during the six months ended June 30, 2026 consisting of severance payments, retention bonuses, employee benefits and related taxes, stock-based compensation, and contract termination costs. The 2026 Restructuring is expected to be completed by the end of 2026. We may also incur additional costs, including, but not limited to, potential impairment charges not currently contemplated that may occur as a result of, or that are associated with the 2026 Restructuring.
While our strategic review process is underway, we expect our overall costs will decrease in the near term due to the reduction in force, the completion of our clinical trials, and other cost reduction initiatives. The outcome of our strategic review process will inform our future development plans and the costs associated with those efforts. If we decide to resume enrollment in our clinical trials or development of our preclinical product candidates, however, we expect that our research and development and general and administrative expenses would increase.
We will need additional capital to fund our operations, which we may raise through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Additionally, the extent to which we use our at-the-market program as a source of future funding will depend on a number of factors, including the prevailing market price of our common stock, general market conditions, the extent to which we are able to secure funds from other sources, and whether we are then subject to limitations on our ability to use Form S-3 to sell more than one-third of the aggregate market value of our public float in the trailing 12-month period, which limitations will remain in place until such time as our public float exceeds $75 million. Our failure to raise capital or enter into such agreements as and when needed could have a material adverse effect on our business, results of operations and financial condition.
Term Loan Facility
In May 2024, we, as borrower, entered into the K2HV Loan Agreement with K2HV (which we refer to, together with any other lender from time to time, as the Lenders); K2HV, as administrative agent for the Lenders (in such capacity, together with its successors, the Administrative Agent); and Ankura Trust Company, LLC, as collateral trustee for the Lenders, or the Collateral Trustee. The K2HV Loan Agreement provided up to $60.0 million principal in term loans. We received $30.0 million in gross loan proceeds at closing; $25.0 million from the first tranche commitment and $5.0 million from the second tranche commitment. A third tranche commitment of up to $10.0 million was available to be drawn at our option through June 30, 2025, subject to the achievement, as determined by the Administrative Agent in its discretion, of certain time-based, clinical and regulatory milestones and receipt of not less than $60.0 million in net cash proceeds from certain financing activities, with at least $50.0 million from a single offering of common stock. Our ability to draw upon the third tranche commitment expired on June 30, 2025 without being drawn upon. A fourth tranche commitment of up to $20.0 million was available to be drawn at our option through May 1, 2026, subject to Lender's review of our clinical, financial and operating plan and subject to the Lender's consent in its sole and absolute discretion. Our ability to draw upon the fourth tranche commitment expired on May 1, 2026 without being drawn upon.
The term loan was scheduled to mature on May 1, 2028, and we were obligated to make interest only payments for the first 24 months followed by equal interest and principal payments each month thereafter through the maturity date. The term loan bore a variable interest rate equal to the greater of (i) 10.3%, and (ii) the sum of (A) the prime rate last quoted in The Wall Street Journal (or a comparable replacement rate if The Wall Street Journal ceases to quote such rate) and (B) 1.8%. We could prepay, at our option, all, but not less than all, of the outstanding principal balance and all accrued and unpaid interest with respect to
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the principal balance being prepaid of the term loans, subject to a prepayment premium to which the Lenders were entitled and certain notice requirements. We were obligated to pay a final fee equal to 6.95% of the aggregate amount of the term loans funded, or the Final Fee, to occur upon the earliest of (i) the maturity date, (ii) the acceleration of the term loans, and (iii) the prepayment of the term loans. The Final Fee was being accreted to interest expense using the effective interest method over the life of the debt.
Pursuant to the terms of the K2HV Loan Agreement, the lenders thereto had the option, prior to the full repayment of the term loans, to convert up to $5.0 million of the outstanding principal of the term loans into shares of our common stock at a conversion price of the lesser of $6.3182 per share, or the Fixed Price Conversion, and the lowest effective price per share of our first equity financing following the closing of the K2HV Loan Agreement, or the Variable Price Conversion, subject to customary adjustments and 9.99% and 19.99% beneficial ownership limitations. There would have been no prepayment penalty for any principal amount converted into common stock. We determined that the Fixed Price Conversion and the Variable Price Conversion within the K2HV Loan Agreement were required to be bifurcated as an embedded derivative under ASC Topic 815, Derivatives and Hedging, at fair value, and recorded as a discount on the debt on the date of issuance, with subsequent changes in fair value recognized in the accompanying condensed consolidated statements of operations.
As security for our obligations under the K2HV Loan Agreement, we granted the Lenders a first priority security interest on substantially all of our assets (other than intellectual property), subject to certain exceptions. The K2HV Loan Agreement contained customary representations and warranties, events of default and affirmative and negative covenants, including covenants that limited or restricted our ability to, among other things, dispose of assets, make changes to our business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, incur additional liens, pay dividends or other distributions or repurchase equity, make investments, and enter into certain transactions with affiliates, in each case subject to certain exceptions. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% per annum may have been applied to the outstanding loan balances, and the Lenders may have declared all outstanding obligations immediately due and payable and exercised all of its rights and remedies as set forth in the K2HV Loan Agreement and under applicable law.
Subject to certain conditions, we granted the Lenders the right, prior to repayment of the term loans, to invest up to $5.0 million in the aggregate in future offerings of capital stock, at market terms, subject to certain exceptions and conditions.
We incurred debt issuance costs of $0.7 million in connection with the term loans, composed of the facility fee of $0.4 million and other expenses paid to the Lenders of $0.2 million and external legal fees of $0.1 million. These debt issuance costs, together with fair value of the embedded derivative of $4.5 million, resulted in a debt discount of $5.1 million which was being amortized to interest expense over the term of the K2HV Loan Agreement using the effective interest method.
On May 6, 2026, we entered into a letter agreement providing for the repayment by us of all amounts owed under the K2HV Loan Agreement. On May 6, 2026, upon payment by us of $31.4 million, all of our indebtedness and obligations to the Collateral Trustee and the Lenders under the K2HV Loan Agreement and any other related loan and collateral security documents was deemed paid and discharged in full. During the six months ended June 30, 2026, we recognized a loss on the extinguishment of debt in the amount of $3.4 million, primarily due to the write off of unamortized debt issuance costs and the unaccreted balance of the Final Fee.
ATM Offering
On May 10, 2022, we entered into a sales agreement, or the Sales Agreement, with Leerink Partners LLC, or Leerink Partners, pursuant to which, from time to time, we may offer and sell shares of our common stock, which we refer to as the ATM Offering. The Sales Agreement provides that Leerink Partners is entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering. We were initially entitled to offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million in the ATM Offering, which was subsequently increased in February 2024 to $75.0 million. On May 8, 2025, we filed a new Registration Statement on Form S-3 and filed a new prospectus covering the ATM Offering, or the Prospectus, with an aggregate offering price of up to $12.5 million in the ATM Offering as a result of being subject to General Instruction I.B.6 of Form S-3, or the Baby Shelf Limitation. As of June 30, 2026, we remain subject to the Baby Shelf Limitation. During the six months ended June 30, 2026, we did not sell any shares of our common stock under the ATM Offering.
Jazz Collaboration
As of June 30, 2026, we had received $41.0 million in payments from Jazz, excluding payments for reimbursed costs, under the terms of the Collaboration Agreement and the Purchase Agreement.
Pursuant to the Purchase Agreement, Jazz has agreed to pay us an additional $2.0 million contingent upon the consent to the partial assignment of a certain license agreement, as and to the extent such agreement relates to the conduct of the 898 Program. There can be assurances of the timing of when we will receive the $2.0 million contingent payment, or at all.
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Effective as of the Closing, the Collaboration Agreement was terminated, and as a result, we are no longer eligible to receive payment for meeting the conditions of the development and regulatory milestones or sales-based milestones we were previously eligible for under the Collaboration Agreement.
Plan of Operation and Future Funding Requirements
As of June 30, 2026, we had cash and cash equivalents of $22.0 million. Based on our current operating plan, we expect that our cash and cash equivalents will be insufficient to allow us to fund our current operating plan through at least twelve months from the date these condensed consolidated financial statements are issued in this Quarterly Report. These conditions raise substantial doubt about our ability to continue as a going concern for at least twelve months from the date these condensed consolidated financial statements are issued in this Quarterly Report. As described above, we have initiated a process to explore a full range of strategic alternatives to advance our promising platform and drug development pipeline to maximize stockholder value. The outcome of our strategic review process will inform our future funding requirements, however, because of the numerous risks and uncertainties associated with the strategic review process, we are unable to estimate our current operating capital requirements.
The timing and amount of our operating expenditures will depend largely on:
•the nature, timing, and extent of our strategic review process;
•the pursuit of viable strategic alternatives, if any;
•the scope, progress, timing, costs and results of researching and developing our current product candidates or any future product candidates, including with respect to our clinical trials of WTX-124 and WTX-330 and the costs associated with attracting, hiring and retaining skilled personnel and consultants as our preclinical and clinical activities increase;
•the cost of manufacturing our product candidates WTX-124, WTX-330, and any future product candidates for clinical trials and, if we are able to obtain marketing approval, for commercial sale;
•the costs of any third-party products used in our combination clinical trials that are not covered by such third parties or other sources;
•the success of our collaboration with Jazz;
•the timing of, and the cost involved in, obtaining marketing approval for WTX-124 and WTX-330 or any future product candidates, and our ability to obtain marketing approval and generate revenue from any potential commercial sales of such product candidates;
•the cost of building a sales force in anticipation of product commercialization and the cost of commercialization activities for WTX-124, WTX-330, our INDUCER molecules, or any future product candidates if we receive marketing approval, including marketing, sales and distribution costs;
•the potential emergence of competing therapies and other adverse market developments;
•the amount and timing of any payments we may be required to make pursuant to our license agreement with Harpoon Therapeutics, Inc., or other future license agreements or collaboration agreements;
•our ability to establish future collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;
•the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;
•any product liability or other lawsuits related to our product candidates;
•the extent to which we in-license or acquire other products and technologies; and
•the costs of operating as a public company.
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financing. We may also consider entering into collaboration arrangements or selectively partnering for clinical development and commercialization. The sale of additional equity may result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations or our ability to incur additional indebtedness or pay dividends, among other items. If we raise additional funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties, we
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may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise capital when needed or on acceptable terms, we may be forced to delay, reduce, or eliminate certain costs related to our operations and research and development programs.
Cash Flows
The following table provides information regarding our cash flows:
|
Six Months Ended June 30, |
|||||||||||
| 2026 | 2025 | ||||||||||
| (in thousands) | |||||||||||
|
Net cash (used in) provided by:
|
|||||||||||
|
Operating activities
|
$ | (3,968) | $ | (34,112) | |||||||
|
Investing activities
|
416 | - | |||||||||
|
Financing activities
|
(32,412) | 388 | |||||||||
|
Net decrease in cash, cash equivalents and restricted cash and cash equivalents
|
$ | (35,964) | $ | (33,724) | |||||||
Operating Activities
Net cash used in operating activities for the six months ended June 30, 2026 was $4.0 million compared to $34.1 million for the six months ended June 30, 2025. The decrease in cash used for operating activities of $30.1 million is the result of receipt of a $21.0 million payment from Jazz related to the Purchase Agreement in May 2026, combined with various cost reduction initiatives implemented during the six months ended June 30, 2026. Our operating expenses, excluding non-cash expenses, have decreased $6.9 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Similarly, our cash used to pay down our current liabilities, net of prepayments, has decreased $5.3 million due to our lower operating costs. During the six months ended June 30, 2026, we incurred higher lease payments of $2.4 million compared to the six months ended June 30, 2025 due to the termination of our lease in May 2026. Finally, interest income recognized during the six months ended June 30, 2026 decreased by $1.1 million compared to the six months ended June 30, 2025.
Investing Activities
Net cash provided by investing activities for the six months ended June 30, 2026 was $0.4 million, which represents proceeds from the sale of property and equipment during the period. No investing activities occurred during the six months ended June 30, 2025.
Financing Activities
Net cash used for financing activities for the six months ended June 30, 2026 was $32.4 million, which represents the repayment of amounts owed under the K2HV Loan Agreement during the period, plus payment of fees incurred for extinguishment of the note payable. Net cash provided by financing activities for the six months ended June 30, 2025 was $0.4 million, and primarily consisted of net proceeds of $0.3 million from our ATM Offering.
Contractual Obligations
Overview
In the normal course of business, we enter into agreements with contract research organizations, or CROs, contract manufacturers, vendors and other third parties for preclinical studies and clinical trials, manufacturing services and other services and products for operating purposes. These contracts do not contain minimum purchase commitments and are cancellable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation.
Term Loan Facility
See "Liquidity and Capital Resources - Sources of Liquidity - Term Loan Facility" for descriptions of the K2HV Loan Agreement and the repayment thereof.
Lease Agreement
The lease for office and laboratory space that we entered into in June 2021 commenced in May 2022 and was scheduled to expire in May 2030. On May 7, 2026, we entered into an Agreement for Termination of Lease and Voluntary Surrender of Premises (the "Lease Termination") with ARE-770/784/790 Memorial Drive, LLC (the "Landlord"), pursuant to which we and the Landlord agreed to terminate that certain lease, dated June 1, 2021, as amended, by and between us and the Landlord (the "Lease"), effective October 31, 2026 or such sooner date as a party provides notice in accordance with the Lease Termination
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(the "Lease Termination Date"). Under the Lease, we leased approximately 25,778 square feet of space, consisting of the entire building located at 200 Talcott Avenue, Watertown, Massachusetts. Pursuant to the Lease Termination, we paid the Landlord an aggregate termination fee of $2.7 million, which represented full satisfaction of all remaining payments and other financial obligations due from us to the Landlord under the Lease, including, without limitation, Base Rent (as defined in the Lease) for the months of May 2026 through October 2026. On July 1, 2026, the Landlord exercised its option to accelerate the Lease Termination Date to July 31, 2026, and we have no further rent obligations under the Lease after that date.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates which include, but are not limited to those related to accrued expenses, assumptions used in the valuation of stock-based compensation expense and the fair value of the derivative liability. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions and conditions.
Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our 2025 Annual Report, which was filed with the SEC on March 27, 2026. During the three and six months ended June 30, 2026, there were no material changes to our critical accounting policies from those previously disclosed.
Werewolf Therapeutics Inc. published this content on July 31, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 31, 2026 at 11:11 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]