← Back to SPRB filing summaryOriginal filing text · Part I
Item 2 — Management's Discussion and Analysis
Spruce Biosciences, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”) and our audited financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (“SEC”) on March 9, 2026 (the “Annual Report”). Unless otherwise indicated, all references in this Quarterly Report to “Spruce,” the “company,” “we,” “our,” “us” or similar terms refer to Spruce Biosciences, Inc.
Forward-Looking Statements
In addition to historical financial information, this Quarterly Report contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will” or the negative of these terms or other similar expressions.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a biopharmaceutical company focused on developing and commercializing novel therapies for neurological disorders with significant unmet medical need. We have a diverse portfolio of product candidates aimed at addressing diseases with high unmet medical need and clear biology for treatment, for which there are either no approved therapies treating the underlying disease or suboptimal treatment options. We were incorporated in April 2016 and are led by a management team experienced in the development and commercialization of groundbreaking therapeutics.
Since inception, we have focused primarily on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting preclinical and clinical development of, and manufacturing development for, our product candidates. Since November 2024 we have shifted our focus to the development of tralesinidase alfa enzyme replacement therapy (“TA-ERT”), an investigational treatment for mucopolysaccharidoses type IIIB (“MPS IIIB”), or Sanfilippo Syndrome Type B. In October 2025, TA-ERT received breakthrough therapy designation from the U.S. Food and Drug Administration (“FDA”) for the treatment of Sanfilippo Syndrome Type B. TA-ERT has received Rare Pediatric Disease Designation, Fast Track Designation, Breakthrough Therapy Designation, and Orphan Drug Designation in the United States and European Union (“EU”). We anticipate submitting a biologics license application of TA-ERT for the treatment of Sanfilippo Syndrome Type B in the fourth quarter of 2026. Currently, there is no FDA-approved therapy for the treatment of MPS IIIB, and disease management consists of limited palliative care.
We have no products approved for commercial sale and have not generated any product revenue to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development of TA-ERT and our other current and future product candidates.
Since inception, we have incurred significant losses and negative cash flows from operations. During the six months ended June 30, 2026 and 2025, we incurred net losses of $28.5 million and $16.1 million, respectively, and used $30.9 million and $21.6 million of cash in operations, respectively. As of June 30, 2026, we had an accumulated deficit of $317.7 million, and we do not expect positive cash flows from operations for the foreseeable future. We expect to continue to incur significant and increasing losses for the foreseeable future, and our net losses may fluctuate significantly from period to period, depending on the timing of expenditures on our planned research and development activities.
Since inception through the date of this filing, we have raised aggregate gross proceeds of $432.6 million, including $103.5 million from our initial public offering in October 2020, $116.0 million from the sale of our redeemable convertible preferred stock, $109.1 million from private placement financings (including the August 2026 private placement), $69.0 million from the April 2026 underwritten public offering, $20.0 million from the issuance of debt, and $15.0 million upfront payment from Kaken Pharmaceutical Co., Ltd. received in April 2023. As of June 30, 2026, we had cash and cash equivalents of $96.3 million.
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We believe that based on our current operating plan, our cash and cash equivalents of $96.3 million as of June 30, 2026 and the proceeds from the August 2026 private placement will be sufficient to fund our planned operations and debt obligations for at least 12 months following the issuance date of these financial statements included elsewhere in this Quarterly Report.
We expect our expenses will increase significantly in connection with our ongoing activities, as we:
•pursue regulatory approval of TA-ERT in patients with MPS IIIB;
•build a highly specialized commercial organization to support the commercialization of TA-ERT, if approved, in the United States;
•seek strategic collaborations to benefit from the resources of biopharmaceutical companies specialized in either relevant disease areas or geographies in markets outside the United States;
•advance TA-ERT through our planned TrAnsform confirmatory study in patients with MPS IIIB and expanded access programs, both of which are expected to initiate in the fourth quarter of 2026 and are expected to enroll approximately 14 and 10 participants, respectively;
•expand manufacturing capacity to accommodate anticipated global demand of TA-ERT, if approved, for the treatment of MPS IIIB;
•implement operational, financial, and management information systems;
•hire additional personnel; and
•obtain, maintain, expand, and protect our intellectual property portfolio.
In November 2025, the U.S. Securities and Exchange Commission (“SEC”) declared effective a registration statement on Form S-3 (the “Shelf Registration”), covering the sale of up to $300.0 million of our securities. Also, in March 2026, we entered into an Open Market Sales AgreementSM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal. As of June 30, 2026, we have not issued any shares of common stock under the Sales Agreement.
Additionally, on April 22, 2026, we closed our previously announced underwritten public offering of 1,150,000 shares of our common stock at a public offering price of $50.00 per share and pre-funded warrants to purchase up to 50,000 shares of our common stock at a public offering price of $49.99 per pre-funded warrant (which equals the public offering price per share of common stock, less the $0.01 per share exercise price of each pre-funded warrant). In addition, we granted the underwriters a 30-day option to purchase up to 180,000 additional shares of common stock at the public offering price, less underwriting discounts and commissions, which was exercised in full. The net proceeds to us from the offering, after deducting underwriting discounts and commissions and offering expenses payable by us, were $64.4 million.
Global economic and business activities continue to face widespread macroeconomic uncertainties, including global trade disputes, labor shortages, declines in consumer confidence, inflation and monetary supply shifts, recession risks, potential disruptions from the ongoing wars in Ukraine and the Middle East and related sanctions, declines in economic growth, tariffs and related legal challenges, and uncertainty about economic stability.
The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.
Reverse Stock Split
We effected a one-for-seventy-five (1:75) reverse stock split of our outstanding common stock (the “Reverse Stock Split”) on August 4, 2025.
All of the outstanding common stock share numbers (including shares of common stock subject to our options), share prices, exercise prices and per share amounts contained in the financial statements have been retroactively adjusted in the financial statements to reflect this Reverse Stock Split for all periods presented.
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Material Agreements
Loan Agreement with Avenue
On January 7, 2026 (the “Avenue Closing Date”), we entered into a Loan and Security Agreement (the “Avenue Loan and Security Agreement”) and a Supplement to the Loan and Security Agreement (together with the Avenue Loan and Security Agreement, the “Avenue Loan Agreement”), with Avenue Capital Management II, L.P., as administrative agent and collateral agent (the “Agent”) and Avenue Venture Opportunities Fund II, L.P., as lender (the “Lender”, together with the Agent, “Avenue”).
The Avenue Loan Agreement makes available to us term loans in an aggregate principal amount of up to $50.0 million with (i) $15.0 million funded within 5 business days after the Avenue Closing Date (“Tranche 1”), (ii) up to $10.0 million to be made available to us between March 1, 2026 and September 30, 2026, subject to, among other things, our achievement of a key regulatory milestone related to our development of TA-ERT for the treatment of MPS IIIB (“Tranche 2”) and (iii) up to $15.0 million to be made available to us between September 1, 2026 and March 31, 2027, subject to, among other things, our achievement of an additional key regulatory milestone with respect to our development of TA-ERT for the treatment of MPS IIIB (“Tranche 3”). The Lender may make additional term loans of up to an additional $10.0 million (the “Discretionary Tranche 4” and collectively with Tranche 1, Tranche 2 and Tranche 3, the “Avenue Loans”), to be funded between October 1, 2027 and June 30, 2028, subject to, among other things, (i) our achievement of a certain commercial milestone and (ii) the mutual written agreement of us and the Lender (upon the Lender’s investment committee approval). The Avenue Loans bear interest at an annual rate equal to the greater of (x) the sum of 5.25% plus the prime rate as reported in The Wall Street Journal and (y) 12.25%. The Avenue Loans are secured by a lien on and security interest in all of our assets, including intellectual property, subject to agreed exceptions. The maturity date of the Avenue Loans is July 1, 2029 (the “Avenue Maturity Date”). The Avenue Loan Agreement does not contain any minimum cash requirement or other financial covenants. As of June 30, 2026, the outstanding principal was $15.0 million under Tranche 1.
We will make interest only payments on the Avenue Loans until the 12-month anniversary of the Avenue Closing Date, subject to (i) a 6-month extension, so long as at least $5.0 million from Tranche 2 has been funded and (ii) an additional 12-month extension if we achieve the Tranche 3 milestone. The Avenue Loan principal is repayable in equal monthly installments from the end of interest only period to the Avenue Maturity Date.
We may, at our option at any time, prepay the Avenue Loans in their entirety by paying the then-outstanding principal balance and all accrued and unpaid interest on the Avenue Loans, subject to a prepayment fee equal to (i) 3.0% of the principal amount outstanding if the prepayment occurs on or prior to the first anniversary following the Avenue Closing Date, (ii) 2.0% of the principal amount outstanding if the prepayment occurs after the first anniversary following the Avenue Closing Date, but on or prior to the second anniversary following the Avenue Closing Date, and (iii) 1.0% of the principal amount outstanding if the prepayment occurs after the second anniversary following the Avenue Closing Date. We will pay a final payment of 4.0% of the aggregate commitment amounts for Tranche 1, Tranche 2 and Tranche 3, which shall be increased to include the commitment amount of Discretionary Tranche 4 upon the funding of such tranche, on the earlier of (x) the Avenue Maturity Date and (y) the date that we prepay all of the outstanding principal amount of the Avenue Loans in full. On the Avenue Closing Date, we paid to the Lender a commitment fee of $0.4 million.
The Avenue Loan Agreement contains customary representations, warranties and covenants, including covenants by the company limiting, among other things, additional indebtedness, liens, guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes. The Avenue Loan Agreement provides for events of default customary for term loans of this type, including but not limited to non-payment, breaches or defaults in the performance of covenants, insolvency, bankruptcy and the occurrence of a material adverse effect on the company. After the occurrence of an event of default, the Agent may (i) accelerate payment of all obligations, impose an increased rate of interest, and terminate the Lender’s commitments under the Avenue Loan Agreement and (ii) exercise any other right or remedy provided by contract or applicable law, including a foreclosure on our assets.
Components of Results of Operations
Operating Expenses
We classify operating expenses into two main categories: (i) research and development expenses and (ii) general and administrative expenses.
Research and Development Expenses
Our research and development expenses consist of external and internal expenses incurred in connection with our research activities and development programs.
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These expenses include:
▪external expenses, consisting of:
oclinical development—expenses associated with clinical research organizations (“CROs”) engaged to manage and conduct clinical trials, in-process research and development and other outside services;
opreclinical studies—expenses associated with preclinical studies and clinical pharmacology;
omanufacturing—expenses associated with contract manufacturing; labeling, packaging, and distribution of clinical trial supplies, and other outside services;
oother research and development—expenses associated with business operations, quality and regulatory compliance; and
▪internal expenses, consisting of personnel, including expenses for salaries, bonuses, benefits, stock-based compensation, as well as allocation of certain expenses.
To date, these expenses have been incurred primarily to develop TA-ERT. We expect that these expenses will primarily consist of personnel costs, expenses for the conduct of clinical trials, manufacturing costs for clinical drug supply, and in-process research and development. We expect that significant additional spending will be required to progress TA-ERT through clinical development and potential regulatory approval and advancing our other investigational product candidates through clinical and pre-clinical development.
Research and development expenses are recognized as they are incurred, including licenses of intellectual property that have no alternative future use at the time of the acquisition. If deposits are required by external vendors, a portion of the deposit is included as a prepaid expense until the activity has been performed or when the goods have been received to amortize the deposit to expense in the statements of operations and comprehensive loss.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits, and stock-based compensation expense, for executive, finance, and other administrative functions. General and administrative expenses also include legal fees, professional fees, insurance costs, facility costs not otherwise included in research and development expenses, and public company expenses such as costs associated with compliance with the rules and regulations of the SEC, and those of the Nasdaq Stock Market LLC listing rules.
We expect that our general and administrative expenses will continue to increase in the foreseeable future as additional administrative personnel and services are required to manage these functions of a public company, and as we advance TA-ERT through potential regulatory approval.
Interest Expense
Interest expense consists of interest incurred and non-cash amortization of debt discount and issuance costs in connection with our debt.
Interest and Other Income, Net
Interest and other income, net primarily consists of interest income earned on our cash and cash equivalents.
Change in Fair Value of Warrant and Conversion Option Liabilities
Change in fair value of warrant and conversion option liabilities consists of the change in the fair value of the warrant liability and debt conversion option.
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Results of Operations
Comparisons of the Three and Six Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the periods presented (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 Change 2026 2025 Change
Operating expenses:
Research and development $ 12,163 $ (430 ) $ 12,593 $ 19,738 $ 10,407 $ 9,331
General and administrative 4,349 3,122 1,227 8,761 6,777 1,984
Total operating expenses 16,512 2,692 13,820 28,499 17,184 11,315
Loss from operations (16,512 ) (2,692 ) (13,820 ) (28,499 ) (17,184 ) (11,315 )
Interest expense (1,097 ) (29 ) (1,068 ) (1,771 ) (65 ) (1,706 )
Interest and other income, net 765 193 572 1,251 522 729
Change in fair value of warrant and conversion option liabilities 615 461 154 524 619 (95 )
Net loss $ (16,229 ) $ (2,067 ) $ (14,162 ) $ (28,495 ) $ (16,108 ) $ (12,387 )
Research and Development Expenses
The following table sets forth research and development expenses for the periods presented (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 Change 2026 2025 Change
External expenses:
Clinical development $ 3,487 $ (1,262 ) $ 4,749 $ 8,132 $ 7,331 $ 801
Manufacturing 6,894 (484 ) 7,378 8,374 (102 ) 8,476
Preclinical studies 51 3 48 56 (46 ) 102
Other research and development 372 197 175 572 459 113
Internal expenses:
Personnel 1,312 1,026 286 2,502 2,594 (92 )
Facilities and other 47 90 (43 ) 102 171 (69 )
Total research and development expenses $ 12,163 $ (430 ) $ 12,593 $ 19,738 $ 10,407 $ 9,331
Research and development expenses increased by $12.6 million during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase in clinical development expenses of $4.7 million was primarily related to increased expenses for TA-ERT of $5.8 million, offset by the discontinuation of the tildacerfont congenital adrenal hyperplasia (“CAH”) development program of $1.1 million. The increase in manufacturing expenses of $7.4 million was primarily related to TA-ERT. There was also an increase in personnel related costs of $0.3 million.
Research and development expenses increased by $9.3 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase in clinical development expenses of $0.8 million was primarily related to increased expenses for TA-ERT of $9.6 million, offset by lower one-time product acquisition related costs of $5.7 million and the discontinuation of the tildacerfont CAH development program of $3.0 million. The increase in manufacturing expenses of $8.5 million was primarily related to TA-ERT.
We anticipate that research and development expenses will increase into the foreseeable future as we advance TA-ERT through an anticipated biologics license application submission in the fourth quarter of 2026 and potential FDA approval.
For a description of the terms of our license agreements, see Note 7 to our unaudited condensed financial statements “License Agreements” presented elsewhere in this Quarterly Report.
General and Administrative Expenses
General and administrative expenses increased by $1.2 million during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 primarily due to an increase in personnel related costs of $0.9 million and an increase in professional fees of $0.2 million.
General and administrative expenses increased by $2.0 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to an increase in personnel related costs of $1.1 million and an increase in professional fees of $0.7 million.
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Interest Expense
Interest expense increased by $1.1 million during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 and increased by $1.7 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 due to an increase in our debt and its related interest rate and an increase in the related amortization of debt discount and issuance costs.
Interest and Other Income, Net
Interest and other income, net increased by $0.6 million during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 and increased by $0.7 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to higher money market fund balances.
Change in Fair Value of Warrant and Conversion Option Liabilities
Change in fair value of warrant and conversion option liabilities increased by $0.2 million during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 and decreased by $0.1 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. In the prior period, the change in fair value was for pre-funded warrants issued to HBM Alpha Therapeutics, Inc. In the current period, the change in fair value relates to warrants and the conversion option under the Avenue Loan Agreement.
Liquidity and Capital Resources
Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations. We anticipate that we will continue to incur net losses for the foreseeable future. As of June 30, 2026 and December 31, 2025, we had an accumulated deficit of $317.7 million and $289.2 million, respectively. As of June 30, 2026 and December 31, 2025, we had cash and cash equivalents of $96.3 million and $48.9 million, respectively.
Since inception through the date of this filing, we have raised aggregate gross proceeds of $432.6 million, including $103.5 million from our initial public offering in October 2020, $116.0 million from the sale of our redeemable convertible preferred stock, $109.1 million from private placement financings (including the August 2026 private placement), $69.0 million from the April 2026 underwritten public offering, $20.0 million from the issuance of debt, and $15.0 million upfront payment from Kaken Pharmaceutical Co., Ltd. received in April 2023. As of June 30, 2026, we had cash and cash equivalents of $96.3 million.
On August 7, 2026, we entered into a Stock Purchase Agreement with the National MPS Society and the Cure Sanfilippo Foundation, pursuant to which we agreed to sell and issue 121,203 shares of our common stock in a private placement transaction. The purchase price per share was $45.38 per share. The total gross proceeds were $5.5 million. The proceeds will be used to partially fund our early access program, which is expected to initiate in the fourth quarter of 2026. We believe that based on our current operating plan, our cash and cash equivalents of $96.3 million as of June 30, 2026 and proceeds from the August 2026 private placement will be sufficient to fund our planned operations and debt obligations for at least 12 months following the issuance date of these financial statements included elsewhere in this Quarterly Report.
Until we can generate sufficient revenue, if ever, to fund our operations, we will need to finance future cash needs through the sale of a priority review voucher, if received, public or private equity offerings, license agreements, debt financings or restructurings, collaborations, strategic alliances and marketing or distribution arrangements, and there can be no assurance that such arrangements will be available to us on a timely basis, or, if available, will be available on terms acceptable to us.
Shelf Registration and Sales Agreement
In November 2025, the SEC declared effective the Shelf Registration covering the sale of up to $300.0 million of our securities. Also, in March 2026, we entered into the Sales Agreement with Jefferies, pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $75.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal (the “ATM Offering”). We have also filed a prospectus supplement with the SEC in connection with the ATM Offering under the Shelf Registration. Upon delivery of an issuance notice and subject to the terms and conditions of the Sales Agreement, Jefferies may sell the shares at market prices by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through The Nasdaq Capital Market, the existing trading market for our common stock. As of June 30, 2026, we have not issued any shares of common stock pursuant to the Sales Agreement. We have agreed to pay Jefferies commissions for its services of acting as agent of 3.0% of the gross proceeds from the sale of the shares pursuant to the Sales Agreement. We have also agreed to provide Jefferies with customary indemnification and contribution rights.
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Funding Requirements
To date, we have not generated any product revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval and commercialize TA-ERT or any other current or future product candidates, and we do not know when, or if at all, that will occur. We will continue to require additional capital to develop and launch TA-ERT and fund operations for the foreseeable future. Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our clinical development programs, and to a lesser extent, general and administrative expenses.
At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, TA-ERT or any of our other current or future product candidates. We expect our research and development expenses to increase significantly in the foreseeable future as we continue to invest in activities related to the clinical development and commercialization of TA-ERT and as we pursue regulatory approval of TA-ERT for the treatment of MPS IIIB. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and we may never succeed in achieving regulatory approval for TA-ERT in patients with MPS IIIB.
We may seek to raise capital through the sale of a priority review voucher, if received, equity or debt financings, collaborative agreements, potentially including agreements to out-license rights to develop and commercialize TA-ERT, or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:
•the progress, costs, trial design, results of, and timing of our ongoing and planned clinical trials of our product candidates;
•the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;
•the number and characteristics of product candidates that we may pursue;
•our ability to manufacture sufficient quantities of our product candidates;
•our plan to expand our research and development activities;
•the costs associated with manufacturing our product candidates and establishing clinical and commercial supplies, and sales, marketing, and distribution capabilities;
•our ability to enter into favorable out-licensing agreements for the development and commercialization of our product candidates;
•the costs associated with commercialization;
•the costs of acquiring, licensing, or investing in product candidates;
•our ability to maintain, expand, and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense, and enforcement of any patents or other intellectual property rights;
•our need and ability to retain key management and hire scientific, technical, business, and medical personnel;
•the effect of competing products and product candidates and other market developments;
•the timing, receipt, and amount of sales from our product candidates and any future product candidates, if approved;
•our need to implement additional internal systems and infrastructure, including financial and reporting systems;
•the economic and other terms, timing of, and success of any collaboration, licensing, or other arrangements which we may enter in the future; and
•the effects of the disruptions to and volatility in the credit and financial markets in the United States and worldwide from geopolitical and macroeconomic events, including global trade disputes, labor shortages, declines in consumer confidence, inflation and monetary supply shifts, recession risks, tariffs and related legal challenges, and the ongoing wars in Ukraine and the Middle East and related sanctions.
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If we raise additional funds by issuing equity securities, our stockholders will experience dilution. If we raise additional capital through debt financing, we may be subject to 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.
We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from macroeconomic events, global trade disputes, labor shortages, declines in consumer confidence, inflation and monetary supply shifts, recession risks, potential disruptions from the wars in Ukraine and the Middle East and related sanctions, declines in economic growth, tariffs and related legal challenges, and uncertainty about economic stability. If the equity and credit markets continue to deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the development or commercialization of our product candidates or other research and development initiatives. We also could be required to seek collaborators for our product candidates and any future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to our product candidates and any future product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.
The amount and timing of our future funding requirements will depend on many factors including the pace and results of our development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Material Cash Requirements
As of June 30, 2026, future payments of principal and interest on the Avenue Loans, which matures in July 2029, were $19.9 million. For a description of the terms of the Avenue Loans, see the section titled “Material Agreements — Loan Agreement with Avenue” above.
As of June 30, 2026, the total undiscounted lease payments for our non-cancelable operating lease for office space, which terminates in February 2028 unless renewed, was $0.6 million.
We enter into contracts in the normal course of business with third-party contract manufacturing organizations and CROs for clinical trials, non-clinical studies, drug substance and product manufacturing and other services for operating purposes. These contracts are generally cancelable by us upon prior written notice after a certain period, except for certain contracts with contract manufacturing organizations containing minimum purchase obligations. 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.
We have also entered into license and collaboration agreements under which we are obligated to make aggregate milestone payments upon the achievement of specified milestones as well as royalty payments. As of June 30, 2026, we were unable to estimate the timing or likelihood of achieving these milestones or generating future product sales. For a description of the terms of our license and collaboration agreements, see Note 7 to our unaudited condensed financial statements “License Agreements” presented elsewhere in this Quarterly Report.
Summary Statements of Cash Flows
The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for the periods presented below (in thousands):
Six Months Ended June 30,
2026 2025 Change
Net cash used in operating activities $ (30,852 ) $ (21,555 ) $ (9,297 )
Net cash used in investing activities (145 ) — $ (145 )
Net cash provided by (used in) financing activities 78,386 (811 ) 79,197
Net increase (decrease) in cash, cash equivalents, and restricted cash $ 47,389 $ (22,366 ) $ 69,755
Operating Activities
Net cash used in operating activities increased by $9.3 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily due to increased clinical development activities for TA-ERT offset by the receipt of $2.6 million related to the Allievex Purchase Agreement due to the completed Allievex bankruptcy proceedings.
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For a description of the terms of our license agreements, see Note 7 to our unaudited condensed financial statements “License Agreements” presented elsewhere in this Quarterly Report.
Investing Activities
For the six months ended June 30, 2026, net cash used in investing activities was related to purchase of property and equipment.
Financing Activities
For the six months ended June 30, 2026, net cash provided by financing activities was $78.4 million, consisting primarily of net proceeds from the issuance of common stock and warrants of $64.4 million and net proceeds from the Avenue Loans of $14.0 million.
For the six months ended June 30, 2025, net cash used in financing activities was $0.8 million, consisting of principal payments on debt of $0.8 million.
Critical Accounting Estimates
Our condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses, as well as the related disclosure of contingent assets and liabilities as of the date of the financial statements. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting estimates are described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in the Annual Report. During the six months ended June 30, 2026, there were no changes to our critical accounting estimates from those discussed in the Annual Report.
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