AVBP US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the “Risk Factors” section of this Annual Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage biopharmaceutical company dedicated to the identification, development and commercialization of differentiated medicines to address the unmet medical needs of patients with cancers. We seek to utilize our team’s deep drug development experience to maximize the potential of our lead development candidate, furmonertinib, and advance a pipeline of novel therapeutics, such as next-generation antibody drug conjugates, through approval and commercialization in patients suffering from cancer, with an initial focus on solid tumors. Furmonertinib is currently being evaluated in multiple clinical trials across a range of EGFRm in NSCLC, including a pivotal Phase 3 clinical trial in treatment naive, or first-line, patients with locally advanced or metastatic EGFRm NSCLC with exon 20 insertion mutations. We received Breakthrough Therapy Designation for furmonertinib for this disease from the FDA in October 2023, and Orphan Drug Designation for treatment of NSCLC with EGFRm or HER2 mutations or HER4 mutations in February 2024. A product candidate can receive Breakthrough Therapy Designation if preliminary clinical evidence indicates that the product candidate, alone or in combination with one or more other drugs, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as Breakthrough Therapies, interaction and communication between the FDA and the sponsor can help to identify the most efficient path for development. The receipt of a Breakthrough Therapy Designation for a product candidate may not result in a faster

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development process, review or approval compared to product candidates considered for approval under conventional FDA procedures and does not increase the likelihood that the product candidate will ultimately receive FDA approval for any indication.

Furmonertinib is an investigational, novel, EGFR mutant-selective TKI that we are developing for the treatment of NSCLC patients across a broader set of EGFRm than are currently served by approved EGFR TKIs. Furmonertinib is currently only approved and commercially distributed by Allist in China as a first-line therapy to treat classical EGFRm NSCLC. The FDA has not approved furmonertinib for any use. We selected furmonertinib for global development against nonclassical, or uncommon, mutations based on preliminary reductions in tumor size observed in seven out of ten patients in first-line treatment with EGFR exon 20 insertion mutations in the ongoing Phase 1b clinical trial, the FAVOUR trial, conducted by Allist in China, and preclinical activity in PACC mutations, each a subtype of uncommon mutation. In a subsequent interim data readout from the FAVOUR trial of furmonertinib in first-line patients with locally advanced or metastatic EGFRm NSCLC with exon 20 insertion mutations, 79% of patients (n=22 out of 28 patients) were observed to experience a reduction in tumor size of at least 30%. Allist expects to release final results of the primary analysis from the FAVOUR study in 2024. If the future clinical trial results of the FAVOUR trial are unfavorable, our clinical development plans for furmonertinib, which include conducting our global, pivotal Phase 3 FURVENT clinical trial in first-line non-squamous locally advanced or metastatic EGFRm NSCLC patients with exon 20 insertion mutations, may be adversely affected. In 2021, we licensed from Allist the right to develop and commercialize furmonertinib worldwide, with the exception of greater China, which includes mainland China, Hong Kong, Macau and Taiwan.

As one of the most prevalent cancers in the world, lung cancer imposes a significant global burden on human health, and EGFRm NSCLC represents a significant proportion of those affected. Despite progress in the therapeutic landscape for EGFRm NSCLC, many patients, particularly those with uncommon mutations, such as exon 20 insertions or PACC mutations, are underserved by existing treatments. In an interim data readout from the FAVOUR trial of furmonertinib in first-line patients with locally advanced or metastatic EGFRm NSCLC with exon 20 insertion mutations, 79% of patients (n=22 out of 28 patients) were observed to experience a reduction in tumor size of at least 30% from the baseline in a patient without evidence of progression as measured by RECIST 1.1 criteria, which measurement of reduction is the threshold in this trial for a partial response and for inclusion in determination of the ORR, which is the primary endpoint of this trial. In the same interim data readout, those 79% of patients were observed to experience a 15.2 month median DOR. Interim results may not be indicative of final results; however, we believe these interim clinical results underscore furmonertinib’s potential in patients whose tumors contain an uncommon EGFRm.

We have entered into the Allist License Agreement, pursuant to which, we have, among other things, secured an exclusive, royalty bearing and sublicensable license under certain intellectual property, including patents and know-how, owned or controlled by Allist to develop and commercialize any product containing furmonertinib or any of its salts or derivatives as an active ingredient of a product, which is led by a joint collaboration committee, comprising of representatives from both Allist and us. Under the Allist License Agreement, we are obligated to pay Allist milestone payments up to an aggregate of $765.0 million upon the achievement of certain development, regulatory and sales milestone events as set forth in the Allist License Agreement. During the year ended December 31, 2023, we paid $5.0 million in clinical milestones to Allist. We are also obligated under the Allist License Agreement to pay Allist tiered royalties based on net sales of Licensed Products. See “Business — Licenses, Partnerships and Collaborations — Allist Agreements.”

Since our inception in April 2021, we have devoted substantially all of our resources to organizing and staffing our company, acquiring the rights to develop furmonertinib, clinical development of furmonertinib, business planning, raising capital, identifying potential product candidates, enhancing our intellectual property portfolio and undertaking research and clinical and preclinical studies for our development programs. We do not have any products approved for sale and have not generated any revenue from product sales or otherwise. We have funded our operations to date primarily through the private placement of convertible preferred stock.

We have incurred significant operating losses since our inception and have not yet generated any revenue. Our net losses were $69.3 million and $36.9 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $157.8 million. Our net losses may fluctuate significantly from

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quarter-to-quarter and year-to-year, depending on the timing of our preclinical studies, clinical trials and our expenditures on other research and development activities. We expect to continue to incur losses for the foreseeable future. We anticipate these losses will increase substantially as we:

● advance our lead product candidate, furmonertinib, through clinical trials;

● acquire or in-license additional product candidates;

● advance our preclinical programs to clinical trials;

● further invest in our pipeline;

● further support our external partners’ manufacturing capabilities;

● seek regulatory approval for our product candidates;

● pursue commercialization of our product candidates;

● maintain, expand, protect and defend our intellectual property portfolio;

In addition, if we obtain regulatory approval for furmonertinib or any product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.

We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

On January 30, 2024, we completed the closing of our initial public offering of 9,722,222 shares of common stock at a price of $18.00 per share. Additionally, the underwriters exercised their option to purchase an additional 1,458,333 shares of common stock at a price of $18.00 per share. The shares of common stock began trading on the Nasdaq Global Market on January 26, 2024, under the symbol “AVBP”. We received net proceeds of $183.4 million, after deducting underwriting discounts and commissions and other estimated offering expenses. In addition, as a result of the closing of our initial public offering, our convertible preferred stock converted into 19,567,306 shares of common stock in January 2024.

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Key Components of Our Results of Operations

Operating Expenses

Research and Development Expenses

To date, our research and development expenses have been related primarily to the development of furmonertinib, preclinical studies and other clinical activities related to our portfolio. Research and development costs are expensed as incurred and payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized when the goods or services are received.

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Research and development costs include:

● license fees and research funding; and

Our direct research and development expenses consist principally of external costs, such as fees paid to CROs and consultants in connection with our clinical trials for furmonertinib, preclinical and toxicology studies and costs related to manufacturing materials for clinical and preclinical studies. Prior to our identification of potential product candidates in 2022, we did not track external costs by program. Subsequent to the identification of potential product candidates, a significant majority of our direct research and development costs have been related to furmonertinib. We deploy our personnel resources across all of our research and development activities.

We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of furmonertinib and the identification and development of new product candidates. We cannot determine with certainty the timing of initiation, the duration or the completion costs of future clinical trials and preclinical studies of product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Our future clinical development costs may vary significantly based on factors such as:

● per patient trial costs;

● the number of patients needed to determine a recommended dose;

● the number of trials required for approval;

● the number of sites included in the trials;

● the countries in which the trials are conducted;

● the length of time required to enroll eligible patients;

● the number of patients that participate in the trials;

● the number of doses that patients receive;

● the drop-out or discontinuation rates of patients;

● potential additional safety monitoring requested by regulatory agencies;

● the duration of patient participation in the trials and follow-up;

● the phase of development of the product candidate; and

● the efficacy and safety profile of the product candidate.

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General and Administrative Expenses

General and administrative expenses consist primarily of salaries, payroll taxes, employee benefits and stock-based compensation expenses for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities and, if any product candidates receive marketing approval, commercialization activities. We also anticipate increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.

Interest Income

Interest income consists of interest earned on our cash equivalents and short-term investments.

Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

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Research and Development

We track outsourced clinical and preclinical costs and other external research and development costs associated with our lead product candidate, furmonertinib, and other discovery-stage programs. We do not track internal research and development costs by product candidate. The following table summarizes our research and development expenses for the years ended December 31, 2023 and 2022:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Furmonertinib: ​ ​ ​ ​ ​ ​ ​ ​ ​

Personnel-related and other internal costs ​ ​ 12,705 ​ ​ 9,598 ​ ​ 3,107

​

Research and development expenses were $64.9 million and $30.4 million for the years ended December 31, 2023 and 2022, respectively. The increase of $34.5 million was primarily due to an increase of $30.1 million related to our lead product candidate, furmonertinib, an increase of $3.1 million of higher personnel-related costs due to increased headcount and $1.2 million in preclinical discovery work. Cost related to furmonertinib increased as a result of increased costs related to our FURVENT Phase 3 clinical trial of $18.6 million, which includes a $5.0 million milestone incurred

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under the Allist License Agreement, and a $11.7 million increase in costs related to our FURTHER Phase 1 clinical trial due to additional patients added to the studies in second half of 2023, offset by decreases in costs related to our FAVOUR trial and other general furmonertinib costs totaling $0.2 million.

General and Administrative

General and administrative expenses were $9.7 million and $6.5 million for the years ended December 31, 2023 and 2022, respectively. The increase of $3.2 million was due primarily to increases of $2.2 million in professional services and $1.0 million in personnel-related expenses.

Interest Income

Interest income was $5.3 million for the year ended December 31, 2023 and consisted of interest earned on our cash equivalents and short-term investments. For the year ended December 31, 2022, we did not earn any interest income.

Liquidity and Capital Resources

Sources of Liquidity

We have funded our operations primarily through the private placement of convertible preferred stock. To date, we have raised gross proceeds of $305.0 million from the issuance of convertible preferred stock. As of December 31, 2023, we had cash and cash equivalents of $150.4 million. In the first quarter of 2024, we completed our initial public offering of 11,180,555 shares of our common stock at a price to the public of $18.00 per share, including the exercise in full by the underwriters of their option to purchase 1,458,333 additional shares of our common stock. Including the option exercise, our aggregate net proceeds from the offering were $183.4 million, net of underwriting discounts, commissions and estimated offering costs.

Future Funding Requirements

We plan to continue to fund our operating expenses and capital expenditure requirements through additional public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. Debt or equity financing or collaborations and partnerships with other entities may not be available on a timely basis, on acceptable terms, or at all. In addition, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount or reduce other operating expenses. This could have an adverse impact on our ability to achieve certain of our planned objectives, and thus, materially harm our business. Our ability to successfully transition to profitability will depend upon obtaining additional financing and achieving a level of product sales adequate to support our cost structure. We cannot be assured that we will ever be profitable or generate positive cash flows from operating activities.

We believe that our existing cash and cash equivalents, together with the net proceeds from our initial public offering, will be sufficient to meet our anticipated cash requirements into 2026. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.

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

● the number and characteristics of product candidates that we pursue;

● the outcome, timing and costs of seeking regulatory approvals;

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● the emergence of competing therapies and other adverse market developments;

● the costs of operating as a public company.

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our platform technology, future revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Net cash (used in) provided by: ​ ​

Investing activities ​ — ​ —

Net (decrease) increase in cash and cash equivalents ​ $ (12,983) ​ $ 126,092

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Operating Activities

Net cash used in operating activities was $55.8 million for the year ended December 31, 2023 reflecting our net loss of $69.3 million that was offset by $0.9 million in stock-based compensation and a $12.6 million net change in our operating assets and liabilities attributable to the timing in which we pay our vendors for research and development activities.

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Net cash used in operating activities was $43.6 million for the year ended December 31, 2022 reflecting our net loss of $36.9 million and a $7.1 million net change in our operating assets and liabilities attributable to the timing in which we pay our vendors for research and development activities offset, in part, by $0.4 million in stock-based compensation.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2023 included $25.0 million of purchases of short-term investments, offset by $25.0 of maturities of short-term investments.

Financing Activities

Net cash provided by financing activities was $42.9 million for the year ended December 31, 2023, due to $44.9 million of net proceeds from the issuance of Series B convertible preferred stock and $0.4 million of proceeds from the exercise of stock options offset by a $2.4 million payment of deferred offering costs.

Net cash provided by financing activities was $169.7 million for the year ended December 31, 2022, due to the net proceeds of $60.0 million from the issuance of Series A convertible preferred stock and net proceeds of $109.7 million from the issuance of Series B convertible preferred stock.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2023 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

​

​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Payments Due by Period ​

​ ​ (in thousands) ​

Operating lease obligations ​ $ 352 ​ ​ $ 165 ​ $ 187 ​ ​ $ — ​ ​ $ — ​

Total ​ $ 352 ​ ​ $ 165 ​ ​ $ 187 ​ ​ $ — ​ ​ $ — ​

​

As of December 31, 2023, except for the operating lease, we did not have any long-term obligations, capital lease obligations, purchase obligation or long-term liabilities. We enter into contracts in the normal course of business with third-party CROs and clinical trial sites for our clinical trials, and with supply vendors for other services and products for operating purposes. These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts.

Critical Accounting Policies, Significant Judgments and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development and stock-based compensation expenses. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 3 to our accompanying financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies to be most critical to the preparation of our financial statements.

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Research and Development Accruals

Research and development expenses consist primarily of costs incurred in connection with the development of our lead product candidate. We expense research and development costs as incurred.

We accrue expenses for pre-clinical and clinical studies and activities performed by third parties based upon estimates of the proportion of work completed over the term of the individual trial and patient enrollment rates in accordance with agreements with third parties. We determine the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with our internal clinical personnel and external service providers as to the progress or stage of completion of activities or services and the agreed-upon fee to be paid for such services. However, actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan.

We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Non-refundable advance payments for goods and services, including fees for manufacturing and distribution of clinical and pre-clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

Milestone payments within our licensing and collaboration arrangements will be recognized when achievement of the milestone is deemed probable to occur. To the extent products are commercialized and future economic benefit has been established, commercial milestones that become probable are capitalized and amortized over the estimated remaining useful life of the intellectual property. In addition, we will accrue royalty expense and sublicense non-royalty payments, as applicable, for the amount we are obligated to pay, with adjustments as sales are made.

Stock-Based Compensation Expense

We maintain a stock-based compensation plan as a long-term incentive for employees and non-employee consultants. The plan allows for the issuance of incentive stock options and non-qualified stock options.

We recognize stock-based compensation expense for stock options on a straight-line basis over the requisite service period, which is the vesting period of the awards. Our stock-based compensation expense is based upon the grant date fair value of stock options estimated using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the use of highly subjective assumptions to determine the fair value of our stock options.

Estimating the fair value of stock options as of the grant date using the Black-Scholes option pricing model is affected by assumptions regarding a number of variables. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. Several of these inputs are subjective and require judgment to develop, including the fair value of our common stock for grants made prior to our initial public offering and expected volatility. We will continue to use judgment in evaluating these inputs utilized for our stock-based compensation expense calculations on a prospective basis.

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JOBS Act and Emerging Growth Company Status

As an emerging growth company under the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our initial public offering, (ii) the last day of the fiscal year in which we have

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total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if, among other factors, the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year (subject to certain conditions), or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 3 to our accompanying financial statements appearing elsewhere in this Annual Report.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our cash and cash equivalents consist of cash held in an interest-bearing savings account and money market account. As a result, we believe that our exposure to interest rate risk is not significant, and a hypothetical 1.0% change in market interest rates during any of the periods presented would not have had a material impact on the total value of our portfolio.

Foreign Currency

We do not regularly incur any material expenses with vendors outside the United States or that are denominated in currencies other than the U.S. dollar. We may incur such expenses in the future at which point exchange rate fluctuations might adversely affect our expenses, results of operations, financial position and cash flows. To date, exchange rate fluctuations have not had a material effect on our results of operations.

Effects of Inflation

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe inflation has had a material effect on our results of operations during the periods presented and do not anticipate a material impact going forward.

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Item 8. Financial Statements and Supplementary Data

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ARRIVENT BIOPHARMA, INC.

INDEX TO FINANCIAL STATEMENTS

​ Page

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Statements of Operations for the Years Ended December 31, 2023 and 2022 ​ F-4

​ ​ ​

​ ​ ​

Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 ​ F-6

​ ​ ​

Notes to Financial Statements ​ F-7

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

ArriVent BioPharma, Inc.:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of ArriVent BioPharma, Inc. (the Company) as of December 31, 2023 and 2022, the related statements of operations, convertible preferred stock and stockholders’ equity (deficit), and cash flows for the years then ended and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2023

Philadelphia, Pennsylvania

March 28, 2024

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ARRIVENT BIOPHARMA, INC.

BALANCE SHEETS

(in thousands, except share and per share data)

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Assets ​ ​

Current assets: ​ ​

Prepaid expenses and other current assets ​ 9,579 ​ 19,250

Right of use assets – operating leases ​ 291 ​ 139

Deferred offering costs ​ ​ 2,732 ​ ​ —

​ ​ ​ ​ ​ ​ ​

Liabilities, Convertible Preferred Stock and Stockholders’ (Deficit) ​ ​

Current liabilities: ​ ​

Operating lease liabilities ​ 140 ​ 128

Operating lease liabilities ​ 177 ​ 11

​ ​ ​ ​ ​ ​ ​

Commitments and contingencies (Note 7) ​ ​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Stockholders’ (deficit): ​ ​ ​ ​ ​ ​

Additional paid-in capital ​ 4,652 ​ 3,403

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See accompanying notes to financial statements.

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ARRIVENT BIOPHARMA, INC.

STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Operating expenses: ​ ​

General and administrative ​ 9,706 ​ 6,473

Interest income ​ ​ 5,257 ​ ​ —

​ ​ ​ ​ ​ ​ ​

Share information: ​ ​

Net loss per share of common stock, basic and diluted ​ $ (32.38) ​ $ (28.90)

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See accompanying notes to financial statements.

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ARRIVENT BIOPHARMA, INC.

STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share and per share data)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Series A ​ Series B ​ ​ Series A ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​

Exercise of stock options — ​ — — ​ — ​ — ​ — ​ — ​ — ​ ​ — ​ 15 ​ — ​ 15

Net loss — ​ — — ​ — ​ — ​ — ​ — ​ — ​ ​ — ​ — ​ (36,906) ​ (36,906)

Net loss — ​ — — ​ — ​ — ​ — ​ — ​ — ​ ​ — ​ — ​ (69,333) ​ (69,333)

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See accompanying notes to financial statements.

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ARRIVENT BIOPHARMA, INC.

STATEMENTS OF CASH FLOWS

(in thousands)

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Cash flows from operating activities: ​ ​

Adjustment to reconcile net loss to net cash used in operating activities: ​ ​

Stock-based compensation expense ​ 895 ​ 424

Changes in operating assets and liabilities: ​ ​

Prepaid expenses and other current assets ​ 9,671 ​ (13,578)

Other assets ​ (35) ​ 16

Operating lease liabilities ​ 25 ​ —

Net cash used in operating activities ​ (55,842) ​ (43,631)

Cash flows from investing activities: ​ ​

Purchase of short-term investments ​ (25,000) ​ —

Maturity of short-term investments ​ 25,000 ​ —

Net cash used in investing activities ​ — ​ —

Cash flows from financing activities: ​ ​

Proceeds from issuance of common stock ​ — ​ 2

Proceeds from the exercise of stock options ​ 354 ​ 15

Payment of deferred offering costs ​ (2,414) ​ —

Net cash provided by financing activities ​ 42,859 ​ 169,723

​ ​ ​ ​ ​ ​ ​

Net (decrease) increase in cash and cash equivalents ​ (12,983) ​ 126,092

Cash and cash equivalents at beginning of the year ​ 163,372 ​ 37,280

Cash and cash equivalents at end of the year ​ $ 150,389 ​ $ 163,372

​ ​ ​ ​ ​ ​ ​

Supplemental disclosures of non-cash financing and investing activities ​ ​

Deferred offering costs included in accounts payable ​ $ 318 ​ $ —

​

See accompanying notes to financial statements.

​

​

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

(1) Background

ArriVent BioPharma, Inc., a Delaware Corporation (the “Company”), founded on April 14, 2021, is a clinical-stage biopharmaceutical company focused on identifying, licensing and globalizing top biopharma innovations from around the world to deliver important medicines to patients. In June 2021, the Company entered into a license agreement with Shanghai Allist Pharmaceuticals Co. Ltd. (“Allist”) which granted the Company an exclusive license under certain intellectual property owned or controlled by Allist to develop, manufacture and commercialize any product containing furmonertinib or any of its derivatives as an active ingredient, for all uses, in all countries and territories other than greater China, which includes mainland China, Hong Kong, Macau and Taiwan (See Note 11). The Company’s lead development candidate, furmonertinib, is a third-generation tyrosine kinase inhibitor currently being evaluated in multiple clinical trials across a range of epidermal growth factor receptor (EGFR) mutations in non-small cell lung cancer (NSCLC), many for which there are limited treatment options.

​

On January 30, 2024, the Company completed the closing of its initial public offering of 9,722,222 shares of common stock at a price of $18.00 per share. Additionally, the underwriters exercised their option to purchase an additional 1,458,333 shares of common stock at a price of $18.00 per share. The shares of common stock began trading on the Nasdaq Global Market on January 26, 2024, under the symbol “AVBP”. The Company received net proceeds of $183.4 million, after deducting underwriting discounts and commissions and other estimated offering expenses. In addition, as a result of the closing of the Company’s initial public offering, the Company’s Series A and Series B convertible preferred stock converted into 19,567,306 shares of common stock in January 2024.

​

​

(2) Development-Stage Risks and Liquidity

The Company has incurred losses since inception and has an accumulated deficit of $157.8 million as of December 31, 2023. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales from its product candidates currently in development. Management believes that cash and cash equivalents of $150.4 million as of December 31, 2023, together with the net proceeds from the initial public offering, are sufficient to sustain planned operations through at least twelve months from the issuance date of these financial statements.

The Company is subject to those risks associated with any specialty biotechnology company that has substantial expenditures for research and development. There can be no assurance that the Company’s research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants.

​

(3) Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Any references in these notes to applicable guidance are meant to refer to GAAP as found in Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).

(b) Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from such estimates. Estimates and assumptions are periodically reviewed, and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.

Significant areas that require management’s estimates include the fair value of the Company’s common stock, stock-based compensation expense assumptions and accrued research and development expenses.

(c) Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

​Management believes that the carrying amounts of the Company’s financial instruments, principally cash equivalents and accounts payable, approximate fair value due to the short-term nature of those instruments.

(d) Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains cash in a checking account with a federally insured financial institution in excess of federally insured limits. Cash equivalents are defined as all liquid investments with maturity from date of purchase of 90 days or less that are readily convertible into cash and consist of money market funds and certificates of deposit. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash.

(e) Leases

Effective January 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842), as amended. Under the guidance, the Company determines whether an arrangement is or contains a lease, its classification, and its term at the lease commencement date. Leases with a term greater than one year will be recognized on the balance sheet as right-of-use (“ROU”) assets, current lease liabilities, and if applicable, long-term lease liabilities. The Company has elected certain practical expedients permitted under the transition guidance to not record short-term leases (terms less than 12 months during 2022). Lease liabilities and the corresponding ROU assets are recorded based on the present values of lease payments over the lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rates, which are the rates that would be incurred to borrow on a collateralized basis, over similar terms, amounts equal to the lease payments in a similar economic environment. Payments for non-lease components or that are variable in nature that do not depend on a rate or index are not included in the lease liability and are typically expensed as incurred. If significant events, changes in circumstances,

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

or other events indicate that the lease term or other inputs have changed, the Company would reassess lease classification, remeasure the lease liability using revised inputs as of the reassessment date, and adjust the ROU assets. Lease expense is recognized on a straight-line basis over the expected lease term for operating-classified leases.

(f) Research and Development Costs

Research and development costs are recorded as expense as incurred and principally consist of personnel costs as well as amounts paid to third parties for up-front and milestone payments made for services provided and related supply costs.

(g) Stock-Based Compensation Expense

The Company measures stock-based awards, including stock options, at their grant-date fair value and records compensation expense over the requisite service period, which is the vesting period of the awards. The Company accounts for forfeitures as they occur.

Estimating the fair value of stock options requires the use of subjective assumptions, including the fair value of the Company’s common stock, the expected term of the option and expected stock price volatility. The Company uses the Black-Scholes option-pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock options represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

The fair value of the Company’s common stock is estimated by the Company’s board of directors, with input from management considering the most recently available third-party valuation of the Company’s common stock. The expected term of stock options for employees is estimated using the “simplified method,” as the Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The simplified method is the midpoint between the vesting date and the contractual term of the option. The contractual term is used as the expected term for stock options granted to non-employees. For stock price volatility, the Company uses comparable public companies as a basis for the expected volatility to calculate the fair value of option grants. The risk-free rate is based on the U.S. Treasury yield curve commensurate with the expected term of the option. The expected dividend yield is zero given the Company does not expect to pay dividends for the foreseeable future.

(h) Net Loss per Share

Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during each period. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as convertible preferred stock and stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share since when a net loss exists, potentially dilutive securities are not included in the calculation as their impact is anti-dilutive. The Company’s convertible preferred stock entitles the holder to participate in dividends and earnings of the Company, and, if the Company were to recognize net income, it would have to use the two-class method to calculate earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the convertible preferred stock have no obligation to fund losses.

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

The following table sets forth the computation of net loss, basic and diluted (in thousands, except share and per share data):

​ ​ ​ ​ ​ ​ ​

​ ​ Year ended December 31,

Numerator: ​ ​

Denominator: ​ ​ ​ ​ ​ ​

Weighted-average shares of common stock outstanding ​ 2,633,907 ​ 2,591,993

​ ​ ​ ​ ​ ​ ​

​

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

​ ​ ​ ​ ​

​ ​ December 31,

Common stock subject to repurchase ​ — ​ 1,314,914

​

(i) Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not-to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. The Company will recognize interest and penalties related to uncertain tax positions as a component of income tax expense (benefit).

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

(j) Segment and Geographic Information

Operating segments are defined as components of an enterprise (business activity from which it earns revenue and incurs expenses) about which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The chief operating decision maker reviews operating results to make decisions about allocating resources and assessing performance for the entire company. The Company views its operations and manages its business as one operating segment. All of the Company’s assets are located in the United States.

(k) Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard includes the requirements that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, the title and position of the chief operating decision maker, and an explanation of how the chief operating decision maker uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. It also requires that a public entity that has a single reportable segment provide all the disclosures required by the guidance and all existing segment disclosures in ASC 280, Segment Reporting. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in the guidance retrospectively to all prior periods presented in the financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company is currently evaluating the impact that this standard may have on its financial statements.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard includes the requirement that public business entities, on an annual basis, disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5% of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). It also requires that all entities disclose, on an annual basis, the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received) and requires that all entities disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. Lastly, this standard eliminates the requirement for all entities to disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or make a statement that an estimate of the range cannot be made. This standard is effective for the Company for the annual period beginning January 1, 2026. Early adoption is permitted. This standard should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the impact that this standard may have on its financial statements.

(l) Reverse Stock Split

On January 23, 2024, the Company filed an amendment to its Articles of Incorporation and effected a 15.21-for-1 reverse stock split of its issued and outstanding shares of common stock. All common stock share and per-share amounts presented in the financial statements and related notes have been retroactively adjusted to reflect the reverse stock split.

​

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

(4) Fair Value Measurements

The following table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Level 1 Level 2 Level 3 Total

Current assets: ​ ​ ​ ​ ​ ​ ​ ​

Cash equivalents - money market funds ​ $ 124,322 ​ $ — ​ $ — ​ $ 124,322

Total assets measured at fair value ​ $ 124,322 ​ $ — ​ $ — ​ $ 124,322

​

Money market accounts are highly liquid investments. The pricing information on the Company’s money market account is based on quoted prices in active markets. This approach results in a classification of these securities as Level 1 of the fair value hierarchy.

​

(5) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Tax credit receivable ​ 761 ​ 500

​

​

(6) Accrued Expenses

Accrued expenses consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Research and development ​ $ 3,126 ​ $ 2,299

Compensation and related expenses ​ 3,353 ​ 2,677

Other accrued expenses ​ 62 ​ 21

​

​

(7) Commitments and Contingencies

Leases

The Company has two operating leases that it subleases for its office space in California, one of which commenced in January 2022 with an original lease term through January 2024 (which ended in January 2024) and one of which commenced in November 2023 with an original lease term through January 2026. The Company also leases other space with an initial lease term of less than twelve months; therefore, it does not recognize this lease as an operating lease on the balance sheet.

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

The Company’s operating lease ROU asset and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. The Company is responsible for payment of certain real estate taxes, insurance and other expenses on certain of its leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU assets and lease liability. The Company accounts for non-lease components, such as maintenance, separately from lease components.

Operating lease expense was $0.2 million and $0.1 million for the years ended December 31, 2023 and 2022, respectively. The Company’s remaining lease term and discount rate for its operating lease as of December 31, 2023 are 2.17 years and 9.84%, respectively.

Future maturities of operating lease liabilities were as follows as of December 31, 2023 (in thousands):

​ ​ ​ ​

Fiscal year ending: ​ ​

Total future minimum payments ​ 352

Less imputed interest ​ ​ (35)

Present value of lease liabilities ​ $ 317

​

Cash paid for rent expense recorded during the years ended December 31, 2023 and 2022 was $0.1 million and $0.2 million, respectively.

Aarvik Research Agreement

In December 2021, the Company entered into a Research Collaboration Agreement, as amended, effective June 2023, with Aarvik Pharmaceuticals, Inc. (“Aarvik”), under which the Company is required to pay Aarvik up to $3.1 million on statements of work (“SOWs”) and an initiation fee of $0.3 million predefined in the agreement. After the completion of the SOWs, the Company has an exclusive option to license the Aarvik intellectual property, and the option to acquire certain of Aarvik’s intellectual property, after which it is the Company’s sole responsibility to research, develop, manufacture and commercialize any applicable compound and product in the field and territory. If the Company exercises that option, it would be obligated to pay up to $18.0 million per product upon the achievement of certain clinical and regulatory milestone events and up to $80.0 million per product in commercial milestones. Additionally, the Company would be obligated to pay Aarvik royalties in the mid-single digits based on net sales of licensed products.

During the years ended December 31, 2023 and 2022, the Company incurred $1.2 million and $0.5 million, respectively, in research and development expenses related to the Aarvik SOWs.

Purchase Commitments

The Company enters into contracts in the normal course of business with contract research organizations, contract manufacturing organizations, universities, and other third parties for preclinical research studies, clinical trials and testing and manufacturing services. These contracts generally do not contain minimum purchase commitments and are cancellable by the Company upon prior written notice although, purchase orders for clinical materials are generally non-cancellable. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancellable obligations of the Company’s service providers, up to the date of cancellation or upon completion of a manufacturing run.

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

Employee Benefit Plan

The Company maintains a 401(k) plan for employees. The 401(k) plan qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the 401(k) plan, participating employees may defer a portion of their pre-tax earnings. The Company contributes 100% of employee salary deferral contributions up to 4% of pay for each payroll period. The Company contributions to the 401(k) plan during the years ended December 31, 2023 and 2022, were $0.4 million and $0.3 million, respectively.

Contingencies

Liabilities for loss contingencies, arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

​

(8) Convertible Preferred Stock and Common Stock

Convertible Preferred Stock

In June 2021, the Company sold 90,000,000 shares of Series A convertible preferred stock (“Series A”) at an original issuance price of $1.00 per share. In February 2022, the Company sold 60,000,000 shares of Series A at an original issuance price of $1.00 per share. In December 2022, the Company sold 104,761,894 shares of Series B convertible preferred stock (“Series B”) at an original issuance price of $1.05 per share. In March 2023, the Company sold 42,857,140 shares of Series B at an original issuance price of $1.05 per share.

The following is a summary of the rights, preferences, and terms of the Series A and Series B (collectively, “Convertible Preferred Stock”):

Dividends

The holders of the Convertible Preferred Stock are entitled to receive dividends payable when, as and if declared by the board of directors of the Company, with the holders of common stock, paid out of any assets or on the common stock of the Company, on an as-converted or as exchangeable to common stock basis. No dividends on common stock were declared or paid from inception through December 31, 2023.

Voting

The holders of Convertible Preferred Stock are entitled to vote on any matter presented to the stockholders of the Company. Each holder of outstanding shares of Convertible Preferred Stock is entitled to the number of votes equal to the number of shares of common stock into which the shares of Convertible Preferred Stock are convertible or exchangeable. Holders of Series A are entitled to elect two directors; holders of Series B are entitled to elect two directors; and holders of common stock are entitled to elect two directors. The holders of common stock and Convertible Preferred Stock, together as a single class, are entitled to elect the balance of the total directors of the corporation and on an as converted or exchangeable basis. As of December 31, 2023, the Company had seven directors.

Liquidation Preference

In the event of any voluntary or involuntary liquidations, dissolution or winding up of the Company, including a Deemed Liquidation Event (as described below), the holders of Series B shall be entitled to be paid out of the consideration payable to stockholders before any payment shall be made to the holders of Series A or common stock, an amount equal to the greater of (i) Series B original issue price, plus any dividend declared but unpaid, or (ii) such

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

amount per share as would have been payable had all shares of Series B been converted into common stock immediately prior to liquidation, dissolution or winding up. The holders of Series A shall be entitled to be paid out of the consideration payable to stockholders after any payment to the holders of Series B but before any payment shall be made to the holders common stock, an amount equal to the greater of (i) Series A original issue price, plus any dividend declared but unpaid, or (ii) such amount per share as would have been payable had all shares of Series A been converted into common stock immediately prior to liquidation, dissolution or winding up. As of December 31, 2023, the liquidation amount is $1.00 per share for the Series A and $1.05 per share for the Series B.

A Deemed Liquidation Event shall include a merger or consolidation in which the Company is a constituent party (other than one in which the current stockholders of the Company own a majority of the voting power of the outstanding shares of the surviving company) or the sale, lease, transfer, exclusive license or other disposition of all or substantially all of the business or assets of the Company.

Classification of Convertible Preferred Stock

Upon the second closing of the Series A in February 2022, the Series A and Series B have been classified outside of stockholders’ equity (deficit) because the holders of such shares have redemption rights in the event of a Deemed Liquidation Event that is not solely within the control of the Company. Because the occurrence of a Deemed Liquidation Event is not currently probable, the carrying values of the Convertible Preferred Stock are not being accreted to their redemption values.

Conversion

The Convertible Preferred Stock is convertible into common stock based on the original issuance price of the security, which is the Conversion Price, subject to certain anti-dilution provisions in the event of a future issuance of preferred stock which creates a down round. The Conversion Price is $15.21 per share for Series A and $15.97 per share for Series B, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization as set for the Company’s Certificate of Incorporation. As a result, as of December 31, 2023, each outstanding share of Series A and Series B is convertible into common stock on a 15.21 for 1 basis. The Convertible Preferred Stock automatically converts to common stock upon (1) an initial public offering totaling at least $31.94 per share, resulting in at least $75.0 million in proceeds, or (2) the date and time, or the occurrence of an event, specified by vote or written consent of (i) the holders of at least 55% of the voting power represented by the outstanding shares of Series A, voting together as a single class and (ii) the holders of at least 60% of the voting power represented by the outstanding shares of Series B, voting together as a single class.

On January 26, 2024, the Convertible Preferred Stockholders waived the initial public offering per share parameter and as such, the Convertible Preferred Stock for both Series A and Series B were converted at the time of the initial public offering.

Common Stock

The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders. Unless required by law, there shall be no cumulative voting. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after the payment of all preferential amounts required to be paid to the holders of shares of Convertible Preferred Stock, the remaining funds and assets available for distribution to the stockholders of the Company will be distributed among the holders of shares of common stock, pro rata based on the number of shares of common stock held by each such holder.

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

Founders’ Shares

In May 2021, the Company issued 1,314,914 shares of its common stock at a purchase price of $0.0015 per share, which are referred to as Founders’ Shares. The issuance price was equal to the estimated fair value of the common stock as the Founders’ Shares were issued shortly after the Company’s inception prior to raising any capital or acquiring any intellectual property. Prior to the second anniversary of the issuance date, the Company had the right to repurchase the Founders’ Shares at the original issuance price if the purchaser of the Founders’ Shares resigned employment or ceased to provide services to the Company. During the year ended December 31, 2023, the Company repurchased 7,387 Founders’ Shares from a holder upon the termination of their employment. The Company’s right to repurchase Founders’ Shares has lapsed.

​

​

(9) Stock-based Compensation

In June 2021, the Company adopted the 2021 Employee, Director and Consultant Equity Incentive Plan (the “Plan”), as amended, that authorized the Company to grant up to 803,564 shares of common stock. In 2022, the Company amended the Plan and increased the total number of shares authorized under the Plan to 2,748,818. As of December 31, 2023, there were 903,866 shares available to be granted. The Company’s stock options vest based on the terms in the awards agreements and generally vest over four years. The Company recorded stock-based compensation expense in the following expense categories in its accompanying statements of operations (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Research and development ​ $ 432 ​ $ 215

General and administrative ​ 463 ​ 209

​

The following is a summary of stock options activity under the Plan:

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​

​ ​ ​ ​ Weighted ​ average ​ ​

​ ​ ​ ​ average ​ remaining ​ Aggregate

​ ​ ​ ​ exercise ​ contractual ​ Intrinsic Value

​ Options price term (years) (in thousands)

Forfeited/expired ​ (41,601) ​ ​ 3.04 ​ ​ ​ ​ ​

​

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

The weighted-average grant-date fair value of options granted in 2023 and 2022 were $3.57 and $1.67 per share. The fair value was estimated using the Black-Scholes option-pricing model based on the following assumptions:

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31,

Expected term ​ 5.5 - 6.1 years ​ 6 years

Expected dividend yield ​ — ​ —

​

Unrecognized compensation cost for awards not vested as of December 31, 2023 was $3.2 million and will be expensed over a weighted-average period of 2.7 years.

​

(10) Income Taxes

The Company has incurred losses since inception and has not recorded current or deferred income taxes.

A reconciliation of income tax benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:

​ ​ ​ ​ ​ ​

​ ​ Year Ended December 31, ​

Tax at U.S. federal rate ​ 21.0 % 21.0 %

State income taxes 5.5 0.1 ​

Other permanent differences (0.1) (0.1) ​

Research and development credit 3.2 3.4 ​

Rate change ​ 5.5 ​ — ​

Valuation allowance (35.1) (24.4) ​

Total provision — % — %

​

Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

Significant components of the Company’s deferred tax assets and liabilities for federal income taxes consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Deferred tax assets ​ ​ ​ ​

Research and development credit ​ 3,465 ​ 1,366

Capitalized research and development ​ 20,583 ​ 5,935

Total deferred tax assets ​ 70 ​ 29

​ ​ ​ ​ ​ ​ ​

Deferred tax liabilities ​ ​

Right of use asset ​ ​ (70) ​ (29)

Total deferred tax liabilities ​ ​ (70) ​ ​ (29)

Net deferred tax assets and liabilities ​ $ — ​ $ —

​

The Company records a valuation allowance against its deferred tax assets when it is more likely than not that realization will not occur. The realization of deferred tax assets depends upon the Company’s ability to generate future taxable income or other tax planning strategies available in the relevant taxing jurisdiction. In evaluating the realizability of its deferred tax assets, management must determine whether there will be sufficient taxable income to allow for the realization of deferred tax assets. Based upon the historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more-likely-than-not threshold for realizability. As a result, the Company recorded a valuation allowance against its deferred tax assets as of December 31, 2023 and 2022. The valuation allowance increased by $24.1 million and $9.0 million during the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, the Company had federal net operating loss (“NOL”) carryforwards of $38.9 million and $22.6 million, which will be carried forward indefinitely to offset future taxable income, subject to an eighty percent limitation of taxable income annually. In addition, state NOLs exist of $25.5 million and $0.7 million, which also carryforward indefinitely. The Company also had research and development tax credit carryforwards of $3.5 million and $1.4 million that will begin to expire in 2041. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, (the “Code”) if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and credits to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by one or more “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. The Company has not determined if it has experienced Section 382/383 ownership changes in the past and if a portion of the Company’s NOL and tax credit carryforwards are subject to an annual limitation under Section 382/383. In addition, the Company may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of its control.

As of December 31, 2023 and 2022, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s financial statements. The Company is generally subject to three-year statute of limitations for federal and state; therefore, 2021 through the current year remain open for examination.

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F-18

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ARRIVENT BIOPHARMA, INC.

NOTES TO THE FINANCIAL STATEMENTS

(11) Allist License Agreement

In June 2021, the Company entered into a Global Technology Transfer and License Agreement with Allist (the “Allist Agreement”). Pursuant to the Allist Agreement, the Company was granted an exclusive license under certain intellectual property to develop, manufacture and commercialize certain licensed products in the field in the licensed territory. Upon execution of the Allist Agreement, the Company paid Allist a non-refundable cash payment of $40.0 million and issued 1,276,250 shares of its common stock. The upfront payment and fair value of the common stock issued have been recorded as acquired in-process research and development in the Company’s statements of operations since further development and regulatory approval of the licensed product candidates is necessary.

Upon the achievement of certain clinical, regulatory and commercial milestones using the licensed technology, the Company is obligated to make future milestone payments to Allist. During the year ended December 31, 2023, the Company paid $5.0 million in clinical milestone payments to Allist. The Company is obligated to make future milestone payments of up to $105.0 million in clinical and regulatory milestones and $655.0 million in sales milestones. Furthermore royalties, ranging from high single digit percentages to low mid-teen percentage will be payable on net sales of licensed products in licensed territories.

In connection with the Allist Agreement, in December 2021, the parties also entered into a Joint Clinical Collaboration Agreement (“Clinical Collaboration”) to define the framework under which the parties will cooperate and share costs related to global clinical studies to be conducted jointly by the Company and Allist. During the years ended December 31, 2023 and 2022, the Company incurred $2.0 million and $2.8 million, respectively, in cost reimbursements to Allist which have been recorded as research and development expense under the Clinical Collaboration Agreement. The Company also was entitled to cost reimbursement from Allist of $0.1 million and $0.8 million for the years ended December 31, 2023 and 2022, which has been recorded as a reduction of research and development expenses. The Company assessed the Clinical Collaboration in accordance with ASC 808, Collaborative Arrangements, and determined that the arrangement did not meet the definition of a collaborative arrangement under ASC 808 since, while the Company and Allist are active participants in the activities under the Clinical Collaboration, both parties are not exposed to significant risks and rewards dependent on the commercial success of the activities.

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F-19

Table of Contents

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023. As of December 31, 2023, our disclosure controls and procedures were not effective as a result of our material weaknesses in our internal control over financial reporting.

However, our management, including our Chief Executive Officer and our Chief Financial Officer, has concluded that, notwithstanding the identified material weaknesses in our internal control over financial reporting, the financial statements in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Inherent Limitations over Internal Controls

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Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, a company’s principal executive officer and principal financial officer, or persons performing similar functions, and effected by a company’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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As described in Item 1A. “Risk Factors,” as of December 31, 2023, we have material weaknesses in our internal control over financial reporting relating to insufficient accounting resources which resulted in the following ineffective risk assessment activities:

Management’s Report on Internal Control Over Financial Reporting

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This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting due to a transition period established by rules of the SEC for newly public companies.

Attestation Report of the Registered Public Accounting Firm

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This Annual Report does not include an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Additionally, our independent registered public accounting firm will not be required to opine on our internal control over financial reporting until we are no longer an emerging growth company.

Changes in Internal Control Over Financial Reporting

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Other than the material weakness remediation activities described below, there were no changes in our internal control over financial reporting, as identified in connection with evaluation required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that occurred during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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During the year ended December 31, 2023, we have taken steps of implementing our remediation plans with respect to the material weaknesses identified in our internal control over financial reporting. Specifically, with the oversight of senior management and our audit committee, we have hired our Chief Financial Officer, and begun implementing processes and controls to address the material weaknesses. We have increased the number of resources (internal and third-party) dedicated to our accounting and finance team, including personnel with additional knowledge, experience, and training, to ensure we have adequate staff, to segregate key duties, and to comply with company policies and procedures. We also plan to engage a third-party provider to help us assess and improve our internal controls in preparation for compliance with the Sarbanes-Oxley Act. Additionally, we continue to make progress on implementing written policies and implementing process level and management review controls for our manual journal entries. However, we cannot assure you that we will be successful in remediating the material weaknesses we identified or that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.

While we believe that these efforts will improve our internal control over financial reporting in accordance with U.S. GAAP and SEC reporting requirements, the implementation of these measures is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. The material weaknesses will not be considered remediated until our management designs and implements effective controls that operate for a sufficient period of time and our management has concluded through testing that these controls are effective. We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to establish and maintain effective internal control over financial reporting.

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Item 9B. Other Information

On March 27, 2024, Dr. Jallal notified our board of directors of her decision to resign from our board of directors and the compensation committee and the nominating and corporate governance committee, effective March 28, 2024. Dr. Jallal’s decision to resign was not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

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On March 28, 2024, we notified the Nasdaq Stock Market (“Nasdaq”) of Dr. Jallal’s resignation from the board of directors and that because such resignation, the compensation committee (the “Compensation Committee”) of our board of directors will have only one member, and the registrant will no longer comply with Nasdaq Listing Rule 5605(d)(2), which requires companies with securities listed on Nasdaq to have a compensation committee composed of at least two directors. In accordance with Nasdaq Listing Rule 5605(d)(4), we have an automatic cure period in order to regain compliance. We expect to regain compliance with such rule by filling the vacancy on the Compensation Committee caused by Dr. Jallal’s resignation with an independent director who satisfies the applicable requirements of the Nasdaq Listing Rules prior to the expiration of the cure period provided under Nasdaq Listing Rule 5605.

Rule 10b5-1 Trading Plans

During the fiscal quarter ended December 31, 2023, none of our directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

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Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

None.

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PART III

Item 10. Directors, Executive Officers, and Corporate Governance

Executive Officers and Directors

The following table provides information regarding our executive officers and directors, including their ages as of December 31, 2023:

Name ​ Position

Executive Officers: ​ ​ ​ ​

Zhengbin (Bing) Yao, Ph.D. ​ 58 ​ Chief Executive Officer and Chairman of Board

Winston Kung, MBA ​ 48 ​ Chief Financial Officer and Treasurer

Robin LaChapelle ​ 51 ​ Chief Operating Officer

James Kastenmayer, J.D., Ph.D. ​ 52 ​ General Counsel and Secretary

Non-Employee Directors: ​ ​ ​ ​

Carl L. Gordon, Ph.D., CFA(1) ​ 59 ​ Director

James Healy, M.D., Ph.D.(1)(3) ​ 58 ​ Director

Bahija Jallal, Ph.D.(2)(3) (4) ​ 62 ​ Director

Chris W. Nolet(1)(2) ​ 67 ​ Director

(1) Member of the audit committee.

(2) Member of the compensation committee.