HOWL US Equity☆

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

The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and uncertainties of cash flows from operations and from outside resources, so as to allow investors to better view our company from management’s perspective. The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, the discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors we believe could cause or contribute to these differences below and elsewhere in this Annual Report, including those factors set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” and in the section entitled “Risk Factors” in Part I, Item 1A of this Annual Report.

Overview

We are an innovative biopharmaceutical company pioneering the development of therapeutics engineered to stimulate the body’s immune system for the treatment of cancer. We are leveraging our proprietary PREDATOR platform to design conditionally activated molecules that stimulate both adaptive and innate immunity with the goal of addressing the limitations of conventional proinflammatory immune therapies. Our molecules, which we refer to as INDUKINE molecules, are intended to activate selectively in the tumor microenvironment. Our most advanced product candidates, WTX-124 and WTX-330, are systemically delivered, conditionally activated Interleukin-2 and Interleukin-12, respectively, INDUKINE molecules for the treatment of multiple tumor types.

We are currently evaluating WTX-124 in a Phase 1/1b clinical trial as a monotherapy and in combination with Merck & Co., Inc.’s anti-PD-1 therapy KEYTRUDA (pembrolizumab) in patients with immunotherapy sensitive advanced or metastatic solid tumors who have failed standard of care treatment, including checkpoint inhibitor therapy. In November 2023, we announced preliminary first-in-human clinical data from the initial monotherapy dose-escalation cohorts in the Phase 1/1b clinical trial. The preliminary data established proof of mechanism for WTX-124 and proof of concept for our INDUKINE design, and included assessments of safety and tolerability, pharmacokinetics, relevant biomarkers and preliminary antitumor activity. The preliminary data included data collected as of October 18, 2023, from 16 heavily pretreated patients from the first four monotherapy dose escalation cohorts (1, 3, 6, and 12 mg) supportive of continued dose escalation. Dose escalation is ongoing in the monotherapy and combination therapy arms of the trial. In the first half of 2024, we expect to report updated interim data from the monotherapy dose-escalation arms of the Phase 1/1b clinical trial, select a recommended dose for expansion and initiate monotherapy dose expansion arms, and report initial data from the combination dose escalation cohorts of the Phase 1/1b clinical trial.

We are also currently evaluating WTX-330 in a Phase 1 clinical trial for the treatment of immunotherapy resistant advanced or metastatic solid tumors or lymphoma, to be followed by expansion arms in relapsed/refractory tumors following treatment with checkpoint inhibitors or tumors for which checkpoint inhibitors are not approved. We announced the initiation of patient dosing in February 2023. The trial is currently open for enrollment. We plan to report initial data from the Phase 1 clinical trial in the second quarter of 2024.

In April 2022, we entered into a global collaboration and license agreement, or the Collaboration Agreement, with Jazz Pharmaceuticals Ireland Limited, or Jazz, under which Jazz acquired exclusive global development and commercialization rights related to Interferon alpha, or IFNα, INDUKINE molecule, JZP898 (formerly WTX-613), as well as products containing certain isolated recombinant polypeptides comprising IFNα that meet specified criteria (each such product, a Licensed Product). Pursuant to the terms of the Collaboration Agreement, we are responsible for certain preclinical development activities with respect to JZP898 and other development activities specified in mutually agreed upon development plans. Jazz will generally reimburse us for the cost of such activities. Jazz will be responsible for all other development and commercialization activities conducted to exploit the Licensed Products. Jazz received IND application clearance from the FDA for JZP898 in July 2023 and initiated a Phase 1 clinical trial of JZP898 in the fourth quarter of 2023.

Financial Operations Overview

Revenue

All of our revenue has been generated from the Collaboration Agreement with Jazz. For the years ended December 31, 2023 and 2022, we recognized $19.9 million and $16.4 million of revenue, respectively. Revenue from the transaction price for the Collaboration Agreement is recognized based on a cost-to-cost input method for both periods and includes upfront, milestone, and cost reimbursement payments. The Collaboration Agreement includes multiple development and regulatory and sales-based milestones, which were excluded from the transaction price at inception of the Collaboration Agreement based on our assessment that there was a high level of uncertainty of achieving the milestones. During the year ended December 31, 2023, we re-evaluated this assessment and concluded that a $5.0 million variable consideration payment should be added to the

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transaction price, resulting in a cumulative catch-up of revenue of $4.2 million recognized during the year ended December 31, 2023.

In the future, our ability to generate revenue from the Collaboration Agreement will depend on successfully achieving the various development and regulatory and sales-based milestones, as well as incurring costs for research activities that are reimbursable by Jazz. We may also generate revenue from product sales or other collaboration agreements, strategic alliances and licensing arrangements. We expect that potential future revenue, if any, will fluctuate from quarter-to-quarter and year-to-year based upon our pattern of performance under the Collaboration Agreement and as a result of the timing and amount of milestones, reimbursement of costs incurred and other payments and product sales, to the extent any are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, and include:

•salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

•expenses incurred under agreements with third parties that conduct research, preclinical and clinical activities on our behalf;

•costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

•costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; and

•facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of performance of the individual arrangements, which may differ from the pattern of billings incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses.

We typically use our employee and infrastructure resources across our development programs. We track external development costs by product candidate or development program, but generally we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates.

Our external development costs were as follows:

Year Ended December 31,

(in thousands)

Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase substantially for the foreseeable future as we progress our clinical trials of WTX-124 and WTX-330, continue preclinical development of WTX-712 and WTX-518, and continue to discover and develop additional product candidates. As a result of our entry into the Collaboration Agreement, which commenced in April 2022, our external preclinical development costs for JZP898 will generally be reimbursed by Jazz.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. We cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete

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development of our current or future product candidates. The actual probability of success for our product candidates will depend on a variety of factors, including:

•the scope, rate of progress and expenses of our ongoing research activities as well as any preclinical studies and clinical trials, including our ongoing Phase 1/1b clinical trial for WTX-124 and Phase 1 clinical trial for WTX-330, and other research and development activities;

•establishing an appropriate safety profile;

•successful enrollment in and completion of clinical trials;

•whether our product candidates show safety and efficacy in our clinical trials;

•receipt of marketing approvals from applicable regulatory authorities;

•establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

•obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

•commercializing product candidates, if and when approved, whether alone or in collaboration with others; and

•continued acceptable safety profile of the products following any regulatory approval.

A change in the outcome of any of these variables with respect to the development of our current and future product candidates would significantly change the costs and timing associated with the development of those product candidates and we may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development activities.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel in our executive, finance, people operations, business development, legal, information technology and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, audit, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support the increasing size and complexity of our research, development and manufacturing activities.

Other Income

Interest Income

Interest income consists of interest earned from cash and cash equivalents and restricted cash and cash equivalents invested in money market funds.

Interest Expense

Interest expense represents interest incurred from our loan agreement with Pacific Western Bank, or PWB, and non-cash interest expense related the amortization of debt issuance costs.

Other (Expense) Income, Net

Other (expense) income, net consists primarily of remeasurement gains or losses attributable to changes in the fair value of the success payment liability associated with our loan agreement with PWB and amortization of debt issuance costs incurred prior to the drawdown of our loan agreement with PWB. For more information see “Liquidity and Capital Resources” below.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates which include, but are not limited to those related to revenue recognition, accrued expenses, assumptions used in the valuation of stock-based compensation expense and income taxes. We base our estimates on historical experience, known trends and events

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and various other factors that we believe to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions and conditions.

While our significant accounting policies are described in more detail in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements included within Part IV, Item 15 in this Annual Report, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We analyze our collaborations to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of Accounting Standards Codification, or ASC, Topic 808, Collaborative Arrangements, orASC 808. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For arrangements within the scope of ASC 808 that contain multiple elements, we first determine which elements of the collaboration are deemed to be within the scope of ASC 808 and which elements of the collaboration are more reflective of a vendor-customer relationship and therefore within the scope of ASC Topic 606, Revenue from Contracts with Customers,or ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, either by analogy to authoritative accounting literature or by applying a reasonable and rational policy election.

For those elements of the arrangement that are accounted for pursuant to ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. In applying ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the promises and performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligations. We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. As part of the assessment, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. We use key assumptions to determine the standalone selling price, which may include reimbursement rates for personnel costs, development timelines and probabilities of regulatory success. We do not assess whether a contract has a significant financing component if we expect at contract inception that the period between payment by the customer and the transfer of promised goods or services to the customer will be one year or less.

Arrangements that include upfront payments may require deferral of revenue recognition to a future period until obligations under these arrangements are fulfilled. Event-based milestone payments represent variable consideration, and we use the “most likely amount” method to estimate this variable consideration. Given the high degree of uncertainty around the occurrence of these events, we consider the milestone and other contingent amounts to be fully constrained until the uncertainty associated with these payments is resolved. Revenue will be recognized from sales-based royalty payments when or as the sales occur. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur.

Leases

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than twelve months are recognized on the balance sheet as right-of-use assets and current or non-current lease liabilities, as applicable. We do not recognize leases with terms of twelve months or less on the balance sheet. The lease term is determined at lease commencement, and includes the noncancellable period during which we have the right to use the underlying asset. Any period covered by an option to extend or terminate a lease is included in the lease term if we are reasonably certain that the option to extend will be exercised or the option to terminate will not be exercised. We monitor plans to renew material leases on a quarterly basis.

We combine lease and non-lease components for our leases. Lease payments included in determining the right-of-use asset and lease liability recognized include fixed payments to be paid over the term of the lease, less any lease incentives to be paid or payable to us by the lessor. Variable lease payments are included if they are based on an index or rate. Variable lease payments that are not based on an index or rate are recognized as expense in the period incurred.

The interest rate implicit in lease contracts is typically not readily determinable. As a result, we utilize our incremental borrowing rate, or IBR, which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease

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payments in the same currency, for a similar term, and in a similar economic environment. The lease liability is measured as the value of the remaining lease payments, discounted to present value using the IBR for the lease.

All of our leases are classified as operating leases. Operating lease expense is recognized over the lease term using the straight-line method.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses as of each balance sheet date. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. This process involves reviewing open contracts and purchase orders, communicating with internal personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We periodically confirm the accuracy of our estimates with our service providers and make adjustments if necessary. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. The financial terms of agreements with these service providers are subject to negotiation, vary from contract to contract and may result in uneven payment flows. In circumstances where amounts have been paid in excess of costs incurred, we record a prepaid expense.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period.

Stock-based Compensation

We issue stock-based awards to employees and directors, generally in the form of stock options, restricted stock units, or RSUs, restricted stock awards, or RSAs, or as awards under our 2021 Employee Stock Purchase Plan, or the 2021 ESPP. Stock-based compensation is measured at the grant date based on the estimated fair value of the award and recognized as expense over the requisite service period of the award on a straight-line basis. For awards with performance conditions, we estimate the likelihood of satisfaction of the performance condition, which affects the period over which the expense is recognized. When the likelihood of satisfying the performance conditions related to an award is determined to be probable, the expense is recognized over the requisite service period. We have not granted any awards with market conditions. We recognize forfeitures of stock-based awards as they occur.

The grant date fair value of stock options, and awards granted under the 2021 ESPP are measured using the Black-Scholes valuation model, which requires us to make assumptions about the fair value of the underlying common stock on the date of grant. The grant date fair value of RSUs and RSAs is estimated to be equal to the closing price of our common stock on the date of grant. In the event that stock-based awards are granted in contemplation of or shortly before a planned release of material non-public information, and such information is expected to result in a material increase in the share price of our common stock, we may consider whether an adjustment to the observable market price is required when estimating the grant date fair value.

Recent Accounting Pronouncements

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” to our consolidated financial statements included within Part IV, Item 15 of this Annual Report for a description of recent accounting pronouncements applicable to our business.

JOBS Act Accounting Election and Smaller Reporting Company Implications

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or Sarbanes-Oxley Act. Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to continue to take advantage of reduced disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act if we are a smaller reporting company with less than $100.0 million in annual revenue.

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Results of Operations

Comparison of the years ended December 31, 2023 and 2022

The following table summarizes our results of operations:

Year Ended December 31, $ Change

(in thousands)

Revenue:

Operating expenses:

Other income:

Revenue

Revenue was $19.9 million for the year ended December 31, 2023, which is comprised of partial recognition of the $15.0 million upfront payment received in April 2022 upon the execution of the Collaboration Agreement with Jazz and costs incurred for research services to be reimbursed by Jazz, and revenue related to the achievement of certain variable consideration components. Comparatively, we recognized $16.4 million in collaboration revenue during the year ended December 31, 2022. This $3.5 million increase in collaboration revenue is primarily driven by a change in the transaction price of $5.0 million during the year ended December 31, 2023, upon achieving a variable consideration component included in the Collaboration Agreement, which led to an additional recognition of $4.7 million during the year ended December 31, 2023. This increase was partially offset by a decline in revenue recognized as a result of a decrease in research and development activities related to JZP898.

Research and Development Expenses

The following table summarizes our research and development expenses:

Year Ended December 31, $ Change

(in thousands)

Research and development expenses for the year ended December 31, 2023 were $41.8 million, compared to $53.8 million for the year ended December 31, 2022. The decrease of $12.0 million was primarily due to:

•$14.3 million of decreased manufacturing costs driven by a decrease of $12.9 million in costs incurred with contract manufacturing organizations used to support the production of preclinical, and current and future clinical

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trial materials associated with candidates WTX-124, WTX-330, and JZP898, as well as $1.4 million of favorable adjustments recognized during the second quarter of 2023 upon the closeout of completed purchase orders; and

•$2.3 million of decreased contract research organization costs driven by $1.4 million of higher costs in 2022 leading up to initiating our clinical trials for WTX-124 and WTX-330, as well as $1.8 million in higher costs incurred in 2022 related to IND-enabling studies for JZP989. These decreases were partially offset by $1.0 million in contract research organization costs incurred in 2023 as we furthered our development of WTX-712.

These decreases were partially offset by:

•$1.1 million of increased personnel costs, including $0.6 million of increased stock-based compensation expense due to the timing and valuation of stock-based awards granted to employees, combined with annual cost of living adjustments;

•$2.2 million of increased clinical trial costs, primarily driven by continued expansion of sites and enrollment for both our WTX-124 and WTX-330 trials; and

•$1.1 million of increased lab consumables costs, primarily related to expanded discovery efforts.

General and Administrative Expenses

The following table summarizes our general and administrative expenses:

Year Ended December 31, $ Change

(in thousands)

Total general and administrative expenses $ 18,670 $ 18,696 $ (26)

General and administrative expenses were $18.7 million for each of the years ended December 31, 2023 and 2022. Significant fluctuations in general and administrative expenses include:

•$1.1 million of decreased corporate insurance costs, driven by a reduction in associated premiums;

•$0.2 million of increased personnel costs, driven by higher headcount and annual cost of living adjustments; and

•$0.7 million of increased professional services costs, driven by costs incurred to protect our intellectual property and general corporate matters.

Interest Income

Interest income was $7.4 million for the year ended December 31, 2023, compared to $1.9 million for the year ended December 31, 2022. This increase in interest income was primarily a result of higher interest rates during the year ended December 31, 2023 compared to the year ended December 31, 2022.

Interest Expense

During the year ended December 31, 2023 we recognized interest expense of $2.9 million related to the unpaid principal balance of our Term Loans. Additionally, we recognized $0.3 million of non-cash interest related to the amortization of debt issuance costs during the year ended December 31, 2023. No interest expense was incurred during the year ended December 31, 2022.

Other (Expense) Income, Net

During the year ended December 31, 2023, other (expense) income, net primarily consisted of $1.0 million in losses recognized for the change in the fair value of the success payment liability during the period. Comparatively, we recognized a gain of $0.6 million related to the change in the fair value of the success payment liability during the year ended December 31, 2022.

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Liquidity and Capital Resources

Sources of Liquidity

Since our inception in 2017, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company; business planning; raising capital; developing and optimizing our platform technology; identifying potential product candidates; enhancing our intellectual property portfolio; undertaking research, preclinical studies, and clinical trials; and enabling manufacturing for our development programs. Our net loss was $37.4 million and $53.8 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $344.1 million. As we have no products that are approved for sale, we have not generated any revenue from product sales to date, and we do not expect to generate any such revenue for the foreseeable future, if at all. Instead, we have financed our operations primarily through aggregate cash proceeds from convertible promissory notes, private placements of our convertible preferred stock, our initial public offering, payments from Jazz under the Collaboration Agreement, sales of common stock through our at-the-market program, and the drawdown of our term loans. Because our product candidates are in clinical development and the outcome of our efforts is uncertain, we cannot estimate the actual costs necessary to successfully complete the development and commercialization of our product candidates, or when we may achieve profitability, if at all.

We expect to continue to incur substantial and increasing expenses and net losses for the foreseeable future, as we continue to advance our current and future product candidates through preclinical and clinical development, manufacture drug product and drug supply, seek regulatory approval for our current and future product candidates, maintain and expand our intellectual property portfolio, hire additional research and development and business personnel and operate as a public company. As a result, we expect that our accumulated deficit will also increase significantly.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our failure to raise capital or enter into such agreements as and when needed could have a material adverse effect on our business, results of operations and financial condition.

Term Loan Facility

In April 2022, we entered into an amended and restated loan and security agreement, or the Loan Agreement, with PWB, which amended and restated in its entirety our previous loan and security agreement with PWB. Under the terms of the Loan Agreement, PWB made available term loans in an aggregate principal amount of up to $40.0 million, or the Term Loans, consisting of (i) a term loan in the aggregate principal amount of up to $20.0 million available at any time until February 28, 2024 (which was extended to August 31, 2024 upon the satisfaction of certain conditions set forth in the Loan Agreement), or the Amortization Date, and (ii) a term loan in the aggregate principal amount of up to $20.0 million available at any time until the Amortization Date upon the acceptance by the FDA of two IND submissions on or before March 31, 2023. In March 2023, we drew down $40.0 million of the Term Loans.

The Term Loans bear interest on the outstanding daily balance at a floating annual rate equal to greater of: (i) 0.5% above the prime rate then in effect or (ii) 4.50%. If the prime rate changes throughout the term, the interest rate is adjusted effective on the date of the prime rate change. All interest chargeable under the Loan Agreement is computed on a 360-day year for the actual number of days elapsed, with interest payable monthly. The Loan Agreement provides for interest-only payments until the Amortization Date, at which time the aggregate outstanding principal balance of the Term Loans is required to be repaid in monthly installments on a 24-month repayment schedule. All unpaid principal and accrued and unpaid interest with respect to the Term Loans is due and payable in full on August 31, 2026. At our option, we may elect to prepay all, or any part, of the outstanding Term Loans at any time without premium or penalty.

We were obligated to pay PWB a one-time fee in the event of certain corporate transactions equal to either (i) the greater of (a) $200,000 and (b) 2.00% of the amount drawn under the Term Loans for a transaction occurring on or prior to March 31, 2023, or (ii) for any transaction occurring thereafter, the greater of (a) $400,000 and (b) 4.00% of the amount drawn under the Term Loans, which fee is referred to as the Success Fee, upon the occurrence of a Success Fee Event (as defined in the Loan Agreement). In April 2023, the Success Fee Event occurred and, as such, we became obligated to pay the corresponding Success Fee to PWB, in accordance with the terms of the Loan Agreement. We removed the corresponding financial instrument for the Success Fee liability and paid the total $1.6 million upon the occurrence of the Success Fee Event. Upon occurrence of the Success Fee Event, the Amortization Date was extended to August 31, 2024, thereby extending the date for all unpaid principal and accrued and unpaid interest with respect to the Term Loans to August 31, 2026.

Under the Loan Agreement, we are required to comply with certain negative covenants, which among other things, restrict us from incurring future debt or granting liens, effectuating a merger or consolidation with or into any other business organization,

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paying dividends or making certain other distributions, selling or otherwise transferring our assets, and making investments in any entities or instruments, subject, in each case, to certain exceptions specified in the Loan Agreement. The Loan Agreement also contains standard affirmative covenants, including with respect to the issuance of audited consolidated financial statements, insurance, maintenance of good standing and government compliance in our state of formation. We maintain at least $20.0 million of cash in PWB accounts, included within restricted cash and cash equivalents, net of current portion on our consolidated balance sheet as of December 31, 2023, which we are required to maintain at all times pursuant to the terms of the Loan Agreement. Our failure to comply with any of the foregoing covenants would result in an event of default under the Loan Agreement.

ATM Offering

On May 10, 2022, we entered into a sales agreement, or the Sales Agreement, with Leerink Partners LLC, or Leerink Partners, pursuant to which, from time to time, we may offer and sell shares of our common stock, which we refer to as the ATM Offering. The Sales Agreement provides that Leerink Partners is entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering.

In accordance with the terms of the Sales Agreement and a sales agreement prospectus included in the registration statement on Form S-3 that we filed with the SEC on May 10, 2022, which was declared effective on May 20, 2022, we were initially entitled to offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million in the ATM Offering. As of December 31, 2023, we had sold an aggregate of 11,259,548 shares under the ATM Offering at an average price of $3.18 per share for net proceeds of $34.0 million after deducting sales commissions and offering expenses. Subsequent to December 31, 2023, we sold an additional 3,083,983 shares under the ATM Offering, such that as of February 9, 2024, we had sold shares of common stock under the ATM Offering for aggregate gross sale proceeds of approximately $50.0 million. On February 9, 2024, we filed a sales agreement prospectus supplement to the registration statement on Form S-3, pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to an additional $25.0 million in the ATM Offering. During the period from February 9, 2024 through March 1, 2024, we sold 545,077 additional shares of our common stock under the Sales Agreement and the sales agreement prospectus supplement for aggregate gross sale proceeds of approximately $3.5 million.

Jazz Collaboration

As of December 31, 2023, we have received $20.0 million in payments from Jazz, excluding payments for reimbursed costs, under the terms of the Collaboration Agreement. We are eligible to receive up to an additional $515.0 million in development and regulatory milestones, and up to $740.0 million in sales-based milestones for all Licensed Products. In addition, we are eligible to receive tiered mid-single digit royalties based on Jazz’s, and any of its affiliates’ and sublicensees’, annual net sales of Licensed Products, subject to reduction in specified circumstances.

Plan of Operation and Future Funding Requirements

As of December 31, 2023, we had cash and cash equivalents of $134.3 million. We expect that our existing cash and cash equivalents will be sufficient to fund our operational expenses and capital expenditure requirements through at least twelve months from the date the consolidated financial statements included elsewhere in the Annual Report were issued on March 7, 2024. Based on updated forecasting the Company expects that its existing cash and cash equivalents at December 31, 2023, and gross proceeds of $17.7 million under the at-the-market sales facility received from January 1, 2024 through March 1, 2024, will be sufficient to fund its operational expenses and capital expenditure requirements through at least the second quarter of 2025. We have based this estimate on assumptions that may prove to be wrong, however, and we could use our capital resources sooner than we expect. Our need to raise additional funds may be accelerated if our research and development expenses exceed our current expectations, if we acquire a third party, or if we acquire or license rights to additional product candidates or new technologies from one or more third parties.

The timing and amount of our operating expenditures will depend largely on:

•the scope, progress, timing, costs and results of researching and developing our current product candidates or any future product candidates, including with respect to our clinical trials of WTX-124 and WTX-330 and the costs associated with attracting, hiring and retaining skilled personnel and consultants as our preclinical and clinical activities increase;

•the cost of manufacturing our product candidates WTX-124, WTX-330, and any future product candidates for clinical trials and, if we are able to obtain marketing approval, for commercial sale;

•the costs of any third-party products used in our combination clinical trials that are not covered by such third parties or other sources;

•the success of our collaboration with Jazz;

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•the timing of, and the cost involved in, obtaining marketing approval for WTX-124 and WTX-330 or any future product candidates, and our ability to obtain marketing approval and generate revenue from any potential commercial sales of such product candidates;

•the cost of building a sales force in anticipation of product commercialization and the cost of commercialization activities for WTX-124, WTX-330 or any future product candidates if we receive marketing approval, including marketing, sales and distribution costs;

•the potential emergence of competing therapies and other adverse market developments;

•the amount and timing of any payments we may be required to make pursuant to our license agreement with Harpoon Therapeutics, Inc., or Harpoon, or other future license agreements or collaboration agreements;

•our ability to establish future collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;

•the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;

•any product liability or other lawsuits related to our product candidates;

•the extent to which we in-license or acquire other products and technologies; and

•the costs of operating as a public company.

Our cash and cash equivalents will not be sufficient to complete development of WTX-124, WTX-330 or any other product candidates. Accordingly, we will be required to obtain further funding to achieve our business objectives.

Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financing. We may also consider entering into collaboration arrangements or selectively partnering for clinical development and commercialization. The sale of additional equity may result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations or our ability to incur additional indebtedness or pay dividends, among other items. If we raise additional funds through governmental funding, collaborations, strategic partnerships and alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could materially and adversely affect our business, financial condition, results of operations, cash flows and prospects.

Cash Flows

The following table provides information regarding our cash flows:

Year Ended December 31,

(in thousands)

Net cash (used in) provided by:

Operating Activities

Net cash used in operating activities for the year ended December 31, 2023 was $32.6 million, compared to $40.6 million for the year ended December 31, 2022. This decrease of approximately $8.0 million was primarily driven by higher revenue from our Collaboration Agreement of $3.5 million, combined with a reduction in research and development expenses of $12.0 million. Additionally, other income increased $0.9 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to higher interest rates during the current period. The benefit of a lower net loss was partially

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offset by a net increase of $7.4 million in cash used in operating activities as a result of a decrease in accounts payable, accrued expenses and other liabilities as of December 31, 2023 compared to December 31, 2022.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2023 was $0.8 million, compared to $3.6 million for the year ended December 31, 2022. This decrease of approximately $2.8 million was primarily driven by high capital expenditures in the second quarter of 2022 related to leasehold improvements for our new headquarters, which was opened in May 2022.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2023 was $58.4 million, compared to $15.9 million for the year ended December 31, 2022. Cash provided by financing activities for the year ended December 31, 2023 primarily consisted of proceeds from the $40.0 million drawdown of the Term Loans, plus net proceeds of $18.3 million from our ATM Offering during the period. Comparatively, cash provided by financing activities for the year ended December 31, 2022 consisted primarily of net proceeds of $15.7 million from our ATM Offering during the period.

Inflation

Inflation generally affects us by increasing our cost of labor and certain services; however, we do not believe that inflation has had a material impact on our results of operations since inception.

Contractual Obligations

Overview

In the normal course of business, we enter into agreements with CROs, contact manufacturers, vendors and other third parties for preclinical studies and clinical trials, manufacturing services and other services and products for operating purposes. These contracts do not contain minimum purchase commitments and are cancellable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation.

Term Loan Facility

See “Liquidity and Capital Resources – Sources of Liquidity – Term Loan Facility” for a description of our Loan Agreement.

Lease Agreements

Total estimated base rent payments over the remaining term of the lease for office and laboratory space that we entered into in April 2019 as our prior headquarters are approximately $0.2 million. In May 2022, we entered into a sublease agreement with Crossbow Therapeutics, Inc., or Crossbow, a related party, to sublease the entirety of this space. The payments we expect to receive over the remaining term of the sublease are approximately $0.3 million, which is greater than the annual rent paid by us to the landlord for the leased premises. Crossbow is obligated to pay all real estate taxes and costs related to the subleased premises, including cost of operations, maintenance, repair, replacement, and property management.

The lease for office and laboratory space that we entered into in March 2021 terminated in May 2022.

The lease for office and laboratory space that we entered into in June 2021 commenced in May 2022 and expires in May 2030. Total estimated base rent payments over the remaining term of the lease are approximately $15.7 million.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, or the Exchange Act, and are not required to provide the information under this item.

Item 8. Financial Statements and Supplementary Data

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report. An index of those financial statements is found in Part IV, Item 15.

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

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and

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procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting as discussed below.

Notwithstanding this material weakness, our management, including our principal executive officer and principal financial officer, has concluded that our financial statements in this Annual Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America. The material weakness did not result in any restatements of consolidated financial statements previously reported by us, nor were there any changes to previously released financial results.

Management’s Annual Report on Internal Control over Financial Reporting

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:

•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of a company’s assets;

•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of the company’s management and directors; and

•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on the financial statements.

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.

Under the supervision of and with the participation of our principal executive officer and principal financial officer, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on this assessment as of December 31, 2023, management concluded that our internal control over financial reporting was not effective due to the material weakness discussed below.

In our Form 10-Q for the quarterly period ended June 30, 2023, we reported a material weakness in our internal control related to design and operating deficiencies in our purchasing process, specifically related to the application of invoices to purchase orders and processes to estimate progress on open purchase orders and to identify inaccurate expense estimates within purchase orders. During 2023, we implemented, and are continuing to implement measures designed to improve internal control over financial reporting to remediate the control deficiencies that led to the material weakness, including the efforts outlined below, designed to improve our internal control over financial reporting to remediate this material weakness. These efforts included:

•hiring additional qualified accounting personnel, including an Assistant Controller and Senior Accountant;

•conducting a review of our procurement process and software, as well as sunsetting the historical software;

•engaging a professional accounting services firm to help us assess and commence documentation of our internal controls for complying with the Sarbanes-Oxley Act of 2002;

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•strengthening, formalizing, documenting, and testing accounting processes and internal controls;

•engaging consultants to provide additional technical accounting expertise; and

•implementing procedures around our estimation processes with key vendors as well as adding analytical tools to help identify possible material errors.

We believe significant progress was made in 2023 to enhance and strengthen our internal control over financial reporting. However, while we believe our internal controls were properly designed and implemented as of December 31, 2023, they were not in all cases in place for a sufficient period of time to demonstrate operating effectiveness as of December 31, 2023. As a result, management has concluded that the material weakness was not fully remediated as of December 31, 2023.

The measures we are implementing are subject to continued management review supported by confirmation and testing, as well as audit committee oversight. Management remains committed to remediating these material weaknesses. We will continue to implement measures to remedy our internal control deficiencies, though there can be no assurance that our efforts will be successful or avoid potential future material weaknesses.

This Annual Report does not include an attestation report of our independent registered public accounting firm, as it is not required for as long as we remain an emerging growth company or a smaller reporting company with less than $100.0 million in annual revenue.

Changes in Internal Control over Financial Reporting

Other than the changes intended to remediate the material weaknesses noted above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of the year ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the fourth quarter of 2023.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item 10 will be included in the sections captioned “Corporate Governance,” “Proposal No. 1” and “Delinquent Section 16(a) Reports” in our definitive proxy statement to be filed with the Securities and Exchange Commission, or the SEC, with respect to our 2024 Annual Meeting of Stockholders within 120 days of December 31, 2023, which information is incorporated herein by reference.

Code of Ethics

We have adopted a written code of business conduct and ethics that applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code is posted on the Corporate Governance section of our website, which is located at www.werewolftx.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K. We will provide any person, without charge, a copy of such Code of Business Conduct and Ethics upon written request, which may be mailed to 200 Talcott Ave, 2nd Floor, Watertown, MA 02472, Attn: Corporate Secretary.

Item 11. Executive Compensation

The information required by this Item 11 will be included in the section captioned “Executive Compensation” in our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2023, which information, other than the information required by Item 402(v) of Regulation S-K, is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Except to the extent provided below, the information required by this Item 12 will be included in the section captioned “Principal Stockholders” in our definitive Proxy Statement for our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2023, which information is incorporated herein by reference.

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Equity Compensation Plan Information

The following table contains information about our 2017 Stock Incentive Plan, or the 2017 Plan, our 2021 Stock Incentive Plan, or the 2021 Plan, and our 2021 Employee Stock Purchase Plan, or 2021 ESPP, as of December 31, 2023.

(a) (b) (c)

Equity compensation plans not approved by security holders — — —

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 will be included in the sections captioned “Corporate Governance” and “Transactions with Related Persons” in our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2023, which information is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this Item 14 will be included in the section captioned “Ratification of the Appointment of Ernst & Young, LLP As Our Independent Registered Public Accounting Firm For The Fiscal Year Ending December 31, 2024” in our definitive Proxy Statement for our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2023, which information is incorporated herein by reference.

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PART IV

Item 15. Exhibit and Financial Statement Schedules

(1) Financial Statements

Consolidated Balance Sheets 105

Consolidated Statements of Operations 106

Consolidated Statements of Stockholders’ Equity 107

Consolidated Statements of Cash Flows 108

Notes to Consolidated Financial Statements 109

(2) Financial Statement Schedules

(3) Exhibits

Item 16. Form 10-K Summary

None.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Werewolf Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Werewolf Therapeutics, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, consolidated statements of stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, 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 the Company’s 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

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/ Ernst & Young LLP

We have served as the Company’s auditor since 2022.

Boston, Massachusetts

March 7, 2024

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Werewolf Therapeutics, Inc.

Consolidated Balance Sheets

(amounts in thousands, except share and per share amounts)

December 31,

Assets

Current assets:

Prepaid expenses and other current assets 2,677 3,957

Restricted cash and cash equivalents, net of current portion 21,023 1,214

Operating lease right of use asset 6,888 8,463

Liabilities and stockholders’ equity:

Current liabilities:

Accrued expenses and other current liabilities 8,860 14,152

Operating lease liability, current 1,608 2,084

Note payable, current 6,667 —

Operating lease liability, net of current portion 10,992 12,600

Deferred revenue, net of current portion 433 1,128

Note payable, net of discount, issuance costs, and current portion 32,656 —

Other liabilities — 191

Commitments and contingencies

Stockholders’ equity:

Total liabilities and stockholders’ equity $ 174,833 $ 160,245

The accompanying notes are an integral part of these consolidated financial statements.

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1z

Werewolf Therapeutics, Inc.

Consolidated Statements of Operations

(amounts in thousands, except share and per share amounts)

Year Ended December 31,

Revenue:

Operating expenses:

Other income:

Interest expense (3,139) —

Other (expense) income, net (1,142) 338

The accompanying notes are an integral part of these consolidated financial statements.

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Werewolf Therapeutics, Inc.

Consolidated Statements of Stockholders’ Equity

(amounts in thousands, except share amounts)

Shares Amount

Stock-based compensation expense — — 7,400 — 7,400

Stock-based compensation expense — — 8,008 — 8,008

Stock option exercises 2,956 — 7 — 7

The accompanying notes are an integral part of these consolidated financial statements.

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Werewolf Therapeutics, Inc.

Consolidated Statements of Cash Flows

(amounts in thousands)

Year Ended December 31,

Operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense 8,008 7,400

Non-cash interest expense 273 —

Change in fair value of success payment liability (1,030) 555

Amortization of debt issuance costs 60 203

Loss on disposal of property and equipment — 7

Changes in operating assets and liabilities:

Prepaid expenses and other assets 1,267 (262)

Accounts payable, accrued expenses and other liabilities (4,335) 3,046

Operating lease liability (2,084) (977)

Net cash used in operating activities (32,612) (40,596)

Investing activities:

Purchases of property and equipment (769) (3,611)

Net cash used in investing activities (769) (3,611)

Financing activities:

Proceeds from drawdown of term loans 40,000 —

Proceeds from issuances under Employee Stock Purchase Plan 93 —

Proceeds from stock option exercises 7 254

Payment of deferred financing costs — (88)

Net cash provided by financing activities 58,429 15,906

Prepaid expenses and other current assets 211 —

Restricted cash and cash equivalents, net of current portion 21,023 1,214

Supplemental disclosure of cash flow information:

Cash paid for interest $ 2,556 $ —

Supplemental disclosure of non-cash investing and financing activities:

Issuance costs in accounts payable and accrued expenses $ 36 $ 4

The accompanying notes are an integral part of these consolidated financial statements.

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Werewolf Therapeutics, Inc.

Notes to Consolidated Financial Statements

1. Nature of Business

Werewolf Therapeutics, Inc. (“Werewolf” or the “Company”) was incorporated in the state of Delaware in October 2017. The Company is an innovative biopharmaceutical company pioneering the development of therapeutics engineered to stimulate the body’s immune system for the treatment of cancer. The Company’s headquarters are located in Watertown, Massachusetts.

Since inception, the Company has devoted substantially all of its efforts and financial resources to organizing and staffing the company; business planning; raising capital; developing and optimizing its platform technology; identifying potential product candidates; enhancing its intellectual property portfolio; undertaking research, preclinical studies, and clinical trials; and enabling manufacturing for its development programs. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The Company had cash and cash equivalents of $134.3 million at December 31, 2023. The Company expects that its cash and cash equivalents will enable it to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of issuance of the consolidated financial statements included in this Annual Report on Form 10-K. However, additional funding will be necessary beyond this point to fund future preclinical and clinical activities. The Company expects to finance its future cash needs through a combination of equity or debt financings, collaboration agreements, strategic alliances and licensing arrangements.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).The accompanying consolidated financial statements include the accounts of Werewolf Therapeutics, Inc. and its wholly owned subsidiary, Werewolf Therapeutics Mass Securities, Inc. All intercompany transactions and balances have been eliminated in consolidation.

Segment Information

The Company operates in one business segment, which focuses on the discovery and development of cancer therapeutics. The Company’s chief operating decision maker, its Chief Executive Officer, makes operating decisions based upon the performance of the enterprise as a whole and utilizes the Company’s consolidated financial statements for decision making.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, those related to revenue recognition, accrued expenses, assumptions used in the valuation of stock-based compensation expense and income taxes. Actual results could differ from those estimates.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC 820 defines fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant

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assumptions in fair value measurements, ASC 820 establishes a three-tiered fair value hierarchy that distinguishes between the following:

•Level 1 - Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3 - Unobservable inputs for which little or no market data exists and that are significant to the fair value measurement, such as the Company’s own assumptions used to measure assets and liabilities at fair value.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. The classification of a financial asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

The Company’s cash and cash equivalents consist of cash maintained within standard checking accounts. The Company also maintains cash sweep accounts in which cash from its main operating cash accounts are invested overnight in highly liquid, short-term investments. The Company considers all highly liquid investments with a maturity date of 90 days or less at the date of purchase to be cash equivalents.

The Company maintained restricted cash and cash equivalents of $21.2 million and $1.2 million at December 31, 2023 and December 31, 2022, respectively. At December 31, 2023, $20.0 million of the restricted cash and cash equivalents balance represents an obligation under the term loan facility to maintain a minimum cash balance in the Company’s accounts with Pacific Western Bank (“PWB”). This obligation became effective upon imminent achievement of the funding goal as required by the terms of an amended and restated loan and security agreement (the “Loan Agreement”) with PWB (see Note 7, Term Loan). The remaining restricted cash and cash equivalents balance as of December 31, 2023 and the entire restricted cash and cash equivalents balance as of December 31, 2022 are comprised solely of letters of credit required pursuant to the Company’s leased office spaces (see Note 10, Commitments and Contingencies). Restricted cash and cash equivalents are presented as current or non-current assets based on when the restrictions are expected to expire. The current portion of restricted cash and cash equivalents is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets.

Property and Equipment

Property and equipment are stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the applicable assets. Upon the sale or retirement of an asset, the cost and related accumulated depreciation are eliminated from the respective account, and the resulting gain or loss, if any, is included in current operations. Amortization of leasehold improvements is recorded as depreciation expense using the straight-line method over the shorter of the remaining lease term or the estimated useful life of the related asset. The Company capitalizes property and equipment that are acquired for research and development activities and that have an alternate future use. Expenditures for maintenance and repairs are recorded to expense as incurred, whereas major betterments are capitalized as additions to property and equipment. Property and equipment are depreciated over the following periods:

Laboratory equipment 5 years

Furniture and office equipment 5 years

Computer equipment 3 years

Leasehold improvements Shorter of lease term or useful life of asset

Costs for property and equipment not yet placed into service are classified as construction in progress and depreciated in accordance with the above guidelines once placed into service.

Impairment of Long-lived Assets

Long-lived assets consist of property and equipment. The Company reviews its property and equipment whenever events or changes in circumstances indicate that the carrying value of certain assets might not be recoverable. If such events or changes in circumstances arise, the Company compares the carrying amount of the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the long-lived assets. If the estimated aggregate undiscounted cash flows are less than the carrying amount of the long-lived assets, an impairment charge, calculated as the amount by which the carrying amount of the assets exceeds the fair value of the assets, is recorded. The fair value of long-lived assets is determined based on the

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estimated discounted cash flows expected to be generated from the long-lived assets. The Company has not recorded any material impairment charges during the years ended December 31, 2023 or 2022.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than twelve months are recognized on the balance sheet as right-of-use assets and current or non-current lease liabilities, as applicable. The Company does not recognize leases with terms of twelve months or less on the balance sheet. The lease term is determined at lease commencement, and includes the noncancellable period during which the Company has the right to use the underlying asset. Any period covered by an option to extend or terminate a lease is included in the lease term if the Company is reasonably certain that the option to extend will be exercised or the option to terminate will not be exercised. The Company monitors its plans to renew its material leases on a quarterly basis.

The Company combines lease and non-lease components for its leases. Lease payments included in determining the right-of-use asset and lease liability recognized include fixed payments to be paid over the term of the lease, less any lease incentives to be paid or payable to the Company by the lessor. Variable lease payments are included if they are based on an index or rate. Variable lease payments that are not based on an index or rate are recognized as expense in the period incurred.

The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate (“IBR”), which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, and in a similar economic environment. The lease liability is measured as the value of the remaining lease payments, discounted to present value using the IBR for the lease.

All of the Company’s leases are classified as operating leases. Operating lease expense is recognized over the lease term using the straight-line method.

Revenue Recognition

The Company analyzes its collaborations to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements (“ASC 808”). This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and which elements of the collaboration are more reflective of a vendor-customer relationship and therefore within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, either by analogy to authoritative accounting literature or by applying a reasonable and rational policy election.

For those elements of the arrangement that are accounted for pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. In applying ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the promises and performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies the performance obligations. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. As part of the assessment, the Company must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. The Company uses key assumptions to determine the standalone selling price, which may include reimbursement rates for personnel costs, development timelines and probabilities of regulatory success. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of promised goods or services to the customer will be one year or less.

Arrangements that include upfront payments may require deferral of revenue recognition to a future period until obligations under these arrangements are fulfilled. Event-based milestone payments represent variable consideration, and the Company uses the “most likely amount” method to estimate this variable consideration. Given the high degree of uncertainty around the occurrence of these events, the Company considers the milestones and other contingent amounts to be fully constrained until the uncertainty associated with these payments is resolved. Revenue will be recognized from sales-based royalty payments

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when or as the sales occur. The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur.

Research and Development Expenses

Expenditures relating to research and development are expensed as incurred. Research and development expenses include external expenses incurred under arrangements with third parties, academic and non-profit institutions and consultants; salaries and personnel-related costs, including non-cash stock-based compensation expense; license fees to acquire in-process technology and other expenses, which include direct and allocated expenses for laboratory, facilities and other costs. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Intellectual Property Expenses

The Company expenses costs associated with intellectual property-related matters as incurred and classifies such costs as general and administrative expenses within the consolidated statements of operations.

Stock-based Compensation

The Company issues stock-based awards to employees and directors, generally in the form of stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”), or as awards under the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). Stock-based compensation is measured at the grant date based on the estimated fair value of the award and recognized as expense over the requisite service period of the award on a straight-line basis. For awards with performance conditions, the Company estimates the likelihood of satisfaction of the performance condition, which affects the period over which the expense is recognized. When the likelihood of satisfying the performance conditions related to an award is determined to be probable, the expense is recognized over the requisite service period. The Company has not granted any awards with market conditions. The Company recognizes forfeitures of stock-based awards as they occur.

The grant date fair value of stock options, and awards granted under the 2021 ESPP are measured using the Black-Scholes valuation model, which requires the Company to make assumptions about the fair value of the underlying common stock on the date of grant. The grant date fair value of RSUs and RSAs is estimated to be equal to the closing price of the Company’s common stock on the date of grant. In the event that stock-based awards are granted in contemplation of or shortly before a planned release of material non-public information, and such information is expected to result in a material increase in the share price of the Company’s common stock, the Company may consider whether an adjustment to the observable market price is required when estimating the grant date fair value.

Debt Issuance Costs

Certain costs associated with the issuance of debt instruments are capitalized and amortized over the term of the respective debt instrument using the effective interest method through the maturity date of the related debt instrument and are recognized as a non-cash component of interest expense. The carrying value of the Company’s debt instruments are presented net of debt issuance costs.

Equity Issuance Costs

Equity issuance costs represent costs paid to third parties to secure equity financing and generally consist of sales agent commissions, incremental legal fees and other professional fees. Equity issuance costs are capitalized as other assets until the associated equity financing is consummated. Upon consummation of an equity financing, these costs are recorded as a reduction of additional paid-in capital. In the event that a planned equity financing is abandoned, any capitalized equity issuance costs are immediately expensed to operating expenses in the consolidated statement of operations.

Income Taxes

Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”) which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors, including, but not limited to, changes in the law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject

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to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company recognizes any material interest and penalties related to unrecognized tax benefits in income tax expense.

Comprehensive Loss

The Company does not have items of other comprehensive loss for the years ended December 31, 2023 and 2022, and therefore does not present a consolidated statement of comprehensive loss. The Company’s comprehensive loss equals its net loss.

Basic and Diluted Net Loss per Common Share

Basic net loss per share is calculated based upon the weighted-average number of common shares outstanding during the period, excluding outstanding stock options and RSUs that have been issued but are not yet vested. Diluted net loss per share is calculated based upon the weighted-average number of common shares outstanding during the period plus the dilutive impact of weighted-average common equivalent shares outstanding during the period. The potentially dilutive shares of common stock resulting from the assumed exercise of outstanding stock options and the assumed vesting of RSUs are determined under the treasury stock method.

Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents. Cash and cash equivalents are primarily held with three reputable financial institutions in the United States. At times, such deposits may be in excess of insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.The Company has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU No. 2023-09”), which enhances the transparency and decision usefulness of income tax disclosures primarily related to rate reconciliation and income taxes paid. The provisions of ASU No. 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and are required to be applied on a prospective basis. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

Subsequent Events

The Company has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Other than as described in these financial statements, the Company did not identify any subsequent events that would have required adjustment to or disclosure in the financial statements.

3. Jazz Collaboration and License Agreement

In April 2022, the Company entered into an exclusive global collaboration and license agreement (the “Collaboration Agreement”) with Jazz Pharmaceuticals Ireland Limited (“Jazz”) pursuant to which the Company granted Jazz certain licenses to develop and commercialize products containing the Company’s Interferon alpha (“IFNα”) INDUKINETM molecule, JZP898 (formerly WTX-613), as well as products containing certain isolated recombinant polypeptides comprising IFNα that meet specified criteria (each such product, a “Licensed Product”). Under the Collaboration Agreement, the Company is responsible for certain preclinical development activities with respect to JZP898 and other development activities specified in mutually agreed upon development plans. Jazz will generally reimburse the Company for the cost of such activities. Jazz will be responsible for all other development and commercialization activities conducted to exploit the Licensed Products, including submission of an investigational new drug application (“IND”) to the U.S. Food and Drug Administration (the “FDA”). Jazz received IND application clearance for JZP898 in July 2023.

Under the terms of the Collaboration Agreement, the Company received a non-refundable upfront cash payment of $15.0 million in April 2022 and a variable consideration payment of $5.0 million in July 2023, which is included in the overall transaction price as described below.

Milestones and Royalties

As of December 31, 2023, the Company is eligible to receive up to $515.0 million in development and regulatory milestones, and up to $740.0 million in sales-based milestones for all Licensed Products. In addition, the Company is eligible to receive tiered mid-single digit royalties based on Jazz’s, and any of its affiliates’ and sublicensees’ annual net sales of Licensed Products, subject to reduction in specified circumstances.

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As of December 31, 2023, the Company has not recognized any revenue related to sales-based milestones.

Accounting Analysis under ASC 606

Identification of the Contract(s)

The Company assessed the Collaboration Agreement and concluded that it represents a contract with a customer within the scope of ASC 606.

Identification of Promises and Performance Obligations

The Company has concluded that the exclusive license to its intellectual property, JZP898, and the non-exclusive corresponding “know-how” are not capable of being distinct from the other promises within the contract, and as such, the Company has determined that the license and “know-how” combined with the other research and development services and supply represent a single combined performance obligation.

Determination of Transaction Price

The overall transaction price as of the inception of the contract was determined to be $32.3 million, which was comprised of the nonrefundable upfront payment of $15.0 million and the estimated costs for research services of $17.3 million. Outside of the estimated costs for research services, there was no other variable consideration included in the transaction price at inception. The Company used the most likely amount method to estimate variable consideration and estimated that the most likely amount for each potential development and regulatory milestone payment under this agreement was zero at inception of the contract, as achievement of those milestones was uncertain and highly susceptible to factors outside the Company’s control. Accordingly, all such milestone payments were excluded from the transaction price at inception. Management re-evaluates the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur, adjusts the transaction price as necessary. During the year ended December 31, 2023, the overall transaction price was adjusted to include $5.0 million in variable consideration that was previously excluded based on the Company’s evaluation of the variable constraint associated with the variable payment. Sales based royalties, including milestones based on the level of sales, were also excluded from the transaction price, as the license is deemed to be the predominant item to which the royalties relate. The Company will recognize such revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

The upfront payment of $15.0 million was recorded as deferred revenue and, along with payments related to the Company’s conduct of research services under the Collaboration Agreement or any development and regulatory milestones, will be recognized as revenue using an input-based measurement of actual costs incurred as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services. The Company believes this input-based method to recognize revenue best reflects the transfer of value to Jazz. The remaining deferred revenue as of December 31, 2023 is expected to be recognized as revenue over a term of approximately 2.3 years.

Recognition of Revenue

The Company uses the cost-to-cost input method, which best depicts the research services performed for the customer, to measure the revenue recognized under the Collaboration Agreement. Significant judgements used in the cost-to-cost method include estimated costs for research services and assumptions about the timing of when those costs are expected to be incurred. Differences in these estimates and assumptions can have a significant impact on the measurement and timing of when revenue under the Collaboration Agreement is recognized. For the years ended December 31, 2023 and 2022, the Company recognized $19.9 million and $16.4 million of revenue related to the Collaboration Agreement, respectively. The measurement of revenue recognized based on the cost-to-cost input method and the timing of payments received under the Collaboration Agreement directly impact the amounts reported as contract liabilities in the Company’s consolidated balance sheets as of December 31, 2023 and 2022. During the year ended December 31, 2023, the total revenue recognized included a cumulative catch-up of revenue of $4.2 million related to a variable payment that was previously excluded from the overall transaction price based on the Company’s evaluation of the variable constraint associated with the variable payment. The cumulative catch-up of revenue was recognized based on the cost-to-cost input method discussed above. Costs associated with the Collaboration Agreement are recorded in research and development expense in the consolidated statements of operations, and were $8.6 million and $9.1 million during the years ended December 31, 2023 and 2022, respectively. Revenue from the reimbursement of costs for research activities were recognized during each of the respective periods in amounts equal to the costs incurred.

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The following table presents the activity in the Company’s contract liabilities during the year ended December 31, 2023:

Beginning of Period Balance Additions Reductions End of Period Balance

(in thousands)

Contract liabilities:

The following table presents the activity in the Company’s contract liabilities during the year ended December 31, 2022:

Beginning of Period Balance Additions Reductions End of Period Balance

(in thousands)

Contract liabilities:

Unbilled receivables related to the Collaboration Agreement of $0.4 million and $4.1 million is included in other receivables in the accompanying consolidated balance sheets as of December 31, 2023 and 2022, respectively. Receivables related to the Collaboration Agreement of $0.9 million and $2.8 million are included in other receivables in the accompanying consolidated balance sheets as of December 31, 2023 and 2022, respectively. Revenue recognized during the year ended December 31, 2023 includes $6.7 million of revenue that was included in deferred revenue as of December 31, 2022. No revenue recognized during the year ended December 31, 2022 was included in deferred revenue as of December 31, 2021.

As of December 31, 2023, the Company has not received any royalty payments under the Collaboration Agreement.

4. Financial Instruments and Fair Value Measurements

The Company’s assets that are required to be measured at fair value on a recurring basis consist of money market funds, classified as cash, cash equivalents and restricted cash and cash equivalents on the Company’s consolidated balance sheets as of December 31, 2023 and 2022 . The Company’s liabilities that were required to be measured at fair value on a recurring basis consist of a success payment liability pursuant to the Loan Agreement with PWB (see Note 7, Term Loan) as of December 31, 2022. The Company did not have any liabilities that are required to be measured at fair value on a recurring basis as of December 31, 2023.

The carrying amounts reflected in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values, due to their short-term nature.

Assets measured at fair value on a recurring basis as of December 31, 2023 were as follows:

Level 1 Level 2 Level 3 Total

(in thousands)

Assets:

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 were as follows:

Level 1 Level 2 Level 3 Total

(in thousands)

Assets:

Liabilities

Success payment liability $ — $ — $ 570 $ 570

Total liabilities $ — $ — $ 570 $ 570

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The success payment liability was included within accrued expenses and other current liabilities in the accompanying consolidated balance sheet as of December 31, 2022. There were no changes in valuation techniques during the year ended December 31, 2023.

Success Payment Liability

The Company was obligated to pay to PWB a one-time success payment of up to $1.6 million upon the occurrence of the Company achieving certain conditions defined in the Loan Agreement. The Success Fee Event (as defined in the Loan Agreement) occurred during the second quarter of 2023, resulting in the immediate payment in full of the required Success Fee (as defined in Note 7 below).

The following table reconciles the change in fair value of the success payment liability during the years ended December 31, 2023 and 2022 based on Level 3 inputs (in thousands):

Balance at December 31, 2021 $ —

Change in fair value (555)

Change in fair value 1,030

Payment at Success Fee Event (1,600)

Balance at December 31, 2023 $ —

The success payment liability is stated at fair value and is considered Level 3 because its fair value measurement is based, in part, on significant inputs not observed in the market. Upon completion of the Success Fee Event, the Company paid the total $1.6 million success payment and removed the corresponding success payment liability. The Company remeasured the success payment liability at each reporting date and immediately prior to the Success Fee Event. Changes in the fair value of the success payment liability are included in other (expense) income, net in the accompanying consolidated statements of operations.

The fair value of the success payment liability was determined using a probability weighted expected return method, in which the probability and timing of potential future events was considered in order to estimate the fair value of the success payment liability as of each valuation date. Management determined the fair value of the success payment liability immediately prior to the completion of the Success Fee Event and as of December 31, 2022 using the following significant unobservable inputs:

Immediately prior to completion of the Success Fee Event As of December 31, 2022

Probability of Success Fee Event 100 % 75 %

Discount rate — % 7.1 %

5. Property and Equipment, Net

Property and equipment, net was comprised as follows:

December 31,

(in thousands)

Construction in progress — 106

Less: accumulated depreciation (3,170) (1,406)

Total property and equipment, net $ 7,958 $ 8,988

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6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were comprised as follows:

December 31,

(in thousands)

Employee compensation and benefits $ 3,627 $ 3,135

Accrued interest 310 —

Success payment liability — 570

Total accrued expenses and other current liabilities $ 8,860 $ 14,152

7. Term Loan

In April 2022, the Company entered into the Loan Agreement with PWB. Under the terms of the Loan Agreement, PWB made available a term loan in an aggregate principal amount of up to $20.0 million (“Tranche I Loan”) available at any time after the closing date until February 28, 2024 as extended to August 31, 2024 upon the satisfaction of certain conditions set forth in the Loan Agreement (such date, the “Amortization Date”). Based on the satisfaction of certain conditions defined in the Loan Agreement, PWB was also obligated to make available an additional term loan in the aggregate principal amount of up to $20.0 million (“Tranche II Loan”, or collectively with the Tranche I Loan, the “Term Loans”) available at any time after the closing date until the Amortization Date upon the acceptance by the FDA of two IND submissions on or before March 31, 2023. The Company had not drawn down any of the Term Loans as of December 31, 2022 and had no outstanding borrowings under the Loan Agreement. During the year ended December 31, 2023, the Company drew down the entire $40.0 million available through the Term Loans.

The outstanding notes payable balance under the Term Loans consists of the following:

(in thousands)

Unamortized debt discount and issuance costs (677)

Net carrying amount of note payable 39,323

Less: current portion of note payable (6,667)

Note payable, net, less current portion $ 32,656

Subsequent to the interest-only period, which ends on August 31, 2024, the Company is required to make equal monthly principal payments plus interest until the Term Loans mature on August 31, 2026. The Term Loans will bear interest on the outstanding daily balance at a floating annual rate equal to greater of: (i) 0.5% above the prime rate then in effect or (ii) 4.5%. If the prime rate changes throughout the term, the interest rate will be adjusted effective on the date of the prime rate change. All interest chargeable under the Loan Agreement is computed on a 360-day year for the actual number of days elapsed, with interest payable monthly. The Company recognized interest expense related to the Loan Agreement of $2.9 million during the year ended December 31, 2023. No interest expense related to the Loan Agreement was incurred during the year ended December 31, 2022.

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The following table presents the total principal payments scheduled to become due during each of the years ended December 31:

Principal Payments

(in thousands)

The Company was obligated to pay PWB a one-time fee in the event of certain corporate transactions equal to either (i) the greater of (a) $0.2 million and (b) 2.0% of the amount drawn under the Term Loans, for a transaction occurring on or before March 31, 2023, or (ii) for any transaction occurring thereafter, the greater of (a) $0.4 million and (b) 4.0% of the amount drawn under the Term Loans (the “Success Fee”). The Company determined that the Success Fee constituted a freestanding financial instrument that was required to be accounted for as a liability in connection with ASC Topic 815, Derivatives and Hedging. The Company determined the fair value of the Success Fee upon the closing date of the Loan Agreement and then marked to market the fair value of the Success Fee as of December 31, 2022. The Success Fee Event (as defined in the Loan Agreement) occurred during the second quarter of 2023, resulting in the immediate payment in full of the $1.6 million required Success Fee.

All outstanding obligations under the Loan Agreement are secured by the Company’s personal property (exclusive of any intellectual property) and are subject to acceleration in the event of default. In the event of a late payment or default, the Company is obligated to pay a fee equal to 5.0% of such unpaid amounts. In connection with the Loan Agreement, the Company is required to comply with certain negative covenants, which among other things, restrict the Company from (i) incurring future debt or granting liens, (ii) effectuating a merger or consolidation with or into any other business organization, (iii) paying dividends or making certain other distributions, (iv) selling or otherwise transferring its assets, (v) making investments in any entities or instruments other than certain investments specified in the Loan Agreement and (vi) making capitalized expenditures in excess of 125% of the amount provided for in the annual budget approved by the board of directors. The Loan Agreement also contains standard affirmative covenants, including with respect to the issuance of audited consolidated financial statements, insurance, and maintenance of good standing and government compliance in the Company’s state of formation. On or before September 30, 2023, the Company was required to raise aggregate gross cash process of at least $50.0 million from the sale or issuance of its equity or from strategic partnerships or any similar transaction. From after receipt of those proceeds, the Company is required to maintain at all times at least $20.0 million of unrestricted cash in accounts with PWB, which is included within restricted cash and cash equivalents, net of current portion on the Company’s consolidated balance sheet as of December 31, 2023. On April 17, 2023, the Company achieved the $50.0 million funding milestone, triggering the corresponding $20.0 million cash covenant, full payment of the Success Fee of $1.6 million, and the updated Amortization Date of August 31, 2024.

PWB has the right to accelerate all outstanding obligations of the Company under the Loan Agreement or terminate any remaining Term Loan commitments in the event of a material adverse effect on (i) the operations, business or financial condition of the Company, (ii) the Company’s ability to repay any portion of the Term Loans or perform any of its other obligations under the Loan Agreement, and (iii) the Company’s interest in, or the value, perfection or priority of PWB’s security interest in the collateral.

8. Common and Preferred Stock

Common Stock

The Company is authorized to issue 200,000,000 shares of common stock. Common stockholders are entitled to dividends if and when declared by the Company’s board of directors. As of December 31, 2023, no dividends on common stock had been declared by the Company.

On May 10, 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with Leerink Partners, LLC (“Leerink Partners”), formerly known as SVB Securities LLC, pursuant to which the Company is entitled to offer and sell shares of its common stock (the “ATM Offering”). The Sales Agreement provides that Leerink Partners will be entitled to a sales commission equal to 3.0% of the gross sales price per share of all shares sold under the ATM Offering. In accordance with the terms of the Sales Agreement and a sales agreement prospectus included in the registration statement on Form S-3 that the Company filed with the SEC on May 10, 2022, which was declared effective on May 20, 2022, the Company was initially entitled to offer and sell shares of its common stock having an aggregate offering price of up to $50.0 million in the ATM Offering. During the year ended December 31, 2023, the Company sold an aggregate of 7,431,981 shares under the ATM Offering at an average price of $2.56 per share for net proceeds of $18.3 million after deducting sales commissions and offering

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expenses. During the year ended December 31, 2022, the Company sold an aggregate of 3,827,567 shares under the ATM Offering at an average price of $4.36 per share for net proceeds of $15.7 million after deducting sales commissions and offering expenses.

On February 9, 2024, the Company filed a prospectus supplement (the “Prospectus Supplement”) under its shelf registration statement for the offer and sale of shares of its common stock having an aggregate offering price of up to $25.0 million. Following the Company’s filing of the Prospectus Supplement, the Company is entitled to offer and sell shares of its common stock with an offering price of up to $75.0 million pursuant to the Sales Agreement.

During the period beginning January 1, 2024 and ending March 1, 2024, the Company sold 3,629,060 shares of its common stock under the ATM Offering, for gross proceeds of $17.7 million before deducting sales commissions and issuance costs.

The Company had reserved shares of common stock for issuance as follows:

As of December 31,

Shares reserved for exercises of outstanding stock options 5,700,070 5,244,121

Shares reserved for vesting of restricted stock units 361,500 322,725

Shares reserved for exercises of warrants 58,904 58,904

Preferred Stock

The Company is authorized to issue 5,000,000 shares of undesignated preferred stock in one or more series. As of December 31, 2023, no shares of preferred stock were issued or outstanding.

9. Stock-based Compensation

2017 Stock Incentive Plan

In December 2017, the Company adopted the 2017 Stock Incentive Plan (the “2017 Plan”), as amended and restated, under which it could grant incentive stock options (“ISOs”), non-qualified stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards to eligible employees, officers, directors and consultants. The terms of stock options and RSAs, including vesting requirements, are determined by the board of directors, subject to the provisions of the 2017 Plan.

2021 Stock Incentive Plan

In April 2021, the board of directors adopted and the Company’s stockholders approved the 2021 Stock Incentive Plan (the “2021 Plan”), which became effective immediately prior to the effectiveness of the Company’s initial public offering (the “IPO”). As a result of the adoption of the 2021 Plan, no further awards will be made under the 2017 Plan.

The 2021 Plan provides for the grant of ISOs, non-qualified stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards. The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2021 Plan. The terms of awards, including vesting requirements, are determined by the board of directors, subject to the provisions of the 2021 Plan.

The Company initially registered 3,352,725 shares of common stock under the 2021 Plan, pursuant to a Registration Statement on Form S-8 filed with the SEC on April 30, 2021, which was comprised of (i) 2,843,116 shares of common stock reserved for issuance under the 2021 Plan, (ii) 31,884 shares of common stock originally reserved for issuance under the 2017 Plan that became available for issuance under the 2021 Plan upon the completion of the IPO, and (iii) 477,725 shares of unvested restricted stock subject to repurchase by us that may become issuable under the 2021 Stock Incentive Plan following such repurchase. The 2021 Plan also provides that an additional number of shares will be added annually to the shares authorized for issuance under the 2021 Plan on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2022 and continuing until, and including, the fiscal year ended December 31, 2031. The number of shares added each year will be equal to the lesser of (i) 5% of the number of outstanding common stock on such date and (ii) such amount as determined by the board of directors. As of December 31, 2023, a total of 2,956,150 additional shares have been added to the total shares authorized for issuance under the 2021 Plan in accordance with these terms.

As of December 31, 2023, there were 1,911,660 shares available for future issuance under the 2021 Plan.

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2021 Employee Stock Purchase Plan

The 2021 ESPP permits eligible employees to purchase shares of the Company’s common stock at a discount and consists of consecutive six-month offering periods, each containing a single six-month purchase period. On the first day of each offering period, each employee who is enrolled in the 2021 ESPP will automatically receive an option to purchase up to a whole number of shares of the Company’s common stock. The purchase price of each of the shares purchased, in a given purchase period, will be equal to 85% of the lesser of the closing price of a share of the Company’s common stock on (i) the first day of the offering period, or (ii) the last day of the offering period. During the year ended December 31, 2023, 52,037 shares of the Company’s common stock were purchased by participants of the 2021 ESPP for total proceeds of $0.1 million. No shares of the Company’s common stock were purchased by participants of the 2021 ESPP during year ended December 31, 2022.

Stock-Based Compensation Expense

Total stock-based compensation expense recognized in the consolidated statements of operations was as follows:

Year Ended December 31,

(in thousands)

Total stock-based compensation $ 8,008 $ 7,400

RSA Activity

The Company may, at its discretion, repurchase unvested shares of restricted stock issued pursuant to the 2017 Plan at the initial purchase price if the employees or non-employees terminate their service relationship with the Company. The shares are recorded in stockholders’ deficit as they vest.

The following table summarizes RSA activity during the year ended December 31, 2023:

Shares/Units Weighted-AverageGrant Date FairValue Per Share

Granted — $ —

Forfeited — $ —

Unvested at December 31, 2023 — $ —

The aggregate fair value of RSAs that vested during the years ended December 31, 2023 and 2022, based upon the fair value of the stock underlying the RSAs on the day of vesting, was $0.2 million and $1.2 million, respectively.

RSU Activity

The Company has also granted RSUs to its employees under the 2021 Plan. The following table summarizes RSU activity during the year ended December 31, 2023:

Shares/Units Weighted-AverageGrant Date FairValue Per Share

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As of December 31, 2023, there was unrecognized stock-based compensation expense related to unvested RSUs of $0.6 million, which the Company expects to recognize over a weighted-average period of approximately 0.63 years.

The aggregate fair value of RSUs that vested during the year ended December 31, 2023, based upon the fair value of the stock underlying the RSUs on the day of vesting was $0.2 million. No RSUs vested during the year ended December 31, 2022.

Stock Option Activity

During the year ended December 31, 2022, the Company granted performance-based stock options to certain executive officers for the purchase of an aggregate of 883,352 shares of common stock with a grant date fair value of $3.36 per share. These stock options would have vested only upon achievement of specified performance targets related to certain business objectives prior to December 31, 2023. These performance targets were not achieved, and accordingly these awards expired without vesting on December 31, 2023. No stock-based compensation expense has been recognized during the year ended December 31, 2023 or 2022 based on the Company’s assessment about the probability that the performance targets would be achieved prior to expiration.

The fair value of stock options granted during the years ended December 31, 2023 and 2022 was calculated on the date of grant using the following weighted-average assumptions:

Year Ended December 31,

Risk-free interest rate 3.9 % 2.3 %

Expected term (in years) 6.0 6.0

Expected annual dividend yield — % — %

Expected volatility 82.7 % 77.0 %

The valuation assumptions were determined as follows:

•Risk-free interest rate: The yield on zero-coupon U.S. Treasury securities for a period that was commensurate with the expected term of the awards.

•Expected term (in years): The expected term of the awards represents the period of time that the awards were expected to be outstanding. The Company uses the simplified method to estimate the expected term due to a lack of sufficient historical exercise data to provide a reasonable basis on which to estimate the expected term. Under this method, the expected term equals the average of the vesting term and the original contractual term of the option.

•Expected annual dividend yield: The estimated dividend yield was zero because the Company has no history of paying dividends, and does not intend to do so in the foreseeable future.

•Expected volatility: The expected term of stock options granted by the Company is generally longer than the trading history of the Company’s common stock since the IPO on April 30, 2021. Accordingly, the Company estimated the expected volatility based on the historical volatility of a group of publicly-traded companies with similar characteristics to the Company, including stage of product development and therapeutic focus within the life sciences industry. The historical volatility of these companies was calculated over a period of time commensurate with the expected term of the stock option.

Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the years ended December 31, 2023 and 2022 was $1.56 and $5.98 per share, respectively.

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The following table summarizes stock option activity during the year ended December 31, 2023:

Options Outstanding

The aggregate intrinsic fair value of stock options exercised during the year ended December 31, 2023 was nominal. The aggregate intrinsic fair value of stock options exercised during the year ended December 31, 2022 was $0.4 million.

As of December 31, 2023, there was unrecognized stock-based compensation expense related to unvested stock options of $9.9 million, which the Company expects to recognize over a weighted-average period of approximately 2.0 years.

10. Commitments and Contingencies

Leases

The Company’s leases are as follows:

•An April 2019 operating lease for approximately 9,949 square feet of office and laboratory space which commenced in April 2019 and terminates in March 2024. The lease is subject to fixed-rate rent escalations and provided for a term extension option, which was not reasonably certain of exercise. In May 2022, the Company entered into a sublease agreement with Crossbow Therapeutics, Inc. (“Crossbow”), to sublease the entirety of this space. The total rent due to the Company for the subleased premises over the term of the sublease is approximately $2.1 million, which is greater than the annual rent paid by the Company to the landlord for the leased premises over the same term. Rent expense associated with the April 2019 operating lease is recognized net of the lease income generated from the sublease agreement. Lease income is allocated to either research and development expense or general and administrative expense in the same manner that the associated rent expense is allocated. Crossbow is obligated to pay all real estate taxes and costs related to the subleased premises, including cost of operations, maintenance, repair, replacement, and property management.

•A March 2021 short-term lease for approximately 7,500 square feet of office and laboratory space which commenced in April 2021 and terminated in May 2022. The Company did not recognize an operating lease right of use asset or a lease liability upon lease commencement. Rent expense for the short-term lease was recognized as incurred.