ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
Information pertaining to fiscal year ended December 31, 2023 was included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, on pages 97 through 105, under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was filed with the SEC on March 21, 2024.
Overview
We are a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of novel treatments for patients suffering from serious hematologic diseases. We have assembled a portfolio of clinical and preclinical product candidates that aim to modify fundamental biological pathways associated with the formation and function of red blood cells, specifically heme biosynthesis and iron homeostasis. Our current pipeline includes bitopertin for the treatment of erythropoietic porphyrias, or EPs, including erythropoietic protoporphyria, or EPP, and X-linked protoporphyria, or XLP; DISC-0974 for the treatment of anemia of myelofibrosis, or MF, and anemia of inflammatory bowel disease, or IBD; and DISC-3405 for the treatment of polycythemia vera, or PV, sickle cell disease, or SCD, and other hematologic disorders. In addition, our preclinical programs include DISC-0998 for the treatment of anemia associated with inflammatory diseases. Our approach to product candidate development leverages well-understood molecular mechanisms that have been validated in humans. We believe that each of our product candidates, if approved, has the potential to improve the lives of patients suffering from hematologic diseases.
Heme Biosynthesis: Bitopertin
Bitopertin is the lead product candidate in our heme biosynthesis modulation portfolio. Bitopertin was previously evaluated by F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., or collectively, Roche, in a comprehensive clinical program in over 4,000 individuals in other indications which demonstrated the activity of bitopertin as a glycine transporter 1, or GlyT1, inhibitor and its effect on heme biosynthesis. We are initially developing bitopertin for the treatment of EPs, including EPP and XLP, which are part of a group of severe diseases, known as porphyrias, caused by defects in the heme biosynthesis pathway that cause an accumulation of toxic metabolites referred to as porphyrins, resulting in skin hypersensitivity to sunlight and some types of artificial light.
We have completed two Phase 2 clinical trials of bitopertin: BEACON, an open-label, parallel-dose clinical trial in EPP and XLP patients conducted at sites in Australia, and AURORA, a randomized, double-blind, placebo-controlled clinical trial in EPP patients conducted at sites in the United States. In both trials, bitopertin significantly reduced the toxic metabolite, protoporphyrin IX, or PPIX, and was associated with improvements in measures of time spent in sunlight and quality of life. In addition, bitopertin was generally well-tolerated. All participants in AURORA and BEACON were eligible to participate in HELIOS, an ongoing open-label, long-term extension study of bitopertin in EPP and XLP patients. Interim data from HELIOS, presented in June 2025, demonstrated that longer term treatment of bitopertin was associated with sustained reductions in PPIX, as well as improvements in quality of life and liver biomarkers. In our end-of-Phase 2 meeting in September 2024, the U.S. Food & Drug Administration, or the FDA, agreed with the potential for reduction of PPIX to serve as a surrogate endpoint to support a potential accelerated approval of bitopertin in EPP and XLP. In our Type C meeting in December 2024, we aligned with the FDA on the design of APOLLO, a Phase 3, randomized, double-blind, placebo-controlled, clinical trial of bitopertin in EPP and XLP patients that in the setting of an accelerated approval would serve as a post-marketing confirmatory trial. We initiated the APOLLO trial in May 2025 and in September 2025 we submitted a New Drug Application, or NDA, for accelerated approval of bitopertin in EPP and XLP in the United States based on our existing data. In October 2025, we were awarded a Commissioner’s National Priority Voucher, or CNPV, from the FDA for bitopertin in EPP and XLP. The CNPV program, announced in June 2025, is designed to accelerate the development and review of certain drugs aligned with US national health priorities. The FDA accepted our NDA for review in November 2025 and in February 2026 issued a complete response letter, or CRL. Although the FDA agreed that clinical data from AURORA and BEACON provided sufficient evidence that bitopertin significantly lowers whole blood metal-free PPIX, the FDA concluded that the trials did not show evidence of association between percent change in PPIX and sunlight exposure-based endpoints as measured in the trials. As such, the FDA determined that there is uncertainty regarding whether bitopertin’s effect on PPIX is reasonably likely to predict clinical benefit, despite the strong mechanistic and biological plausibility supporting the use of the PPIX biomarker in protoporphyria. The FDA indicated that results of the ongoing APOLLO trial could serve as evidence to support a potential traditional approval, and we plan to request a Type A meeting to review our approach with the FDA. We expect to report topline data from APOLLO in the fourth quarter of 2026, following which we plan to submit a response to the CRL.
102
Our APOLLO clinical trial is also intended to serve as a registrational trial with respect to any potential future marketing applications for bitopertin in EPP and XLP outside the United States. We continue to evaluate potential additional trials of bitopertin in other indications.
Iron Homeostasis: DISC-0974 and DISC-3405
DISC-0974 is the lead product candidate in our iron homeostasis portfolio and was licensed from AbbVie Deutschland GmbH & Co. KG, or AbbVie. DISC-0974 is designed to suppress hepcidin production and increase serum iron levels. We completed a Phase 1 clinical trial in healthy volunteers in the United States in June 2022, with results showing an acceptable tolerability profile and evidence of target engagement, iron mobilization and augmented erythropoiesis. We initiated a Phase 1b/2 clinical trial in June 2022 in patients with anemia of MF, with results from the Phase 1b portion of this clinical trial showing substantial and sustained reductions in hepcidin levels and increases in iron alongside strong hematologic responses across patient types and an acceptable tolerability profile. We initiated RALLY-MF, the open-label Phase 2 portion of this clinical trial, in December 2024 and reported initial data from this Phase 2 trial in December 2025, with results demonstrating meaningful overall anemia responses across all patient subgroups, regardless of baseline transfusion status and independent of concomitant Janus Kinase, or JAK, inhibitor therapy use. Topline data from this trial is expected in the second half of 2026, which, if positive, is expected to support discussions with regulatory agencies on the potential regulatory path for DISC-0974 in anemia of MF. We initiated a Phase 2 clinical trial of DISC-0974 in patients with IBD and anemia in the first quarter of 2026, and we are planning exploratory studies in additional patient populations with anemia of chronic disease. We are also developing a preclinical anti-hemojuvelin, or HJV, monoclonal antibody, DISC-0998, which also targets hepcidin suppression and was licensed from AbbVie. DISC-0998 is designed to increase serum iron levels and has an extended serum half-life as compared to DISC-0974. We believe this profile may be desirable in certain subsets of patients with anemia associated with inflammatory diseases.
In addition, we are developing DISC-3405, a monoclonal antibody against Transmembrane Serine Protease 6, or TMPRSS6, that we licensed from Mabwell Therapeutics, Inc., or Mabwell. DISC-3405 is part of our iron homeostasis portfolio and is designed to induce hepcidin production and reduce serum iron levels. We initiated a Phase 1 clinical trial of DISC-3405 in healthy adult volunteers in October 2023 and presented interim data from the single-ascending dose, or SAD, portion of this clinical trial in June 2024. We presented data from the multiple ascending dose, or MAD, portion of this clinical trial in December 2024, and presented updated data from both the SAD and MAD portions of this clinical trial in June 2025, with results showing an acceptable tolerability profile and evidence of target engagement, including dose-related increases in serum hepcidin and corresponding reductions in serum iron across all dose levels. We are developing DISC-3405 for the treatment of PV, SCD, and other hematologic disorders. We initiated RESTORE-PV, an open-label Phase 2 clinical trial of DISC-3405 in patients with PV, in the first half of 2025, with initial data expected in the second half of 2026. We also initiated a Phase 1b, open-label clinical trial of DISC-3405 in patients with SCD in October 2025, with initial data expected in the second half of 2026, and plan to explore the role of therapeutic iron restriction in other indications.
Funding
In October 2025 we completed an underwritten offering of shares of our common stock and pre-funded warrants for net proceeds of $211.0 million, after deducting offering expenses. As of December 31, 2025, we had cash, cash equivalents and marketable securities of $791.2 million. We believe that our cash, cash equivalents and marketable securities, will be sufficient to fund our current operating and capital expenditure plans and our debt service obligations into 2029, without taking into account any potential net cash inflows from bitopertin or any other marketed product, if approved during such period. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See "Liquidity and Capital Resources" for additional details.
Financial Operations Overview
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If our development efforts are successful and result in commercialization of one or more product candidates or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from product sales, payments from such collaboration or license agreements or a combination thereof.
103
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the research and development of our product candidates. These expenses include:
•
employee-related expenses, including salaries, benefits, and stock-based compensation expense, for personnel engaged in research and development functions;
•
expenses incurred in connection with our research and development activities, including under agreements with third parties such as consultants, contractors and contract research organizations, or CROs;
•
costs related to contract development and manufacturing organizations, or CDMOs, that are primarily engaged to provide drug substance and product for our preclinical studies, clinical trials and research and development programs, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
•
the costs of acquiring and manufacturing preclinical study and clinical trial materials, including manufacturing registration and validation batches;
•
costs related to compliance with quality and regulatory requirements; and
•
payments made under third-party licensing agreements.
We expense research and development costs as incurred. Costs incurred 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 costs incurred, and may be reflected in our consolidated financial statements as prepaid or accrued expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses and expensed as the related goods are delivered or the services are performed or when it is no longer expected that the goods will be delivered or the services rendered.
We typically use our employee and infrastructure resources across product candidates and development programs. We track external development costs by product candidate or development program, but we do not allocate personnel costs or other internal costs to specific product candidates or development programs.
We expect that our research and development expenses will increase substantially as we advance our programs into and through clinical development. At this time, we cannot accurately estimate or know the nature, timing or costs of the efforts that will be necessary to complete their preclinical and clinical development. Changes in the outcome of any number of variables with respect to these programs could significantly affect the costs and timing associated with their development. We may never succeed in obtaining regulatory approval for any product candidates that have not yet been approved. The successful development of any product candidate is highly uncertain due to the numerous risks and uncertainties inherent in product development, including the following:
•
the timing and progress of preclinical and clinical development activities;
•
the number and scope of preclinical and clinical programs we decide to pursue;
•
our ability to raise additional funds to the extent necessary to complete clinical development of and commercialize our product candidates;
•
our ability to establish new licensing or collaboration arrangements and the progress of the development efforts of third parties with whom we may enter into such arrangements;
•
our ability to maintain our current research and development programs and to establish new programs;
•
the successful initiation, enrollment and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
•
the receipt and related terms of regulatory approvals from applicable regulatory authorities for any product candidates;
•
the availability of raw materials for use in production of our product candidates;
•
our ability to establish agreements with third-party manufacturers for supply of product candidate components for our clinical trials;
104
•
our ability to obtain and maintain patents, trade secret protection and regulatory exclusivity, both in the United States and internationally;
•
our ability to protect our other rights in our intellectual property portfolio;
•
our ability to commercialize product candidates, if and when approved, whether alone or in collaboration with others; and
•
our ability to obtain and maintain third-party insurance coverage and adequate reimbursement for any approved products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, commercial, corporate and business development, and administrative functions. Selling, general and administrative expenses also include legal fees relating to patent and corporate matters, including noncapitalizable transaction costs; professional fees for accounting, auditing, tax compliance and administrative consulting services; investor and public relations expenses; commercial planning and market research; director and officer insurance costs and other insurance costs; and facility related expenses including maintenance and allocated expenses for rent and other operating costs.
We anticipate that our selling, general and administrative expenses will increase substantially in the future as we increase our headcount to support our continued research and development and potential commercialization activities, including establishing the infrastructure to commercialize any product candidates for which we may obtain marketing approval.
Other Income (Expense), Net
Interest Income
Interest income primarily consists of interest earned on cash equivalents, consisting of money market funds, U.S. treasury securities and corporate debt securities, as well as marketable securities, consisting of U.S treasury securities, U.S. government agency securities and corporate debt securities.
Interest Expense
Interest expense primarily consists of amortization of debt issuance costs and discount and interest expense under the Hercules Loan Agreement.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024 (in thousands):
Year EndedDecember 31,
Operating expenses:
Other income (expense), net:
Other income (expense) 45 (2 ) 47
Income tax expense (361 ) (355 ) (6 )
105
Research and Development Expenses
The following table summarizes our research and development expenses for the years ended December 31, 2025 and 2024 (in thousands):
Year EndedDecember 31,
Personnel-related (including equity-based compensation) 47,160 27,539 19,621
Research and development expenses were $170.6 million for the year ended December 31, 2025, compared to $96.7 million for the year ended December 31, 2024. The increase of $74.0 million was primarily due to an increase of $30.7 million in bitopertin development expense consisting of a $10.0 million milestone payment triggered by the initiation of our APOLLO trial and a $20.7 million increase in ongoing costs associated with both the APOLLO study and the HELIOS long-term extension trial. Personnel-related costs increased $19.6 million related to higher research and development headcount, including an increase of $9.0 million in stock-based compensation driven by awards granted under our equity compensation plans. DISC-0974 development expenses increased $10.6 million primarily due to clinical trial advancement and drug manufacturing activities. Other research programs and expenses increased $9.2 million related to expanded research initiatives and ongoing program support. Additionally, DISC-3405 development expenses increased $3.8 million driven by a $10.0 million milestone payment triggered by the first administration to a patient in a Phase 2 clinical trial, partially offset by a decrease of $6.2 million related to manufacturing costs incurred in the year ended December 31, 2024 that did not recur in the year ended December 31, 2025.
Selling, General and Administrative Expenses
The following table summarizes our selling, general and administrative expenses for the years ended December 31, 2025 and 2024 (in thousands):
Year EndedDecember 31,
Total selling, general and administrative expenses $ 65,382 $ 33,049 $ 32,333
Selling, general and administrative expenses were $65.4 million for the year ended December 31, 2025, compared to $33.0 million for the year ended December 31, 2024. The increase of $32.3 million was primarily due to an increase of $17.5 million in personnel-related costs due to higher selling, general and administrative headcount, including an increase of $8.6 million in stock-based compensation driven by awards granted under our equity compensation plans. There was also a $13.1 million increase in legal, consulting, and professional fees primarily related to developing our commercialization capabilities.
Other Income (Expense), Net
Other income (expense), net was $24.2 million for the year ended December 31, 2025, compared to $20.7 million for the year ended December 31, 2024. The increase of $3.5 million was primarily due to higher interest income driven by larger cash, cash equivalents and marketable securities balances, partially offset by an increase in interest expense associated with our term loan.
Income Tax Expense
Income tax expense was $0.4 million for the years ended December 31, 2025 and 2024, respectively. This expense primarily relates to state income tax resulting from an increase in interest income.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses in the foreseeable future as we advance the clinical development of our product candidates. We expect that our research and development and selling, general and administrative costs will continue to increase significantly, including in connection with conducting clinical trials and manufacturing for our product candidates to
106
support commercialization and providing selling, general and administrative support for our operations, including the costs associated with operating as a public company. As a result, we may need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources. See “Risk Factors” included within Item 1A of this Annual Report on Form 10-K for additional risks associated with our substantial capital requirements.
To date, we have funded our operations primarily with proceeds from the sale of our convertible preferred stock and common stock, the proceeds from the merger with Gemini, proceeds from various private and public sales of our equity securities, and proceeds from borrowings under the Hercules Loan Agreement. Through December 31, 2025, we have received net proceeds of $144.5 million from sales of our Series Seed, Series A and Series B convertible preferred stock, $89.5 million from the merger with Gemini, $941.8 million from various private and public sales of our equity securities, and $27.6 million from borrowings under the Hercules Loan Agreement. As of December 31, 2025, we had cash, cash equivalents, and marketable securities of $791.2 million.
We have incurred significant operating losses since inception and, as of December 31, 2025, had an accumulated deficit of $510.2 million. In addition, we expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future. We believe that our cash, cash equivalents and marketable securities will be sufficient to fund our current operating and capital expenditure plans and our debt service obligations into 2029, without taking into account any potential net cash inflows from bitopertin or any other marketed product, if approved during such period. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We may also pursue additional cash resources through public or private equity offerings, collaborations or additional debt financing.
Cash Flows
The following table provides information regarding our cash flows for each period presented (in thousands):
Year EndedDecember 31,
Net cash (used in) provided by:
Operating Activities
Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support our business. We have historically experienced negative cash flows from operating activities as we invested in developing our portfolio, drug discovery efforts, conducting clinical trials and manufacturing, and related infrastructure. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of operating assets and liabilities, which are primarily the result of increased expenses and timing of vendor payments.
During the year ended December 31, 2025, net cash used in operating activities of $180.4 million was primarily due to our net loss of $212.2 million, offset by changes in operating assets and liabilities of $3.5 million and non-cash expenses of $28.3 million which primarily related to stock-based compensation expense of $34.3 million, reduced by $8.5 million from amortization and accretion of investment securities.
During the year ended December 31, 2024, net cash used in operating activities of $93.9 million was primarily due to our net loss of $109.4 million, offset by changes in operating assets and liabilities of $3.2 million and non-cash expenses of $12.2 million which primarily related to stock-based compensation expense of $16.8 million, reduced by $5.3 million from amortization and accretion of investment securities.
Investing Activities
During the year ended December 31, 2025, net cash used in investing activities was primarily due to purchases of marketable securities of $849.6 million, partially offset by maturities of marketable securities of $456.2 million.
During the year ended December 31, 2024, net cash used in investing activities was primarily due to purchases of marketable securities of $386.6 million, partially offset by maturities of marketable securities of $94.8 million.
Financing Activities
During the year ended December 31, 2025, net cash provided by financing activities of $473.4 million consisted primarily of aggregate net proceeds from sales of common stock and pre-funded warrants of $454.4 million from our underwritten offerings in January and October 2025, aggregate net proceeds of $9.8 million from at-the-market offerings and proceeds from the exercise of stock options of $8.6 million.
107
During the year ended December 31, 2024, net cash provided by financing activities of $218.3 million consisted primarily of net proceeds of $172.5 million from the June 2024 underwritten offering, net proceeds from the issuance of long-term debt of $27.6 million, aggregate net proceeds of $14.8 million from at-the-market offerings, and proceeds from the exercise of stock options of $3.0 million.
Future Funding Requirements
We expect our expenses to continue to increase in connection with our ongoing activities, particularly as we continue the research and development of, initiate and complete clinical trials of, and seek regulatory approval for, our product candidates. In addition, depending on the status of regulatory approval, or if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We may also need to raise additional funds sooner if we choose to pursue additional indications and/or geographies for our current or future product candidates or otherwise expand more rapidly than presently anticipated. Furthermore, we expect to continue to incur costs associated with operating as a public company. Our future capital requirements will depend on and could increase significantly as a result of many factors, including:
•
the timing and progress of preclinical and clinical development activities;
•
the number and scope of preclinical and clinical programs we decide to pursue;
•
our ability to raise additional funds to the extent necessary to complete clinical development of and commercialize our product candidates;
•
our ability to establish new and maintain existing licensing or collaboration arrangements and the progress of the development efforts of third parties with whom we may enter into such arrangements;
•
our ability to maintain our current research and development programs and to establish new programs;
•
the successful initiation, enrollment and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
•
the receipt and related terms of regulatory approvals from applicable regulatory authorities for any product candidates;
•
the availability of raw materials for use in production of our product candidates;
•
the terms of agreements with third-party manufacturers for supply of product candidate components for our clinical trials;
•
our ability to obtain and maintain patents, trade secret protection and regulatory exclusivity, both in the United States and internationally;
•
our ability to protect our other rights in our intellectual property portfolio;
•
commercializing product candidates, if and when approved, whether alone or in collaboration with others; and
•
obtaining and maintaining third-party insurance coverage and adequate reimbursement for any approved products.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that may take longer than we anticipate to become commercially available, if they become commercially available at all. Accordingly, we may need to obtain substantial additional funds to achieve our business objectives.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
108
Contractual Obligations and Other Commitments
The following table summarizes our contractual obligations as of December 31, 2025 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):
Payments Due by Period
Total Less Than 1 Year 1 to 3 Years 3 to 5 Years More Than 5 Years
(1) Amounts reflect contractual rent payments due for our leased and subleased office spaces in Watertown, Massachusetts as of December 31, 2025 and include contractual payments due under our forward-starting lease which is expected to commence in December 2026. The term date for our existing lease is December 31, 2029 and the term date for our existing sublease is November 30, 2026.
We enter into contracts in the normal course of business with CROs, CDMOs and other third parties for preclinical studies, clinical trials and manufacturing services. These contracts typically do not contain minimum purchase commitments and are generally cancelable by us upon written notice. Payments due upon cancellation consist of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation and, in the case of certain arrangements with CROs and CDMOs, may include non-cancelable fees. These payments are not included in the table above as the amount and timing of such payments are not fixed and estimable.
We have also entered into license agreements under which we are obligated to make specified milestone and royalty payments. We have not included future payments under these agreements in the table of contractual obligations above since the payment obligations under these agreements are contingent upon future events such as regulatory milestones or generating product sales. We are unable to estimate the timing or likelihood of achieving these milestones or generating future product sales. For additional information about our license agreements and amounts that could become payable in the future under such agreements, see our consolidated financial statements.
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 U.S. generally accepted accounting principles, or GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and costs and expenses in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Research and Development Contract Costs and Accruals
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued and prepaid research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with applicable 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 actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of these estimates with the service providers and makes adjustments, if necessary. Examples of estimated accrued research and development expenses include fees paid to:
•
vendors in connection with preclinical development activities;
•
CROs and investigative sites in connection with preclinical studies and clinical trials; and
•
CDMOs in connection with the production of preclinical study and clinical trial materials.
The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. 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. If the actual timing of the performance of services or the level of effort varies from
109
the estimate, we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.
Stock-Based Compensation Expense
We measure stock-based awards granted to employees, directors, and nonemployees based on their fair value on the date of the grant and recognize compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. For stock-based awards with service-based vesting conditions, we recognize compensation expense using the straight-line method. For stock-based awards with performance-based vesting conditions, we use the accelerated attribution method to expense the awards over the implicit service period based on the probability of achieving the performance conditions.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including:
•
Fair value of our common stock: Prior to the merger with Gemini closing, we determined the estimated fair value of our common-stock based on third-party valuations and certain other relevant objective and subjective factors. See Determination of the Fair Value of Common Stock below for additional details. After the close of the merger, the fair value of our common stock is determined based on the quoted market price of our common stock.
•
Expected stock price volatility: Due to the lack of company-specific historical and implied volatility data, we determine the volatility for awards granted based on an analysis of reported data for a group of guideline companies that issued options with substantially similar terms. The expected volatility has been determined using a weighted average of the historical volatility measures of this group of guideline companies. We expect to continue to do so until such time that we have adequate historical data regarding the volatility of our own traded stock price.
•
Expected term of the option. The expected term of our stock options granted to employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options, using the average between the vesting date and the contractual term.
•
Risk-free interest rate. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
•
Expected dividend yield: We have not paid, and do not anticipate paying, cash dividends on our common stock; therefore, the expected dividend yield is assumed to be zero.
If any assumptions used in the Black-Scholes option pricing model changed significantly, stock-based compensation expense for future awards may differ materially compared with the expense for awards granted previously. We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may refine our estimates, which could materially impact our future stock-based compensation expense.
Determination of the Fair Value of Common Stock
Prior to the merger with Gemini closing, the estimated fair value of our common stock had been determined by our board of directors as of the date of each option grant with input from management, considering our most recently available third-party valuation of common stock, and our board of directors’ assessment of additional objective and subjective factors that we believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.
Our common stock valuations were prepared using either an option pricing method, or OPM, or a hybrid method, both of which used market approaches to estimate our enterprise value. The OPM treats common stock and convertible preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the convertible preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock.
The hybrid method is a probability-weighted expected return method, or PWERM, by which the equity value in one or more scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the company, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the
110
valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock.
The assumptions underlying these valuations were highly complex and subjective and represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment. As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and stock-based compensation expense could be materially different.
Upon closing of the merger, a public trading market for our common stock has been established and it is no longer necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for granted stock options and other such awards we may grant, as the fair value of our common stock is now determined based on the quoted market price of our common stock
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued and certain recently adopted accounting pronouncements that have or may potentially impact our financial position and results of operations is included in Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As of December 31, 2025, we had cash, cash equivalents and marketable securities of $791.2 million. As of December 31, 2025, our cash equivalents consisted of U.S. treasury and corporate debt securities with original maturities of three months or less and our marketable securities consisted of U.S. treasury, U.S. government agency, and corporate debt securities which were classified as available-for-sale securities. As of December 31, 2024, we had cash, cash equivalents, and marketable securities of $489.9 million. As of December 31, 2024, our cash equivalents consisted of money market funds and U.S. treasury securities and our marketable securities consisted of U.S. treasury securities and U.S. government agency securities which were classified as available-for-sale securities. Our primary investment objectives are the preservation of capital and the maintenance of liquidity, and our investment policy defines allowable investments based on quality of the institutions and financial instruments designed to minimize risk exposure. Our exposure to interest rate sensitivity is affected by changes in the general level of U.S. interest rates. Our marketable securities are subject to interest rate risk and will fall in value if market interest rates increase. Due to the short-term maturities and low risk profiles of our investments, we do not anticipate a significant exposure to interest rate risk. If market interest rates were to increase immediately and uniformly by one percentage point from levels as of December 31, 2025, the net fair value of our marketable securities would decrease by approximately $5.2 million.
Our employees and operations are primarily located in the United States. We have, from time to time, engaged in contracts with contractors or other vendors in a currency other than the U.S. dollar. To date, we have had minimal exposure to fluctuations in foreign currency exchange rates as the time period between the date that transactions are initiated, and the date of payment or receipt of payment is generally of short duration. Accordingly, we believe we do not have a material exposure to foreign currency risk.
Inflation generally affects us by increasing our cost of labor and contract research. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the years ended December 31, 2025, 2024 and 2023.
111
ITEM 8.CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DISC MEDICINE, INC.
Index to Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 113
Consolidated Balance Sheets 115
Consolidated Statements of Operations and Comprehensive Loss 116
Consolidated Statements of Stockholders' Equity 117
Consolidated Statements of Cash Flows 118
Notes to Consolidated Financial Statements 120
112
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Disc Medicine, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Disc Medicine, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2026 expressed an unqualified opinion thereon.
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 PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accrued External Research and Development Expenses
113
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2020.
Boston, Massachusetts
February 26, 2026
114
DISC MEDICINE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
Assets
Current assets:
Prepaid expenses and other current assets 12,746 3,734
Property and equipment, net 1,159 751
Right-of-use assets, operating leases 1,096 1,569
Liabilities and Stockholders’ Equity
Current liabilities:
Accrued external research and development expenses 11,451 7,141
Operating lease liabilities, current 611 130
Operating lease liabilities, non-current 1,253 1,548
Commitments and contingencies (Note 14)
Stockholders’ equity:
Accumulated other comprehensive income 965 289
Total liabilities and stockholders’ equity $ 806,879 $ 496,773
The accompanying notes are an integral part of these consolidated financial statements.
115
DISC MEDICINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
Year EndedDecember 31,
Operating expenses:
Other income (expense), net:
Other income (expense) 45 (2 ) (2 )
Net loss per share, basic and diluted $ (6.01 ) $ (3.96 ) $ (3.42 )
Comprehensive loss:
Other comprehensive income:
Foreign currency translation adjustments (1 ) (27 ) —
Unrealized gain on marketable securities 677 316 —
Total other comprehensive income 676 289 —
The accompanying notes are an integral part of these consolidated financial statements.
116
DISC MEDICINE, INC.
CONSOLIDATED STATEMENTS STOCKHOLDERS’ EQUITY
(In thousands, except share and per share amounts)
Shares Amount Capital Income Deficit Equity
Issuance of common stock upon vesting of restricted stock awards 1,916 — — — — —
Issuance of common stock upon exercise of warrants 1,229,221 — — — — —
Stock-based compensation expense — — 5,530 — — 5,530
Issuance of common stock under employee stock purchase plan 11,082 — 441 — — 441
Stock-based compensation expense — — 16,815 — — 16,815
Foreign currency translation adjustments — — — (27 ) — (27 )
Unrealized gain on marketable securities — — — 316 — 316
Issuance of common stock under employee stock purchase plan 14,115 — 578 — — 578
Stock-based compensation expense — — 34,340 — — 34,340
Foreign currency translation adjustments — — — (1 ) — (1 )
Unrealized gain on marketable securities — — — 677 — 677
The accompanying notes are an integral part of these consolidated financial statements.
117
DISC MEDICINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year EndedDecember 31,
Cash flows from operating activities
Adjustments to reconcile net loss to net cash used in operations:
Amortization/accretion of investment securities (8,519 ) (5,304 ) —
Loss from initial consolidation of variable interest entity 852 — —
Non-cash interest expense 837 127 —
Other non-cash items 1 (27 ) —
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (8,922 ) 1,571 (1,166 )
Accrued external research and development expenses 4,310 5,155 169
Operating lease liabilities 186 (495 ) (54 )
Cash flows from investing activities
Purchases of property and equipment (933 ) (505 ) (89 )
Cash flows from financing activities
Proceeds from issuance of long-term debt, net of issuance costs paid — 28,988 —
Payment of debt issuance costs — (1,393 ) —
Contributions from employee stock purchase plan 578 441 —
The accompanying notes are an integral part of these consolidated financial statements.
118
DISC MEDICINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
Year EndedDecember 31,
Supplemental cash flow information
Cash paid for interest $ 2,795 $ 198 $ —
The accompanying notes are an integral part of these consolidated financial statements.
119
DISC MEDICINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Nature of the Business
Disc Medicine, Inc. (together with its subsidiaries, the “Company”) is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel treatments for patients suffering from serious hematologic diseases. The Company has assembled a portfolio of clinical and preclinical product candidates that aim to modify fundamental biological pathways associated with the formation and function of red blood cells, specifically heme biosynthesis and iron homeostasis. The Company's current pipeline includes bitopertin for the treatment of erythropoietic porphyrias ("EPs"), including erythropoietic protoporphyria ("EPP"), and X-linked protoporphyria ("XLP"); DISC-0974 for the treatment of anemia of myelofibrosis ("MF"), and anemia of inflammatory bowel disease ("IBD"); and DISC-3405 for the treatment of polycythemia vera ("PV"), sickle cell disease ("SCD"), and other hematologic disorders. In addition, the Company's preclinical programs include DISC-0998 for the treatment of anemia associated with inflammatory diseases. The Company's approach to product development leverages well-understood molecular mechanisms that have been validated in humans. The Company believes that each of its product candidates, if approved, has the potential to improve the lives of patients suffering from hematologic diseases. The Company was founded in October 2017. The Company’s principal offices are located in Watertown, Massachusetts.
The Company is subject to a number of risks and uncertainties common to the biotechnology industry, including, but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, reliance on third-party organizations, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. The Company’s research and development programs require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.
Reverse Merger with Gemini
On August 9, 2022, Gemini Therapeutics, Inc., a Delaware corporation (“Gemini”), Gemstone Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Gemini (“Merger Sub”), and Disc Medicine, Inc., a Delaware corporation (“Private Disc”), entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). The merger was completed on December 29, 2022. In accordance with the Merger Agreement, the Merger Sub merged with and into Private Disc, with Private Disc surviving as a wholly-owned subsidiary of the Company (the “merger”). Gemini changed its name to Disc Medicine Inc., and Private Disc, which remains as a wholly-owned subsidiary of the Company, changed its name to Disc Medicine Opco, Inc. On December 30, 2022, the combined company’s common stock began trading on The Nasdaq Capital Market under the ticker symbol “IRON.”
Except as otherwise indicated, references herein to “Disc”, the “Company”, or the “combined company”, refer to Disc Medicine, Inc. on a post-merger basis, and the term “Private Disc” refers to the business of privately-held Disc Medicine, Inc., prior to completion of the merger. References to "Gemini" refer to Gemini Therapeutics, Inc. prior to completion of the merger.
In connection with the merger, each person who was a stockholder of record of Gemini or had the right to receive Gemini’s common stock received a contractual contingent value right (“CVR”) issued by Gemini subject to and in accordance with the terms and conditions of a Contingent Value Rights Agreement (the “CVR Agreement”). The CVRs represented the contractual right to receive consideration from the post-closing combined company upon the receipt of certain proceeds from a disposition of Gemini’s pre-merger assets (specifically, Gemini’s intellectual property assets (“Gemini IP”), which the Company assumed in the merger) during the one year after the closing of the merger, calculated in accordance with the CVR Agreement.
To satisfy its obligations with respect to the CVRs and the Gemini IP, the Company hired an outside firm to attempt to sell the Gemini IP. In June 2023, the Company received an offer and recorded a $1.5 million liability representing the estimated fair value of the Company’s obligation to the holders of the CVRs. However, the counterparty and the Company were unable to come to an agreement. The disposition period ended on December 29, 2023 and no dispositions of Gemini's pre-merger assets were made during the disposition period. Therefore, there were no CVR payments made to the holders and there will not be any future CVR payments to the holders. The Company’s obligations under the CVR Agreement expired and the CVRs are valueless. In December 2023, the Company recognized the reversal of the $1.5 million liability in the consolidated statements of operations and comprehensive loss. The Company generated no revenue from Gemini’s pre-merger assets and incurred approximately $1.6 million in aggregate costs (including maintenance of license agreements, storage, legal and other fees) during the year ended December 31, 2023, to maintain Gemini’s pre-merger assets solely in order to fulfill the Company’s obligations under the CVR Agreement.
Liquidity and Capital Resources
The Company’s consolidated financial statements have been prepared on the basis of the Company continuing as a going concern. The Company expects that its existing cash, cash equivalents and marketable securities as of December 31, 2025 of $791.2 million
120
will enable the Company to fund its planned operating expense and capital expenditure requirements for at least twelve months from the date of issuance of these consolidated financial statements. The Company has incurred recurring losses and negative cash flows from operations since inception. As of December 31, 2025, the Company had an accumulated deficit of $510.2 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future. The future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. There can be no assurance that the Company will ever earn revenues or achieve profitability, or if achieved, that the revenues or profitability will be sustained on a continuing basis. In addition, the Company’s preclinical and clinical development activities, manufacturing and commercialization of the Company’s product candidates, if approved, may require significant additional financing.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States as found in the Accounting Standard Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to accrued research and development expenses; stock-based compensation expense; the fair value of the common stock prior to the effective date of the merger; and income taxes. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it has concluded to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ materially from those estimates or assumptions.
Segment Information
The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions, resulting in a single reportable segment. The Company has determined that its chief operating decision maker is its Chief Executive Officer. The Company’s chief operating decision maker reviews the Company’s financial information on a consolidated basis for purposes of allocating resources and assessing financial performance. All of the Company’s tangible assets are held in the United States. See Note 13 - Segment Information for additional details.
Concentration of Credit Risk and of Significant Suppliers
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits and limits its exposure to cash risk by placing its cash with high credit quality accredited financial institutions. The Company has concluded that it is not subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company relies, and expects to continue to rely, on a small number of vendors to manufacture supplies and to process its product candidates for its development programs. These programs could be adversely affected by a significant interruption in the manufacturing process or supply chain.
Comprehensive Income (Loss)
Comprehensive income (loss) is the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes net income (loss) and the change in accumulated other comprehensive income (loss) for the period. Accumulated other comprehensive income (loss) consisted of foreign currency translation adjustments and unrealized gains (losses) on available-for-sale marketable securities during the years ended years ended December 31, 2025, 2024 and 2023.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts and U.S. treasury
121
and corporate debt securities with original maturities of three months or less at the date of purchase. Cash equivalents are reflected at fair value based on quoted market prices as further described in Note 5 - Fair Value Measurements.
Marketable Securities
The Company classifies its marketable securities as available-for-sale. All of the Company’s marketable securities are available to the Company for use in current operations. As a result, the Company classified all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date. Marketable securities are maintained by an investment manager and consist of U.S. treasury, US government agency, and corporate debt securities. Marketable securities are carried at fair value with the unrealized gains and losses included in accumulated other comprehensive income (loss) as a component of stockholders’ equity until realized. Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or expense over the life of the underlying marketable security. Although these marketable securities are available to be sold to meet operating needs or otherwise, they are generally held through maturity. The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income (expense), net within the consolidated statements of operations and comprehensive loss. The Company reviews its portfolio of available-for-sale securities, using both quantitative and qualitative factors, to determine if declines in fair value below cost have resulted from a credit loss or other factors. If the decline in fair value is due to credit loss factors, a loss is recognized. To date, the Company has not experienced any credit losses and does not expect it is exposed to any significant credit risk on these investments.
Deferred Transaction Costs
The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred transaction costs until such financings are consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds from the transaction, either as a reduction of the carrying value of the preferred stock or in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the transaction. Should the in-process equity financing be abandoned, the deferred transaction costs would be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss.
Fair Value Measurements
The Company categorizes its assets and liabilities measured at fair value in accordance with the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which establishes a consistent framework for measuring fair value and expands disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the 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 such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
•
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
•
Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
•
Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
The fair value of the Company’s cash equivalents and marketable securities are determined according to the fair value hierarchy described above (see Note 5 - Fair Value Measurements). The carrying values of the Company’s prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.
Estimated Useful Life
Leasehold improvements Shorter of useful life or remaining life of lease
Computer equipment 3.0 years
Furniture and fixtures 3.0 years
Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated in accordance with the above guidelines once placed into service. Upon retirement or sale, the cost of assets disposed and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance are expensed as incurred.
122
The Company capitalizes internal costs incurred to develop software for internal use during the application development stage. The Company includes capitalized internally developed software subject to a cloud computing arrangement within other assets. Amortization of capitalized internally developed software costs is recorded within depreciation expense over the estimated useful life of the related asset, which is typically three years.
Impairment of Long-lived Assets
The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC Topic 360, Property, Plant, and Equipment. Long-lived assets, such as property and equipment and right-of-use ("ROU") assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The recoverability of assets or asset groups to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or asset group exceeds the estimated fair value of the asset or asset group. There were no impairment losses recorded for the years ended December 31, 2025, 2024 and 2023.
Leases
The Company accounts for its leases under ASC Topic 842, Leases. Upon adoption, the Company elected to combine lease and non-lease components when calculating minimum lease payments on new leases for all asset classes. The Company has also elected an accounting policy to forgo the recognition of lease assets or liabilities for short-term leases. Short-term leases are defined, in accordance with the standard, as those with terms of one year or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
The Company determines if an arrangement is or contains a lease at contract inception. The Company accounts for a contract as a lease when it has the right to direct the use of the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of right-of-use assets and lease liabilities at the lease commencement date and thereafter at the modification date, if modified.
Right-of-use assets represent the Company's right to control the underlying assets under lease, and the lease liability is the Company's obligation to make the lease payments related to the underlying assets under lease, over the contractual term. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of future minimum fixed lease payments to be made over the lease term. The Company uses the non-cancellable lease term unless it is reasonably certain that a renewal or termination option will be exercised. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. As most leases do not provide an implicit rate, the Company estimates the incremental borrowing rate to discount the lease payments. The Company estimates the incremental borrowing rate based on the rates of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis, over a similar term, and in a similar economic environment. The right-of-use asset also includes any lease prepayments and initial direct costs, offset by lease incentives.
Certain lease agreements contain variable lease payments which are not included in the measurement of the lease liability. Variable lease payments relate to taxes, insurance, utilities, and common area maintenance ("CAM"). These variable lease payments are recognized in the consolidated statements of operations and comprehensive loss in the period in which the obligation for those payments is incurred.
Research and Development Expenses
Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries and bonuses, stock-based compensation, employee benefits, facilities costs, depreciation, external costs of vendors engaged to conduct preclinical development activities and clinical trials, manufacturing expenses, as well as the costs of licensing technology.
Nonrefundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered.
If the Company acquires an asset or group of assets under an in-licensing arrangement that does not meet the definition of a business under ASC Topic 805, Business Combinations, and the acquired in-process research and development does not have an alternative future use, any related upfront license payment is expensed as incurred in accordance with guidance in ASC Topic 730, Research and Development. Where contingent milestone payments are due to third parties under license or other agreements, the milestone payment obligations are recognized as expense when achievement of the contingent milestone is probable, which is generally upon achievement of the milestone event. Any contingent payments that qualify as a derivative liability are recognized at fair value on the Company’s consolidated balance sheets. Annual maintenance fees under license agreements are expensed in the period in which they are incurred. Contingent payments for assets acquired are expensed as incurred or capitalized and amortized based on the nature
123
of the associated asset at the date the payment is recognized. Milestone payments made to third parties subsequent to regulatory approval are capitalized as intangible assets and amortized over the estimated remaining useful life of the related product. Royalties owed on sales of the products licensed pursuant to license agreements are expensed in the period the related revenues are recognized.
The Company has entered into various research, development and manufacturing contracts with research institutions and other companies primarily in the United States, including contracts with third-party contract research organizations and contract development and manufacturing organizations. These agreements are generally cancelable, and related costs are recorded as research and development expenses as incurred. The Company records accrued liabilities for estimated ongoing research, development and manufacturing costs and prepaid expenses for payments made in advance of work performed. When billing terms under these contracts do not coincide with the timing of when the work is performed, the Company is required to make estimates of outstanding obligations to those third parties as of period end. Any accrual estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the research, development and manufacturing activities, invoicing to date under the contracts, communication from the research institutions and other companies of any actual costs incurred during the period that have not yet been invoiced and the costs included in the contracts. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results may differ from the estimates made by the Company.
Amortization of Debt Discount and Issuance Costs
Long-term debt is initially recorded as the proceeds received by the Company, net of debt issuance costs and discounts. Debt is subsequently stated at amortized cost. Debt issuance costs and discounts and are amortized to interest expense using the effective interest method, over the term of the debt. Debt issuance costs and discounts related to a recognized debt liability are presented in the consolidated balance sheets as a direct deduction from the carrying amount of that debt liability. For tranches not yet drawn, the related debt issuance costs are deferred and recorded as an asset. In the consolidated statements of cash flows, debt issuance costs paid to lenders are netted against the proceeds from the related long-term debt while debt issuance costs paid to third parties, are presented separately within financing activities.
Patent Costs
The Company expenses all costs as incurred in connection with patent applications, including direct application fees, and the legal and consulting expenses related to making such applications due to the uncertainty about the recovery of the expenditure. These costs are included in selling, general and administrative expenses within the Company’s consolidated statements of operations and comprehensive loss.
Stock-Based Compensation
The Company accounts for all stock-based awards granted to employees and non-employees as stock-based compensation expense at fair value in accordance with ASC Topic 718, Compensation - Stock Compensation. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the fair value of the Company’s common stock on the date of grant, the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option and the Company’s expected dividend yield. Due to the lack of company-specific historical and implied volatility data, the Company determines the volatility for awards granted based on an analysis of reported data for a group of guideline companies that issued options with substantially similar terms. The expected volatility has been determined using a weighted-average of the historical volatility measures of this group of guideline companies. The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options granted to employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. The grant date fair value of restricted stock units and shares of restricted stock granted is based on the fair value of the underlying common stock on the date of grant.
The Company recognizes compensation expense for employees and non-employees over the requisite service period, which is generally the vesting period of the respective award, based on the grant date fair value of the award. For awards that include performance-based vesting conditions expense is recognized using the accelerated attribution method when the performance condition is deemed to be probable. The Company accounts for forfeitures as they occur.
The Company classifies stock-based compensation expense in the consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. See Note 10 - Stock-Based Compensation for a summary of the stock-based award activity under the Company’s stock-based compensation plans.
124
Determination of Fair Value of Common Stock on Grant Dates
Prior to the merger, due to the absence of an active market for Private Disc’s common stock, Private Disc and its Board were required to determine the fair value of Private Disc’s common stock at the time of each grant of a stock-based award. Private Disc estimated the fair value of its common stock utilizing methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. In determining the exercise prices for options granted, Private Disc considered the estimated fair value of the common stock as of the measurement date. The estimated fair value of the common stock has been determined at each grant date based upon a variety of factors, including prices paid for Private Disc’s convertible preferred stock and the rights, preferences, and privileges of Private Disc’s Preferred Stock and common stock; Private Disc’s stage of development and status of technological developments within Private Disc’s research; the illiquid nature of securities in a private company; the prospects of a liquidity event; and the current business climate in the marketplace. Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date.
Private Disc’s common stock valuations were prepared using either an option pricing method (“OPM”), or a hybrid method, both of which used market approaches to estimate our enterprise value. The OPM treats common stock and convertible preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeds the value of the convertible preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock.
The hybrid method is a probability-weighted expected return method (“PWERM”), by which the equity value in one or more scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the company, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. In addition to a scenario using the OPM, the hybrid method also considers an initial public offering scenario in which the shares of convertible preferred stock are assumed to convert to common stock. The future value of the common stock in the initial public offering scenario was discounted back to the valuation date at an appropriate risk adjusted discount rate. In the hybrid method, the present value indicated for each scenario was probability weighted to arrive at an indication of value for the Private Disc’s common stock. Private Disc utilized significant estimates and assumptions in determining the fair value of its equity and equity-based awards.
Substantially all of the awards granted by the Company are either new hire grants or routine annual grants. Management evaluates its award grants and modifications contemporaneously and if any are determined to be spring-loaded, the Company will adjust the fair value.
Income Taxes
Income taxes have been accounted for using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance against deferred tax assets is recorded if, based upon the weight of all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Since the Company has generated operating losses and expects to continue to incur future losses, the net deferred tax assets have been fully offset by a valuation allowance.
The Company accounts for income taxes in accordance with authoritative accounting guidance which states the impact of an uncertain income tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. There are no unrecognized tax benefits included in the Company’s consolidated balance sheets as of December 31, 2025 or December 31, 2024. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. The Company has not recognized interest or penalties related to income tax matters in its consolidated statements of operations and comprehensive loss since inception.
The Company files federal income tax returns in the United States, the Netherlands and Australia and state income tax returns in Massachusetts and various other state jurisdictions. The Company’s income tax returns are subject to review and tax assessment from an income tax examination. As of December 31, 2025, the Company was not under examination by the Internal Revenue Service or other jurisdictions for any tax year.
125
Net Loss Per Share
Basic and diluted net loss per share is computed by dividing net loss by the weighted-average common shares outstanding. The weighted-average common shares outstanding used in the basic and diluted net loss per share calculation includes the pre-funded warrants issued in connection with the Company’s underwritten offerings in October 2025, January 2025, and June 2023 as the pre-funded warrants are exercisable for nominal cash consideration. In periods in which the Company reports a net loss, diluted net loss per share is generally the same as basic net loss per share since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires enhanced disclosures related to the rate reconciliation and income taxes paid, among other changes. The Company adopted the standard effective January 1, 2025, on a prospective basis. The adoption of ASU 2023-09 did not have a material impact on the Company’s consolidated financial statements, but did result in expanded income tax disclosures as required by the amended guidance. Refer to Note 11 - Income Taxes for additional details.
Recently Issued Accounting Pronouncements Not Yet Adopted
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.
3. Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following (in thousands):
December 31, December 31,
The Company's restricted cash balance, which is classified within prepaid expenses and other current assets and other assets on the consolidated balance sheets, consists of letters of credit related to leased and subleased office space in Watertown, Massachusetts. The Company is required to maintain a separate cash balance to secure its letters of credit.
4. Marketable Securities
Marketable securities as of December 31, 2025 consisted of the following (in thousands):
Gross Unrealized
Amortized Cost Gains Losses Estimated Fair Value
Marketable securities available-for-sale:
Marketable securities as of December 31, 2024 consisted of the following (in thousands):
Gross Unrealized
Amortized Cost Gains Losses Estimated Fair Value
Marketable securities available-for-sale:
126
As of December 31, 2025, all of the Company’s marketable securities are available to the Company for use in current operations. As a result, the Company has classified all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.
The following table shows the fair value of the Company’s marketable securities, by contractual maturity, as of December 31, 2025 (in thousands):
Due after one year through five years 220,324
Total available-for-sale securities $ 700,007
The aggregate fair value of marketable securities with unrealized losses was $41.3 million as of December 31, 2025 and $51.0 million as of December 31, 2024. As of December 31, 2025 and December 31, 2024, five investments, respectively, were in an unrealized loss position. All such investments have been in an unrealized loss position for less than a year and these losses are considered temporary. The Company has the ability and intent to hold these investments until a recovery of their amortized cost, which may not occur until maturity. The Company expects that U.S. treasury, U.S. government agency and corporate debt securities are subject to minimal credit risk. As a result, the Company did not record any charges for credit-related impairments for its available-for-sale securities during the years ended December 31, 2025, 2024 and 2023.
5. Fair Value Measurements
The following tables present information about the Company’s assets and liabilities that are measured and carried at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value, which is described further within Note 2 - Summary of Significant Accounting Policies.
Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 are summarized as follows (in thousands):
Level 1 Level 2 Level 3
Assets
Cash equivalents:
Money market funds $ 72,932 $ — $ —
Corporate debt securities — 9,981 —
Marketable securities:
U.S. treasury securities — 485,529 —
Corporate debt securities — 132,941 —
U.S. government agency securities — 81,537 —
Total marketable securities — 700,007 —
Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 are summarized as follows (in thousands):
Level 1 Level 2 Level 3
Assets
Cash equivalents:
Money market funds $ 88,735 $ — $ —
U.S. treasury securities — 91,916 —
Marketable securities:
U.S. treasury securities — 189,663 —
U.S. government agency securities — 107,784 —
Total marketable securities — 297,447 —
The fair value of the Company’s Level 1 cash equivalents, consisting of money market funds, is based on quoted market prices in active markets with no valuation adjustment. The fair value of the Company’s Level 2 cash equivalents consisting of U.S. treasury
127
and corporate debt securities with original maturities of three months or less and marketable securities consisting of U.S. treasury, U.S. government agency, and corporate debt securities with original maturities 24 months or less, are determined through third-party pricing services. The amortized cost of cash equivalents approximates the fair value.
There were no impairments of the Company’s assets measured and carried at fair value during the years ended December 31, 2025, 2024 and 2023. In addition, there were no changes in valuation techniques during the years ended December 31, 2025 and 2024. There were no transfers between Level 1, Level 2 and Level 3 financial assets during the year ended December 31, 2025. The Company transferred assets of $0.9 million from Level 2 to Level 1 during the year ended December 31, 2024. The Company did not have any non-recurring fair value measurements on any assets or liabilities during the years ended December 31, 2025 and 2024.
6. Other Accrued Expenses
Other accrued expenses consisted of the following (in thousands):
December 31, December 31,
Accrued employee-related expenses $ 12,642 $ 7,211
7. Licensing Activities and Business Development
License and Stock Purchase Agreement with AbbVie Deutschland GmbH & Co. KG (“AbbVie”)
In September 2019, the Company entered into an agreement with AbbVie, pursuant to which AbbVie granted the Company an exclusive license, with the right to grant sublicenses, to certain AbbVie intellectual property.
Under this agreement, the Company paid a non-refundable, non-creditable upfront fee of $0.6 million. The Company is also obligated to make aggregate payments upon the achievement of certain development, commercialization and sales-based milestones up to $18.0 million, $45.0 million and $87.5 million, respectively on a licensed product-by-licensed product basis. In addition, the Company is also obligated to pay royalties based on net sales of the licensed products on a licensed product-by-licensed product and country-by-country basis.
The Company’s royalty obligation expires on a licensed product-by-licensed product and country-by-country basis upon the expiration of the last-to-expire valid claim under the licensed intellectual property rights in such country. Unless terminated earlier, the agreement expires upon the expiration of the Company’s royalty obligation for all licensed products. AbbVie can terminate the agreement if the Company fails to make any payments within a specified period after receiving written notice of such failure, or in the event of a material breach by the Company and failure to cure such breach within a certain period of time.
In January 2025, the Company made a milestone payment of $3.0 million upon the first administration to a patient in the Phase 2 clinical trial of DISC-0974 which was recorded within research and development in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2025. As of December 31, 2025, no additional milestones were deemed probable of achievement.
License Agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (collectively “Roche”)
In connection with a license agreement with Roche, (the "Roche Agreement"), the Company paid Roche an upfront, non-refundable exclusivity payment of $0.5 million in March 2021. Upon execution of the Roche Agreement in May 2021, the Company paid Roche an additional upfront, non-refundable payment of $4.0 million.
The Company is obligated to make contingent payments to Roche up to an aggregate of $50.0 million in development and regulatory milestone payments for development and approval in a first indication and up to an aggregate of $35.0 million in development and regulatory milestone payments for development and approval in a second indication. The Company is also obligated to make contingent payments to Roche up to an aggregate of $120.0 million based on achievement of certain thresholds for annual net sales of licensed products. Roche is also eligible to receive tiered royalties on net sales of commercialized products, at rates ranging from high single-digits to high teens. Pursuant to the terms of the Roche Agreement and in connection with the Company's reverse merger with Gemini, the Company issued 482,313 shares of the Company to Roche for no consideration.
In June 2025, the Company made a milestone payment of $10.0 million upon the initiation of the first Phase 3 clinical trial with a licensed product in a first indication which was recorded within research and development in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2025. The next potential milestone payment is $15.0 million due upon regulatory approval in the United States with a licensed product in a first indication. As of December 31, 2025, this milestone was not deemed probable of achievement.
128
License Agreement with Mabwell Therapeutics, Inc. ("Mabwell")
In January 2023, the Company entered into an exclusive license agreement with Mabwell, pursuant to which Mabwell granted the Company an exclusive and sublicensable license to certain Mabwell intellectual property.
In connection with the agreement, the Company paid Mabwell an upfront payment of $10.0 million in March 2023. In addition, the Company is obligated to pay certain development and regulatory milestone payments for the licensed products, for up to three indications, up to a maximum aggregate amount of $127.5 million, as well as certain commercial milestone payments for certain licensed product net sales achievements, up to a maximum aggregate amount of $275.0 million. The Company is further obligated to pay a tiered percentage of revenue that the Company receives from its sublicensees ranging from a low third decile percentage to a low first decile percentage. In addition, the Company is obligated to pay Mabwell a royalty on annual net sales of all licensed products at a tiered rate ranging from low single-digits to high single-digits.
In October 2023, the Company made a milestone payment of $5.0 million upon the first administration to a patient in the Phase 1 clinical trial for DISC-3405. In September 2025, the Company made a milestone payment of $10.0 million upon the first administration to a patient in a Phase 2 clinical trial for DISC-3405. These payments were recorded within research and development in the Company’s consolidated statements of operations and comprehensive loss. The next potential milestone payment is $5.0 million due upon the first administration to a patient in a Phase 1b clinical trial with a licensed product in a second indication. As of December 31, 2025, this milestone was not deemed probable of achievement. Subsequent to December 31, 2025, on February 9, 2026, this milestone was achieved. See Note 17 - Subsequent Events for additional details.
License Agreement with Oak Bay Biosciences, Inc. (“OBB”)
In December 2024, the Company entered into an out-license agreement with OBB pursuant to which the Company granted an exclusive license, with the right to grant sublicenses, to certain Gemini intellectual property. Under the terms of the agreement, the Company received an upfront payment of $0.2 million with additional consideration receivable upon the achievement of certain clinical, regulatory and sales milestones up to $7.0 million, $35.0 million, and $160.0 million, respectively. As of December 31, 2025, none of the milestones had been achieved, nor were they considered probable of achievement.
Merger Agreement
In May 2025, the Company acquired a privately held company with a clinic-ready program for myelodysplastic syndromes and similar hematologic conditions. The transaction included no upfront cash payment and up to $50.0 million in late-stage contingent development and sales-based milestone payments (“Contingent Consideration”). The acquired entity’s primary asset was in-process research and development (“IPR&D”) with no alternative future use.
The Company determined that the acquired entity did not meet the definition of a business under ASC Topic 805. The transaction was accounted for as the initial consolidation of a variable interest entity (“VIE”) in accordance with ASC Topic 810, as the acquired entity lacked sufficient equity at risk to fund its operations, and the Company became its sole equity holder and primary beneficiary.
In connection with the transaction, the Company recorded the acquired assets and assumed liabilities at their estimated fair values as of the acquisition date, which resulted in net acquired liabilities of $0.5 million, excluding Contingent Consideration. Total consideration transferred, including the fair value of the Contingent Consideration, was $0.3 million. The difference between the consideration transferred and the fair value of net liabilities assumed resulted in a $0.9 million loss upon initial consolidation, which was recorded within research and development in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2025.
The fair value of the Contingent Consideration was determined using Level 3 unobservable inputs including management's estimates of milestone achievement probabilities and the application of an appropriate discount rate. Because the milestone payments were not accounted for as derivatives under ASC Topic 815, they were initially measured at fair value as of the acquisition date and are not remeasured each reporting period. The Contingent Consideration will be adjusted when it is determined that achievement of the contingent milestone is probable, which is generally upon achievement of the milestone event.
As part of the transaction, the Company also obtained an exclusive license to certain intellectual property. Under the terms of the license, the Company is obligated to make certain development and sales-based milestone payments of up to $5.6 million and $20.0 million, respectively, for each compound. Additionally, the Company is required to pay royalties on net sales of licensed products at rates in the low single-digits. As of December 31, 2025, none of the milestones had been achieved, nor were they considered probable of achievement.
8. Long-Term Debt
On November 6, 2024 (the "Closing Date"), the Company entered into a Loan and Security Agreement (the “Hercules Loan Agreement”), with the lenders party thereto (the “Lenders”) and Hercules Capital, Inc., as administrative agent and collateral agent (the “Agent”). The Hercules Loan Agreement provides for up to $200.0 million of senior secured term loans available to the Company in multiple tranches (the “Term Loan Facility”). Under the Hercules Loan Agreement, the Company borrowed an initial
129
amount of $30.0 million on the Closing Date, and at the Company's sole option, can draw an additional $80.0 million on or prior to December 15, 2026, as well as additional term loan advances in an aggregate principal amount of up to $65.0 million during the term of the Term Loan Facility subject to achievement of specified performance milestones, and one additional term loan advance up to an aggregate principal amount of $25.0 million subject to certain terms and conditions. The Company intends to use the proceeds of the Term Loan Facility for working capital and general corporate purposes.
The Term Loan Facility will mature on December 1, 2029 (the “Maturity Date”). The outstanding principal balance of the Term Loan Facility bears cash interest at a floating annual rate equal to the greater of (i) 8.25% and (ii) the sum of the Prime Rate and 1.75%. Accrued interest is payable monthly following the funding of each term loan advance. Borrowings under the Hercules Loan Agreement are repayable in monthly interest-only payments through November 2028. At the end of the interest-only payment period, borrowings under the Hercules Loan Agreement are repayable in equal monthly payments of principal and accrued interest until the Maturity Date. At the Company's option, the Company may prepay all or a portion of the outstanding borrowings, subject to a prepayment fee of 3.0% of the principal amount if prepayment occurs during the 18 months following the Closing Date, 2.0% after 18 months following the Closing Date but prior to 36 months following the Closing Date, and 1.0% thereafter.
The obligations under the Hercules Loan Agreement are secured, subject to customary permitted liens and other agreed-upon exceptions, by a first-priority perfected security interest in all of the tangible and intangible assets of the Company, other than intellectual property. The Hercules Loan Agreement includes customary repayment and prepayment terms, events of default, affirmative and negative covenants and representations and warranties. Additionally, the Hercules Loan Agreement contains a minimum cash covenant that requires the Company to maintain certain levels of cash in accounts subject to a control agreement in favor of the Agent at all times beginning on the first day on or after January 1, 2027 (or January 1, 2028, if the Company achieves a certain milestone) on which the aggregate principal amount of the term loan advances is then more than $50.0 million; provided, however, the minimum cash covenant will be waived during all times that the Company's market capitalization is greater than or equal to $1.0 billion. The Hercules Loan Agreement also includes a subjective acceleration clause for circumstances which could be reasonably expected to have a material adverse effect on the Company.
The Hercules Loan Agreement provides for a final payment ("End of Term Charge"), payable upon maturity or the repayment of the obligations in full or in part (on a pro rata basis), equal to 6.75% of the aggregate principal amount of term loans advanced to the Company and repaid on such date, which is being accrued on the Company's consolidated balance sheets.
The Company recorded debt discount and debt issuance costs of $1.8 million upon closing of the Hercules Loan Agreement. Debt discount and unamortized debt issuance costs were recorded as a reduction of the carrying amount on the term loan and are amortized as interest expense using the effective-interest method. In addition, unamortized deferred financing costs of $0.6 million were recorded in other assets as of December 31, 2025 and 2024 related to the Company's right to borrow additional amounts in the future.
Interest expense related to the Term Loan Facility for the years ended December 31, 2025 and 2024 was $3.6 million and $0.6 million, respectively. As of December 31, 2025 and 2024, the carrying value of the Term Loan Facility approximates its fair value.
The obligations under the Term Loan Facility as of December 31, 2025 consisted of the following (in thousands):
December 31,
Principal term loan balance $ 30,000
Unamortized debt discount and issuance costs (1,351 )
Accrued end of term fee 510
Long-term debt, net $ 29,159
The annual principal payments due under the Term Loan Facility as of December 31, 2025 were as follows (in thousands):
The table of future principal payments excludes the End of Term Charge of $2.0 million, which is due upon the maturity of the loan.
130
9. Stockholders' Equity
Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of preferred stock, $0.0001 par value per share. As of December 31, 2025 no shares of preferred stock were issued or outstanding.
Common Stock
The Company is authorized to issue up to 100,000,000 shares of common stock, $0.0001 par value per share. As of December 31, 2025, 37,890,616 shares of common stock were issued and outstanding.
Underwritten Offerings
October 2025 Offering
In October 2025, in connection with an underwriting agreement with Jefferies LLC, Leerink Partners LLC, Morgan Stanley & Co. LLC, and Cantor Fitzgerald & Co., the Company sold 2,619,049 shares of its common stock, at a public offering price of $84.00 per share. The Company also sold pre-funded warrants to purchase an aggregate of 59,523 shares of common stock at a price of $83.9999 per pre-funded warrant. The Company received aggregate net proceeds of $211.0 million, after deducting offering expenses of $14.0 million. As of December 31, 2025, none of the 59,523 pre-funded warrants had been exercised.
January 2025 Offering
In January 2025, in connection with an underwriting agreement with Jefferies LLC, Leerink Partners LLC, Stifel, Nicolaus & Company, Incorporated and Cantor Fitzgerald & Co., the Company sold 4,533,182 shares of its common stock, which included the exercise in full by the underwriters of their option to purchase up to 615,000 additional shares of common stock, at a public offering price of $55.00 per share. The Company also sold pre-funded warrants to purchase an aggregate of 181,818 shares of common stock at a price of $54.9999 per pre-funded warrant. The Company received aggregate net proceeds of $243.4 million, after deducting offering expenses of $15.9 million. As of December 31, 2025, none of the 181,818 pre-funded warrants had been exercised.
June 2024 Offering
In June 2024, the Company entered into an underwriting agreement with Leerink Partners LLC related to an underwritten offering. Pursuant to the agreement, the Company sold 4,944,000 shares of common stock of the Company, par value $0.0001 per share, at a price to the public of $36.00 per share. The Company received net proceeds of $172.5 million, after deducting the underwriting discount and offering expenses of $5.5 million.
June 2023 Offering
In June 2023, the Company sold 3,015,919 shares of its common stock upon the completion of its public follow-on offering, which included the exercise in full by the underwriters of their option to purchase up to 420,000 additional shares of common stock, at a public offering price of $49.00 per share. The Company also sold, in lieu of shares of the Company’s common stock, pre-funded warrants to purchase an aggregate of 204,081 shares of common stock at a price of $48.9999 per pre-funded warrant. The Company received aggregate net proceeds of $147.9 million, after deducting offering expenses of $9.9 million. As of December 31, 2025, none of the 204,081 pre-funded warrants had been exercised.
February 2023 Offering
In February 2023, the Company entered into a securities purchase agreement, with certain investors. Pursuant to the securities purchase agreement, the Company sold an aggregate of 1,488,166 shares of the Company’s common stock, at a purchase price of $23.00 per share, and with respect to a certain investor, in lieu of shares of the Company’s common stock, pre-funded warrants to purchase an aggregate of 1,229,224 shares of the Company’s common stock, at a purchase price of $22.9999 per pre-funded warrant, for aggregate net proceeds of $62.4 million, after deducting offering expenses of $0.1 million. In September 2023, all of the pre-funded warrants were exercised in a cashless transaction which resulted in 1,229,221 shares of common stock being issued to the investor.
At-The-Market ("ATM") Programs
Cantor Fitzgerald & Co. (“Cantor”)
On November 15, 2024, the Company entered into a Controlled Equity Offering Sales Agreement (the “Cantor ATM Agreement”) with Cantor, pursuant to which the Company may, from time to time in its sole discretion, issue and sell to or through Cantor, acting as sales agent, shares of the Company’s common stock, par value $0.0001
131
per share having an aggregate offering price of up to $200.0 million. This offering was made pursuant to the Company's effective registration statement on Form S-3 filed in August 2024 (the "August 2024 Shelf").
During the year ended December 31, 2025, the Company sold an aggregate of 162,457 shares of common stock in Cantor ATM offerings under the August 2024 Shelf and pursuant to the Cantor ATM Agreement. Aggregate gross proceeds from the transaction were $10.1 million and the Company received $9.8 million in net proceeds, after deducting placement agent fees and offering expenses.
Jefferies LLC ("Jefferies")
In October 2023, the Company entered into an Open Market Sale Agreement with Jefferies as sales agent (the “Jefferies ATM Agreement”) to provide for the offering, issuance and sale by the Company of up to $59.7 million of the Company’s common stock from time to time in ATM offerings under the Company's registration statement on Form S-3 filed in January 2023. In November 2023, the Company filed a shelf registration statement on Form S-3 with the SEC, which covered the offering, issuance and sale by the Company of up to an aggregate of $400.0 million of the Company’s common stock, preferred stock, debt securities, warrants or units (the “November 2023 Shelf”). On December 5, 2023, the Company and Jefferies entered into an amendment to the Jefferies ATM Agreement to increase the aggregate offering price of the shares of common stock that the Company may offer under the Jefferies ATM Agreement from $59.7 million to $200.0 million. The material terms and conditions of the Jefferies ATM Agreement otherwise remained unchanged. On November 15, 2024, the Company terminated the Jefferies ATM Agreement. In connection with the termination, the Company recognized the remaining capitalized issuance costs of $0.6 million as selling, general and administrative expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.
During the years ended December 31, 2024 and 2023, the Company sold an aggregate of 234,449 and 141,914 shares of common stock in Jefferies ATM offerings under the November 2023 Shelf and pursuant to the Jefferies ATM Agreement, respectively. During the years ended December 31, 2024 and 2023, aggregate gross proceeds from the transactions were $15.3 million and $7.2 million, respectively, and the Company received $14.8 million and $7.0 million in net proceeds, after deducting placement agent fees and offering expenses, respectively. In total, the Company sold an aggregate of 376,363 shares of common stock in ATM offerings under the November 2023 Shelf and pursuant to the Jefferies ATM Agreement for aggregate gross proceeds of $22.5 million and aggregate net proceeds received of $21.8 million, after deducting placement agent fees and offering expenses.
SVB Securities LLC
In January 2023, the Company filed a shelf registration statement on Form S-3 with the SEC, which covered the offering, issuance and sale by the Company of up to an aggregate of $300.0 million of the Company’s common stock, preferred stock, debt securities, warrants or units (the “January 2023 Shelf”). Subsequently in January 2023, the Company entered into a Sales Agreement (the “Sales Agreement”) with SVB Securities LLC, as sales agent, to provide for the offering, issuance and sale by the Company of up to $100.0 million of the Company’s common stock from time to time in ATM offerings under the January 2023 Shelf. Effective June 12, 2023, the ATM program with SVB Securities LLC was suspended. Following the date of the ATM suspension, the Company did not make any further sales of its common stock pursuant to the Sales Agreement. The Sales Agreement was terminated effective September 28, 2023. In connection with the ATM suspension, the Company recognized the remaining capitalized issuance costs of $0.3 million as selling, general and administrative expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.
During the year ended December 31, 2023, the Company sold an aggregate of 825,350 shares of common stock in ATM offerings under the January 2023 Shelf and pursuant to the Sales Agreement. During the year ended December 31, 2023, aggregate gross proceeds from the transactions were $20.0 million and the Company received $19.5 million in net proceeds, after deducting placement agent fees and offering expenses.
Registration Statements Resulting from the Merger
In January 2023, as a result of the merger, the Company filed a resale registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”), which covered the proposed resale or other disposition by certain stockholders of up to an aggregate of 12,635,956 shares of the Company’s common stock. The Company also filed a registration statement on Form S-8 with the SEC, which registered 1,672,599 shares of common stock issuable with respect to Private Disc options assumed by the Company pursuant to the Merger Agreement as well as 2,035,103 additional shares of common stock reserved and available for future issuance under the 2021 Plan and 180,894 additional shares of common stock reserved and available for future issuance under the 2021 Employee Stock Purchase Plan (the “2021 ESPP”).
10. Stock-Based Compensation
2021 Stock Option and Incentive Plan
In February 202
132
1, Gemini adopted the 2021 Stock Option and Incentive Plan (the "2021 Plan") reserving shares of common stock to grant incentive stock options or nonqualified stock options for the purchase of common stock, stock appreciation rights, restricted stock awards, restricted stock units, unrestricted stock awards, cash-based awards and dividend equivalent rights to employees, officers, directors and consultants. Upon approving the 2021 Plan in February 2021, Gemini ceased granting awards under its then existing 2017 Stock Option and Grant Plan (the "2017 Gemini Plan"). Incentive stock options may only be granted to employees. The 2021 Plan is administered by the plan administrator, which is the compensation committee of the Company’s board of directors, provided therein, which has discretionary authority, subject only to the express provisions of the 2021 Plan, to interpret the 2021 Plan; determine eligibility for and grant awards; determine form of settlement of awards (whether in cash, shares of stock, other property or a combination of the foregoing), determine, modify or waive the terms and conditions of any award; prescribe forms, rules and procedures; and otherwise do all things necessary to carry out the purposes of the 2021 Plan.
The exercise price of each stock option granted under the 2021 Plan is 100% of the fair market value of the underlying stock subject to the award, determined as of the date of the grant, or such higher amount as the plan administrator may determine in connection with the grant, and the term of stock option may not be greater than ten years. The vesting and other restrictions are determined at the discretion of the plan administrator with awards generally vesting over a four-year period.
The number of shares of common stock reserved for issuance under the 2021 Plan automatically increases on January 1 of each calendar year, starting on January 1, 2022 and continuing through January 1, 2031, in an amount equal to 4% of the total number of shares of the Company’s capital stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Company’s board of directors. As of December 31, 2025, 1,158,171 shares remained available for future issuance under the 2021 Plan.
2021 Employee Stock Purchase Plan
In July 2021, Gemini’s board of directors approved the 2021 Employee Stock Purchase Plan (the "2021 ESPP"). The first offering period under the 2021 ESPP began on December 1, 2021. The number of shares of common stock reserved for issuance under the 2021 ESPP automatically increases on January 1 of each calendar year, starting on January 1, 2023 and continuing through January 1, 2031, in an amount equal to the least of (a) 1% of the total number of shares of the Company’s capital stock outstanding on the last day of the calendar month before the date of each automatic increase, (b) 43,055 shares of common stock, or (c) such number of shares determined by the Company’s board of directors. As of December 31, 2025, 283,866 shares remained available for future issuance under the 2021 ESPP.
2021 Inducement Plan
In February 2021, Gemini’s board of directors approved the 2021 Inducement Plan. The 2021 Inducement Plan is a non-stockholder approved stock plan under which equity awards are granted to induce highly-qualified prospective officers and employees who are not currently employed by the Company to accept employment and provide them with a proprietary interest in the Company. From the completion of the merger through December 31, 2025, the Company had not granted awards under the 2021 Inducement Plan. As of December 31, 2025,161,689 shares remained available for future issuance under the plan.
2017 Stock Option and Grant Plan (the "Private Disc Plan")
Private Disc adopted the Private Disc Plan in November 2017 reserving shares of common stock for issuance to employees, directors, and consultants. The Private Disc Plan allowed for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and other stock awards. Recipients of stock options or stock appreciation rights were eligible to purchase shares of Private Disc’s common stock at an exercise price equal to the estimated fair market value of such stock on the date of grant. The exercise price could have been less than fair market value if the stock award was granted pursuant to an assumption or substitution for another stock award in the event of a merger or sale of Private Disc. The maximum term of options granted under the Private Disc Plan was ten years, and stock options typically vested over a four-year period. The Board could have assigned vesting terms to the stock options grants as deemed appropriate. Private Disc also had the right of first refusal to purchase any proposed disposition of shares issued under the Private Disc Plan. As it relates to restricted stock awards, Private Disc had the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. At the discretion of the Board, unvested shares held by employees, directors and consultants could have accelerated vesting in the event of a change of control of Private Disc unless assumed or substituted by the acquirer or surviving entity. Upon completion of the merger in December 2022, the Company ceased granting awards under the Private Disc Plan.
Out-of-Plan Inducement Grants
From time to time, the Company grants equity awards to newly hired executives as a material inducement to enter into employment with the Company. These grants are made in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules and are issued outside the 2021 Plan, the 2021 Inducement Plan and each of the other stock incentive plans described above. The inducement grants typically include nonqualified stock options to purchase shares of the Company's common stock, as well as restricted stock unit grants representing shares of the Company's common stock. The option awards have a ten-year term, with 25% of the underlying shares vesting and becoming exercisable on the one-year anniversary of the date of grant, and the balance of each option award vesting in equal monthly installments over 36 months thereafter. The restricted stock unit awards vest with respect to 25
133
% of the underlying shares on each of the first, second, third and fourth anniversaries of the vesting date as set by the Company policy. The inducement grants are included in the stock option and restricted stock unit tables below.
During the year ended December 31, 2025, the Company granted 35,000 nonqualified stock options and 23,333 restricted stock units under employment inducement grants. During the year ended December 31, 2024, the Company granted 220,000 nonqualified stock options and 146,664 restricted stock units under employment inducement grants. The Company made no employment inducement grants during the year ended December 31, 2023.
Stock Options
For purposes of calculating stock-based compensation, the Company estimates the fair value of stock options using the Black-Scholes option-pricing model. This model incorporates various assumptions, including the expected volatility, expected term, and interest rates.
The Company does not yet have sufficient company-specific historical or implied volatility information. Therefore, the Company estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer public companies and the Company will continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the option. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected dividend yield of 0% is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
The weighted-average assumptions used to estimate the fair value of stock options granted were as follows:
Year EndedDecember 31,
Expected volatility 76 % 60 % 59 %
Expected dividend yield 0 % 0 % 0 %
The weighted-average grant date fair value of options granted in the years ended December 31, 2025, 2024 and 2023 was $39.53, $35.36 and $26.54 per share, respectively.
The following table summarizes stock option activity for the year ended December 31, 2025:
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the period. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2025, 2024 and 2023 was $30.2 million, $14.5 million and $8.3 million, respectively. The total fair value of options vested during the years ended December 31, 2025, 2024 and 2023 was $17.7 million, $10.0 million and $3.7 million, respectively. The tax benefit from the exercise of options eligible for a tax deduction realized during the years ended December 31, 2025, 2024 and 2023 was $21.8 million, $11.0 million and $7.2 million, respectively.
Restricted Stock Units
For purposes of calculating stock-based compensation, the Company determines the fair value of the restricted stock units based on the fair value of the Company’s common stock at the time of grant. The following table summarizes restricted stock unit activity for the year ended December 31, 2025:
134
Number of Units Weighted-Average GrantDate Fair Value
The total fair value of restricted stock units vested during the year ended December 31, 2025 was $7.1 million. There were no restricted stock units which vested during the years ended December 31, 2024 or December 31, 2023.
Shares of Restricted Common Stock
The Company issued a total of 63,061 shares of restricted common stock pursuant to the Private Disc Plan at $0.0001 per share. The stock restrictions related to the sale and transferability of the stock and lapsed over the defined vesting period in the restricted stock agreement. The vesting period was generally contingent upon continued employment or consulting services being provided to the Company. In the event of termination, the Company had the right, but not the obligation to repurchase the unvested shares at the original purchase price. During the year ended December 31, 2023, 1,916 shares of restricted common stock vested. As of December 31, 2023, all awards of restricted common stock were fully vested.
Stock-Based Compensation Expense
Total stock-based compensation expense recorded as research and development and selling, general and administrative expenses, respectively, for employees, directors and non-employees was as follows (in thousands):
Year EndedDecember 31,
The following table summarizes unrecognized stock-based compensation expense as of December 31, 2025:
Total unrecognized equity-based compensation expense $ 101,765
11. Income Taxes
The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures effective January 1, 2025, on a prospective basis. The disclosures required by the standard are included below for the year ended December 31, 2025. Comparative prior-period disclosures have not been revised.
The components of loss before income taxes were as follows (in thousands):
Year EndedDecember 31,
Total gain (loss) before income taxes $ (211,823 )
135
The components of income tax expense were as follows (in thousands):
Year EndedDecember 31,
Current:
Federal $ —
Foreign —
Total income tax expense $ 361
During the year ended December 31, 2025, the Company did not recognize any deferred income tax expense.
Income taxes paid were as follows (in thousands):
Year EndedDecember 31,
Federal $ —
Total cash paid during the period for income taxes $ 349
Total state and foreign income taxes paid (net of refunds) for the year ended December 31, 2025 were related to Massachusetts and the Netherlands, respectively. During the years ended December 31, 2024 and 2023, the Company made cash payments for income taxes of $0.3 million and $0.1 million, respectively.
The following table reconciles the U.S. federal statutory income tax rate to the Company’s effective income tax rate for the year ended December 31, 2025:
Year Ended
Amount(In Thousands) Percentage
Federal statutory income tax rate $ (44,483 ) 21.0 %
State and local income taxes, net of federal income tax effect* 286 (0.1 )%
Foreign tax effects:
Other foreign jurisdictions (69 ) 0.0 %
Tax credits:
Research and development tax credits (13,029 ) 6.1 %
Changes in valuation allowances 54,693 (25.8 )%
Nontaxable or nondeductible items:
Stock-based compensation (2,676 ) 1.3 %
Effective income tax rate $ 361 (0.2 )%
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective
136
income tax rate differed from the federal statutory income tax rate as follows:
Year EndedDecember 31,
Federal statutory income tax rate 21.0 % 21.0 %
State and local income taxes, net of federal income tax effect 6.4 % 8.0 %
Research and development tax credits 12.1 % 4.0 %
Stock-based compensation 1.3 % 1.3 %
Section 162(m) limitation (1.6 )% (0.8 )%