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 elsewhere in this Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs, and involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those discussed in the section titled “Risk Factors” included under Part I, Item 1A and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements” in this Annual Report.

Overview

We are a biopharmaceutical company. Our initial focus was on advancing AV 101, our dry powder inhaled formulation of imatinib for the treatment of PAH a devastating disease impacting approximately 70,000 people in the United States and Europe. On June 17, 2024, we announced topline results from the Phase 2b portion of our Phase 2b/Phase 3 IMPAHCT. Topline data showed that, while AV-101 was generally well tolerated across all dose groups, the study did not meet its primary endpoint for improvement in pulmonary vascular resistance compared to placebo for any of the studied doses or show meaningful improvements in the secondary endpoint of change in six minute walk distance. We also reviewed data from several additional secondary endpoints of the Phase 2b portion of IMPAHCT, which also failed to show meaningful improvements. Based upon these results and in agreement with the independent study advisory committee, we halted enrollment and shut down the Phase 3 portion of IMPAHCT as well as the long-term extension study. AV-101 for the treatment of PAH was our only product candidate in development. We do not intend to resume development of AV-101 or any other product candidates. In July 2024, we announced the decision to conduct a comprehensive review of strategic alternatives focused on maximizing shareholder value. We also engaged Wedbush PacGrow as our exclusive strategic financial advisor to assist in the process of exploring strategic alternatives, which may include but are not limited to, an acquisition, merger, reverse merger, business combination, liquidation or other transaction.

Recent Developments

In June 2024, following our decision to halt further development of AV-101, we announced our plan to terminate nearly all of our workforce in the coming months, or the Workforce Reduction Plan. As of December 31, 2024, 47 individuals, or approximately 92% of our workforce, have been terminated. The affected individuals have been and will be provided severance benefits, including cash severance payments. Each affected individual’s eligibility for severance benefits is contingent upon entering into a separation agreement, which includes a general release of claims against our company. In connection with the Workforce Reduction Plan, we incurred costs (in consideration of releases) of approximately $6.7 million, which are primarily one-time severance benefits.

On October 30, 2024, we entered into an Agreement and Plan of Merger, or the Merger Agreement, by and among us, Caribbean Merger Sub I, Inc., a Delaware corporation and our wholly owned subsidiary, or Merger Sub I, Caribbean Merger Sub II, LLC, a Delaware limited liability company and our wholly owned subsidiary, or Merger Sub II and together with Merger Sub I, Merger Subs, and Jade Biosciences, Inc., a Delaware corporation, or Jade, pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, among other things, Merger Sub I will merge with and into Jade, with Jade surviving the merger as the surviving corporation, or the First Merger, and as part of the same overall transaction, Jade will merge with and into Merger Sub II, with Merger Sub II continuing as our

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wholly owned subsidiary and the surviving corporation of the merger, or the Second Merger and together with the First Merger, the Merger. The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended.

In addition, in connection with the closing of the Merger, or the Closing, we expect to declare a cash dividend to our pre-Merger stockholders of approximately $65.0 million in the aggregate, or the Cash Dividend, provided such amount is subject to adjustment as set forth in the Merger Agreement.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, or the Effective Time, (a) each then-outstanding share of Jade’s common stock, par value $0.0001 per share, or Jade Common Stock, will be converted into the right to receive a number of shares of our common stock, par value $0.0001 per share, or Aerovate Common Stock, based on a ratio calculated in accordance with the Merger Agreement, or the Exchange Ratio, provided that any unvested restricted shares of Jade Common Stock will be subject to the same terms and conditions (including, without limitation, vesting and repurchase provisions) that are otherwise applicable to such unvested shares as of immediately prior to the Effective Time, (b) each then-outstanding share of Jade’s preferred stock, par value $0.0001 per share, or Jade Preferred Stock, will be converted into the right to receive a number of shares of our newly authorized convertible preferred stock, par value $0.0001 per share, equal to (x) the Exchange Ratio divided by (y) 1,000, (c) each then-outstanding option to purchase Jade Common Stock will be assumed by us, subject to adjustment as set forth in the Merger Agreement and (d) each then-outstanding warrant to purchase shares of Jade Common Stock or Jade Preferred Stock will be assumed by us, subject to adjust as set forth in the Merger Agreement.

We and Jade have each agreed to customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants relating to (1) obtaining the requisite approval of our respective stockholders, (2) non-solicitation of alternative acquisition proposals and (3) the conduct of our respective businesses during the period between the date of signing the Merger Agreement and the Closing.

On October 30, 2024, Jade entered into a Securities Purchase Agreement, or the Purchase Agreement, with certain existing Jade stockholders and new investors, or the Investors. Pursuant to the Purchase Agreement, and subject to the terms and conditions thereof, Jade agreed to sell, and the Investors agreed to purchase, immediately prior to the consummation of the Merger, shares of Jade Common Stock and pre-funded warrants for an aggregate purchase price of approximately $300.0 million, or the Concurrent Investment, which reflects the conversion of the previously issued $95.0 million of convertible notes. The consummation of the Concurrent Investment is conditioned on the satisfaction or waiver of the conditions set forth in the Merger Agreement and in the Purchase Agreement. Shares of Jade Common Stock and pre-funded warrants issued pursuant to this financing transaction will be converted into shares of Aerovate Common Stock and pre-funded warrants to acquire shares of Aerovate Common Stock, in accordance with the Exchange Ratio and the Merger Agreement.

Consummation of the Merger is subject to certain closing conditions, including, among other things, (1) requisite approval by our stockholders, (2) approval by the requisite Jade stockholders of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, (3) Nasdaq’s approval of the listing of the shares of Aerovate Common Stock to be issued in connection with the Merger, and (4) an executed Purchase Agreement for the Concurrent Investment in full force and effect evidencing cash proceeds of not less than $80.0 million to be received by the combined company immediately prior to or following the Closing.

The Merger Agreement contains certain termination rights of each of us and Jade. Upon termination of the Merger Agreement under specified circumstances, we may be required to pay Jade a termination fee of $2,340,000, and in certain other circumstances, Jade may be required to pay us a termination fee of $5,250,000.

Pursuant to a Certificate of Designation of Preferences, Rights and Limitations of the Series A Non-Voting Convertible Preferred Stock to be filed by us with the Secretary of State of the State of Delaware, or the Certificate of Designation in connection with the Merger Agreement and the transactions thereunder, we will establish the terms of a new series of preferred stock designated as Series A Non-Voting Convertible Preferred Stock, our Series A Preferred Stock. Holders of our Series A Preferred Stock will be entitled to receive dividends on shares of our Series A Preferred Stock equal to, on an as-if-converted-to-our common stock basis, and in the same form as dividends actually paid on shares of our common

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stock. Except as otherwise required by the Certificate of Designation or law, our Series A Preferred Stock will not have voting rights. However, as long as any shares of our Series A Preferred Stock are outstanding, we will not, without the affirmative vote of the holders of a majority of the then outstanding shares of our Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to our Series A Preferred Stock, (b) alter or amend the Certificate of Designation, (c) amend our certificate of incorporation, bylaws or other charter documents in any manner that adversely affects any rights of the holders of our Series A Preferred Stock, (d) file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of Preferred Stock (as defined in the Certificate of Designation), if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of our Series A Preferred Stock, (e) issue further shares of our Series A Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of our Series A Preferred Stock, (f) at any time while at least 30% of the originally issued Series A Preferred Stock remains issued and outstanding, consummate either (A) a Fundamental Transaction (as defined in the Certificate of Designation) or (B) any merger or consolidation of our Company or other business combination in which our stockholders immediately before such transaction do not hold at least a majority of the capital stock of our Company immediately after such transaction, or (f) enter into any agreement with respect to any of the foregoing. Our Series A Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of our Company.

Following the closing of the First Merger, each share of our Series A Preferred Stock then outstanding shall be convertible, at any time and from time to time, at the option of the holder of our Series A Preferred Stock, into a number of shares equal to 1,000 shares of our common stock, subject to certain limitations, including that a holder of our Series A Preferred Stock is prohibited from converting shares of our Series A Preferred Stock into shares of our common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (initially set at 19.99%) of the total number of shares of our common stock issued and outstanding immediately after giving effect to such conversion.

At the Effective Time, our board of directors of is expected to consist of six members, all of whom will be designated by Jade.

Concurrently and in connection with the execution of the Merger Agreement, (i) certain stockholders of Jade (solely in their respective capacities as Jade stockholders) holding approximately 99% of the outstanding shares of Jade capital stock have entered into support agreements with us and Jade to vote all of their shares of Jade capital stock in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby and (ii) certain of our stockholders holding approximately 38.1% of the outstanding shares of Aerovate Common Stock have entered into support agreements with us and Jade to vote all of their shares of Aerovate Common Stock in favor of, among other things, the adoption and approval of the Merger Agreement and the transactions contemplated thereby.

At-The-Market Offering

On April 5, 2023, we entered into an ATM Equity OfferingSM Sales Agreement, or the Sales Agreement, with BofA Securities, Inc., or the Agent, pursuant to which we established an “at-the-market” offering program to sell, from time to time, at our option, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of December 31, 2024, 3,462,721 shares have been sold under the Sales Agreement, generating $67.9 million of net proceeds after deducting commissions to the Agent and other offering costs. As of the date of this Annual Report on Form 10-K, up to $6.0 million of shares of our common stock remain available for sale from time to time under the Sales Agreement.

Components of Results of Operations

Revenue

We currently have no products approved for sale, and we have not generated any revenue to date. At this time, we do not intend to resume development of AV-101 or any other product candidates, and as a result, we currently do not anticipate generating revenue. Our ability to generate product revenue will depend on the successful development and eventual

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commercialization of any future drug candidates we may pursue. If we do not resume development activities or if we resume development but fail to obtain regulatory approval for any future drug candidates, our ability to generate future revenue and our results of operations and financial position would be materially adversely affected.

Operating Expenses

Research and Development

Prior to mid-June, our research and development expenses have related to the development of AV-101. Since our decision to halt further development of AV-101, we have also incurred costs related to shutting down our clinical trials and research and development operations. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

Research and development expenses include:

● costs related to manufacturing AV-101 for use in clinical trials;

● costs related to shutting down clinical trials of AV-101.

Our research and development expenses consist principally of direct costs, such as fees paid to CROs, investigative sites and consultants in connection with our clinical trials, preclinical and non-clinical studies, and costs related to manufacturing clinical trial materials. We deploy our personnel related resources across all of our research and development activities. We track direct expenses on a clinical and non-clinical basis.

The successful development of any future product candidates is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that would be necessary to complete the potential development and commercialization of any future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of potential future product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:

● per patient trial costs;

● the number of trials required for approval;

● the number of sites included in the trials;

● the countries in which the trials are conducted;

● the length of time required to enroll eligible patients;

● the number of patients that participate in the trials;

● the number of doses evaluated in the trials;

● the drop-out or discontinuation rates of patients;

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● potential additional safety monitoring requested by regulatory agencies;

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

● the efficacy and safety profile of the product candidate.

General and Administrative

General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll taxes, employee benefits, stock-based compensation and severance charges for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. Our general and administrative expenses decreased for the second half of 2024 as we decreased the size of our organization in connection with the Workforce Reduction Plan. Our future general and administrative expenses will be significantly dependent on our ability to successfully consummate the Merger, related audit and legal expenses and whether we decide to pursue any future product development efforts.

Results of Operations

Comparison of the Years Ended December 31, 2024 and December 31, 2023

The following table summarizes our results of operations for the years ended December 31, 2024 and December 31, 2023 (in thousands):

Year Ended December 31,

(unaudited)

Operating expenses:

Other income (expense):

Other expense (19) (1) (18)

Provision for income taxes 55 56 (1)

Research and Development Expenses

Research and development expenses for the year ended December 31, 2024 were $53.2 million compared to $64.2 million for the year ended December 31, 2023. The decrease of $11.0 million was primarily due to decreases of $6.6 million in clinical trial costs, $3.2 million in contract manufacturing costs, and $2.3 million in headcount related costs, partially offset by lower regulatory and other costs of $1.1 million.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2024 were $21.4 million compared to $17.2 million for the year ended December 31, 2023. The increase of $4.2 million was primarily due to a $2.4 million increase in legal and consulting costs, a $1.3 million increase in headcount related and stock based compensation expense, and a $0.9 million increase in travel and other miscellaneous costs, offset by decreases of $0.4 million in insurance costs.

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Total Other Income

Other income for the year ended December 31, 2024 was $5.0 million compared to $5.9 million of other income for the year ended December 31, 2023. The change was primarily due to interest earned on our cash and cash equivalents and short-term investments for the year ended December 31, 2024.

Liquidity and Capital Resources

From our inception through December 31, 2024, we have received aggregate net proceeds of $79.8 million from the sale of shares of our convertible preferred stock and $5.0 million from convertible promissory notes to related parties. In July 2021, we completed our IPO with aggregate net proceeds from the offering of $126.9 million, after deducting underwriting discounts, commissions and offering costs.

On October 30. 2024, we entered into the Merger Agreement pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub I will merge with and into Jade, with Jade surviving the first merger as the surviving corporation and as part of the same overall transaction, Jade will merge with and into Merger Sub II, with Merger Sub II continuing as our wholly owned subsidiary and the surviving corporation of the second merger. The closing of the Merger is subject to approval by our stockholders and the stockholders of Jade and other customary closing conditions. Our future operations are highly dependent on the success of the proposed Merger with Jade.

At-the-Market Offering

On April 5, 2023, we entered into the Sales Agreement with the Agent, pursuant to which we can sell, from time to time, up to an aggregate of $75.0 million of shares of our common stock, through the Agent, as our sales agent. As of December 31, 2024, 3,462,721 shares have been sold under the Sales Agreement, generating $67.9 million of net proceeds after deducting commissions to the Agent and other offering costs. As of the date of this Annual Report on Form 10-K, up to $6.0 million of shares of our common stock remain available for sale from time to time under the Sales Agreement.

Future Funding Requirements

We have prepared operating plans and cash flow forecasts which indicate that our existing cash and cash equivalents and short-term investments on-hand of $78.6 million will be sufficient to fund our planned operations for at least twelve months from the filing date of this Annual Report on Form 10-K. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

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

● the costs and timing of the Merger;

● our ability to successfully consummate the Merger;

● the costs and timing of any future product development efforts;

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We expect to finance our cash needs through our existing cash, cash equivalents and short-term investments. However, we may be unable to enter into 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 stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our drug candidates even if we would otherwise prefer to develop and market such drug candidates ourselves.

Contractual Obligations and Commitments

In August 2021, we entered into the Waltham Lease. The base rent under the Waltham Lease is $43.00 per rentable square foot, or approximately $18,000 per month and is subject to scheduled annual increases of $1.00 per rentable square foot during the lease term. In January 2024, we entered into the First Amendment to the Waltham Lease resulting in the lease expiring on December 31, 2025, and an increase of $1.00 per rentable square foot during the additional lease term. In obtaining this lease extension, we no longer have the option to extend the Waltham Lease for one additional period of three years.

In April 2022, we entered into the Foster City Lease. The base rent under the Foster City Lease is $76.80 per rentable square foot, or approximately $22,600 per month and is subject to scheduled annual increases of 3% on each annual anniversary during the lease term. The term of the Foster City Lease is thirty-nine months, unless extended or earlier terminated pursuant to the terms of the Foster City Lease. We have the option to extend the Foster City Lease for one additional period of one year.

As of December 31, 2024, we do not have any other operating lease obligations, long-term debt obligations, capital lease obligations, purchase obligations or long-term liabilities.

We enter into contracts in the normal course of business for contract research services, contract manufacturing services, professional services and other services and products for operating purposes. These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts and not included above.

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Cash Flows

Comparison of the Years Ended December 31, 2024 and December 31, 2023

The following table sets forth a summary of the net cash flow activity for the years ended December 31, 2024 and December 31, 2023 (in thousands):

Year Ended December 31,

(unaudited)

Net cash used in operating activities $ (71,196) $ (56,778)

Net cash provided by investing activities 56,029 11,876

Net cash provided by financing activities 25,427 45,996

Net increase in cash and cash equivalents $ 10,260 $ 1,094

Operating Activities

Net cash used in operating activities for the year ended December 31, 2024 was $71.2 million, consisting primarily of our net loss incurred during the period of $69.6 million adjusted for non-cash charges of $11.3 million for stock-based compensation expense, $2.2 million of accretion on investments, $0.5 million of depreciation and impairment expense, and $11.2 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $0.3 million increase in prepaid expenses, a $0.6 million decrease in other assets, and a $12.1 million decrease in accounts payable and accrued and other current liabilities.

Net cash used in operating activities for the year ended December 31, 2023 was $56.8 million, consisting primarily of our net loss incurred during the period of $75.5 million adjusted for $8.9 million of noncash charges and $9.7 million for net changes in operating assets and liabilities. Noncash charges consisted primarily of $11.9 million in stock-based compensation expense, partially offset by $3.1 million of amortization of our investments. The net change in operating assets and liabilities related to a $9.8 million increase in accounts payables and accrued liabilities, a $0.5 million increase in prepaid expenses and other current assets, partially offset by a $0.4 million decrease in liabilities and $0.1 million decrease in other long-term assets.

Investing Activities

Net cash provided by investing activities for the year ended December 31, 2024 of $56.0 million consisted of maturities of short-term investments of $75.7 million, offset by purchases of short-term investments of $19.7 million.

Net cash provided by investing activities for the year ended December 31, 2023 of $11.9 million consisted of maturities of short-term investments of $136.0 million, offset by purchases of short-term investments of $124.0 million and $0.1 million for purchases of property and equipment.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2024 of $25.4 million consisted of $23.6 million in net proceeds received from sales of common stock under the Sales Agreement, after deducting Agent commissions, $0.3 million of payments made for offering costs, and $1.8 million of proceeds from stock option exercises and issuances of common stock under our employee stock purchase plan.

Net cash provided by financing activities for the year ended December 31, 2023 consisted of $44.9 million in net proceeds received from sales of common stock under the Sales Agreement, after deducting Agent commissions, $1.3 million of proceeds from stock option exercises and issuances of common stock under our employee stock purchase plan, offset by $0.2 million of payments made for offering costs.

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and the related disclosures of contingent liabilities in our consolidated financial statements and accompanying notes. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

See Note 2 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our consolidated financial statements.

Research and Development Expenses

We are required to estimate our expenses resulting from obligations under contracts with vendors, consultants and CROs, in connection with conducting research and development activities. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. We reflect research and development expenses in our consolidated financial statements by matching those expenses with the period in which services and efforts are expended. We account for these expenses according to the progress of the preclinical or clinical study as measured by the timing of various aspects of the study or related activities. We determine clinical trial cost estimates through review of the underlying contracts along with preparation of financial models taking into account discussions with research and other key personnel and outsider service providers as to the progress of studies or other services being conducted. During the course of a study, we adjust our rate of expense recognition if actual results differ from our estimates.

Emerging Growth Company Status

As an emerging growth company under the JOBS Act we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time public companies adopt the new or revised standard. The decision to opt out of the extended transition period under the JOBS Act is irrevocable.

Recently Issued Accounting Pronouncements

See Note 2 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10 K for a summary of recently issued accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities related to our cash, cash equivalents and short-term investments. We invest our excess cash primarily in money market funds, commercial paper, corporate debt securities and U.S. Treasury bills. We mitigate credit risk by maintaining a well-diversified portfolio and limiting the amount of investment exposure as to institution, maturity and investment type.

Because of the short-term maturities of our cash equivalents and short-term investments, along with the low risk profile of our investments, we do not believe that an increase in market rates would have any significant impact on the realized value of our investments. An immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents and short-term investments.

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Inflation Fluctuation Risk

Inflation generally affects us by increasing our cost of labor. 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, 2024 and 2023.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those consolidated financial statements is found in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K.

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

None.

Item 9A. Controls and Procedures.

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024. Based upon such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.

Management’s Report on Internal Control over Financial Reporting

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

●pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;

●provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and

●provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Under the supervision of and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework provided in Internal Control—Integrated Framework issued by the Committee of Sponsoring

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Organizations of the Treadway Commission in (2013 Framework). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2024.

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

Attestation Report of the Registered Public Accounting Firm

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to an exemption established by the JOBS Act for “emerging growth companies.”

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

(a)

None.

(b)

Rule 10b5-1 Plans

On November 4, 2024, Timothy Noyes, our Chief Executive Officer, terminated a trading arrangement that was intended to satisfy the affirmative defense of Rule 10b5-1(c), or the Noyes 10b5-1 Plan. The Noyes 10b5-1 Plan was entered into on November 27, 2023, and commenced on April 1, 2024, with a termination date of the earlier of July 31, 2025, or the date all shares under the plan were sold. The aggregate number of securities sold under the Noyes 10b5-1 Plan was 40,000.

On November 4, 2024, Ralph Niven, our former Chief Scientific Officer, terminated a trading arrangement that was intended to satisfy the affirmative defense of Rule 10b5-1(c), or the Niven 10b5-1 Plan. The Niven 10b5-1 Plan was entered into on April 9, 2024, and commenced on August 8, 2024, with a termination date of the earlier of April 9, 2025, or the date all shares under the plan were sold. There were no securities sold under the Niven 10b5-1 Plan.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item 10 is incorporated herein by reference from our Registration Statement on Form S-4, as amended, which is deemed to be a definitive proxy statement under Section 14a-6 of the Exchange Act, that has been filed with the SEC on March 25, 2025, or the 2025 Proxy Statement, under the captions “Proposal No. 7 – The Director Election Proposal,” “Aerovate Executive Officers and Corporate Governance,” and “Proposal No. 8 – The Auditor Ratification Proposal.”.

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Item 11. Executive Compensation.

The information required by this Item 11 is incorporated herein by reference from the 2025 Proxy Statement, including the information in the 2025 Proxy Statement appearing under the captions “Aerovate Executive Compensation” and “Aerovate Executive Officers and Corporate Governance.”

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

The information required by this Item 12 is incorporated herein by reference from the 2025 Proxy Statement, including the information in the 2025 Proxy Statement appearing under the captions “Equity Compensation Plan Information” and “Principal Stockholders of Aerovate.”

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

The information required by this Item 13 is incorporated herein by reference from the 2025 Proxy Statement, including the information in the 2025 Proxy Statement appearing under the captions “Certain Relationships and Related Party Transactions of the Combined Company” and “Proposal No. 7 – The Director Election Proposal.”

Item 14. Principal Accounting Fees and Services.

Our independent public accounting firm is KPMG LLP, San Diego, California (PCAOB Auditor ID: 185).

The information required by this Item 14 is incorporated herein by reference from the 2025 Proxy Statement, including the information in the 2025 Proxy Statement appearing under the caption “Proposal No. 8 – The Auditor Ratification Proposal.”.

PART IV

Item 15. Exhibits, Financial Statement Schedules

1.All financial statements.

Our consolidated financial statements, together with the report thereon of KPMG LLP, our independent registered public accounting firm, are included in this annual report on Form 10-K beginning on page F-1.

2.Financial statement schedules.

All schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the consolidated financial statements or notes thereto.

3.Exhibits

A list of exhibits is set forth on the Exhibit Index immediately preceding the signature page of this annual report on Form 10-K and is incorporated herein by reference.

Item 16. Form 10-K Summary

We have elected not to include summary information.

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AEROVATE THERAPEUTICS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets F-3

Consolidated Statements of Operations and Comprehensive Loss F-4

Consolidated Statements of Stockholders’ Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Aerovate Therapeutics, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Aerovate Therapeutics, Inc. and subsidiary (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

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

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2019.

San Diego, California

February 24, 2025

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AEROVATE THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

December 31, December 31,

Assets

Current assets:

Prepaid expenses and other current assets 1,494 1,793

Property and equipment, net 6 288

Operating lease right-of-use assets 209 614

Other long-term assets — 2,284

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable $ 224 $ 2,396

Accrued and other current liabilities 3,187 14,821

Operating lease liabilities 417 420

Operating lease liabilities, net of current portion — 255

Other liabilities 70 70

Commitments and contingencies (Note 5)

Stockholders’ equity:

Accumulated other comprehensive gain 105 237

Total liabilities and stockholders’ equity $ 80,332 $ 127,418

See accompanying notes to consolidated financial statements.

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AEROVATE THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Year Ended December 31,

Operating expenses:

Other income (expense):

Other expense: (19) (1)

Net loss before income taxes (69,573) (75,465)

Provision for income taxes 55 56

Comprehensive loss:

Other comprehensive loss:

Unrealized (loss) gain on securities (132) 703

Net loss per share, basic and diluted $ (2.44) $ (2.87)

See accompanying notes to consolidated financial statements.

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AEROVATE THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Accumulated

Additional Other Total

Common Stock Paid-In Comprehensive Accumulated Stockholders’

Shares Amount Capital (Loss) Income Deficit Equity

Unrealized gain on investments — — — 703 — 703

Stock based compensation — — 11,906 — — 11,906

Vesting of restricted stock units 9,913 — — — — —

Issuance of common stock under ESPP 28,108 — 356 — — 356

Unrealized loss on investments — — — (132) — (132)

Issuance of common stock under ESPP 34,034 — 308 — — 308

Vesting of restricted stock units 5,492 — — — — —

Stock based compensation — — 11,311 — — 11,311

See accompanying notes to consolidated financial statements.

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AEROVATE THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

Year ended December 31,

Cash flow from operating activities:

Stock-based compensation expense 11,311 11,906

Depreciation and amortization expense 282 96

Impairment of right-of-use asset 256 —

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 299 483

Other long-term assets 563 (110)

Accounts payable (2,172) (164)

Accrued and other liabilities (9,913) 9,999

Operating lease assets and liabilities, net (109) (26)

Other liabilities 163 (384)

Net cash used in operating activities $ (71,196) $ (56,778)

Cash flow from investing activities:

Purchases of short-term investments (19,683) (123,982)

Maturities of short-term investments 75,712 136,000

Purchases of property and equipment — (142)

Net cash provided by investing activities $ 56,029 $ 11,876

Cash flow from financing activities:

Payments for offering costs (307) (234)

Proceeds from issuance of common stock under ESPP 308 356

Net cash provided by financing activities $ 25,427 $ 45,996

Net increase in cash and cash equivalents 10,260 1,094

Cash and cash equivalents at the beginning of the year 23,491 22,397

Cash and cash equivalents at the end of the period $ 33,751 $ 23,491

Supplemental disclosure of noncash investing and financing activities:

See accompanying notes to consolidated financial statements.

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AEROVATE THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Organization and Nature of Operations

Aerovate Therapeutics Inc. (“Aerovate” or the “Company”) was incorporated in the state of Delaware in July 2018, and is headquartered in Waltham, Massachusetts. The Company has a wholly owned subsidiary, Aerovate Securities Corporation. The Company is a biopharmaceutical company. The Company’s initial focus was on advancing AV-101, the Company’s dry powder inhaled formulation of imatinib for the treatment of pulmonary arterial hypertension (“PAH”). However, in June 2024, the Company announced negative results from the Phase 2b portion of its global Phase 2b/Phase 3 trial of AV-101 in adults with PAH, and, as a result, the Company decided to halt enrollment and shut down the Phase 3 portion of the Phase 2b/Phase 3 trial as well as the long-term extension study. In June 2024, the Company announced a corporate restructuring and in July 2024, the Company engaged Wedbush Securities Inc. as the Company’s exclusive strategic financial advisor to assist in the process of exploring strategic alternatives, including but not limited to an acquisition, merger, reverse merger, business combination, liquidation or other transaction.

On October 30, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Caribbean Merger Sub I, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub I”), Caribbean Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Merger Sub II” and together with Merger Sub I, the “Merger Subs”), and Jade Biosciences, Inc., a Delaware corporation (“Jade”), pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, among other things, Merger Sub I will merge with and into Jade, with Jade surviving the merger as the surviving corporation (the “First Merger”), and as part of the same overall transaction, Jade will merge with and into Merger Sub II, with Merger Sub II continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the “Second Merger” and together with the First Merger, the “Merger”). In addition, in connection with the closing of the Merger (the “Closing”), the Company expects to declare a cash dividend to its pre-Merger stockholders of approximately $65.0 million in the aggregate (the “Cash Dividend”), provided such amount is subject to adjustment as set forth in the Merger Agreement. The Merger was approved by the Company’s board of directors (the “Board”), and the Board resolved to recommend approval of the Merger Agreement to the Company’s stockholders. The Closing is subject to approval by the stockholders of the Company and Jade as well as other customary closing conditions, including the effectiveness of a registration statement filed with the U.S. Securities and Exchange Commission (“SEC”) in connection with the transaction. If the Merger is completed, the business of Jade will continue as the business of the combined company.

(b) At-the-Market Offering

On April 5, 2023, the Company entered into an ATM Equity OfferingSM Sales Agreement (the “Sales Agreement”) with BofA Securities, Inc., or the Agent, pursuant to which the Company can sell, from time to time, at its option, up to an aggregate of $75.0 million of shares of its common stock, through the Agent, as its sales agent. As of December 31, 2024, 3,462,721 shares have been sold under the Sales Agreement, generating $67.9 million of net proceeds after deducting commissions to the Agent and other offering costs. As of the date of this Annual Report on Form 10-K, up to $6.0 million of shares of the Company’s common stock remain available for sale from time to time under the Sales Agreement.

Since inception, the Company has devoted substantially all of its resources to research and development activities, business planning, establishing and maintaining its intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations and has not realized revenues from its planned principal operations. The Company has incurred losses and negative cash flows from operations since

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inception. As of December 31, 2024, the Company had cash and cash equivalents and short-term investments of $78.6 million.

Management believes that the Company’s current cash and cash equivalents and short-term investments will provide sufficient funds to enable the Company to meet its obligations for at least twelve months from the filing date of this report while it explores strategic alternatives.

(2)BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the Company’s wholly owned subsidiary, Aerovate Securities Corporation. All intercompany transactions and balances have been eliminated in consolidation.

(b) Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Reported amounts and note disclosures reflect the overall economic conditions that are most likely to occur and anticipated measures management intends to take. Actual results could differ materially from those estimates. Accounting estimates and management judgements reflected in the consolidated financial statements include: normal recurring accruals, including the accrual for research and development expenses, stock-based compensation, fair value of investments, and operating lease right-of-use assets and lease liabilities. Estimates and assumptions are reviewed quarterly. Any revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Cash and cash equivalents include cash in readily available checking accounts, money market funds and commercial paper. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.

(d) Short-term Investments

Short-term investments consist of corporate debt securities, commercial paper and U.S. Treasury bills, classified as available-for-sale securities and have maturities of greater than three months. The Company has classified all of its available-for-sale investment securities as current assets on the consolidated balance sheets because these are considered highly liquid securities and are available for use in current operations. The Company carries these securities at fair value and reports unrealized gains and losses as a separate component of accumulated other comprehensive loss. The cost of debt securities is adjusted for amortization of purchase premiums and accretion of discounts to maturity. Such amortization and accretion is included in interest income in the consolidated statements of operations and comprehensive loss. Realized gains and losses on sales of securities are determined using the specific identification method and recorded in other income (expense), net in the consolidated statement of operations and comprehensive loss.

(e) Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash, cash equivalents and short-term investments. The Company maintains cash, cash equivalents and short-term investments with various high credit quality banks and other financial institutions in the United States. Such deposits may be in excess of federally insured limits. Management believes that the Company is not exposed to

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significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company has not experienced any losses on deposits since inception.

(f) Comprehensive Loss

Comprehensive loss consists of net loss and unrealized gains or losses on available-for-sale investments. The Company displays comprehensive loss and its components as part of the consolidated statements of operations and comprehensive loss.

(g) Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an 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 accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of prepaid expenses and other current assets, accounts payable, accrued liabilities and other current liabilities are reasonable estimates of their fair value due to the short-term nature of these accounts.

(h) Prepaid Expenses and Other Current Assets

Any expenses paid prior to the related services rendered are recorded as prepaid expenses. Such prepaid expenses are expensed in the period the expense is incurred. If the expense is for a service covering multiple periods, it is expensed from the date the services begin and over the period of the service rendered (or contract service period if services rendered dates are not defined).

(i) Property and Equipment, Net

Property and equipment, which consist of leasehold improvements, furniture and fixtures, research equipment, computers and construction-in-progress are stated at cost less accumulated depreciation or accumulated amortization. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the assets, which ranges from three to five years. Leasehold improvements are amortized over the remaining life of the lease for leasehold improvements at the time the asset is placed into service.

(j) Impairment of Long-lived Assets

The carrying value of long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the asset may not be recoverable. An impairment loss is recognized when the total of estimated future undiscounted cash flows, expected to result from the use of the asset and its eventual disposition, are less than its carrying amount. Impairment, if any, would be assessed using discounted cash flows or other appropriate measures of fair value. Following the Company’s Workforce Reduction Plan, the Company terminated all employees in the Foster City office and vacated the premises in September 2024. As a result, the Company impaired the related right-of-use asset of approximately $0.3 million, and recognized a loss on impairment in its general and administrative operating expenses during the year ended December 31, 2024.

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(k) Leases

At the commencement date of a lease, the Company recognizes lease liabilities which represent its obligation to make lease payments, and right-of-use assets (“ROU assets”) which represent its right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As the Company’s leases typically do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the lease commencement date. The ROU asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. ROU assets are recorded in operating lease ROU assets and lease liabilities are recorded in operating lease liabilities, current and noncurrent in the consolidated balance sheets.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has elected not to separate lease and non-lease components and not recognize lease liabilities and ROU assets for short-term leases with terms of twelve months or less.

(l) Research and Development Expenses

Research and development costs are expensed as incurred. Research and development costs consist primarily of salaries and other benefits of research and development personnel, including associated share-based compensation, costs related to research activities, preclinical studies, clinical trial, drug manufacturing and allocated overhead and facility-related expenses. The Company accounts for non-refundable advance payments for goods or services that will be used in future research and development activities as expenses when the goods have been received or when the service has been performed rather than when the payment is made.

Clinical trial costs are a component of research and development expenses. The Company expenses costs for its clinical trial activities performed by third parties, including clinical research organizations and other service providers, as they are incurred, based upon estimates of the work completed over the life of the individual study in accordance with associated agreements. The Company uses information it receives from internal personnel and outside service providers to estimate the clinical trial costs incurred.

(m) Stock-Based Compensation

Stock-based compensation expense represents the cost of the grant-date fair value of employee, officer, director, and non-employee stock option grants and restricted stock units, estimated in accordance with the applicable accounting guidance, recognized using the straight-line method over the vesting period for service-based options and using the graded vesting method for performance-based options. The vesting period generally approximates the expected service period of the awards. Forfeitures are recognized and accounted for as they occur.

The fair value of stock options is estimated using a Black-Scholes option pricing model on the date of grant. This method requires certain assumptions be used as inputs, such as the fair value of the underlying common stock, expected term of the option before exercise, expected volatility of the Company’s common stock, expected dividend yield, and a risk-free interest rate. Options and awards granted during the year have a maximum contractual term of ten years. The Company has limited historical stock option activity and therefore estimates the expected term of stock options granted using the simplified method, which represents the average of the contractual term of the stock option and its weighted-average vesting period. The expected volatility of stock options is based upon the historical volatility of a number of publicly traded companies in similar stages of clinical development. The Company has historically not declared or paid any dividends and does not currently expect to do so in the foreseeable future. The risk-free interest rates used are based on the U.S. Department of Treasury (“U.S. Treasury”) yield in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term of the stock options.

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(n) Income Taxes

Income taxes are 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 statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss ("NOL") and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply 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 income 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. The company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability.

(o) Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business as one operating segment. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this standard in the current period and disclosed a summary of significant segment expenses in Note 9 to our consolidated financial statements.

(p) Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration of potential dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the sum of the weighted average number of common shares plus the potential dilutive effects of potential dilutive securities outstanding during the period. Potential dilutive securities are excluded from diluted earnings or loss per share if the effect of such inclusion is antidilutive. The Company’s potentially dilutive securities, which include outstanding stock options under the Company’s equity incentive plan, have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

The following table summarizes the Company’s net loss per share:

Year Ended December 31,

Numerator:

Net loss attributable to common stockholders $ (69,628) $ (75,521)

Denominator:

Net loss per share, basic and diluted $ (2.44) $ (2.87)

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Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would have had an anti-dilutive effect are as follows (in common stock equivalent shares):

As of December 31,

Unvested restricted stock units — 21,968

(q) Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The standard is effective for fiscal years beginning after December 15, 2024, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard may have on its consolidated financial statements and related disclosures, and does not anticipate this ASU to materially impact our consolidated financial statements and related disclosures.

On November 4, 2024, the FASB issued ASU 2024-03 Income Statement Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 requires, in a tabular presentation, each relevant expense caption on the face of the income statement that includes any of the following natural expenses: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (DD&A) recognized as part of oil- and gas-producing activities or other types of depletion expenses. The tabular disclosure would also include certain other expenses, when applicable. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.

(3) FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):

Fair Value Measurements Using

Quoted Prices in

Active Markets Significant Other Significant

for Identical Observable Unobservable

December 31, Assets Inputs Inputs

2024 (Level 1) (Level 2) (level 3)

Assets:

Cash equivalents

Money market funds $ 33,529 $ 33,529 $ — $ —

Short-term investments

Corporate debt securities 9,057 — 9,057 —

U.S. Treasury bills 8,386 8,386 — —

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Fair Value Measurements Using

Quoted Prices in

Active Markets Significant Other Significant

for Identical Observable Unobservable

December 31, Assets Inputs Inputs

2023 (Level 1) (Level 2) (level 3)

Assets:

Cash equivalents

Money market funds $ 19,787 $ 19,787 $ — $ —

Short-term investments

Corporate debt securities 7,945 — 7,945 —

Cash Equivalents and Short-Term Investments

Financial assets measured at fair value on a recurring basis consist of the Company’s cash equivalents and short-term investments. Cash equivalents consisted of money market funds and commercial paper, and short-term investments consisted of U.S. Treasury bills, agency bonds, corporate debt securities, and commercial paper. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers.

The following tables summarize the Company’s short-term investments (in thousands):

As of December 31, 2024

Gross Gross

Amortized unrealized unrealized Estimated fair

Maturity cost gains losses value

Corporate debt securities 1 year or less 9,031 27 (1) 9,057

U.S. Treasury bills 1 year or less 8,378 8 — 8,386

As of December 31, 2023

Gross Gross

Amortized unrealized unrealized Estimated fair

Maturity cost gains losses value

Commercial paper 2 years or less 38,362 29 (5) 38,386

Corporate debt securities 2 years or less 7,925 21 (1) 7,945

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The following tables summarize the Company’s short-term investments with unrealized losses for less than 12 months and 12 months or greater:

Less than 12 months 12 months or Greater

Unrealized Unrealized Total Total Unrealized

Fair Value Losses Fair Value Losses Fair Value Losses

Corporate debt securities $ 2,016 $ (1) $ — $ — $ 2,016 $ (1)

Less than 12 months 12 months or Greater

Unrealized Unrealized Total Total Unrealized

Fair Value Losses Fair Value Losses Fair Value Losses

Commercial paper $ 6,042 $ (5) $ — $ — $ 6,042 $ (5)

Corporate debt securities 3,110 (1) — — 3,110 (1)

The Company considers whether unrealized losses have resulted from a credit loss or other factors. The unrealized losses on the Company’s short-term investments as of December 31, 2024, were caused by fluctuations in market value and interest rates as a result of the economic environment and not credit risk. The Company concluded that an allowance for credit losses was unnecessary as of December 31, 2024. It is neither management’s intention to sell nor is it more likely than not that the Company will be required to sell these investments prior to recovery of their cost basis or recovery of fair value. Unrealized gains and losses are included in accumulated other comprehensive loss.

Accrued interest receivable is written off through net realized investment gains (losses) at the time the issuer of the bond defaults or is expected to default on payment. Accrued interest receivable related to short-term investments was $0.5 million and $0.6 million as of December 31, 2024 and December 31, 2023, respectively.

(4) BALANCE SHEET COMPONENTS

Prepaid Expenses and Other Current Assets

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

December 31, December 31,

Other current assets $ 845 $ 250

Prepaid expenses 649 1,168

Prepaid research and development — 375

Total prepaid expenses and other current assets $ 1,494 $ 1,793

Accrued and Other Current Liabilities

In June 2024, following the Company’s decision to halt further development of AV-101, the Company announced its plan to terminate nearly all of its workforce in the coming months (the “Workforce Reduction Plan”). As of December 31, 2024, 47 individuals, or approximately 92% of the Company’s workforce, have been terminated.

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The affected individuals have been and will be provided severance benefits, including cash severance payments. Each affected individual’s eligibility for severance benefits is contingent upon entering into a separation agreement, which includes a general release of claims against the Company. In connection with the Workforce Reduction Plan, the Company incurred costs (in consideration of releases) of approximately $6.7 million, which are primarily one-time severance benefits, during the year ended December 31, 2024. The Company has paid approximately $3.8 million of severance benefits, and liabilities associated with the Workforce Reduction Plan were approximately $2.9 million as of December 31, 2024. The Company estimates that the remaining liabilities will be paid in the first quarter of 2025.

Accrued and other current liabilities consisted of the following (in thousands):

December 31, December 31,

Accrued payroll and other employee benefits 2,868 4,368

Accrued research and development — 9,363

Total accrued and other current liabilities $ 3,187 $ 14,821

(5) COMMITMENTS AND CONTINGENCIES

In August 2021, the Company entered into a lease agreement (the “Waltham Lease”) for approximately 5,000 square feet of office space in Waltham, Massachusetts for the Company’s corporate headquarters. The Waltham Lease has a term of thirty-nine months (“Lease Term”), unless extended or earlier terminated. The Company has the option to extend the Waltham Lease for one additional period of three years. The Lease Term had an initial abatement period, and the initial base rent payable is approximately $18,000 per month following the abatement period. The initial base rent payable will increase by approximately 2% per year over the Lease Term. The Waltham Lease commencement date was September 1, 2021. In January 2024, the Company entered into the First Amendment to the Waltham Lease resulting in the lease expiring on December 31, 2025, and an increase of $1.00 per rentable square foot during the additional lease term. In obtaining this lease extension, the Company no longer has the option to extend the Waltham Lease for one additional period of three years.

In April 2022, the Company entered into a lease agreement (the “Foster City Lease”) for approximately 3,500 square feet of office space in Foster City, California. The Foster City Lease has a term of thirty-nine months, unless extended or earlier terminated. The Company has the option to extend the Foster City Lease for on additional period of one year. The base rent payable under the Lease Term will be $22,600 per month and will be subject to annual increase of 3% on each anniversary. Following the Company’s Workforce Reduction Plan, the Company terminated all employees in the Foster City office and vacated the premises in September 2024. As a result, the Company impaired the related right-of-use asset of approximately $0.3 million, and recognized a loss on impairment in its general and administrative operating expenses during the year ended December 31, 2024.

As of December 31, 2024, the future minimum annual lease payments under the operating leases were as follows (in thousands):

Total Minimum

Lease Payments

Total operating lease payments 429

Less: Amount representing interest (12)

Present value of net minimum lease payments $ 417

As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the lease commencement date. The components of operating leases for the years

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ended December 31, 2024 and December 31, 2023 were as follows (in thousands except lease term and discount rate):

December 31, December 31,

Operating lease liabilities: 2024 2023

Non-current — 255

Total lease liabilities $ 417 $ 675

Weighted-average remaining lease term (in years) 0.8 1.5

Weighted-average incremental borrowing rate 6.4 % 6.0 %

Supplemental cash flow information related to cash paid for amounts included in the measurement of operating lease liabilities was as follows (in thousands):

Year ended December 31,

Cash paid included in operating cash flows $ 507 $ 442

Rent expense was as follows (in thousands):

Year ended December 31,

Operating lease $ 458 $ 464

Short-term lease 165 —

Total rent expense $ 623 $ 464

(6) STOCKHOLDERS’ EQUITY

On July 2, 2021, the Company’s certificate of amendment to its certificate of incorporation became effective, which provided 150,000,000 authorized shares of common stock with a par value of $0.0001 per share and 10,000,000 authorized shares of undesignated preferred stock with a par value of $0.0001 per share.

The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders.

As of December 31, 2024, the Company had reserved the following shares of common stock for future issuance:

Common stock options granted and outstanding 2,434,535

Shares reserved for issuance under the 2021 Plan 4,144,366

Reserved for future ESPP issuances 401,218

(7) SHARE-BASED COMPENSATION

(a) Stock Option Plan

The Company’s 2021 Stock Option and Incentive Plan (the “2021 Plan”) was adopted by the Company’s board of directors and approved by the Company’s stockholders in June 2021 and became effective as of June 29, 2021. Upon the effectiveness of the 2021 Plan, the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) was

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terminated and no further grants may be made thereunder. The Company’s 2021 Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including cash awards to its officers, directors, employees, consultants and advisors.

As of December 31, 2024, a total of 5,675,841 shares of the Company’s common stock were authorized for issuance with respect to awards granted under the 2021 Plan. The share limit will automatically increase on the first trading day in January of each year (commencing with 2022) by an amount equal to the lesser of (1) 4% of the total number of outstanding shares of the Company’s common stock on the last trading day in December in the prior year, or (2) such lesser number as determined by the Company’s board of directors. Since adoption, the annual increases have accumulated to a total of 3,075,841 shares through January 1, 2024.

Any shares subject to awards granted under the 2021 Plan or the 2018 Plan that are not paid, delivered or exercised before they expire or are canceled or terminated, or otherwise fail to vest, as well as shares used to pay the purchase or exercise price of such awards or related tax withholding obligations, will become available for new award grants under the 2021 Plan.

As of December 31, 2024, 1,676,073 and 758,462 options been granted and outstanding under the 2021 Plan and 2018 Plan, respectively.

The options that are granted under the 2021 Plan and the 2018 Plan are exercisable at various dates as determined upon grant and terminate within 10 years of the date of grant. The vesting period generally occurs over three to four years.

The following table summarizes the option activity under the 2021 Plan and 2018 Plan for the year ended December 31, 2024:

Weighted-

Average

Remaining Aggregate

Weighted-Average Contractual Term Intrinsic Value

JBIO US Equity

JBIO · 10-K · period ended 2024-12-31

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

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

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

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

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

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules

Item 16. Form 10-K Summary

JBIO US Equity☆

JBIO · 10-K · period ended 2024-12-31

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

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

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

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

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

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules

Item 16. Form 10-K Summary

JBIO US Equity