Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in “Item 1A. Risk Factors” and in other parts of this Annual Report on Form 10-K.
Overview
We are a clinical stage genetic medicine company dedicated to reshaping heart health by applying pioneering science to fundamentally change how cardiovascular diseases are treated. We are advancing a portfolio of therapeutic candidates that take aim at the underlying genetic causes of conditions, including FA cardiomyopathy, plakophilin-2, or PKP2, arrhythmogenic cardiomyopathy, or ACM, and other devastating diseases with high unmet need.
LX2006 for the treatment of FA cardiomyopathy
Our most advanced cardiovascular product candidate, LX2006 for the treatment of FA cardiomyopathy, is currently being evaluated in SUNRISE-FA, our ongoing Phase 1/2 clinical trial and in a Cornell investigator-initiated trial.
Interim Clinical Data Updates
In October 2025, we provided an interim clinical update, which included baseline characteristics and safety data from the 17 treated participants across the two studies, and clinical efficacy data from the 16 participants who had reached at least six months follow-up as of that time. A summary of key observations from the October 2025 interim update is set forth below.
•
Improvements in LVMI among participants with abnormal baseline LVMI (n=6). Five of six participants achieved >10% by 12-month visit or sooner and six of six participants achieved LVMI measurements within the normal range as of latest visit. A 18% mean improvement in LVMI was observed at 6-month visit and a 23% mean improvement in LVMI was observed at 12-month visit, exceeding 10% FDA-aligned threshold for pivotal study. In the mid- and high-dose cohorts (n=3), a 28% mean improvement in LVMI was observed at 6-month visit and a 33% mean improvement in LVMI was observed at 12-month visit, suggesting dose-dependent improvement. Among participants with normal baseline LVMI (n=10), the majority demonstrated LVMI improvement or stabilization over time.
•
Improvements in secondary cardiac biomarkers. Fourteen of sixteen participants achieved >25% reduction in high-sensitivity troponin I from baseline at latest visit. Fourteen of sixteen participants achieved reduction or stabilization in LWT from baseline at latest visit.
•
Improvements in mFARS as demonstrated by a 2.0-point mean improvement from baseline at latest visit across all participants. Eleven of sixteen participants achieved reduction or stabilization in mFARS from baseline at latest visit.
•
Previously reported data in April 2025 from ongoing SUNRISE-FA trial (n=8) showed that all study participants achieved increases in frataxin protein expression from baseline at 3-month visit, with dose-dependent increases observed across cohorts.
Based on the data observed as of the October 2025 update, LX2006 remained generally well tolerated with no Grade 3+ SAEs and no signs of complement activation or other immunogenicity.
Regulatory Alignment
In February 2025, we announced further alignment on elements of the accelerated development pathway following a Type B RMAT meeting with the FDA including frataxin expression co-primary endpoint to be evaluated for any increase from baseline rather than numerical threshold.
In July 2025, we announced Breakthrough Therapy designation based on interim clinical data from Phase 1/2 trials showing clinically meaningful improvements in cardiac biomarkers and functional measures. We also announced that LX2006 was selected for the CDRP Program, created to facilitate CMC registrational readiness and support faster patient access.
100
In October 2025, in response to our questions regarding the possibility of a faster path to BLA, the FDA indicated openness to a BLA submission for accelerated approval that includes clinical data from the ongoing Phase 1/2 studies of LX2006 pooled with new clinical data to be generated in the planned pivotal study. The FDA also previously agreed to evaluate the co-primary endpoint of LVMI at a time point earlier than 12 months. Collectively, we believe this regulatory feedback has the potential to reduce the size and length of the planned pivotal study, possibly accelerating the overall timeline to BLA submission. We plan to initiate the LX2006 pivotal study in the first half of 2026, pending finalization of the trial protocol.
LX2020 for the treatment of arrhythmogenic cardiomyopathy
Our second most advanced cardiovascular product candidate, LX2020 for the treatment of arrhythmogenic cardiomyopathy, or ACM, caused by mutations in the PKP2 gene, referred to as PKP2-ACM, is currently being evaluated in HEROIC-PKP2, an ongoing Phase 1/2 clinical trial.
Interim Clinical Data Updates
In October 2025, we provided an interim clinical data update for the three participants dosed in cohort 1 (n=2 at 12-month visit; n=1 at 9-month visit), assessing multiple cardiac parameters at latest visit relative to baseline. A summary of key observations from the October 2025 interim update is set forth below.
•
Premature ventricular contractions, or PVCs, were reduced in one of three participants and non-sustained ventricular tachycardia, or NSVT, was reduced or stable in two of three participants.
•
QRS duration was normalized or stable in two of three participants and T-wave inversions were reduced in two of three participants.
•
Left ventricular ejection fraction, or LVEF, and right ventricular ejection fraction, or RVEF, were stable in three of three participants.
In January 2026, we provided an interim clinical data update, which included baseline characteristics and safety data from the ten participants dosed, including three participants in cohort 1 at the low dose and seven participants in cohorts 2 and 3 at the high dose. Clinical efficacy data were inclusive of those participants with at least 6 months of follow-up (n=8). A summary of key observations from the January 2026 interim update is set forth below.
•
Arrhythmia burden stabilized or improved in majority of participants with dose-dependent response in NSVT and PVCs. NSVT reduced or stabilized in the majority of participants, with a 22% mean improvement in high-dose cohorts at latest visit (n=5). PVCs reduced or stabilized in the majority of participants, with a 14% mean improvement in high-dose cohorts at latest visit.
•
Four of five participants in high-dose cohorts report improvement relative to baseline on the PGIC scale, a patient-reported outcome measure.
•
Participants stable across other clinical measures including QRS duration, T-wave inversion, RVEF and NYHA Class.
•
Increases in PKP2 protein expression versus baseline at three months in all participants that had undergone cardiac biopsies (n=7) assessed by western blot. Dose-dependent increases observed, with mean increase of 93% in the low-dose cohort (n=2) and 162% mean increase in the high-dose cohorts (n=5).
Based on the data observed as of the October 2025 and January 2026 readouts, LX2020 remained generally well tolerated with no clinically significant complement activation.
Each of our gene therapy candidates utilizes the vector construct, dose and route of administration that we believe will result in the most favorable biodistribution and safety profile for our product candidate for each disease. Our most advanced programs use the AAVrh10 vector due to its high transduction efficiency in myocardial cells, potential for lower toxicity given the opportunity to utilize lower doses compared to other well-established AAV serotypes, and low pre-existing immunity.
Current and Future Capital Requirements
To date, we have funded our operations primarily through proceeds from the sale of shares of our convertible preferred stock, common stock, and pre-funded warrants and warrants to purchase our common stock, including from our October 2025 Financing Transactions, May 2025 Private Placement, March 2024 Private Placement, IPO and the subsequent partial exercise of the underwriters’ 30-day option to purchase additional shares of common stock. As of December 31, 2025, we had $246.6 million of cash, cash equivalents, and investments in U.S. Treasury securities. We have incurred significant operating losses since the commencement of our operations. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and
101
eventual commercialization of one or more of our current gene therapy candidates or any future gene therapy candidates. Our net losses for the years ended December 31, 2025 and December 31, 2024 were $100.0 million and $98.3 million, respectively, and our accumulated deficit was $380.1 million at December 31, 2025. We expect to continue to incur significant losses for the foreseeable future as we advance our current and future product candidates through preclinical and clinical development, continue to build our operations and operate as a public company.
We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures to continue to increase. We expect our expenses and capital requirements will increase significantly in connection with our ongoing activities as we:
•
continue our ongoing and planned clinical trials as well as research and development of our FA cardiomyopathy (LX2006) and arrhythmogenic cardiomyopathy caused by mutations in the PKP2 gene, or PKP2-ACM (LX2020) programs and other product candidates;
•
initiate preclinical studies and clinical trials for any additional product candidates that we may pursue in the future;
•
seek to discover and develop additional product candidates and further expand our clinical product pipeline;
•
seek regulatory approvals for any product candidates that successfully complete clinical trials;
•
invest in capital equipment in order to expand our research and development and manufacturing activities;
•
attract, hire and retain additional clinical, scientific, quality control, regulatory, and manufacturing management and administrative personnel;
•
add clinical, operational, financial and management information systems and personnel, including personnel to support our product development;
•
develop, maintain, expand, protect and enforce our intellectual property portfolio, including patents, trade secrets and know-how;
•
acquire or in-license other product candidates and technologies;
•
expand our operations in the United States and to other geographies;
•
incur additional legal, accounting, investor relations and other general and administrative expenses associated with operating as a public company; and
•
establish a sales, marketing and distribution infrastructure, either ourselves or in partnership with others, to commercialize any product candidates, if approved, and related additional commercial manufacturing costs.
Components of our results of operations
Revenue
To date, we have not generated any revenue from product sales. If our development efforts for LX2006 and LX2020, or any future product candidates, are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from product sales, royalties or payments from such collaboration or license agreements, or a combination of product sales and payments from such agreements.
Operating expenses
Research and development
Research and development expenses consist of costs incurred for our research activities, including our discovery efforts and the preclinical and clinical development of our programs. These expenses include:
•
employee-related expenses, including salaries, benefits, and stock-based compensation expense for employees engaged in research and development functions;
102
•
expenses incurred under agreements with third parties, such as consultants, clinical investigators, contractors and CROs that assist with (i) identification of potential product candidates in discovery platforms and (ii) the preclinical and clinical studies of our product candidates;
•
the cost of developing and scaling our manufacturing process and manufacturing product candidates for use in our research, preclinical studies and clinical trials, including under agreements with third parties, such as consultants, contractors and CMOs;
•
costs to maintain compliance with FDA and other regulatory requirements;
•
laboratory supplies and research materials;
•
facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities;
•
payments made under our licensing agreements with third parties, including milestone payments; and
•
other expenses incurred as a result of research and development activities.
We record research and development costs as expenses when incurred. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. When third-party service providers’ billing terms do not coincide with our period-end, we are required to make estimates of our obligations to those third parties incurred in a given accounting period and record accruals at the end of the period. We base these estimates on our knowledge of the research and development programs, services performed for the period, past history for related activities and the expected duration of the third-party service contract, where applicable. If timelines or contracts are modified based upon changes in the scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis; therefore, actual results could differ from our estimates. Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.
Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to CROs, CMOs, central laboratories and certain outside consultants in connection with our research and discovery, preclinical development, process development, manufacturing, clinical development, clinical trials, regulatory and quality assurance activities. We do not allocate professional services costs and licensing fees and other similar costs to specific programs because these costs are deployed across multiple programs.
Research and development activities are central to our business model and account for a significant portion of our operating expenses. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect our research and development expenses to increase for the foreseeable future as we further advance LX2006 and LX2020, and any other future product candidates that we may develop, into and through preclinical studies and clinical trials and pursue regulatory approvals. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future research, preclinical studies and clinical trials, regulatory developments and our assessments as to each product candidate’s commercial potential. In addition, we cannot forecast whether any of our current or future product candidates will be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset our expenses.
General and administrative
General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expense for personnel in executive, accounting, business development, legal, human resources and administrative functions. General and administrative expenses also include corporate facility costs not otherwise included in research and development expenses, depreciation, and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, as well as professional fees for legal, consulting, investor and public relations, accounting and audit services.
103
We expect that in the near to medium term future our general and administrative expenses will decrease relative to those incurred during the year ended December 31, 2025 on an annualized basis, primarily due to lower anticipated third-party legal fees and related costs, while supporting the continued research and development of our programs and the growth of our business.
Gain on long-term investment
Gain on long-term investment includes non-operating income related to an unrealized gain on convertible preferred stock received that was recorded at fair value to long-term investment.
Other income (expense), net
Other income (expense), net includes foreign exchange gains and (losses).
Interest expense
Interest expense is primarily associated with our finance right of use asset equipment leases.
Interest income
Interest income is primarily related to interest earned from our investments in U.S. government money market funds and interest earned from our investments in U.S. Treasury securities, as well as interest earned on interest-bearing demand deposit cash accounts and a cash collateral account.
(Amortization of premium) accretion of discount on investments in U.S. Treasury securities, net
Amortization of premium and accretion of discount on investments consists of amortization of premium and accretion of discount on our investments in U.S. Treasury securities.
Income taxes
Provision for income taxes consists of U.S. federal and state income taxes in the jurisdictions where we conduct business. Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each year or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss, or NOL, carryforwards and tax credits will not be realized. Accordingly, we have recorded a full valuation allowance against our net deferred tax assets at December 31, 2025 and December 31, 2024. As of December 31, 2025 and December 31, 2024 we had no unrecognized tax benefits.
104
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):
Years Ended December 31,
Operating expenses
Other income and expense
Gain on long-term investment 3,390 - 3,390
Other expense, net (18 ) (9 ) (9 )
Income taxes - - -
Research and development expenses
The following table summarizes our research and development expenses incurred for the years ended December 31, 2025 and 2024 (in thousands):
Years Ended December 31,
Direct external research and development expenses by program:
Unallocated research and development expenses:
Other unallocated costs, including facilities 3,020 3,051 (31 )
Total unallocated research and development expenses: 26,978 28,459 (1,481 )
The net decrease of $10.3 million in total research and development expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to decreases in (i) milestone expenses of $6.1 million, consisting primarily of a $6.0 million development milestone for our LX2020 program that was achieved during the third quarter of 2024 and subsequently paid to the selling shareholders of Stelios, (ii) clinical trial costs of $3.2 million excluding an adjustment that reduced estimated accrued clinical trial expenses in 2024 by $2.2 million for our LX1001 program, (iii) employee and stock-based compensation costs of $1.3 million primarily due to decreased headcount, (iv) CMC expenses of $1.2 million, and (v) license fees of $0.6 million related to the Third Cornell License Agreement that were incurred in 2024. These decreases were partially offset by an adjustment that reduced estimated accrued clinical trial expenses in 2024 by $2.2 million for our LX1001 program.
105
General and administrative expenses
The net increase of $13.8 million in general and administrative expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to increases in third-party legal fees and associated costs of $11.7 million, as well as employee compensation costs of $1.9 million primarily due to increased headcount.
Gain on long-term investment
We recorded non-operating income of approximately $3.4 million during the year ended December 31, 2025 related to an unrealized gain on convertible preferred stock received that was recorded at fair value to long-term investment.
Interest income
We recognized interest income of $6.1 million and $7.6 million for the years ended December 31, 2025 and December 31, 2024, respectively, primarily related to interest earned on our investments in U.S. government money market funds and our investments in U.S Treasury securities, with the decrease primarily due to lower interest rates.
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 and negative cash flows from our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates. Since our inception through December 31, 2025, we funded our operations primarily through proceeds from the sale of shares of our convertible preferred stock, common stock, and pre-funded warrants and warrants to purchase our common stock, including from our October 2025 Financing Transactions, May 2025 Private Placement, March 2024 Private Placement, IPO and the subsequent partial exercise of the underwriters’ 30-day option to purchase additional shares of common stock, with estimated net proceeds since our inception totaling $594.9 million. As of December 31, 2025 and December 31, 2024, we had cash, cash equivalents, and investments in U.S. Treasury Securities of $246.6 million and $128.5 million, respectively.
On March 24, 2025 we filed a prospectus supplement to the prospectus which forms a part of our effective shelf registration statement on Form S-3, dated December 13, 2024, which registers the offering, issuance, and sale of up to $75.0 million of common stock pursuant to our ATM Program. As of December 31, 2025, we have not sold any shares of common stock pursuant to the ATM Program. In October 2025, we raised $153.8 million in equity capital from the October 2025 Financing Transactions, receiving net proceeds of $143.9 million after transaction costs.
We believe that our cash, cash equivalents, and investments in U.S. Treasury securities balances will be sufficient to fund our planned operating expenses and capital expenditure requirements into 2028. Our total future capital requirements will depend on many factors and are subject to the risks and uncertainties set forth in “Item 1ARisk Factors.”
Cash flows
The following table summarizes our sources and uses of cash for the years ended December 31, 2025 and December 31, 2024 (in thousands):
Years Ended December 31,
Net cash used in operating activities $ (98,561 ) $ (81,151 )
Net cash used in investing activities (90,252 ) (94,077 )
Net cash provided by financing activities 216,795 88,776
Net increase (decrease) in cash $ 27,982 $ (86,452 )
Operating activities
During the year ended December 31, 2025, net cash used in operating activities consisted primarily of our net loss of $100.0 million, which included an unrealized gain of $3.4 million recorded to other non-operating income upon receipt of our long-term investment in convertible preferred stock, in addition to $9.5 million of net cash used in changes in operating assets and liabilities, which were partially offset by $12.1 million of stock-based compensation expense and $2.1 million of depreciation expense and amortization of operating and finance right-of-use assets.
106
During the year ended December 31, 2024, net cash used in operating activities consisted primarily of our net loss of $98.3 million, which was partially offset by (i) $12.5 million of stock-based compensation expense, (ii) $2.7 million of net cash provided by changes in operating assets and liabilities, and (iii) $2.0 million of depreciation expense and amortization of operating and finance right-of-use assets.
Investing activities
During year ended December 31, 2025, net cash used in investing activities was $90.3 million and consisted primarily of purchases of investments in U.S. Treasury securities of $195.4 million, which was partially offset by proceeds from sales or maturities of investments in U.S. Treasury securities of $105.5 million and purchases of lab equipment of $0.4 million.
During the year ended December 31, 2024, net cash used in investing activities was $94.1 million and consisted primarily of the purchase of investments in U.S. Treasury securities and lab equipment.
Financing activities
During the year ended December 31, 2025, net cash provided by financing activities consisted primarily of the net proceeds received from the October 2025 Financing Transactions of $143.9 million, the May 2025 Private Placement of $73.1 million, as well as proceeds received from common stock issuances under the 2023 ESPP (as defined below) of $0.3 million and proceeds received from the exercise of stock options of $0.1 million, which were partially offset by $0.5 million of principal payments made on equipment finance leases.
During the year ended December 31, 2024, net cash provided by financing activities consisted primarily of the net proceeds received from the March 2024 Private Placement of $88.7 million, as well as $0.5 million of proceeds received from the exercise of stock options, which were partially offset by $0.4 million of principal payments made on equipment finance leases.
We expect our expenses and capital requirements to increase significantly in connection with our ongoing activities, particularly as we advance our lead product candidates and other development programs. Accordingly, we will continue to require substantial additional funding to support our continuing operations.
The timing and amount of our future operating and capital requirements will largely depend on many factors, including:
•
the initiation, scope, progress, timing, results and costs of product discovery, preclinical studies and clinical trials for our product candidates or any future candidates we may develop;
•
our ability to maintain our relationships with Cornell University, Adverum, The Regents of UCSD, and any other key licensors or collaborators;
•
the scope, prioritization and number of our research and development programs;
•
the costs, timing and outcome of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more preclinical studies or clinical trials than those that we currently expect or change their requirements on studies that had previously been agreed to;
•
our ability to establish and maintain collaborations on favorable terms, if at all;
•
the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we have or may enter into;
•
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;
•
the costs to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•
the extent to which we acquire or in-license other product candidates and technologies;
•
the costs of securing manufacturing arrangements for commercial production;
107
•
the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates; and
•
our need to implement additional internal systems and infrastructure.
We may be unable to raise additional funds or enter into potential collaborations, strategic partnerships or marketing, distribution, licensing or other similar agreements or arrangements on favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your stockholder ownership interest will be diluted. If we fail to raise capital or enter into such agreements or arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of our product candidates or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Critical accounting policies and significant judgments and estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and the disclosure of our contingent liabilities in our 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 to our audited financial statements included elsewhere in this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our audited financial statements.
Research and development
As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves 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 financial statements based on facts and circumstances known to us at that time. At each period end, we corroborate the accuracy of these estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include those related to fees paid to:
•
vendors in connection with discovery and preclinical development activities;
•
CROs in connection with preclinical studies and testing; and
•
CMOs in connection with the process development and scale up activities and the production of materials.
We record the expense and accrual related to contract research and manufacturing based on our estimates of the services received and efforts expended considering a number of factors, including our knowledge of the progress towards completion of the research, development, and manufacturing activities; invoicing to date under contracts; communication from the CROs, CMOs, and other companies of any actual costs incurred during the period that have not yet been invoiced; and the costs included in the contracts and purchase orders. 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 the estimate, we adjust the accrual or the amount of prepaid expense 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. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses; however, we cannot guarantee that such adjustments will not be made in the future.
108
Stock option awards
We recognize share-based compensation expense related to stock option awards granted based on the estimated fair value of the awards on the date of grant using a Black-Scholes option pricing model. The grant date fair value of the share-based awards is recognized on an accelerated basis under the graded vesting method over the requisite service period of the award, which is the vesting period of the respective awards. Share-based payments to non-employees issued in exchange for services are based upon the fair value of the equity instruments issued. Compensation expense for stock options issued to non-employees is calculated using the Black-Scholes option pricing model and is recorded over the requisite service performance period.
The Black-Scholes option-pricing model requires the use of highly subjective assumptions, which are used to determine the fair value stock option awards granted. These assumptions include:
Expected Term. The expected term represents the period that our stock option awards granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).
Expected Volatility. The expected stock price volatility is primarily based on the historical volatility of a publicly traded set of peer companies for stock options granted since the IPO, each for a period equal to the expected life of the stock options granted, and we expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded stock price. Our peer group of publicly traded companies was chosen based on their similar size, stage in the life cycle or area of specialty.
Risk-Free Interest Rate. The risk-free interest rate is based on the interest rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of stock options granted.
Expected Dividend. We have never paid, and do not anticipate paying, cash dividends on our shares of common stock. Therefore, the expected dividend yield was assumed to be zero.
Fair Value of Common Stock. The fair value of shares of our common stock is measured by the stock price on the date of grant.
Emerging growth company and smaller reporting company status
The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not 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 private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. There are other exemptions and reduced reporting requirements provided by the JOBS Act that we are currently evaluating. For example, as an “emerging growth company,” we are exempt from Sections 14A(a) and (b) of the Exchange Act, which would otherwise require us to (1) submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “golden parachutes;” and (2) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of our chief executive officer’s compensation to our median employee compensation. We also rely on an exemption from the rule requiring us to provide an auditor’s attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. We will continue to remain an “emerging growth company” until the earliest of the following: (1) the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO; (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates was less than $700.0 million as of June 30, 2025 and our annual revenue was less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (1) the market value of our stock held by non-affiliates is less than $250.0 million or (2) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million as of June 30 of such year. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited consolidated financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
109
Recently issued accounting pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations and cash flows is disclosed in Note 2 to our audited financial statements included elsewhere in this Annual Report.
Qualitative and quantitative disclosures about market risk
Interest rate risk
We are a smaller reporting company, as defined by Rule 12b-2 under the Exchange Act and are not required to provide the information under this item.
Item 7A. Reserved
110
Item 8. Financial Statements and Supplementary Data.
LEXEO THERAPEUTICS, INC.
INDEX TO FINANCIAL STATEMENTS
Balance Sheets 113
Statements of Operations and Comprehensive Loss 114
Statements of Stockholders’ Equity 115
Statements of Cash Flows 116
Notes to Financial Statements 117
111
KPMG LLP
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Lexeo Therapeutics, Inc.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Lexeo Therapeutics, Inc. (the Company) as of December 31, 2025 and 2024, the related statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the 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.
We have served as the Company’s auditor since 2021.
New York, New York
March 30, 2026
KPMG LLP, a Delaware limited liability partnership and a member firm of
the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee.
112
Lexeo Therapeutics, Inc.
Balance Sheets
(In thousands, except share and per share amounts)
December 31, December 31,
Assets
Current assets:
Current portion of investments in U.S. Treasury securities 118,767 86,504
Prepaid expenses and other current assets 6,625 4,603
Non-current portion of investments in U.S. Treasury securities 64,801 7,012
Long-term investment 3,390 -
Lease right-of-use assets - finance 1,140 1,460
Lease right-of-use assets - operating 6,578 8,069
Liabilities and stockholders' equity
Current liabilities:
Accrued expenses and other current liabilities 9,277 13,759
Current portion of lease liabilities - finance 518 570
Current portion of lease liabilities - operating 2,157 2,100
Non-current liabilities
Non-current portion of lease liabilities - finance 327 817
Non-current portion of lease liabilities - operating 4,884 6,437
Commitments and contingencies (Note 11)
Stockholders' equity:
Accumulated other comprehensive gain (loss) 188 (103 )
Total liabilities and stockholders' equity $ 268,688 $ 146,942
The accompanying notes are an integral part of these financial statements.
113
Lexeo Therapeutics, Inc.
Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
Year Ended December 31,
Operating expenses
Other income and expense
Gain on long-term investment 3,390 -
Other expense, net (18 ) (9 )
Interest expense (95 ) (137 )
Total other income and expense 9,296 7,433
Loss from operations before income taxes (99,961 ) (98,333 )
Income taxes - -
Other comprehensive gain (loss)
Net unrealized gain (loss) on investments 291 (103 )
Total other comprehensive gain (loss) 291 (103 )
Net loss per common share, basic and diluted $ (1.86 ) $ (3.09 )
The accompanying notes are an integral part of these financial statements.
114
Lexeo Therapeutics, Inc.
Statements of Stockholders’ Equity
(In thousands, except share amounts)
Accumulated
Additional Other Total
Common Stock Treasury Paid-in Comprehensive Accumulated Stockholders'
Shares Amount Stock Capital Income (Loss) Deficit Equity
Exercise of stock options 15,300 - - 59 - - 59
Stock-based compensation expense - - - 12,132 - - 12,132
Accumulated
Additional Other Total
Common Stock Treasury Paid-in Comprehensive Accumulated Stockholders'
Shares Amount Stock Capital Income (Loss) Deficit Equity
Treasury stock repurchase - - (17 ) - - - (17 )
Stock-based compensation expense - - - 12,474 - - 12,474
The accompanying notes are an integral part of these financial statements.
115
Lexeo Therapeutics, Inc.
Statements of Cash Flows
(In thousands)
Years Ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Reduction in the carrying amount of ROU assets, operating 1,491 1,373
Reduction in the carrying amount of ROU assets, finance 320 325
Depreciation and amortization expense 268 304
Non-cash gain on long-term investment (3,390 ) -
Net realized gain on investments in U.S. Treasury securities (17 ) -
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (2,004 ) (1,690 )
Accrued expenses and other current liabilities (4,445 ) 3,367
Lease liabilities, operating (1,496 ) (1,336 )
Lease liabilities, finance (9 ) 10
Net cash used in operating activities (98,561 ) (81,151 )
Cash flows from investing activities:
Purchase of property and equipment (397 ) (481 )
Proceeds from sales or maturities of investments 105,527 -
Net cash used in investing activities (90,252 ) (94,077 )
Cash flows from financing activities:
Proceeds from exercise of stock options 59 491
Payments on finance leases (533 ) (410 )
Proceeds from common stock issuances under 2023 ESPP 270 -
Treasury stock repurchase - (17 )
Net cash provided by financing activities 216,795 88,776
Net change in cash, cash equivalents and restricted cash 27,982 (86,452 )
Cash, cash equivalents and restricted cash at beginning of period 38,266 124,718
Cash, cash equivalents and restricted cash at end of period $ 66,248 $ 38,266
Supplemental disclosures of cash flow information
Supplemental disclosure of non-cash activities
Unrealized gain (loss) on investments $ 291 $ (103 )
Unpaid offering costs included in accounts payable and accrued expenses $ 25 $ -
The accompanying notes are an integral part of these financial statements.
116
Lexeo Therapeutics, Inc.
Notes to Financial Statements
(Table amounts in thousands, except share and per share amounts)
1. Description of Business and Basis of Presentation
Description of Business—Lexeo Therapeutics, Inc. (the “Company”) is a clinical stage genetic medicine company dedicated to pioneering novel treatments for cardiovascular disease. The Company utilizes adeno-associated viruses (“AAV”) that have been engineered to transfer genes to patients. The Company’s therapeutic investigational treatments include AAV-based gene therapies primarily in the clinical and late pre-clinical stages of research and development.
The Company is located in New York, NY and was first formed on February 17, 2017, as an LLC under the laws of the State of Delaware under the legal name Lexeo Therapeutics, LLC. The Company filed and executed a certificate of conversion to a corporation on November 20, 2020, to convert the LLC to Lexeo Therapeutics, Inc, a Delaware corporation. All of the Company’s tangible assets are held in the United States (“U.S.”).
Basis of Presentation and Principles of Consolidation—The accompanying financial statements and these notes reflect the operations of the Company that have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). The Company has no unconsolidated subsidiaries. Certain prior period balances have been reclassified to conform to the current period presentation.
Need for Additional Capital—Since inception, the Company has incurred net losses and negative cash flows from operations, including net losses of $100.0 million and $98.3 million during the years ended December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025, the Company had cash, cash equivalents, and investments in U.S. Treasury Securities of $246.6 million and an accumulated deficit of $380.1 million and expects to incur substantial operating losses and negative cash flows from operations for the foreseeable future. During the year ended December 31, 2024, the Company received total net proceeds of $88.7 million after deducting approximately $6.3 million of commissions and offering expenses in the March 2024 Private Placement (as defined below) (see Note 7). During the year ended December 31, 2025, the Company received total net proceeds of approximately $73.1 million after deducting approximately $6.9 million of commissions and offering expenses in the May 2025 Private Placement (as defined below) (see Note 7), as well as net proceeds of approximately $143.9 million after deducting approximately $9.8 million of underwriter commissions, placement agent fees and estimated offering expenses in the October 2025 Financing Transactions (as defined below) (see Note 7). Management estimates that the Company's current cash, cash equivalents, and investments in U.S. Treasury securities balances are sufficient to fund its operations for at least 12 months from the issuance date of these financial statements.
If the Company is unable to obtain additional funding before achieving sufficient profitability and positive cash flows from operations, if ever, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues to pursue plans to obtain additional funding before achieving sufficient profitability and positive cash flows from operations, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
Risks and Uncertainties—The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, successful discovery and development of its product candidates, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations, the ability to secure additional capital to fund operations, and commercial success of its product candidates. Any of the Company’s current product candidates and future product candidates that it may develop will require extensive non-clinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, infrastructure, and extensive compliance- reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
117
2. Summary of Significant Accounting Policies
Use of Estimates—The preparation of the financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expense during the reporting period. The most significant estimates relate to the accruals of research and development costs, including accruals of research contract costs, and assumptions used to estimate the fair value of the Company’s stock option awards. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
Cash and Cash Equivalents and Restricted Cash—The Company considers all highly liquid investments with a remaining maturity when purchased of three months or less to be cash equivalents. Cash equivalents are reported at carrying values, which approximated their fair values and are based on quoted prices in active markets for identical securities. At December 31, 2025 and December 31, 2024, the Company’s cash equivalents were held in U.S. government money market funds. As of December 31, 2025 and 2024, cash consists of cash on deposit with U.S. banks denominated in U.S. dollars, and restricted cash consists of cash on deposit with U.S. banks denominated in U.S. dollars for which its use is restricted and is classified as non-current in the Company’s balance sheet according to the timing of maturity, and is associated with collateral for letters of credit issued in connection with its operating lease right-of-use and finance lease right-of-use assets and corresponding lease liabilities. Cash is stated at its historical carrying amount, which approximates fair value due to its short-term nature. Restricted cash is stated at its historical carrying amount, which approximates fair value. The Company regularly maintains cash and cash equivalents and restricted cash balances with financial institutions that exceed Federal Deposit Insurance Corporation insurance limits.
Investments—Investments consist primarily of U.S. Treasury securities. Management determines the appropriate classification of these securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date, including the determination of current and non-current classifications based on the contractual maturity dates of the underlying investments. Investments may be sold by the Company prior to contractual maturity. The Company classifies its investments as available-for-sale pursuant to ASC Topic 320, Investments—Debt and Equity Securities. Investments are recorded at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive income (loss) in stockholders’ equity and a component of total comprehensive loss in the statements of comprehensive loss, until realized. The Company's current and non-current investments are presented net of premiums of approximately $149,000 and $39,000, respectively, at December 31, 2025.
Net Loss per Share— The Company follows the two-class method when computing net income (loss) as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per common share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income (loss) available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company considers the shares issued upon the early exercise of stock options that are subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. There is no allocation required under the two-class method during periods of loss since the participating securities do not have a contractual obligation to share in the losses of the Company.
Basic net income (loss) per common share is computed by dividing the net income (loss) per common share by the weighted-average number of common shares and pre-funded warrants to purchase shares of common stock outstanding for the period. In accordance with ASC Topic 260, Earnings per Share, the pre-funded warrants are included in the computation of basic net loss per share because the exercise price is negligible and they are fully vested and exercisable at any time after the original issuance date. Diluted net income (loss) per common share is computed by adjusting net income (loss) to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per common share is computed by dividing the diluted net loss by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares.
In periods in which the Company reported a net loss, diluted net loss per common share was the same as basic net loss per common share since dilutive common shares were not assumed to have been issued if their effect was anti-dilutive. During the years ended December 31, 2025 and December 31, 2024, 19,117,976 and 3,724,218 total potential common shares, respectively, related to the exercise of outstanding stock options, settlement of outstanding restricted stock units ("RSUs"), settlement of outstanding RSUs that vest upon the achievement of certain performance conditions ("PRSUs"), and exercise of outstanding warrants were excluded from the computation of diluted net loss per common share because including them would have had an anti-dilutive effect as the Company reported net losses for those periods.
118
Deferred Offering Costs—The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the proceeds from the offering in stockholders’ equity as a reduction of additional capital generated as a result of the offering. Should the equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the statement of operations and comprehensive loss.
Research and Development—Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research, and develop drug candidates, including personnel expenses, allocated facility-related and depreciation expenses, and third-party license fees. Costs incurred to obtain technology licenses are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future use.
General and Administrative—General and administrative expenses consist primarily of the cost of employees to engage in corporate functions, such as finance and accounting, information technology, human resources, and legal and executive management. General and administrative expenses also include rent and occupancy costs, office expenses, depreciation and amortization, other general overhead costs, insurance premiums, professional service fees, and costs related to regulatory and litigation matters.
Stock Based Compensation Expense—The Company accounts for stock-based payment awards granted to employees and non-employees, as well as shares issued to its employees under the Company's 2023 Employee Stock Purchase Plan (the "2023 ESPP"), as stock-based compensation expense at fair value. The Company issues stock-based awards to employees and non-employees in the form of stock options and also issues stock-based awards to employees in the form of RSUs and PRSUs. The measurement date for employee stock option, RSU, and PRSU awards is the date of grant, and stock-based compensation costs for employee non-performance awards are recognized as expense over the employees’ requisite service period, which is the vesting period, on a graded basis. Compensation expense for equity awards with performance conditions, including PRSUs, is recognized if and when the Company concludes that it is probable that the performance conditions will be achieved. The Company reassesses the probability of vesting at each reporting period for equity awards with such performance conditions and adjusts compensation expense based on its probability assessment. The measurement date for non-employee awards is the date of grant without changes in the fair value of the award, and stock-based compensation costs for non-employees are recognized as expense over the vesting period on a graded basis. The measurement date for shares issued under the 2023 ESPP is the first date of each employee stock purchase plan offering period, and stock-based compensation costs are recognized as expense over the offering period on a straight-line basis. Stock-based compensation expense for all equity awards is classified in the accompanying statement of operations based on the function to which the related services are provided. As the Company is permitted to repurchase shares legally issued for unvested stock options exercised at their exercise price under the Company's 2021 Equity Incentive Plan (the "2021 Plan"), (i) cash received for unvested stock options exercised under the 2021 Plan is recorded as a deposit liability as a reclassification from additional paid-in capital in the Company’s balance sheet, which is relieved to additional paid-in capital as such awards vest, (ii) stock based compensation expense is recognized over the requisite service period for each such award, and (iii) the amount and number of shares of common stock outstanding in the Company’s balance sheet and statement stockholders’ equity are reduced until such awards vest. Forfeitures are recorded as they occur.
The fair value of each stock option grant under the 2021 Plan and the Company's 2023 Equity Incentive Plan (the "2023 Plan", and together with the 2021 Plan, the “Plans”), and shares issued under the 2023 ESPP, are estimated on the date of stock option grant or on the first date of each employee stock purchase plan offering period, respectively, using the Black-Scholes option-pricing model, while the fair value of each RSU and PRSU granted under the 2023 Plan is equal to the closing price of the Company's common stock on the date of the grant. Prior to its initial public offering ("IPO") on November 3, 2023, the Company was a private company and lacked company-specific historical and implied volatility information for stock options granted. Therefore, the Company estimated its expected stock volatility entirely based on the historical volatility of a publicly traded set of peer companies for stock options granted prior to its IPO, and estimates its expected stock price volatility primarily based on the historical volatility of a publicly traded set of peer companies for stock options granted since its IPO, each for a period equal to the expected life of the stock options granted, and 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 has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options and expects to continue to do so until such time as it has adequate historical data regarding the expected term of its own stock 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 expected dividend yield is zero as the Company has never paid cash dividends on its common stock and does not expect to pay any cash dividends in the foreseeable future.
119
Income Taxes—Prior to November 20, 2020, the Company was an LLC entity and elected to be treated under the Partnership provisions of the Internal Revenue Code. Accordingly, the LLC entity was not viewed as a tax-paying entity in any jurisdiction and all income and deductions of the LLC entity flowed through to the individual members and therefore no income taxes were recorded by the Company. On November 20, 2020, the Company converted to a C Corporation.
The Company accounts for income taxes under the asset and liability method pursuant to ASC 740, Income Taxes. Under this method, the Company recognizes deferred tax assets and liabilities 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 operating loss 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 is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized based on all available positive and negative evidence. As of December 31, 2025 and December 31, 2024, the Company continues to maintain a full valuation allowance against its deferred tax assets (see Note 10).
The Company recognizes a tax benefit only if it is more likely than not the tax position will be sustained on examination by the local taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit greater than 50% likelihood of being realized upon settlement with the related tax authority. The changes in recognition or measurement are reflected in the period in which the change in judgment occurs. As of December 31, 2025 and December 31, 2024, the Company has not identified any uncertain tax positions.
The Company's policy, to the extent uncertain tax positions exist, is to record interest and penalties related to uncertain tax positions in the provision for income taxes.
Fair Value Measurements—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of inputs that may be used to measure fair value are as follows:
Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
Level 3—Inputs are unobservable inputs for the asset or liability.
Long-term Investment—The Company accounts for its long-term investment in nonredeemable convertible preferred stock in accordance with the provisions of ASC Topic 321, Investments - Equity Securities, and elected to use the measurement alternative therein. The fair value of the nonredeemable convertible preferred stock received was based upon an observable price of cash paid for an identical security in an orderly transaction with a third-party and was capitalized as a long-term investment in the Company's balance sheet and recorded as an unrealized gain to other non-operating income in the Company's statement of operations and comprehensive loss. The long-term investment will be remeasured upon future observable price change(s) in orderly transaction(s) or upon impairment, if any.
Concentrations of Credit Risk—Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and investments. The Company’s cash and restricted cash balances exceed Federal Deposit Insurance Corporation insurance limits. The Company’s cash equivalents consist of investments in U.S. government money market funds, and the Company's cash investments consist of U.S. Treasury securities. The Company’s cash, cash equivalents, and restricted cash are held with large financial institutions that management believes to be of high credit quality. To date, the Company has not recognized any losses caused by uninsured balances.
Segment Information—The Company manages its operations as a single segment for the purposes of assessing performance and allocating resources. The Company is focused on preclinical and clinical stage gene therapies, and specifically on hereditary and acquired diseases of high unmet need. The Company’s Chief Operating Decision Maker ("CODM") is its Chief Executive Officer ("CEO") and its senior leadership team. The CODM reviews the Company’s financial information on an aggregated basis for purposes of assessing performance and allocating resources. All assets are held in the United States. The Company has not earned any product revenue through December 31, 2025.
120
Property and Equipment—Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recognized using the straight-line method over the estimated useful life of each asset. Such costs are periodically reviewed for recoverability when impairment indicators are present. Such indicators include, among other factors, unused capacity, market value declines, and obsolescence of technology. Recorded values of asset groups of equipment that are not expected to be recovered through undiscounted future net cash flows are written down to current fair value, which generally is determined from estimated discounted future net cash flows (assets held for use) or net realizable value (assets held for sale).
Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service. Upon retirement or sale, the cost of assets disposed of 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 that do not improve or extend the life of the respective assets are charged to expense in the period incurred. See Note 6 for information regarding the Company’s capitalized operating and finance lease right-of-use assets.
The following is the summary of property and equipment and related accumulated depreciation as of December 31, 2025, and December 31, 2024:
Furniture and fixtures 5 years $ 386 $ 386
Leasehold improvements 7 years 272 272
Less: accumulated depreciation (741 ) (474 )
Total property and equipment, net $ 1,139 $ 1,028
Leases—In accordance with ASC Topic 842, Leases ("ASC 842"), the Company determines if an arrangement is or contains a lease at inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company classifies leases at the lease commencement date as operating or finance leases and records a right-of-use asset and a lease liability on the balance sheet for all leases with an initial lease term of greater than 12 months. Leases with an initial term of 12 months or less are not recorded in the balance sheet, but payments are recognized as expense on a straight-line basis over the lease term. The Company has elected not to recognize leases with terms of 12 months or less.
A lease qualifies as a finance lease if any of the following criteria are met at the inception of the lease: (i) there is a transfer of ownership of the leased asset to the Company by the end of the lease term, (ii) the Company holds an option to purchase the leased asset that it is reasonably certain to exercise, (iii) the lease term is for a major part of the remaining economic life of the leased asset, (iv) the present value of the sum of lease payments equals or exceeds substantially all of the fair value of the leased asset, or (v) the nature of the leased asset is specialized to the point that it is expected to provide the lessor no alternative use at the end of the lease term. All other leases are recorded as operating leases.
The Company enters into contracts that contain both lease and non-lease components. Non-lease components may include maintenance, utilities, and other operating costs. The Company combines the lease and non-lease components of fixed costs in its lease arrangements as a single lease component. Variable costs, such as utilities or maintenance costs, are not included in the measurement of right-of-use assets and lease liabilities but rather are expensed when the event determining the amount of variable consideration to be paid occurs.
Operating lease right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term using the discount rate implicit in the lease. If the implicit rate is not readily determinable, the Company utilizes an estimate of its incremental borrowing rate based upon the available information at the operating lease commencement date. Operating lease right-of-use assets are further adjusted for prepaid or accrued lease payments. Operating lease payments are expensed using the straight-line method as an operating expense over the lease term. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Finance lease right-of-use assets and lease liabilities are recognized upon receipt of the assets based on their fair values and are amortized to depreciation expense using the straight-line method over the estimated useful lives of the related assets. Finance lease liability payments are bifurcated into (i) a portion that is recorded as interest expense and (ii) a portion that reduces the finance liability associated with the lease, according to the interest rates implicit in the leases.
Certain of the Company’s leases include options to extend or terminate the lease. The amounts determined for the Company’s right-of-use assets and lease liabilities generally do not assume that renewal options or early-termination provisions, if any, are exercised, unless it is reasonably certain that the Company will exercise such options.
121
Recent Accounting Pronouncements Adopted—In December 2023, the FASB issued ASU No. 2023-09, Income Taxes—Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid (Topic 740) ("ASU No. 2023-09"). ASU No. 2023-09 requires a public business entity (a "PBE") to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, ASU No. 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in ASU No. 2023-09 prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for all periods presented, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. As of December 31, 2025, the Company adopted ASU No. 2023-09 retrospectively, which only impacted the Company's income tax disclosures with no impact to its balance sheet or its statements of operations and comprehensive loss, stockholders' equity, or cash flows (see Note 10).
Recent Accounting Pronouncements Not Adopted—In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU No. 2024-03"). ASU No. 2024-03 requires disclosure of specified information about certain costs and expenses in the notes to financial statements. ASU No. 2024-03 will be effective for the Company starting in annual periods after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of adopting this guidance on its financial statements.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270) ("ASU No. 2025-11"). ASU No. 2025-11 clarifies interim disclosure requirements and the applicability of Topic 270. ASU No. 2025-11 will be effective for the Company starting in interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of adopting this guidance on its financial statements.
3. Fair Value Measurements
The Company’s cash equivalents consist of investments in U.S. government money market funds stated at carrying value, which approximates fair value and is based on quoted prices in active markets for identical securities. Cash is stated at carrying value, which approximates fair value due to its short-term nature. The Company classifies its investments in U.S. Treasury securities as Level 2 assets as these assets are not traded in an active market and have been valued through a third-party pricing service based on quoted prices for similar assets. The carrying values of the Company’s prepaid expenses, other current assets, accounts payable and accrued expenses approximate their fair values due to their short-term nature.
The following table presents information about the Company’s financial assets and investments measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values:
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents (money market) $ 40,178 $ - $ - $ 40,178
Current portion of investments in U.S. Treasury securities - 118,767 - 118,767
Investments:
Non-current portion of investments in U.S. Treasury securities - 64,801 - 64,801
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents (money market) $ 17,636 $ - $ - $ 17,636
Current portion of investments in U.S. Treasury securities - 86,504 - 86,504
Investments:
Non-current portion of investments in U.S. Treasury securities - 7,012 - 7,012
122
Investments in U.S. Treasury securities, which are classified as available-for-sale securities, consisted of the following as of December 31, 2025 and December 31, 2024:
Amortized Cost Basis Gross Unrealized Gains Gross Unrealized Losses Fair Value
Available-for-sale securities:
Amortized Cost Basis Gross Unrealized Gains Gross Unrealized Losses Fair Value
Available-for-sale securities:
All investments in U.S. Treasury securities classified as available-for-sale securities held as of December 31, 2025 and December 31, 2024 had contractual maturities of less than one year for the current portion of investments in U.S. Treasury securities and between one to two years for the non-current portion of investments in U.S. Treasury securities. There have been no material realized gains or losses on investments classified as available-for-sale securities for the periods presented.
4. Long-term Investment
In June 2025, the Company entered into a collaboration and license agreement (the "June 2025 CLA") and a preferred stock purchase agreement (the "June 2025 Preferred Stock Purchase Agreement") with Tilia Therapeutics, Inc., now known as Myoventive, Inc., a privately-held Delaware corporation (the "Investee"), to develop therapies for genetic cardiac diseases utilizing a novel non-viral RNA platform. In exchange for access to certain of the Company's expertise in developing cardiac genetic medicines, certain existing preclinical intellectual property, and technology contributed under the terms of the June 2025 CLA, the Company received 10,000,000 shares of the Investee's nonredeemable convertible preferred stock issued under the June 2025 Preferred Stock Purchase Agreement, initially representing approximately 12% of the Investee's issued and outstanding voting stock as of June 30, 2025. Under the terms of the June 2025 CLA, the Company is entitled to certain future milestone payments, royalties, and opt-in rights to certain program(s) (see Note 12).
The Company accounts for its investment in the Investee in accordance with the provisions of ASC Topic 321, Investments - Equity Securities, and elected to use the measurement alternative therein. The fair value of the nonredeemable convertible preferred stock received of approximately $3.4 million, or approximately $0.338983 per share, was based upon an observable price of cash paid for an identical security in an orderly transaction between the Investee and a third-party and was capitalized as a long-term investment in the Company's balance sheet and recorded as an unrealized gain to other non-operating income in the Company's statement of operations and comprehensive loss. The long-term investment will be remeasured upon future observable price change(s) in orderly transaction(s) or upon impairment, if any.
5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
Accrued research and development expenses $ 4,299 $ 6,696
Accrued compensation and other personnel costs 4,066 4,112
Other current liabilities 73 545
Total accrued expenses and other current liabilities $ 9,277 $ 13,759
123
6. Leases
Operating Lease Right-of-Use Asset
In January 2022, the Company entered into a lease agreement for an office facility and laboratory space in New York, New York that commenced in April 2022 and ends in July 2029 with an additional five-yearoption to extend the lease beyond July 2029 at the then-prevailing effective market rental rate. Upon commencement of this lease, the Company recorded operating lease right-of-use assets and operating lease liabilities of $11.6 million based on the present value of payments over the lease term using an estimated incremental borrowing rate of 8.53% in accordance with the provisions of ASC 842. In connection with the Company’s lease of office space and laboratory space, the Company provided a security deposit to the landlord in the form of a letter of credit totaling $1.2 million. The cash collateralizing the letter of credit was included in long-term restricted cash in the Company’s balance sheets as of December 31, 2025, and December 31, 2024. This lease was classified as an operating lease in accordance with the provisions of ASC 842. The Company did not recognize any right-of-use assets and lease liabilities associated with the potential option to renew or extend. The Company’s operating lease agreement does not contain any significant residual value guarantees or restrictive covenants.
The remaining lease terms and payment terms as of December 31, 2025 and December 31, 2024 were 3.6 years and 4.6 years, respectively. The components of this operating lease were as follows:
Year Ended
December 31,
Total operating lease expense $ 2,650 $ 2,606
The following table provides a reconciliation of the Company’s remaining undiscounted contractual rent obligations due within each year ended December 31 to the operating lease liabilities recognized as of December 31, 2025:
Year ended December 31 OperatingLeases
Thereafter -
Total lease payments 8,157
Less: present value adjustment (1,116 )
Total operating lease liabilities $ 7,041
Included in the balance sheet:
Current portion of lease liabilities - operating $ 2,157
Non-current portion of lease liabilities - operating 4,884
Total operating lease liabilities $ 7,041
124
Equipment Finance Leases
Commencing in April 2022, the Company leases certain laboratory equipment under financing arrangements accounted for as finance leases in accordance with the provisions of ASC 842 that are classified in the Company’s balance sheet as finance lease liabilities with related right-of-use assets recorded and depreciated on a straight-line basis over the estimated useful life of 7 years. In connection with the Company’s leases of laboratory equipment, the Company provided a security deposit to the lessor in the form of a letter of credit totaling $1.9 million and assigned all rights and interests in the equipment to the lessor. The cash collateralizing the letter of credit is included in long-term restricted cash in the Company’s balance sheet as of December 31, 2025. The total gross, accumulated amortization, and net book values of equipment finance lease right-of-use assets capitalized under such finance lease arrangements at December 31, 2025 were $2.2 million, $1.1 million and $1.1 million, respectively. Under the terms of the equipment finance lease agreements executed through the issuance date of these financial statements, the principal balances plus interest for the equipment are to be repaid in full after 60 monthly installments following lease commencement, with lease commencement dates ranging from April 1, 2022 to April 1, 2023, annual imputed interest rates ranging from 7.90% to 9.30%, and monthly installment payment amounts ranging from $4,000 to $18,000. The total aggregate monthly installment payment amount is $49,000 for the Company's equipment finance lease agreements.
The weighted-average remaining lease payment term, weighted-average remaining amortization term, and weighted-average effective interest rate for the Company's equipment finance lease agreements as of December 31, 2025 were 1.7 years, 3.8 years, and 8.61%, respectively. The weighted-average remaining lease payment term, weighted-average remaining amortization term, and weighted-average effective interest rate for the Company's equipment finance lease agreements as of December 31, 2024 were 2.7 years, 4.8 years, and 8.59%, respectively. The components of the equipment finance leases were as follows:
Year Ended
December 31,
Reduction in the carrying amount of ROU assets, finance $ 320 $ 325
Interest on finance lease liabilities 104 127
Total finance lease expense $ 424 $ 452
The following table provides a reconciliation of the Company’s remaining equipment finance lease obligations due within each year ending December 31 to the equipment finance lease liabilities recognized at December 31, 2025:
Year ended December 31 Equipment Finance Leases
Thereafter -
Total lease payments 907
Less: imputed interest (62 )
Total finance lease liabilities $ 845
Included in the balance sheet:
Current portion of lease liabilities - finance $ 518
Non-current portion of lease liabilities - finance 327
Total finance lease liabilities $ 845
125
7. Capital Stock
As of December 31, 2025 and December 31, 2024, the Company’s amended and restated certificate of incorporation provided that the authorized capital stock of the Company was 510,000,000 shares consisting of 500,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock, both with a par value of $0.0001 per share. As of December 31, 2025 and December 31, 2024, 73,001,766 shares and 33,079,209 shares, respectively, of the Company's common stock authorized were issued, including 416 shares and 7,948 shares, respectively, that were legally issued upon the early exercise of unvested stock options and that are excluded from the number of shares outstanding until the right to repurchase subsequently lapses upon vesting. The Company did not repurchase any shares of its common stock during the year ended December 31, 2025, and repurchased a total of 3,827 shares of its common stock issued pursuant to the early exercise of stock options granted under the 2021 Plan for a total of approximately $17,000 during the year ended December 31, 2024, which was recorded to treasury stock in the Company's balance sheet (see Note 8). Each common share entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, if any, as may be declared by the Company’s Board of Directors. No cash dividends have been declared or paid by the Company.
On March 11, 2024, the Company entered into a common stock purchase agreement to issue and sell an aggregate of 6,278,905 shares of its common stock at a price of $15.13 per share, in a private placement that closed on March 13, 2024 (the "March 2024 Private Placement"). The gross and net proceeds received from the March 2024 Private Placement were approximately $95.0 million and $88.7 million, respectively, after deducting approximately $6.3 million of commissions and other offering costs.
On March 24, 2025, the Company entered into a sales agreement (the "Sales Agreement") with Leerink Partners LLC ("Leerink") to sell shares of the Company's common stock having an aggregate offering price of up to $75.0 million from time to time through an at-the-market equity offering program (the "ATM Program") under which Leerink is acting as the Company's agent. Leerink is entitled to compensation for its services in an amount equal to 3% of the gross proceeds of any of the shares of the Company's common stock sold under the Sales Agreement. No shares of the Company's common stock have been sold under the Sales Agreement through December 31, 2025.
On May 28, 2025, pursuant to a securities purchase agreement, the Company issued and sold an aggregate of 20,790,120 shares of its common stock, as well as pre-funded warrants to purchase 6,963,556 shares of its common stock to certain purchasers, together with accompanying warrants to purchase 13,876,838 shares of its common stock, at a purchase price of $2.8825 per share of common stock and accompanying common warrant, or $2.8824 per pre-funded warrant and accompanying warrant (the "May 2025 Private Placement"). The gross and net proceeds received from the May 2025 Private Placement were approximately $80.0 million and $73.1 million, respectively, after deducting approximately $6.9 million of commissions and other offering costs. The warrants and pre-funded warrants issued in the May 2025 Private Placement are immediately exercisable at exercise prices of $2.82 per share and $0.0001 per share, respectively, except that the warrants and pre-funded warrants cannot be exercised by the holder if, after giving effect thereto, the holder would beneficially own more than 9.99% of the Company’s common stock (the "Maximum Percentage"). The Maximum Percentage can be changed at the holder's election to any other percentage not in excess of 19.99%, and any increase in the Maximum Percentage will not be effective until the 61st day after the holder provides notice to the Company of the desired increase. The warrants are exercisable until May 28, 2029, and the pre-funded warrants do not expire. The warrants and pre-funded warrants are classified as equity in accordance with ASC Topic 815-40, Derivatives and Hedging - Contracts in an Entity's Own Equity. Upon issuance, the total pre-allocated fair value of the warrants of approximately $26.8 million, or approximately $1.93 per warrant share, was estimated using a Black-Scholes option pricing model with the following assumptions:
Stock Price $ 2.74
Exercise Price $ 2.82
Risk-free interest rate 4.00 %
Expected term (in years) 4.00
Expected volatility 100.35 %
Expected dividend yield 0.00 %
Approximately $44.3 million, $20.8 million and $14.9 million of the total gross proceeds received in the May 2025 Private Placement were allocated to the shares of common stock, warrants and pre-funded warrants, respectively, on a relative fair value basis, and were recorded as credits to additional paid-in capital, and are not subject to remeasurement. As of December 31, 2025, none of the warrants and 867,302 pre-funded warrants issued in the May 2025 Private Placement had been exercised. In January 2026, a total of 867,302 warrants issued in the May 2025 Private Placement were exercised (see Note 14).
126
On October 16, 2025, the Company entered into an underwriting agreement to issue and sell an aggregate of 15,625,000 shares of its common stock at a price of $8.00 per share, less underwriting discounts and commissions, in a public offering that closed on October 20, 2025 (the "October 2025 Public Offering"). In addition, the Company granted the underwriters of the October 2025 Public Offering a 30-day option to purchase up to an additional 2,343,750 shares of the Company's common stock a price of $8.00 per share, less underwriting discounts and commissions (the "30-day Underwriter Option"), which was exercised in full. The gross and net proceeds received from the October 2025 Public Offering including the full exercise of the 30-day Underwriter Option were approximately $143.8 million and $134.6 million, respectively, after deducting approximately $9.2 million of underwriter commissions and other estimated offering costs.
On October 16, 2025, the Company entered into a securities purchase agreement to sell and issue pre-funded warrants to purchase 1,250,015 shares of the Company's common stock at a purchase price of $7.9999 per pre-funded warrant, in a private placement that closed on October 20, 2025 (the "October 2025 Private Placement", and together with the October 2025 Public Offering and the 30-day Underwriter Option, the "October 2025 Financing Transactions"). The gross and net proceeds received from the October 2025 Private Placement were approximately $10.0 million and $9.3 million, respectively, after deducting approximately $0.7 million of placement agent fees and other estimated offering costs. The pre-funded warrants issued in the October 2025 Private Placement do not expire and are immediately exercisable at an exercise price of $0.0001 per pre-funded warrant share, except that the pre-funded warrants cannot be exercised by the holder if, after giving effect thereto, the holder would beneficially own more than 9.99% of the Company’s common stock (the "October 2025 Private Placement Maximum Percentage"). The October 2025 Private Placement Maximum Percentage can be changed at the holder's election to any other percentage not in excess of 19.99%, and any increase in the October 2025 Private Placement Maximum Percentage will not be effective until the 61st day after the holder provides notice to the Company of the desired increase.
Approximately $143.8 million and $10.0 million of the total gross proceeds received in the October 2025 Financing Transactions were allocated to the shares of common stock and pre-funded warrants, respectively, on a relative fair value basis, and were recorded as credits to additional paid-in capital, and are not subject to remeasurement. As of December 31, 2025, none of the pre-funded warrants issued in the October 2025 Financing Transactions had been exercised.
The Company had reserved the following number of shares of common stock for the exercise of outstanding warrants, exercise of outstanding pre-funded warrants, exercise of outstanding stock options, settlement of outstanding RSUs and PRSUs, and future issuances of stock-based awards:
Warrants to purchase shares of common stock 13,876,838 -
Pre-funded warrants to purchase shares of common stock 6,096,254 -
Total shares of common stock reserved for future issuance 28,079,625 6,414,830
8. Stock-based Compensation
In February 2021, the Company adopted the 2021 Plan for the issuance of stock options granted to the Company’s key directors, officers, employees and consultants, as a means to secure the benefits arising from capital stock ownership. In connection with the Company’s IPO in November 2023, the Company adopted the 2023 Plan for the issuance of equity awards granted to the Company's directors, officers, employees, and consultants, and for the issuance of shares purchased under the 2023 ESPP to the Company's employees, as a means to secure the benefits arising from capital stock ownership. The purposes of the Plans and the 2023 ESPP are also to promote the alignment of the interests of directors, officers, employees, and consultants with the success of the Company and to provide compensation opportunities to attract, retain and motivate directors, officers, employees, and consultants of the Company. Upon adoption of the 2023 Plan, no further grants may be made under the 2021 Plan.
127
The number of shares of common stock reserved for issuance under the 2023 Plan will automatically increase on January 1 of each year, beginning on January 1, 2024, and continuing through and including January 1, 2033, by 5% of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year, or a lesser number of shares determined by the Company’s Board of Directors prior to the applicable January 1. The number of shares of common stock reserved for issuance under the 2023 ESPP will automatically increase on January 1 of each calendar year, beginning on January 1, 2024 and continuing through and including January 1, 2033, by the lesser of (i) 1% of the total number of shares of capital stock outstanding on December 31 of the preceding calendar year, (ii) 477,200 shares, and (iii) a number of shares determined by the Company’s Board of Directors. Shares subject to purchase rights granted under the 2023 ESPP that terminate without having been exercised in full do not reduce the number of shares available for issuance under the 2023 ESPP.
On January 1, 2026, the number of shares of common stock reserved for issuance under the 2023 Plan and the 2023 ESPP automatically increased by 3,650,088 shares and 477,200 shares, respectively, to totals of 6,804,770 shares and 1,210,439 shares, respectively. As of December 31, 2025, 2,132,156 shares and 733,239 shares were available for future issuance under the 2023 Plan and 2023 ESPP, respectively. A total of 102,837 shares have been issued under the 2023 ESPP through December 31, 2025.
On November 4, 2025, the Company's board of directors adopted the Lexeo Therapeutics, Inc. 2025 Inducement Equity Incentive Plan (the "2025 Inducement Equity Plan") and, subject to the adjustment provisions of the 2025 Inducement Equity Plan, reserved 2,000,000 shares of the Company's common stock for issuance pursuant to equity awards granted under the 2025 Inducement Equity Plan.
Stock option activity
Stock options granted under the 2021 Plan are issued from new shares upon exercise, have a contractual term of 10 years from grant date, and generally (i) are subject to requisite service requirements, (ii) vest over a four-year period with 25% of the options granted vesting after one year and the remainder vesting in equal monthly installments over the following 36 months, and (iii) allow for early exercise subject to repurchase. Stock options granted under the 2021 Plan to certain of the Company’s non-employees vest in equal monthly installments over a four-year period or vested upon the achievement of a certain milestone event. The Company did not repurchase any shares of its common stock during the year ended December 31, 2025, and repurchased a total of 3,827 shares of its common stock issued pursuant to the early exercise of stock options granted under the 2021 Plan for a total of approximately $17,000 during the year ended December 31, 2024, which was recorded to treasury stock in the Company's balance sheet (see Note 7).
Stock options granted under the 2023 Plan are issued from new shares upon exercise, have a contractual term of 10 years from grant date, and generally vest over a four-year period with 25% of the options granted vesting after approximately one year and the remainder vesting in equal monthly installments over the following 36 months, subject to requisite service requirements. Stock options granted under the 2023 Plan to certain of the Company's non-employee directors vest in equal annual installments over a three-year period for initial grants or over a one-year period for subsequent annual grants, subject to requisite service requirements.
The following table summarizes the stock option activity under the 2021 Plan and the 2023 Plan for the year ended December 31, 2025:
Shares (per share) (in years) Value
The weighted-average grant date fair value of stock options granted during the years ended December 31, 2025 and December 31, 2024 was $4.22 per share and $11.58 per share, respectively.
The aggregate intrinsic value of stock 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 Company’s common stock. The total aggregate intrinsic value of stock options exercised during the year ended December 31, 2024 was $1.3 million.
128
The total grant date fair values of stock options vested during the years ended December 31, 2025 and December 31, 2024 were $10.3 million and $7.1 million, respectively.
The Company estimated the fair value of options granted using a Black-Scholes option pricing model with the following assumptions during the years ended December 31, 2025 and December 31, 2024:
Year Ended
December 31,
Expected term (in years), weighted-average 5.79 6.02
Expected volatility, weighted-average 92.25 % 85.85 %
Expected dividend yield 0.00 % 0.00 %
The expected dividend yields are 0.00% as the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
As of December 31, 2025 there was $6.3 million of unrecognized stock-based compensation expense related to stock options estimated to be recognized over a weighted-average period of 2.20 years.
RSU and PRSU activity
RSUs granted under the 2023 Plan generally vest over a four-year period with 25% of the RSUs vesting after approximately one year and the remainder vesting in equal quarterly installments over the following 12 quarters, subject to requisite service requirements. During the year ended December 31, 2025, a total of 217,500 PRSUs were granted to certain employees under the 2023 Plan that vest upon the achievement of certain performance conditions generally over an approximate 18-month period, subject to requisite service requirements. Additionally, during the year ended December 31, 2025, a total of 77,650 RSUs were granted to employees under the 2023 Plan that vest over a two-year period with 50% of the RSUs vesting after approximately one year and the remainder vesting in equal quarterly installments over the following four quarters, subject to requisite service requirements.
The following table summarizes the RSU activity under the 2023 Plan for the year ended December 31, 2025:
Number of Weighted-AverageGrant Date Fair Value
Shares (per share)
As of December 31, 2025 there was $3.0 million of unrecognized stock-based compensation expense related to RSUs estimated to be recognized over a weighted-average period of 2.66 years.
The following table summarizes the PRSU activity under the 2023 Plan for the nine months ended December 31, 2025:
Number of Weighted-AverageGrant Date Fair Value
Shares (per share)
Unvested as of December 31, 2024 - $ -
Forfeited - -
129
Employee Stock Purchase Plan
Under the 2023 ESPP, eligible employees may purchase shares of the Company's common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning of the offering period or the end of each six-month purchase period. Each offering period of two years will consist of four six-month purchase periods, subject to reset on the first day of each purchase period depending on the fair market values of the Company's stock. Employees may not purchase more than 6,000 shares of the Company's common stock during any purchase period. The first purchase period within the first offering period under the 2023 ESPP commenced during the three months ended December 31, 2024 and concluded during the three months ended March 31, 2025; following reset, the first purchase period within the second offering period commenced during the three months ended March 31, 2025 and concluded during the three months ended September 30, 2025; and the second purchase period within the second offering period commenced during the three months ended September 30, 2025. As of and during the year ended December 31, 2025, stock-based compensation expense recorded, as well as the estimated fair value of unearned and unrecognized stock-based expense expected to be recorded, related to the 2023 ESPP were not material. During the year ended December 31, 2025, a total of 102,837 shares were issued under the 2023 ESPP at a weighted average purchase price of $2.62 per share with total proceeds of approximately $0.3 million received by the Company.
Stock-based compensation expense
Stock-based compensation expense was classified as follows in the Company’s statements of operations and comprehensive loss:
Year Ended
December 31,
Research and development expense $ 5,524 $ 6,001
General and administrative expense 6,608 6,473
Total stock-based compensation expense $ 12,132 $ 12,474
9. Net Loss per Share
Basic and diluted net loss per common share attributable to common stockholders was calculated as follows:
Year Ended
December 31,
Numerator:
Net loss attributable to common stockholders $ (99,961 ) $ (98,333 )
Denominator:
10. Income Taxes
The components of net income (loss) before income tax expense are as follows:
Year Ended
December 31,
130
A reconciliation of the Company's statutory income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31, 2025, and December 31, 2024:
Year Ended
December 31,
Amount Percent Amount Percent
Tax Credits:
Nontaxable or Nondeductible Items:
The Company's effective tax rate includes the effects of state and local income taxes, net of the federal income tax benefit, which are primarily attributable to New York and New York City, where the Company has significant business activities. This state has higher effective tax rates compared to other jurisdictions where the Company operates, and together, it accounts for more than half of the Company's total state tax expense.
The principal components of the Company's deferred tax assets and liabilities at December 31, 2025 and December 31, 2024 are as follows:
Year Ended
December 31,
Deferred tax assets:
Year Ended
December 31,
Deferred tax liabilities:
Other deferred tax liabilities (380 ) (315 )
Total deferred tax liabilities (2,439 ) (2,978 )
Net deferred tax assets (liabilities) $ - $ -
As of December 31, 2025 and 2024, the Company had federal net operating loss ("NOL") carryforwards of approximately $182.0 million and $106.4 million, respectively, which can be carried forward indefinitely. As of December 31, 2025 and 2024, the Company had state and local net operating loss carryforwards of approximately $362.9 million and $212.7 million, respectively, which begin to expire in 2040.
As of December 31, 2025 and 2024, the Company had federal tax credits of $7.2 million and $10.7 million, respectively, which begin to expire in 2040.
131
The Tax Cuts and Jobs Act (the "TCJA") resulted in significant changes to the treatment of research and developmental (“R&D”) expenditures under Section 174 of the Internal Revenue Code of 1986, as amended (the "IRC"). For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or incurred in connection with their trade or business. Specifically, costs for U.S.-based R&D activities must be amortized over five years and costs for foreign R&D activities must be amortized over 15 years, both using a midyear convention.
For tax years beginning after December 31, 2024, the One Big Beautiful Bill Act enacted a new rule under Section 174A of the IRC allowing companies to immediately expense any domestic R&D expenditures. For domestic R&D, companies may either immediately expense or elect to capitalize and amortize over at least 60 months under Section 174A of the IRC. However, foreign R&D continues to require capitalization subject to the mandatory 15-year amortization period under Section 174 of the IRC.
For domestic R&D expenditures that were previously capitalized in tax years 2022-2024 under the prior TCJA, companies may elect to recover the remaining unamortized balance by either (1) expensing fully in the first year beginning after December 31, 2024, (2) expensing ratably over two years beginning after December 31, 2024, or (3) continue amortizing over the remaining life.
The Company has elected to continue amortizing the previously capitalized costs over their remaining life. Beginning in tax year 2025, instead of immediately expensing domestic R&D expenditures under Section 174A of the IRC, the Company elected to capitalize and amortize its domestic R&D expenditures under Section 59(e) of the IRC over a 10-year period. Any foreign R&D costs will continue to be capitalized and amortized over 15 years in accordance with the requirements of Section 174 of the IRC.
Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2025 and December 31, 2024, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the deferred tax assets will not be realized. As a result, the Company increased its valuation allowance by $23.5 million as of December 31, 2025.
The utilization of NOLs and tax credit carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that have occurred previously or may occur in the future. Under Sections 382 and 383 of the IRC, a corporation that undergoes an ownership change may be subject to limitations on its ability to utilize its pre-change NOLs and other tax attributes otherwise available to offset future taxable income and/or tax liability. An ownership change is defined as a cumulative change of 50% or more in the ownership positions of certain stockholders during a rolling three-year period.
The Company conducted ownership analyses under IRC Section 382 as of September 30, 2024 and December 31, 2025 and determined the Company experienced ownership changes on November 7, 2023 and May 28, 2025, respectively, that limit the Company’s ability to utilize its federal NOLs and tax credits. As a result of the ownership changes, the Company is subject to an annual limitation of approximately $2.4 million on its ability to utilize its federal NOLs and tax credits recognized before May 28, 2025, inclusive of the ownership change that occurred on November 7, 2023. Due to the limitations, no federal NOLs are expected to expire unutilized and $10.6 million of federal tax credits that had been available to offset future tax liabilities, prior to the date of the ownership changes, are expected to expire unutilized. As a result, during the year ended December 31, 2025, the Company reduced its deferred tax assets related to the federal tax credits, which was offset by a corresponding decrease in the valuation allowance.
The calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which it operates or does business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2025 and December 31, 2024, the Company has not recorded any uncertain tax positions in its financial statements.
The Company recognizes interest and penalties related to uncertain tax positions on the income tax expense line in the accompanying statements of operations. As of December 31, 2025 and December 31, 2024, no accrued interest or penalties are included on the related tax liability line in the balance sheet.
132
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The resolution of tax matters is not expected to have a material effect on the Company's financial statements. The Company’s tax years remain open under statute from December 31, 2022 to the present.
The following summarizes the Company's capital base and franchise taxes paid (net of refunds received) for the years presented below:
Year Ended
December 31,
Federal $ - $ -
The following summarizes the jurisdictions that exceeded 5% of the Company's total capital base and franchise taxes paid (net of refunds) for the years presented below:
Year Ended
December 31,
11. Commitments and Contingencies
Leases—As of December 31, 2025, the Company had entered into commitments under lease agreements to rent laboratory and office space and finance equipment (see Note 6).
Commitments—As of December 31, 2025, the Company had entered into commitments under license, acquisition, research collaboration and sponsored research agreements with third parties (see Note 12). In addition, the Company has entered into services agreements with third parties for pharmaceutical manufacturing and research activities in the normal course of business, which can generally be terminated by the Company with 30- to 60-days’ written notice, unless otherwise indicated. Further, certain of the Company’s manufacturing agreements could require early termination and wind-down payments due from the Company upon either the termination of its clinical trials or if the Company terminates such agreements for convenience.
Contingencies—From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business. The Company recognizes any associated legal fees as incurred and accrues a liability for such contingent liability matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. For all periods presented, the Company was not a party to any pending material litigation or other material legal proceedings, except that on October 12, 2023, Rocket Pharmaceuticals, Inc. (“Rocket”) filed a lawsuit in the U.S. District Court for the Southern District of New York against the Company and two former employees that claimed, among other things, misappropriation of confidential information and trade secrets. The complaint alleged the individual defendants downloaded confidential Rocket company documents and other proprietary materials prior to leaving Rocket in 2021 and that the Company used this information to advance its programs after they became employed at the Company. The complaint sought unspecified damages and asked the court to enjoin the Company from competing and working in the market for gene therapy treatments targeting cardiac diseases. In August 2024, the Company asserted counterclaims against Rocket and Spacecraft Seven LLC, a wholly owned subsidiary of Rocket, for misappropriation of trade secrets, correction of inventorship of certain patents, breach of contract, and tortious interference with contract. The Company's counterclaims sought equitable relief, damages, attorneys' fees and costs from Rocket and Spacecraft Seven LLC. In June 2025, the litigation was resolved amicably and without admission of liability by any party, and all claims have been dismissed with prejudice.
Indemnification Agreements—In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its Board of Directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. For all periods presented, the Company has not incurred any material costs as a result of such indemnifications.
133
12. License, Acquisition, Research and Collaboration and Sponsored Research Agreements
Adverum Biotechnologies—On January 25, 2021, the Company entered into an exclusive license agreement with Adverum Biotechnologies Inc. (“Adverum”) to in-license materials and technology related to the treatment of cardiomyopathy due to Friedreich's ataxia ("FA") (as amended in February 2022, the “Adverum Agreement”). In connection with the Adverum Agreement, the Company gained access to a portfolio of inventions, patent rights, technology, and licensed methods that the Company continues to develop, and the Company will assume all development and commercialization activities worldwide. Pursuant to the Adverum Agreement, the Company paid a one-time up-front non-refundable fee of $7.5 million, and is obligated to pay aggregate development and regulatory milestones of up to $17.5 million including a $3.5 million development milestone that was achieved and paid in the first quarter of 2023, and aggregate sales event and commercialization milestones of up to $49.0 million. The Company is obligated to pay Adverum tiered royalties ranging from high single-digits to sub teens based on annual aggregate worldwide net sales of Products (as defined in the Adverum Agreement). As of December 31, 2025, there were no research and development expenses recorded by the Company or payments made to Adverum under the terms of the Adverum Agreement other than the one-time up-front non-refundable fee of $7.5 million and the $3.5 million development milestone that was achieved and paid in the first quarter of 2023.
The Adverum Agreement remains in effect until termination at the date of the last royalty term to expire. The Company can terminate the Adverum Agreement with 120 days’ written notice. The Adverum Agreement can also be terminated as a result of a patent challenge, material breach of contractual terms, or insolvency by either party.
Cornell University—On May 28, 2020, the Company entered into two exclusive license agreements with Cornell University (“Cornell”) (each, as amended, the “First Cornell License Agreement” and the “Second Cornell License Agreement,” respectively; collectively the “May 2020 Cornell License Agreements”). The First Cornell License Agreement is for the in-license of technology related to portfolios for APOE-associated Alzheimer’s disease and Anti-Tau, although the Company’s license is not restricted by such indications and it includes assignment to the Company of Cornell’s IND for the use of AAVrh10.hAPOE2 vector to treat APOE4 homozygous patients who are at risk for or have Alzheimer’s disease to support development of the Company’s LX1001 program. The Second Cornell License Agreement is for the in-license of technology related to a portfolio for FA although the Company’s license is not restricted by such indications, and it includes assignment to the Company of Cornell’s IND for the use of AAVrh.10cUhCLN2 to treat children with CLN2 Batten disease to support development of the Company’s LX1004 program. Through the May 2020 Cornell License Agreements, the Company gains access to a portfolio of inventions, patent rights, technology, and licensed methods that the Company continues to develop. Under the terms of the May 2020 Cornell License Agreements, the Company has assumed all development and commercialization activities worldwide with respect to the licensed technology.
As initial consideration for the May 2020 Cornell License Agreements, the Company paid Cornell an upfront payment in cash of $0.3 million and issued $1.3 million of notes (the “Cornell Notes”). In November 2020, the Cornell Notes with outstanding principal of $1.3 million were cancelled in exchange for 1,337,610 shares of series A convertible preferred stock, which converted into 126,258 shares of common stock upon the closing of the Company's IPO on November 7, 2023. As additional consideration, the Company is required to pay Cornell up to $8.4 million upon the achievement of specific clinical and regulatory milestones under the First Cornell License Agreement and up to $4.3 million in two portfolios and up to $0.6 million for a third portfolio upon the achievement of specific clinical and regulatory milestones under the Second Cornell License Agreement. In the second quarter of 2022, a clinical and regulatory milestone of $0.1 million was recognized and paid to Cornell in connection with the Second Cornell License Agreement. The Company is also required to pay Cornell a flat royalty in the mid-single-digits based on net sales of the products covered by the licenses, subject to certain adjustments.
Upon expiration of the royalty term of a given licensed product in a country, the respective license becomes non-exclusive and royalty-free. In addition, each of the May 2020 Cornell License Agreements may be terminated by the Company for any reason upon ninety (90)-days’ advance notice to Cornell and by Cornell upon the Company’s material uncured breach, and all licenses and rights granted by either party under such agreement will concurrently terminate.
On April 21, 2024, the Company entered into the Third License Agreement (as amended, the “Third Cornell License Agreement,” together with the May 2020 Cornell License Agreements, the “Cornell License Agreements”) with Cornell. Pursuant to the Third Cornell License Agreement, Cornell has granted the Company an exclusive license to practice under certain patent rights generated in animal studies conducted by Cornell on behalf of the Company and a non-exclusive license to know-how concerning a gene therapy for FA cardiomyopathy and current and future data generated in an ongoing investigator-initiated Phase 1A trial of AAVrh.10hFXN to treat FA cardiomyopathy. Both licenses are worldwide and cover products with human and non-human prophylactic and therapeutic uses. Cornell has also granted the Company a right of reference to Cornell’s Investigational New Drug application for a gene therapy for FA cardiomyopathy.
134
Under the Third Cornell License Agreement, the Company paid a license issue fee and an initial data transfer fee to Cornell totaling $0.6 million. Additionally, the Company will be paying an annual data transfer fee of $50,000 until data is no longer being gathered. The Company has agreed to pay annual license maintenance fees ranging from $2,500 to $25,000 until such time the Company commercializes a licensed product. In addition, the Company will pay Cornell up to an aggregate of $2.1 million in regulatory milestones and up to an aggregate of $100 million in commercial milestones, plus low single digit royalties on net sales.
The Third Cornell License Agreement contains other customary license terms including terms related to sublicensing, development, commercialization, milestones, royalties, intellectual property, and termination. Upon expiration of the applicable royalty term for a product in a given country, the Company shall retain a non-exclusive, royalty free license to the data and know-how, including to continue selling such product in that country.
Cornell may terminate the Third Cornell License Agreement if the Company (i) breaches the Third Cornell License Agreement (subject to a cure period), (ii) participates in any proceeding challenging the validity of the licensed patents, (iii) publishes the licensed data without Cornell’s prior written consent, or (iv) does not reach certain milestones. Cornell may also terminate the Third Cornell License Agreement in part on a product-by-product basis if the Company does not diligently develop and sell a product. The Company may terminate the Third Cornell License Agreement, in whole or in part with respect to the right of reference, or the licensed data, know-how, or patent rights, with 90 days’ prior written notice to Cornell.
On December 17, 2025, the Company executed a Second Amendment to the Third Cornell License Agreement (the “Second Amendment to the Third Cornell License Agreement”), which added a one-time fee of $0.1 million for additional data transfer and processing.
During the year ended December 31, 2025, the Company incurred $0.2 million and paid $0.1 million in connection with the Amended Cornell License Agreements. During the year ended December 31, 2024, the Company incurred and paid $0.7 million in connection with the Amended Cornell License Agreements.
Stelios Therapeutics, Inc.—Stelios Therapeutics, Inc. (“Stelios”) was an early-stage company developing novel adeno-associated AAV-based gene therapies for rare cardiac conditions including arrhythmogenic cardiomyopathy and TNNI3-associated hypertrophic cardiomyopathy. On July 16, 2021, the Company acquired 100% of the outstanding stock of Stelios that was accounted for as an asset acquisition pursuant to FASB ASC 805, Business Combinations. The Company is required to pay up to a remaining aggregate of $12.5 million to the selling shareholders of Stelios upon the achievement of certain development milestones, excluding a $6.0 million development milestone that was achieved in the third quarter of 2024 and paid in the fourth quarter of 2024. Dr. Eric Adler, the Company's former Chief Medical Officer and Head of Research, was a co-founder of Stelios and a selling shareholder. Of the $6.0 million development milestone payment, Dr. Adler received approximately $1.3 million. Stelios was merged into the Company on December 15, 2022 and ceased to exist.