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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks, uncertainties, and assumptions. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” our actual results could differ materially from the results described in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors.” You should carefully read the “Cautionary Note About Forward-Looking Statements” and “Risk Factors” sections of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from the results described below.

In this section, references to “we,” “our,” “us,” and “the Company” refer to pre- and post-merger Neurogene Inc., unless otherwise indicated.

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Overview

Despite recent scientific advances in genetics, most neurological diseases, particularly those with devastating consequences to patients, are left untreated. Conventional gene therapy is an attractive potential treatment approach for only a limited number of monogenic diseases due to the challenges caused by the complex biology of neurological diseases and by inherent variable transgene uptake and expression. We are a clinical-stage biotechnology company committed to overcoming these limitations and turning today’s complex devastating neurological diseases into treatable conditions. By harnessing our proprietary transgene regulation technology, EXACT (Expression Attenuation via Construct Tuning), we are building a robust and differentiated product portfolio of genetic medicines for rare neurological diseases with high unmet need not otherwise addressable by conventional gene therapy. Our EXACT approach leverages key scientific breakthroughs, including gene transfer technology, microRNA-based genetic circuits, and adeno-associated virus delivery, and is designed to deliver therapeutic levels of transgene to key areas of the brain that underlie neurological disease pathology.

Our first clinical-stage program to utilize the EXACT platform is NGN-401, which is under development for the treatment of Rett syndrome, a disease with a patient population that has a significant unmet need, and that ultimately progresses to substantial neurological and physical impairment and premature death. In January 2023, we received clearance from the FDA for our IND application for a Phase 1/2 clinical trial of NGN-401 for the treatment of pediatric female patients. The Phase 1/2 clinical trial is an open-label, multi-center clinical trial that will assess the safety, tolerability, and efficacy of two doses of NGN-401 delivered using a one-time intracerebral ventricular procedure, which we believe is the most suitable route of administration to achieve optimal biodistribution in key regions of the brain. Consistent with our clinical development strategy, in February 2024, we amended the protocol to expand Cohort 1 to add three additional patients for a total of eight patients and remove staggered dosing, as well as adding a second higher dose cohort of eight patients. This approach provides us the flexibility to evaluate two doses concurrently, both of which we expect to be efficacious based on preclinical data, with higher doses demonstrating greater biodistribution preclinically. We also believe that including two concurrent dose cohorts in this clinical trial will result in a more robust dataset that we will be able to use to inform a future registrational trial design. NGN-401 was manufactured at our manufacturing facility and clinical-grade product is being used for dosing in the Phase 1/2 clinical trial that is currently enrolling participants. We expect preliminary clinical data from the first cohort of patients in this study in the fourth quarter of 2024 and an updated dataset from an expanded number of patients in the second half of 2025.

We believe that our EXACT platform has broad applicability in complex neurological diseases not otherwise easily addressable by conventional gene therapy. In addition to our Rett syndrome program, we have multiple programs in the discovery stage. We anticipate advancing one program into clinical development in 2025.

In addition to NGN-401, we are also pursuing a conventional gene therapy program in an ongoing Phase 1/2 clinical trial of NGN-101 for the treatment of CLN5 Batten disease. This patient population has a significant unmet need, and experiences extensive neurological and physical impairment leading to blindness, loss of motor function and early mortality. Our Phase 1/2 clinical trial of NGN-101 is the first trial to assess the treatment of both neurodegenerative and ocular disease manifestations of Batten disease. A third-party manufacturer produced product for the NGN-101 program to initiate the Phase 1/2 clinical trial. Dosing for this program commenced in the second quarter of 2022. We have completed enrollment in the first two dosing cohorts and are currently enrolling a higher dosing cohort and expect interim clinical data in the second half of 2024. To enable a go/no-go decision to advance the program into a registration study, we are planning to request a clinical/regulatory strategy meeting with the FDA in the second half of 2024. The focus of this meeting will be to align with the FDA on the expected clinical requirements to support a streamlined registration pathway, which will be necessary to move this program forward into a pivotal clinical trial.

We also established a fully operational cGMP facility in Houston, Texas used to manufacture current and future product for research, toxicology and clinical studies. We believe that our in-house manufacturing capabilities better enable control of product quality and development timelines, strategic pipeline and financial flexibility, and clinical-to-commercial continuity.

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Completion of the Reverse Merger and Pre-Closing Financing

On December 18, 2023, we completed our business combination with Neurogene OpCo in accordance with the terms of the Agreement and Plan of Merger, dated as of July 17, 2023 (the “Merger Agreement”), by and among the Company, Project North Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and Neurogene OpCo, pursuant to which, among other matters, Merger Sub merged with and into Neurogene OpCo, with Neurogene OpCo surviving as a wholly owned subsidiary of the Company (the “Reverse Merger”). In connection with the completion of the Reverse Merger, the Company changed its name from “Neoleukin Therapeutics, Inc.” to “Neurogene Inc.,” and the business conducted by the Company became primarily the business conducted by Neurogene OpCo. Immediately prior to Closing, the Company effected a 1-for-4 reverse stock split (the “Reverse Stock Split”). Unless noted otherwise, all references in this Annual Report on Form 10-K to share and per share amounts reflect the Reverse Stock Split.

Concurrently with the execution and delivery of the Merger Agreement, and in order to provide Neurogene OpCo with additional capital for its development programs, Neurogene OpCo entered into a subscription agreement (the “Subscription Agreement”) with certain investors named therein (the “Investors”), pursuant to which, subject to the terms and conditions of the Subscription Agreement, immediately prior to the effective time of the Reverse Merger, Neurogene OpCo issued and sold, and the Investors purchased, 2,792,206 shares of Neurogene OpCo common stock and 1,811,739 pre-funded warrants, exercisable for 1,811,739 shares of Neurogene OpCo common stock, at a purchase price of approximately $20.63 per share or $20.63 per warrant, for an aggregate purchase price of approximately $95.0 million (the “Pre-Closing Financing”).

On December 18, 2023, immediately prior to Closing and prior to the Reverse Stock Split, the Company also entered into a contingent value rights agreement (the “CVR Agreement”) with a rights agent, pursuant to which holders of common stock or pre-funded warrants of the Company prior to Closing received one non-transferable contingent value right (each, a “CVR”) for each outstanding share of Company common stock held by such stockholder or warrant holder immediately prior to Closing and before giving effect to the Reverse Stock Split. Holders of options to purchase our common stock outstanding immediately prior to the effective time of the reverse merger who elect to exercise those options following the reverse merger will also receive four CVRs for each share of our common stock issued upon exercise of such option (in order to preserve the ratio of CVRs to shares of common stock prior to the Reverse Merger), subject to certain conditions set forth in the CVR Agreement. Each CVR represents the contractual right to receive (i) certain net savings, if any, realized by the Company by June 30, 2029 in connection with certain legacy lease obligations related to the business of the Company prior to the Reverse Merger (the “Lease CVR”), including those related to a sublease entered into in October 2023, (ii) 100% of net proceeds, if any, derived from any consideration paid as a result of the sale of our pre-merger legacy assets pursuant any agreements entered into before Closing, and 80% of net proceeds, if any, derived from any consideration paid as a result of the sale of our pre-merger legacy assets pursuant any agreements entered into within one year after Closing (the “Intellectual Property CVR”), and (iii) certain net proceeds, if any, derived from an anticipated sales tax refund from Washington State relating to tax returns filed by the Company prior to Closing (the “Sales Tax CVR”).

See Item 8 of Part II “Financial Statements––Note 1 – Reverse Merger and Pre-Closing Financing” for additional information.

Background

We were founded in 2018, and have devoted substantially all of our resources to conducting research and development activities (including with respect to the NGN-401 and NGN-101 programs) and undertaking preclinical studies, establishing our manufacturing facility, conducting clinical trials and the manufacturing of product used in our clinical trials and preclinical studies, business planning, developing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these activities.

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Since our inception, we have funded our operations primarily with outside capital (e.g., proceeds from the sale of preferred stock and common stock) and have raised aggregate net proceeds of $332.4 million from these private placements. However, we have incurred significant recurring losses, including a net loss of $36.3 million and $55.2 million for the years ended December 31, 2023 and 2022, respectively. In addition, as of December 31, 2023, we had an accumulated deficit of $187.2 million and cash, cash equivalents and short term investments totaling $197.2 million. In order to continue our operations, we must achieve profitable operations and/or obtain additional equity or debt financing. Until we achieve profitability, management plans to fund our operations and capital expenditures with cash on hand and the sale and issuance of securities. There can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us. If we are unable to raise sufficient additional capital, we may be compelled to consider actions such as reducing the scope of our operations and planned capital expenditures or sell certain assets, including intellectual property assets.

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on a variety of factors, including the timing, scope and results of our research and development activities. Management expects that our expenses and capital requirements will increase substantially in connection with our ongoing activities as we:

•advance the NGN-401 and NGN-101 programs through clinical development, including in any additional indications;

•advance discovery programs from preclinical development into and through clinical development;

•seek regulatory approvals for any product candidates that successfully complete clinical trials;

•establish sales, marketing and distribution infrastructure to commercialize any approved product candidates;

•establish a commercialization infrastructure and scale up internal and external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval

•expand clinical, scientific, management and administrative teams;

•maintain, expand, protect and enforce our intellectual property portfolio, including patents, trade secrets and know-how;

•implement operational, financial and management systems; and

•incur additional legal, accounting and other expenses related to operating as a public company.

We do not have any products approved for commercial sale and have not generated any commercial revenue from product sales. Our ability to generate product revenue sufficient to achieve and maintain profitability will depend upon the successful development and eventual commercialization of one or more of our product candidates, which we expect, if it ever occurs, will take many years. We expect to spend a significant amount in development and marketing costs prior to such time. We will therefore require substantial additional capital to develop our product candidates and support our continuing operations. We may never succeed in achieving regulatory and marketing approval for our product candidates. We may obtain unexpected results from our preclinical and clinical trials. We may elect to discontinue, delay, or modify preclinical and clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. Accordingly, until such time that we can generate a sufficient amount of revenue from product sales or other sources, if ever, management expects to finance our operations through private or public equity or debt financings, loans or other capital sources, which could include income from collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. However, we may be unable to raise additional capital from these sources on favorable terms, or at all. Our failure to obtain sufficient capital on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to delay, reduce or curtail our research, product development or future commercialization efforts. We may also be required to license rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Our management cannot provide assurance that we will ever generate positive cash flow from operating activities. See “Liquidity and Capital Resources.”

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In December 2020, we entered into a research collaboration with the University of Edinburgh to support our pipeline development and expansion, and to accelerate scientific innovation to continue to improve upon conventional gene therapy. In November 2023, the collaboration agreement was amended and extended through December 2026. The University of Edinburgh has a vibrant community of over 500 neuroscience researchers and is widely recognized as a preeminent center for neuroscience research, especially in areas of neurodegeneration and in neurodevelopmental disorders, such as Rett syndrome. For example, researchers currently in neuroscience centers at the University of Edinburgh conducted the seminal preclinical work for Rett syndrome, including discovery of the MECP2 protein, its function as a transcriptional repressor, developing the first and most widely adopted animal model of Rett syndrome, demonstrating for the first time, the reversibility of phenotypes in any neurodevelopmental disorder as well as the first ever preclinical gene therapy efforts in Rett syndrome. Under the terms of the agreement, we have the option to in-license product candidates from Dr. Stuart Cobb’s laboratory, where he has a dual appointment as a Professor in Translational Neuroscience at the Patrick Wild Centre and the Centre for Discovery Brain Sciences and serves as our Chief Scientific Officer. Dr. Cobb may be entitled to receive in the future a percentage of certain license-related payments from Neurogene to the University of Edinburgh in accordance with the University of Edinburgh’s standard policies for professor inventors.

Impact of Global Economic Events

Uncertainty in the global economy presents significant risks to our business. We are subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including high inflation, changes in interest rates, changes in foreign currency exchange rates, recent bank failures, geopolitical factors, including the ongoing conflicts between Russia and Ukraine and Israel and the surrounding areas and the responses thereto, and supply chain disruptions. While management is closely monitoring the impact of the current macroeconomic conditions on all aspects of our business, including the impacts on our participants in our Phase 1/2 clinical trials, employees, suppliers, vendors and business partners, the ultimate extent of the impact on our business remains highly uncertain and will depend on future developments and factors that continue to evolve. Most of these developments and factors are outside our control and could exist for an extended period of time. Management will continue to evaluate the nature and extent of the potential impacts to our business, results of operations, liquidity and capital resources. For additional information, see the section entitled “Risk Factors.”

Components of Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred, including:

•expenses incurred to conduct the necessary discovery-stage laboratory work, preclinical studies and clinical trials required to obtain regulatory approval;

•acquired licenses and intellectual property that are accounted for as asset acquisitions and have no alternative future use;

•personnel expenses, including salaries, benefits and stock-based compensation expense for our employees engaged in research and development functions;

•costs of funding research performed by third parties, including pursuant to agreements with CROs that conduct our clinical trials, as well as investigative sites, consultants and CROs that conduct our preclinical and nonclinical studies;

•expenses incurred under agreements with our third-party CDMOs, as well as internal manufacturing scale-up expenses, including the cost of acquiring and manufacturing preclinical study and clinical trial materials;

•fees paid to consultants who assist with research and development activities;

•expenses related to regulatory activities, including filing fees paid to regulatory agencies; and

•allocated expenses for facility costs, including rent, utilities, depreciation and maintenance.

Before a product receives regulatory approval, we record upfront and milestone payments to third parties under licensing arrangements as expense, provided that there is no alternative future use of the rights in other research and developments projects.

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We track outsourced development costs and other external research and development costs to specific product candidates on a program-by-program basis, including fees paid to CROs, CDMOs and research laboratories in connection with our preclinical development, process development, and clinical development activities. We also incur personnel and other operating expenses for research and development programs, which are presented in aggregate.

Research and development activities are central to our business model. 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. We expect our research and development expenses to increase significantly over the next several years as we increase personnel costs, including stock-based compensation, conduct clinical trials, including later-stage clinical trials for current and future product candidates, and prepare regulatory filings for our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expense, for employees and consultants in executive, finance and accounting, legal, operations support, information technology and human resource functions. General and administrative expenses also include corporate facility costs not otherwise included in research and development expense, including rent, utilities, depreciation and maintenance, as well as legal fees related to intellectual property and corporate matters and fees for accounting and consulting services.

We expect that our general and administrative expense will increase in the future to support our continued research and development activities, potential commercialization efforts and increased costs of operating as a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, legal support and accountants, among other expenses. Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of Nasdaq and the SEC, insurance and investor relations costs. If any of our current or future product candidates obtains U.S. regulatory approval, we expect that we would incur significantly increased expenses associated with building a sales and marketing team, as well as an expanded regulatory and compliance function.

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents and short term investments. We expect our interest income to fluctuate depending on interest rates and the amount of cash that is invested.

Income Taxes

Since inception, we have not recorded any income tax benefits for net operating losses (“NOLs”) we have incurred 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 NOLs and tax credits will not be realized. Accordingly, we have established a valuation allowance against such deferred tax assets for all periods since inception.

We assess our income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we record the amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions for which it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements.

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As of December 31, 2023, we had federal and state NOL carryforwards in the amount of $277.9 million and $35.1 million, respectively, which may be available to offset future taxable income. The state NOL carryforwards will begin to expire in 2038, unless previously utilized. Most federal NOL carryforwards were generated subsequent to January 1, 2018, and therefore are able to be carried forward indefinitely. As of December 31, 2023, we also had federal research tax credit and federal orphan drug tax credit carryforwards of $7.5 million and $2.2 million, respectively, which may be used to offset future tax liabilities. These tax and orphan drug credit carryforwards begin to expire in 2039 and 2042, respectively, unless previously utilized.

Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the periods indicated:

(in thousands) Year EndedDecember 31,

Operating expenses:

Other income (expense):

Interest expense (12) (2) (10)

Other expense (28) (7) (21)

Research and Development Expenses

The following table summarizes our research and development expenses for the periods indicated:

(in thousands) Year EndedDecember 31,

Program specific expenses:

Unallocated internal expenses:

Research and development expenses were $44.4 million for the year ended December 31, 2023, as compared to $47.5 million for the year ended December 31, 2022, a decrease of $3.1 million.

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Expenses related to the Rett syndrome program increased primarily due to a $4.2 million increase in clinical trial costs related to the Phase 1/2 clinical trial of NGN-401, offset by a $2.6 million decrease in preclinical costs. The decrease in expenses related to the Batten disease program was driven primarily by a decrease of $0.1 million in clinical development expenses. The increase in Early Discovery expenses was driven primarily by a $1.5 million increase in preclinical costs. Discontinued Programs expense decreased primarily due to a $1.3 million decrease in preclinical costs, a $1.1 million decrease in chemistry, manufacturing and controls costs, a $0.5 million decrease in clinical trial costs, and $0.5 million decrease in milestone payments. Expenses for Discontinued Programs were substantially complete by year end 2023 and are not expected to contribute meaningfully in 2024.

The $2.5 million decrease in unallocated internal expenses was primarily driven by a $1.7 million decrease in manufacturing expenses due to lower raw material expenses and a $0.8 million decrease in personnel-related expenses primarily driven by $0.7 million in employee retention tax credits received in 2023.

General and Administrative Expenses

General and administrative expenses were $11.2 million for the year ended December 31, 2023, as compared to $9.0 million for the year ended December 31, 2022, an increase of $2.2 million. The increase was attributable to: (i) a business email compromise attack by a third party, which resulted in the diversion of payments totaling approximately $0.9 million to fraudulent bank accounts that was partially offset by the recovery of approximately $0.5 million of the diverted funds; (ii) increases in personnel costs totaling $0.7 million, (iii) increases in professional and consulting fees of approximately $0.6 million resulting from the merger, and (iv) increases in insurance and information technology costs of approximately $0.4 million. Subsequent to December 31, 2023, we have recovered approximately an additional $0.2 million of the funds diverted in our email compromise attack.

Interest Income

Interest income increased by $1.7 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase was due to a significant rise in interest rates from 2022 to 2023, which was partially offset by a decrease in the average amount of our cash, cash equivalents and investments during the same time period.

Bargain Purchase Gain

We recorded a bargain purchase gain of approximately $16.4 million in connection with the Closing. The fair value of Neoleukin’s net assets acquired at the Closing exceeded the total consideration transferred after the fair value allocation by approximately $17.6 million. $1.3 million of the difference was recorded as a contingent consideration liability for payments that are probable and estimable under the CVR Agreement, and the remaining $16.4 million was recognized as a bargain purchase gain.

Liquidity and Capital Resources

Sources of Liquidity

Since 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 continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates. We expect that our research and development and general and administrative costs will continue to increase significantly, including in connection with conducting clinical trials and manufacturing for our product candidates to support commercialization and providing general and administrative support for our operations, including the costs associated with operating as a public company. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources. We believe that our existing capital resources will be sufficient to fund our operations through at least 12 months following the filing date of this Form 10-K. See the section entitled “Risk Factors” for additional risks associated with our substantial capital requirements.

As of December 31, 2023, we had cash, cash equivalents and short term investments totaling $197.2 million. Since inception, we have funded our operations primarily through private placements of convertible preferred stock and common stock for net proceeds of $332.4 million.

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Future Capital Requirements

In order to complete the development of our product candidates and to build the sales, marketing and distribution infrastructure that management believes will be necessary to commercialize product candidates, if approved, we will require substantial additional capital. Accordingly, until such time that we can generate a sufficient amount of revenue from product sales or other sources, if ever, management expects to seek to raise any necessary additional capital through private or public equity or debt financings, loans or other capital sources, which could include income from collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. To the extent that we raise additional capital through equity financings or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our own common stock, make certain investments or engage in merger, consolidation, licensing, or asset sale transactions. If we raise capital through collaborations, partnerships, and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. We may be unable to raise additional capital from these sources on favorable terms, or at all. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from recent bank failures, other macroeconomic conditions and otherwise. The failure to obtain sufficient capital on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including by requiring us to delay, reduce or curtail our research, product development or future commercialization efforts. We may also be required to license rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. Management cannot provide assurance that we will ever generate positive cash flow from operating activities.

In order to continue our operations, we must achieve profitable operations and/or obtain additional equity or debt financing. Until we achieve profitability, management plans to fund our operations and capital expenditures with cash on hand and the sale and issuance of securities. We may not be successful in raising additional capital and such capital, if available, may not be on terms that are acceptable to us.

Since the Closing, we have incurred, and expect to continue to incur, additional costs associated with operating as a public company. In addition, we anticipate that we will need substantial additional funding in connection with our continuing operations. Management bases its projections of operating capital requirements on our current operating plan, which includes several assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than management expects.

Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our capital requirements. Our future funding requirements will depend on many factors, including:

•the scope, timing, progress, results, and costs of researching and developing genetic medicines, and conducting larger and later-stage clinical trials;

•the scope, timing, progress, results, and costs of researching and developing other product candidates that we may pursue;

•the costs, timing, and outcome of regulatory review of our product candidates;

•the costs of future activities, including product sales, medical affairs, marketing, manufacturing, and distribution, for any of our product candidates for which we receive marketing approval;

•the costs of manufacturing commercial-grade products and sufficient inventory to support commercial launch;

•the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;

•the cost and timing of attracting, hiring, and retaining skilled personnel to support our operations and continued growth;

•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

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•Our ability to establish, maintain, and derive value from collaborations, partnerships or other marketing, distribution, licensing, or other strategic arrangements with third parties on favorable terms, if at all;

•the extent to which we acquire or in-license other product candidates and technologies, if any; and

•the costs associated with operating as a public company.

A change in the outcome of any of these or other factors with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of such product candidate. Furthermore, our operating plans may change in the future, and we may need additional capital to meet the capital requirements associated with such operating plans. Please see Item 1A of this Annual Report on Form 10-K titled “Risk Factors” for additional risks associated with our substantial capital requirements.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

Year EndedDecember 31,

Net cash used in operating activities $ (51,422) $ (52,824)

Net cash provided by (used) in investing activities 25,637 (2,230)

Net cash provided by financing activities 92,482 66,531

Net increase in cash and cash equivalents $ 66,697 $ 11,477

Cash Flows from Operating Activities

For the year ended December 31, 2023, we used $51.4 million of cash in operating activities. Cash used in operating activities reflected our net loss of $36.3 million, a $4.1 million net increase in our operating assets and liabilities, and noncash charges of $11.1 million. The non-cash charges consisted of a bargain purchase gain in connection with the merger of $16.4 million, which was partially offset by $3.3 million in depreciation, $1.4 million in stock-based compensation and $0.7 million in non-cash operating lease expense. The primary use of cash was to fund our operations related to the development of our product candidates.

For the year ended December 31, 2022, we used $52.8 million of cash in operating activities. Cash used in operating activities reflected our net loss of $55.2 million and a $2.7 million net increase in our operating assets and liabilities, and was partially offset by noncash charges of $5.1 million, which consisted of $3.2 million in depreciation, $1.3 million in stock-based compensation and $0.6 million in non-cash operating lease expense. The primary use of cash was to fund our operations related to the development of our product candidates.

Cash Flows from Investing Activities

For the year ended December 31, 2023, net cash flows provided by investing activities consisted of cash acquired from the merger of $22.2 million and maturities on short-term investments of $5.0 million, which were partially offset by merger transaction costs paid of $1.3 million and purchases of property and equipment of $0.3 million.

For the year ended December 31, 2022, net cash flows used in investing activities consisted of purchases of property and equipment of $2.2 million.

Cash Flows from Financing Activities

For the year ended December 31, 2023, net cash flows provided by financing activities consisted of net proceeds from the issuance of common stock and pre-funded warrants in the Pre-Closing Financing of $92.3 million and proceeds from the issuance of common stock upon the exercise of options of $0.2 million.

For the year ended December 31, 2022, net cash flows provided by financing activities consisted of proceeds from the issuance of Series B convertible preferred stock of $66.5 million and proceeds from the issuance of Series A common stock upon the exercise of options of $0.1 million.

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Contractual Obligations and Commitments

Lease Obligations

New York Headquarters Lease

We sub-lease approximately 6,000 square feet of office space for our corporate headquarters in New York, New York, with a term expiring in June 2026.

Houston Lease

We lease 42,342 square feet for a manufacturing facility in Houston, Texas. The lease expires in August 2029. We have the option to renew the lease term for two additional five-year terms. The renewal periods were not included in the lease term for purposes of determining the lease liability or right-of-use asset.

Blaine Lease in Seattle

As a result of the merger, we assumed an operating lease for approximately 33,300 square feet of office space in Seattle, Washington for offices, a laboratory for research and development, and related uses. The lease expires on February 1, 2029, with the option to extend the lease for two five-year terms. The renewal periods were not included in the lease term for purposes of determining the lease liability.

Eastlake Lease in Seattle

As a result of the merger, we assumed an operating lease for approximately 6,272 square feet of office space in Seattle, Washington, for additional office and laboratory space for research and development and related uses (the “Eastlake Lease”). We also assumed the existing agreement to sublease the Eastlake Lease to an unrelated third party (“Eastlake Sublease”). Pursuant to the terms of the Eastlake Sublease, we are entitled to receive a total of approximately $1.6 million in lease payments. The term of the sublease is through September 30, 2026.

Lease CVR

In accordance with the terms of the Lease CVR within the CVR Agreement, we accrued approximately $1.3 million as a contingent consideration liability on our consolidated balance sheet. The commitments relate to Neoleukin’s sublease agreement, effective October 31, 2023, for one of its properties with an unrelated third party for the remainder of the lease term. For more information on the Lease CVR, see Note 1, Organization and Description of Business in the Notes to Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K.

The following table summarizes our contractual obligations and commitments as of December 31, 2023, which we generally expect to satisfy with cash on hand (in thousands):

Maturity of operating lease liabilities

Total lease payments $ 18,643

Approximately $13.8 million of the future lease payments pertain to the Blaine and Eastlake leases assumed at the Closing.

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Maturity of finance lease liabilities

Total lease payments $ 123

Maturity of Lease CVR

Total lease CVR payments $ 1,287

Research and Development and Manufacturing Agreements

We enter into agreements with certain vendors for the provision of goods and services, which includes manufacturing services with contract development and manufacturing organizations and development and clinical trial services with CROs. These agreements may include certain provisions for purchase obligations and termination obligations that could require payments for the cancellation of committed purchase obligations or for early termination of the agreements. The amount of the cancellation or termination payments vary and are based on the timing of the cancellation or termination and the specific terms of the agreement. These obligations and commitments are not presented separately.

License and Collaboration Agreements

License Agreement with The University of North Carolina

In May 2019, we entered into an Exclusive License Agreement with UNC to obtain an exclusive, worldwide, royalty bearing license, with the right to grant sublicenses under certain patents to make, use, or sell products covered by such patents for prevention or treatment of disease or medical or genetic conditions, including CLN5 Batten disease or other diseases from dysfunction of the CLN5 gene. We are obligated to pay UNC up to $1.7 million in sales-related milestones for licensed products based on annual sales of the licensed product in excess of defined thresholds and low single-digit percentage royalties on net sales of licensed product for as long as there is a valid patent claim under the patent rights. We are also required to reimburse any patent expenses, as well as pay a nonrefundable annual maintenance fee which, when royalties become due and payable, will be creditable against such royalties.

License Agreement with The University of Edinburgh

In December 2020, we entered into the MCA with University of Edinburgh. Under the MCA, Neurogene and the University of Edinburgh agreed to collaborate on the Projects, and we agreed to provide funding for such Projects for a 40-month initial term, which term may be extended by mutual agreement. In exchange for such funding, the University of Edinburgh granted us the option to exclusively license any intellectual property arising from such Projects. If we exercise an exclusive option for a particular Project, we will enter into a separate exclusive license agreement on our own terms with the University of Edinburgh. Under the MCA, we are obligated to pay semi-annual installment payments relating to funding of costs for personnel and lab consumables for the 40-month period. Either party may terminate the MCA for convenience upon 90 days’ notice. If we terminate the MCA, we would be responsible for all non-cancellable costs and commitments related to any particular Project and any and all funding costs for any person working on such Project.

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In March 2022, we exercised our option through the collaboration under the MCA, and entered into a License Agreement (the “March 2022 Edinburgh License Agreement”) with University of Edinburgh, pursuant to which we licensed certain patents and know-how related to the EXACT technology and optimized MECP2 cassettes on an exclusive basis. Under the March 2022 Edinburgh License Agreement, we obtained an exclusive, worldwide license to the licensed patents to develop, manufacture, supply, sell, and commercialize any products that utilize the licensed patents (the “Licensed Products”) in exchange for low single-digit percentage royalties on future commercial net sales of the Licensed Products. Royalties are payable on a Licensed Product-by-Licensed Product and country-by-country basis until the later of the expiration of the last licensed patent covering such Licensed Product in the country where the Licensed Product is sold, or, if no licensed patent exists or has expired in such country, then ten years from first commercial sale of such Licensed Product in such country (the “Royalty Term”). The term of the March 2022 Edinburgh License Agreement continues until the end of the Royalty Term and the expiration of all of the payment obligation thereunder. We may terminate the March 2022 Edinburgh License Agreement for convenience upon 90 days’ notice. In connection with the license, we are also obligated to pay the University of Edinburgh up to $5.25 million in regulatory-related milestones and up to $25 million in sales-related milestones based on annual net sales of Licensed Products in excess of defined thresholds.

In November 2023, we and University of Edinburgh amended the MCA, pursuant to which amendment we agreed to continue collaborating on certain Projects and to provide funding for such Projects for an additional 33 months. We are obligated to pay semi-annual installment payments relating to funding of costs for personnel and lab consumables for the entire period.

License Agreement with Virovek

In September 2020, we entered into a Non-Exclusive License Agreement with Virovek, Inc., pursuant to which we have a license to use certain patents and know-how on a non-exclusive basis related to our baculovirus process in exchange for low single-digit percentage royalties on future commercial net sales of each product using the baculovirus process, development milestone payments of up to $0.2 million in the aggregate, and a nonrefundable annual license fee. This agreement continues until the later of (a) the expiration of the last to expire patent right that covers the manufacture, use, offer for sale, sale, importation, export or supply of any licensed product, (b) ten years after the first commercial sale of any licensed product, or (c) the expiration of all regulatory or market exclusivities. We may terminate this agreement for convenience upon 60 days’ notice.

License Agreement with Sigma-Aldrich Co

In January 2023, we entered into a Non-Exclusive License Agreement with Sigma-Aldrich Co. LLC, pursuant to which we have a license to certain patents and know-how on a non-exclusive basis related to certain cell lines used in our baculovirus process in exchange for a small annual fee on a product-by-product basis, payable once the first product candidate enters the clinic. In addition, on a product-by-product basis, we are obligated to pay up to $2.5 million in the aggregate for development-related milestones. This agreement remains in force for as long as we continue to possess and use the licensed technology. We may terminate this agreement for convenience upon 60 days’ notice.

Off-Balance Sheet Arrangements

We currently do not have, and did not have during the periods presented, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of the financial statements and related disclosures requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that management believes 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. Management evaluates estimates and assumptions on a periodic basis. Our actual results may differ from these estimates.

While our significant accounting policies are described in more detail in Note 3 to the financial statements for the years ended December 31, 2023 and 2022, appearing elsewhere in this Form 10-K, management believes that the following accounting policies are critical to understanding our historical and future performance, as the policies relate to the more significant areas involving management’s judgments and estimates used in the preparation of the financial statements.

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Research and Development Expenses

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

These costs include, but are not limited to, employee-related expenses, including salaries, benefits and travel of research and development personnel, facilities, supplies, rent, insurance, stock-based compensation, depreciation and external expenses incurred under agreements with contract research organizations and investigative sites that conduct preclinical and clinical studies and manufacture the drug product for our preclinical and clinical activities and other costs associated with preclinical activities.

We accrue expenses for preclinical studies and clinical trial activities performed by our vendors based upon estimates of the proportion of work completed. We determine the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with our internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. However, actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan. There can be judgment involved in measuring the research and development expenses to be recognized in a particular period. In some cases, expense is recorded using an underlying assumption of the progress to completion of specific activities. For example, costs may be recognized based on the passage of time for activities that span reporting periods. If the provision of services is not linear then this assumption could impact the amount of expense recognized. The level of judgment varies based on the nature of the services being performed and the underlying support obtained. For some activities, such as for certain clinical trials, expense is recorded based on information obtained from vendors as an intermediary to those performing the underlying services, such as contract research organizations. These estimates are inherently more judgmental since the quality and availability of the underlying data may vary. We do not need to make significant estimates where costs incurred are supported by invoices or reports of costs incurred are obtained from a vendor that is directly performing the underlying services, such as a consultant or contract manufacturing organization.

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

In-process research and development (“IPR&D”) that is acquired through licensing arrangements and accounted for as asset acquisitions are expensed immediately and within research and development expenses if the IPR&D has no alternative future use.

Stock-Based Compensation

We account for stock options granted to employees and non-employees at fair value, which is measured using Black-Scholes Option pricing model. The fair value measurement date for employee awards is generally the date of grant. We recognize stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period and use the straight-line method to recognize stock-based compensation.

Our policy is to account for forfeitures of stock-based awards when they occur in accordance with ASC 718, Compensation—Stock Compensation. We reverse compensation cost previously recognized, in the period the award is forfeited, for an award that is forfeited before completion of the requisite service period.

We utilize the Black-Scholes option-pricing model, which incorporates assumptions and estimates, to value these options. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying stock issuable upon exercise of the options, life of the options, risk-free interest rate, expected dividend yield and expected volatility from peer public companies of the price of the underlying stock.

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Estimating the Fair Value of Common Stock

Prior to the merger, we were required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations using the Black-Scholes option pricing model. Because our common stock was not publicly traded, the fair value of the common stock underlying our stock options was determined on each grant date by our board of directors, with input from management, considering our most recently available third-party valuation of common shares. Following the merger, the fair value of our common stock is based on the closing stock price on the date of grant as reported on Nasdaq.

Prior to the merger, the third-party valuations of our common stock were performed using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation. In addition, our board of directors considered various objective and subjective factors to estimate the estimated fair value of our common stock, including:

•contemporaneous valuations of our common stock performed by independent third-party specialists;

•prices of our convertible preferred stock sold to outside investors in arm’s length transactions, and the rights, preferences and privileges of our convertible preferred stock as compared to those of our common stock, including the liquidation preferences of our convertible preferred stock;

•estimated value of each security both outstanding and anticipated;

•anticipated capital structure, which will directly impact the value of the currently outstanding securities;

•actual results of operations and financial position;

•the status of our research and development efforts;

•the composition of, and changes to, our management team and board of directors;

•the lack of marketability and liquidity of our common stock as a private company;

•our stage of development and business strategy and the material risks related to our business and industry;

•general external market conditions affecting the life sciences and biotechnology industry sectors;

•U.S. and global economic conditions;

•the likelihood of achieving a liquidity event for the holders of our common stock, such as an initial public offering or a sale of our company, given prevailing market conditions; and

•the market value and volatility of comparable companies.

In determining the estimated fair value of our common stock, our board of directors considered the subjective factors discussed above in conjunction with the most recent valuations of our common stock that were prepared by a third-party. Our board of directors, with the assistance of third parties, determined valuations of Neurogene’s common stock of $20.24 and $18.39 per share as of March 4, 2022 and January 13, 2023, respectively, and such valuations by the board of directors were used for the purposes of determining the stock-based compensation expense.

Recent Accounting Pronouncements

See Note 3, Recently Issued Accounting Standards, in the Notes to Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K.

Smaller Reporting Company Status

We are a “smaller reporting company” as defined under the Exchange Act. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) 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 a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and smaller reporting companies have reduced disclosure obligations regarding executive compensation.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Item 305 of Regulation S-K we are not required to provide quantitative and qualitative disclosures about market risk.

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Item 8. Financial Statements and Supplementary Data

NEUROGENE INC.

Index to Financial Statements

Consolidated Balance Sheets 112

Consolidated Statements of Operations 113

Consolidated Statements of Cash Flows 115

Notes to Consolidated Financial Statements 116

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Neurogene Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Neurogene Inc. and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of statements of operations, changes in convertible preferred stock and stockholders’ equity (deficit), and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

Our audit 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 audit 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 audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Reverse Merger Acquisition — Accounting Conclusions — Refer to Note 1, 3, 4 and 10 to the financial statements.

Critical Audit Matter Description

The reverse merger between Neoleukin Therapeutics, Inc. (“Neoleukin”), one of Neoleukin’s wholly owned subsidiaries, and Neurogene Inc. (“Neurogene”) was accounted for as a reverse asset acquisition pursuant to ASC 805, Business Combinations, as Neoleukin did not meet the definition of a business under ASC 805 but it did represent a group of assets. The initial accounting conclusions related to the reverse merger involved determining: (1) the accounting acquirer and accounting acquiree; (2) whether the transaction should be accounted for as a business combination or an asset acquisition; and (3) whether contingent consideration liabilities associated with the Contingent Value Rights (CVRs) should be accounted for as a derivative at fair value or recognized when payments are probable and estimable as defined by ASC 450, Contingencies.

Given the significant judgment required by management in concluding that Neurogene is the accounting acquirer in the reverse merger transaction, the transaction be accounted for as a reverse asset acquisition, and the accounting for the contingent consideration liabilities associated with the CVRs, the audit procedures performed to evaluate the reasonableness of management’s conclusions related to these accounting conclusions required a high degree of auditor judgment, including the need to involve professionals in our firm with the appropriate expertise in accounting for business combinations and derivatives.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to evaluating the reasonableness of management’s accounting conclusions related to the determination of the accounting acquirer and accounting for the transaction as a reverse asset acquisition and accounting for contingent consideration liabilities associated with the CVRs included the following, among others:

· We obtained and read the Agreement and Plan of Merger (the “Merger Agreement”).

· With the assistance of professionals in our firm with expertise in accounting for business combinations, we evaluated the Company’s accounting conclusions for the reverse merger, including determining whether Neurogene should be the accounting acquirer and whether the transaction should be accounted for as a reverse asset acquisition based on the terms of the Merger Agreement.

· With the assistance of professionals in our firm with expertise in accounting for business combinations and derivatives, we evaluated the Company’s accounting conclusions for contingent consideration liabilities associated with the CVRs.

Accrued research and development expenses— Refer to Note 3 and Note 9 to the financial statements

Critical Audit Matter Description

The Company incurs certain research and development expenses from third-party contract research organizations. The Company accrues expenses for preclinical studies and clinical trial activities performed by its vendors based upon estimates of the proportion of work completed. The Company determines estimates of the work completed under the contracts based on review of the contracts, vendor agreements and purchase orders, and through discussions with internal clinical personnel and external service providers to determine stage of completion of trials or services and the agreed-upon fee to be paid for such services.

Given the judgement required by management to estimate the extent of services performed and the associated expenses incurred as it relates to research and development costs incurred, performing audit procedures to evaluate accrued research and development expenses required a high degree of auditor judgement and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to accrued research and development expenses included the following, among others:

· We evaluated publicly available information (such as press releases and investor presentations) and board of directors' materials regarding the status of research and development activities.

· We selected a sample of vendors and tested the related accrual of research and development expenses by:

◦Confirming the completeness of the terms and conditions of research and development service agreements directly with the vendor.

◦Obtaining and reading the related contracts to understand key provisions and agree them to the Company's analysis.

◦Obtaining and inspecting third-party documents such as status reports and other correspondence received from the vendors related to the services provided and comparing them to the Company's schedule of estimated expenses incurred to date.

◦Inspecting meeting minutes between the Company's finance team and clinical and manufacturing operations and corroborating the progress of research and development activities through inquiry with the Company's clinical operations personnel.

◦Examining invoices received from vendors and cash disbursements, where applicable, made subsequent to the balance sheet date and inquiring of clinical operations to corroborate the applicable service period in order to evaluate completeness of the accruals.

/s/ Deloitte & Touche LLP

Seattle, WA

March 18, 2024

We have served as the Company's auditor since 2023.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Neurogene Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Neurogene Inc. (the Company) as of December 31, 2022, the related statements of operations, changes in convertible preferred stock and stockholders’ deficit and cash flows for the year ended December 31, 2022, and the related notes(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for the year 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 the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accrued research and development expenses

Description of the Matter

As more fully described in Note 3 to the financial statements, the Company records accrued liabilities for estimated costs of research and development (“R&D”) activities based upon the estimated cost of services provided but not yet invoiced. As of December 31, 2022, accrued clinical costs and other R&D costs were $1.8 million. The accrued costs included estimated clinical trial and other R&D costs incurred but not invoiced under certain significant R&D service agreements with organizations that conduct R&D activities on behalf of the Company (“Accrued R&D Costs”). The Company accrues for these costs based on several factors, such as information obtained from vendors and estimates of the work completed under the service agreements. Auditing the Company's accounting for Accrued R&D Costs was complex because the Company’s analysis is dependent upon data obtained from external third-party service providers who often act as intermediaries to those performing the underlying services. The determination of the accrual when the Company has either not been invoiced or has not received information regarding actual costs incurred requires evaluation of the stage of completion of the services.

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How We Addressed the

Matter in Our Audit

To test the Accrued R&D Costs, our audit procedures included, among others, i) confirming the completeness of the terms and conditions of certain significant R&D service agreements directly with the vendor; ii) testing the completeness and accuracy of the Company’s accrual models through verification of significant inputs, such as costs incurred and invoices paid, to the terms and conditions of the underlying agreements and information from the Company’s internal personnel and vendors; iii) meeting with personnel outside of the accounting department to discuss the basis for assumptions used in estimating cost of services provided but not yet invoiced; and iv) performing a hindsight analysis of invoices received subsequent to the balance sheet date.

Valuation of common stock

Description of the Matter

As discussed in Note 3 and Note 14 to the financial statements, the Company accounts for stock options granted to employees and non-employees at fair value using Black-Scholes Option pricing model. The valuation of common stock, among other inputs, was used to determine the fair value measurement for stock-based awards granted. The Company's common stock was not publicly traded on the dates which the stock-based awards were granted and required management to estimate its value with the assistance of an unrelated third-party valuation firm using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation. Auditing the Company's valuation of common stock was complex and required auditor's judgment due to significant assumptions which included, among others, discount for lack of marketability and probability weighting the likelihood of achieving a liquidity event for the holders of the Company’s common stock. The Company recognized $1.3 million in stock-based compensation expense for the year ending December 31, 2022.

How We Addressed the

Matter in Our Audit

To test the valuation of common stock, our audit procedures included, among others, assessing the competence of the third-party valuation firm and the valuation methodologies by considering the Company’s equity structure, the proximity of sales of convertible preferred stock to investors in arm’s length transactions, and possible exit scenarios used in estimating the fair value of the common stock. We also evaluated whether the calculations supporting the estimate were applied in accordance with acceptable approaches and mathematically accurate, evaluated the reasonableness of the discount for lack of marketability used in the valuation and performed sensitivity analyses of the significant assumptions to evaluate the change in the fair value resulting from changes in the assumptions. Internal valuation specialists assisted us in performing these procedures. In addition, we assessed the appropriateness of comparable companies used to determine multiples used in market approach estimates applied to Company financial data.

/s/ Ernst & Young LLP

We served as the Company’s auditor from 2019 to 2023.

Stamford, Connecticut

August 18, 2023, except for the effects of the exchange ratio disclosed in Note 1, sub-section titled Reverse Merger and Pre-Closing Financing, as to which the date is March 18, 2024.

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Neurogene Inc.

Consolidated Balance Sheets

(In Thousands, Except Share Information)

Assets

Current Assets:

Short-term investments 48,947 —

Prepaid expenses and other current assets 3,191 2,698

Operating lease right-of-use assets 3,681 4,344

Finance lease right-of-use assets 98 87

Restricted cash 508 —

Other non-current assets 764 —

Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)

Current liabilities:

Accrued expenses and other current liabilities 17,495 5,324

Operating lease liabilities, current 2,559 678

Finance lease liabilities, current 42 24

Lease contingent value rights liability, current 281 —

Operating lease liabilities, non-current 12,302 3,921

Finance lease liabilities, non-current 65 66

Lease contingent value rights liability, non-current 1,006 —

Other liabilities 203 —

Commitments and contingencies (Note 10)

Convertible preferred stock:

Total convertible preferred stock — 244,366

Stockholders' equity (deficit)

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

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Neurogene Inc.

Consolidated Statements of Operations

(In Thousands, Except Share Information)

Year Ended December 31,

Operating expenses:

Other income (expense):

Interest expense (12) (2)

Bargain purchase gain 16,355 —

Other expense (28) (7)

Pre-Merger Post-Merger Pre-Merger

Per share information (1): (a) (b) (c) (a) (b)

Net income (loss) per share, basic $ (117.28) $ — $ 27.76 $ (139.88) $ —

Net income (loss) per share, diluted $ (117.28) $ — $ 2.93 $ (139.88) $ —

(1)On December 18, 2023, the Company completed its reverse merger, which among other things, resulted in Neurogene OpCo merging with and into a wholly owned subsidiary of Neoleukin Therapeutics, Inc. As the earnings per share information for the pre-merger period is not comparable to the earnings per share information for the post-merger period, the earnings per share information is being presented separately for these periods. See Note 3, Net Income (Loss) Per share, for additional information.

(a)Presents information for the pre-merger period for Class A common stock. The pre-merger period is January 1, 2023 through December 17, 2023 for the year ended December 31, 2023 and the full fiscal year ended December 31, 2022.

(b)Presents information for the pre-merger period for Class B common stock. The pre-merger period is January 1, 2023 through December 17, 2023 for the year ended December 31, 2023 and the full fiscal year ended December 31, 2022.

(c)Presents information for the post-merger period for common stock. The post-merger period is December 18, 2023 through December 31, 2023.

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

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Neurogene Inc.

Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In Thousands, Except Share Information)

Convertible Preferred Stock Stockholders' equity (deficit)

Stock-based compensation expense — — — — — — — — — — — — — — 1,252 — 1,252

Net loss — — — — — — — — — — — — — — — (55,189) (55,189)

Stock-based compensation expense — — — — — — — — — — — — — 1,418 — 1,418

Net loss — — — — — — — — — — — — — (36,317) (36,317)

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

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Neurogene Inc.

Consolidated Statements of Cash Flows

(In Thousands)

Year Ended December 31,

Cash flows used in operating activities:

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

Stock-based compensation expense 1,418 1,252

Bargain purchase gain in connection with reverse merger (16,355) —

Depreciation and amortization of property and equipment 3,262 3,196

Non-cash operating lease expense 663 608

Amortization of finance lease right-of-use assets 35 4

Changes in assets and liabilities:

Prepaid expenses and other current assets 326 716

Other assets (764) —

Accrued expenses and other current liabilities (3,574) 806

Operating lease liabilities (678) (610)

Net cash used in operating activities (51,422) (52,824)

Cash flows used in investing activities:

Purchases of property and equipment (321) (2,230)

Cash and restricted cash acquired from reverse merger transaction 22,243 —

Reverse merger transaction costs paid (1,285) —

Proceeds from maturities of held-to-maturity investments 5,000 —

Net cash used in investing activities 25,637 (2,230)

Cash flows provided by financing activities:

Proceeds from pre-closing financing, net of offering costs paid 92,343 —

Proceeds from the issuance of common stock upon exercise of options 168 73

Principal payments on finance leases (29) (1)

Net cash provided by financing activities 92,482 66,531

Net increase in cash, cash equivalents and restricted cash 66,697 11,477

Cash, cash equivalents and restricted cash at beginning of year 82,021 70,544

Cash, cash equivalents and restricted cash at end of year $ 148,718 $ 82,021

Supplemental disclosure of non-cash investing and financing activities:

Contingent consideration liability assumed in the reverse merger $ 1,287 $ —

Other liabilities assumed in the reverse merger $ 10,110 $ —

Supplemental cash flow information:

Cash paid for interest $ 12 $ 2

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

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NEUROGENE INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Organization and Description of Business

Neurogene Inc. (formerly known as Neoleukin Therapeutics, Inc.) (the “Company” or “Neurogene”) is a clinical stage biotechnology company that is a result of the reverse merger discussed below. Pre-merger Neurogene Inc. was incorporated as a limited liability company in Delaware on January 26, 2018 and converted into a corporation on July 3, 2018, and has a principal place of business in New York, NY. The Company was formed to harness the power of gene therapy, combined with its EXACT gene regulation technology, to turn today’s complex devastating neurological diseases into treatable conditions. The Company’s first clinical-stage program to utilize the EXACT technology is NGN-401, which is under development for the treatment of Rett syndrome. In addition to NGN-401, Neurogene is also pursuing a conventional gene therapy program in an ongoing Phase 1/2 clinical trial of NGN-101 for the treatment of CLN5 Batten disease. Since beginning operations, the Company has devoted substantially all its efforts to research and development, recruiting management and technical staff, administration, and raising capital.

Reverse Merger and Pre-Closing Financing

On July 18, 2023, Neoleukin Therapeutics, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) with one of its wholly owned subsidiaries (“Merger Sub”) and Neurogene Inc. (“Neurogene OpCo”). Pursuant to the terms of the Merger Agreement, upon closing on December 18, 2023 (the “Closing”), Merger Sub merged with and into Neurogene OpCo, with Neurogene OpCo continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger (referred to herein as the “reverse merger”).

At the time of Closing (or immediately prior to, where indicated), the following also occurred:

•The Company changed its name from “Neoleukin Therapeutics, Inc.” to “Neurogene Inc.” and is referred to herein as the “Company.” Unless the context otherwise requires, references to “Neoleukin Therapeutics, Inc.” or “Neoleukin” refer to the Company prior to Closing.

•Immediately prior to Closing, Neoleukin effected a 1-for-4 reverse stock split (the “Reverse Stock Split”). Unless noted otherwise, all references herein to share and per share amounts reflect the Reverse Stock Split.

•All of the then outstanding shares of Neurogene OpCo Class A common stock were converted into 3,240,888 shares of the Company’s common stock, based on an exchange ratio of approximately 0.0756 (the “Exchange Ratio”).

•All of the then outstanding shares of Neurogene OpCo preferred stock were converted into 7,231,747 shares of the Company’s common stock, based on the Exchange Ratio. Refer to Note 12, Preferred Stock, for further detail on the conversion of Neurogene OpCo preferred stock.

•Each then outstanding Neurogene OpCo stock option was exchanged for an equivalent stock option of the Company, adjusted to reflect the Exchange Ratio as necessary.

•Each then outstanding Neurogene OpCo pre-funded warrant to purchase shares of Neurogene OpCo common stock was converted into a pre-funded warrant to purchase shares of the Company’s common stock, adjusted to reflect the Exchange Ratio as necessary. Refer to the discussion below for further detail on Neurogene OpCo pre-funded warrants.

Concurrently with the execution and delivery of the Merger Agreement, and in order to provide Neurogene OpCo with additional capital for its development programs, Neurogene OpCo entered into a subscription agreement (the “Subscription Agreement”) with certain investors. Pursuant to the terms of the Subscription Agreement, immediately prior to the Closing, Neurogene OpCo issued and sold to the investors: (i) 2,792,206 shares of Neurogene OpCo common stock and (ii) 1,811,739 pre-funded warrants, exercisable for 1,811,739 shares of Neurogene OpCo common stock, at a purchase price of approximately $20.63 per share or $20.63 per warrant, for an aggregate purchase price of approximately $95.0 million (the “Pre-Closing Financing”).

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On December 18, 2023, immediately prior to Closing, Neoleukin entered into a contingent value rights agreement (the “CVR Agreement”) with a rights agent and the lease representative, pursuant to which holders of Neoleukin common stock or pre-funded warrants prior to Closing received one non-transferable contingent value right (each, a “CVR”) for each outstanding share of Neoleukin common stock held by such stockholder or warrant holder immediately prior to Closing. Holders of options to purchase Neoleukin common stock outstanding immediately prior to the effective time of the reverse merger who elect to exercise those options following the reverse merger will also receive one CVR for each share of Neoleukin common stock issued upon exercise of such option, subject to certain conditions set forth in the CVR Agreement. Each CVR represents the contractual right to receive (i) certain net savings, if any, realized by the Company by June 30, 2029 in connection with Neoleukin’s legacy lease obligations (the “Lease CVR”), including those related to Neoleukin’s sublease, entered into in October 2023, (ii) 100% of net proceeds, if any, derived from any consideration paid as a result of the sale of Neoleukin’s pre-merger legacy assets pursuant any agreements entered into before Closing, and 80% of net proceeds, if any, derived from any consideration paid as a result of the sale of Neoleukin’s pre-merger legacy assets pursuant any agreements entered into within one year after Closing (the “Intellectual Property CVR”), and (iii) certain net proceeds, if any, derived from Neoleukin’s anticipated sales tax refund from Washington State relating to tax returns filed by Neoleukin prior to Closing (the “Sales Tax CVR”). As of December 31, 2023, the Company has recorded approximately $0.3 million and $1.0 million to lease contingent value rights liability, current and lease contingent value rights liability, non-current, respectively, related to amounts that are probable and estimable under the Lease CVR as of December 31, 2023. As no other amounts related to the CVR Agreement were probable as of December 31, 2023, no contingencies for the Intellectual Property CVR or Sales Tax CVR have been recorded. Refer to Note 10, Commitments and Contingencies, for further discussion on the CVR components.

Based on the following factors, the Company determined under the Accounting Standards Codification (“ASC”) 805, Business Combinations, that the merger should be accounted for as a reverse asset acquisition:

•Neurogene OpCo stockholders owned approximately 84% of the voting rights in the Company, and thus had sufficient voting rights to exert influence over the Company.

•Neurogene OpCo designated a majority of the Company’s board of directors and maintained a majority of the composition of management.

•At the time of Closing, Neoleukin did not meet the definition of a business but it did represent a group of assets.

For further discussion on the reverse merger and the related accounting, refer to Note 4, Reverse Merger.

2.Risks and Uncertainties

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, successful development of technology, obtaining additional funding, protection of proprietary technology, compliance with government regulations, risks of failure of pre-clinical studies, clinical studies and clinical trials, the need to obtain marketing approval for its drug candidates and its consumer products, fluctuations in operating results, economic pressure impacting therapeutic pricing, dependence on key personnel, risks associated with changes in technologies, development by competitors of technological innovations and the ability to transition from pilot scale manufacturing to large scale production.

Liquidity and Financial Condition

Since its inception, the Company has funded its operations primarily with proceeds from the sales of equity securities and has incurred significant recurring losses, including net losses of $36.3 million and $55.2 million for the years ended December 31, 2023 and 2022, respectively. In addition, the Company used cash in operations of $51.4 million and $52.8 million for the years ended December 31, 2023 and 2022, respectively, and had an accumulated deficit of $187.2 million as of December 31, 2023. Management expects to incur substantial and increasing losses in future periods as the Company advances its products through its clinical and regulatory process and will rely on outside capital to fund its operations for the foreseeable future. The Company has not generated positive cash flows from operations, and there are no assurances that the Company will be successful in obtaining an adequate level of financing for the development and commercialization of its product candidates.

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As of December 31, 2023, the Company had cash and cash equivalents of approximately $148.2 million. On December 18, 2023, the Company closed on the merger with Neoleukin Therapeutics, Inc. (see Note 4, Reverse Merger) and a Pre-Closing Financing (see Note 1, Organization and Description of Business). The Company expects its available cash and cash equivalents on hand as of the issuance date of these financial statements will be sufficient to fund its obligations as they become due for at least one year beyond the issuance date of these financial statements. As a result of the reverse merger with Neoleukin Therapeutics, the Company assumed an ATM or “at-the-market” Equity Offering Sales Agreement (the “Sales Agreement”) with BofA Securities, Inc., as agent (“BofA”), pursuant to which the Company may offer and sell, from time to time through BofA, shares of the Company’s common stock, having an aggregate offering price of up to $40.0 million. In March 2024, the Company terminated the ATM.

In the event the Company is unable to secure additional outside capital, management will be required to seek other alternatives which may include, among others, a delay or termination of clinical trials or the development of its product candidates, temporary or permanent curtailment of the Company’s operations, a sale of assets, or other alternatives with strategic or financial partners.

The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

3.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements are presented in United States (“U.S.”) dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Use of Estimates

The preparation of the financial statements in accordance with US 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 expenses during the reporting period. In preparing these financial statements, management used significant estimates in the following areas, among others: recoverability of the Company’s net deferred tax assets and related valuation allowance, useful lives and recoverability of property and equipment, determining the Incremental Borrowing Rate (“IBR”) for calculating lease liabilities and related right-of-use (“ROU”) assets and finance lease assets, clinical trial accruals, accrual estimates for all CVRs, the value attributed to employee stock options and other stock-based awards and valuation of common stock. On an ongoing basis, the Company reviews its estimates to ensure that they appropriately reflect changes in the business or as new information becomes available. Actual results may differ from these estimates.

Segment Information

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company operates as a single operating segment and has one reportable segment. The Company’s operations and its assets are held in the United States.

Cash and Cash Equivalents

The Company considers all highly-liquid investments purchased with original maturities of 90 days or less at time of purchase to be cash equivalents. Cash and cash equivalents include cash held in banks and are stated at fair value.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash in the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows (in thousands):

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December 31,

Restricted cash 508 —

Total cash, cash equivalents and restricted cash $ 148,718 $ 82,021

Cash equivalents consist of money market funds in which the carrying value equals the fair value (see Note 6, Fair Value of Financial Instruments). Restricted cash includes $0.5 million in cash deposits the Company maintains with its bank as collateral for the irrevocable letters of credits related to its lease obligations.

Concentrations of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company’s cash and cash equivalent accounts, at times, may exceed federally insured limits. As of December 31, 2023, the Company had $147.7 million in excess of the federally insured limits. The Company places its cash in financial institutions that management believes to be of high credit quality.

Investments

Investment securities at December 31, 2023 consist of U.S. treasury notes. The Company classifies these securities as held-to-maturity. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts are amortized or accreted over the life of the related held-to-maturity security as an adjustment to yield using the effective interest method. The Company reassesses the classification of held-to-maturity at each reporting period.

The allowance for credit losses on held-to-maturity securities is a contra-asset valuation account determined in accordance with ASC 326, which is deducted from the securities' amortized cost basis at the balance sheet date as a result of management's assessment of the net amount expected to be collected. Securities that are determined to be uncollectible are written off against the allowance. The Company did not recognize an allowance for credit losses as of December 31, 2023. Interest income is recognized when earned. Additional information regarding held-to-maturity investments is included in Note 5, Investments.

Fair Value of Financial Instruments

Management believes that the carrying amounts of the Company’s financial instruments, including cash, prepaid and other current assets, accounts payable and accrued expenses, approximate fair value due to the short-term nature of these instruments. Certain assets and liabilities are carried at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•Level 1 – Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.

•Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

◦quoted prices for similar assets and liabilities in active markets.

◦quoted prices for identical or similar assets or liabilities in markets that are not active.

◦observable inputs other than quoted prices that are used in the valuation of the asset or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals).

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◦inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3 – Unobservable inputs for the assets or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

Property and Equipment

Property and equipment costs are stated at cost, net of accumulated depreciation and amortization. The cost of property and equipment costs are depreciated on the straight-line method over the following estimated useful lives:

Type Estimated usefullife

Lab equipment 5 years

Manufacturing equipment 10 years

Furniture and fixtures 5 years

Software 3 years

Leasehold improvements are amortized over the shorter of the estimated useful life of the assets or the remaining lease term. Major additions and betterments are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to operating expenses as incurred. Depreciation has been calculated using the straight-line method over their estimated useful lives once the asset is placed in service. Costs of software obtained for internal use are capitalized in accordance with ASC 350 and are recognized on a straight-line basis over the useful life. Software costs that do not meet the capitalization criteria, including costs incurred in the maintenance and minor upgrade and enhancement of software without additional functionality, are expensed as incurred. No depreciation has been calculated on work in progress assets.

Capitalized Software Development Costs

Implementation costs incurred in a cloud computing arrangement that is a service contract are capitalized and recorded in prepaid expenses and other current assets and other non-current assets on the consolidated balance sheets. Capitalized implementation costs include external professional service costs related to technical development. Post-implementation training and maintenance costs are expensed as incurred. Capitalized eligible implementation costs related to cloud computing service contracts are included in prepaid expenses and other current assets and other non-current assets were $0.3 million and $0.4 million as of December 31, 2023, and 2022, respectively. Capitalized cloud computing implementation costs are amortized on a straight-line basis over the expected term of the arrangement. Expense recognized related to the implementation costs capitalized was $0.2 million and $0.2 million for the years ended December 31, 2023 and 2022, respectively. Cloud computing arrangements are tested for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. No impairment of cloud computing arrangements occurred in 2023 or 2022.

Impairment of Long-Lived Assets

Management assesses the carrying value of property and equipment and software whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the years ended December 31, 2023 and 2022, the Company did not recognize any impairments for its long-lived assets.

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Leases

Operating and finance leases are accounted for in accordance with ASU 2016-02, Leases as amended. They are presented in the Company’s consolidated balance sheet as right-of-use assets from leases, current lease liabilities, and long-term lease liabilities. At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company records the associated lease liability and corresponding ROU asset upon commencement of the lease using the implicit rate or a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease. As the Company’s leases do not provide an implicit rate, the Company utilizes the appropriate IBR, determined as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and in a similar economic environment.

Both operating and finance lease assets represent a right to use an underlying asset for the lease term, and operating and finance lease liabilities represent an obligation to make lease payments arising from the lease. Lease liabilities with a term greater than one year and their corresponding ROU assets are recognized on the balance sheet at the commencement date of the lease based on the present value of lease payments over the expected lease term.

Certain of the Company’s lease agreements at the adoption date contain renewal options. The Company does not recognize right-of-use assets or lease liabilities for renewal periods upon lease inception date unless it is determined that the Company is reasonably certain of renewing the lease at inception or when a triggering event occurs. The Company also made an accounting policy election to utilize the short-term lease exemption, whereby leases with a term of 12 months or less will not follow the recognition and measurement requirements of the standard.

The Company’s leases do not contain any residual value guarantees. Since the Company elected to account for each lease component and its associated non-lease components as a single combined lease component, all contract consideration is allocated to the combined lease component. Some of the Company’s lease agreements contain rent escalation clauses. For operating leases, the Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. The Company will amortize this expense over the term of the lease beginning with the lease commencement date. Certain lease agreements contain variable payments, which are expensed as incurred and not included in the lease right-of-use assets and liabilities. These amounts include payments for maintenance and utilities. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate and are recognized as incurred.

Additional information and disclosures are included in Note 10, Commitments and Contingencies.

Contingent Value Rights

As discussed within the Reverse Merger and Pre-Closing Financing section in Note 1, Organization and Description of Business, the Company entered into a CVR Agreement on December 18, 2023 prior to Closing. Included in the CVR Agreement are three different types of CVRs: (i) the Lease CVR, (ii) the Intellectual Property CVR, and (iii) the Sales Tax CVR (together, the “CVRs”). The Company evaluated each of the CVRs to determine if they qualified as derivatives under ASC 815, Derivatives and Hedging,and concluded that since certain scope exceptions were met, the CVRs did not qualify as derivatives. Instead, the Company records a contingent consideration liability associated with the CVRs when payments are probable and estimable under ASC 450. In assessing whether payments are probable and estimable, the Company considers the existence of or ability to enter agreements with third parties or government agencies and timing of potential payments. As of December 31, 2023, the Company recorded $0.3 million and $1.0 million to lease contingent value rights liability, current and lease contingent value rights liability, non-current, respectively, related to amounts that are probable and estimable under the Lease CVR. As no other amounts related to the CVR Agreement were probable as of December 31, 2023, no contingencies for the Intellectual Property CVR or Sales Tax CVR have been recorded. Refer to Note 1, Organization and Description of Business, and Note 10, Commitments and Contingencies, for further discussion on the CVR components.

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Exit and Disposal Costs

In connection with the reverse merger and through fiscal 2024, the Company has incurred and expects to incur costs to wind-down Neoleukin’s Phase 1 NL-201 study. This study has ceased further development, and the Company has no plans to continue developing Neoleukin’s de novo protein technology. As a result, the study’s activities do not provide the Company any future economic benefit. In accordance with ASC 420 Exit or Disposal Costs, the Company accrued the remaining costs to be incurred in the contract of approximately $0.9 million, which was included in the liabilities assumed in the reverse merger. As of December 31, 2023, no payments were made and the liability of $0.8 million was classified as accrued expenses and other current liabilities in the consolidated balance sheet.

Research and Development

Research and development costs are expensed as incurred. These costs include, but are not limited to, employee-related expenses, including salaries, benefits and travel of the Company’s research and development personnel, facilities, supplies, rent, insurance, stock-based compensation, depreciation and external expenses incurred under agreements with contract research organizations and investigative sites that conduct preclinical studies and manufacture the drug product for the preclinical activities and other costs associated with preclinical activities.

Before a compound receives regulatory approval, the Company records upfront and milestone payments to third parties under licensing arrangements as expense provided that there is no alternative future use of the rights in other research and developments projects.

Non-refundable prepayments for research and development costs that are paid in advance of performance are capitalized as a prepaid expense and amortized over the service period as the services are provided. Costs for certain development activities, such as outside research programs funded by the Company, are recognized based on an evaluation of the progress to completion of specific tasks with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense as applicable. There can be judgment involved in measuring the research and development expenses to be recognized in a particular period. In some cases, expense is recorded using an underlying assumption of the progress to completion of specific activities. For example, costs may be recognized based on the passage of time for activities that span reporting periods. If the provision of services is not linear then this assumption could impact the amount of expense recognized. The level of judgment varies based on the nature of the services being performed and the underlying support obtained. For some activities, such as for certain clinical trials, expense is recorded based on information obtained from vendors as an intermediary to those performing the underlying services, such as contract research organizations. These estimates are inherently more judgmental since the quality and availability of the underlying data may vary. The Company does not need to make significant estimates where costs incurred are supported by invoices or reports of costs incurred are obtained from a vendor that is directly performing the underlying services, such as a consultant or contract manufacturing organization.

General and Administrative

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Stock-Based Compensation

The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock, to be recognized in the consolidated statements of operations based on their fair values. All of the stock-based awards are subject only to service-based vesting conditions. Management estimates the fair value of the stock option awards using the Black-Scholes option pricing model, which requires the input of assumptions, including (a) the fair value of the Company’s common stock, (b) the expected stock price volatility, (c) the calculation of expected term of the award, (d) the risk-free interest rate and (e) expected dividends. Management estimates the fair value of the restricted stock awards using the fair value of the Company’s common stock. Forfeitures are recognized as they are incurred.

Prior to the reverse merger, the Company periodically estimated the fair value of the Company’s common stock considering, among other things, valuations of its common stock prepared by management with the assistance of a third party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Following the reverse merger, the fair value of the Company’s common stock is based on the closing stock price on the date of grant as reported on the Nasdaq Global Market. The expected life of the stock options in years is estimated using the “simplified method,” as prescribed in SEC’s Staff Accounting Bulletin (SAB) No. 107, as the Company has no historical information from which to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The simplified method is the midpoint between the vesting period and the contractual term of the option. For stock price volatility, the Company uses comparable public companies as a basis for its expected volatility to calculate the fair value of option grants. The risk-free rate is based on the U.S. Treasury yield curve commensurate with the expected life of the option. The expected dividend yield is zero as the Company has no history of paying dividends and no plans to do so in the near term.

The Company classified stock-based compensation expense in its consolidated statement of operations in the same manner of the award recipient’s payroll costs.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which prescribes the use of the liability method whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided to reduce the net deferred tax assets to a level which, more likely than not, will be realized.

The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions for which it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. Potential interest and penalties associated with such uncertain tax positions is recorded as a component of income tax expense.

Net Income (Loss) Per Share

For the prior year and pre-merger periods in which the Company had multiple classes of stock participating in earnings, the Company uses the two-class method in calculating earnings per share. Basic earnings per share of Class A and Class B common stock is computed by dividing net income attributable to Neurogene OpCo by the weighted-average number of shares of Class A and Class B common stock outstanding during the period.

For the post-merger period, the only period in which the Company had income, diluted earnings per share of the single class of common stock is computed by dividing net income attributable to the Company, adjusted for the assumed exchange of all potentially dilutive instruments for common stock, by the weighted-average number of shares of common stock outstanding, adjusted to give effect to potentially dilutive elements.

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As of December 18, 2023, the Company consummated the reverse merger, leaving only one class of common stock remaining, and as such, the two-class method is not presented for the post-merger period from December 18, 2023 to December 31, 2023. The single class of common stock remaining post-merger is referred to throughout as “common stock.”

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

Pre-Merger (1) Post-Merger (2) Pre-Merger (1)

Class A Class B Common stock Class A Class B

Net income (loss) per share, basic:

Numerator:

Denominator:

Net income (loss) per share, basic $ (117.28) $ — $ 27.76 $ (139.88) $ —

Net income (loss) per share, diluted:

Numerator:

Denominator:

Weighted-average effect of dilutive securities:

Warrants to purchase common stock — — 4,063,361 — —

Options to purchase common stock — — 101,719 — —

Net income (loss) per share, diluted $ (117.28) $ — $ 2.93 $ (139.88) $ —

Potentially dilutive securities that were not included in the diluted per share calculations because they would be antidilutive were as follows:

Pre-Merger (1) Post-Merger (2) Pre-Merger (1)

Class A Class B Common stock Class A Class B

Restricted stock awards — — — 6,691 —

Series A-1 convertible preferred stock (3) — — — 18,604,653 —

Series A-2 convertible preferred stock (3) — — — 13,291,208 —

Series B convertible preferred stock (3) — — — 74,405,719 —

Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards have or may have a material impact on our financial statements or disclosures.

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Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this update expand segment disclosure requirements, including new segment disclosure requirements for entities with a single reportable segment among other disclosure requirements. This update is effective for the Company in the consolidated financial statements for the year ending December 31, 2024, and interim periods beginning after January 1, 2025. The Company is analyzing the impact of this standard on its disclosures in the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures which requires consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. This standard will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on the Company’s consolidated financial statements and related disclosures but does not expect the adoption of ASU 2020-09 to be material.

Recently Adopted Accounting Pronouncements

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses, as amended, on January 1, 2023.This ASU sets forth a current expected credit loss model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. The impact of ASU 2016-13 on the Company’s consolidated financial statements was not material.

4. Reverse Merger

As discussed within the Reverse Merger and Pre-Closing Financing section in Note 1, Organization and Description of Business, on December 18, 2023 the reverse merger between Neoleukin, Merger Sub, and Neurogene OpCo was consummated. Pursuant to the Merger Agreement, upon Closing, Merger Sub merged with and into Neurogene OpCo, with Neurogene OpCo surviving as a wholly owned subsidiary and surviving corporation of the merger. In connection with the completion of the reverse merger, the Company changed its name from “Neoleukin Therapeutics, Inc.” to “Neurogene Inc.,” and the business conducted by the Company became primarily the business conducted by Neurogene OpCo. The reverse merger was contemplated and consummated, along with the Pre-Closing Financing, to generate capital resources to support the advancement of the Company’s pipeline and future operations.

As further discussed in Note 1, Organization and Description of Business, the reverse merger was accounted for as a reverse asset acquisition pursuant to ASC 805, Business Combinations as Neoleukin did not meet the definition of a business under ASC 805 but it did represent a group of assets. Therefore, the transaction was treated as the equivalent of Neurogene issuing stock to acquire the net assets of Neoleukin. In accordance with the relative fair value allocation guidance in ASC 805, to account for the reverse merger, the Company allocated the difference between the total consideration transferred and the fair value of the net assets acquired to Neoleukin’s non-monetary assets on a pro rata basis. As the fair value of Neoleukin’s net assets acquired at Closing exceeded the total consideration transferred after the fair value allocation, (i) $1.3 million of the difference was recorded as a contingent consideration liability on the Company’s consolidated balance sheet for payments that are probable and estimable under the CVR Agreement and (ii) the remaining $16.4 million was recognized as a bargain purchase gain in the Company’s consolidated statement of operations.

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The following table summarizes the final purchase price paid in the reverse merger along with the fair value allocation (in thousands, except share and per share amounts):

Calculation of total purchase price:

Multiplied by the fair value per share of Neoleukin common stock (2) $ 13.76

Fair value of Neoleukin common stock issued (2) $ 38,212

Transaction costs (6) 4,140

Contingent consideration liability (3) 1,287

Total purchase price $ 43,639

Monetary assets acquired (4) $ 76,906

Liabilities assumed (5) (21,052)

Fair value of net assets acquired $ 55,854

Less: total consideration transferred (38,212)

Fair value allocated to contingent consideration liability (3) 1,287

Fair value allocated to bargain purchase gain 16,355

Total fair value allocated $ 17,642

Reconciliation of allocation to purchase price:

Fair value of monetary assets acquired (4) $ 76,906

Transaction costs (6) 4,140

Neoleukin liabilities assumed (5) (21,052)

Fair value allocated to bargain purchase gain (16,355)

Total purchase price $ 43,639

(1) The number of shares is based on a total 2,351,030 shares of Neoleukin common stock and 425,987 pre-funded warrants outstanding as of December 18, 2023.

(2)The fair value of Neoleukin common stock (also referred to in discussions herein as “total consideration transferred”) was determined using the closing price of Neoleukin’s common stock on December 15, 2023, after giving effect to the Reverse Stock Split. As discussed in Note 3, Summary of Significant Accounting Policies, Neoleukin’s stock price is measured using Level 1 fair value measurements.

(3) Refer to Note 10, Commitments and Contingencies, for further discussion on the contingent consideration liability.

(4) In accordance with the guidance in ASC 805, Business Combinations, the fair value of the net assets acquired was allocated to any non-monetary assets on a pro rata basis. As such, the assets acquired only include cash, cash equivalents and restricted cash of $22.2 million, short-term investments of $53.9 million, and other immaterial monetary assets of $0.8 million.

(5) Included in Neoleukin liabilities assumed is (i) $10.9 million in lease liabilities, (ii) $3.8 million in accrued payroll and $6.3 million in other accrued costs and accounts payable. For the lease liabilities, the Company utilized judgment in estimating the IBR used in determining the fair value of the leases upon Closing.

(6) As indicated in ASC 805 regarding asset purchases, the accounting acquirer’s transaction costs incurred directly related to the asset purchase should be included in the consideration to acquire the assets. These costs were initially recorded as deferred financing costs and then reclassified to offset to equity upon Closing.

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5. Investments

The following table summarizes the Company’s investment securities as of December 31, 2023 (in thousands):

Short-term investments:

U.S. treasury notes $ — $ — $ — $ —

All of the Company’s investments mature within the next 12 months.

6.Fair Value of Financial Instruments

As of December 31, 2023 and December 31, 2022, financial assets measured at fair value on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations (in thousands):

Level 1 Level 2 Level 3

Assets:

Money market funds $ 144,358 $ — $ —

U.S. treasury notes 48,947 — —

Level 1 Level 2 Level 3

Assets:

Money market funds $ 78,749 $ — $ —

Money market funds are cash equivalents and are included in cash and cash equivalents in the consolidated balance sheet as of December 31, 2023 and 2022.

7.Prepaid expenses and other current assets

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

December 31,

Refunds and other receivables $ 600 $ 990

Total prepaid and other current assets $ 3,191 $ 2,698

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8.Property and Equipment, Net

Property and equipment consist of the following (in thousands):

December 31,

Office equipment 19 —

Construction in progress 234 252

Less accumulated depreciation and amortization (8,009) (4,767)

Depreciation and amortization expense for the years ended December 31, 2023 and December 31, 2022 was approximately $3.3 million and $3.2 million, respectively.

NGNE US Equity

NGNE · 10-K · period ended 2023-12-31

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

NGNE US Equity☆

NGNE · 10-K · period ended 2023-12-31

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

NGNE US Equity