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

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this 10-K, including information with respect to our plans, strategies, objectives, expectations and intentions for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this 10-K, our actual results could differ materially from the results described in or implied by these forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

PepGen is a clinical-stage biotechnology company advancing the next-generation of oligonucleotide therapies with the goal of transforming the treatment of severe neuromuscular and neurological diseases. Our proprietary EDO platform is founded on over a decade of research and development and leverages CPPs to improve the uptake and activity of conjugated oligonucleotide therapeutics. Using these EDO peptides, we are generating a pipeline of oligonucleotide therapeutic candidates that are designed to target the root cause of serious diseases.

We are initially focused on addressing the underlying cause of DMD and DM1, that have high unmet need. Our current pipeline consists of two clinical stage programs, PGN-EDO51 for DMD patients who are amenable to exon 51 skipping and PGN-EDODM1 for DM1 patients, along with three additional preclinical stage programs. We anticipate expanding this pipeline over time to include other neuromuscular targets as well as potential opportunities in neurologic diseases.

We completed a first-in-human Phase 1 HV clinical trial with our lead product candidate, PGN-EDO51, in the third quarter of 2022. In the Phase 1 clinical trial, treatment with PGN-EDO51 resulted in the highest levels of mean exon skippingin humans following a single dose compared to publicly available data for a single dose of other DMD exon 51-skipping approaches that are approved or in clinical development.

Our clinical development program for PGN-EDO51 comprises two parallel Phase 2 studies of PGN-EDO51 in DMD patients whose mutations are amenable to an exon 51-skipping approach. The first study, CONNECT1, is an ongoing open-label, MAD Phase 2 study in boys and young men living with DMD being conducted in Canada. We initiated dosing patients in CONNECT1 in January 2024 and have fully enrolled the first cohort at the 5 mg/kg PGN-EDO51 dose level. We anticipate reporting initial proof-of-concept data, that would include safety, exon skipping and dystrophin production for this cohort in mid-2024.

In February 2024, we received clearance from the MHRA to initiate the second study, CONNECT2, a Phase 2, multinational, randomized, double-blind, placebo-controlled MAD study, in the U.K. The CONNECT2 study will evaluate multiple dose cohorts and trial participants will be administered PGN-EDO51 once every four weeks for six months. We will assess safety, tolerability, exon skipping, dystrophin expression and functional outcomes in this study. The CONNECT2 study, together with data from the CONNECT1 study, is designed to support a potential accelerated approval pathway for PGN-EDO51, subject to alignment with regulatory authorities.

We are also developing PGN-EDODM1 for the treatment of DM1 and are utilizing what we believe to be a unique mechanism of action and a different delivery approach compared to other approaches in more advanced stages of clinical development. We have conducted extensive preclinical studies of our product candidate, and these preclinical data form the basis of our clinical development plan for PGN-EDODM1. In May 2023, we announced that we received a clinical hold notice from the FDA regarding our IND application to initiate our first-in-human Phase 1 FREEDOM study. In September 2023, we announced that Health Canada had cleared our CTA for the FREEDOM study in Canada. In October 2023, we announced that the FDA lifted the clinical hold on the FREEDOM study, allowing this study to proceed in the U.S. In December 2023, we announced that the MHRA had cleared our CTA for the FREEDOM study in the U.K. and we began dosing patients in this study. FREEDOM is a multinational, randomized, double-blind, placebo-controlled, SAD study designed to assess PGN-EDODM1's safety and tolerability, splicing correction and functional outcome measures in DM1 patients. We expect to report preliminary data from this study in the second half of 2024. In February 2024, we announced that PGN-EDODM1 received Fast Track designation from the FDA for the treatment of DM1. We also expect to open the FREEDOM2-DM1 Phase 2 randomized, double blind, placebo-controlled MAD study in DM1 patients in the second half of 2024.

In addition to these lead candidates, we are developing EDO candidates for additional DMD sub-populations amenable to skipping of other exons, including exon 53, 45 and 44. We have previously reported robust exon 53-skipping levels following either a single dose or multiple doses in NHPs for our PGN-EDO53 program. We anticipate advancing PGN-EDO53 into CTA and/or IND-enabling preclinical studies in 2024.

Initial Public Offering and Liquidity

On May 10, 2022, we closed our IPO in which we sold an aggregate of 9,000,000 shares at a public offering price of $12.00 per share for gross proceeds of $108.0 million. In connection with the IPO, we granted the underwriters a 30-day option to purchase

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1,350,000 additional shares of common stock. On May 16, 2022, the underwriters exercised the option in part and we issued 1,238,951 shares of common stock for gross proceeds of $14.9 million. From the IPO and option exercise by the underwriters, we received approximately $122.9 million in gross proceeds and $110.2 million in net proceeds, after deducting underwriting discounts and offering expenses.

Immediately prior to consummation of the IPO, all 12,546,805 outstanding shares of our redeemable convertible preferred stock, and 35,529 preferred stock warrants that were exercised on May 4, 2022, converted into 12,359,856 shares of common stock.

On February 5, 2024, we issued and sold 1,000,000 shares at a purchase price of $10.00 per share under our ATM program, resulting in net proceeds of $9.9 million. On February 9, 2024, we issued and sold 7,530,000 shares at a purchase price of $10.635 per share, which was the closing sale price of our common stock on the Nasdaq Global Select Market on February 6, 2024 in a Follow-on Offering. The Follow-on Offering resulted in net proceeds of $76.9 million after deducting underwriters' fees of $3.2 million. Net proceeds from the ATM program and Follow-on Offering, after deducting underwriters' fees and before deducting costs of the offerings, were $86.8 million.

Since our inception, we have not generated any revenue from product sales or other sources and have incurred significant operating losses and negative cash flows from our operations. Our primary uses of cash to date have been to fund our research and development activities, business planning, establishing and maintaining our intellectual property portfolio, acquiring and developing product and technology rights, hiring personnel, leasing premises and associated capital expenditures, raising capital, and providing general and administrative support for these operations. To date, we have funded our operations primarily through private placements of our convertible preferred stock and proceeds from our IPO, the ATM program and the Follow-on Offering.

We have incurred operating losses in each year since our inception. Our net losses were $78.3 million and $69.1 million for the years ended December 31, 2023 and December 31, 2022, respectively. As of December 31, 2023, we had cash, cash equivalents, and marketable securities of $110.4 million, excluding proceeds from the ATM program offering and the Follow-on Offering made subsequent to December 31, 2023. As of December 31, 2023, we had an accumulated deficit of $181.2 million. We expect our expenses and operating losses will continue as we conduct our ongoing preclinical studies and current and planned clinical trials, continue our research and development activities, utilize third parties to manufacture our product candidates and related raw materials, hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance with an exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs. In addition, we have several development, regulatory and commercial milestone payment obligations under our licensing arrangements. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our preclinical studies and current and planned clinical trials and our expenditures on other research and development activities.

Based on our current operating plans, we believe that our existing cash, cash equivalents, marketable securities, and proceeds from shares sold under our ATM program and in the Follow-on Offering will be sufficient to fund our operations into 2026. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which will not be for at least the next several years, if ever. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Corporate Reorganization

We were initially formed as PepGen Limited on January 25, 2018, in the U.K. On November 9, 2020, PepGen Limited initiated a corporate reorganization, or the Reorganization. As part of the Reorganization, PepGen Limited formed PepGen Inc., a Delaware corporation with nominal assets and liabilities, for the purpose of consummating the Reorganization. In connection with the Reorganization, the existing shareholders of PepGen Limited exchanged each of their classes of shares of PepGen Limited for the same number and class of common stock of PepGen Inc. on a one-to-one basis. The newly issued stock of PepGen Inc. had substantially identical rights to the exchanged shares of PepGen Limited. As a result of the exchange, PepGen Inc. became the sole shareholder of PepGen Limited. Upon the completion of the Reorganization on November 23, 2020, the historical financial statements of PepGen Limited became the historical financial statements of PepGen Inc., as the Reorganization was deemed to be between entities under common control.

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After the Reorganization was completed, PepGen Limited began the process of transferring certain operations, including financial management functions, to PepGen Inc. pursuant to an intercompany services agreement, effective as of April 2021, and certain assets, including a novation of all intellectual property assets, pursuant to an asset transfer agreement, effective as of January 1, 2022. After the transfer of intellectual property and other assets from PepGen Limited to PepGen Inc., there were limited operations through the end of 2022 at PepGen Limited.

Components of Results of Operations

Operating Expenses

Research and Development

To date, our research and development expenses have primarily consisted of external and internal costs associated with our research and development activities, including our discovery and research efforts, the development of our proprietary EDO platform, and the preclinical and clinical development of our product candidates. Our research and development expenses include:

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external expenses, including expenses incurred under arrangements with third parties, such as CROs, CDMOs, consultants and our scientific advisors;

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personnel-related costs, including salaries, cash incentive compensation, payroll taxes, employee benefits, and stock-based compensation;

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costs for laboratory supplies and materials and reagents for chemical synthesis of product candidates; and

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facility costs, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies.

Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development activities are recorded as prepaid expenses until the goods or services are received.

The following table (in thousands) summarizes our research and development expenses for the years ended December 31, 2023 and December 31, 2022. The direct external development program expenses reflect external costs attributable to our clinical development candidates and preclinical candidates selected for further development. Our internal resources, personnel and infrastructure are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs. As such, we do not track internal expenses on a program-specific basis.

Year EndedDecember 31,

External expenses:

Other programs and unallocated expenses 4,762 5,296

Internal expenses:

Personnel-related (including stock-based compensation) 16,143 10,744

Total research and development expenses $ 68,126 $ 54,077

We expect our research and development expenses to increase in 2024 as we conduct our CONNECT1 and CONNECT2 Phase 2 clinical trials, our FREEDOM Phase 1 clinical trial, our planned FREEDOM2-DM1 Phase 2 clinical trial, and continue to conduct our ongoing research and development activities. The process of conducting preclinical studies, producing drug product supply, and completing clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for any of our product candidates.

The timelines and costs associated with research and development activities are uncertain and can vary significantly for each product candidate and development program due to the inherently unpredictable nature of preclinical and clinical development. We anticipate we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to preclinical and clinical results, regulatory developments, and ongoing assessments as to each program’s commercial potential. We will need to raise substantial additional capital in the future.

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Our future development costs may vary significantly based on factors such as:

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the status of clinical trials, animal and other preclinical studies and IND- or CTA-enabling studies;

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per patient trial costs;

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the number of trials required for approval;

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the number of sites included in the trials;

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the countries in which the trials are conducted;

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the length of time required to enroll eligible patients;

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the number of patients that participate in the trials;

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the number of doses that patients receive;

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the drop-out or discontinuation rates of patients;

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

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the cost and timing of manufacturing our product candidates;

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the efficacy and safety profile of our product candidates; and

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maintaining a continued acceptable safety profile of our products if any receive regulatory approval.

General and Administrative

General and administrative expenses consist primarily of personnel-related costs, including salaries, cash incentive compensation, payroll taxes, employee benefits, and stock-based compensation charges for those individuals in executive, finance, facility operations, and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for audit, accounting and consulting services, and insurance costs.

We anticipate that our general and administrative expenses will remain consistent in 2024 as compared to 2023 to support our public company operating expenses associated with audit, legal, regulatory, and tax-related services associated with maintaining compliance with our exchange listing and SEC requirements, director and officer insurance premiums, and investor relations.

Other Income (Expense), Net

Interest Income

Interest income consists of interest earned on our money market mutual funds and short-term U.S. treasury holdings.

Other Income (expense)

We classified our outstanding warrants to purchase shares of our Series A-2 convertible preferred stock as liabilities on our consolidated balance sheets at their estimated fair value as the underlying convertible preferred stock was classified as temporary equity. At the end of each reporting period, changes in the estimated fair value during the period were recorded as a component of other income (expense), net. We recognized changes in the fair value of our warrant liability until the warrants were exercised on May 4, 2022, prior to the completion of our IPO.

Other components of other income (expense) relate to realized and unrealized gains and losses on currency revaluation.

Income Taxes

We have not recorded a U.S. provision for federal or state income taxes as we have no revenue and have incurred losses since inception. During the year ended December 31, 2022, we recorded a $3.7 million tax charge associated with the transfer of our intellectual property assets from our wholly owned subsidiary, PepGen Limited, to the parent company, PepGen Inc. (see Note 11 of Notes to the Consolidated Financial Statements). We had no material tax liability for the year ended December 31, 2023.

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Results of Operations

Comparison of the Year Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands):

Year EndedDecember 31, Period-to-

Operating expenses:

Other income (expense), net

Research and Development Expenses

Research and development expenses increased by $14.0 million from $54.1 million for the year ended December 31, 2022, to $68.1 million for the year ended December 31, 2023. This increase was attributable to increased research and development activities related to the advancement of our pipeline programs, including a $2.7 million increase in preclinical and manufacturing costs, a $2.9 million increase in clinical costs due to our CONNECT1, CONNECT2 and FREEDOM trials, and a $5.4 million increase in personnel-related costs due to increased headcount, including an increase of $1.3 million in stock-based compensation expense. There was also an increase of $4.4 million in facility and office expenses related to rent and related expense on our principal facility lease and a $0.4 million increase in depreciation expense related to lab equipment in our new lab space. These increases were partially offset by a $1.5 million decrease in other research and development expense primarily related to the OUI exit fee that was expensed upon completion of our IPO and a $0.4 million decrease in consulting expense.

General and Administrative Expenses

General and administrative expenses increased by $2.4 million from $14.2 million for the year ended December 31, 2022, to $16.6 million for the year ended December 31, 2023. The increase was primarily driven by a $1.7 million increase in personnel-related costs due to increased headcount, including an increase of $1.0 million in stock-based compensation expense, an increase of $1.4 million in facility-related costs due to our expansion of operations in Boston, Massachusetts, and a $0.3 million increase in insurance expense associated with operating as a public company. These increases were partially offset by a $0.9 million decrease in consulting and legal expense.

Other Income (Expense), Net

Other income (expense), net was income of $6.2 million for the year ended December 31, 2023, compared to income of $2.9 million for the year ended December 31, 2022. The increase was primarily driven by interest earned from our money market fund and U.S. treasury holdings.

Income Tax Expense

Income tax expense decreased by $3.6 million from $3.7 million for the year ended December 31, 2022, to $0.1 million for the year ended December 31, 2023 due to a tax charge associated with the transfer of all intellectual property assets from PepGen Limited to the parent company, PepGen Inc., pursuant to an asset transfer agreement, in January 2022.

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Liquidity and Capital Resources

Sources of Liquidity

From our inception in January 2018 through December 31, 2023, we have funded our operations primarily through the sale of our common stock and convertible preferred stock. We received aggregate gross proceeds of $163.9 million from these sales prior to our IPO. Additionally, in May 2022, we received gross proceeds from our IPO of $108.0 million, and $14.9 million when the underwriters partially exercised their option to purchase 1,350,000 additional shares of common stock.

We filed a shelf registration statement on Form S-3 with the SEC, which covers the offering, issuance and sale of an amount up to $300.0 million in the aggregate of shares of our common stock, preferred stock, debt securities, warrants, and/or units or any combination thereof, which was declared effective on June 16, 2023.

On August 8, 2023, we filed a prospectus supplement and entered into a Sales Agreement with Stifel, Nicolaus & Company, Incorporated, as sales agent, which provides for the issuance and sale by us of up to $100.0 million of shares of common stock from time to time under the ATM program. On February 5, 2024, we issued and sold 1,000,000 shares at a purchase price of $10.00 per share under the ATM program, resulting in net proceeds of $9.9 million.

On February 9, 2024, we issued and sold 7,530,000 shares in the Follow-on Offering at a purchase price of $10.635 per share, resulting in net proceeds of $76.9 million after deducting underwriters' fees of $3.2 million.

Future Funding Requirements

As of December 31, 2023, we had cash, cash equivalents, and marketable securities in the amount of $110.4 million. On February 5, 2024, we issued and sold 1,000,000 shares at a purchase price of $10.00 per share under our ATM program, resulting in net proceeds of $9.9 million. On February 9, 2024, we issued and sold 7,530,000 shares at a purchase price of $10.635 per share, resulting in net proceeds of $76.9 million after deducting underwriting fees of $3.2 million in the Follow-on Offering. Based on our current operating plans, we believe that our existing cash, cash equivalents, marketable securities, together with proceeds from shares sold under our ATM Program and in the Follow-on Offering, will be sufficient to fund our operations into 2026. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain.

Our future capital requirements will depend on many factors, including but not limited to:

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the scope, progress, costs and results of preclinical and clinical development for our product candidates, any additional product candidates we may develop and any new indications we may pursue;

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the scope, costs, timing and outcome of regulatory review of our product candidates, any additional product candidates we may develop and any new indications we may pursue;

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the cost and timing of manufacturing activities;

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the identification of additional research programs and product candidates;

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the costs and scope of the continued development of our EDO platform;

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the costs and timing of preparing, filing and prosecuting applications for patents, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims, including claims of infringement, misappropriation or other violations of third-party intellectual property;

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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any product candidate that receives marketing approval;

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the costs of satisfying any post-marketing requirements;

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the revenue, if any, received from commercial sales of our product candidates if marketing approval is received;

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the costs of operational, financial and management information systems and associated personnel;

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the associated costs in connection with any acquisition of in-licensed products, intellectual property and technologies; and

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the costs of operating as a public company.

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

Cash Flows

The following table sets forth a summary of the net cash flow activity for the years ended December 31, 2023 and December 31, 2022 (in thousands):

Year Ended December 31,

Net cash (used in) provided by:

Effect of exchange rate changes on cash 286 (316 )

Operating Activities

For the year ended December 31, 2023, net cash used in operating activities was $69.0 million resulting from our net loss of $78.6 million partially offset by cash provided by changes in our operating assets and liabilities of $2.0 million and non-cash charges of $7.7million. The net changes in our operating assets and liabilities were primarily due to an increase in accrued expenses of $1.4 million and an increase in prepaids and other current assets of $2.0 million. These increases were partially offset by a $1.2 million decrease in operating lease liabilities related to cash paid towards tenant improvements on our new office and lab lease. Non-cash charges included $7.0 million in stock-based compensation expense and $1.2 million in depreciation expense.

For the year ended December 31, 2022, net cash used in operating activities was $59.3 million resulting from our net loss of $69.1 million partially offset by cash provided by changes in our operating assets and liabilities of $4.5 million and non-cash charges of $5.3 million. The net changes in our operating assets and liabilities were primarily due to an increase in accrued expenses of $5.5 million and receipt of $4.2 million associated with our U.K. R&D tax credit in 2022, which is accounted for in other receivables. These increases were partially offset by a $2.0 million decrease in operating lease liabilities related to cash paid towards tenant improvements on our new office and lab lease. Non-cash charges included $4.8 million in stock-based compensation expense and $0.5 million in depreciation expense.

Investing Activities

Net cash used in investing activities was $32.0 million during the year ended December 31, 2023 as compared to $3.8 million during the year ended December 31, 2022. Cash used for investing activities was related to $29.4 million in purchases of marketable securities and $2.6 million in purchases of property and equipment during the year ended December 31, 2023. Cash used for investing activities related to $3.8 million in purchase of property and equipment during the year ended December 31, 2022.

Financing Activities

Net cash used in financing activities was $0.2 million for the year ended December 31, 2023, which was primarily the result of $0.4 million in payments towards offering costs related to our Form S-3 and Sales Agreement filings in May and August 2023, respectively. These payments were partially offset by $0.3 million of proceeds from equity plans .

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Net cash provided by financing activities was $112.2 million for the year ended December 31, 2022, which was primarily the result of $114.3 million in net proceeds from the IPO, after deducting the payment of $2.7 million in IPO-related costs made in 2022. In 2021, we made payments of $1.4 million in IPO-related costs. Total net proceeds from the IPO were $110.2 million. Additionally, we generated $0.4 million from the exercise of the A-2 preferred stock warrants and $0.2 million in proceeds from stock option exercises.

Critical Accounting Polices and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which are prepared in accordance with generally accepted accounting principles in the U.S., or GAAP. The preparation of our financial statements requires us to make estimates and management discussion assumptions that affect the reported amounts of assets, liabilities, costs, and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. We evaluate our estimates and judgments on an ongoing basis. We base our estimates and assumptions on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements appearing elsewhere in this 10-K, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Research and Development Expenses and Accrued Research and Development Costs

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

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Stock-Based Compensation

We account for all stock-based compensation awards granted as stock-based compensation expense at fair value in accordance with the Financial Accounting Standards Board ASC Topic 718, Compensation—Stock Compensation. Stock-based compensation expense represents the cost of the grant date fair value of equity awards recognized over the requisite service period of the awards (usually the vesting period) on a straight-line or accelerated basis. We estimate the fair value of stock option awards using the Black-Scholes option pricing model and recognize forfeitures as they occur.

The Black-Scholes option pricing model requires the use of subjective assumptions, including the risk-free interest rate, the expected stock price volatility, the expected term of stock options, the expected dividend yield, and the fair value of the underlying common stock on the date of grant. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. Prior to our IPO, there was no public market for our common stock, and consequently, the estimated fair value of our common stock was determined by our board of directors as of the date of each stock option grant, with input from management, considering third-party valuations of our common stock as well as our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent third-party valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or Practice Aid. The Practice Aid identifies various available methods for allocating the enterprise value across classes of series of capital stock in determining the fair value of our common stock at each valuation date. Since our IPO, we have determined the fair market value of our common stock using the closing price of our common stock as reported on the Nasdaq Global Select Market.

Off-balance sheet arrangements

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

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

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

Item 8. Financial Statements and Supplementary Data.

Our consolidated financial statements, together with the reports of our independent registered public accounting firms, appear beginning on page F-1 of this Form 10-K

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

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) that are designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. In designing and evaluating our disclosure controls and procedures, our management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of December 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officer to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Management assessed our internal control over financial reporting as of December 31, 2023. Management based its assessment on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.

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

118

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d‐15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

Director and Executive Officer Trading Arrangements

During the fourth quarter of 2023, none of our directors or officers adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).

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

Not Applicable.

119

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the close of our fiscal year ended December 31, 2023.

Item 11. Executive Compensation.

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

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

Item 14. Principal Accounting Fees and Services.

120

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(1)

For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference.

121

(2)

Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto.

(3)

Exhibits:

122

ExhibitNumber Description

123

23.1* Consent of KPMG, LLP, independent registered public accounting firm.

97* Compensation Recovery Policy

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

** Furnished herewith.

*** Previously filed.

† Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the SEC.

Item 16. Form 10-K Summary.

None.

124

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 6, 2024.

PEPGEN INC.

By: /s/ James McArthur

Name: James McArthur

Title: Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of March 6, 2024.

Name Title

/s/ James McArthur Chief Executive Officer(Principal Executive Officer)

James McArthur, Ph. D.

Noel Donnelly, M.B.A.

/s/ Laurie B. Keating Chairperson of the Board of Directors

Laurie B. Keating, J.D.

/s/ Christopher Ashton Director

Christopher Ashton, Ph.D.

/s/ Habib Joseph Dable Director

Habib Joseph Dable

/s/ Heidi Henson Director

Heidi Henson

/s/ Howard Mayer Director

Howard Mayer, M.D.

/s/ Joshua Resnick. Director

Joshua Resnick, M.D., M.B.A

125

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 185) F-2

Consolidated Balance Sheets F-3

Consolidated Statements of Operations F-4

Consolidated Statements of Comprehensive Loss F-5

Consolidated Statements of Cash Flows F-7

Notes to Consolidated Financial Statements F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

PepGen Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of PepGen Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

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

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2021.

Phoenix, Arizona

March 6, 2024

F-2

PEPGEN INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)

December 31,

Assets

Current assets:

Marketable Securities 29,633 —

Prepaid expenses and other current assets 2,271 4,331

Liabilities, convertible preferred stock, and stockholders’ equity (deficit)

Current liabilities:

Operating lease liability, net of current portion 17,100 18,981

Stockholders’ equity:

Accumulated other comprehensive income (loss) 34 (81 )

See accompanying notes to consolidated financial statements.

F-3

PEPGEN INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Year EndedDecember 31,

Operating expenses:

Other income (expense)

Other income (expense), net (187 ) 110

Income tax expense (73 ) (3,706 )

Net loss per share, basic and diluted $ (3.30 ) $ (4.42 )

See accompanying notes to consolidated financial statements.

F-4

PEPGEN INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)

Year EndedDecember 31,

Cumulative translation adjustment arising during the period 104 (98 )

Unrealized gain on marketable securities 11 —

See accompanying notes to consolidated financial statements.

F-5

PEPGEN INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Shares Amount Shares Amount Shares Amount Shares Amount

Release of common stock from vesting restrictions — — — — — — 69,529 — — — — —

Exercise of stock options — — — — — — 81,272 — 217 — — 217

Stock-based compensation expense — — — — — — — — 4,763 — — 4,763

Stock-based compensation expense — — — — — — — — 7,048 — — 7,048

Unrealized gain on marketable securities — — — — — — — — — 11 — 11

See accompanying notes to consolidated financial statements.

F-6

PEPGEN INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

Year EndedDecember 31,

Cash flows from operating activities:

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

Stock-based compensation expense 7,048 4,763

Amortization and interest accretion related to operating lease (334 ) —

Amortization of premium and discounts on marketable securities, net (220 ) —

Change in fair value of preferred stock warrant liability — (58 )

Loss on disposal of fixed assets — 134

Changes in operating assets and liabilities:

Prepaids and other current and non-current assets 2,038 (1,784 )

Accrued expenses and other non-current liabilities 1,422 5,531

Operating lease liabilities, current and non-current (1,166 ) (2,016 )

Net cash used in operating activities (68,997 ) (59,265 )

Cash flows from investing activities:

Purchases of property and equipment (2,599 ) (3,755 )

Purchases of marketable securities (29,404 ) —

Net cash used in investing activities (32,003 ) (3,755 )

Cash flows from financing activities:

Payment of offering costs (442 ) (2,697 )

Proceeds from employee equity plans 253 217

Net cash provided by financing activities (189 ) 112,193

Effect of exchange rate changes on cash 286 (316 )

Cash, cash equivalents and restricted cash at end of period $ 82,322 $ 183,225

Components of cash, cash equivalents and restricted cash

Supplemental noncash investing and financing activities

Cash paid for taxes 2,702 —

Lease assets obtained in exchange for new operating lease liabilities — 26,549

See accompanying notes to consolidated financial statements.

F-7

PEPGEN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

PepGen Inc. (PepGen or the Company), is a clinical-stage biotechnology company advancing the next generation of oligonucleotide therapeutics with the goal of transforming the treatment of severe neuromuscular and neurologic diseases. The Company's principal offices are located in Boston, Massachusetts.

The Company was initially formed as PepGen Limited on January 25, 2018, in the United Kingdom, or the U.K. On November 9, 2020, PepGen Limited completed a corporate reorganization, or the Reorganization. As part of the Reorganization, PepGen Limited formed PepGen Inc., a Delaware corporation with nominal assets and liabilities, for the purpose of consummating the Reorganization. In connection with the Reorganization, the existing stockholders of PepGen Limited exchanged each of its classes of shares of PepGen Limited for the same number and class of common stock of PepGen Inc. on a one-to-one basis. The newly issued stock of PepGen Inc. had substantially identical rights to the exchanged shares of PepGen Limited. As a result of the exchange, PepGen Inc. became the sole stockholder of PepGen Limited. Upon the completion of the Reorganization on November 23, 2020, the historical financial statements of PepGen Limited became the historical financial statements of PepGen Inc. as the Reorganization was deemed to be between entities under common control.

Initial Public Offering and Follow-On Offerings

On May 10, 2022, the Company closed its initial public offering, or IPO, in which the Company sold an aggregate of 9,000,000 shares at a public offering price of $12.00 per share for gross proceeds of $108.0 million. In connection with the IPO, the Company granted the underwriters a 30-day option to purchase 1,350,000 additional shares of common stock. On May 16, 2022, the underwriters exercised the option in part and the Company issued 1,238,951 shares of common stock for gross proceeds of $14.9 million. From the IPO and option exercise by the underwriters, the Company received approximately $122.9 million in gross proceeds and $110.2 million in net proceeds, after deducting underwriting discounts and offering expenses payable by the Company.

Immediately prior to consummation of the IPO, all 12,546,805 outstanding shares of the Company’s redeemable convertible preferred stock, and 35,529 preferred stock warrants that were exercised on May 4, 2022 (see Note 3), converted into 12,359,856 shares of the Company’s common stock.

On February 5, 2024, the Company sold shares under its At-the-Market Equity Offering Sales Agreement, or Sales Agreement, with Stifel, Nicolaus & Company, Incorporated dated as of August 8, 2023, resulting in net proceeds of $9.9 million. On February 9, 2024, the Company sold shares in a follow-on offering, referred to as the Follow-on Offering, pursuant to an underwriting agreement with Leerink Partners LLC dated as of February 6, 2024, resulting in net proceeds of $76.9 million after deducting underwriting fees of $3.2 million. Net proceeds from sales under the Sales Agreement and Follow-on Offering, after deducting underwriters' fees and before deducting costs of the offerings, were $86.8 million.

Liquidity and Going Concern

Since inception, the Company has not generated any revenue from product sales or other sources and has incurred significant operating losses and negative cash flows from operations. The Company’s primary uses of cash and cash equivalents to date have been to fund research and development activities, business planning, establishing and maintaining the Company’s intellectual property portfolio, hiring personnel, leasing premises and associated capital expenditures, raising capital, and providing general and administrative support for these operations. As of December 31, 2023, the Company had an accumulated deficit of $181.5 million. To date, the Company has funded operations primarily through private placements of convertible preferred stock and its IPO. As of December 31, 2023, the Company had cash, cash equivalents, and marketable securities of $110.4 million, excluding net proceeds from the Sales Agreement and Follow-On Offering. Based on its current operating plans, the Company believes that its cash, cash equivalents, and marketable securities as of December 31, 2023, as well as proceeds from the Sales Agreement and Follow-On Offering (see Note 12) will be sufficient to fund its currently planned operations for at least the next 12 months from the filing of these consolidated financial statements.

As the Company continues to pursue its business plan to successfully develop and obtain regulatory approval for the Company’s product candidates, it expects to finance its operations through the sale of equity, debt financings or other capital resources, which could include income from collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. However, there can be no assurance that any additional financing or strategic transactions will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company

F-8

does not obtain additional funding, it may need to delay, reduce or eliminate its product development or future commercialization efforts, which could have a material adverse effect on the Company’s business, results of operations or financial condition.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The consolidated financial statements include the accounts of PepGen Inc. (a U.S. corporation) and its wholly owned subsidiaries PepGen Limited (a U.K. corporation) and PepGen Securities Corp. (a U.S. corporation). All intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain amounts disclosed in the prior period financial statements have been reclassified from their original presentation to conform to the current period presentation. The reclassification had no effect on net income, earnings per share, retained earnings, cash flows or total assets.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management bases its estimates and judgments on historical experience, knowledge of current conditions, and beliefs of what could occur in the future, given the available information. On an ongoing basis, management evaluates such estimates and assumptions for continued reasonableness. In particular, management makes estimates with respect to accruals for research and development activities, for the valuation of intellectual property, for the fair value of common stock and convertible preferred stock warrants and stock-based compensation expense. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. Actual results could differ materially from those estimates and assumptions.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, or the CODM. The Company’s CODM is its chief executive officer who reviews financial information together with certain operating metrics principally to make decisions about how to allocate resources and to measure the Company’s performance. The Company has determined that it operates as a single reportable segment. The Company’s CODM evaluates financial information on a consolidated basis. As the Company operates as one operating segment, all required segment financial information is presented in the consolidated financial statements.

Foreign Currency Remeasurement

The Company’s reporting currency is the U.S. Dollar. The functional currency of PepGen Limited is the British Pound. The assets and liabilities of PepGen Limited are translated into U.S. Dollars at the exchange rates in effect at each balance sheet date, and the results of operations are translated using the average exchange rates prevailing throughout the reporting period. Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the cumulative translation adjustment, a component of accumulated other comprehensive loss in stockholders’ equity (deficit).

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and money market accounts. As of December 31, 2023, the Company’s cash, cash equivalents, and marketable securities were held by four financial institutions in the U.S. and one financial institution in the U.K. At times, the Company’s deposits held in the U.S. and U.K. may exceed the respective insured limits of the Federal Depository Insurance Corporation and Financial Services Compensation Scheme.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. As of December 31, 2023 and 2022, cash and cash equivalents consisted primarily of checking and money market funds composed of U.S. government obligations.

F-9

Restricted Cash

The Company classifies all cash whose use is limited by contractual provisions as restricted cash. Restricted cash arises from the requirement for the Company to maintain cash of $1.5 million as collateral under a lease agreement. As of December 31, 2023 and 2022, $1.5 million of restricted cash was recorded in other assets on the consolidated balance sheets.

Marketable Securities

The Company’s marketable securities consist of U.S. treasury notes which are classified as available-for-sale and are reported at fair value. Unrealized gains and losses on available-for-sale debt securities are reported as a component of accumulated other comprehensive loss in stockholders’ equity (deficit). Realized gains and losses are based on the specific identification method and are included as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

The Company evaluates its marketable securities with unrealized losses for other-than-temporary impairment. When assessing marketable securities for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value, and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under U.S. GAAP. 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: Fair values are determined utilizing prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

•

Level 2: Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3: Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

For certain financial instruments, including cash and cash equivalents, prepaid expenses, accounts payable, as well as certain accrued liabilities, the recorded amount approximates estimated fair value due to their relatively short maturity period.

Property and Equipment, Net

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs that do not improve or extend the life of the assets are expensed when incurred.

The estimated useful lives of the Company’s property and equipment are as follows:

Laboratory and computer equipment 5 years

Furniture and fixtures 3 years

Deferred Offering Costs

The Company capitalizes within other long-term assets certain legal, accounting, and other third-party fees that are directly related to the Company’s in-process equity financings, until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the proceeds received as a result of the offering. Should a planned equity financing be abandoned, terminated, or significantly delayed, the deferred offering costs are immediately written off to operating

F-10

expenses. As of December 31, 2023, deferred offering costs of $0.4 million were recorded within other assets on the consolidated balance sheets. Subsequent to the completion of the IPO in May 2022, deferred offering costs totaling $4.1 million were recorded within stockholders’ equity (deficit) as a reduction of additional paid-in-capital generated from the IPO.

Leases

Effective January 1, 2022, the Company adopted ASU 2016-02, Leases (Topic 842), or ASC 842. Under ASC 842, at the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances presented in the arrangement, including whether the Company controls the use of identified assets. The Company classifies leases with a term greater than one year as either operating or finance leases at the lease commencement date and records a right-of-use assets and current and non-current lease liabilities, as applicable on the balance sheet. The Company has elected not to recognize on the balance sheet leases with terms of one year or less, but payments are recognized as expense on a straight-line basis over the lease term. If a lease includes options to extend the lease term, the Company does not assume the option will be exercised in its initial lease term assessment unless there is reasonable certainty that the Company will renew based on an assessment of economic factors present as of the lease commencement date. The Company monitors its plans to renew its material lease each reporting period. If a lease includes provisions for leasehold improvements for which the Company has an obligation to pay, the Company determines if the improvements should be considered lessor or lessee assets. If the improvements are considered lessor assets, the Company records the payments in the calculation of the lease liability and corresponding right-of-use asset.

Lease liabilities and the corresponding right-of-use assets are recorded based on the present value of lease payments over the remaining lease term. The present value of future lease payments are discounted using the interest rate implicit in lease contracts if that rate is readily determinable; otherwise the Company utilizes information available at the commencement of the lease to calculate the incremental borrowing rate, or IBR, which reflects the fixed rate at which the Company could borrow on a collateralized basis over a similar term, the amount of the lease payments in a similar economic environment. In order to determine the appropriate incremental borrowing rate, the Company used available third-party information, including comparable company collateralized borrowing information. After lease commencement and the establishment of a right-to-use asset and operating lease liability, lease expense is recorded on a straight-line basis over the lease term.

The Company enters into contracts that contain both lease and non-lease components. Non-lease components include costs that do not provide a right-to-use a leased asset but instead provide a service, such as maintenance costs. The Company has elected to account for the lease and non-lease components together as a single component for all classes of underlying assets. Variable costs associated with the lease, such as maintenance and utilities, are not included in the measurement of right-to-use assets and lease liabilities but rather are expensed when the events determining the amount of variable consideration to be paid have occurred.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group.

If the carrying amount of an asset or asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset or asset group exceeds the estimated discounted future cash flows of the asset or asset group. There have been no such impairments of long-lived assets for the years ended December 31, 2023 and 2022.

Commitment and Contingencies

The Company recognizes a liability with regard to loss contingencies when it believes it is probable a liability has been incurred, and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount the Company accrues the minimum amount in the range. The Company has not recorded any such liabilities as of December 31, 2023 and 2022 that were material to the consolidated financial statements.

Convertible Preferred Stock

The Company recorded convertible preferred stock at fair value on the dates of issuance, net of issuance costs. Upon the occurrence of certain events that are outside the Company’s control, including a deemed liquidation event, holders of the convertible preferred stock could cause redemption for cash. Therefore, convertible preferred stock was classified outside of stockholders’ deficit on the consolidated balance sheets as events triggering the liquidation preferences are not solely within the Company’s control. No accretion was recognized as the contingent events that could give rise to redemption were not deemed probable. Upon completion of

F-11

the IPO, all preferred stock was converted to common stock and as such no amounts were issued or outstanding as of December 31, 2023 and 2022.

Preferred Stock Warrants

The Company classified warrants to purchase its Series A-2 convertible preferred stock as a liability on the consolidated balance sheets as these warrants were freestanding financial instruments that could have required the Company to transfer assets upon exercise.

Research and Development

Research and development costs are expensed as incurred. Research and development costs consist of salaries, benefits, and other personnel-related costs, including stock-based compensation, laboratory supplies, process development costs, fees paid to other entities to conduct certain research and development activities on the Company’s behalf, including contract manufacturing organizations and contract research organizations, and allocated facility and other related costs. Non-refundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses until the related goods are delivered or services are performed. During the year-ended December 31, 2022, the Company received £3.4 million (approximately $4.1 million) relating to its 2021 U.K. research and development tax credit for research and development activities undertaken by its U.K. subsidiary. As of December 31, 2023 and 2022, no research and development tax credits were recorded in other receivables on the consolidated balance sheets, respectively.

The Company records accrued liabilities for estimated costs of research and development activities conducted by third-party service providers. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers under the service agreements. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The historical accrual estimates made by the Company have not been materially different from the actual costs.

Stock-Based Compensation

The Company accounts for its stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees, non-employees and directors, to be recognized as expense in the consolidated statements of operations based on their grant date fair values. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model, or Black-Scholes, for stock option grants to employees, non-employees and directors. The fair value of the Company’s common stock is used to determine the fair value of restricted stock awards.

The Company’s stock-based compensation awards are generally subject to service-based vesting conditions. Compensation expense related to awards to employees, non-employees and directors with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term.

Black-Scholes requires inputs based on certain subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. The Company determines the expected volatility using the historical volatility of a peer group of comparable publicly traded companies with product candidates in similar stages of development to the Company’s product candidates. The Company uses the simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for stock options granted to employees, non-employees and directors whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the stock options due to its lack of sufficient historical data. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. The Company recognizes forfeitures as they occur.

Prior to the Company’s IPO, there was no public market for its common stock, and consequently, the estimated fair value of its common stock was determined by the board of directors as of the date of each stock option grant, with input from management, considering third-party valuations of its common stock as well as its board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent third-party valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation , or Practice Aid. The Practice Aid identifies various available methods for allocating the enterprise value across classes of series of capital stock in determining the fair value of the Company’s common stock at each valuation date.

F-12

Subsequent to the Company’s IPO, the fair value of the common stock underlying the stock-based awards is the closing price of the Company’s common stock on the date of grant.

The Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Income Taxes

Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts or existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment. The Company records a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not.

The Company recognizes the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained upon examination by the tax authorities, based on the merits of the position. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

Comprehensive Loss

Comprehensive loss is composed of two components — net loss and other comprehensive loss. Other comprehensive loss refers to gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity but are excluded from net loss. The Company’s other comprehensive loss consists of foreign currency translation adjustments and unrealized gains and losses on available-for-sale marketable debt securities.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potential dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the sum of the weighted average number of common shares plus the potential dilutive effects of potential dilutive securities outstanding during the period.

Potential dilutive securities are excluded from diluted earnings or loss per share if the effect of such inclusion is anti-dilutive. The Company’s potentially dilutive securities include unvested common stock under the Company’s equity incentive plan which have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:

As of December 31,

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. The Company may take advantage of these exemptions until the Company is no longer an “emerging growth company.” Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, its consolidated financial statements may not be comparable to companies that comply with public company effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of the IPO or such earlier time that it is no longer an “emerging growth company.” As a result of the Company having elected the extended

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transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, 2016-13 and ASU 2019-11 are effective for the Company for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB or other standard-setting bodies that the Company adopts as of the specified effective date. The Company qualifies as an “emerging growth company” as defined in the JOBS Act of 2012 and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and non-public companies, the Company can adopt the new or revised standard at the time non-public companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for non-public companies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial statements and disclosures.

Effective January 1, 2022, the Company adopted ASC 842. Upon commencement of the Company's lease in December 2022, the Company recognized lease liabilities totaling $24.5 million and right-of-use assets totaling $26.5 million.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. The standard changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The effective date of this update is for fiscal years beginning after December 15, 2022, and interim periods therein. The Company adopted ASU 2016-13 effective January 1, 2023, with no material impact on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), or ASU 2019-12. The standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also improves consistent application by clarifying and amending existing guidance. The standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company adopted ASU 2019-12 effective January 1, 2023, with no material impact on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, or ASU 2023-07, to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption and retrospective application is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU 2023-07, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. ASU 2023-07 is effective for the Company beginning the year ended May 31, 2025. The Company is currently evaluating the impact of this ASU 2023-07 on its consolidated financial statements and related disclosures.

3. Fair Value Measurements

The following table sets forth marketable securities for the year ended December 31, 2023 (in thousands). The Company did not hold any marketable securities during the year ended December 31, 2022.

Amortized Cost Unrealized Gains Unrealized Losses Total

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The following table set forth the fair value of the Company’s financial assets measured at fair value on a recurring basis and indicates the level within the fair value hierarchy utilized to determine such values (in thousands):

Total Level 1 Level 2 Level 3

Cash Equivalents:

U.S. Treasury-backed money market funds $ 64,397 $ 64,397 — —

Marketable Securities:

Total Level 1 Level 2 Level 3

U.S. Treasury-backed money market funds $ 18,645 $ 18,645 — —

Money market funds are highly liquid investments that are valued based on quoted market prices in active markets, which represent a Level 1 measurement within the fair value hierarchy. These money market funds are classified on the balance sheet under cash and cash equivalents.

Preferred Stock Warrant Liability

In connection with the November 24, 2020 Stock Purchase Agreement (see Note 9), the Company granted warrants to purchase up to 35,529 shares of Series A-2 convertible preferred stock at a price per share equal to $11.42 and with a term ending upon the earlier of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, the consummation of a Deemed Liquidation Event, as such term is defined in the Company’s Restated Certificate of Incorporation, or 10 years. As the warrants were for preferred stock, which did not qualify for equity classification, the warrants were recorded as a liability and were required to be remeasured to fair value at each reporting date. The warrants were exercised on May 4, 2022, just prior to the completion of the IPO, for proceeds of $0.4 million. Immediately prior to the consummation of the IPO, the warrants were converted into 34,901 shares of the Company's common stock.

As there are several inputs that are not observable in the market, the warrant valuation represented a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the preferred stock warrants utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the preferred stock warrants.

The quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the preferred stock warrant liability included the fair value per share of the underlying Series A-2 convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock. The most significant assumption in the Black-Scholes option-pricing model impacting the fair value of the preferred stock warrants was the fair value of the Company’s Series A-2 convertible preferred stock as of each remeasurement date. The Company determined the fair value per share of the underlying preferred stock by taking into consideration its most recent sales of its convertible preferred stock. The Company historically had been a private company and lacked company-specific historical and implied volatility information of its stock. Therefore, it estimated its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company had estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends.

The Company recognized changes in the fair value of the warrant liability as a component of other income (expense) in its consolidated statements of operations and comprehensive loss.

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A reconciliation of the Level 3 warrant liability through exercise in the second quarter of 2022 was as follows (in thousands):

Series A-2 PreferredStock Warrant Liability

Change in fair value (58 )

Exercise of preferred stock warrants (168 )

Balance as of December 31, 2022 $ —

4. Property and Equipment, Net

The cost and accumulated depreciation of property and equipment were as follows (in thousands):

December 31,

Computer and office equipment 1,446 171

Construction in process 69 1,129

Less accumulated depreciation (1,572 ) (389 )

Total property and equipment, net $ 4,764 $ 3,335

Depreciation expense was $1.2 million and $0.5 million for the years ended December 31, 2023 and 2022, respectively.

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

December 31,

Taxes payable — 2,574

6. Leases

In December 2021, the Company entered into a non-cancellable operating lease agreement, or the Harrison Lease, pursuant to which the Company leases 31,668 square feet of office and laboratory space located in Boston, Massachusetts, or the Premises. The Harrison Lease commenced for accounting purposes when the Company gained access to the Premises on December 29, 2022, or the Lease Commencement Date. The Harrison Lease has a term of nine years and two months from the Lease Commencement Date. The Company’s obligation for the payment of base rent for the Premises began in May 2023, and is $0.2 million per month, increasing up to $0.3 million per month during the term of the Lease. The Company has one option to extend the term of the Harrison Lease, for a period of an additional five years. Due to the timing of the Lease Commencement Date at the end of 2022, there was no fixed lease rent expense associated with the Harrison Lease in 2022. At December 31, 2023, the Harrison Lease was the only lease for which the Company recorded a lease liability and corresponding right-of-use asset.

The landlord completed significant leasehold improvements to the Premises, a portion of which the Company was obligated to pay per the terms of the Harrison Lease. The Company paid $2.0 million for the improvements prior to lease commencement in 2022, and paid $3.4 million for the improvements in 2023, for total payments to the landlord for improvements of $5.4 million. The Company determined that the landlord is the accounting owner of the improvements, and payments by the Company for the improvements are included in the calculation of the right-of-use asset and lease liability.

During 2022 and the first quarter of 2023, the Company leased office space in Cambridge, Massachusetts, the terms of which were month-to-month, with a 30-day written notice of cancellation. The Company terminated this lease in January 2023. The Company also leased laboratory space at the University of Massachusetts, Mount Ida Campus in Newton, Massachusetts, with an

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initial lease term from February 1, 2022 to January 31, 2023, which the Company extended until March 2023. The Company also leased space at Innovation Building, University of Oxford in Oxford, U.K. The Company terminated its lease in Oxford in July 2022. All of these leases had initial terms of under 12 months and are considered short-term lease costs and are not recognized on the consolidated balance sheets.

Summary of Lease Costs

The components of lease cost under ASC 842 for the leases were as follows (in thousands):

Fixed lease cost $ 3,799 $ —

Variable lease cost 993 —

Supplemental disclosure of cash flow information under ASC 842 for the leases was as follows (in thousands):

Operating cash payments for operating leases $ 5,299

Cash payments for operating leases during 2023 related to tenant improvements of $3.4 million and $1.9 million in rent payments in line with the Harrison Lease. Additionally, the Company made payments on variable lease costs throughout the year of $1.0 million. These payments related to parking, management fees, and other costs associated with maintaining our office and lab space.

The remaining lease term for the Harrison Lease is 8.4years, and the discount rate is 8.0%.

Future minimum lease payments under the non-cancelable operating lease consisted of the following as of December 31, 2023:

Year Ending December 31, (in thousands)

Total future minimum lease payments $ 28,027

Less: imputed interest (7,923 )

Present value of lease liability $ 20,104

Included in the consolidated balance sheet (in thousands) December 31, 2023

Lease liability $ 3,004

Lease liability, net of current portion 17,100

Total lease liability $ 20,104

7. Related Party Transactions

Technology License Agreement with Oxford University Innovation Limited

In March 2018, the Company, Oxford University Innovation Limited, or OUI, and the Medical Research Council of United Kingdom Research and Innovation, or MRC (or collectively the Licensors), entered into a license of technology agreement, or the License Agreement, which was subsequently amended in December 2018 and further amended and restated in November 2020. The Licensors and affiliates held shares of Series A-1 and Series A-2 preferred stock, Series B preferred stock and Class A common stock. The License Agreement provides the Company with an exclusive world-wide license to licensed data and technology owned by OUI and MRC in respect of CPP for treatment of Duchenne muscular dystrophy, spinal muscular atrophy, and other conditions. The License Agreement provides the Company with the rights to grant and authorize sublicenses to make, use, sell, and import products and otherwise exploit the patent rights.

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As consideration for the license, the Company made an initial upfront payment in 2018, as well as a Restatement Completion Fee and a License Data Fee in 2020 totaling $0.1 million.

The Company could be required to make milestone payments to the Licensors upon achievement of certain patent and commercial milestones related to the patents and commercialization of certain of the Company’s product candidates. The aggregate potential milestone payments are $0.1 million. The Company also agreed to pay the Licensors low single digit royalties on net sales of any licensed products that are commercialized by the Company in excess of a threshold amount between £20 million and £30 million ($25.5 million and $38.2 million as of December 31, 2023), subject to certain adjustments. The term of the License Agreement continues until the later of (i) the date on which all the patents and patent applications covered thereunder have been abandoned or allowed to lapse or expired or been rejected or revoked or (ii) 20 years from the date of the original agreement.

Upon completion of the IPO, the Company became obligated to pay OUI an exit fee between 0.5% to 2% of the value determined in an acquisition or initial public offering, not to exceed £5 million ($6.2 million as of the IPO date). The exit fee due to OUI, based on the proceeds of the IPO, was $1.4 million, which was paid during the second quarter of 2022 and included in research and development expense on the consolidated statement of operations. One member of the Company’s board of directors is also employed by Oxford Science Enterprises, which is an affiliate by OUI.

Additionally, the Company paid office space rent to OUI. For the years ended December 31, 2023 and 2022, total rent payments were nil and $0.2 million, respectively. The Company paid $0.1 million during the years ended December 31, 2023 and 2022 to Oxford Science Enterprises as compensation for their board seat. As of December 31, 2023 and 2022, nil was due to OUI by the Company.

Services Agreement with RA Capital Management, L.P.

In November 2020, the Company entered into an agreement, or the Services Agreement, with Carnot Pharma, LLC, or Carnot, under which Carnot provided research and other services to the Company. Carnot is an entity controlled by RA Capital Management, L.P. Entities affiliated with RA Capital Management, L.P. purchased shares of Series A-2 convertible preferred stock in the Company’s preferred stock financing in November 2020 and May and July 2021. In addition, entities affiliated with RA Capital Management, L.P. purchased shares of the Company’s Series B convertible preferred stock in the Company’s preferred stock financing in July 2021. Two members of the Company’s board of directors are also affiliated with RA Capital Management, L.P.

Under the terms of the Services Agreement, the Company compensated Carnot on a fully burdened cost basis for personal time devoted to Company projects. In addition, the Company reimbursed Carnot on a costs basis for any subcontractor costs incurred. The Company paid Carnot on a quarterly basis, in arrears, for services performed and costs incurred. The Services Agreement was terminated in April 2022.

Expenses incurred by the Company under the Services Agreement with Carnot for the year ended December 31, 2023 and 2022, totaled nil and $0.1 million, respectively. Additionally, the Company paid $0.1 million during the years ended December 31, 2023 and 2022 to RA Capital Management, L.P. as compensation for their board seat. As of December 31, 2023 and 2022, nil was due to Carnot by the Company for services rendered under the Services Agreement.

8. Commitments and Contingencies

Legal proceedings

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and that such expenditures can be reasonably estimated.

The Company is not party to any litigation and does not have contingency reserves established for any litigation liabilities.

Other

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Company agrees to indemnify, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, including in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products. Further, the Company indemnifies its directors and officers who are, or were, serving at the Company’s request in such capacities. The Company’s maximum exposure under these arrangements is unknown as of December 31, 2023. The Company does not anticipate recognizing any significant losses relating to these arrangements. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements may be unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

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9. Convertible Preferred Stock and Stockholders’ Equity

Reverse Stock Split

On April 29, 2022, the Company filed a charter amendment to affect a 1.018 for 1 reverse stock split of its issued and outstanding shares of common stock, which resulted in a proportional adjustment to the existing conversion ratios for each series of the Company’s preferred stock. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split and adjustment of the preferred stock conversion ratios.

Series A-1 Convertible Preferred Stock and Series A-2 Convertible Preferred Stock

In connection with the November 24, 2020 Stock Purchase Agreement, the Company agreed to issue an aggregate of 3,939,069 shares of Series A-2 convertible preferred stock to new and existing investors at a price of $11.42 per share, in three closings, and elected to convert 1,348,693 shares of outstanding Class A and Class B common stock into 1,372,970 shares of Series A-1 convertible preferred stock. A total of 1,033,117 shares of Class A common stock held by certain founding investors and employees were not modified and continued to exist as Class A common stock. The Series A-1 and Series A-2 convertible preferred stock was converted to common stock immediately prior to the consummation of the IPO in May 2022 (see Note 1).

Series B Convertible Preferred Stock

In July 2021 the Company entered into the Series B Stock Purchase Agreement, whereby the Company agreed to issue and sold an aggregate of 7,234,766 shares of Series B convertible stock to new and existing investors at a per share price of $15.55 per share for aggregate gross proceeds of $112.5 million. The Series B convertible preferred stock was converted to common stock immediately prior to the consummation of the Company's IPO in May 2022 (see Note 1).

Common Stock

Under the Third Amended and Restated Certificate of Incorporation, dated May 10, 2022, the Company has the authority to issue a total of 500,000,000 shares of common stock (par value of $0.0001 per share) and 10,000,000 shares of undesignated preferred stock (par value of $0.0001 per share). In connection with the IPO, the Company re-designated all shares of Class A common stock as shares of common stock. Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No cash dividends have been declared by the board of directors during the year ended December 31, 2023 and December 31, 2022.

The Company has reserved the following shares of common stock for issuance, as follows:

December 31,

Authorized for future stock awards or option grants 1,091,187 901,462

Shares of Common Stock Subject to Repurchase

In November 2020, in connection with the Series A-2 convertible preferred stock financing, two founding stockholders entered into Stock Restriction Agreements, or Restriction Agreements, whereby 139,057 shares that were previously vested and not subject to repurchase became restricted and subject to repurchase. The repurchase rights lapsed as to 50% on the one-year anniversary of the Restriction Agreements and 50% on the second anniversary of the Restriction Agreements. Shares subject to repurchase by the Company are not deemed, for accounting purposes, to be outstanding until those shares vest and therefore are not included in the shares outstanding on the consolidated balance sheet.

In connection with the vesting restrictions placed on these previously vested shares, the Company was required to determine the measurement date fair value of the shares, which was $2.37 per share or $0.3 million in aggregate. The measurement date fair value of the restricted stock was recognized as stock-based compensation expense over the vesting period. As of December 31, 2023 and 2022, zero shares were subject to repurchase by the Company.

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10. Stock-Based Compensation

The Company maintains three equity compensation plans; the 2020 Stock Plan, or the 2020 Plan, the 2022 Stock Option Incentive Plan, or the 2022 Plan, and the 2022 Employee Stock Purchase Plan, or the ESPP. As of the Company's IPO in May 2022, the Company's board of directors determined that no further awards would be made from the 2020 plan. The number of shares of common stock that may be issued under the 2022 Plan is subject to increase by the number of shares under any outstanding stock options forfeited and not exercised under the 2020 Plan. Additionally, the number of shares reserved for issuance under the 2022 Plan automatically increases on the first day of each fiscal year in an amount equal to the lower of (1) 5% of the shares of common stock outstanding on such date and (2) an amount determined by the Company’s board of directors. The 2022 Plan allows the board of directors to grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, unrestricted stock awards, cash-based awards, and dividend equivalent rights to the Company’s officers, employees, directors and other key persons. As of December 31, 2023, 1,091,187 shares remained available for grant under the 2022 Plan and 216,306 shares remained available for grant under the ESPP.

Stock Option Valuation

In determining the fair value of the stock options granted, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment.

Expected Term—The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For stock options with service-based vesting periods, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

Expected Volatility—The Company has historically been a private company and lacks significant company-specific historical and implied volatility information. The expected volatility is estimated based the average historical volatilities for comparable publicly traded biotechnology companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle and area of specialty. The Company will continue to apply this process until enough historical information regarding the volatility of its own stock price becomes available.

Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

Expected Dividend Yield—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

The fair value of stock options was estimated using the following weighted average assumptions:

Year EndedDecember 31,

Risk-free interest rate % 4.19 % 2.95 %

Expected term (in years) 6.05 6.08

Expected dividend yield — —

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Stock Option Activity

Stock option activity under the 2020 Plan and 2022 Plan, are as follows:

The aggregate intrinsic value of stock options is calculated as the difference between the exercise prices of the stock options and the fair value of the Company's common stock for those stock options that had exercises prices lower than the fair value of the Company's common stock. The total intrinsic value of the stock options exercised during the years ended December 31, 2023 and 2022 was $1.4 million and $0.9 million, respectively. The intrinsic value is the difference between the estimated fair value of the Company’s common stock at the time of exercise and the exercise price of the stock option. During the years ended December 31, 2023 and 2022, the total proceeds to the Company from stock option exercises was $0.2 million and $0.2 million, respectively.

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2023 and 2022 was $8.56 and $7.66 per share, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense recognized for stock option grants included in the accompanying consolidated statements of operations and comprehensive loss is as follows (in thousands):

Year EndedDecember 31,

Total stock-based compensation expense $ 7,048 $ 4,763

The Company had 4,233,203 vested and unvested stock options outstanding as of December 31, 2023. As of December 31, 2023, total unrecognized compensation expense related to stock options was $20.2 million. This amount is expected to be recognized over a weighted average period of approximately 2.49 years.

11. Income Taxes

The Company’s loss before income taxes for the years ended December 31, 2023 and 2022 were generated in the following jurisdictions (in thousands):

Year EndedDecember 31,

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The foreign income for the year-ended December 31, 2022 was due to the transfer of intellectual property, or IP, from PepGen Limited to the parent company, PepGen Inc., in an arm’s length transaction at fair value pursuant to an asset transfer agreement.

The components of net deferred income taxes consisted of the following as of December 31, 2023 and 2022 (in thousands):

December 31,

Deferred tax assets:

Net operating loss carryforwards $ 8,038 $ 474

Research and development credits 4,547 1,287

Intangible asset amortization 7,425 6,879

Other, net 21 —

Deferred tax liabilities

Other, net — (2 )

Deferred tax liabilities (7,918 ) (6,280 )

Net deferred tax assets $ — $ —

The components of income tax expense were as follows for the years ended December 31, 2023 and 2022 (in thousands):

Year EndedDecember 31,

Current expense:

U.S. Federal $ — $ —

Deferred expense:

U.S. Federal — —

State — —

Foreign — —

Total deferred expense — —

Provision for income taxes $ 73 $ 3,706

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A reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to the loss from operations is summarized for the years ended December 31, 2023 and 2022, as follows:

Year EndedDecember 31,

Tax at statutory rate 21.0 % 21.0 %

State tax (net of federal benefit) (0.7 )% (0.0 )%

Permanent differences (0.4 )% (0.1 )%

Research and development credit 3.2 % 1.6 %

GILTI Inclusion 0.0 % (8.9 )%

U.K. R&D credit 0.0 % 0.0 %

Foreign rate differential 0.0 % (1.0 )%

Change in valuation allowance (23.9 )% (23.4 )%

Income tax expense (benefit) (0.8 )% (5.8 )%

The Company’s income tax expense was $0.1 million for the year ended December 31, 2023 and $3.7 million for the year ended December 31, 2022. The income tax expense for the year ended December 31, 2023 was state taxes on interest income generated from the Company's cash equivalents and marketable securities. The income tax expense for the year ended December 31, 2022 was due to the IP transfer noted in the paragraph below.

PEPG US Equity

PEPG · 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.

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

Item 9A. Controls and Procedures.

Item 9B. Other Information.

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

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

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

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

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

PEPG US Equity☆

PEPG · 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.

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

Item 9A. Controls and Procedures.

Item 9B. Other Information.

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

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

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

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

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

PEPG US Equity