SGMT US Equity☆

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

The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by such forward-looking statements as a result of many important factors, including those set forth in Part I of this Annual Report on Form 10-K under the caption “Risk Factors.” Please also see the section titled “Forward-Looking Statements”. We do not

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undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report.

Overview

We are a clinical-stage biopharmaceutical company developing novel therapeutics called fatty acid synthase (FASN) inhibitors that target dysfunctional metabolic and fibrotic pathways in diseases resulting from the overproduction of the fatty acid, palmitate. Our lead drug candidate, denifanstat, is an oral, once-daily pill and selective FASN inhibitor in development for the treatment of metabolic dysfunction-associated steatohepatitis (MASH), formerly known as nonalcoholic steatohepatitis (NASH). Denifanstat has been studied in over 740 people to date in our clinical trials, including our Phase 2 FASCINATE-1 and Phase 2b FASINATE-2 clinical trials.

In January 2024, we announced positive topline results from the Phase 2b FASCINATE-2 clinical trial evaluating denifanstat in 168 biopsy-confirmed MASH patients with stage F2 or F3 fibrosis compared to placebo at week 52. The Phase 2b FASCINATE-2 clinical trial achieved statistically significant results on primary and multiple secondary endpoints at week 52 in MASH patients in the modified intention to treat (mITT) population, including:

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Denifanstat showed also statistical significance in fibrosis improvement as measured by an artificial intelligence (AI) digital pathology-based qFibrosis assessment. Additionally, our precision medicine approach is core to our development strategy in MASH and includes the identification of pharmacodynamic and predictive biomarkers to confirm target engagement and clinical response in patients treated with denifanstat.

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In June 2024, we presented positive data from the Phase 2b FASCINATE-2 clinical trial of denifanstat versus placebo in biopsy-confirmed MASH patients at the European Association for the Study of the Liver (EASL) Congress. Our EASL presentation included the following 52-week data from the ITT, mITT, and F3 mITT patient populations:

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In October 2024, the U.S. Food and Drug Administration (FDA) granted Breakthrough Therapy designation to denifanstat for the treatment of non-cirrhotic MASH with moderate to advanced liver fibrosis (consistent with stages F2 to F3 fibrosis). Treatments that receive Breakthrough Therapy designation must target a serious or life-threatening disease and preliminary clinical evidence must indicate that the drug may demonstrate a substantial improvement over existing therapies on one or more clinically significant endpoints. Breakthrough Therapy designation of denifanstat was supported by positive data from the Phase 2b FASCINATE-2 clinical trial in biopsy-confirmed MASH patients with stage 2 or stage 3 fibrosis.

In October 2024, we announced the publication of results from the Phase 2b FASCINATE-2 clinical trial of denifanstat in The Lancet Gastroenterology & Hepatology. The publication, titled “Denifanstat for the treatment of metabolic-dysfunction associated steatohepatitis: a multicentre, double-blind, randomised, placebo-controlled, phase 2b trial,” reported that denifanstat treatment achieved statistically significant and clinically meaningful improvements in disease activity, MASH resolution and fibrosis.

In October 2024, we completed successful end-of-Phase 2 interactions with the FDA, supporting the advancement of denifanstat into Phase 3 clinical trials in MASH. Based on our ongoing discussions with the FDA, the Phase 3 program will consist of two double-blind, placebo-controlled multicenter registrational trials:

The Phase 3 program is designed to comprise a minimum of 1,800 patients exposed to denifanstat and was initiated in the fourth quarter of 2024. We expect to initiate screening in the Phase 3 program in the first half of 2025. We currently have insufficient funds to complete the Phase 3 program for denifanstat through topline data readout and are exploring various funding alternatives.

We are also evaluating the promise of FASN inhibition, beyond MASH, in additional disease areas in which dysregulation of fatty acid metabolism also plays a key role, including in acne and certain forms of cancer. Denifanstat is currently being tested in China by our license partner, Ascletis BioScience Co. Ltd. (Ascletis), a subsidiary of Ascletis Pharma Inc. (Ascletis Pharma), in a Phase 3 clinical trial for moderate to severe acne vulgaris and a Phase 3 clinical trial in recurrent glioblastoma multiforme (GBM) in combination with bevacizumab. In November 2024, Ascletis announced completion of enrollment of 480 patients in the acne Phase 3 clinical trial and that it expects to announce topline results in the second quarter of 2025. In March 2025, we announced the clearance of our Investigational New Drug (IND) application for a first-in-human Phase 1 clinical trial of our second FASN inhibitor, TVB-3567; we plan to initiate this Phase 1 trial in 2025. We expect the results of the Ascletis studies in GBM and acne, as well as the results of our planned Phase 1 clinical trial of TVB-3567, to inform our development strategy in acne, GBM and additional indications.

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Components of results of operations

License revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future. Our revenues to date have been generated solely from the license agreement with Ascletis. We expect that our revenue for the next several years will be derived primarily from this agreement and any additional collaboration into which we may enter.

Research and development expenses

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of our own product development efforts and include personnel-related costs (such as salaries, employee benefits and stock-based compensation) for our personnel in research and development functions; costs related to acquiring, developing and manufacturing supplies for preclinical studies, clinical trials and other studies, including fees paid to contract manufacturing organizations (CMOs); costs and expenses related to agreements with contract research organizations (CROs), investigative sites and consultants to conduct non-clinical and preclinical studies and clinical trials; professional and consulting services costs; and facility and other allocated costs.

All research and development expenses are charged to operations as incurred in accordance with Accounting Standards Codification 730, Research and Development. We account for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received, rather than when the payment is made.

We expect our research and development expenses to increase substantially for the foreseeable future as we advance our drug candidates into and through preclinical studies and clinical trials, pursue regulatory approval and expand our pipeline.

General and administrative expenses

Our general and administrative expenses consist primarily of costs and expenses related to: personnel (including salaries, employee benefits and stock-based compensation) in our executive, finance and accounting and other administrative functions; legal services, including relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; information technology; and facility and other allocated costs not otherwise included in research and development expenses.

We expect our general and administrative expenses to increase substantially for the foreseeable future as we increase our headcount and continue to grow our corporate infrastructure. We also anticipate that we will incur increased expenses as a result of operating as a public company, including expenses related to audit, legal and tax-related services associated with maintaining compliance with Securities and Exchange Commission (SEC) rules and regulations and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relations activities and other administrative and professional services.

Other income

Other income consists primarily of interest income earned on our cash, cash equivalents and marketable securities offset by accretion of discounts to maturity on our marketable securities.

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Results of operations

Comparison of the years ended December 31, 2024 and 2023

The following table summarizes our results of operations for the periods indicated (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31, ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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License revenue – License revenue for the year ended December 31, 2023 was $2.0 million, recognized from the license agreement with Ascletis. We did not recognize any license revenue during the year ended December 31, 2024.

Research and development – Research and development expense increased by $18.7 million, or 94%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. This increase was primarily due to (i) a $13.5 million net increase in clinical trial expenses related primarily to start-up costs incurred for our Phase 3 program of denifanstat in MASH, which was partially offset by lower clinical trial expenses for the Phase 2b FASCINATE-2 trial as the trial was substantially complete in the first quarter of 2024 and topline results for the trial were announced in January 2024, (ii) a $4.2 million increase in manufacturing costs for clinical batches of denifanstat in preparation for the Phase 3 clinical development program, and (iii) a $0.3 million increase in personnel related expenses largely driven by an increase in headcount.

General and administrative – General and administrative expenses increased by $3.0 million, or 24%, for the year ended December 31, 2024, compared to the year ended December 31, 2023 primarily due to (i) a $1.3 million increase in professional fees, largely due to our transition to a public company in 2023 and the related compliance costs, (ii) a $0.9 million increase in personnel related expenses, largely driven by an increase in headcount, and (iii) a $0.5 million increase in insurance expenses due to our transition to a public company.

Other income – Other income increased by $6.0 million, or 210%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to an increase of interest income earned on the cash proceeds received from our initial public offering (IPO) and the January 2024 follow-on offering.

Liquidity and capital resources

Sources and uses of cash

Since our inception, we have devoted substantially all of our resources to researching, discovering and developing our pipeline of proprietary FASN inhibitors and other drug targets, organizing and staffing our company, performing business planning, establishing our intellectual property portfolio, raising capital and general and administration activities to support and expand such activities. We do not have any products approved for sale and have not generated any revenue from product sales. Our revenues to date have been generated solely from the license agreement with Ascletis.

To date, we have financed our operations primarily through public and private equity and debt financings, including our IPO of Series A common stock in July 2023 and our follow-on offering in January 2024, from which we received aggregate net proceeds of $190.9 million. Prior to becoming a public company, we raised $233.3 million in gross proceeds from the sale of our redeemable convertible preferred stock and convertible notes.

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In August 2024, we entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (Cantor) to establish an at-the-market offering (ATM Offering) through which we may offer and sell, from time to time at our sole discretion, up to $75.0 million of shares of our Series A common stock through Cantor acting as our sales agent. There were no sales under the ATM Offering during the year ended December 31, 2024.

As of December 31, 2024, we had cash, cash equivalents and marketable securities of $158.7 million. We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our drug candidates, which we expect will take a number of years, if ever. We anticipate that we will continue to incur significant expenses for the foreseeable future as we continue to advance our drug candidates through preclinical and clinical trials; manufacture supplies for our preclinical studies and clinical trials; expand our corporate infrastructure, including the costs associated with being a public company; pursue regulatory approval of our drug candidates; hire additional personnel; acquire, discover, validate and develop additional drug candidates; and obtain maintain, expand and protect our intellectual property portfolio.

Until we can generate a sufficient amount of revenue from the commercialization of our drug candidates or additional revenue from collaboration agreements with third parties, if ever, we expect to finance our future cash needs through public or private equity or debt financings, third-party funding and marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. The sale of equity or convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financings may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our ability to raise additional funds may be adversely impacted by macroeconomic conditions, disruptions to and volatility in the credit and financial markets and geopolitical turmoil. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of or eliminate one or more of our research and development programs, including the Phase 3 program for denifanstat in MASH.

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

● slow enrollment and retention rate of subjects in our clinical trials;

● lack of adequate funding to continue clinical trials;

● subjects experiencing severe or unexpected drug-related adverse effects;

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A change in the outcome of any of these or other variables could significantly change our costs and timing associated with the development of our drug candidates. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such change.

We rely and will continue to rely on third parties in the conduct of our preclinical studies and clinical trials and for manufacturing and supply of our drug candidates. We have no internal manufacturing capabilities, and we will continue to rely on third parties for our preclinical study and clinical trial materials. Given our stage of development, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, if we obtain regulatory approval for any of our drug candidates, we also expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

We enter into contracts in the normal course of business for products and services, including contract research and contract manufacturing services, which include provisions allowing for termination under certain conditions and timelines. These contracts generally do not include payments for early termination and are considered cancellable contracts.

Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities as of December 31, 2024, will be sufficient for us to fund our operating expenses for at least the next 12 months from the issuance of our audited financial statements. Further, we currently have insufficient funds to complete the Phase 3 program for denifanstat through topline data readout and are exploring various funding alternatives for the continuation of the MASH clinical program.

Cash flows

The following table shows a summary of our cash flows for each of the periods presented below (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Net cash (used in) provided by: ​ ​

Net increase in cash and cash equivalents ​ $ 701 ​ $ 74,981

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Cash flows from operating activities - Net cash used in operating activities was $42.4 million for the year ended December 31, 2024, and primarily related to cash used to fund clinical development, manufacturing and other non-clinical activities for denifanstat, inclusive of clinical-batch manufacturing and other trial start-up costs for our Phase 3 program of denifanstat in MASH, as well as costs to build out our corporate infrastructure and costs associated with being a public company.

Net cash used in operating activities was $23.8 million for the year ended December 31, 2023 and primarily related to cash used to fund clinical development and other pre-clinical activities for denifanstat, primarily relating to the Phase 2b FASCINATE-2 trial for

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which topline results were announced in January 2024, as well as other costs to support our corporate infrastructure. Cash expenses were offset by the net $1.7 million development milestone received from Ascletis in connection with the Ascletis license agreement during the year ended December 31, 2023.

Cash flows from investing activities - Net cash used in investing activities was $61.7 million for the year ended December 31, 2024 and related to purchases of marketable securities of $108.1 million, partially offset by proceeds received from the sale and maturity of marketable securities of $46.4 million.

Net cash provided by investing activities was $12.6 million for the year ended December 31, 2023, which primarily related to proceeds from sales of marketable securities of $32.2 million, partially offset by purchases of marketable securities of $19.6 million.

Cash flows from financing activities - Net cash provided by financing activities was $104.8 million for the year ended December 31, 2024, which primarily related to net cash proceeds of $105.7 million received from the sale of Series A common stock in our January 2024 follow-on offering and $0.1 million in proceeds from stock option exercises during the period, offset by the payment of financing costs related to the January 2024 follow-on offering of $1.0 million.

Net cash provided by financing activities was $86.2 million for the year ended December 31, 2023, which related primarily to the proceeds from our IPO, net of underwriters’ commissions and discounts.

Critical accounting policies and estimates

We prepare our financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made and changes in estimates may occur.

While our significant accounting policies are described in more detail in Note 2 in our financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Accrued research and development expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers require advance payments; however, some invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary.

We base our expenses related to manufacturing, preclinical studies, clinical trials and other studies on our estimates of the services performed pursuant to contracts with research institutions, CROs and CMOs that conduct and manage such activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

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Revenue recognition

We recognize revenue from contracts when our customer obtains control of the promised goods or services, in an amount that reflects the consideration which we have received or expect to receive in exchange for those goods or services. We enter into collaboration and licensing arrangements that generally contain multiple elements or deliverables, which may include (i) licenses to our technology, (ii) research and development activities performed for the collaboration partner, (iii) participation on joint steering committees (JSCs), and (iv) the manufacturing of clinical or preclinical material. Payments under these arrangements typically include milestone payments upon achieving significant development events, research and development reimbursements, sales milestones, and royalties on future drug sales. We assess whether the promises in its arrangements with customers are considered distinct performance obligations that should be accounted for separately. Judgment may be required to determine whether the research and development services are distinct from the license to our intellectual property or participation on steering committees.

We use judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price. At the inception of each arrangement that includes milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the control of the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

Variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period. For arrangements that include sales-based royalties or milestone payments, for which the license is deemed to be the predominant item, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Stock-based compensation expense

We recognize stock-based compensation expense in an amount equal to the estimated grant date fair value of each option grant or stock award over the estimated period of service and vesting. This estimation of the fair value of each stock-based grant or issuance on the date of grant involves numerous assumptions by management. Although we calculate the fair value using the Black Scholes option pricing model, which is a standard option pricing model, this model still requires the use of numerous estimates, including, among others, the expected term of the award, the volatility of the underlying equity security, a risk-free interest rate, fair value of common stock, and expected dividends. The use of different values by management in connection with these estimates in the Black Scholes option pricing model could produce substantially different results.

For awards with service-based vesting conditions only, we recognize stock-based compensation expense on a straight-line basis over the requisite service or vesting period. For awards with service- and performance- based vesting conditions, we recognize stock-based compensation expense using the graded vesting method over the requisite service period beginning in the period in which the awards are deemed probable to vest, to the extent such awards are probable to vest. We recognize the cumulative effect of changes in the probability outcomes in the period in which the changes occur.

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 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.

Following our IPO, in connection with the accounting for granted stock options and other awards we may grant, the fair value of the common stock is determined based on the quoted market price of our Series A common stock.

Emerging growth company and smaller reporting status

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We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (the JOBS Act). Under the JOBS Act, emerging growth companies can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under

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the JOBS Act for emerging growth companies include an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation and less extensive disclosure about our executive compensation arrangements. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenues of $1.235 billion or more, (ii) December 31, 2028, (iii) the date on which we are deemed to be a large accelerated filer, under the rules of the SEC, which means the market value of equity securities that is held by non-affiliates exceeds $700.0 million as of the prior June 30th and (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Recently adopted accounting pronouncements

See “Notes to the Financial Statements—Note 2” included in our financial statements in Item 8 in this Annual Report for more information.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 34) 124

Balance Sheets 125

Statements of Operations and Comprehensive Loss 126

Statements of Cash Flows 128

Notes to the Financial Statements 129

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Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of Sagimet Biosciences Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Sagimet Biosciences Inc. (the "Company") as of December 31, 2024 and 2023, the related statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our 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 financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

San Francisco, California

March 12, 2025

We have served as the Company's auditor since 2015.

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SAGIMET BIOSCIENCES INC.

BALANCE SHEETS

(in thousands, except for share and per share amounts)

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​ ​ ​ ​ ​ ​ ​

​ ​ ​

​ ​ As of

​ ​ December 31, ​ December 31,

Assets ​ ​ ​ ​ ​ ​

Current assets: ​ ​

Prepaid expenses and other current assets ​ ​ 1,524 ​ ​ 1,749

Long-term marketable securities ​ ​ 7,408 ​ ​ —

Operating lease right-of-use assets ​ ​ 77 ​ ​ 73

Liabilities and stockholders’ equity ​ ​

Current liabilities: ​ ​

Operating lease liabilities ​ 78 ​ 65

Total current liabilities ​ 4,454 ​ 5,654

Commitments and contingencies (Note 6) ​ ​

Stockholders’ equity: ​ ​

Accumulated other comprehensive income ​ 230 ​ 30

Total liabilities and stockholders’ equity ​ $ 160,259 ​ $ 96,719

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

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SAGIMET BIOSCIENCES INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except for share and per share amounts)

​

​ ​ ​ ​ ​ ​ ​

​ Years Ended December 31,

License revenue ​ $ — ​ $ 2,000

​ ​ ​ ​ ​ ​ ​

Operating expenses: ​ ​ ​ ​ ​ ​

Other income: ​ ​ ​ ​ ​ ​

Change in fair value of Series A common stock warrant liability ​ ​ — ​ ​ 4

Interest income and other, net ​ ​ 8,887 ​ ​ 2,860

​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​

Other comprehensive income: ​ ​

Net unrealized income on marketable securities ​ 200 ​ 114

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

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SAGIMET BIOSCIENCES INC.

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STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​

Net loss — ​ — ​ — ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ (27,876) ​ — ​ (27,876)

Net loss — ​ — ​ — ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ (45,567) ​ — ​ (45,567)

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

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SAGIMET BIOSCIENCES INC.

STATEMENTS OF CASH FLOWS

(in thousands)

​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Cash flows from operating activities ​ ​

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

Accretion of discount on marketable securities ​ (1,253) ​ (37)

Non-cash operating lease expense ​ 145 ​ 139

Stock-based compensation expense ​ 5,288 ​ 4,990

Change in fair value of Series A common stock warrant liability ​ ​ — ​ ​ (4)

Changes in operating assets and liabilities: ​ ​ ​

Prepaid expenses and other current assets ​ (5) ​ (952)

Accounts payable, accrued expenses and other current liabilities ​ (907) ​ 120

Operating lease liabilities ​ (136) ​ (146)

Net cash used in operating activities ​ (42,435) ​ (23,766)

Cash flows from investing activities ​ ​

Purchases of marketable securities ​ ​ (108,087) ​ ​ (19,620)

Sales and maturities of marketable securities ​ 46,404 ​ 32,200

Net cash (used in) provided by investing activities ​ (61,683) ​ 12,580

Cash flows from financing activities ​ ​

Payment of financing costs ​ (1,045) ​ (3,518)

Proceeds from exercise of stock options ​ ​ 114 ​ ​ 6

Net cash provided by financing activities ​ 104,819 ​ 86,167

Net increase in cash and cash equivalents ​ 701 ​ 74,981

Cash and cash equivalents at beginning of period ​ 75,139 ​ 158

Cash and cash equivalents at end of period ​ $ 75,840 ​ $ 75,139

​ ​ ​ ​ ​ ​ ​

Supplemental non-cash investing and financing activities: ​ ​ ​ ​ ​ ​

Deferred financing costs included in accrued expenses ​ $ — ​ $ 323

Reclassification of common stock to Series A common stock ​ $ — ​ $ 1

​

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

​

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SAGIMET BIOSCIENCES INC.

NOTES TO THE FINANCIAL STATEMENTS

1. Description of Business and Basis of Presentation

Sagimet Biosciences Inc. (the Company), a Delaware corporation headquartered in San Mateo, California, is a clinical-stage biopharmaceutical company developing novel therapeutics called fatty acid synthase (FASN) inhibitors that target dysfunctional metabolic and fibroticpathways in diseases resulting from the overproduction of the fatty acid, palmitate. The Company’s lead drug candidate, denifanstat, is an oral, once-daily pill and selective FASN inhibitor for the treatment of metabolic dysfunction-associated steatohepatitis (MASH), formerly known as nonalcoholic steatohepatitis (NASH). In January 2024, the Company announced positive topline results from the Phase 2b FASCINATE-2 clinical trial evaluating denifanstat in biopsy-confirmed MASH patients with stage F2 or F3 fibrosis compared to placebo at week 52. In June 2024, the Company presented additional 52-week intention to treat (ITT) and F3 subgroup efficacy data from the Phase 2b FASCINATE-2 clinical trial.

In October 2024, the U.S. Food and Drug Administration (FDA) granted Breakthrough Therapy designation to denifanstat for the treatment of non-cirrhotic MASH with moderate to advanced liver fibrosis (consistent with stages F2 to F3 fibrosis). Breakthrough Therapy designation of denifanstat was supported by positive data from the Phase 2b FASCINATE-2 clinical trial in biopsy-confirmed MASH patients with stage 2 or stage 3 fibrosis.

In October 2024, the Company completed successful end-of-Phase 2 interactions with the FDA, supporting the advancement of denifanstat into Phase 3 in MASH. The program will include two Phase 3 trials: FASCINATE-3, evaluating patients with F2/F3 (non-cirrhotic) MASH, and FASCINIT, evaluating patients with suspected or confirmed diagnosis of metabolic dysfunction-associated steatotic liver disease (MASLD)/MASH. The Phase 3 program was initiated in the fourth quarter of 2024.

In addition to MASH, the Company is exploring the use of its FASN inhibitors in acne and in select forms of cancer, diseases in which dysregulation of fatty acid metabolism also plays a key role. Denifanstat is currently being tested in China by the Company’s license partner, Ascletis BioScience Co. Ltd. (Ascletis), a subsidiary of Ascletis Pharma Inc. (Ascletis Pharma), in a Phase 3 clinical trial for moderate to severe acne vulgaris and a Phase 3 trial in recurrent glioblastoma multiforme (GBM) in combination with bevacizumab. In November 2024, Ascletis announced completion of enrollment of 480 patients in the acne Phase 3 clinical trial. In March 2025, the Company announced the clearance of its Investigational New Drug (IND) application for a first-in-human Phase 1 clinical trial of the Company’s second FASN inhibitor, TVB-3567.

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted (GAAP) in the United States. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) promulgated by the Financial Accounting Standards Board (FASB).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates include accruals of research and development expenses, accrued costs for services rendered under agreements with third-party contract research organizations (CROs), preferred stock and common stock valuations prior to the Company’s initial public offering of Series A common stock (IPO) and stock option valuations and stock-based compensation. On an ongoing basis, the Company evaluates its estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Emerging growth company status

The Company is an emerging growth company (EGC) as defined in the Jumpstart Our Business Startups Acts of 2012, as amended (the JOBS Act), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act and has elected to use the extended transition period for complying with new or revised accounting standards. As a result of this election, the Company’s financial statements may not be comparable to those issued by companies that comply with the effective dates pursuant to public company FASB standards.

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Liquidity

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company will require substantial additional capital to fund its research and development and ongoing operating expenses. As of December 31, 2024, the Company has relied on public and private equity and debt financings and proceeds from licensing arrangements to fund its operations. The Company has incurred recurring losses and negative cash flows from operations since inception, and, as of December 31, 2024, had an accumulated deficit of $295.3 million and cash, cash equivalents and marketable securities of $158.7 million. The Company expects to incur additional losses and negative cash flows from operations for the foreseeable future.

In July and August 2023, the Company completed its IPO, and inclusive of the partial exercise of the underwriters’ overallotment option, the Company sold an aggregate of 6,026,772 shares of Series A common stock at a public offering price of $16.00 per share and received $86.2 million in net proceeds. In January 2024, the Company completed a follow-on offering whereby it sold 9,000,000 shares of its Series A common stock at price of $12.50 per share and received $104.7 million in proceeds, net of issuance costs of $7.8 million.

In August 2024, the Company entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. to establish an at-the-market offering (ATM Offering) through which the Company may sell, from time to time at its sole discretion up to $75.0 million of shares of its Series A common stock. There were no sales under the ATM Offering during the year ended December 31, 2024.

The Company expects that its cash, cash equivalents and marketable securities as of December 31, 2024 will be sufficient to fund the Company’s operating expenses for at least the next 12 months from the issuance of these financial statements. In the future, the Company will need to raise additional funds until it is able to generate sufficient revenues to fund its development activities, if ever. The Company’s future operating activities, coupled with its plans to raise capital or issue debt financing, may provide additional liquidity in the future, however these actions are not solely within the control of the Company and the Company is unable to predict the outcome of these actions to generate the liquidity ultimately required.

​

2. Significant Accounting Policies

Reverse stock split

A one-for-79.4784 reverse stock split of the Company’s issued and outstanding common stock was effected on July 7, 2023. Stockholders entitled to fractional shares as a result of the reverse stock split received a cash payment in lieu of receiving fractional shares. Accordingly, all share and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the effects of the reverse stock split. Shares of common stock underlying outstanding stock options and common stock warrants were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. Shares of common stock reserved for issuance upon the conversion of the Company’s preferred stock were proportionately reduced and the respective conversion prices were proportionately increased.

Segment information

The Company determines and presents operating segments based on the information that is regularly reviewed by the Chief Executive Officer, who is the Company’s chief operating decision maker (CODM), in accordance with Accounting Standards Codification (ASC) 280, Segment Reporting. The Company has determined that it operates as a single business segment, developing and commercializing therapeutics for the treatment of MASH and other diseases where FASN plays a pathogenic role. Refer to Note 11, Segment Reporting for further information related to the Company’s segment.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities. The Company holds cash, cash equivalents and marketable securities at third-party financial institutions, that may from time to time, be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits. However, the Company believes its risk of loss is minimal as the majority of its cash, cash equivalents and marketable securities are held in custodial accounts at multiple large financial institutions which are well established and of high quality. The Company has not experienced any losses to date.

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Cash and cash equivalents

The Company considers only those investments which are highly liquid, readily convertible to cash, or purchased with an original maturity of three months or less to be cash equivalents. Marketable securities are those investments with original maturities in excess of three months. As of December 31, 2024 and 2023, cash and cash equivalents consisted of bank deposits, deposits in money market funds as well as investments in certain Agency securities.

Marketable securities

The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the balance sheets. The Company adopted Accounting Standards Update (ASU) No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments on January 1, 2023. Marketable securities for which the estimated fair value is lower than amortized cost are evaluated for credit impairment. Credit impairment is recorded through the statements of operations and comprehensive loss via an allowance for credit losses account, and any remaining unrealized gains and losses are reported as a component of other comprehensive income (loss) within the statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than three months but less than one year as current assets on the balance sheets, and those with remaining maturities greater than one year are classified as long-term marketable securities. For all marketable securities which the estimated fair value was lower than the amortized cost as of December 31, 2024 and 2023, the decline in fair value was determined to not be driven by credit impairment. As of December 31, 2024, the Company has not recognized any impairment or credit losses on its available for sale securities.

Leases

The Company determines if an arrangement is or contains a lease and the classification of that lease at contract inception. Specifically, the Company considers whether it controls the underlying asset and has the right to obtain substantially all the economic benefits or outputs from the asset. The Company enters into lease agreements for its office facility and accounts for its lease obligations under ASU No. 2016-02, Leases (Topic 842). The Company’s operating lease asset is included in “operating lease right-of-use assets” ​(ROU assets) and the current portion of the operating lease liability is included in “operating lease liabilities” in the accompanying balance sheets. As of December 31, 2024 and 2023, the Company had no finance leases.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. Operating lease ROU assets are based on the corresponding lease liability adjusted for (i) payments made at or before the commencement date, (ii) initial direct costs incurred and (iii) tenant incentives under the lease. The Company does not account for renewals or early terminations unless it is reasonably certain to exercise these options at commencement. Operating lease expense is recognized on a straight-line basis over the lease term. The Company accounts for lease and non-lease components as a single lease component for operating leases. The Company does not record leases with terms of 12 months or less on the balance sheets.

As the implicit rate for the operating lease was not determinable, the Company used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The Company’s incremental borrowing rate was estimated to approximate the interest rate on a collateralized basis with similar terms and payments, in an economic environment where the leased asset is located. The Company determined the incremental borrowing rate by considering various factors, such as its credit rating, interest rates of similar debt instruments of entities with comparable credit rating, the lease term and the currency in which the lease was denominated.

Accrued research and development expense

Research and development expenses represent costs incurred in performing research, development and manufacturing activities in support of the Company’s product development efforts and include personnel-related costs (such as salaries, employee benefits and stock-based compensation) for personnel in research and development functions; costs related to acquiring, developing and manufacturing supplies for preclinical studies, clinical trials and other studies, including fees paid to contract manufacturing organizations (CMOs); costs and expenses related to agreements with CROs, investigative sites and consultants to conduct non-clinical and preclinical studies and clinical trials; professional and consulting services costs; and facility and other allocated costs.

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All research and development expenses are charged to operations as incurred in accordance with ASC 730, Research and Development. Advance payments for goods or services for future research and development activities are deferred and expensed as the goods are delivered or the related services are performed.

​

The Company estimates its manufacturing, preclinical study, clinical trial and other study expenses based on the services performed pursuant to contracts with research institutions, CROs and CMOs that conduct and manage such activities on the Company’s behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. These estimates are based on communications with the third-party service providers and the Company’s estimates of accrued expenses and on information available at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. There have been no material changes in estimates for the periods presented.

Redeemable convertible preferred stock

The Company recorded its redeemable convertible preferred stock at fair value on the dates of issuance, net of issuance costs. The redeemable convertible preferred stock was recorded outside of stockholders’ deficit because the shares contained liquidation features that were not solely within the Company’s control. The Company did not adjust the carrying values of the redeemable convertible preferred stock to the liquidation preferences of such shares because it was uncertain whether or when an event would occur that would obligate the Company to pay the liquidation preferences to holders of shares of redeemable convertible preferred stock. Upon the closing of the IPO in July 2023, the redeemable convertible preferred stock automatically converted to shares of Series A and Series B common stock.

Common stock warrants

From time to time, the Company has issued warrants to investors and creditors together with the Company’s debt and equity financings. The Company accounts for warrants in accordance with the guidance contained in ASC 815, Derivatives and Hedging. Under ASC 815-40, warrants that meet the criteria for equity treatment are recorded in stockholders’ equity. The warrants are subject to re-evaluation of the proper classification and accounting treatment at each reporting period. If the warrants no longer meet the criteria for equity treatment, they will be recorded as a liability and remeasured each period with changes recorded in the statement of operations and comprehensive loss. The Company values warrants using an option pricing model.

Revenue recognition

The Company enters into collaboration and licensing arrangements that generally contain multiple elements or deliverables, which may include (i) licenses to the Company’s technology, (ii) research and development activities performed for the collaboration partner, (iii) participation on joint steering committees (JSCs), and (iv) the manufacturing of clinical or preclinical material. Payments pursuant to these arrangements include milestone payments upon achieving significant development events, research and development reimbursements, sales milestones, and royalties on future sales. Variable consideration is constrained until it is probable that the revenue is not at a significant risk of reversal in a future period.

In determining the appropriate amount of revenue to be recognized for the components of the arrangements that are within the scope of ASC 606, Revenue from Contracts with Customers (ASC 606), the Company performs the following steps: (i) identification of the promised goods or services in the contract within the scope of ASC 606; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must use significant judgment to determine: a) the number of performance obligations based on the determination under step (ii) above; b) the transaction price under step (iii) above; c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above; and d) the measure of progress in step (v) above. The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below.

At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered

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probable of being achieved until those approvals are received. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

For arrangements that include sales-based royalties or milestone payments, for which the license is deemed to be the predominant item, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Stock-based compensation expense

The Company provides share-based payments in the form of stock options and restricted stock awards. For awards only subject to service conditions, the Company uses the straight-line attribution method for recognizing compensation expense over the requisite service period, which is generally the vesting period of the award. Compensation expense is recognized on awards ultimately expected to vest. Forfeitures are recorded when they occur.

For awards with performance vesting conditions, the Company evaluates the probability of achieving the performance condition at each reporting date. No compensation expense is recognized for awards subject to performance conditions until it is probable that the performance condition will be met. If the performance condition is probable of being achieved, the Company recognizes expense for such performance awards over the requisite service period using the accelerated attribution method.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Due to the lack of trading history, the Company’s computation of expected stock volatility is based on the volatility rates of comparable publicly held companies over a period equal to the expected term of the option. The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The Company’s computation of expected term is determined using the simplified method, which represents the average of the contractual term of the options and the weighted-average expected vesting period. The Company believes that it does not have sufficient reliable exercise data in order to justify the use of a method other than the simplified method of estimating the expected exercise term of employee stock option grants. For non-employee stock option grants, the Company has the option to utilize either the expected term or the contractual term, determined on an award-by-award basis. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the option. The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividends to stockholders and has no current intentions to pay cash dividends.

Prior to the Company’s IPO, there was no public market for the Company’s common stock, and consequently, the estimated fair value of the common stock was determined by the board of directors as of the date of each option grant, with input from management, considering third-party valuations of the Company’s common stock as well as the 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.

Following the Company’s IPO, in connection with the accounting for stock options and other awards the Company may grant, the fair value of the common stock is determined based on the quoted market price of the Company’s Series A common stock.

Income taxes

The Company accounts for income taxes using the asset and liability method. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates. In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. In the event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance that would reduce the provision for income taxes. Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period when such determination is made. As of December 31, 2024 and 2023, the Company has recorded a full valuation allowance on its deferred tax assets.

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Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit. Interest and penalties related to unrecognized tax benefits are included within the provision for income tax.

Net loss per share attributable to common stockholders

Basic and diluted net loss per share is computed using the two-class method required for multiple classes of common stock and participating securities. The Company’s participating securities do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders for all periods presented. Basic net loss per common share attributable to common stockholders is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share attributable to common stockholders’ calculation, common stock options, restricted stock units and common stock warrants are considered to be potentially dilutive securities. As the Company has reported a net loss for the periods presented, basic and diluted net loss per share attributable to common stockholders is the same as all potentially dilutive securities would have an anti-dilutive impact.

On July 18, 2023, each share of the Company’s common stock issued and outstanding became reclassified as one share of Series A common stock. Any stock certificate that immediately prior to July 18, 2023, represented shares of the Company’s common stock was deemed to represent shares of Series A common stock, without the need for surrender or exchange thereof. Additionally, in connection with the IPO, the Company’s outstanding redeemable convertible preferred stock automatically converted into 15,117,912 shares of Series A common stock and 1,520,490 shares of Series B common stock. The rights of the holders of Series A common stock and Series B common stock are substantially identical, except with respect to voting and conversion. Each share of Series A common stock is entitled to one vote, and shares of Series B common stock are non-voting, except as may be required by law. Each share of Series B common stock may be converted at any time into one share of Series A common stock at the option of its holder, subject to certain ownership limitations. As such, basic and diluted net loss per share attributable to common stockholders is presented on a combined basis as undistributed earnings, when allocated to each series of common stock, result in the same net loss per share for all periods presented.

The following table presents the calculation of basic and diluted net loss per share for the years ended December 31, 2024 and 2023 (in thousands, except share and per share data):

​

​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Numerator: ​ ​ ​ ​ ​ ​

Denominator: ​ ​ ​ ​ ​ ​

​

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of Series A and Series B common stock outstanding, as their effect would have been anti-dilutive:

​

​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Warrants to purchase Series A common stock ​ 1,000 ​ 1,000

​

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Foreign currency translation

The Company considers the U.S. dollar to be its functional currency. Expenses denominated in foreign currencies are translated at the exchange rate on the date the expense is incurred. The effect of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars is included in the statements of operations and comprehensive loss. Foreign exchange transaction gains and losses are included in the results of operations and are not material in the Company’s financial statements.

Recently adopted accounting pronouncements

The Company considers the applicability and impact of all ASUs. ASUs not discussed below were assessed and either determined to be not applicable or expected to have minimal impact on the Company’s financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures. ASU 2023-07 requires disclosure of incremental segment information on an interim and annual basis and provides new segment disclosure requirements for entities with a single reportable segment. ASU 2023-07 is effective for all public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company adopted ASU 2023-07 using a retrospective transition method beginning with this Annual Report. See Note 11, Segment Reporting, for the updated segment disclosures as a result of adopting this ASU.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40); Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. This amendment is effective for fiscal years beginning after December 15, 2023, including interim periods within. Effective January 1, 2024, the Company adopted ASU 2020-06. The adoption of this standard had no impact on the Company’s financial statements and related disclosures.

New accounting pronouncements not yet adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires public business entities to disclose, for interim and annual reporting periods, additional information about certain income statement expense categories. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently evaluating the impact of the adoption of this standard on its financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures, a final standard on improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions and applies to all entities subject to income taxes. The new standard is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of the adoption of this standard on its financial statements and related disclosures.

​

3. Fair Value Measurements and Fair Value of Financial Instruments

The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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As of December 31, 2024 and 2023, financial assets measured at fair value on a recurring basis consist of cash equivalents and marketable securities. Cash equivalents consist primarily of money market funds and other investments that are readily convertible into cash and have maturities of three months or less at the time of acquisition. The fair value of cash equivalents was $75.3 million and $74.1 million as of December 31, 2024 and, 2023, respectively. The Company considers marketable securities with maturities greater than three months at the time of acquisition to be available for sale securities. The fair value of available for sale maturities was $82.8 million and $19.8 million as of December 31, 2024, and 2023, respectively. These available for sale securities have expected maturities ranging from 0.2 to 13.7 months, and securities with an expected maturity greater than 12 months as of the balance sheet date, are classified in long-term. The fair value of marketable securities, which are Level 2 financial instruments, is based upon market prices quoted on the last day of the fiscal period or other observable market inputs. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker-dealer quotes, bids and/or offers.

The Company evaluates securities with unrealized losses, if any, to determine whether the decline in fair value has resulted from credit loss or other factors, including various qualitative factors. As of December 31, 2024, the Company has not recognized any impairment or credit losses on the Company’s available for sale securities. While the Company classifies these securities as available for sale, the Company does not intend to sell its investments and based on its current plans, the Company currently believes it has the ability to hold these investments until maturity.

The carrying values of the Company’s accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company’s Level 3 liabilities that are measured at fair value on a recurring basis consist of the Series A common stock warrant liability related to the warrant to purchase 1,000 shares of Series A common stock with an exercise price of $69.94 per share and an expiration date of July 18, 2026, the third anniversary date of the closing of the Company’s IPO. The fair value of Series A common stock warrant liability was immaterial as of December 31, 2024 and 2023, as well as the change in fair value during the years ended December 31, 2024 and 2023. There were no transfers within the hierarchy during the periods presented.

The following tables set forth the Company’s financial assets that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Valuation Amortized Unrealized Unrealized ​

​ ​ ​ Hierarchy ​ cost ​ Gains ​ Losses ​ Fair Value

Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Money market funds ​ ​ Level 1 ​ $ 72,800 ​ $ — ​ $ — ​ $ 72,800

U.S. Treasury securities ​ ​ Level 2 ​ ​ 2,477 ​ ​ — ​ ​ — ​ ​ 2,477

Total cash equivalents ​ ​ ​ ​ ​ 75,277 ​ ​ — ​ ​ — ​ ​ 75,277

Short-term marketable securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Corporate debt securities ​ ​ Level 2 ​ ​ 6,909 ​ ​ 7 ​ ​ — ​ ​ 6,916

U.S. Treasury securities ​ ​ Level 2 ​ ​ 27,493 ​ ​ 123 ​ ​ — ​ ​ 27,616

Asset-backed securities ​ ​ Level 2 ​ ​ 5,030 ​ ​ 22 ​ ​ — ​ ​ 5,052

Long-term marketable securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

U.S. Treasury securities ​ ​ Level 2 ​ ​ 4,884 ​ ​ 36 ​ ​ — ​ ​ 4,920

Asset-backed securities ​ ​ Level 2 ​ ​ 2,480 ​ ​ 8 ​ ​ — ​ ​ 2,488

Total long-term marketable securities ​ ​ ​ ​ ​ 7,364 ​ ​ 44 ​ ​ — ​ ​ 7,408

​

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ Valuation Amortized Unrealized Unrealized ​

​ ​ ​ Hierarchy ​ cost ​ Gains ​ Losses ​ Fair Value

Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash equivalents: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Money market funds ​ ​ Level 1 ​ $ 69,516 ​ $ — ​ $ — ​ $ 69,516

Corporate debt securities ​ ​ Level 2 ​ ​ 4,622 ​ ​ — ​ ​ — ​ ​ 4,622

Total cash equivalents ​ ​ ​ ​ ​ 74,138 ​ ​ — ​ ​ — ​ ​ 74,138

Short-term marketable securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Corporate debt securities ​ ​ Level 2 ​ ​ 2,945 ​ ​ 4 ​ ​ — ​ ​ 2,949

U.S. Treasury securities ​ ​ Level 2 ​ ​ 6,904 ​ ​ 7 ​ ​ — ​ ​ 6,911

Total short-term marketable securities ​ ​ ​ ​ ​ 19,728 ​ ​ 30 ​ ​ — ​ ​ 19,758

​

​

4. Prepaid Expenses and Other Current Assets

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

​ ​ ​ ​ ​ ​ ​

​ ​

​ ​ As of December 31,

Prepaid clinical costs ​ $ 436 ​ $ 767

Prepaid research and development costs ​ ​ 48 ​ ​ —

Prepaid insurance ​ ​ 577 ​ ​ 585

Deferred financing costs (1) ​ ​ 306 ​ ​ 323

Total prepaid expenses and other current assets ​ $ 1,524 ​ $ 1,749

____________

​

​

5. Accrued Expenses and Other Current Liabilities

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

​ ​ ​ ​ ​ ​ ​

​ ​

​ ​ As of December 31,

Accrued payroll-related costs ​ $ 1,358 ​ $ 1,105

Accrued clinical costs ​ ​ 528 ​ ​ 2,668

Accrued research and development costs ​ ​ 516 ​ ​ 632

Accrued general and administrative costs ​ ​ 544 ​ ​ 442

Accrued offering costs ​ ​ — ​ ​ 323

Total accrued expenses and other current liabilities ​ $ 2,951 ​ $ 5,403

​

​

​

6. Commitments and Contingencies

License and other agreements

Ascletis BioScience Co. Ltd

In January 2019, the Company entered into a license agreement that became effective in February 2019 with Ascletis BioScience Co. Ltd. (Ascletis), a subsidiary of Ascletis Pharma Inc. (Ascletis Pharma), a biotechnology company incorporated in the Cayman

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Islands and headquartered in Hangzhou, China. Ascletis Pharma, through a subsidiary, was the lead investor in the Company’s Series E redeemable convertible preferred stock financing in February 2019. The parties entered into this agreement with the intention to develop, manufacture, and commercialize the Company’s proprietary FASN inhibitor, denifanstat, which Ascletis refers to as ASC40. Under the terms of the license agreement, the Company granted Ascletis and its affiliates an exclusive, royalty-bearing sublicensable right and license under the Company’s intellectual property to develop, manufacture, commercialize and otherwise exploit denifanstat and other products containing denifanstat-related compounds in Greater China, consisting of the People’s Republic of China, Hong Kong, Macau and Taiwan.

The Company is eligible to receive development and commercial milestone payments from Ascletis in aggregate of up to $122.0 million as well as tiered royalties ranging from percentages in the high single digits to mid-teens on future net sales of denifanstat in Greater China. The license and the research and development services components of this license agreement are representative of a relationship with a customer, and therefore, the Company evaluated the license agreement under the provisions of ASC 606, Revenue from Contracts with Customers. The developmental and commercial event-based milestone payments represent variable consideration, and the Company used the most likely amount method to estimate this variable consideration because the potential milestone payment is a binary event, as the Company will either receive the milestone payment or it will not. Given the high degree of uncertainty around achievement of these milestones, the Company determined the milestone amounts to be fully constrained and will not recognize revenue until the uncertainty associated with these payments is resolved. Any consideration related to royalties will be recognized if and when the related sales occur. The Company re-assesses the transaction price in each reporting period and when events whose outcomes are resolved or other changes in circumstances occur.

In July 2023, the Company recognized $2.0 million of revenue related to a development milestone triggered by the initial dosing of a Phase 3 trial for recurrent glioblastoma multiforme (GBM), of which $1.7 million was received from Ascletis in August 2023, net of applicable taxes, which are recorded in general and administrative expense in the statement of operations and comprehensive loss.

In July 2023, the Company entered into an Assignment and Assumption Agreement with Ascletis and Ascletis’ affiliate Gannex Pharma Co., Ltd. (Gannex) under which Ascletis, while remaining responsible for performance under the license agreement, assigned all of its rights and obligations under the license agreement to Gannex and Gannex assumed such rights and obligations, effective as of October 2019.

Contract Research Organization

In June 2024, the Company entered into a contract with a global CRO to perform certain research and related services in connection with certain of the Company’s clinical trials and research studies (CRO Services Agreement). The terms of the CRO Services Agreement require the Company to pay to the CRO certain direct fees, investigator grants and other pass-through costs, generally on an upfront prepaid basis. These payments are capitalized at the time of payment and expensed in the period in which the research and development activity is performed. The Company may terminate the CRO Services Agreement or underlying statement of work at will, with 60 days’ written notice.

Facility Lease Agreement

On March 12, 2019, the Company executed a 38-month non-cancelable operating lease agreement for 3,030 square feet of office space for its headquarters facility in San Mateo, California, which commenced April 1, 2019. The lease provides for monthly lease payments of approximately $12,000 with annual increases. In December, 2021, the lease agreement was amended to extend the term of the lease through June 2024; in April 2024, the Company amended the lease agreement to (i) extend the lease through June 30, 2025 and (ii) increase the monthly lease payment to approximately $13,000 beginning on July 1, 2024, which resulted in an increase in the Company’s operating lease right-of-use asset and corresponding operating lease liability of $0.1 million on the amendment date.

Operating lease costs were $0.2 million and $0.2 million for the years ended December 31, 2024, and 2023, respectively.

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The following is a schedule by year of future maturities of the Company’s operating lease liabilities (in thousands):

​

​ ​ ​ ​

​ ​ ​

​ ​ Operating Leases

Year ending December 31, ​ ​ ​

Total lease payments ​ 80

Less: present value discount ​ (2)

Present value of lease liabilities ​ $ 78

​

Supplemental cash flow information related to leases was as follows (in thousands):

​ ​ ​ ​ ​ ​ ​

​ Years Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities: ​ ​

Operating cash flows from operating leases ​ $ 159 ​ $ 158

​

Weighted-average remaining lease term and discount rate were as follows as of December 31, 2024:

​

​ ​ ​ ​

Weighted-average remaining lease term ​ 0.5 years

Weighted-average discount rate ​ 9 %

​

​

Guarantees and indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As of December 31, 2024, the Company does not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.

Legal Proceedings

From time to time, the Company may become involved in various legal proceedings that arise in the ordinary course of its business. The Company records a liability for such matters when it is probable that future losses will be incurred and that such losses can be reasonably estimated. Significant judgment by the Company is required to determine both probability and the estimated amount. The Company is not party to any material legal proceedings as of December 31, 2024.

​

7. Stockholders’ Equity (Deficit)

Common stock

As of December 31, 2024 and 2023, the Company had authorized 500,000,000 shares of Series A common stock, $0.0001 par value per share, and 15,000,000 shares of Series B common stock, $0.0001 par value per share. Holders of Series A common stock are entitled to one vote and Series B common stock are not entitled to vote. Upon the voluntary or involuntary liquidation, dissolution or winding up of the Company, the net assets of the Company will be distributed pro rata to the holders of Series A common stock and Series B common stock. Each share of Series B common stock is convertible, at any time at the option of the holder, into one share of Series A common stock, unless that holder would beneficially own a number of Series A common stock in excess of 4.99% of the total number of shares of Series A common stock then issued and outstanding. On July 18, 2023, upon the Company’s IPO, each share of the Company’s common stock issued and outstanding became reclassified as one share of Series A common stock (see Note 2).

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Undesignated preferred stock

As of December 31, 2024 and 2023, the Company had authorized 10,000,000 shares of undesignated preferred stock, $0.0001 par value per share, of which none were issued and outstanding.

​

8. Stock-Based Compensation

The 2023 Stock Option and Incentive Plan (2023 Plan) was adopted by the board of directors, approved by the Company’s stockholders on July 4, 2023, and became effective on July 13, 2023, replacing the 2017 Equity Incentive Plan. The number of shares initially reserved for issuance under the 2023 Plan was 2,585,968. Under the 2023 Plan, the amount of shares reserved for issuance automatically increases each January 1, by (i) 4% of the outstanding number of shares of the Company’s Series A common stock on the immediately preceding December 31 or (ii) a lesser number of shares as determined by the compensation committee of the board of directors. On January 1, 2024, in accordance with the 2023 plan, the shares reserved for issuance automatically increased by 855,016 shares. As of December 31, 2024, the aggregate maximum number of shares reserved for issuance under the 2023 Plan was 3,440,984, of which 1,729,910 shares were available for future grant. Option grants issued under the 2023 Plan are exercisable for up to 10 years from the date of issuance.

In connection with the 2023 Plan, the number of shares reserved for issuance under the 2023 plan was automatically increased by 1,226,994 shares, effective January 1, 2025.

In March 2024, the Company established a pool of 1,000,000 shares of Series A common stock (Inducement Pool) from which equity grants in the form of options and restricted stock units may be issued as inducement for new employees to accept employment offers from the Company or individuals returning to employment after a bona fide period of non-employment with the Company. Inducement Pool grants are granted outside of the 2023 Plan and do not require approval from the Company’s stockholders pursuant to the Nasdaq inducement grant exception in accordance with Nasdaq Listing Rule 5635(c)(4). As of December 31, 2024, 104,017 shares were available for future grants from the Inducement Pool.

Total stock-based compensation recorded in the statements of operations and comprehensive loss related to stock options and restricted stock units for employees and non-employees was as follows (in thousands):

​ ​ ​ ​ ​ ​ ​

​ Years Ended December 31,

Restricted stock units ​ 1,061 ​ 158

Total stock-based compensation expense ​ $ 5,288 ​ $ 4,990

Included in: ​ ​ ​ ​ ​ ​

General and administrative expense ​ $ 4,306 ​ $ 4,171

Research and development expense ​ 982 ​ 819

Total stock-based compensation expense ​ $ 5,288 ​ $ 4,990

​

Stock Options

The Company grants stock options which consist of (i) time-based options, which vest and become exercisable, subject to the participant’s continued employment or service through the applicable vesting date and (ii) performance-based options, which vest based on performance measures against predetermined objectives that include successful completion of qualified equity offerings or announced topline results for clinical trials and positive clinical results over a specified performance period. The Company’s time-based options have various vesting schedules that range from vesting immediately to vesting over a four-year period.

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The following table summarizes stock option activity (in thousands, except share and per share data):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ Weighted- ​ ​

​ ​ Number of ​ ​ ​ ​ Average ​ ​ ​

​ ​ Shares ​ Weighted- ​ Remaining ​ ​ ​

​ ​ Underlying ​ Average ​ Contractual ​ Aggregate

​ ​ Outstanding ​ Exercise ​ Term ​ Intrinsic

​ ​ Options ​ Price ​ (in Years) ​ Value

Options exercised ​ (17,995) ​ ​ 6.36 ​ ​ ​ ​ ​

Options forfeited/expired (900,726) ​ ​ 8.21 ​ ​ ​

_______

During the years ended December 31, 2024 and 2023, the weighted average grant-date fair value per share of stock options granted was $3.26 and $10.28, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2024 and 2023 was $0.1 million and $0.1 million, respectively. Additionally, during the years ended December 31, 2024 and 2023, cash received from the exercise of stock options was $0.1 million and approximately $6,000, respectively.

As of December 31, 2024, there was $8.5 million of unrecognized compensation expense, which is expected to be recognized over a remaining weighted-average period of 2.3 years.

Restricted stock units

The Company’s restricted stock units generally vest over a four-year period in equal amounts on an annual basis, provided the employee remains continuously employed with the Company. The fair value of the restricted stock units is equal to the closing price of the Company’s Series A common stock on the grant date.

The following table summarizes restricted stock unit activity:

​

​ ​ ​ ​ ​ ​

​ ​ ​ ​ Weighted-Average

​ Restricted Grant Date

​ Stock Units Fair Value

​

As of December 31, 2024, the total unrecognized compensation expense related to unvested restricted stock units was $2.1 million, which is expected to be recognized over a remaining weighted-average period of 2.5 years.

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Valuation assumptions

The fair value of each stock option granted was estimated on the date of grant using the Black-Scholes option pricing model using the following assumptions:

​

​ ​ ​ ​ ​ ​ ​

​ Years Ended December 31,

Expected volatility 91 - 96 % ​ 89 - 91 %

Risk-free interest rate 3.6 - 4.5 % ​ 3.6 %

Dividend yield — ​ —

Expected term (in years) 5.3 - 6.1 ​ ​ 5.0 - 7.0 ​

​

The expected term is determined using the simplified method, which represents the average of the contractual term of the options and the weighted-average expected vesting period. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the option. The expected stock volatility rate is based on the volatility rates of comparable publicly held companies over a period equal to the expected term of the option. The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividends to stockholders and has no current intentions to pay cash dividends.

​

Employee stock purchase plan

The 2023 Employee Stock Purchase Plan (the ESPP) was adopted by the board of directors in July 2023 with an initial total of 215,497 shares of Series A common stock reserved for issuance. Under the ESPP, the amount of shares reserved automatically increases each January 1 through January 1, 2033, by the least of (i) 215,497 shares of Series A common stock, (ii) 1% of the outstanding number of shares of the Company’s Series A common stock on the immediately preceding December 31 or (iii) such lesser number of shares of Series A common stock as determined by the administrator of the ESPP. On January 1, 2024, in accordance with the ESPP, the authorized shares were increased by 213,754 shares for a total of 429,251 shares of Series A common stock available under the ESPP. No shares of Series A common stock have been issued under the ESPP to date.

​

In connection with the ESPP, the number of shares reserved by issuance under the ESPP was automatically increased by 215,497 shares, effective January 1, 2025.

​

9. Income Taxes

For the years ended December 31, 2024, and 2023, the Company did not record a provision or benefit for federal or state income taxes, as the Company has incurred a net loss for all periods presented and the Company has provided a full valuation allowance against its net deferred tax assets.

A reconciliation between the federal statutory tax rates and the Company’s effective tax rate for the years ended December 31, 2024, and 2023, is as follows:

​

​ ​ ​ ​ ​ ​ ​

​ Years Ended December 31,

Federal income taxes at statutory rates 21.00 % ​ 21.00 %

State income tax, net of federal benefit 0.51 ​ ​ 0.54 ​

Research and development credits 4.73 ​ ​ 2.92 ​

Stock-based compensation ​ (1.55) ​ ​ 1.49 ​

Change in valuation allowance ​ (24.69) ​ ​ (25.95) ​

Effective income tax rate ​ — % ​ — %

​

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents significant components of the Company’s net deferred tax assets as of December 31, 2024 and 2023 (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ As of December 31,

Deferred tax assets: ​ ​ ​ ​ ​

Net operating loss carryforwards $ 35,045 ​ $ 31,097

Capitalized start-up costs and research expenses ​ 20,137 ​ ​ 15,409

Research and development credits ​ ​ 8,265 ​ ​ 5,943

Accruals, reserves and other ​ ​ 270 ​ ​ 312

Lease liabilities ​ ​ 16 ​ ​ 14

Total deferred tax assets ​ ​ 16 ​ ​ 43

Deferred tax liabilities: ​ ​ ​ ​ ​ ​

Right-of-use assets ​ ​ (16) ​ ​ (15)

Other ​ ​ — ​ ​ (28)

Total deferred liabilities ​ ​ (16) ​ ​ (43)

Net deferred tax assets ​ $ — ​ $ —

​

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of December 31, 2024, and 2023. The valuation allowance increased $11.3 million and $7.3 million during the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, the Company had U.S. federal net operating loss carryforwards (NOLs) of approximately $158.4 million which may be available to offset future U.S. federal income. U.S. Federal NOLs incurred in taxable years beginning prior to January 1, 2018 of approximately $91.0 million expire beginning in 2029 while U.S. federal NOLs incurred in taxable years beginning after December 31, 2017 of approximately $67.4 million will have an indefinite carryforward period, subject to annual limitations. As of December 31, 2024, the Company also had state NOL carryforwards of approximately $25.7 million which may be available to offset future state income and expire at various years beginning in 2028.

As of December 31, 2024, the Company had U.S. federal research and development tax credit (R&D credit) carryforwards of approximately $8.1 million available to reduce future tax liabilities which expire at various years beginning with 2028. As of December 31, 2024, the Company had state credit carryforwards of approximately $2.9 million available to reduce future tax liabilities which do not expire.

Under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by “5% shareholders” over a rolling three-year period, the corporation’s ability to use its pre-change NOLs, R&D credits and certain other tax attributes to offset its post-change income or taxes may be limited. This could limit the amount of NOLs, R&D credit carryforwards or other applicable tax attributes that the Company can utilize annually to offset future taxable income or tax liabilities. The Company has not performed a Section 382 analysis through December 31, 2024, and as such, the Company is not able to determine the impact of any potential limitations on the usage of the Company’s NOLs and tax credit carryforwards. To the extent that an assessment is completed in the future, the Company’s ability to utilize tax attributes could be restricted on a year-by-year basis and certain attributes could expire before they are utilized.

The Company applies the two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be substantiated on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. Income tax positions must meet a more likely than not recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent

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periods. This interpretation also provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods and transition.

A reconciliation of the unrecognized tax benefits for the years ended December 31, 2024 and 2023, is as follows (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ Years Ended December 31,

Unrecognized tax benefits as of the beginning of the year $ 1,784 ​ $ 1,534

Decrease related to prior year tax positions ​ ​ (251) ​ ​ —

Increase related to current year tax positions ​ 653 ​ ​ 250

Unrecognized tax benefits as of the end of the year $ 2,186 ​ $ 1,784

​

No amount of the unrecognized tax benefits, if recognized, would reduce the Company’s annual effective tax rate because the benefits are in the form of deferred tax assets for which a full valuation allowance has been recorded. The Company does not anticipate a significant change to its unrecognized tax benefits over the next 12 months.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2024, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations and comprehensive loss. There are no ongoing examinations by taxing authorities at this time.

The Company files U.S. and state income tax returns with varying statutes of limitations. The Company’s tax years from inception in 2006 will remain open to examination due to the carryover of the unused NOLs and tax credits. The Company does not have any tax audits or other proceedings pending.

10. Related Party Transactions

Jinzi J. Wu, Ph.D., a member of the Company’s board of directors until June 2024, founded and serves as the chief executive officer of Ascletis, Gannex, and Ascletis Pharma.

​

During the years ended December 31, 2024 and 2023, the Company recognized $0.3 million and $31,000 of expenses, respectively, under the Ascletis license agreement, inclusive of manufacturing services fees charged by Ascletis pursuant to the manufacturing agreement with Ascletis which falls under the license agreement. These expenses are recorded in research and development expense in the statements of operations and comprehensive loss. As of December 31, 2024 and 2023, the Company recorded nil and $31,000, respectively, of accruals related to the Ascletis license agreement.

​

11. Segment Reporting

Operating segments are defined as components of an entity about which discrete financial information is evaluated regularly by the CODM in deciding how to allocate resources and assess performance. The Company operates and manages its business as one business segment, which is development and commercialization of therapeutics for the treatment of MASH and other diseases where FASN plays a pathogenic role. Accordingly, the Company has one reportable segment. The Company has a single management team that reports to the Chief Executive Officer, the Company's CODM, who comprehensively manages the entire Company. The accounting policies of the segment are the same as those described in the summary of significant accounting policies.

​

When evaluating the Company’s financial performance, the CODM is regularly provided with more detailed expense information than what is included in the Company’s statements of operations and comprehensive loss. The CODM uses net loss, as reported in the statements of operations and comprehensive loss, in evaluating the performance of the segment. Decisions regarding resource allocation are made primarily during the annual budget planning process and reallocated as needed throughout the year. The measure of segment assets is reported on the balance sheets as total assets.

​

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The following table shows a reconciliation of the Company’s net loss, including the significant expense categories regularly provided to and reviewed by the CODM, as computed under U.S. GAAP, to the Company’s total net loss in the statements of operations and comprehensive loss, for the years ended December 31, 2024, and 2023 (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ ​

​ ​ Years Ended December 31,

License revenue ​ $ — ​ $ 2,000