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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those identified under Item 1A. Risk Factors in this report.

Overview

Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we,” “our” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. Our sole program, molgramostim, is an inhaled biologic, specifically granulocyte-macrophage colony-stimulating factor in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). Savara, together with its wholly-owned subsidiaries, which include Aravas Inc. and Savara ApS, operate in one segment with its principal office in Langhorne, Pennsylvania, though a majority of our employees work remotely.

Since inception, we have devoted substantially all of our efforts and resources to identifying and developing our product candidates, recruiting personnel, and raising capital. We have incurred operating losses and negative cash flow from operations and have no product revenue from inception to date. From inception to December 31, 2023, we have raised net cash proceeds of approximately $476.7 million, primarily from public offerings of our common stock and pre-funded warrants to acquire our common stock, private placements of convertible preferred stock, and debt financings.

We have never been profitable and have incurred operating losses in each year since inception. Our net losses were $54.7 million and $38.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $393.4 million. Our operating losses primarily resulted from expenses attributed to our research and development programs and from general and administrative costs associated with our operations.

We have chosen to operate by outsourcing our manufacturing and most of our clinical operations. We expect to incur significant additional expenses and continue to incur operating losses for at least the next several years as we initiate and continue the clinical development of, and seek regulatory approval for, our product candidate. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical development programs and efforts to achieve regulatory approval.

As of December 31, 2023, we had cash and cash equivalents of $26.6 million and short-term investments of $135.7 million. Although we have sufficient capital to fund many of our planned activities, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and begin to commercialize any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.

Recent Events

Diagnostic Testing - aPAP ClearPathTM

In December 2023, we launched aPAP ClearPathTM, a new serum-based blood test that can be used by physicians in the U.S. to obtain a definitive diagnosis of aPAP. The aPAP ClearPathTM test is a sensitive and specific quantitative immunoassay designed to detect aPAP GM-CSF autoantibodies in human serum. The Company partnered with Trillium Health, a modern health solutions provider and a Clinical Laboratory Improvement Amendments (CLIA)-certified lab, to develop the simple, no-cost, and noninvasive test. A supporting disease awareness campaign was also launched to improve understanding of aPAP, highlight the hallmark signs and symptoms of the disease, and educate physicians about the need for early testing. The Company expects to roll out a healthcare provider disease awareness campaign and GM-CSF autoantibody blood test in Europe during 2024.

ATM Sale

In December 2023, we sold 2,071,511 shares of common stock under a Common Stock Sales Agreement with Evercore Group L.L.C., (“Evercore”) executed on July 6, 2021, to a single institutional investor resulting in net proceeds of $8.8 million.

International Conflicts

In February 2022, Russia commenced a military invasion of Ukraine, and in October 2023, Israel declared war on Hamas in Gaza. The ongoing conflict and political and physical conditions in Ukraine, Russia, Israel and Gaza as well as in neighboring or involved countries, organizations and governments, may disrupt our supply chain and increase our costs, which may adversely affect our ability to conduct our ongoing clinical trial and impact patients’ ability to participate. While we do not believe these conflicts will have a material impact on our current operations, given the evolving hostilities and their potential expansion beyond Ukraine, Russia, Israel, Gaza and the Middle East, the full impact of the conflicts remain uncertain. Additionally, our primary manufacturer for drug substance operates in Argentina, which is experiencing high inflation, a weakening currency, labor strikes and social and political unrest. Those conditions have not had a material impact on our operations to date but could result in supply chain disruptions or increased costs in the future.

Continued Funding of Federal Government Operations

On January 18, 2024, the U.S. Congress passed a third continuing resolution ("CR") for fiscal year 2024, H.R. 2872, the “Further Additional Continuing Appropriations and Other Extensions Act, 2024,” to avoid a partial government shutdown, which President Biden signed on January 19, 2024. The new CR extends the "laddered" approach from the current CR, with certain appropriations bills expiring on March 1, 2024 through March 8, 2024. Additionally, the U.S. Congress is currently trying to pass legislation consisting of a package of six spending bills to continue funding a broad portion of the federal government through the fiscal year and avoid interruptions to the operations of the government. The outcome and impact of a potential government shutdown to our operations is uncertain; however, we are actively assessing and monitoring the potential impacts and situation.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Refer to Note 2. Summary of Significant Accounting Policies in the notes to our consolidated financial statements in this annual report on Form 10-K for additional discussion.

Accrued Research and Development Expenses

We record the costs associated with research, nonclinical and clinical trials, and manufacturing development as incurred. These costs are a significant component of our research and development expenses, with a substantial portion of our on-going research and development activities conducted by third party service providers, including contract research and manufacturing organizations.

We accrue for expenses resulting from obligations under agreements with CROs, CMOs, and other outside service providers for which payment flows do not match the periods over which materials or services are provided to us. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. We make significant judgments and estimates in determining the accrual balance in each reporting period. In the event advance payments are made to a CRO, CMO, or outside service provider, the payments will be recorded as a prepaid asset which will be amortized or expensed as the contracted services are performed. As actual costs become known, we adjust our prepaids and accruals. Inputs, such as the services performed, the number of patients enrolled, or the trial duration, may vary from our estimates, resulting in adjustments to research and development expense in future periods. Changes in these estimates that result in material changes to our accruals could materially affect our results of operations. To date, we have not experienced any material deviations between accrued and actual research and development expenses.

Goodwill and Acquired IPR&D

In accordance with ASC Topic 350, Intangibles – Goodwill and Other, our IPR&D and goodwill, when present, is determined to have indefinite lives and, therefore, is not amortized. Instead, it is tested for impairment annually and between annual tests if we become aware of an event or a change in circumstances that would indicate the carrying value may be impaired.

With respect to the impairment testing of acquired IPR&D, ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment, and ASU 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, provide us a two-step impairment process with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads us to determine that it is more-likely-than not (that is, a likelihood of more than 50%) that our acquired IPR&D is impaired. If we choose to first assess qualitative factors and we determine that it is more-likely-than not acquired IPR&D is not impaired, we are not required to take further action to test for impairment.

ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, outlines an impairment model providing us the option to implement a one-step method for determining impairment of goodwill, thereby simplifying the subsequent measurement of goodwill by eliminating Step 2 (quantitative calculation of measuring a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill) from the goodwill impairment test. Under the amendments in this guidance, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

When we perform a quantitative assessment of acquired IPR&D, we compare its carrying value to its estimated fair value to determine whether an impairment exists. In previous years, due to a lack of Level 1 or Level 2 inputs, the Multi-Period Excess Earnings Method (“MPEEM”), which is a form of the income approach, was used to estimate the fair value of acquired IPR&D when performing a quantitative assessment. Under the MPEEM, the fair value of an intangible asset is equal to the present value of the asset’s projected incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life. We evaluate potential impairment of our acquired IPR&D annually on September 30, utilizing a qualitative approach and determining if it was more-likely-than not that the fair value was impaired. We evaluate potential impairment of our acquired goodwill, if any, annually on June 30, performing the quantitative analysis based upon market capitalization.

Our determinations as to whether, and if so, the extent to which goodwill and acquired IPR&D become impaired are highly judgmental and, in the case of applying the MPEEM approach to estimate fair value, are based on significant assumptions regarding our projected future financial condition and operating results, changes in the manner of our use of the acquired assets, development of our acquired assets or our overall business strategy, and regulatory, market, and economic environment and trends.

If the associated research and development effort is abandoned, the related asset will be written-off, and we will record a non-cash impairment loss on our consolidated statements of operations and comprehensive loss. For those products that reach commercialization, the IPR&D asset will be amortized over its estimated useful life.

Financial Operations Overview

Research and Development Expenses

We recognize research and development expenses as they are incurred. These expenses consist primarily of the following:

•

expenses incurred under agreements with CROs, consultants, and clinical trial sites that conduct research and development activities on our behalf;

•

laboratory and vendor expenses related to the execution of our clinical trials;

•

contract manufacturing expenses, primarily for the production of clinical supplies; and

•

internal costs that are associated with activities performed by our research and development organization, which primarily consist of:

•

personnel costs, which include salaries, benefits and stock-based compensation expense;

•

facilities and other expenses, which include expenses for maintenance of facilities and depreciation expense; and

•

regulatory expenses and technology license fees related to development activities.

We expect research and development expenses will remain significant in the future as we advance our molgramostim product candidate through clinical trials and pursue regulatory approvals, which will require a significant increased investment in regulatory support and contract manufacturing activities, including investing in the development of a second source manufacturer and clinical supplies.

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidate. The probability of success of our product candidate may be affected by numerous factors, including clinical data, competition, intellectual property rights, manufacturing capability, and commercial viability. As a result, we are unable to accurately determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of molgramostim.

General and Administrative Expenses

General and administrative (“G&A”) expenses consist primarily of salaries, benefits, and related costs for personnel in executive, finance and accounting, legal, and investor relations; as well as professional and consulting fees for accounting, legal, investor relations, business development, human resources, and information technology services. Other G&A expenses include facility lease and insurance costs.

Other Income (Expense), Net

Other income (expense) includes amortization expense related to capitalized debt issuance costs and debt discount under our Amended Loan Agreement with Silicon Valley Bank. Interest expense is typically reported net of interest income which includes interest earned on our cash, cash equivalent, and short-term investment balances. Other income (expense) also includes net unrealized and realized gains and losses from foreign currency transactions, foreign exchange derivatives not designated as hedging, refundable tax credits generated by some of our foreign subsidiaries, and securities subject to fair value accounting as well as any other non-operating gains and losses.

Results of Operations – Comparison of Years Ended December 31, 2023 and 2022

Year ended December 31, Dollar

(in thousands)

Operating expenses:

Depreciation and amortization 77 31 46

Research and Development

Research and development expenses increased $16.4 million, or 58.8%, to $44.3 million for the year ended December 31, 2023 from $27.9 million for the year ended December 31, 2022. This increase is primarily due to the performance of tasks related to our molgramostim program which includes approximately $6.8 million of costs related to our chemistry, manufacturing, and controls activities, $4.4 million of costs related to our IMPALA-2 pivotal trial, including CRO-related activities, $1.6 million of costs related to quality assurance, and $3.6 million due to an increase in personnel and related costs.

General and Administrative

General and administrative expenses increased $4.7 million, or 43.4%, to $15.7 million for the year ended December 31, 2023 from $10.9 million for the year ended December 31, 2022. The increase is primarily attributable to costs related to the strategic addition of personnel for key positions to facilitate the management of our business and operations of approximately $3.6 million and certain commercial activities of $1.1 million.

Other Income (Expense), Net

Other income, net increased $4.6 million to $5.3 million for the year ended December 31, 2023 from $0.7 million for the year ended December 31, 2022. The change is primarily related to the increase in interest income during the year ended December 31, 2023 as a result of both an increase in our short-term investments following the registered direct offering of our common stock and pre-funded warrants in July 2023 (the “July 2023 Offering”) and an increase in market interest rates. Refer Note 9. Stockholders’ Equity of the consolidated financial statements in this annual report on Form 10-K for additional discussion of the July 2023 Offering..

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2023, we had $26.6 million in cash, $135.7 million in short-term investments, and an accumulated deficit of $393.4 million. Since inception through December 31, 2023, our operations have been financed primarily by net cash proceeds of approximately $476.7 million, primarily from public offerings of common stock, registered direct offerings of common stock, private placements, and debt financings.

We have used and intend to use the net proceeds from these offerings for working capital and general corporate purposes, which include, but are not limited to, the funding of clinical development of and pursuing regulatory approval for our product candidate and general and administrative expenses. As we continue to progress on the IMPALA-2 pivotal trial, we will continue to monitor our liquidity and capital requirements.

Debt Facility

As discussed in Note 7. Debt Facility in the notes to the consolidated financial statements included in this annual report on Form 10-K, we entered into our Amended Loan Agreement with Silicon Valley Bank during the year ended December 31, 2017, which was subsequently amended and then amended and restated in April 2022. As of December 31, 2023, the carrying value of the secured loan was $26.3 million.

On March 10, 2023, the FDIC took control and was appointed receiver of Silicon Valley Bank, and on March 27, 2023, First Citizens BancShares, Inc. announced that it had entered into an agreement with the FDIC to purchase all of the assets and liabilities of Silicon Valley Bank.

Common Stock Sales Agreement

Evercore Sales Agreement

On July 6, 2021, the Company entered into a Common Stock Sales Agreement with Evercore, as sales agent (the “Sales Agreement”), pursuant to which the Company may offer and sell, from time to time, through Evercore, shares of our common stock ("Shares"), having an aggregate offering price of not more than $60 million. The Agreement was effective on July 16, 2021, the date the Company’s shelf registration agreement on Form S-3, as filed with the SEC on July 6, 2021, was declared effective by the SEC (the “New Registration Statement”). The Shares will be offered and sold pursuant to the New Registration Statement. Subject to the terms and conditions of the Sales Agreement, Evercore will use commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. The Company has provided Evercore with customary indemnification rights, and Evercore will be entitled to a commission at a fixed commission rate equal to 3% of the gross proceeds per Share sold. Sales of the Shares, if any, under the Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended. The Company has no obligation to sell any of the Shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement.

During the year ended December 31, 2023, we sold 2,071,511 shares of common stock under the Evercore Sales Agreement to a single institutional investor resulting in net proceeds of $8.8 million. During the year ended December 31, 2022, we did not sell any shares of common stock under the Evercore Sales Agreement.

Recent Registered Direct Offering of Common Stock

On July 17, 2023, we completed a registered direct offering of our common stock and pre-funded warrants for gross proceeds of approximately $80 million and net proceeds, after deducting underwriting discounts, commissions and

offering expenses, of approximately $74.9 million as discussed in Note 9. Stockholders’ Equity in the notes to the consolidated financial statements included in this annual report on Form 10-K.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

Year ended December 31,

(in thousands)

Cash used in operating activities $ (51,061 ) $ (34,554 )

Cash provided by (used in) investing activities (57,116 ) 52,645

Cash provided by financing activities 82,780 87

Effect of exchange rate changes on cash and cash equivalents (118 ) (90 )

Cash flows from operating activities

Cash used in operating activities for the year ended December 31, 2023 was $51.1 million, consisting of a net loss of $54.7 million and a net increase in operating assets and liabilities of $4.1 million. The change in our net operating assets and liabilities was primarily due to an increase in accrued liabilities, specifically, compensation and research and development costs for molgramostim. This was partially offset by approximately $0.5 million of non-cash charges, mainly comprised of amortization of debt issuance costs, accretion on discount/amortization on premium to short-term investments, and stock-based compensation.

Cash used in operating activities for the year ended December 31, 2022 was $34.6 million, consisting of a net loss of $38.2 million, which was partially offset by non-cash charges of $2.6 million, mainly comprised of amortization of right-of-use assets, depreciation, amortization of debt issuance costs, and stock-based compensation, and further offset by a net increase in assets and liabilities of $1.0 million. The change in our net operating assets and liabilities was primarily due to a decrease in accrued liabilities mostly related to research and development costs for molgramostim and a decrease related to a cessation of residual costs of the wind-down of a prior ancillary product trial.

Cash flows from investing activities

Cash used in or provided by investing activities for the years ended December 31, 2023 and 2022 was primarily the result of net sale and maturities of short-term investments.

Cash flows from financing activities

Cash provided by financing activities of $82.8 million for the year ended December 31, 2023 was primarily the result of net proceeds from the July 2023 Offering and at the market offerings. Refer to Note 9. Stockholders’ Equity of the consolidated financial statements in this annual report on Form 10-K for additional discussion of the July 2023 offering.

There was minimal cash provided by financing activities for the year ended December 31, 2022.

Future Funding Requirements

We have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize our product candidate. At the same time, we expect our expenses to increase in connection with our ongoing development and manufacturing activities, particularly as we continue the research, development, manufacture, and clinical trials of, and seeking regulatory approval for, our product candidate. In addition, subject to obtaining regulatory approval of our product candidate, we anticipate we may need additional funding in connection with our continuing operations.

As of December 31, 2023, we had cash, cash equivalents, and short-term investments of $162.3 million. Although we have sufficient capital to fund our planned activities, including those discussed in Note 10. Commitments – Manufacturing and Other of the consolidated financial statements in this annual report on Form 10-K, we may need to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and to begin commercialization of any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when

needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.

Although we believe we are well capitalized based on our current operations, until we can generate a sufficient amount of product revenue to finance our cash requirements, we may finance our future cash needs primarily through the issuance of additional equity securities and potentially through borrowings, grants, and strategic alliances with partner companies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or commercialization efforts or grant rights to develop and market product candidate to third parties that we would otherwise prefer to develop and market ourselves.

Manufacturing and Other Commitments and Contingencies

We are subject to various manufacturing royalties and payments and other commitments related to molgramostim.

For a summary of the contingent milestone payments and commitments, refer to Note 10. Commitments – Manufacturing and Other, of the consolidated financial statements in this annual report on Form 10-K.

Other Contracts

We enter into contracts in the normal course of business with various third parties for research studies, clinical trials, testing, and other services. These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

Recent Accounting Pronouncements

Refer to Note 2. Summary of Significant Accounting Policies – Recent Accounting Pronouncements, of the consolidated financial statements in this annual report on Form 10-K milestone for a discussion of recent accounting pronouncements and their effect, if any, on us.

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

We have market risk exposure related to our cash, cash equivalents and short-term investment securities. Such interest-earning instruments carry a degree of interest rate risk; however, we have not been exposed to nor do we anticipate being exposed to material risks due to changes in interest rates. A hypothetical 1% change in interest rates during any of the periods presented would not have had a material impact on our audited consolidated financial statements. Additionally, our investment securities are fixed income instruments denominated and payable in U.S. dollars and have short-term maturities, typically less than twelve months, and typically carry credit ratings of “A” at a minimum by two of three nationally recognized statistical rating organizations, specifically Moody’s, Standard & Poor’s or Fitch. As such, we do not believe that our cash, cash equivalents, and short-term investment securities have significant risk of default or illiquidity.

We have vendors in Denmark and elsewhere in Europe and pay those vendors in local currency, Danish Krone or Euros, respectively. We did not recognize any significant exchange rate losses during the years ended December 31, 2023 and 2022. A 10% change in the Krone-to-dollar or Euro-to-dollar exchange rate on December 31, 2023 would not have had a material effect on our results of operations or financial condition.

We also have interest rate exposure as a result of our Amended Loan Agreement with Silicon Valley Bank. Refer to Note7. Debt Facility of the consolidated financial statements in this annual report on Form 10-K for additional discussion. As of December 31, 2023, the carrying value of the secured term loan was $26.3 million. The loan bears interest at a floating rate equal to the greater of (i) 3% or (ii) the prime rate reported in The Wall Street Journal, minus a spread of 0.5%. Changes in the prime rate may therefore affect our interest expense associated with our secured term loan. If a 10% change in interest rates from the interest rates on December 31, 2023 were to have occurred, this change would not have had a material effect on the value of our investment portfolio or on our interest expense obligations with respect to outstanding borrowed amounts.

Additionally, inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during the periods presented.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements and supplementary financial information required by this item are filed with this report as described under Item 15 Exhibits, Financial Statement Schedules.

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

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2023, pursuant to and as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2023, our disclosure controls and procedures, as defined by Rule 13a-15(e) under the Exchange Act, were effective and designed to ensure that (i) information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of that assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2023 based on criteria in Internal Control - Integrated Framework (2013) issued by the COSO.

As a smaller reporting company, we were not required to obtain an audit on the effectiveness of our internal control over financial reporting as of December 31, 2023.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during Savara’s quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

During the quarter ended December 31, 2023, no officer or director of the Company adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities of the Company’s common stock that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement as defined in 17 CFR § 229.408(c).

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

Not applicable

PART III

Certain information required by Part III of this report is omitted from this report pursuant to General Instruction G(3) of Form 10-K because we will file a definitive proxy statement pursuant to Regulation 14A for our 2023 annual meeting of stockholders (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this report, and the information included in the Proxy Statement that is required by Part III of this report is incorporated herein by reference.

Item 10. Directors, Executive Officers, and Corporate Governance.

Code of Ethics

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, as well as all of our other officers, directors, and employees. This code of ethics is a part of our code of business conduct and ethics, and is available on our corporate website at http://www.savarapharma.com. We intend to disclose future amendments to, or waivers of, certain provisions of our code of ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions on our corporate website within four business days following such amendment or waiver.

The other information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference.

Item 11. Executive Compensation.

The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference.

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

The other information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference.

Equity Compensation Plan Information

The table below provides information about our common stock that, as of December 31, 2023, may be issued upon the exercise of options and the vesting of RSUs under the following equity compensation plans (which are all our equity compensation plans; provided, however, that new equity awards may only be issued under the 2015 Omnibus Incentive Plan and the 2021 Inducement Plan):

•

2015 Omnibus Incentive Plan (the “2015 Plan”)

•

Savara Inc. Stock Option Plan (the “2008 Plan”)

•

2021 Inducement Equity Incentive Plan (the "2021 Inducement Plan”)

(a) (b) (c)

(1)

The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, which have no exercise price.

(2)

Includes 7,242,443 shares issuable upon the exercise of outstanding options granted under the 2015 Plan, 2,228,438 shares issuable upon the exercise of outstanding options granted under the 2021 Inducement Plan, and 162,186 shares issuable upon the exercise of outstanding options granted under the 2008 Plan.

(3)

Includes 2,828,250 shares issuable upon the vesting of RSUs granted under the 2015 Plan and 660,000 shares issuable upon the vesting of RSUs granted under the 2021 Inducement Plan.

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

The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference.

Item 14. Principal Accounting Fees and Services.

The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Documents Filed. The following documents are filed as part of this report:

(1)

Financial Statements. The following report of RSM US LLP and financial statements:

•

Report of Independent Registered Public Accounting Firm

•

Consolidated Balance Sheets as of December 31, 2023 and 2022

•

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2023 and 2022

•

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023 and 2022

•

Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022

•

Notes to Consolidated Financial Statements

(1)

Financial Statement Schedules. See subsection (c) below.

(2)

Exhibits. See subsection (b) below.

(b) Exhibits. The exhibits filed or furnished with this report are set forth on the Exhibit Index immediately following the signature page of this report, which Exhibit Index is incorporated herein by reference.

(c)Financial Statement Schedules. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

Item 16. Form 10-K Summary.

Not applicable.

Exhibit Index

Exhibit Number Description

23.1 Consent of RSM US LLP, Independent Registered Public Accounting Firm

24.1 Power of Attorney included on page 65 of this Form 10-K

97 Clawback Policy

101.SCH Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

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

# Indicates management contract or compensatory plan

SIGNATURES

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

Savara Inc.

Date: March 7, 2024 By: /s/ Matthew Pauls

Matthew Pauls

Chief Executive Officer and Chair of the Board of Directors

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Matthew Pauls and Dave Lowrance, and each of them acting individually, as his or her attorney-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney to any and all amendments to said Report.

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

Name Title Date

Matthew Pauls

Dave Lowrance

/s/ David Ramsay Director March 7, 2024

David Ramsay

/s/ Joseph McCracken Director March 7, 2024

Joseph McCracken

/s/ Nevan Elam Director March 7, 2024

Nevan Elam

/s/ Rick Hawkins Director March 7, 2024

Rick Hawkins

/s/ An Van Es-Johansson Director March 7, 2024

An Van Es-Johansson

/s/ Ricky Sun Director March 7, 2024

Ricky Sun

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 49) F-

Consolidated Balance Sheets as of December 31, 2023 and 2022 F-3

Notes to Consolidated Financial Statements F-7

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Savara Inc. and its subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, 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 United States 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.

Critical Audit Matter

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

F-1

Accrued Research and Development Costs

As described in Note 2 to the consolidated financial statements, the Company records expenses of research and development activities, including nonclinical studies, and third-party contract services for clinical trials and manufacturing development. Clinical trials and contract manufacturing activities performed by third parties are expensed based upon estimates of work completed with respective contract research organizations (CROs) or contract manufacturing organizations (CMOs) and other third-party vendors. Though expenses are based on signed agreements, the complexity involved in determining expenses arises from agreements containing multiple milestones that require management’s careful analysis with external parties to determine period expenses and potential contractual milestone expenses based on the progress made against benchmarks including but not limited to patients enrolled, services performed and equipment purchased.

During 2023, the Company incurred $44.2 million of research and development expenses. The Company recorded an accrued liability of $2.2 million for expenses incurred but not yet invoiced, and a prepaid expense of $2.2 million for payments made to vendors in excess of costs incurred.

Given the significant judgments and estimates in accounting for accrued research and development costs, we have determined this area a critical audit matter.

Our audit procedures related to the Company’s accrued research and development costs included the following among others:

•

We evaluated, on a sample basis, the reasonableness of management’s methods and assumptions used in developing the accrued or prepaid research and development costs by:

(1)

Agreeing key milestones and completion terms, activities, timing, and costs per management provided schedules to signed and executed CMO and CRO contracts,

(2)

Obtaining evidence from third parties of the research and development activities performed for significant clinical trials and contract manufacturing services,

(3)

Inquiring of financial and clinical personnel on the status of the clinical trials, progress to completion of clinical trials, method of allocating contractual charges to specific tasks performed during the clinical trials, and the status of change orders, and

(4)

Performing a comparison of current quarterly and annual results compared to prior quarter and prior year to assess the historical accuracy of management’s analysis.

/s/ RSM US LLP

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

Austin, Texas

March 7, 2024

F-2

Savara Inc. and Subsidiaries

Consolidated Balance Sheets

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

As of December 31,

Assets

Current assets:

Prepaid expenses and other current assets 3,628 3,078

Property and equipment, net 270 51

Other non-current assets 387 116

Liabilities and stockholders’ equity

Current liabilities:

Accrued expenses and other current liabilities 7,093 4,533

Long-term liabilities:

Other long-term liabilities 247 54

Commitments and contingencies (Note 10)

Stockholders’ equity:

Accumulated other comprehensive loss (271 ) (605 )

Total liabilities and stockholders' equity $ 177,564 $ 139,777

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

F-3

Savara Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

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

Years ended December 31,

Operating expenses:

Depreciation and amortization 77 31

Other income (expense), net:

Interest income (expense), net 4,436 (88 )

Foreign currency exchange gain (loss) 76 (19 )

Total other income (expense), net 5,309 689

Net loss per share:

Basic and diluted $ (0.33 ) $ (0.25 )

Weighted-average common shares outstanding:

Other comprehensive income (loss):

Gain (loss) on foreign currency translation 133 (648 )

Unrealized gain on short-term investments 201 38

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

F-4

Savara Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended December 31, 2023 and 2022

(in thousands, except share amounts)

Stockholders’ Equity

Common Stock Accumulated

Issuance of common stock upon exercise of stock options 2,344 — 2 — — 2

Issuance of common stock for settlement of RSUs 9,125 — — — — —

Repurchase of shares for minimum tax withholdings (2,016 ) — (3 ) — — (3 )

Stock-based compensation — — 2,041 — — 2,041

Foreign exchange translation adjustment — — — — (648 ) (648 )

Unrealized gain on short-term investments — — — — 38 38

Issuance of common stock upon exercise of stock options 245,786 — 283 — — 283

Issuance of common stock for settlement of RSUs 1,062,000 1 (1 ) — — —

Stock-based compensation — — 4,178 — — 4,178

Foreign exchange translation adjustment — — — — 133 133

Unrealized gain on short-term investments — — — — 201 201

(1)

As discussed in Note 9. Stockholders’ Equity, the Company sold (i) an aggregate of 21,000,000 shares of the Company’s common stock, par value $0.001 per share and (ii) pre-funded warrants to purchase an aggregate of 5,666,667 shares of the Company's common stock at an exercise price, equal to the par value, of $0.001 per share.

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

F-5

Savara Inc. and Subsidiaries

Consolidated 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:

Depreciation and amortization 77 31

Amortization of right-of-use assets 98 136

Foreign currency gain (loss) (76 ) 19

Amortization of debt issuance costs 271 334

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (456 ) 1,336

Non-current assets (12 ) (57 )

Accounts payable and accrued expenses and other current liabilities 4,541 (319 )

Net cash used in operating activities (51,061 ) (34,554 )

Cash flows from investing activities:

Purchase of property and equipment (296 ) (9 )

Purchase of available-for-sale securities, net (194,220 ) (89,415 )

Sale of available-for-sale securities, net — 11,276

Net cash provided by (used in) investing activities (57,116 ) 52,645

Cash flows from financing activities:

Repayment of long-term debt (1) — (26,350 )

Proceeds from long-term debt, net (1) — 26,438

Issuance of common stock upon at the market offerings, net 8,831 —

Proceeds from exercise of stock options 283 2

Repurchase of shares for minimum tax withholdings (1,208 ) (3 )

Net cash provided by financing activities 82,780 87

Effect of exchange rate changes on cash and cash equivalents (118 ) (90 )

Increase (decrease) in cash and cash equivalents (25,515 ) 18,088

Cash and cash equivalents beginning of period 52,100 34,012

Cash and cash equivalents end of period $ 26,585 $ 52,100

Supplemental disclosure of cash flow information:

(1)

As discussed in Note 7. Debt Facility, the Amended Loan Agreement (as defined herein) executed on April 21, 2022 was accounted for as a modification. The Company used the proceeds from the Amended Loan Agreement to repay the outstanding amounts under the Loan Agreement from Silicon Valley Bank.

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

F-6

Savara Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Description of Business and Basis of Presentation

Description of Business

Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. The Company’s sole program, molgramostim nebulizer solution (“molgramostim”), a novel inhaled biologic, is a granulocyte-macrophage colony-stimulating factor in Phase 3 development for autoimmune pulmonary alveolar proteinosis (“aPAP”). The Company and its wholly-owned subsidiaries operate in one segment with its principal office in Langhorne, Pennsylvania, though a significant portion of employees work remotely.

Since inception, Savara has devoted its efforts and resources to identifying and developing its product candidates, recruiting personnel, and raising capital. Savara has incurred operating losses and negative cash flow from operations and has no product revenue from inception to date. The Company has not yet commenced commercial operations.

Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) as defined by the Financial Accounting Standards Board (the “FASB”). Certain prior year amounts have been reclassified for consistency with the current period presentation.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements of the Company are stated in U.S. dollars. These financial statements include the accounts of the Company and its wholly-owned subsidiaries. The financial statements of the Company’s wholly-owned subsidiaries are recorded in their functional currency and translated into the reporting currency. The cumulative effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is reported in Accumulated other comprehensive loss. All intercompany transactions and accounts have been eliminated in consolidation.

Liquidity

As of December 31, 2023, the Company had an accumulated deficit of approximately $393.4 million. The Company used cash from operations of approximately $51.1 million for the year ended December 31, 2023. The cost to further develop and obtain regulatory approval for any drug is substantial and, as noted below, the Company may have to take certain steps to maintain a positive cash position. Although the Company has sufficient capital to fund many of its planned activities, it may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, its product candidate and begin to commercialize any approved product.

The Company is currently focused on the development of molgramostim for the treatment of aPAP and believes such activities will result in the continued incurrence of significant research and development and other expenses related to this program. If the clinical trial for the Company’s product candidate fails or produces unsuccessful results and the product candidate does not gain regulatory approval or, if approved, fails to achieve market acceptance, the Company may never become profitable. Even if the Company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods. The Company intends to cover its future operating expenses through cash and cash equivalents on hand, short-term investments, and through a combination of equity offerings, debt financings, government or other third-party funding, and other collaborations and strategic alliances with partner companies. The Company cannot be sure that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to the Company or its stockholders.

The Company had cash and cash equivalents of $26.6 million and short-term investments of $135.7 million as of December 31, 2023, which is sufficient to fund the Company's operations for the twelve months subsequent to the issuance date of its consolidated financial statements for the year ended December 31, 2023. The Company may continue to raise additional capital as needed through the issuance of additional equity securities and potentially through borrowings and strategic alliances with partner companies. However, if such additional financing is not available timely and at adequate levels, the Company may need to reevaluate its long-term operating plans. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

F-7

The Company currently maintains depository accounts and has a debt facility with Silicon Valley Bank, as acquired by First Citizens BancShares, Inc. (Nasdaq: FCNCA) on March 27, 2023 through an agreement with the Federal Deposit Insurance Corporation ("FDIC"). The acquisition included all of the assets and liabilities of Silicon Valley Bank, including all bank deposits, and allowed Silicon Valley Bank to continue its operations.

In order to mitigate risks associated with our banking deposits, the Company maintains a significant portion of its liquidity in U.S. Treasury money market funds and other short-term investments with custodial services provided by U.S. Bank, N.A., refer to Note 5. Short-term Investments and Note 8. Fair Value Measurements. The Company continues to monitor the circumstances surrounding First Citizens BancShares, Inc. and its acquisition of Silicon Valley Bank and has not experienced nor anticipates any material impacts on its financial condition or operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management’s estimates include those related to the accrual of research and development and general and administrative costs, certain financial instruments recorded at fair value, stock-based compensation, and the valuation allowance for deferred tax assets. The Company bases its estimates on historical experience and on various other market-specific and relevant assumptions that it believes to be reasonable under the circumstances. Accordingly, actual results could be materially different from those estimates.

Risks and Uncertainties

The product candidate being developed by the Company requires approval from the U.S. Food and Drug Administration (the “FDA”) or foreign regulatory agencies prior to commercial sales. There can be no assurance that the Company’s product candidate will receive the necessary approvals. If the Company is denied regulatory approval of its product candidate, or if approval is delayed, it will have a material adverse impact on the Company’s business, results of operations, and financial position.

The Company is subject to a number of risks similar to other life science companies, including, but not limited to, risks related to the successful discovery and development of drug candidates, raising additional capital, development of competing drugs and therapies, protection of proprietary technology, and market acceptance of the Company’s products. As a result of these and other factors and the related uncertainties, there can be no assurance of the Company’s future success.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and institutional bank money market accounts with original maturities of three months or less when acquired and are stated at cost, which approximates fair value.

Short-term Investments

The Company has classified its investments in debt securities with readily determinable fair value as available-for-sale securities. These securities are carried at estimated fair value with the aggregate unrealized gains and losses related to these investments reflected as a part of Accumulated other comprehensive loss within stockholders’ equity.

The fair value of the investments is based on the specific quoted market price of the securities or comparable securities at the balance sheet dates. Investments in debt securities are considered to be impaired when a decline in fair value is judged to be other than temporary because the Company either intends to sell or it is more-likely-than not that it will have to sell the impaired security before recovery. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. Refer to Note 5. Short-term Investmentsfor additional discussion.

Concentration of Credit Risk

We are subject to credit risk from our portfolio of cash equivalents and marketable securities. These investments were made in accordance with our investment policy which specifies the categories, allocations, and ratings of securities we may consider for investment. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. We maintain our cash and cash equivalents and marketable securities with a limited number of financial institutions. Deposits held with the financial institutions exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the consolidated balance sheets.

F-8

Accrued Research and Development Costs

The Company records the costs associated with research, nonclinical and clinical trials, and manufacturing development as incurred. These costs are a significant component of the Company’s research and development expenses, with a substantial portion of the Company’s on-going research and development activities conducted by third party service providers, including contract research and manufacturing organizations.

The Company accrues for expenses resulting from obligations under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other outside service providers for which payment flows do not match the periods over which materials or services are provided to the Company. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the proportion of work performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. The Company makes significant judgments and estimates in determining the accrual balance in each reporting period. In the event advance payments are made to a CRO, CMO, or outside service provider, the payments will be recorded as a prepaid asset which will be amortized or expensed as the contracted services are performed. As actual costs become known, the Company adjusts its prepaids and accruals. Inputs, such as the services performed, the number of patients enrolled, or the trial duration, may vary from the Company’s estimates, resulting in adjustments to research and development expense in future periods. Changes in these estimates that result in material changes to the Company’s accruals could materially affect the Company’s results of operations. To date, the Company has not experienced any material deviations between accrued and actual research and development expenses. Refer to Note 4. Accrued Expenses and Other Current Liabilitiesfor additional discussion.

Business Combinations

The Company accounts for business combinations in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, and as further defined by Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805), which requires the purchase price to be measured at fair value. When the purchase consideration consists entirely of shares of our common stock, the Company calculates the purchase price by determining the fair value, as of the acquisition date, of shares issued in connection with the closing of the acquisition and, if the transaction involves contingent consideration based on achievement of milestones or earn-out events, the probability-weighted fair value, as of the acquisition date, of shares issuable upon the occurrence of future events or conditions pursuant to the terms of the agreement governing the business combination. If the transaction involves such contingent consideration, our calculation of the purchase price involves probability inputs that are highly judgmental due to the inherent unpredictability of drug development, particularly by development-stage companies. The Company recognizes estimated fair values of the tangible assets and intangible assets acquired, including in process research and development (“IPR&D”), and liabilities assumed as of the acquisition date, and we record as goodwill any amount of the purchase price of the tangible and intangible assets acquired and liabilities assumed in excess of the fair value.

License and Collaboration Agreements

From time to time the Company enters and may continue to enter into license and collaboration agreements with third parties whereby the Company purchases the rights to develop, market, sell and/or distribute the underlying pharmaceutical products or drug candidates. Pursuant to these agreements, the Company may be required to make up-front payments, milestone payments contingent upon the achievement of certain pre-determined criteria, royalty payments based on specified sales levels of the underlying products, and/or certain other payments. Up-front payments are either expensed immediately as research and development or capitalized. The determination to capitalize amounts related to licenses is based on management’s judgments with respect to stage of development, the nature of the rights acquired, alternative future uses, developmental and regulatory issues and challenges, the net realizable value of such amounts based on projected sales of the underlying products, the commercial status of the underlying products, and/or various other competitive factors. Milestone payments made prior to regulatory approval are generally expensed as incurred and milestone payments made subsequent to regulatory approval are generally capitalized as an intangible asset. Royalty payments are expensed as incurred. Other payments made pursuant to license and collaboration agreements, which are generally related to research and development activities, are expensed as incurred.

F-9

Goodwill and Acquired In-Process Research and Development

In accordance with ASC Topic 350, Intangibles – Goodwill and Other, the Company's acquired IPR&D and goodwill, when applicable, is determined to have indefinite lives and, therefore, is not amortized. Instead, it is tested for impairment annually and between annual tests if the Company becomes aware of an event or a change in circumstances that would indicate the carrying value may be impaired.

With respect to the impairment testing of acquired IPR&D, ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment, and ASU 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, provides for a two-step impairment process with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more-likely-than not (that is, a likelihood of more than 50%) that acquired IPR&D is impaired. If the Company chooses to first assess qualitative factors and it determines that it is more-likely-than not acquired IPR&D is not impaired, the Company is not required to take further action to test for impairment.

When the Company performs a quantitative assessment of acquired IPR&D, it compares its carrying value to its estimated fair value to determine whether an impairment exists. Due to a lack of Level 1 or Level 2 inputs, the Multi-Period Excess Earnings Method (“MPEEM”), which is a form of the income approach, was used to estimate the fair value of acquired IPR&D when performing a quantitative assessment. Under the MPEEM, the fair value of an intangible asset is equal to the present value of the asset’s projected incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life. The Company evaluates potential impairment of its acquired IPR&D annually on September 30, utilizing a qualitative approach and determining if it was more-likely-than not that the fair value was impaired. We evaluate potential impairment of our acquired goodwill, if any, annually on or around June 30, performing the quantitative analysis based upon market capitalization.

If the associated research and development effort is abandoned, the related asset will be written-off, and the Company will record a non-cash impairment loss on its consolidated statements of operations and comprehensive loss. For those products that reach commercialization, the IPR&D asset will be amortized over its estimated useful life. Refer to Note 8. Fair Value Measurements – Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis for additional discussion.

Leases

The Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset's economic benefits in accordance with ASU 2016-02, Leases (Topic 842), as codified in ASC 842, Leases. Lease right-of-use assets and liabilities are initially recorded on the lease commencement date based on the present value of lease payments over the lease term. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term. Leases may include renewal, purchase, or termination options that can extend or shorten the term of the lease. The exercise of those options is at the Company's sole discretion and is evaluated at inception and throughout the contract to determine if a modification of the lease term is required.

F-10

In addition to rent, the leases may require the Company to pay additional amounts for taxes, insurance, maintenance, and other expenses, which are generally referred to as non-lease components. The Company has elected to not separate lease and non-lease components. Only the fixed costs for lease components and their associated non-lease components are accounted for as a single lease component and recognized as part of a right-of-use asset and liability. Rent expense is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expenses in the consolidated statements of operations and comprehensive loss.

The Company has made an accounting policy election providing that leases with an initial term of 12 months or less are not recorded as a lease right-of-use asset and corresponding liability in accordance with ASC 842, Leases; those lease payments are recognized in the consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term. Refer to Note 10. Commitments – Operating Leases for additional discussion.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions on how to allocate resources and assess performance. Our chief operating decision maker is the chief executive officer. We have one operating segment, specialty pharmaceuticals within the respiratory system.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which range from three to five years. Repairs and maintenance that do not improve or extend the useful life of the respective asset are charged to expense as incurred. Refer to Note 6. Property and Equipment, Netfor additional discussion.

Patents and Intellectual Property

As the Company’s products are currently under research and development and are not currently approved for market, costs incurred in connection with patent applications are expensed as incurred due to the uncertainty of the future economic benefits of the underlying patents and intellectual property.

Fair Value of Financial Instruments

The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

The three tiers are defined as follows:

•

Level 1 – Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

•

Level 2 – Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

•

Level 3 – Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

Financial instruments not carried at fair value include accounts payable and accrued liabilities. The carrying amounts of these financial instruments approximate fair value due to the highly liquid nature of these short-term instruments. Refer to Note 8. Fair Value Measurements for additional discussion.

Revenue Recognition

The Company records revenue based on a five-step model in accordance with ASC 606, Revenue from Contracts with Customers. To date, the Company has not generated any product revenue. The Company’s ability to generate product revenues, which the Company does not expect will occur in the next several years, if ever, will depend heavily on the successful development, regulatory approval, and eventual commercialization of the Company’s product candidates.

F-11

Net Loss per Share

Basic net loss attributable to common stockholders per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock and pre-funded warrants outstanding during the period without consideration of common stock equivalents. Since the Company was in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods presented as the inclusion of all potential dilutive securities would have been antidilutive. Refer to Note 14. Net Loss per Share for additional discussion.

Stock-Based Compensation

The Company recognizes the cost of stock-based awards granted to employees based on the estimated grant-date fair value of the awards. The value of the portion of the award is recognized as expense ratably over the requisite service period. The Company recognizes the compensation costs for awards that vest over several years on a straight-line basis over the vesting period. Forfeitures are recognized when they occur, which may result in the reversal of compensation costs in subsequent periods as the forfeitures arise. In addition, the Company accounts for any modifications to stock-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation. Refer to Note 12. Stock-Based Compensation for additional discussion.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities will be recognized in the period that includes the enactment date. A valuation allowance is established against the deferred tax assets to reduce their carrying value to an amount that is more-likely-than not to be realized. Refer to Note 13. Income Taxesfor additional discussion.

Recent Accounting Pronouncements

In December 2023, the FASB issues ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures effective for public business entities for annual periods beginning after Dec. 15, 2024. The Company is currently reviewing ASU 2023-09 and its impact on our consolidated financial statements.

In November 2023, the FASB issues ASU 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures to improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. ASU 2023-07 is effective for public entities fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently reviewing ASU 2023-07 and its impact on our consolidated financial statements.

3. Prepaid Expenses and Other Current Assets

Prepaid expenses, consisted of (in thousands):

December 31,

Prepaid contracted research and development costs $ 2,167 $ 1,822

R&D tax credit receivable 814 792

Total prepaid expenses and other current assets $ 3,628 $ 3,078

Prepaid Contracted Research and Development Costs

As of December 31, 2023, Prepaid contracted research and development costs are primarily comprised of contractual prepayments associated with the Company's clinical trial for molgramostim for the treatment of aPAP and for CMC related activities. This includes prepaid amounts paid under agreements with CROs, CMOs, and other outside service providers that provide services in connection with the Company's research and development activities.

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Tax Credit Receivable

The Company has recorded a Danish tax credit earned by its subsidiary, Savara ApS, as of December 31, 2023. Under Danish tax law, Denmark remits a research and development tax credit equal to 22% of qualified research and development expenditures, not to exceed established thresholds. During the year ended December 31, 2022, the Company generated a Danish tax credit of $0.8 million which was received in the fourth quarter of 2023. During the year ended December 31, 2023, the Company generated a Danish tax credit of $0.8million which is expected to be received in the fourth quarter of 2024.

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other liabilities, consisted of (in thousands):

December 31,

Accrued contracted research and development costs 2,166 1,322

Accrued general and administrative costs 738 782

Total accrued expenses and other current liabilities $ 7,093 $ 4,533

Accrued Compensation

As of December 31, 2023, Accrued compensation includes amounts to be paid to employees for salary, vacation and non-equity performance-based compensation. At the end of any period, the amount accrued for such compensation may vary due to many factors including, but not limited to, timing of payments to employees and vacation usage.

Accrued Contracted Research and Development Costs

As of December 31, 2023, Accrued contracted research and development costs are primarily comprised of costs associated with molgramostim for the treatment of aPAP, including expenses resulting from obligations under agreements with CROs, CMOs, and other outside service providers that provide services in connection with the Company's research and development activities.

5. Short-term Investments

Short-term Investments in Available-for-Sale Securities

The Company’s investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business. The following table summarizes, by major security type, the Company’s investments (in thousands):

Short-term investments

* Designated custodial institution, U.S. Bank, N.A.

The Company has classified its investments as available-for-sale securities. These securities are carried at estimated fair value with the aggregate unrealized gains and losses related to these investments reflected as a part of Accumulated other comprehensive loss in the consolidated balance sheet. Classification as short-term or long-term is based upon whether the maturity of the debt securities is less than or greater than twelve months.

There were no significant realized gains or losses related to investments for the years ended December 31, 2023 and 2022.

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6. Property and Equipment, Net

Property and equipment, net consisted of (in thousands):

December 31,

Research and development equipment $ 1,102 $ 1,102

Furniture and fixtures 110 61

Less accumulated depreciation (2,012 ) (1,923 )

Property and equipment, net $ 270 $ 51

Depreciation expense for the years ended December 31, 2023 and 2022 was minimal, respectively.

7. Debt Facility

On April 28, 2017, the Company and its subsidiary, Aravas Inc. (“Aravas”), entered into a loan and security agreement with Silicon Valley Bank, as amended by the First Amendment on October 31, 2017, the Second Amendment on December 4, 2018, the Third Amendment on January 31, 2020, and the Fourth Amendment on March 30, 2021 (the “Loan Agreement”), pursuant to which Silicon Valley Bank provided a term loan to us in the principal amount of $25.0 million.

On April 21, 2022, the Company and Aravas entered into an Amended and Restated Loan and Security Agreement (the “Amended Loan Agreement”), as co-borrowers, and Silicon Valley Bank, as lender (the “Lender”), which amended and restated the Loan Agreement in its entirety. The Amended Loan Agreement provides for a $26.5 million term loan facility. The Company used the proceeds from the Amended Loan Agreement to repay outstanding amounts under the Loan Agreement, including principal of $25.0 million, a prepayment fee of $0.1 million, and an end of term charge of $1.4 million.

Pursuant to the Amended Loan Agreement, the loan has an interest-only monthly payment through April 21, 2026 (the “Interest-Only Period”) and thereafter equal monthly installments of principal plus interest over 12 months until April 21, 2027 (the “Maturity Date”). However, the Company may elect to extend the Interest-Only Period until the Maturity Date if it maintains cash and cash equivalents equal to at least 1.75 times the outstanding principal amount of the loan during the fifth year. If the Interest-Only Period is extended, all principal and unpaid interest is due and payable on the Maturity Date.

The loan bears interest at a floating rate equal to the greater of (i) 3% and (ii) the prime rate reported in The Wall Street Journal, minus a spread of 0.5%. Savara is obligated to pay customary closing fees and a final payment of 2.75% of the principal amount advanced under the facility. The Company may prepay the loan in whole or in part at any time, subject to a prepayment fee of 1.0% if prepaid between the first and second anniversaries of the closing date. Following the second anniversary, there is no prepayment fee.

The Lender was granted a perfected first priority lien in all of the Company's assets with a negative pledge on intellectual property. The Amended Loan Agreement contains customary affirmative and negative covenants, including among others, covenants that limit the Company's and its subsidiaries’ ability to dispose of assets, permit a change in control, merge or consolidate, make acquisitions, incur indebtedness, grant liens, make investments, make certain restricted payments, and enter into transactions with affiliates, in each case subject to certain exceptions. Additionally, the Amended Loan Agreement contains an affirmative covenant providing that if the Company’s balance of cash and cash equivalents falls below $40.0 million, the Company is required to maintain cash and cash equivalents equal to at least (i) six months of operating expenses and (ii) 1.2 times the outstanding principal amount of the loan (or 1.75 in the final year of the loan if the Interest-Only Period is extended).

In accordance with FASB ASC Topic 470-50, Debt – Modifications and Extinguishments, the Company evaluated the Amended Loan Agreement to determine whether it should be accounted for as a modification or extinguishment. As a result of this analysis, the Amended Loan Agreement was accounted for as a modification. Accordingly, no gain or loss is recognized. Approximately $0.1 million of fees paid to the Lender were capitalized and will be amortized over the term of the Amended Loan Agreement. Expenses paid to third parties associated with the Amended Loan Agreement were immediately expensed and recorded in the Interest income (expense) line item in our consolidated statement of operations.

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Summary of Carrying Value

The following table summarizes the components of the long-term debt carrying value, which approximates the fair value (in thousands):

Future minimum payments due during the year ended December 31,

Total future minimum payments 27,229

Unamortized end of term charge (482 )

Debt issuance costs (366 )

Debt discount related to warrants (33 )

Current portion of long-term debt —

8. Fair Value Measurements

The Company measures and reports certain financial instruments at fair value on a recurring basis and evaluates its financial instruments subject to fair value measurements on a recurring and nonrecurring basis to determine the appropriate level in which to classify them in each reporting period.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company determined that certain investments in debt securities classified as available-for-sale securities were Level 1 financial instruments.

Additional investments in corporate debt securities, commercial paper, and asset-backed securities are considered Level 2 financial instruments because the Company has access to quoted prices but does not have visibility to the volume and frequency of trading for all of these investments. For the Company’s investments, a market approach is used for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.

The fair value of these instruments as of December 31, 2023 and 2022 was as follows (in thousands):

Cash equivalents (*):

U.S. Treasury money market funds $ 17,270 $ — $ — $ 17,270

Short-term investments (*):

Cash equivalents (*):

U.S. Treasury money market funds $ 48,804 $ — $ — $ 48,804

Short-term investments (*):

* Designated custodial institution, U.S. Bank, N.A.

The Company did not transfer any assets measured at fair value on a recurring basis to or from Level 1, Level 2, and Level 3 during the years ended December 31, 2023 and 2022.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments annually or whenever events or

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circumstances indicate that the carrying value of those assets may not be recoverable. These assets and liabilities can include acquired IPR&D and other long-lived assets that are written down to fair value if they are impaired.

As of December 31, 2023, the Company had IPR&D of approximately $11.0 million. For the years ended December 31, 2023 and 2022, the Company experienced an increase of approximately $0.3 million and a decrease of approximately $0.6 million, respectively, in the carrying value of IPR&D, which was due to foreign currency translation.

9. Stockholders’ Equity

Registered Direct Offering of Common Stock

On July 17, 2023, the Company sold (i) an aggregate of 21,000,000 shares of the Company’s common stock (the “Common Stock”) for $3.00 per share which represented a 1% premium over the closing price on that date and (ii) pre-funded warrants to purchase an aggregate of 5,666,667 shares of Common Stock at an exercise price of $0.001 per share (the “2023 Pre-Funded Warrants”) for $2.999 per warrant pursuant to a Registered Direct Offering (the “July 2023 Offering”). The Common Stock and 2023 Pre-Funded Warrants were offered by the Company pursuant to its existing shelf registration statement (File No. 333-257709) filed with the SEC on July 6, 2021 and declared effective on July 16, 2021 (the "Registration Statement").

The Company determined that the securities issued in the July 2023 Offering were free-standing and that the 2023 Pre-Funded Warrants meet the equity classification requirements pursuant to ASC 480, Distinguishing Liability from Equity, ASC 815, Derivatives and Hedging and Subtopic 815-40, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The 2023 Pre-Funded Warrants were sold at the same price as the underlying common stock, less $0.001 (which represents the exercise price of the warrants).

The July 2023 Offering resulted in net proceeds to the Company of approximately $74.9 million, after deducting final underwriting discounts, commissions and offering expenses, as follows (in thousands):

Financial instruments Proceeds

Offering expenses (5,120 )

Evercore Common Stock Sales Agreement

On July 6, 2021, the Company entered into a Common Stock Sales Agreement with Evercore Group L.L.C. (“Evercore”), as sales agent (the “Sales Agreement”), pursuant to which the Company may offer and sell, from time to time, through Evercore, shares of Savara’s common stock, par value $0.001 per share (the “Shares”), having an aggregate offering price of not more than $60 million. The Agreement was effective on July 16, 2021, the date the Registration Statement was declared effective by the SEC. The Shares will be offered and sold pursuant to the Registration Statement. Subject to the terms and conditions of the Sales Agreement, Evercore will use commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. The Company has provided Evercore with customary indemnification rights, and Evercore will be entitled to a commission at a fixed commission rate equal to 3% of the gross proceeds per Share sold. Sales of the Shares, if any, under the Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended. The Company has no obligation to sell any of the Shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement.

During the year ended December 31, 2023, the Company sold 2,071,511shares of common stock under the Evercore Sales Agreement resulting in net proceeds of $8.8 million.

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Common Stock

The Company’s amended and restated certificate of incorporation, as amended, authorizes the Company to issue 301 million shares of capital stock, consisting of 300 million shares of common stock with $0.001 par value per share and one million shares of preferred stock with $0.001 par value per share.

The following is a summary of the Company’s common stock at December 31, 2023 and 2022:

December 31

The Company’s shares of common stock reserved for issuance as of December 31, 2023 and 2022 were as follows:

December 31,

Warrants

The following table summarizes the outstanding warrants for the Company’s common stock as of December 31, 2023:

Expiration Date Shares UnderlyingOutstanding Warrants Exercise Price

Accumulated Other Comprehensive Income (Loss) Information

The components of accumulated other comprehensive income (loss) as of the dates indicated and the change during the period were (in thousands):

10. Commitments

Operating Leases

The Company is obligated under an operating lease, as amended, for commercial real estate located in Langhorne, Pennsylvania, the Company’s headquarters. On February 28, 2023, the Company entered into the first amendment (the “Lease Amendment”) to its existing lease agreement, dated July 7, 2021 and which originally commenced on October 1, 2021. The Lease Amendment commenced on July 1, 2023, continues through June 30, 2026, or an additional thirty-six

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months, expands the existing office space, and increases the average monthly rent to an average of approximately $14.5 thousand, paid over monthly installments during the Lease Amendment term.

As of December 31, 2023, the carrying value of the right-of-use assets for the operating lease was $0.4 million, which is reflected in Other non-current assets and the carrying value of the lease liabilities for the operating lease increased to $0.4 million, of which approximately $0.2 million related to the current portion of the lease liabilities is recorded in Accrued expenses and other current liabilities and approximately $0.2 million related to the non-current portion of the lease liabilities is recorded in Other long-term liabilities.

The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of December 31, 2023 (in thousands):

Year ending December 31,

Total future minimum lease payments $ 390

Less imputed interest (46 )

Operating cash flows from operating leases $ 120

Weighted-average remaining lease term (in months) - operating leases 30

Weighted-average discount rate - operating leases 7.8 %

Manufacturing and Other Commitments and Contingencies

The Company is subject to various royalties and manufacturing and development payments related to its product candidate, molgramostim. Under a manufacture and supply agreement with the active pharmaceutical ingredients (“API”) manufacturer for molgramostim, as amended on December 7, 2022 and December 13, 2023, Savara must make certain payments to the API manufacturer upon achievement of the milestones outlined in the table set forth below. Additionally, upon first receipt of marketing approval by Savara from a regulatory authority in a country for a product containing the API for therapeutic use in humans and ending the earlier of (i) ten (10) years thereafter or (ii) the date a biosimilar of such product is first sold in such country, Savara shall pay the API manufacturer a royalty equal to low-single digits of the net sales in that country.

Additionally, the Company is subject to a purchase requirement under which for ten years following the date of receipt of approval by a regulatory authority of the first regulatory filing for the marketing and sale of the first molgramostim product in any country, each year, the Company will purchase from the API manufacturer the API required to produce a percentage of such molgramostim product it sells (the “Purchase Requirement”); provided, however, that the Purchase Requirement will no longer apply if (i) the price charged by the API manufacturer exceeds a certain price charged by an alternative supplier, (ii) there is a shortage of supply, or (iii) API manufacturer at any time fails to materially fulfill a purchase order of the Company.

Similarly, the Company may become subject to additional milestone payments for the achievement of certain manufacturing protocols of molgramostim pursuant to a services agreement with a second source product manufacturer, as well as, an integrated contract research and CDMO, pursuant to a service agreement, serving as an additional source of manufacturing of molgramostim drug substances. As of December 31, 2023, the Company had no significant obligations for any such milestone payments to either of these additional source product manufacturers.

The Company is also subject to certain contingent milestone payments, disclosed in the following table, payable to the manufacturer of the nebulizer used to administer molgramostim. The change in the amount of the milestone payments from December 31, 2022 to December 31, 2023 was related to foreign currency translation fluctuations. In addition to these milestones, the Company will owe a royalty of three-and one-half percent (3.5%) to the manufacturer of the nebulizer based on net sales.

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Manufacturing, Development, and Other Contingent Milestone Payments (in thousands):

Molgramostim manufacturer:

Molgramostim nebulizer manufacturer:

Total manufacturing and other commitments $ 1,852

The milestone commitments disclosed above reflect the activities that have (i) not been met or incurred; (ii) not been remunerated; and (iii) not accrued, as the activities are not deemed probable or reasonably estimable, as of December 31, 2023.

Contract Research

On March 5, 2021, the Company entered into a Master Services Agreement (“MSA”) with Parexel International (IRL) Limited (“Parexel”) pursuant to which Parexel will provide contract research services related to clinical trials. Contemporaneously with entering the MSA, a work order was executed with Parexel, under which they will provide services related to the IMPALA-2 pivotal trial. Under that work order and subsequent change orders, the Company will pay Parexel service fees and pass-through expenses estimated to be approximately $41.5 million over the course of the IMPALA-2 pivotal clinical trial.

Risk Management

The Company maintains various forms of insurance that the Company's management believes are adequate to reduce the exposure to these risks to an acceptable level.

Employment Agreements

On December 8, 2020, the Company entered into an employment agreement with the CEO, as amended and restated on December 13, 2022, whereby the CEO is entitled to payments and benefits upon certain events. Upon (i) termination without cause, (ii) termination due to the CEO’s death or disability, or (iii) the CEO’s resignation for good reason, the CEO is entitled to receive (i) a lump sum payment equal to 18 months of base salary, (ii) a lump sum payment equal to 100% of his target bonus, (iii) a pro-rated portion of the unpaid target bonus based upon the number of days he was employed by the Company during the relevant performance period, (iv) reimbursement for continued coverage under medical benefit plans for 18 months or until covered under a separate plan from another employer, and (v) the immediate and full vesting of outstanding non-vested Company equity awards. Additionally, all of the CEO’s outstanding stock options will be exercisable through the earlier of (x) the 18 month anniversary of the termination date or (y) the original expiration date.

Upon a termination other than for cause, death or disability or resignation for good reason within three months prior to or 12 months following a change in control, the CEO is entitled to receive (i) a lump sum payment of an amount equal to 24 months of base salary, (ii) 100% of the unpaid target bonus, (iii) a pro-rated portion of the unpaid target bonus based on the number of days he was employed by the Company during the relevant performance period, (iv) reimbursement for continued coverage under medical benefit plans for 24 months or until covered under a separate plan from another employer, and (v) the immediate and full vesting of outstanding non-vested Company equity awards. Additionally, all of the CEO’s outstanding stock options will be exercisable through the earlier of (x) the 24-month anniversary of the termination date or (y) the original expiration date.

Each of the Company’s Chief Financial & Administrative Officer (“CFO”), Chief Medical Officer (“CMO”) and Chief Operating Officer ("COO") is entitled to payments and benefits if the CFO, CMO or COO, respectively, is (i) terminated without cause, (ii) terminated due to the CFO, CMO, or CCO's death or disability, or (iii) resigns for good reason, which includes (i) a lump sum payment equal to 12 months of base salary and a pro-rated portion of their unpaid bonus, (ii) reimbursement for continued coverage under medical benefit plans for 12 months or until covered under a separate plan from another employer, and (iii) accelerated vesting of outstanding non-vested Company equity awards equal to 12 months. Upon a termination other than for cause, death or disability or resignation for good reason within three months prior to or 12 months following a change in control, the CFO, CMO and COO is entitled to receive (i) a lump sum payment of an amount equal to 18 months of base salary, plus 100% of their target bonus, plus a pro-rated portion of their unpaid target bonus, (ii) a lump sum payment equal to the amount required to continue coverage under medical benefit plans for 18 months, and (iii) the immediate and full vesting of outstanding non-vested options at the time of such termination.

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11. Related Parties

As an investor with the right to designate a member of the Company’s board of directors, Bain Capital Life Sciences Fund II, L.P., BCIP Life Sciences Associates, LP and their affiliates (collectively "Bain") has significant influence over the Company and is thereby considered a related party.

Pursuant to the July 2023 Offering (as further discussed in Note 9. Stockholders' Equity), Bain acquired 5,666,667 of the 2023 Pre-Funded Warrants.

12. Stock-Based Compensation

A. Equity Incentive Plans

2008 Stock Option Plan

The Company adopted the Savara Stock Option Plan (the “2008 Plan”), pursuant to which the Company had reserved shares for issuance to employees, directors, and consultants. The 2008 Plan includes (i) the option grant program providing for both incentive and non-qualified stock options, as defined by the Internal Revenue Code, and (ii) the stock issuance program providing for the issuance of awards that are valued based upon common stock, including restricted stock, dividend equivalents, stock appreciation rights, phantom stock, and performance units. The 2008 Plan also allows eligible persons to purchase shares of common stock at an amount determined by the plan administrator. Upon a participant’s termination, the Company retains the right to repurchase non-vested shares issued in conjunction with the stock issuance program at the fair market value per share as of the date of termination.

The Company had previously issued incentive and non-qualified options and restricted stock to employees and non-employees under the 2008 Plan. The terms of the stock options, including the exercise price per share and vesting provisions, were determined by the board of directors. Stock options were granted at exercise prices not less than the estimated fair market value of the Company’s common stock at the date of grant based upon objective and subjective factors including: third-party valuations, preferred stock transactions with third parties, current operating and financial performance, management estimates and future expectations.

The Company no longer issues stock-based awards under the 2008 Plan.

2015 Omnibus Incentive Option Plan

The Company operates the 2015 Omnibus Incentive Plan (the “2015 Plan”), as amended and restated with approval by our stockholders in June 2018 and amended with approval by our stockholders in May 2020 and June 2022. The 2015 Plan provides for the grant of incentive and non-statutory stock options, as well as share appreciation rights, restricted shares, restricted stock units, performance units, shares and other stock-based awards. Share-based awards are subject to terms and conditions established by our board of directors or the compensation committee of our board of directors. As of December 31, 2023, the number of shares of our common stock available for grant under the 2015 Plan was 1,061,102 shares.

Shares of common stock that are subject to awards granted under the 2015 Plan shall be counted against the shares available for issuance under this plan as one share for each share subject to a stock option or stock appreciation right and as 1.34 shares for each share subject to an award other than a stock option or a stock appreciation right such as a restricted stock unit (“RSU”). If any shares of common stock subject to an award granted under any of our stockholder-approved, equity-based incentive plans are forfeited, or an award expires or is settled for cash pursuant to the terms of an award, the shares subject to the award may be used again for awards under the 2015 Plan to the extent of the forfeiture, expiration or cash settlement. The shares of common stock will be added back as one share for every share of common stock if the shares were subject to a stock option or stock appreciation right, and as 1.34 shares for every share of common stock if the shares were subject to an award other than a stock option or stock appreciation right.

Under the 2015 Plan, the purchase price of shares of common stock covered by a stock option cannot be less than 100% of the fair market value of the common stock on the date the stock option is granted. Fair market value of the common stock is generally equal to the closing price for the common stock on the principal securities exchange on which the common stock is traded on the date the stock option is granted (or if there was no closing price on that date, on the last preceding date on which a closing price was reported).

Under the 2008 and 2015 Plan, stock option grants typically vest quarterly over four years and expire ten years from the grant date and restricted stock unit grants typically cliff vest after two years.

2021 Inducement Equity Incentive Plan

The Company adopted the 2021 Inducement Equity Incentive Plan (the “Inducement Plan”) with approval by the Company's board of directors in May 2021. The Inducement Plan provides for the grant of non-statutory stock options,

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restricted stock, restricted stock units, stock appreciation rights, performance units or performance shares. Each award under the Inducement Plan is intended to qualify as an employment inducement grant in accordance with Nasdaq Listing Rule 5635(c)(4). As of December 31, 2023, the number of shares of common stock available for grant under the 2021 Plan was 270,592 shares.

Under the Inducement Plan, stock option grants typically vest quarterly over four years and expire ten years from the grant date and restricted stock unit grants typically cliff vest after two years.

B. Stock Options and Restricted Stock Units

The Company values stock options using the Black-Scholes-Merton option pricing model, which requires the input of subjective assumptions, including the risk-free interest rate, expected life, expected stock price volatility, and dividend yield. The risk-free interest rate assumption is based upon observed interest rates for constant maturity U.S. Treasury securities consistent with the expected term of the Company’s employee stock options. The expected life represents the period of time the stock options are expected to be outstanding and is based on the simplified method. The Company uses the simplified method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. Expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected life of the stock options. The Company assumes no dividend yield because dividends are not expected to be paid in the future, consistent with the Company’s history of not paying dividends. The valuation of stock options is also impacted by the valuation of common stock.

Restricted stock units are valued at the closing market price of the Company’s common stock on the date of grant.

C. Fair Value Assumptions for 2015 Plan

The following table summarizes the assumptions used for estimating the fair value of stock options granted to employees for the years ended December 31, 2023 and 2022:

Expected term (years) 6.06 6.06

Dividend yield 0% 0%

D. Stock-Based Award Activity

The following tables provide a summary for stock option and RSU activity for the year ended December 31, 2023:

Stock Options:

The weighted-average grant date fair values for the Company’s stock options granted during the years ended December 31, 2023 and 2022 were $2.79 per share and $1.13 per share, respectively. The total compensation cost related to non-vested stock options not yet recognized as of December 31, 2023 was $8.2 million, which will be recognized over a weighted-average period of approximately 3.4 years.

During the years ended December 31, 2023 and 2022, the Company did not grant any options to purchase shares of common stock to non-employees. The Company recorded a minimal amount of stock-based compensation expense for options issued to non-employees for the years ended December 31, 2023 and 2022, respectively.

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RSUs:

SVRA US Equity

SVRA · 10-K · period ended 2023-12-31

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

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

Item 8. Financial Statements and Supplementary Data.

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

Item 9A. Controls and Procedures.

Item 9B. Other Information.

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

Item 10. Directors, Executive Officers, and Corporate Governance.

Item 11. Executive Compensation.

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

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

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

SVRA US Equity☆

SVRA · 10-K · period ended 2023-12-31

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

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

Item 8. Financial Statements and Supplementary Data.

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

Item 9A. Controls and Procedures.

Item 9B. Other Information.

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

Item 10. Directors, Executive Officers, and Corporate Governance.

Item 11. Executive Compensation.

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

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

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

SVRA US Equity