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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K (Annual Report). Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis. You should carefully read the “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” sections of this Annual Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biopharmaceutical company aiming to transform the lives of patients by establishing a new class of medicines which engage intracellular targets that have long been considered inaccessible. The Company’s Endosomal Escape Vehicle (EEVTM)-therapeutics are designed to enable the efficient delivery of a wide range of therapeutics into a variety of organs and tissues, resulting in an improved therapeutic index. Through our proprietary, highly versatile and modular EEV platform (EEV Platform), we are building a robust development portfolio of therapeutic candidates. Our first two drug candidates are in clinical trials, and we expect to initiate additional regulatory filings by the end of 2024. We believe that the potential success of our early programs can translate into the efficient development of additional EEV therapeutic candidates and allow us to build portfolios in neuromuscular disease and beyond.

Our most advanced therapeutic candidate, ENTR-601-44, is being developed for patients with DMD that are exon 44 skipping amenable. On July 24, 2023, we received authorization from the MHRA for our Phase 1 clinical trial in healthy volunteers, ENTR-601-44-101. The Phase 1 clinical trial's primary objective is to evaluate the safety and tolerability of a single dose of ENTR-601-44 in healthy volunteers, with a target enrollment of approximately 40 participants. The trial will also evaluate pharmacokinetics and target engagement as measured by exon skipping in the skeletal muscle, bearing the Company's recent in vitro data showed that exon skipping was approximately 10-40x higher in dystrophic muscle compared to healthy muscle, suggesting that data from healthy normal volunteers may substantially underestimate potential potency. On March 13, 2024, we announced that the first, second and third cohorts of participants had been successfully dosed and we expect to report data from the Phase 1 clinical trial in the second half of 2024. The data from this trial will inform our global clinical development strategy, and if favorable, support regulatory filings to open a global multiple ascending dose (MAD) Phase 2 trial in the fourth quarter of 2024. It is expected that countries will be included in the trial on a rolling basis, as dependent on discussions with individual regulators.

On December 19, 2022, we announced that we received a clinical hold notice from the FDA regarding the IND application for ENTR-601-44. The FDA has requested that we continue to gather and submit additional information regarding ENTR-601-44 and we are actively working to resolve the clinical hold in the United States.

On January 9, 2023, we announced the selection of a second clinical candidate within our Duchenne franchise, ENTR-601-45, for the potential treatment of people living with DMD who are exon 45 skipping amenable. We plan to submit a CTA/IND application for ENTR-601-45 in the fourth quarter of 2024.

On November 7, 2023, we announced the selection of a third clinical candidate within our Duchenne franchise, ENTR-601-50, for the potential treatment of people living with DMD who are exon 50 skipping amenable. The selection of ENTR-501-50 is based on in vivo preclinical data that demonstrated robust exon 50 skipping across cardiac and skeletal muscle groups. We plan to submit a CTA/IND application for ENTR-601-50 in 2025.

We have also entered into a Strategic Collaboration and License Agreement, which was amended in October 2023, (the Vertex Agreement) with Vertex Pharmaceuticals Incorporated (Vertex) pursuant to which we granted Vertex an exclusive worldwide license to research, develop, manufacture and commercialize VX-670, our intracellular EEV-based

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therapeutic candidate for the treatment of myotonic dystrophy type 1 (DM1) that targets expanded CUG repeats in DM1 protein kinase (DMPK) mRNA transcripts, as well as any additional EEV-based therapeutic candidates that may be identified by the Company for the potential treatment of DM1 in the course of the parties’ global research collaboration. The Vertex Agreement provides for a four-year global research collaboration under which Vertex will fund our continued preclinical development of VX-670, as well as the option to fund additional DM1-related research activities with a goal of identifying other EEV-based therapeutic product candidates for the potential treatment of DM1. Other than our efforts under this research collaboration, Vertex will be responsible for global development, manufacturing and commercialization of the licensed products.

Under the terms of the Vertex Agreement, Entrada received $250.0 million from the Vertex agreement comprised of an upfront payment of $223.7 million and an equity investment of $26.3 million in our common stock at $16.26 per share. In October 2023, the Company achieved a milestone pursuant to the Vertex Agreement related to preclinical IND-enabling GLP toxicology studies of VX-670 that triggered a $17.5 million milestone payment, which the Company received in November 2023.

On January 7, 2024 Vertex announced authorization from the MHRA of a clinical trial application for VX-670 for patients with DM1 and initiation of a Phase 1/2 clinical trial in patients with DM1 in Canada and that it will initiate the study in the UK in the near-term. Vertex also noted that they submitted an IND application to the FDA for VX-670. The FDA requested additional information, which resulted in a clinical hold. Vertex is working to address the FDA's comments in order to initiate the study in the U.S.

On July 31, 2023 we entered into a license agreement to advance the development of ENTR-501 with Pierrepont Therapeutics, Inc., a mitochondrial disease-focused company. ENTR-501 is an intracellular thymidine phosphorylase enzyme replacement therapy in development for the treatment of mitochondrial neurogastrointestinal encephalomyopathy (MNGIE). MNGIE is a slowly progressive, but fatal, disease characterized by elevated levels of thymidine. Preliminary preclinical studies have demonstrated that ENTR-501 reduces toxic thymidine levels below those observed in wild-type mice. Pharmacokinetic and acute and chronic toxicology studies indicated both a long circulating half-life and a favorable tolerability profile. We continue to believe that the program will have an important role to play in the future treatment of patients with MNGIE.

Since our inception, we have devoted substantially all our resources to research and development efforts relating to our EEV Platform, advancing development of our portfolio of programs and general and administrative support for these operations, including raising capital. Since our inception, we have raised over $650.0 million of gross proceeds from sales of stock to leading biotechnology investors and from the Vertex Agreement.

Since inception, we have incurred significant net losses. As of December 31, 2023, we had an accumulated deficit of $195.0 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future as we advance our platform and EEV therapeutic candidates. We will not generate any revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one or more therapeutic candidates, if ever. If we obtain regulatory approval for any therapeutic candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution.

Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy, as we advance therapeutic candidates through preclinical and, if successful, into clinical development, seek regulatory approval, prepare for and, if any therapeutic candidates are approved, proceed to commercialization and operate as a public company. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions.

If we are unable to obtain funding, we will be forced to delay, reduce, or eliminate some or all of our research and development programs, product portfolio expansion and ultimate commercialization efforts, which would adversely affect our business prospects, or we may be unable to continue operations. Although we continue to pursue these plans, we may not be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we can generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

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As of December 31, 2023, we had cash, cash equivalents and marketable securities of $352.0 million. We believe that our cash, cash equivalents and marketable securities as of December 31, 2023, together with ongoing research support and the anticipated achievement of certain milestones under the Vertex Agreement will be sufficient to extend our cash runway through the second quarter of 2026, supporting the Company's expansion and continued development of EEV therapeutic candidates targeting Duchenne muscular dystrophy and advance EEV-therapeutic candidates in indications beyond neuromuscular disease. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” To finance our operations beyond that point we will need to raise additional capital, which cannot be assured.

Components of Our Results of Operations

Revenue

All of our revenue to date has been derived from the Vertex Agreement. We do not expect to generate any revenue from the sale of products unless and until such time that our product candidates have advanced through clinical development and regulatory approval, if ever. If our development efforts for our therapeutic candidates are successful and result in regulatory approval or we successfully enter into collaboration or license arrangements with third parties, we may generate revenue in the future from product sales, payments from collaboration or license arrangements including those that we may enter into with third parties, or any combination thereof.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our programs. These expenses include:

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

•expenses incurred in connection with the discovery and preclinical development of our therapeutic candidates and research programs, including under agreements with third parties, such as consultants, contractors and CROs;

•the cost of developing and validating our manufacturing process for use in our preclinical studies and potential future clinical trials, including the cost of raw materials used in our research and development activities and engaging with third party CMOs;

•costs incurred in connection with the performance of research and development activities under the Vertex Agreement;

•the cost of laboratory supplies and research materials;

•the costs of payments made under third-party licensing agreements and related future payments should certain development and regulatory milestones be achieved; and

•facilities, depreciation and other direct and allocated expenses, including rent and other operating costs, incurred as a result of our research and development activities.

We expense research and development costs as incurred. Non-refundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.

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Our research and development costs are primarily devoted to supporting our neuromuscular program development and platform discovery efforts. Our direct, external research and development expenses consist primarily of fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our process development, manufacturing and clinical development activities. Our direct external research and development expenses also include fees incurred under license and intellectual property purchase agreements. We expect to track these external research and development costs on a program-by-program basis as we identify specific programs and product candidates to advance into clinical development.

We do not allocate employee costs, costs associated with our development efforts and facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources and third-party consultants primarily to conduct our research and development activities as well as for managing our process development, manufacturing and clinical development activities.

Therapeutic candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our platform development efforts and planned preclinical and clinical development activities in the near term and in the future. We expect that the research and development expenses of our programs will increase in the near term as we initiate and conduct clinical trials as well as investigational new drug (CTA/IND)-enabling activities for our therapeutic candidates. Therefore, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our therapeutic candidates. The successful development of our therapeutic candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development, including the following:

•the scope, timing, rate of progress and expenses of our ongoing and potential future research activities, including preclinical and IND-enabling studies, clinical trials and other research and development activities we decide to pursue;

•the successful initiation, enrollment and completion of clinical trials under current good clinical practices;

•the timing of filing and acceptance of INDs or comparable foreign applications that allow commencement of future clinical trials for our therapeutic candidates;

•the timing and likelihood of resolution of the clinical hold on our IND application for ENTR-601-44 and initiation of clinical trials for ENTR-601-44 in the United States;

•whether our therapeutic candidates show safety and efficacy in our clinical trials and an acceptable risk-benefit profile in the intended populations;

•our ability to hire and retain key research and development personnel;

•our ability to successfully develop, obtain regulatory and marketing approvals of our therapeutic candidates for the expected indications and patient populations;

•our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our therapeutic candidates are approved;

•commercializing therapeutic candidates, if and when approved, whether alone or in collaboration with others;

•our ability to maintain a continued acceptable safety, tolerability and efficacy profile of our therapeutic candidates following approval;

•our ability to establish new licensing or collaboration arrangements to support our potential therapeutic candidates on favorable business terms;

•any decisions we make to discontinue, delay or modify our programs to focus on others;

•obtaining, maintaining, protecting and enforcing patent and trade secret protection and regulatory exclusivity for our therapeutic candidates;

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•obtaining and maintaining adequate coverage and reimbursement from third party payors; and

•the effects of worldwide pandemics and health crises.

A change in the outcome of any of these variables with respect to the development of any of our therapeutic candidates could significantly change the costs and timing associated with the development of that therapeutic candidate. We may never succeed in obtaining regulatory approval for any of our therapeutic candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and personnel-related costs, including stock-based compensation, for our personnel in executive, legal, finance and accounting, corporate and business development, human resources and other administrative functions. General and administrative expenses also include: legal fees relating to intellectual property and corporate matters; professional fees paid for accounting, auditing, consulting and tax services; insurance costs; travel expenses; information technology expenses; and facility costs not otherwise included in research and development expenses.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount and expand our facilities to support our continued research activities and development of our programs and EEV Platform. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance and investor and public relations expenses associated with operating as a public company.

Interest and Other Income

Interest and other income (expense) consists primarily of interest earned on our invested cash equivalents and marketable securities.

Income Taxes

The Company recorded income tax expense of $18.7 million for the year ended December 31, 2023. The income tax expense recorded was driven largely by the current tax liability associated with the tax recognition of the Vertex Agreement payments received during 2023. A significant portion of the taxable income related to the collaboration payment is offset by current year expenses and prior year accumulated losses. For additional details about the current year tax provision, refer to Note 9, Income Taxes, to the Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

As of December 31, 2023, we had federal net operating loss carryforwards of $14.6 million, which may be available to offset future taxable income. None of our federal net operating loss carryforwards will expire, but all are limited in their usage to an annual deduction equal to 80% of annual taxable income. In addition, as of December 31, 2023, we had state net operating loss carryforwards of $8.7 million, which may be available to offset future taxable income and expire at various dates beginning in 2036. As of December 31, 2023, we also had federal and state research and development tax credit carryforwards of $2.1 million and $0.8 million, respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2039 and 2035, respectively.

Critical Accounting Policies and Significant Judgments 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 generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

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

Revenue Recognition

All of our revenue to date has been generated from the Vertex Agreement. We account for revenue pursuant to ASC Topic 606, "Revenue from Contracts with Customers" (ASC 606). For additional details regarding our associated accounting policies of ASC 606, refer to Notes 2, Summary of Significant Accounting Policies, and 12, Collaboration and License Agreements, to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

As part of the process of preparing our consolidated financial statements, we are required to make the following significant judgements and estimates to determine amounts to be recognized in collaboration revenue.

The Company recognizes revenue as research and development services are provided using an input method, according to the costs incurred as related to the respective research services and the costs expected to be incurred in the future to satisfy the performance obligations. As the Company progresses towards satisfaction of performance obligations under the Vertex Agreement, the estimated costs associated with the remaining effort required to complete the performance obligations in accordance with the research plans may change, which may materially impact revenue recognition. The Company regularly evaluates and, when necessary, updates the costs associated with the remaining effort pursuant to the performance obligations under the Vertex Agreement.

The Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically corroborate the accuracy of these estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include those related to fees paid to:

•vendors in connection with discovery and preclinical development activities;

•CROs in connection with preclinical studies and testing; and

•third-party manufacturers in connection with the development and scale up activities and the production of materials.

We base the expense recorded related to contract research and manufacturing on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple service providers that conduct services and supply materials. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. In accruing service fees, we estimate the time period over which services were performed and the level of effort expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. While the majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met, some require advance payments. There may be instances in

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which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. We record these as prepaid expenses on our consolidated balance sheets.

Stock-Based Compensation

We account for all stock-based compensation awards granted as stock-based compensation expense at fair value in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (ASC 718). Our stock-based payments include stock options and grants of common stock restricted for vesting conditions. The measurement date for awards is the date of grant, and stock-based compensation costs are recognized as expense over the requisite service period, which is generally the vesting period, on a straight-line basis. Stock-based compensation expense is classified in the accompanying consolidated statements of operations based on the function to which the related services are provided. Forfeitures are recorded as they occur.

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

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

Recently Issued Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, in the notes to our consolidated financial statements included elsewhere in this Annual Report for a description of recent accounting pronouncements applicable to our business.

-Results of Operations

Comparison of the years ended December 31, 2023 and 2022

Year ended December 31,

Operating expenses:

Other income:

Research and Development Expenses

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Year ended December 31,

External research and development expenses:

(1)Prior year amounts for collaboration services relate to research and development costs incurred for VX-670 prior to entering into the Vertex Agreement.

Research and development expenses were $99.9 million for the year endedDecember 31, 2023, compared to $66.6 million for the year ended December 31, 2022. The increase of $33.3 million in research and development expenses was primarily attributable to:

•an increase of $19.6 million in internal costs driven by increased headcount in our research and development function, inclusive of stock-based compensation expense of $6.2 million and $4.2 million for the years ended December 31, 2023 and 2022, respectively, and increased facilities costs to support our expanding operations; and

•an increase of $13.7 million in external costs primarily driven by higher costs incurred as we advance our preclinical activities for our ENTR-601-45 and other preclinical and discovery programs.

We expect that our research and development expenses will increase as we continue our current research and development activities, continue clinical trials for ENTR-601-44 and our partnered candidate, VX-670, initiate new research programs, continue our preclinical development of therapeutic candidates, and progress ENTR-601-45, ENTR-601-50, and future product candidates, into clinical trials.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2023 were $32.3 million, compared to $30.6 million for the year ended December 31, 2022. The increase of $1.7 million was primarily attributable to the following:

•a $2.3 million increase in personnel-related costs, primarily as a result of the increase in headcount in our general and administrative function, inclusive of stock-based compensation expense of $6.9 million and $5.7 million for the years ended December 31, 2023 and 2022, respectively;

•a $1.3 million decrease in professional services costs;

•a $0.4 million increase in facility and equipment-related expenses in connection with the operating lease for our corporate headquarters; and

Interest and Other Income

Total interest and other income was $15.2 million for the year ended December 31, 2023, compared to $2.6 million of interest and other income for the year ended December 31, 2022. This increase is primarily driven by higher interest rates and larger investments in debt securities.

Provision for Income Taxes

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The Company recorded an income tax expense of $18.7 million for the year ended December 31, 2023. The income tax expense was driven largely by the current tax liability associated with the tax recognition of the Vertex Agreement payments received during 2023. The Company reported no income tax expense for the year ended December 31, 2022.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception in 2016, we have incurred significant operating losses. As of December 31, 2023 and 2022, we had an accumulated deficit of $195.0 million and $188.3 million, respectively. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future as we advance our platform and EEV therapeutic candidates. Since our inception, we have raised over $650 million of gross proceeds from sales of stock to leading biotechnology investors and from the Vertex Agreement. As of December 31, 2023, we had cash, cash equivalents and marketable securities of $352.0 million.

In September 2023, we entered into a sales agreement (Sales Agreement) with Cowen and Company, LLC (Cowen) under which we may, from time to time, issue and sell shares of our common stock having aggregate sales proceeds of up to $150.0 million, in a series of one or more ATM equity offerings (the 2023 ATM Program). Cowen is not required to sell any specific share amounts but acts as the Company’s sales agent, using commercially reasonable efforts consistent with its normal trading and sales practices. Pursuant to the Sales Agreement, shares will be sold pursuant to our shelf registration statement on Form S-3 (File No. 333-268099) filed with the SEC on November 1, 2022, including the base prospectus contained therein, as declared effective by the SEC on November 7, 2022. The Company’s common stock will be sold at prevailing market prices at the time of the sale, and as a result, prices may vary. As of December 31, 2023, we have not sold any shares of common stock under the ATM program.

Cash Flows

The following table summarizes our cash flows for each of the periods presented:

Year Ended December 31,

Net cash provided by (used in) operating activities $ 139,803 $ (93,786)

Net cash provided by financing activities 21,037 479

Operating Activities

For the year ended December 31, 2023, net cash provided by operating activities was $139.8 million, driven by our net loss of $6.7 million, a net cash increase from changes in our operating assets and liabilities of $136.3 million, which was primarily related to the upfront and milestone payment received from Vertex, and adjustments for non-cash items, primarily relating to stock-based compensation expense of $13.1 million, depreciation expense of $2.8 million, and net accretion of premiums and discounts on marketable securities of $5.7 million.

For the year ended December 31, 2022, net cash used in operating activities was $93.8 million, consisting primarily of our net loss of $94.6 million, a net cash decrease from changes in our operating assets and liabilities of $11.1 million, and adjustments for non-cash items, primarily relating to stock-based compensation expense of $9.9 million, depreciation expense of $1.9 million, and net amortization of premiums and discounts of $0.1 million on marketable securities.

Investing Activities

Net cash used in investing activities was $138.4 million for the year ended December 31, 2023, consisting primarily of $407.2 million in purchases of marketable securities, partially offset by $274.4 million from the maturities of marketable securities, and $5.6 million in purchases of property and equipment.

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Net cash used in investing activities was $148.7 million for the year ended December 31, 2022, consisting primarily of $222.0 million in purchases of marketable securities, partially offset by $76.2 million from the maturities of marketable securities, and $2.9 million from purchases of property and equipment.

Financing Activities

Net cash provided by financing activities was$21.0 million for the year ended December 31, 2023, consisting of $19.4 million in net proceeds from the issuance of 1,618,613 shares in connection with the Vertex Agreement, $1.2 millionproceeds from stock option exercises and $0.4 million from the issuance of common stock under our employee stock purchase plan.

Net cash provided by financing activities was $0.5 million for the year ended December 31, 2022, consisting of $0.2 million of proceeds from stock option exercises and $0.3 million from the issuance of common stock under our employee stock purchase plan.

Funding Requirements

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and, if successful, the clinical development of our programs. In addition, we expect to incur additional costs associated with operating as a public company. Our operating expenses and future funding requirements are expected to increase substantially as we continue to advance our portfolio of programs. We believe that our cash, cash equivalents and marketable securities as of December 31, 2023, together with ongoing research support and the anticipated achievement of certain milestones under the Vertex Agreement will be sufficient to extend our cash runway through the second quarter of 2026, supporting the Company's expansion and continued development of EEV therapeutic candidates targeting Duchenne muscular dystrophy and advance EEV-therapeutic candidates in indications beyond neuromuscular disease. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

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

•the continuation of our current research programs and our preclinical development of therapeutic candidates from our current research programs;

•seeking to identify additional research programs and additional therapeutic candidates;

•advancing our existing and future therapeutic candidates into clinical development;

•initiating preclinical studies and clinical trials for any therapeutic candidates we identify and develop or expand development of existing programs into additional indications;

•maintaining, expanding, enforcing, defending and protecting our intellectual property portfolio and providing reimbursement of third-party expenses related to our patent portfolio;

•timing of manufacturing for our therapeutic candidates and commercial manufacturing if any therapeutic candidate is approved;

•establishing and maintaining clinical and commercial supply for the development and manufacture of our therapeutic candidates;

•seeking regulatory and marketing approvals for any of our therapeutic candidates that we develop, if any;

•seeking to identify, establish and maintain additional collaborations and license agreements, and the success of those collaborations and license agreements;

•ultimately establishing a sales, marketing and distribution infrastructure to commercialize any platforms for which we may obtain marketing approval, either by ourselves or in collaboration with others;

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•generating revenue from commercial sales of therapeutic candidates we may develop for which we receive marketing approval;

•hiring additional personnel including research and development, clinical and commercial personnel;

•adding operational, financial and management information systems and personnel, including personnel to support our product development;

•achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;

•acquiring or in-licensing products, intellectual property and technologies; and

•the ongoing costs of operating as a public company and recent increases in inflationary rates.

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

Contractual Obligations and Commitments

Lease Commitments

IDB Lease

We have a noncancellable operating lease of approximately 81,229 square feet of office and laboratory space at One Design Center Place in Boston, Massachusetts (IDB Lease). The term of the IDB lease is approximately 10 years and commenced in February 2023. The initial fixed rental rate is $0.5 million per month, which is for a 12 month period during which the base rent is payable for 65,000 square feet, and will increase 3% per annum thereafter for the entire 81,229 square feet leased.

IDB Sublease

The Company subleases a portion of the office and laboratory space leased under the IDB Lease to a third-party (subtenant). The term of the sublease commenced in April 2023. The sublease term is 3 years. The initial fixed rental rate is approximately $0.2 million per month and will increase 3% per annum thereafter.

6 Tide Street Lease

We have a noncancellable operating lease of 23,189 square feet of office and laboratory space at 6 Tide Street in Boston, Massachusetts. The term for the lease will end on November 30, 2025. The fixed rental rate is $0.5 million per month for the remainder of the lease term.

For additional information about our lease commitments, see Note 11, Leases, to our consolidated financial statements included elsewhere in this Annual Report.

License Agreements

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We have also entered into a license agreement (OSIF License Agreement) with Ohio State Innovation Foundation (OSIF), an affiliate of The Ohio State University (OSU), under which we are obligated to make specific milestone and royalty payments. The payment obligations under this agreement are contingent upon future events, such as our achievement of specified development, regulatory and commercial milestones, or generating product sales. For additional information about our OSIF License Agreement and amounts that could become payable in the future under such agreements, see “Business—Intellectual property— License agreement with The Ohio State University” and Note 10, Commitments and Contingencies, to our consolidated financial statements included elsewhere in this Annual Report.

Other Funding Commitments

We enter into contracts in the normal course of business with CROs, third-party manufacturers, and other third parties for preclinical research studies and testing and manufacturing services. These contracts do not contain minimum purchase commitments and are cancellable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation.

Emerging Growth Company and Smaller Reporting Company Status

We are an “emerging growth company,” or EGC, under the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Section 107 of the JOBS Act provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of delayed adoption of new or revised accounting standards and, therefore, we will be subject to the same requirements to adopt new or revised accounting standards as private entities.

As an EGC, we may, and intend to, take advantage of certain exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC:

•we may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;

•we may avail ourselves of the exemption from providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the Sarbanes-Oxley Act);

•we may avail ourselves of the exemption from complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis;

•we may provide reduced disclosure about our executive compensation arrangements; and

•we may not require nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments.

We will remain an EGC until the earliest to occur of (i) the last day of the fiscal year following the fifth anniversary of the completion of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the previous rolling three-year period or (iv) the date on which we are deemed to be a large accelerated filer under the Securities Exchange Act of 1934, as amended (the Exchange Act).

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

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and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

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

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Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets 138

Consolidated Statements of Operations and Comprehensive Loss 139

Consolidated Statements of Stockholders’ Equity 140

Consolidated Statements of Cash Flows 141

Notes to Consolidated Financial Statements 143

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Entrada Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Entrada Therapeutics, Inc. (the Company) as of December 31, 2023, and 2022, the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

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

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

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

/s/ Ernst & Young LLP

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

Boston, Massachusetts

March 13, 2024

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ENTRADA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

Assets

Current assets:

Collaboration receivable 5,878 —

Prepaid expenses and other current assets 11,924 21,163

Right-of-use assets, operating leases 81,490 25,340

Liabilities and Stockholders’ Equity

Current liabilities:

Accrued expenses and other current liabilities 11,325 7,576

Income taxes payable 4,024 —

Operating lease obligations, current portion 7,909 8,406

Deferred revenue, current portion 132,261 —

Operating lease obligations, net of current portion 60,321 17,530

Deferred revenue, net of current portion 7,715 —

Commitments and contingencies (Note 10)

Stockholders’ equity:

Accumulated other comprehensive income (loss) 195 (2,057)

Total liabilities and stockholders’ equity $ 469,192 $ 252,056

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

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ENTRADA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

Year Ended December 31,

Collaboration revenue $ 129,013 $ —

Operating expenses:

Other income:

Other comprehensive loss:

Total other comprehensive income (loss) 2,252 (2,057)

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

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ENTRADA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

Shares Amount

Issuance of common stock upon exercise of stock options 84,526 — 195 — — 195

Stock‐based compensation — — 9,895 — — 9,895

Other comprehensive loss — — — (2,057) — (2,057)

Vesting of early exercised options 33,416 — 91 — — 91

Vesting of restricted stock units 138,361 — — — — —

Other comprehensive income — — — 2,252 — 2,252

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

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ENTRADA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Cash flows from operating activities:

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

Changes in operating assets and liabilities:

Collaboration receivable (5,878) —

Prepaid expenses and other current assets 8,622 (14,022)

Right-of-use assets, operating leases 11,989 7,651

Accrued expenses and other current liabilities 3,812 1,762

Income taxes payable 4,024 —

Net cash provided by (used in) operating activities 139,803 (93,786)

Cash flows from investing activities:

Purchases of property and equipment (5,614) (2,887)

Cash flows from financing activities:

Proceeds from exercise of stock options 1,187 195

Net cash provided by financing activities 21,037 479

Cash, cash equivalents and restricted cash at beginning of year 49,107 291,064

Cash, cash equivalents and restricted cash at end of year $ 71,552 $ 49,107

Supplemental cash flow disclosures:

Right-of-use assets surrendered as part of lease modification $ 9,445 $ —

Recognition of right-of-use assets upon adoption of ASC 842 $ — $ 32,991

Vesting of options early exercised subject to repurchase $ 91 $ 135

Cash paid for income taxes $ 14,717 $ —

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

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ENTRADA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2023 and 2022

1. Nature of the Business

Organization

Entrada Therapeutics, Inc. (Entrada or the Company) is a clinical-stage biopharmaceutical company aiming to transform the lives of patients by establishing a new class of medicines which engage intracellular targets that have long been considered inaccessible. The Company’s Endosomal Escape Vehicle (EEVTM)-therapeutics are designed to enable the efficient delivery of a wide range of therapeutics into a variety of organs and tissues, resulting in an improved therapeutic index. The Company was incorporated in Delaware on September 22, 2016 and its principal offices are located in Boston, Massachusetts.

Liquidity and Capital Resources

Since its inception, the Company has devoted substantially all of its resources to its research and development efforts relating to its proprietary, highly versatile and modular EEV platform (EEV Platform), advancing development of its portfolio of programs and general and administrative support for these operations, including raising capital. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, technical risks associated with the successful research, development and manufacturing of therapeutic candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Therapeutic candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts will require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

In accordance with Accounting Standards Codification (ASC) 205-40, Going Concern, the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company has incurred significant net losses since its inception, including net losses of $6.7 million and $94.6 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company had an accumulated deficit of $195.0 million. To date, the Company has funded its operations primarily through the sale of equity securities and collaboration payments. Other than the recognition of revenue related to the collaboration payments received during the year ended December 31, 2023, the Company expects to continue to generate operating losses and negative operating cash flows for the foreseeable future.

The Company expects that its cash, cash equivalents, and marketable securities of $352.0 million as of December 31, 2023 will be sufficient to fund its operations and capital expenditure requirements for at least the next twelve months from the date of issuance of these consolidated financial statements. The Company will need additional financing to support its continuing operations and pursue its business strategy and may pursue additional cash resources through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing, or other arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed or on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements reflect the operations of the Company and have been prepared in conformity with generally accepted accounting principles in the United States of America (GAAP). Any

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reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB).

Principles of Consolidation

The accompanying consolidated financial statements include those of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, estimates related to revenue recognition, accrual and prepayment of research and development expenses, the valuation of stock-based compensation and income taxes. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

Segment Information

The Company manages its operations as a single segment. The Company’s chief operating decision maker, its Chief Executive Officer, manages the Company’s operations on a consolidated basis for the purposes of assessing performance and making operating decisions.

Revenue Recognition

To date, all revenue has been generated from the Company's Strategic Collaboration and License Agreement with Vertex, which closed in February 2023 and was amended in October 2023 (Vertex Agreement), and falls within the scope of ASC Topic 606, "Revenue from Contracts with Customers" (ASC 606), under which the Company licensed rights to VX-670 and performs research and development services. The terms of this arrangement includes a non-refundable upfront payment, reimbursement for research and development costs; development, regulatory, and commercial milestone payments; and royalties on net sales of licensed products.

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

For contracts within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered separate performance obligations. The identification of material rights requires judgments related to the determination of the value of the underlying license relative to the option exercise price, including assumptions about technical feasibility and the probability of developing a candidate that would be subject to the option rights. The exercise of a material right is accounted for as a contract modification for accounting purposes.

The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such promised goods or services are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct

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provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct, the Company considers factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.

The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. For contracts within the scope of ASC 606 that contain elements within the scope of a different ASC Topic, the Company excludes the fair value such elements from the transaction price.

If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment as a change in estimate.

If an arrangement includes development or regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price in the period in which the Company deems the milestone to be probable. Milestone payments that are not within the Company’s control or a customer's control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

The transaction price is allocated to the identified performance obligations in proportion to their standalone selling prices (SSP) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations may require significant judgment. In developing the SSP for a performance obligation, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. The Company validates the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.

For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied. Up-front and milestone payments are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements.

Amounts are recorded as a collaboration receivable when the Company's right to consideration is unconditional. To date, the Company has not recorded any credit losses on its collaboration receivables.

The Company then recognizes the revenue allocated to each performance when (or as) each performance obligation is satisfied, either at a point in time or over time. Any over time recognition is based on the use of an output or input method.

Concentrations of Credit Risk and Off-Balance Sheet Risk

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Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents, restricted cash and marketable securities. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality, and the Company has not experienced any losses on these deposits. The Company’s marketable securities primarily consist of corporate bonds and U.S. government agency securities and treasuries, and potentially subject the Company to concentrations of credit risk. Our cash management and investment policy limits investment instruments to investment-grade securities with the objective to preserve capital and to maintain liquidity until the funds can be used in business operations

The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign-hedging arrangements.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents. At December 31, 2023 and 2022 cash and cash equivalents include standard checking accounts and money market account funds that invest primarily in U.S. government-backed securities and treasuries.

As of December 31, 2023 and 2022, restricted cash represents collateral provided for a letter of credit issued as a security deposit in connection with the Company’s lease of its corporate facilities located at One Design Center Place, Boston, Massachusetts. A reconciliation of the cash, cash equivalents, and restricted cash reported within the balance sheet that sum to the total of the same amounts shown in the statement of cash flows is as follows (in thousands):

Total cash, cash equivalents and restricted cash $ 71,552 $ 49,107

Marketable Securities

Investments in marketable securities are classified as available-for-sale. Available-for-sale securities are measured and reported at fair value using quoted prices in active markets for similar securities. Unrealized gains and losses on available-for-sale securities are reported as a separate component of stockholders’ equity. Premiums or discounts from par value are amortized or accreted to investment income and/or expense over the life of the underlying investment. All of the Company’s marketable securities are available to the Company for use in current operations. As a result, the Company classified all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date. Realized gains and losses are determined using the specific identification method and are included in interest and other income in our consolidated statement of operations.

The Company assesses impairment for its marketable securities under the available-for-sale debt security impairment model in ASC 326 as of each reporting date. Based on the model, we determine if a portion of any decline in fair value below carrying value is the result of a credit loss. The Company records credit losses in the consolidated statements of operations and comprehensive loss as credit loss expense within interest and other income, which is limited to the difference between the fair value and the amortized cost of the security. To date, the Company has not recorded any credit losses on its available-for-sale debt securities.

Accrued interest receivable related to the Company's available-for-sale debt securities is presented within prepaid expenses and other current assets on the Company's consolidated balance sheets. The Company has elected the practical expedient available to exclude accrued interest receivable from both the fair value and the amortized cost basis of available-for-sale debt securities for the purposes of identifying and measuring any impairment. The Company writes off accrued interest receivable once it has determined that the asset is not realizable. Any write offs of accrued interest receivable are recorded by reversing interest income, recognizing credit loss expense, or a combination of both. To date, the Company has not written off any accrued interest receivables associated with its marketable securities.

Fair Value Measurements

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ASC Topic 820, Fair Value Measurement (ASC 820), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the assets or liability and are developed based on the best information available under the circumstances. ASC 820 identifies fair value 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.

As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tiered value hierarchy that distinguishes between the following:

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

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

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

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company evaluates transfers between levels at the end of each reporting period. There were no transfers of financial instruments between levels during the years ended December 31, 2023 and 2022. The carrying amounts of accounts payable and accrued expenses approximate their fair values due to their short-term nature.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight line method over the estimated useful life of each asset as follows:

Estimated Useful Life

Laboratory equipment 5 years

Furniture and fixtures 5 years

Computer equipment 3 years

Leasehold improvements Lesser of estimated useful life or remaining lease term

Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in other income (expense), net. Expenditures for repairs and maintenance that do not improve or extend the life of the respective assets are expensed in operations as incurred.

Leases

At the inception of a lease arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and current and non-current lease liabilities, as applicable. The Company has elected not to recognize leases with an original term of one year or less on the balance sheet.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be

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required for items such as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. To estimate its incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since the Company does not currently have a rating agency-based credit rating. Prospectively, the Company adjusts the right-of-use assets for straight-line rent expense or any incentives received and remeasures the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date. Lease expense for lease payments is recognized on a straight-line basis over the assigned lease term.

Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. Changes to the terms and conditions of a lease that result in a change in the scope of or the consideration for the lease result in a lease modification. A lease modification that grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use is treated as a separate contract. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease. For any lease modifications that aren't accounted for as separate contracts, the Company remeasures its right-of-use assets and lease liabilities as of the modification date. The Company assesses its right-of-use assets for impairment in a manner consistent with its assessment for long-lived assets held and used in operations.

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, which consist primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no impairment losses recognized during the years ended December 31, 2023 and 2022.

Deferred Offering Costs

The Company capitalizes incremental legal, professional accounting and other third-party fees that are incurred in the course of preparing for a financing as other non-current assets until the offering is consummated. At the time of the completion of the offering, the costs are reclassified as a reduction of the proceeds of the financing as part of additional paid-in-capital. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated.

Contingencies

The Company records liabilities for legal and other contingencies when information available to the Company indicates that it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Legal costs in connection with legal and other contingencies are expensed as costs are incurred.No liabilities for legal and other contingencies were accrued as of December 31, 2023 and 2022.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, contract research organizations (CROs), business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and its executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any indemnification claims.

Research and Development Expenses

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Research and development costs are charged to expense as incurred. Research and development costs consist of direct and allocated costs incurred in performing research and development activities, including salaries and bonuses, stock-based compensation, employee benefits, facilities costs, third-party license fees related to technology with no alternative future use, laboratory supplies, depreciation, manufacturing expenses, preclinical expenses, clinical expenses, consulting and other contracted services. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the goods are delivered or the related services are performed or until it is no longer expected that the goods will be delivered or the services rendered.

The Company has entered into various research and development related contracts with third parties. These agreements are cancellable with prior written notice, and related fees are recorded as research and development expenses as incurred. Payments for these agreements are based on the terms of the individual contracts, which may differ from the pattern of costs incurred, and payments made in advance of performance are reflected in the accompanying consolidated balance sheets as prepaid and other assets or accrued liabilities. When evaluating the adequacy of the accrued liabilities and prepaid expenses, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued and prepaid balances at the end of any reporting period. Actual results could differ from the Company’s estimates.

Patent Costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Stock-Based Compensation

The Company’s stock-based compensation program allows for grants of stock options and restricted stock units. Grants are awarded to employees and non-employees, including the Company’s board of directors.

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

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

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

Prior to the Company’s IPO, there was no public market for its common stock, and consequently, the estimated fair value of its common stock was determined by the board of directors as of the date of each option grant, with input from management, considering third-party valuations of its common stock as well as its board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent third-party valuation through the date of the grant. These third-party valuations were performed in accordance

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with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (Practice Aid). The Practice Aid identifies various available methods for allocating the enterprise value across classes of series of capital stock in determining the fair value of the Company’s common stock at each valuation date.

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

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

Income Taxes

Income taxes are recorded in accordance with FASB ASC Topic 740, Income Taxes (ASC 740), which provides for deferred taxes using an asset and liability approach. The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

Net Loss per Share

The Company follows the two-class method when computing net loss per share, as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund the losses of the Company.

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss attributable to common stockholders is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents. Given that the Company recorded a net loss for each of the periods presented, there is no difference between basic and diluted net loss per share since the effect of common stock equivalents would be antidilutive and are, therefore, excluded from the diluted net loss per share calculation.

Comprehensive Loss

Comprehensive loss includes net loss and other comprehensive loss. For both the year ended December 31, 2023 and the year ended December 31, 2022, comprehensive loss consists of net loss and changes in unrealized gains and losses on marketable securities.

Emerging Growth Company Status

The Company qualifies as an “emerging growth company” (EGC), as defined in the Jumpstart Our Business Startups Act (JOBS Act) and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. The Company may take advantage of these exemptions until it is

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no longer an EGC under Section 107 of the JOBS Act, which provides that an EGC can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to avail itself of the extended transition period and, therefore, while the Company is an EGC it will not be subject to new or revised accounting standards the same time that they become applicable to other public companies that are not EGCs, unless it chooses to early adopt a new or revised accounting standard. As a result of this election, the consolidated financial statements may not be comparable to companies that comply with public company FASB standards’ effective dates.

Recently Adopted Accounting Pronouncements

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326)

Effective January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). This ASU requires that credit losses for financial instruments measured at amortized cost be reported using an expected losses model rather than the incurred losses model that was previously used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, this standard requires allowances to be recorded for any credit losses instead of reducing the amortized cost of the investment. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. This guidance did not have an impact on the Company's consolidated financial statements.

ASU No. 2022-03, Fair Value Measurement (Topic 820)

Effective January 1, 2023, the Company adopted ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This ASU clarifies that a contractual restriction on the sale of an investment in an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value. For additional information regarding the impact of the adoption of this ASU on our consolidated financial statements, refer to Note 12, Collaboration and License Agreements.

Recently Issued Accounting Pronouncements

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

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to provide enhancements to annual income tax disclosures. In particular, the standard will require more detailed information in the income tax rate reconciliation, as well as the disclosure of income taxes paid disaggregated by jurisdiction, among other enhancements. The standard is effective for years beginning after December 15, 2024 and early adoption is permitted. The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and footnotes.

3. Marketable Securities

The following is a summary of the Company's marketable securities at December 31, 2023 and December 31, 2022 (in thousands).

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Amortized Cost Unrealized Gains Unrealized Losses Fair Value

U.S. government agency securities and treasuries 15,537 45 — 15,582

Amortized Cost Unrealized Gains Unrealized Losses Fair Value

U.S. government agency securities and treasuries — — — —

As of December 31, 2023, the Company had 20 marketable securities with a total fair market value of $101.7 million in an unrealized loss position. As of December 31, 2022, the Company had 32 marketable securities with a total fair market value of $143.6 million in an unrealized loss position.

The Company believes that any unrealized losses associated with the decline in value of its securities are temporary and primarily related to the change in market interest rates since purchase. The Company believes that it is more likely than not that it will be able to hold its debt securities to maturity and that there was no material change in the credit risk of the above instruments since January 1, 2023. Therefore, the Company anticipates a full recovery of the amortized cost basis of its debt securities at maturity and no allowance for credit losses was recognized.

As of December 31, 2023 and December 31, 2022, $1.7 million and $0.6 million, respectively, of accrued interest receivable was included in prepaid expenses and other current assets.

4. Fair Value Measurements

The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value (in thousands):

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Fair Value Measurements atDecember 31, 2023

Level 1 Level 2 Level 3 Total

Cash equivalents:(1)

Marketable securities:

U.S. government agency securities and treasuries — 251,168 — 251,168

Fair Value Measurements atDecember 31, 2022

Level 1 Level 2 Level 3 Total

Cash equivalents: (1)

Marketable securities:

U.S. government agency securities and treasuries $ — $ 99,396 $ — $ 99,396

(1)The cash equivalent amounts above do not include $0.5 million and $0.3 million of cash related to checking accounts included in cash and cash equivalents as of December 31, 2023 and December 31, 2022. These amounts are excluded as no valuation is needed for cash in checking accounts.

Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. The Company measures its debt securities at fair value on a recurring basis using inputs that are observable or can be corroborated by observable market data and classifies those instruments within Level 2 of the fair value hierarchy.

5. Property and Equipment, Net

Property and equipment, net consisted of the following at December 31 (in thousands):

Construction in progress — 584

Less: accumulated depreciation (5,923) (3,301)

Depreciation expense for the years ended December 31, 2023 and 2022 was $2.8 million and $1.9 million, respectively.

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following at December 31 (in thousands):

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Employee compensation and benefits $ 6,660 $ 5,063

External research and development expenses 2,894 1,157

General and administrative professional service expenses 767 925

Total accrued expenses and other current liabilities $ 11,325 $ 7,576

7. Common Stock and Preferred Stock

Common Stock

As of both December 31, 2023 and December 31, 2022, the Company’s certificate of incorporation, as amended and restated effective upon the completion of the IPO, authorized the Company to issue 150,000,000 shares of common stock, par value $0.0001 per share. The holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of common stock do not have any cumulative voting rights. Holders of common stock are entitled to receive ratably any dividends declared by the board of directors out of funds legally available for that purpose, subject to any preferential dividend rights of any outstanding preferred stock. Common stock has no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions. In the event of liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities and any liquidation preference of any outstanding preferred stock.

In February 2023, in connection with the closing of the Vertex Agreement, the Company and Vertex also closed their Stock Purchase Agreement for the sale and issuance of 1,618,613 shares of Entrada's common stock (the “Shares”) to Vertex for an aggregate purchase price of approximately $26.3 million or $16.26 per share. See Note 12, Collaboration and License Agreements, for further discussion of the Company's accounting for the shares sold in connection with the closing of the Vertex Agreement.

In September 2023, the Company entered into a sales agreement (the Sales Agreement) with Cowen and Company, LLC, acting as the Company's agent and/or principal (the Sales Agent), with respect to an "at the market offering" program under which the Company may, from time to time, at its sole discretion, issue and sell shares of its common stock having an aggregate offering price of up to $150.0 million through the Sales Agent. During the year ended December 31, 2023, there have been no sales of common stock pursuant to the Sales Agreement.

Shares Reserved for Future Issuance under Equity Compensation Plans

The Company has reserved the following shares of common stock for future issuance under equity compensation plans at December 31:

Preferred Stock

As of both December 31, 2023 and December 31, 2022, the Company was authorized to issue 10,000,000 shares of undesignated preferred stock, $0.0001 par value, in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation of, such series, any or all of which may be greater than the rights of common stock. As of both December 31, 2023 and December 31, 2022, there were no shares of undesignated preferred stock issued or outstanding.

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8. Stock-Based Compensation

2021 Plan

In September 2021 the Company’s board of directors adopted, and in October 2021 the Company’s stockholders approved, the 2021 Plan, which became effective as of the date immediately prior to the date of the effectiveness of the registration statement for the IPO. The 2021 Plan allows the board of directors to grant incentive stock options or non-qualified stock options, restricted stock, restricted stock units and other equity awards to the Company’s officers, employees, directors and other key persons. In addition, the 2021 Plan includes a provision that allows for an automatic annual increase of 4% in the number of shares of common stock available for issuance under the 2021 Plan. Upon the adoption of the 2021 Plan, the Company ceased granting awards under the 2016 Plan. The total number of shares of common stock authorized for issuance under the 2021 Plan as of December 31, 2023 was 6,336,068 shares and was 5,262,917 shares as of December 31, 2022.

As of December 31, 2023, the Company had issued stock options and restricted stock units (RSUs) under the 2021 Plan. Both stock options and RSUs issued are comprised of service-based awards granted to employees. Vesting of stock options is subject to the recipient’s continued employment or service. Stock options and RSUs typically vest over a four-year period.

2016 Plan

Prior to the adoption of the 2021 Plan, the 2016 Plan provided for the Company to grant incentive stock options or non-qualified stock options, restricted stock, restricted stock units and other equity awards to employees, directors and consultants of the Company. The 2016 Plan was administered by the board of directors of the Company or, at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions were determined at the discretion of the board of directors, or its committee if so delegated. The 2016 Plan allows for early exercise of all stock option grants if authorized by the board of directors at the time of grant. The shares of common stock issued from the early exercise of stock options are restricted and continue to vest over the original service based vesting condition of the original stock option award. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination.

The 2016 Plan will continue to govern the outstanding equity awards granted thereunder. The total number of shares of common stock authorized for issuance under the 2016 Plan as of December 31, 2023 and 2022 was 2,044,585 shares and 2,206,655 shares, respectively. As of both dates, all shares of common stock authorized for issuance under the 2016 Plan relate to outstanding stock options.

2021 Employee Stock Purchase Plan

In September 2021, the Company’s board of directors adopted, and in October 2021 the Company’s stockholders approved, the ESPP, which became effective as of the date immediately prior to the date of the effectiveness of the registration statement for the IPO. The ESPP is administered by the person or persons appointed by the Company’s board of directors for such purpose. The ESPP initially provided participating employees with the opportunity to purchase up to an aggregate of 278,762 shares of common stock. The number of shares of common stock reserved for issuance under the ESPP will automatically increase on January 1st of each year beginning in 2022 and continuing through and including 2031 by the lesser of (i) 1% of the outstanding number of shares of our common stock of the immediately preceding December 31, (ii) 557,524 shares or (iii) such number of shares as determined by the ESPP administrator. The total number of shares of common stock authorized for issuance under the 2021 ESPP as of December 31, 2023 and 2022 was 839,539 shares and 563,115 shares, respectively.

Compensation expense for discounted purchases under the 2021 ESPP is measured using the Black-Scholes model to compute the fair value of the lookback provision plus the purchase discount and is recognized as compensation expense over the course of the offering period.

Stock-Based Compensation

The Company recognized stock-based compensation expense in the consolidated statements of operations and comprehensive loss, by award type, as follows (in thousands):

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Year ended December 31,

Stock-based compensation expense recorded as research and development and general and administrative expenses in the consolidated statements of operations and comprehensive loss is as follows (in thousands):

Year ended December 31,

Research and development expenses $ 6,169 $ 4,166

General and administrative expenses 6,942 5,729

Stock Option Valuation

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock options granted for the years then ended:

Risk‐free interest rate 4.09% 2.20%

Expected volatility 72% 71%

Expected dividend yield — —

Expected term (in years) 6.01 6.04

Early Exercise of Unvested Stock Options

Shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding shares until those shares vest according to their respective vesting schedules. Cash received from employee exercises of unvested options is included in current liabilities on the balance sheet. Amounts recorded are reclassified to common stock and additional paid-in capital as the shares vest. Vesting can occur in the year of exercise and thereafter. There were 14,745 and 53,741 unvested shares related to early exercises of stock options as of December 31, 2023 and December 31, 2022, respectively. In the years ended December 31, 2023 and 2022, the liability associated with the unvested early exercise of stock options was $0.1 million and $0.2 million, respectively.

Stock Options

The following table summarizes the Company’s stock option activity since December 31, 2022:

(in years) (in thousands)

(1)This represents the number of vested and unvested options exercisable as of December 31, 2023.

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(2)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the closing price of the Company's common stock at December 31, 2023 for the options that were in the money as of December 31, 2023.

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2023 and 2022 was $2.1 million and $1.0 million, while the company received $1.2 million and $0.2 million in proceeds for the exercise of these options, respectively.

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2023 and 2022 was $9.23 per share and $7.51 per share, respectively. As of December 31, 2023, there was $20.7 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Stock Units

During the year ended December 31, 2023, RSUs were granted to employees with vesting conditions based on continued service over time. Accordingly, stock-based compensation expense for such awards is recognized using a straight-line attribution model over the vesting term of each RSU. The fair value of each RSU is based on the closing price of the Company's common stock on the date of grant. For the majority of RSUs, the restricted stock vests over a four-year period, with 25% of the shares vesting on each anniversary of the grant date.

A summary of restricted stock activity during the year ended December 31, 2023 is as follows:

Shares Weighted‐AverageGrant‐DateFair Value

As of December 31, 2023, there was $15.1 million of unrecognized stock-based compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average remaining vesting period of 3.17 years.

9. Income Taxes

The Company recorded $12.1 million of pre-tax book income for the year ended December 31, 2023. The Company recorded a pre-tax book loss for the year ended December 31, 2022. The Company has no foreign operations.

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

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Year Ended December 31,

Current:

Foreign — —

Total current tax provision 18,741 —

Deferred:

Federal — —

State — —

Foreign — —

Total deferred tax provision — —

Total income tax provision $ 18,741 $ —

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:

Year Ended December 31,

Federal statutory income tax rate 21.0% 21.0%

State income taxes, net of federal benefit 5.1 5.5

Federal and state research and development tax credits -50.3 5.0

Non-deductible stock compensation and non-taxable items 11.3 (1.4)

Change in deferred tax asset valuation allowance 170.3 (30.1)

Change in state tax rates (1.9) —

Effective income tax rate 155.5% —%

Net deferred tax assets as of December 31, 2023 and 2022 consisted of the following (in thousands):

December 31,

Deferred tax assets:

Net operating loss carryforwards $ 3,617 $ 32,148

Research and development tax credit carryforwards 2,706 7,679

Capitalized research and development expenses 32,803 15,747

Deferred tax liabilities:

Property and equipment (2,044) (298)

Total deferred tax liabilities (24,562) (7,471)

Net deferred tax assets $ — $ —

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The Company recorded income tax expense of $18.7 million for the year ended December 31, 2023. The income tax expense recorded was driven largely by the current tax liability associated with the tax recognition of the Vertex Agreement payments received during 2023. A significant portion of the taxable income related to the collaboration payment is offset by current year expenses and prior year accumulated losses.

As of December 31, 2023, the Company had federal net operating loss carryforwards of $14.6 million, which may be available to offset future taxable income. None of our federal net operating loss carryforwards will expire, but all are limited in their usage to an annual deduction equal to 80% of annual taxable income. In addition, as of December 31, 2023, the Company had state net operating loss carryforwards of $8.7 million, which may be available to offset future taxable income and expire at various dates beginning in 2036. As of December 31, 2023, the Company also had federal and state research and development tax credit carryforwards of $2.1 million and $0.8 million, respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2039 and 2035, respectively.

Utilization of the NOLs and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 due to ownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382, as well as similar state provisions. These ownership changes may limit the amount of NOLs and research and development tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. If a change in control as defined by Section 382 has occurred at any time since the Company’s formation, utilization of its NOLs or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, which could then be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the NOLs or research and development tax carryforwards before their utilization. The Company has determined that ownership changes have occurred in the past and that certain NOLs and research and development tax credit carryforwards will be subject to limitation.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets, which consist primarily of net operating loss carryforwards and research and development tax credit carryforwards, capitalized research and development expenses and deferred revenue. Management has considered the Company’s history of cumulative net losses incurred since inception, estimated future taxable income, and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of federal and state net deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2023 and 2022. The Company reevaluates the positive and negative evidence at each reporting period.

The valuation allowance increased by $20.5 million and $28.5 million for the years ended December 31, 2023 and 2022, respectively.

The Company assesses the uncertainty in its income tax positions to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more-likely-than-not threshold, the tax amount recognized in the consolidated financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement with the relevant taxing authority. The Company’s policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its consolidated statements of operations. As of December 31, 2023 and 2022, the Company had not recorded any reserves for uncertain tax positions or related interest and penalties.

In 2017, the Tax Cuts and Jobs Act of 2017 (2017 Tax Act) was signed into law. Among other provisions, the 2017 Tax Act requires taxpayers to capitalize and amortize research and experimental (R&E) expenditures under Section 174 for tax years beginning after December 31, 2021. As such, the rule noted became effective for the Company during the year ended December 31, 2022 and resulted in the capitalization of certain R&E costs within its tax provision. The Company will amortize such costs for tax purposes over 5 years if the R&E was performed in the United States and over 15 years if the R&E was performed outside the United States.

The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. Due to net operating losses incurred, the Company’s tax returns from inception to date are subject to examination by the taxing authorities.

10. Commitments and Contingencies

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In 2018, the Company entered into a definitive license agreement with Ohio State Innovation Foundation (OSIF), an affiliate of The Ohio State University, (OSIF License Agreement) in which OSIF granted the Company an exclusive worldwide, sublicensable license to certain intellectual property under certain patent rights to research, develop, and otherwise commercialize a product generated from the licensed intellectual property. The Company is obligated to make milestone payments of up to $2.6 million upon the occurrence of specified research, development, and commercial activities for each of the first three license products related to the above technology. In addition, OSIF will receive tiered royalty payments on the applicable licensed program and platform products at a percentage ranging in single-digit royalties of net sales subject to reductions and offsets in certain circumstances, as well as a fee on sublicensed consideration of up to 15% of non-royalty sublicensing consideration.

Concurrently with the Company entering into and later amending the Vertex Agreement, the Company entered into a sublicense agreement with Vertex, which was amended in October 2023 (Sublicense Agreement). Pursuant to the Sublicense Agreement, the Company granted to Vertex an exclusive sublicense under certain intellectual property licensed to the Company under the OSIF License Agreement. The material terms of the Sublicense Agreement mirror those of the Vertex Agreement, and the payments described in connection with the Vertex Agreement in Note 12, Collaboration and License Agreements, are in consideration for the rights granted under both the Vertex Agreement and Sublicense Agreement.

In November 2023, the Company paid approximately $0.1 million for a milestone fee under the OSIF License Agreement. The triggering of all other milestone fees was not considered probable as of December 31, 2023.

In April 2023, the Company paid OSIF a sublicense fee of $2.8 million related to the upfront payment received from Vertex in February of 2023. In January 2024, the Company paid OSIF a sublicense fee of $0.2 million related to the Vertex milestone achieved in October of 2023. This amount was accrued for as of December 31, 2023. If the Company receives any additional sublicensing consideration, it will owe additional fees to OSIF pursuant to the terms of the OSIF License Agreement.

All costs associated with milestone and sublicense fees are recorded as research and development expenses. For the years ended December 31, 2023 and 2022, the Company reimbursed OSIF for patent costs of $0.1 million and $0.2 million, respectively.

11. Leases

The Company’s operating lease activity is comprised of non-cancelable facility leases for office and laboratory space in Boston, Massachusetts.

IDB Lease

On March 16, 2022, the Company and IDB 17-19 Drydock Limited Partnership, as landlord (Landlord), entered into a lease agreement (IDB Lease) with respect to approximately 81,229 square feet of office and laboratory space (Premises) in Boston, Massachusetts. The initial fixed rental rate is $0.5 million per month, which is for a 12 month period during which the base rent is payable for 65,000 square feet, and will increase 3% per annum thereafter for the entire 81,229 square feet leased.

The accounting commencement date occurred in April 2023 when both the Landlord's build-out and the tenant improvements were substantially completed. On the accounting commencement date, the Company recorded an operating lease right-of-use (ROU) asset of $77.6 million and a total lease liability of $63.6 million.

The IDB Lease has a term of approximately 10 years, unless earlier terminated in accordance with the terms of the IDB Lease. The Company has (i) the option to extend the IDB Lease for an additional period of five (5) years, and (ii) a right of first offer on adjacent space to the Premises, subject to the terms and conditions of the IDB Lease. As these options are not reasonably certain of occurring, they have not been included in the initial calculation of the Company's ROU asset upon lease commencement.

Under the terms of the IDB Lease, the Landlord provided an allowance of $19.5 million toward the cost of completing tenant improvements for the Premises. In addition, the Landlord provided an additional contribution of $1.6 million toward the cost of tenant improvements to the Premises, which amount shall be repaid by the Company over the term of the IDB Lease. Such repayments are included in the maturity of the lease liability table below. As of December 31, 2023, the Company had received the full tenant improvement allowance from the Landlord.

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The Company concluded that the improvements resulting from both the Landlord's build-out and the tenant improvements are the Landlord's assets for accounting purposes. Accordingly, the $13.9 million of costs incurred by the Company related to the tenant improvements in excess of the Landlord's allowance were reclassified from other non-current assets to right-of-use assets upon commencement of the IDB lease and will be recognized as rent expense over the remaining lease term.

In connection with the execution of the IDB Lease, the Company executed a cash-collateralized letter of credit, which may be reduced in the future subject to reduction requirements specified in the IDB Lease therein. The $4.0 million of cash collateralizing the letter of credit is classified as restricted cash on the Company's consolidated balance sheets.

6 Tide Street Lease

The Company entered into an operating lease for office and laboratory space at 6 Tide Street in Boston, Massachusetts in February 2020, and entered into subsequent amendments through 2021 to lease additional space (6 Tide Street Lease). Such amendments run co-terminus with the original lease.

During 2023, the Company entered into amendments to the 6 Tide Street lease pursuant to which the Company surrendered portions of the leased space in exchange for being relieved of its obligation to make lease payments. Upon the lease modification, the Company reassessed its incremental borrowing rate and remeasured the lease liability and right-of-use asset. Subsequent to the amendment, the Company continues to classify the 6 Tide Street Lease as an operating lease.

As of December 31, 2023, the Company had a total of 23,189 square feet licensed at this facility. The term for the remaining leased space will end on November 30, 2025. The fixed rental payment will be approximately $0.5 million per month for the remainder of the lease term. The Company has the option to extend the remaining leased space for a period of 3 years, or terminate such remaining space leased without penalty provided sufficient notice is given. At the adoption of ASC 842, the Company concluded that it is not reasonably certain that it will exercise its option to terminate the lease early or exercise its option to extend the leased space.

As of December 31, 2023, the Company's security deposit for the 6 Tide Street Lease was $0.7 million, of which, $0.3 million is recorded as a component of other current assets as it is expected to be received with one year of the balance sheet date. The remaining $0.4 million is recorded as a component of other non-current assets.

Summary of all lease costs recognized under ASC 842

The components of all operating lease cost were as follows (in thousands):

Operating lease cost $ 16,395

Variable lease cost —

Supplemental information related to all operating leases was as follows:

Other information Year ended December 31, 2023

Operating cash flows used for operating leases (in thousands) $ 16,268

Weighted average remaining lease term 8.2 years

Weighted average discount rate 8.13%

Future payments due under all operating leases as of December 31, 2023 were as follows (in thousands):

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Maturity of lease liabilities Amount

Total lease payments $ 94,594

Less: imputed interest (26,364)

Present value of operating lease liabilities $ 68,230

IDB Sublease

In December 2022, the Company entered into a sublease agreement to sublease a portion of the office and laboratory space leased under the IDB Lease to a third-party (subtenant). The sublease term is 3 years and the subtenant has an option to extend the lease term for 6 months. The initial fixed rental rate is $0.2 million per month, and will increase 3% per annum thereafter. The sublessee is obligated to pay its ratable portion of operating expenses during the sublease term. The Company received a letter of credit of $0.5 million in place of a security deposit. As of December 31, 2023, no amounts have been drawn on the letter of credit.

The sublease accounting commencement date occurred in April 2023. During the year ended December 31, 2023, the Company recognized $1.5 million of sublease income. Such amount is recorded as a reduction to rent expense.

12. Collaboration and License Agreements

Vertex Agreement - Overview

The Company and Vertex closed the Vertex Agreement in February 2023, as amended in October 2023, pursuant to which the Company granted Vertex an exclusive worldwide license to research, develop, manufacture and commercialize VX-670, as well as any additional EEV-based therapeutic candidates that may be identified by the Company for the potential treatment of myotonic dystrophy type 1 (DM1) in the course of the parties’ global research collaboration. In October 2023, the Company and Vertex amended the Strategic Collaboration and License Agreement to clarify a milestone and related payment terms.

The Vertex Agreement provides for a four-year global research collaboration under which Entrada will continue to perform preclinical development of the Company's partnered candidate VX-670 pursuant to the mutually agreed-upon research plan (Research Plan). The Research Plan is overseen by a Joint Research Committee (JRC) as detailed in the Vertex Agreement. Pursuant to the terms of the Vertex Agreement, the JRC may amend the Research Plan to include additional DM1-related research activities with a goal of identifying other EEV-based therapeutic product candidates for the potential treatment of DM1. Vertex is obligated to reimburse the Company’s research expenses incurred in performing activities under the Research Plan.

Pursuant to the Vertex Agreement, the Company received an upfront payment of $223.7 million, and Vertex made an equity investment of $26.3 million by purchasing 1,618,613 shares of the Company's common stock, pursuant to a separate but simultaneously executed stock purchase agreement. Under the terms of the Vertex Agreement, the Company is eligible to receive up to $485.0 million upon the achievement of certain research, development, regulatory and commercial milestones. The Company will also receive tiered royalties, from the mid to high single digits based on potential future net sales of licensed products as set forth in the Vertex Agreement. In October 2023, the Company achieved a milestone pursuant to the Vertex Agreement related to preclinical IND-enabling GLP toxicology studies of VX-670 that triggered a $17.5 million milestone payment, which the Company received in November 2023.

The term of the Vertex Agreement will expire in its entirety upon expiration of the royalty term as set forth in the Vertex Agreement. Vertex may terminate the Vertex Agreement for convenience by providing adequate written notice to the Company. The Company may terminate the Vertex Agreement under certain specified circumstances, including in the event Vertex or any of its affiliates or sublicensees challenges directly or indirectly in a legal or administrative proceeding the patentability, enforceability, or validity of any licensed patent as set forth in the Vertex Agreement. Either party may