Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion of our financial condition and results of operations in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Annual Report on Form 10-K. You should read “Cautionary Note Regarding Forward-Looking Statements” and Item 1A. Risk Factors of this Annual Report on Form 10-K for a discussion of material factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Unless otherwise indicated or the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section to “Tvardi,” “the Company,” “we,” “us,” “our” and other similar terms refer to the business and operations of Legacy Tvardi prior to the Merger and to Tvardi Therapeutics, Inc. and its consolidated subsidiaries following the Merger.
Overview
We are a clinical-stage biopharmaceutical company focused on the development of novel, oral, small molecule therapies targeting Signal Transducer and Activator of Transcription 3 (STAT3) to treat inflammatory and proliferative diseases with significant unmet need. Based upon our founders' seminal work and deep understanding of STAT3, we have designed an innovative approach to directly inhibit STAT3, a highly validated yet historically undruggable target. Leveraging this expertise, we are developing a pipeline of STAT3 inhibitors with a differentiated mechanism of action and convenient oral dosing.
Our pipeline includes two oral, small molecule STAT3 inhibitors: TTI-101 and TTI-109. TTI-101 is our first-generation direct STAT3 inhibitor, currently in Phase 1b/2 clinical development in hepatocellular carcinoma (HCC). TTI-109 is a phosphate prodrug of TTI-101 that is mechanistically identical to its parent molecule but is designed to enhance systemic drug delivery and improve tolerability. We submitted an IND application for TTI-109 in June 2025. After FDA acceptance of the IND, we have initiated a Phase 1 trial of TTI-109 in healthy volunteers to evaluate safety, tolerability, and pharmacokinetics, as well as bioequivalence to TTI-101. We expect to report topline data from this trial in the second quarter of 2026, following which we intend to announce the clinical indication in which we plan to advance TTI-109. Subsequently, in the second half of 2026, we expect to report topline data of TTI-101 across the three cohorts of the REVERT LIVER CANCER Phase 1b/2 clinical trial.
In October 2025, we reported preliminary data from our Phase 2 clinical trial of TTI-101 in IPF and concluded that the study did not meet its goals. Subsequently, we conducted additional analyses of a subset of patients who received study drug for 12 weeks. Based on these analyses, which excluded certain patients due to dosing, pharmacokinetic, or clinical factors, treatment with TTI-101 demonstrated greater reductions in certain exploratory measures, including fibrosis and inflammatory markers, compared to placebo – directly recapitulating findings from multiple preclinical models of fibrotic disease and providing human clinical proof of concept for the STAT3 inhibition mechanism. We continue to evaluate these results to inform potential future development decisions.
Since commencing operations in 2017, we have devoted substantially all of our efforts and financial resources to developing our product candidates, organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of our product candidates, signaling and biology, medicinal chemistry and clinical insights to discover and develop novel therapies for the treatment of inflammatory and proliferative diseases driven by dysregulated STAT3 signaling. Through the date of this filing, we have historically financed our operations principally through the issuance and sale of our preferred stock and convertible debt. We received $28.3 million from the sale and issuance of our Convertible Notes (as defined below) in December 2024 and $83.4 million from the issuance and sale of its preferred stock and historical convertible debt, which was converted into preferred stock, in 2018 and 2021.
As of December 31, 2025, we had $20.7 million in cash and cash equivalents and $10.1 million in short-term investments. As further discussed below, in April 2025, we completed our Merger with Cara, through which we acquired approximately $23.9 million in net assets. We have incurred net losses since inception. As of and for the year ended December 31, 2025, we had an accumulated deficit of $110.5 million and a net loss of $18.2 million. As of and for the year ended December 31, 2024, we had an accumulated
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deficit of $92.2 million and a net loss of $29.4 million. Our net loss may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical development activities and other research and development activities. We expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. Losses are expected to continue as we continue to invest in research and development activities. We considered both quantitative and qualitative factors that are known or reasonably knowable as of the date that these consolidated financial statements are issued and concluded that there are conditions present in the aggregate that raise substantial doubt about our ability to continue as a going concern. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect. See the subsection titled “—Liquidity and Capital Resources” below for further discussion.
We will require additional funding in order to finance operations and complete our ongoing and planned clinical trials. Access to such funding on acceptable terms cannot be assured.
We expect that our expense and capital requirements will increase substantially in connection with our ongoing activities and for the foreseeable future, particularly if we, among other things:
● discover and develop additional product candidates;
● advance our preclinical development programs into clinical development;
● maintain, expand and protect our intellectual property portfolio;
● invest in or in-license other technologies or product candidates;
● continue to build out our organization to engage in such activities; and
Given our stage of development, to date we have not had any products approved for sale and have not generated any revenue. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which may not be for several years, if ever. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants or other
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restrictions limiting our ability to engage in specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities, including our ongoing and planned clinical trials, to reduce costs.
Additionally, we are subject to risks and uncertainties as of result of global business, political and macroeconomic events and conditions, including increasing financial market volatility and uncertainty, inflation, interest rate fluctuations, uncertainty with respect to the federal budget and debt ceiling, as well as the potential for future potential government shutdowns related thereto, potential instability in the global banking system, cybersecurity events, the impact of war or military conflict, including regional conflicts around the world, and public health pandemics. Our business, financial condition and results of operations could be materially and adversely affected by further negative impact on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen.
Although, to date, our business has not been materially impacted by these global economic and geopolitical conditions, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which such instability could impact our business and results of operations. The extent and duration of these market disruptions, other geopolitical tensions, record inflation, tariffs or otherwise, are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K.
Reverse Merger
On December 17, 2024, Legacy Tvardi entered into the Merger Agreement with Cara and Merger Sub, pursuant to which, on April 15, 2025, Merger Sub merged with and into Legacy Tvardi, with Legacy Tvardi surviving as a wholly-owned subsidiary of Cara. Upon completion of the Merger, Cara changed its name to Tvardi Therapeutics, Inc., and Legacy Tvardi’s business continued as our business.
Pursuant to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the Effective Time):
Immediately following the Merger, equity holders of Legacy Tvardi prior to the Merger, including the holders of Convertible Notes, owned approximately 84.5% of our outstanding common stock on a fully diluted basis.
The Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States (U.S. GAAP). Legacy Tvardi was deemed to be the accounting acquirer for financial reporting purposes. Refer to Note 3, Merger Agreement, in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
In addition, on April 15, 2025, immediately prior to the closing of the Merger, Cara (i) effected a 1-for-3 reverse stock split of its common stock and (ii) increased its authorized shares of common stock to 150,000,000.
Upon the closing of the Merger, our 2025 Equity Incentive Plan (the 2025 Plan) and 2025 Employee Stock Purchase Plan (the 2025 ESPP), both approved during a special meeting of Cara’s stockholders on April 1, 2025, also became effective, following the reverse stock split.
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As of the Effective Time, there were 935,554 and 93,555 shares of our common stock available for grant under the 2025 Plan and 2025 ESPP, respectively. As of December 31, 2025, there were 445,721 shares of our common stock remaining available for grant under the 2025 Plan. As of December 31, 2025, no offering periods under the 2025 ESPP had been initiated. On January 1, 2026, the aggregate number of shares of common stock that may be issued pursuant to the 2025 Plan increased to 1,465,233, as approved by the Board of Directors.
Convertible Notes
In December 2024, we entered into a note purchase agreement, pursuant to which it issued and sold convertible promissory notes (the Convertible Notes) in an aggregate principal amount of approximately $28.3 million. The Convertible Notes accrued interest at 8% per annum and had a maturity date of December 31, 2026 (the Maturity Date).
Upon the closing of the Merger, pursuant to the terms of the Convertible Notes, the outstanding principal balance of the Convertible Notes and all unpaid accrued interest automatically converted into 1,265,757 shares of our common stock in the aggregate. Utilizing the fair value option to account for the Convertible Notes, we recorded a gain of $12.8 million during the second quarter of 2025 and a net gain of $7.8 million for the year ended December 31, 2025 in our consolidated statements of operations and comprehensive loss as a result of the net changes in fair value over the 2025 period. There was no change in fair value recorded during the second half of 2025 as the Convertible Notes were fully converted during the second quarter of 2025.
License Agreements
In July 2012 and June 2015, StemMed entered into the BCM First Agreement and BCM Second Agreement, respectively. StemMed assigned the BCM First Agreement and BCM Second Agreement to us in connection with the transfer of all or substantially all of the assets and businesses to which BCM First Agreement and BCM Second Agreement relate in January 2018 and February 2018, respectively. Under both the BCM First Agreement and BCM Second Agreement, we obtained exclusive, worldwide, sublicense licenses under certain of BCM’s patents and patent applications and additionally in the case of the BCM First Agreement, certain BCM technology. Under these licenses, we are permitted to make, have made, use, market, sell, offer to sell, lease and import the BCM1 Licensed Products and BCM2 Licensed Products in all fields of use. The licenses, patents and patent applications and technologies applicable to the BCM First Agreement and BCM Second Agreement are further discussed below.
First License Agreement with Baylor College of Medicine (BCM)
Under the BCM First Agreement, we obtained an exclusive, worldwide, sublicensable license under BCM’s rights to certain patents and patent applications related to STAT3 inhibitors in oncology and certain non-oncology indications, which we refer to as the BCM Patent Rights, together with certain cell lines, biological materials, compounds, know-how and technologies, which we collectively refer to as the BCM Technology, to make, have made, use, market, sell, offer to sell, lease and import BCM1 Licensed Products, in all fields of use.
Pursuant to the terms of the BCM First Agreement, StemMed owed an initial license fee of $75,000 as consideration for the license rights. Upon the assignment of the agreement to us, we became responsible for the payment of annual maintenance fees on the anniversary of the agreement, which range from $30,000 to $50,000. We are also required to pay BCM royalties in the amount of a low-single-digit percent of net sales of BCM1 Licensed Products during the term, which expires, on a country-by-country basis, on the later of (i) the date of expiration of the last-to-expire of the BCM Patent Rights, or, (ii) if no BCM Patent Rights issued in such country, the tenth anniversary of the first commercial sale of the BCM1 Licensed Product in such country. We currently expect the BCM Patent Rights to expire April 18, 2039. Upon the initiation of the Phase 2 clinical trials for two BCM1 Licensed Products, we paid BCM development milestone payments of $250,000 in the aggregate. Upon the achievement of additional specified development and regulatory milestones, we are required to pay BCM one-time milestone payments of up to $2,200,000 in the aggregate for the first BCM1 Licensed Product in an oncology indication and for the first BCM1 Licensed Product in a non-oncology indication to achieve such milestones. Further, in connection with the initiation of the Phase 3 clinical trial, we would expect to incur approximately $400,000 of oncology-related costs and approximately $300,000 of non-oncology-related costs. We are additionally required to pay BCM a tiered low-double-digit percentage of sublicensing revenue obtained in connection with any sublicense granted by us under the BCM Patent Rights or BCM Technology.
We may terminate the BCM First Agreement at its convenience following a specified notice period upon advance written notice to BCM. The BCM First Agreement may also be terminated by BCM for our default or failure to perform any of terms of the BCM First Agreement, following a specified notice and cure period. Additionally, BCM may terminate the BCM First Agreement if we
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undergo specified bankruptcy or insolvency events, following the expiration of a specified period. Upon expiration of the term of the BCM First Agreement in a given country, the license grant from BCM to us will be fully-paid and perpetual in such country.
The BCM First Agreement was amended in April 2015 to update the schedule of BCM Patent Rights and description of description of BCM Technology covered by the license for immaterial consideration. The BCM First Agreement was further amended in August 2019 to amend our diligence and insurance obligations as well as to further update the schedule of BCM Patent Rights.
Under the BCM First Agreement, the full amount of $50,000 in annual maintenance fees had already been paid as of December 31, 2025 and 2024, and thus no accrual was needed at each respective date. We also incurred $125,000 in milestones payments in relation to the initiation of a Phase 2 clinical trial during the year ended December 31, 2024. No royalty fees have been incurred to date. All related license costs are expensed as incurred within research and development on the consolidated statements of operations and comprehensive loss.
Second License Agreement with Baylor College of Medicine
Under the BCM Second Agreement, we obtained an exclusive, worldwide, sublicensable license under certain patents and patent applications co-owned by BCM and the National Institutes of Health (NIH), related to methods and compositions for the use of STAT3 inhibitors in certain conditions like anaphylaxis, which rights we refer to as the Licensed Patent Rights, to make, have made, use, market, sell, offer to sell, lease and import the BCM2 Licensed Products, in all fields of use.
Pursuant to the terms of the BCM Second Agreement, StemMed owed an initial license fee of $5,000 in consideration for the license rights. Upon the assignment of the agreement to us, we became responsible for the payment of maintenance fees on the anniversary of the agreement, which range from $30,000 to $50,000. We are also required to pay BCM royalties in the amount of a low-single-digit percent of net sales of BCM2 Licensed Products during the term, which expires, on a country-by-country basis, on the later (i) of the date of expiration of the last to expire of the Licensed Patent Rights, or, (ii) if no Licensed Patent Rights issued in such country, the tenth anniversary of the first commercial sale of the BCM2 Licensed Product in such country. We currently expect the Licensed Patent Rights to expire July 18, 2034. Upon the achievement of additional specified development and regulatory milestones, we are required to pay BCM one-time milestone payments of up to $1,225,000 in the aggregate for the first BCM2 Licensed Product to achieve such milestones. Further, in connection with the initiation of the Phase 3 clinical trial, we would expect to incur approximately $300,000 in costs. We are additionally required to pay BCM a tiered low-double-digit percentage of sublicensing revenue obtained in connection with any sublicense granted by us under the Licensed Patent Rights.
We may terminate the BCM Second Agreement at its convenience following a specified notice period upon advance written notice to BCM. The BCM Second Agreement may also be terminated by BCM for our default or failure to perform any of terms of the BCM Second Agreement, following a specified notice and cure period. Additionally, BCM may terminate the BCM Second Agreement if we undergo specified bankruptcy or insolvency events, following the expiration of a specified period. The NIH may terminate its license to BCM if we fail to fulfill certain obligations. Upon expiration of the term of the BCM Second Agreement in a given country, the license grant from BCM to us will be fully paid and perpetual in such country.
The BCM Second Agreement was amended in June 2019 to amend our diligence and insurance obligations. We entered into a second amendment in April 2023 to further amend our diligence obligations and to terminate the obligation to pay annual maintenance fees until the first anniversary of the achievement of certain patent milestones and annually thereafter.
Under the BCM Second Agreement, no payments were made or incurred during the years ended December 31, 2025 and 2024. No royalty fees have been incurred to date.
Components of Operating Results
The following discussion sets forth certain components of our Consolidated Statements of Operations and Comprehensive Loss as well as factors that impact those items or could impact those items in the future.
Revenue
We have not generated any revenue since our inception and we do not expect to generate any revenue from the sale of products in the near future, if at all. If our development efforts for TTI-101, TTI-109 or additional product candidates that we may develop in the
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future are successful and result in marketing approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.
Operating Expenses
Our operating expenses since inception, as well as our operating expenses, have consisted primarily of research and development expenses and general and administrative costs.
Research and Development Expenses
Our research and development expenses since inception, as well as our operating expenses, consist primarily of direct and indirect costs incurred in performing clinical and preclinical development activities.
Direct costs include:
● costs associated with license agreements.
Indirect costs include:
● costs related to compliance with quality and regulatory requirements.
Pursuant to U.S. GAAP and our internal policies, including our clinical trial accrual policy, we expense all research and development costs in the periods in which they are incurred, including the costs of treatment center start-up activities, patient enrollment, and study reporting. Costs for certain other research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses.
The majority of our clinical spending during the years ended December 31, 2025 and 2024 was on TTI-101, for which certain direct research and development costs are tracked by clinical trial. We also incurred costs for TTI-109 related to CMC and clinical operations for the year ended December 31, 2025. Costs incurred for TTI-109 for the year ended December 31, 2024 were related to CMC and preclinical costs.
We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in the development of TTI-101 and TTI-109, support our ongoing preclinical programs and discover any new product candidates, as well as increase our headcount. In particular, clinical development, as opposed to preclinical development, generally has higher development costs, primarily due to the increased size and duration of later-stage clinical trials. Moreover, the costs associated with our clinical activities, which are managed by our CROs, and CDMOs, to manufacture materials for our product candidates and future commercial products, are much more costly as compared to early-stage preclinical development. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our current and future candidates due to the inherently unpredictable nature of preclinical and clinical development. Preclinical and clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which therapeutic candidates to pursue and how much funding to direct to each therapeutic candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each therapeutic candidate’s commercial potential. We will need substantial
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additional capital in the future to support these efforts. In addition, we cannot forecast which therapeutic candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including:
● poor efficacy of our product candidates during clinical trials;
● high drop-out rates or screening failures of subjects from clinical trials;
● greater than anticipated clinical trial costs;
● inability to compete with other therapies;
● failure to secure or maintain orphan designation in some jurisdictions;
A change in the outcome of any of these variables with respect to the development of any of our product candidates or potential future product candidates could mean a significant change in the costs and timing associated with the development of that product candidate or potential future product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate would be required for the completion of clinical development of a product candidate or potential future product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of
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clinical development. We may never obtain regulatory approval for any of our product candidates, and, even if we do, drug commercialization takes several years and millions of dollars in development costs.
General and Administrative Expenses
General and administrative (G&A) expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. G&A expenses also include outside professional services, such as legal, audit and accounting services, insurance costs and facility-related expenses, which includes direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We expect our G&A expenses to increase over the next several years as we continue our research and development activities, prepare for potential commercialization of our current and future product candidates, as well as expand our operations and continue operating as a public company following the Merger. These increases will likely include increases related to the hiring of additional personnel and legal, regulatory and other fees and services associated with maintaining compliance with listing rules and SEC requirements, director and officer insurance premiums and investor relations costs associated with being a public company.
Interest Income
Interest income for the year ended December 31, 2025 consisted of interest earned on our cash and cash equivalents as well as interest earned on short-term investments and the accretion of the net discount of our short-term investments. Interest income for the year ended December 31, 2024 consisted of interest earned on our cash and cash equivalents.
Other Income (Expense), Net
Other income (expense), net consists of the net changes in fair value of our Convertible Notes, for which we elected the fair value option as well as interest accrued on the Convertible Notes and any associated debt issuance costs incurred. See “Convertible Notes” above for further discussion of our Convertible Notes.
Income Taxes
We provide for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
For the years ended December 31, 2025 and 2024, there was no current or deferred income tax expense or benefit due to our current year loss and prior year loss and full valuation allowance in each respective year. As of December 31, 2025, we evaluated all available evidence and concluded that a valuation allowance was still required against our net deferred tax assets because it is more likely than not they will not be realized in the foreseeable future. As a result, our effective tax rate for each of the periods presented differs from the U.S. federal statutory rate primarily due to recurring operating losses and the full valuation allowance against deferred tax assets.
On July 4, 2025, the OBBBA was signed into law. The OBBBA introduced multiple U.S. federal income tax changes such as favorable changes to the deductibility of domestic research and development expenses, bonus depreciation of certain property additions, and limitations on interest expense deductions. We have considered the impact of these provisions on our consolidated financial statements for the year ended December 31, 2025, however, the changes in tax law did not result in a change in our tax provision. Because we maintain a full valuation allowance and have no current income tax expense or cash tax payments, the enactment of OBBBA in 2025 did not have a material impact on our financial position, results of operations, liquidity or cash flows for the year ended December 31, 2025.
During the year ended December 31, 2025, we adopted Accounting Standards Update 2023-09, Income Taxes (Topic 740):Improvements to Income Tax Disclosures. The adoption did not impact our financial position, results of operations, or cash flows, but resulted in expanded income tax disclosures, primarily related to the disaggregation of effective tax rate reconciliation items and
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income taxes paid, as presented in the notes to the consolidated financial statements. Refer to Note 11, Income Taxes, in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Results of Operations
Comparison of the Years ended December 31, 2025 and 2024
The following table sets forth our results of operations for the years ended December 31, 2025 and 2024 (in thousands, except percentages):
Year Ended
December 31, Change
2025 2024 Amount Percent
Operating expenses:
Research and Development Expenses
Research and development expenses for the years ended December 31, 2025 and 2024 were comprised of the following (in thousands, except percentages):
Year Ended
December 31, Change
2025 2024 Amount Percent
Direct research and development expenses by program:
TTI-101:
Preclinical, CMC, and other (unallocated) 688 969 (281) (29.0) %
Unallocated research and development expense:
Consultant fees and other costs 1,019 1,032 (13) (1.3) %
Research and development expenses were $18.0 million for the year ended December 31, 2025, compared to $23.7 million for the year ended December 31, 2024. The decrease of $5.6 million was primarily driven by costs associated with our product candidate TTI-101, including decreases of $5.4 million, $2.4 million and $2.0 million related to our HCC, metastatic breast cancer (mBC) and IPF trials, respectively. The decrease in costs related to our HCC trial was attributable to the changes in patient enrollments and estimated study costs. The decrease in costs related to our mBC trial was due to the discontinuation of the trial in January 2024 and a related true-up recorded during the second quarter of 2025 due to the negotiation of wind-down costs. The decrease in costs related to our IPF trial was due to reduced patient enrollment as the study progressed and changes in estimated clinical trial costs resulting from clinical trial change orders.
The increase of $4.2 million related to our product candidate TTI-109 was primarily driven by the healthy volunteer study, which began in the third quarter of 2025, as well as related CMC costs related to clinical supply and preclinical studies.
The increase in personnel costs of $0.3 million was primarily related to increases in compensation across the research and development functions as well as an increase in stock-based compensation expense related to new option grants in 2025.
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General and Administrative Expenses
General and administrative expenses for the years ended December 31, 2025 and 2024 were comprised of the following (in thousands, except percentages):
Year Ended December 31, Change
Total general and administrative expenses $ 8,737 $ 4,457 $ 4,280 96.0 %
General and administrative expenses were $8.7 million for the year ended December 31, 2025, compared to $4.5 million for the year ended December 31, 2024. The increase of approximately $4.3 million was primarily driven by increases in professional fees of $2.0 million, attributable to increased legal, accounting and audit fees incurred as a result of the Merger and subsequent filings as a public company. The remaining increase was attributable to increases in personnel costs, insurance costs, and rent and other costs.
Interest Income
Interest income was $1.4 million for the year ended December 31, 2025, compared to $0.7 million for the year ended December 31, 2024. The $1.4 million of interest income for the year ended December 31, 2025 includes $0.7 million of interest earned on our cash and cash equivalents and $0.7 million of interest from our short-term investments, as well as the accretion of the net discount on our short-term investments. The $0.7 million of interest income for the year ended December 31, 2024 was driven by interest income earned on our cash and cash equivalents.
Other Income (Expense), Net
Other income of $7.2 million for the year ended December 31, 2025 was primarily attributable to the $12.8 million remeasurement gain on our Convertible Notes recorded during the second quarter of 2025, partially offset by a $4.9 million remeasurement loss recorded during the first quarter of 2025, as well as a total of $0.7 million in interest accrued on the Convertible Notes during those respective periods. Other expense of $2.0 million for the year ended December 31, 2024 was primarily attributable to a $1.8 million remeasurement loss on our Convertible Notes and $0.1 million of debt issuance costs incurred.
Liquidity and Capital Resources
Sources of Liquidity
Since inception, we have not generated any revenue from product sales or any other sources and have incurred significant operating losses. We have not yet commercialized any products and do not expect to generate revenue from sales of any product candidates for several years, if ever. To date, we have financed our operations primarily through the (i) issuance and sale of our Convertible Notes in December 2024 for gross proceeds of $28.3 million (ii) the issuance and sale of preferred stock and historical convertible debt (which converted into preferred stock in 2018 and 2021) for total gross proceeds of $83.4 million, and (iii) as discussed above in “—Recent Developments,” our Merger with Cara in April 2025. To date, we have devoted substantially all of our efforts and financial resources to developing our product candidates, organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio and performing research and development of our product candidates, signaling and biology, medicinal chemistry and clinical insights to discover and develop novel therapies for the treatment of inflammatory and proliferative diseases driven by dysregulated STAT3 signaling. As of December 31, 2025, we had $20.7 million in cash and cash equivalents and $10.1 million in short-term investments. In April 2025, we acquired approximately $23.9 million of net assets in connection with the closing of the Merger.
Funding Requirements
Our primary uses of cash are to fund our operations, which consist primarily of research and development costs related to the development of our product candidates, and, to a lesser extent, general and administrative costs. We have incurred significant operating losses since our inception, and as of December 31, 2025, had an accumulated deficit of $110.5 million. Management has
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determined that its present capital resources as of December 31, 2025 will not be sufficient to fund its planned operations for at least one year from the issuance date of the consolidated financial statements, included elsewhere in this Annual Report on Form 10-K, which raises substantial doubt as to our ability to continue as a going concern. In April 2025, as further discussed above, Legacy Tvardi completed its Merger with Cara, through which we acquired approximately $23.9 million in net assets. Subsequent to the completion of the Merger, we plan to seek additional funding through equity offerings or debt financings, credit or loan facilities, and strategic alliances and licensing arrangements. However, there can be no assurance that such funding will be available to us, will be obtained on terms favorable to us, or will provide us with sufficient funds to meet our objectives.
We anticipate that we will continue to incur significant and potentially increasing expenses for the foreseeable future as we continue to advance our product candidates, expand our corporate infrastructure, including the costs associated with being a public company following the Merger, further our research and development initiatives for our product candidates and incur costs associated with the potential commercialization of our product candidates, if approved. We are subject to all of the risks typically related to the development of new drug candidates, and may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants or other restrictions limiting our ability to engage in specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements.
Our future funding requirements will depend on many factors, including, but not limited to:
● the clinical development plans we establish for our product candidates;
● the number and characteristics of product candidates that we develop;
● the effect of competing technological and market developments;
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A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. See the section titled “Risk Factors” set forth in this Annual Report on Form 10-K for additional risks associated with our substantial capital requirements.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Year Ended December 31,
Net cash used in operating activities $ (23,499) $ (18,305)
Net cash used in investing activities (10,084) —
Net cash provided by financing activities 22,703 27,000
Net (decrease) increase in cash and cash equivalents $ (10,880) $ 8,695
Operating Activities
Net cash used in operating activities was $23.5 million for the year ended December 31, 2025, reflecting a net loss of $18.2 million and non-cash changes of $5.8 million, partially offset by changes in operating assets and liabilities of $0.5 million. The changes of $5.8 million in non-cash expenses were primarily driven by $7.8 million related to the net change in fair value of our Convertible Notes, partially offset by $1.4 million related to stock-based compensation expense and $0.7 million in interest accrued on our Convertible Notes until conversion during the second quarter of 2025. The net changes in operating assets and liabilities of $0.5 million were primarily driven by a $0.9 million increase in accounts payable and accrued expenses, driven by the timing of invoices and payments, partially offset by a $0.3 million increase in prepaid expenses and other current assets, attributable to payments for pre-clinical activities and prepaid insurance.
Net cash used in operating activities was $18.3 million for the year ended December 31, 2024, reflecting a net loss of $29.4 million, net of changes in operating assets and liabilities of $8.6 million, and non-cash changes of $2.5 million. The net changes in operating assets and liabilities of $8.6 million was primarily driven by a $3.2 million decrease in prepaid expenses and other current assets, attributable to the timing of patient enrollments, and a $5.6 million increase in accounts payable and accrued expenses, driven by the timing of invoices and payments. The changes of $2.5 million in non-cash expenses were primarily driven by $1.8 million related to the change in fair value of our Convertible Notes, $0.2 million in interest accrued on its Convertible Notes, $0.3 million in stock-based compensation, and $0.1 million in depreciation and amortization.
Investing Activities
Net cash used in investing activities was $10.1 million for the year ended December 31, 2025, attributable to purchases of short-term investments of $31.5 million, partially offset by maturities of short-term investments of $21.4 million.
There was no net cash provided by or used in investing activities for the year ended December 31, 2024.
Financing Activities
The net cash provided by financing activities for the year ended December 31, 2025 was primarily due to approximately $25.0 million of cash acquired in connection with the Merger and proceeds of $0.5 million from the exercise of stock options, partially offset by payments of $2.8 million related to Merger transaction costs.
The net cash provided by financing activities for the year ended December 31, 2024 was primarily due to the proceeds from our Convertible Notes, partially offset by payments of deferred offering costs.
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Contractual Obligations and Commitments
Lease Obligations
We lease space under one operating lease agreement for corporate office space in Sugar Land, Texas, which expires in August 2027. As of December 31, 2025, we had future operating lease liabilities of $0.2 million, of which $0.1 million is included within operating lease liabilities, current portion on our consolidated balance sheet.
License Agreements
As discussed above, we have license agreements with BCM for exclusive use of patent rights of TTI-101. The license agreements contain terms for annual maintenance fees, milestone payments and net revenue royalties. Annual maintenance fees range from $30,000 to $50,000 per year, per license. Potential milestone payments are up to $1,225,000 in the aggregate per license. Milestones include new drug filings, clinical trial stages, and NDA approval by the FDA. We are obligated to pay BCM royalties in the amount of a low-single-digit percent of net sales of BCM1 Licensed Products or BCM2 Licensed Products during the term, which expire, on a country-by-country basis, on the later of (i) the date of expiration of BCM Patent Rights or Licensed Patent Rights, whichever is the last to expire, or, (ii) if no BCM Patent Rights or Licensed Patent Rights are issued in such country, the tenth anniversary the first commercial sale of the BCM1 Licensed Products or BCM2 Licensed Products in such country. License fees are expensed as incurred within research and development within our consolidated statements of operations and comprehensive loss. Under the BCM First Agreement, the full amount of $50,000 in annual maintenance fees had already been paid as of December 31, 2025 and 2024, and thus no accrual was needed in either respective year. We also incurred $125,000 in milestones payments in relation to the initiation of a Phase 2 clinical trial during the year ended December 31, 2024. No royalty fees have been incurred to date.
Other Capital Requirements and Additional Royalty Obligations
We enter into agreements in the normal course of business with various third-party providers for the provision of research and development services, which include preclinical studies and clinical trial services with CROs and the manufacturing of product candidates for use in our preclinical studies and clinical trials with CDMOs. These agreements may include certain provisions for purchase obligations and termination obligations that could require payments for the cancellation of committed purchase obligations or for early termination of the agreements. The amount of the cancellation or termination payments vary and are based on the timing of the cancellation or termination and the specific terms of the agreement. These obligations and commitments are not presented separately.
In addition to our obligation to make potential royalty payments under the BCM First Agreement and BCM Second Agreement discussed above, pursuant to our founder restricted stock purchase agreements with each of our founders, David J. Tweardy, M.D. and Ron DePinho, M.D., we are also obligated to pay royalties to each such founder in an amount equal to 1% each on the worldwide net sales of TTI-101 and any derivative formulations (a Royalty Bearing Product). These royalty obligations last, on a country-by-country basis, for the later of (i) the date on which the sale of Royalty Bearing Product is no longer covered by a Covered Patent (as defined below) in such country, or (ii) 15 years after the first commercial sale of Royalty Bearing Product in such country. The timing of when our royalty payments will actually be made is uncertain as the payments are contingent upon future activities, including the successful development, regulatory approval and commercialization of Royalty Bearing Product. A Covered Patent means, subject to certain customary exceptions, an issued patent that is owned by us or an affiliate, or for which all rights to develop and commercialize pharmaceutical products for the treatment of any human disorder, are exclusively licensed to us or an affiliate by the owner of such patent, with our right or our affiliate’s right to grant sublicenses.
Critical Accounting Estimates
Our audited consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of the audited consolidated financial statements and related disclosures requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses in our audited consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management evaluates estimates and assumptions on a periodic basis. Our actual results may differ from these estimates.
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While our significant accounting policies are described in more detail in Note 2 to the audited consolidated financial statements for the years ended December 31, 2025 and 2024, both as included elsewhere within this Annual Report on Form 10-K, management believes that the following accounting policies are critical to understanding our historical and future performance, as the policies relate to the more significant areas involving management’s judgments and estimates used in the preparation of the audited consolidated financial statements.
Prepaid and Accrued Research and Development Expenses
Accounting for preclinical studies and clinical trials relating to activities performed by CROs and other external vendors requires management to exercise significant estimates in regard to the timing and accounting for these expenses. We estimate costs of research and development activities conducted by service providers, which include costs to properly initiate and manage ongoing preclinical studies and clinical trials. The diverse nature of services being provided under contracts with our CROs, CDMOs and other arrangements, the different compensation arrangements that exist for each type of service and the lack of timely information related to certain pre-clinical and clinical activities complicates the estimation of accruals for services rendered by the CROs, CDMOs and other vendors in connection with preclinical studies and clinical trials.
Examples of estimated accrued research and development expenses include:
We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with our CROs, CDMOs and other third-party vendors that conduct research, preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense.
Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing fees, we estimate the time period over which services will be performed, the enrollment of patients and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, or if we receive any change orders from our third-party providers, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.
We also record advance payments to service providers as prepaid expenses and other current assets, which are expensed when the contracted services are performed. If the actual timing of the performance of services varies from the estimate, then we adjust the amount of the accrued expense or the prepaid expense accordingly.
Convertible Notes
Historically, we elected to account for our Convertible Notes pursuant to the fair value option under Accounting Standards Codification (ASC) 825, Financial Instruments (ASC 825). In accordance with ASC 825 and the fair value option, we recorded our Convertible Notes at fair value with changes in fair value recorded as component of other income (expense), net in our consolidated statements of operations and comprehensive loss. As a result of the fair value option, any issuance costs related to the Convertible Notes were expensed as incurred and were not deferred.
The fair value of the Convertible Notes were determined using a scenario-based valuation analysis that required a probability of inputs, including the probability of occurrence of events that would trigger conversion of the Convertible Notes and the expected timing of such events.
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As of December 31, 2024, prior to the Merger with Cara in April 2025, Legacy Tvardi assessed the probability of (i) an automatic conversion of the Convertible Notes into equity securities upon a Qualified or non-Qualified Financing, (ii) an automatic conversion of the Convertible Notes into shares of Legacy Tvardi common stock upon an IPO, (iii) an automatic conversion of the Convertible Notes into the combined company’s common stock upon a reverse merger, and (iv) an event of default, dissolution, or liquidation, weighted with 20%, 10%, 60%, and 10%, respectively. Immediately prior to the Merger closing in April 2025, the probability of these events were weighted as 2.5%, 0%, 95%, and 2.5%, respectively.
Additional assumptions and estimates used to estimate the fair value of the Convertible Notes included the: (i) fixed price conversion option, which was valued using a Black-Scholes option model, (ii) aggregate call value of each scenario, which was synthesized using a bond plus call option model, (iii) expected volatility, (iv) risk-free interest rate, and (v) the fair value of the Convertible Notes under the reverse merger scenario, which was estimated using a forward contract structure.
Since we elected the fair value option for the Convertible Notes, at the time of conversion, the fair value was measured as the quoted market price of our common shares into which the Convertible Notes were exchanged. The fair value was determined to be the closing market trading price on April 16, 2025, the first day of trading for our common stock after the reverse merger with Cara.
Under the fair value option, any change in fair value was recorded to our consolidated statements of operations and comprehensive loss as a gain or loss from a fair value measurement. At the time of conversion, the fair value of the Convertible Notes was $23.1 million, calculated as 1,265,757 shares of common stock at the closing market trading price on April 16, 2025. The $12.8 million change in fair value when comparing the $23.1 million at the time of conversion to the $35.9 million recorded value of the Convertible Notes immediately prior to the conversion date was recorded to our consolidated statements of operations and comprehensive loss within other income (expense), net for the second quarter of 2025. Net fair value changes of $7.8 million were recorded to our consolidated statement of operations and comprehensive loss as a remeasurement gain within other income (expense), net for the year ended December 31, 2025. Net fair value changes of $1.8 million were recorded to our consolidated statement of operations and comprehensive loss as a remeasurement loss within other income (expense), net for the year ended December 31, 2024.
As discussed above, upon the closing of the Merger, the Convertible Notes converted into 1,265,757 shares of our common stock in the aggregate. As a result, there were no Convertible Notes as of December 31, 2025.
Stock-Based Compensation Expense and Fair Value of Stock-Based Awards
Stock-Based Compensation Expense
We measure and record the expense related to stock-based awards granted to employees, directors, consultants and advisors based upon their respective fair value at the date of grant. Generally, we issue stock option awards with service-based vesting conditions and record the expense for these awards using the straight-line method such that the aggregate amount of expense recognized is at least the fair value of what has legally vested. We estimate the grant date fair value of each common stock option using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions and management’s best estimates. These estimates involve inherent uncertainties and management’s judgement. If factors change and different assumptions are used, our stock-based compensation could be materially different in the future.
These assumptions are estimated as follows:
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Changes in the foregoing assumptions can materially affect the estimate of grant date fair value and ultimately how much share-based compensation expense is recognized; and the resulting change in fair value, if any, is recognized in our consolidated statements of operations and comprehensive loss during the period the related services are rendered. These inputs are subjective and generally require significant analysis and judgment to develop.
Fair Value of Stock-Based Awards
As a privately held company prior to the Merger, there had been no public market for our common stock. The estimated fair value of our common stock had been determined by its board of directors as of the date of each option grant, with input from management, considering the most recently available third-party valuations of its common stock and 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 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.
Our third-party valuations of common stock were prepared using the option-pricing method (OPM), which used a market approach to estimate our enterprise value. The OPM treats common stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger.
These third-party valuations resulted in a valuation of our common stock of $0.92 (pre-application of the Exchange Ratio) as of June 30, 2023. We used this information to calculate the grant date fair value per share of stock options granted in January 2024 ($4.62 post-Exchange Ratio). In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, including:
● the lack of an active public market for our common stock and preferred stock;
The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if we had used significantly different assumptions or estimates prior, the fair value of our common stock and our stock-based compensation expense could have been materially different.
Following the Merger and the establishment of a public trading market for our common stock, it is no longer necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for stock options and other such awards we may grant, as the fair value of our common stock will be determined based on the quoted market price of our common stock.
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Recently Issued and Adopted Accounting Pronouncements
We do not expect that any recently issued accounting pronouncements will have a material effect on our financial position, results of operations or cash flows. Refer to Note 2 of Notes to Consolidated Financial Statements, Summary of Significant Accounting Policies, in this Annual Report on Form 10-K, for a full description of accounting pronouncements recently adopted, and issued but not yet adopted, if applicable.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
As of December 31, 2025, we had $20.7 million in cash and cash equivalents and $10.1 million in short-term investments. Our cash, cash equivalents and short-term investments are primarily maintained in accounts with multiple financial institutions in the United States. We may maintain cash and cash equivalent balances in excess of Federal Deposit Insurance Corporation limits. We do not believe that we are subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships, particularly because our investments are in short-term marketable securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term duration and low risk profile of our cash equivalents and short-term investments, we believe an immediate 10% change in interest rates would not have a material effect on their fair market value. We have the ability to hold our investments until maturity, and therefore, would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investment portfolio.
Effects of Inflation
Inflation generally affects us by increasing the cost of labor and research and development contract costs. We do not believe inflation has had a material effect on our results of operations during the periods presented in our audited consolidated financial statements included elsewhere within in this Annual Report on Form 10-K.
Foreign Currency Exchange Risk
All of our employees and our operations are currently located in the United States, and expenses are generally denominated in U.S. dollars. As such, we are not exposed to financial risks from exchange rate fluctuations between U.S. dollars and other currencies.
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Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF
TVARDI THERAPEUTICS, INC.
Page(s)
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 34) 129
Consolidated Balance Sheets 131
Consolidated Statements of Operations and Comprehensive Loss 132
Consolidated Statements of Cash Flows 134
Notes to Consolidated Financial Statements 135
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Tvardi Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Tvardi Therapeutics, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows, for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and does not have sufficient cash on hand or available liquidity to fund operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Prepaid and Accrued Research and Development Expenses – Refer to Notes 2, 5 and 7 to the financial statements
Critical Audit Matter Description
The Company recognizes research and development expenses and records accruals for estimated costs of research and development activities conducted by third-party contract research organizations (CROs) service providers. The majority of the Company’s service providers invoice in arrears for services performed, on a pre-determined schedule, or when contractual milestones are met; however, some require advanced payments. The Company records advance payments to service providers as prepaid expenses and other current assets, which are expensed as the contracted services are performed. The Company accrues for these costs based on factors such as the time period over which services will be performed, the enrollment of patients, and the level of effort to be expended in each period in accordance with its agreements with its third-party service providers for such services.
Given the significant judgments made by the Company in estimating the progress or stage of completion of the services, auditing the Company’s prepaid and accrued research and development expenses related to CROs was especially challenging. Specifically, because the amount of prepaid and accrued research and development expenses is dependent on the Company’s receipt of timely and accurate reporting from third-party service providers, the Company’s estimates of work completed as of the balance sheet date, and the Company’s estimates of the period over which this work will be performed, auditing prepaid and accrued research and development expenses related to CROs required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to testing the prepaid and accrued research and development expenses included the following, among others:
● We confirmed the monthly patient enrollment directly with the CROs.
/s/ Deloitte & Touche LLP
Houston, Texas
March 31, 2026
We have served as the Company’s auditor since 2022.
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TVARDI THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
As of December 31,
Assets
Current assets:
Short-term investments 10,077 —
Prepaid expenses and other current assets 727 72
Property and equipment, net 52 84
Intangible assets, net 322 385
Operating lease right-of-use assets 144 216
Deferred offering costs — 2,811
Other non-current assets 17 17
Current liabilities:
Operating lease liabilities, current portion 116 103
Operating lease liabilities, net of current portion 85 201
Convertible Notes — 30,259
Commitments and contingencies (Note 13)
Stockholders’ Equity (Deficit):
Accumulated other comprehensive income 8 —
Total stockholders’ equity (deficit) 20,946 (91,131)
The accompanying notes are an integral part of these consolidated financial statements.
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TVARDI THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share amounts)
For the Year Ended
December 31,
Operating expenses:
General and administrative 8,737 4,457
Other income (expense), net 7,159 (2,037)
Net loss per share attributable to common stockholders:
Weighted-average common shares outstanding:
Comprehensive loss:
Unrealized gain on short-term investments 8 —
The accompanying notes are an integral part of these consolidated financial statements.
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TVARDI THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(Amounts in thousands, except share amounts)
Redeemable Accumulated
Convertible Additional Other Total
Exercise of stock options — — 8,548 — 5 — — 5
Stock-based compensation — — — — 319 — — 319
Net loss — — — — — (29,397) — (29,397)
Exercise of stock options — — 26,529 — 532 — — 532
Stock-based compensation — — — — 1,399 — — 1,399
Unrealized gain on short-term investments — — — — — — 8 8
Net loss — — — — — (18,214) — (18,214)
The accompanying notes are an integral part of these consolidated financial statements.
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TVARDI THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
For the Year Ended
December 31,
Cash flows from operating activities:
Depreciation and amortization expense 95 95
Stock-based compensation expense 1,399 319
Change in fair value of Convertible Notes (7,810) 1,807
Non-cash lease expense 72 76
Accretion of net discounts on short-term investments (200) —
Interest accrued on Convertible Notes 651 154
Changes in operating assets and liabilities:
Prepaid expenses and other assets (308) 3,167
Accounts payable and accrued expenses 919 5,567
Operating lease liabilities (103) (93)
Net cash used in operating activities (23,499) (18,305)
Cash flows from investing activities:
Purchases of short-term investments (31,486) —
Maturities of short-term investments 21,402 —
Net cash used in investing activities (10,084) —
Cash flows from financing activities:
Cash acquired in connection with the Merger 24,992 —
Payments for Merger transaction costs (2,821) (1,303)
Proceeds from Convertible Notes — 28,298
Proceeds from exercise of stock options 532 5
Net cash provided by financing activities 22,703 27,000
Net (decrease) increase in cash and cash equivalents (10,880) 8,695
Cash and cash equivalents - beginning of year 31,614 22,919
Cash and cash equivalents - end of year $ 20,734 $ 31,614
Non-cash investing and financing activities
Conversion of Convertible Notes to common stock $ 23,100 $ —
The accompanying notes are an integral part of these consolidated financial statements.
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TVARDI THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business and Basis of Presentation
Tvardi Therapeutics, Inc. and subsidiaries (Tvardi or the Company) is a Delaware corporation headquartered in Houston, Texas. The Company is a clinical-stage biopharmaceutical company focused on the development of novel, oral, small molecule therapies targeting STAT3 to treat inflammatory and proliferative diseases with significant unmet need. Based upon its founders’ seminal work and deep understanding of the transcription factor STAT3, the Company has designed an innovative approach to directly inhibit STAT3, a highly validated, yet historically undruggable target. Leveraging this expertise, the Company is developing a pipeline of STAT3 inhibitors with a differentiated mechanism of action and convenient oral dosing. The Company’s pipeline includes two oral, small molecule STAT3 inhibitors: TTI-101 and TTI-109. TTI-101 is the Company’s first-generation direct STAT3 inhibitor, currently in Phase 1b/2 clinical development in hepatocellular carcinoma (HCC). TTI-109 is a phosphate prodrug of TTI-101 that is mechanistically identical to its parent molecule but is designed to enhance systemic drug delivery and improve tolerability. The Company submitted an Investigational New Drug (IND) application for TTI-109 in June 2025. After U.S. Food and Drug Administration (FDA) acceptance of the IND, the Company has initiated a Phase 1 trial of TTI-109 in healthy volunteers to evaluate safety, tolerability, and pharmacokinetics, as well as bioequivalence to TTI-101. In October 2025, the Company reported preliminary data from its Phase 2 clinical trial of TTI-101 in idiopathic pulmonary fibrosis (IPF) and concluded that the study did not meet its goals. The Company is continuing to evaluate the results from the trial to inform potential future development decisions.
Merger
On December 17, 2024, the Delaware corporation formerly known as Tvardi Therapeutics, Inc. (Legacy Tvardi) entered into an agreement and plan of merger and reorganization (the Merger Agreement) with Cara Therapeutics, Inc. (Cara), and CT Convergence Merger Sub, Inc., a wholly-owned subsidiary of Cara (Merger Sub), pursuant to which Merger Sub merged with and into Legacy Tvardi, with Legacy Tvardi surviving the Merger as a wholly-owned subsidiary of Cara (such transaction, the Merger). Upon the closing of the Merger on April 15, 2025, Cara changed its name to Tvardi Therapeutics, Inc. and Legacy Tvardi’s business continued as the business of the Company. Unless otherwise indicated or the context otherwise requires, references in these notes to consolidated financial statements to “Tvardi” and “the Company” refer to the business and operations of Legacy Tvardi prior to the Merger and to Tvardi Therapeutics, Inc. and its consolidated subsidiaries following the Merger. See Note 3, Merger Agreement, for additional information on the Merger.
Risks and Uncertainties
The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, successful development of TTI-101 and TTI-109, the development of new technological innovations by competitors, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations and the ability to secure additional capital to fund operations and commercial success of TTI-101 and TTI-109. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be maintained, that any therapeutic products developed will obtain required regulatory approval or that any approved or consumer products will be commercially viable. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will generate significant product sales.
Additionally, the Company is subject to risks and uncertainties as a result of global business, political and macroeconomic events and conditions, including increasing financial market volatility and uncertainty, inflation, interest rate fluctuations, uncertainty with respect to the federal budget and debt ceiling, as well as the potential for future potential government shutdowns related thereto, potential instability in the global banking system, cybersecurity events, the impact of war or military conflict, including regional conflicts around the world, and public health pandemics. The extent to which business, political and macroeconomic factors, including increasing financial market volatility and uncertainty, will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.
Liquidity and Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
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As of December 31, 2025, the Company had cash and cash equivalents and short-term investments of $20.7 million and $10.1 million, respectively, which included approximately $23.9 million in net assets acquired from the consummation of the Merger Agreement (as further discussed in Note 3, Merger Agreement) in April 2025. Since inception, the Company has incurred net operating losses and negative cash flows from operations. During the year ended December 31, 2025, the Company incurred a net loss of $18.2 million and used $23.5 million of cash in operating activities. As of December 31, 2025, the Company had an accumulated deficit of $110.5 million. The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. Losses are expected to continue as the Company continues to invest in research and development activities. The Company considered both quantitative and qualitative factors that are known or reasonably knowable as of the date that these consolidated financial statements are issued and concluded that there are conditions present in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern.
To date, the Company has no products approved for marketing and sale and it has not yet recorded any revenue from product sales. The Company’s ability to achieve profitability is dependent on its ability to successfully develop its compounds, conduct clinical trials, obtain regulatory approvals, and support commercialization activities for its product candidates. Any products developed will require approval of the FDA or a foreign regulatory authority prior to commercial sale.
Significant additional funding is necessary to maintain current operations and to advance the Company’s research and development activities. The Company plans to seek additional funding through equity offerings or debt financings, credit or loan facilities, strategic alliances and licensing arrangements. The Company’s ability to access capital when and in the amount needed is not assured. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.
The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.
Basis of Presentation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The accompanying consolidated financial statements include the accounts of the Company and its consolidated subsidiaries as a result of the consummation of the Merger in April 2025. All intercompany balances and transactions have been eliminated.
The consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position of the Company as of December 31, 2025 and 2024, and results of operations and cash flows for all periods presented.
Upon the closing of the Merger, the outstanding shares of common stock of Legacy Tvardi (including the shares of common stock issuable upon conversion of all shares of preferred stock of Legacy Tvardi prior to the Merger) were converted into shares of the Company’s common stock, based on an exchange ratio calculated in accordance with the Merger Agreement (the Exchange Ratio). The Exchange Ratio was retroactively applied to all outstanding common shares, redeemable convertible preferred stock, Convertible Notes and stock options of Legacy Tvardi throughout the consolidated financial statements and notes to consolidated financial statements. See Note 3, Merger Agreement, for additional information on the Merger.
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2.Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses as of and during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those estimates. Significant estimates and assumptions reflected within these consolidated financial statements include, but are not limited to, prepaid and accrued research and development expenses, including those related to contract research organizations (CROs), contract development manufacturing organizations (CDMOs), and other third-party vendors, and the valuation of the Company’s common stock prior to the Merger, stock-based awards, and the fair value of Convertible Notes (as defined in Note 4, Fair Value Measurements), which converted to common stock upon close of the Merger. Changes in estimates are recorded in the period in which they become known.
Concentration of Credit Risk and of Significant Suppliers
The Company’s cash and cash equivalents represent potential concentrations of credit risk. The Company deposits its cash and cash equivalents in financial institutions in amounts that may exceed federally insured limits, has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The following table presents information about the Company’s significant supplier:
For the Year Ended
December 31, As of December 31,
% of operating expenses % of accounts payable
For the years ended December 31, 2025 and 2024, no additional suppliers accounted for more than 10% of the Company’s operating expenses or accounts payable. The Company’s preclinical studies and clinical trials and testing could be adversely affected by a significant interruption in the supply chain from its significant supplier.
Cash and Cash Equivalents
The Company considers all highly liquid investments, with an original maturity of three months or less, to be cash equivalents. Cash equivalents include amounts held in money market funds in the amount of $20.0 million and $31.3 million as of December 31, 2025 and 2024, respectively.
The Company recorded interest income on its cash equivalents of $0.7 million for each of the years ended December 31, 2025 and 2024 on its consolidated statements of operations and comprehensive loss.
Short-term Investments
The Company invests excess cash in short-term investments with high credit ratings. These securities consist primarily of U.S. Treasury Notes that are classified as “available-for-sale.” The Company classifies any investments as short-term if the maturity date is less than or equal to one year from the balance sheet date or as long-term if the maturity date is in excess of one year from the balance sheet date.
The Company’s short-term investments are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income in stockholders’ equity (deficit). Realized gains and losses and declines in fair value due to credit-related factors are based on the specific identification method and are included within the non-operating section of the consolidated statements of operations and comprehensive loss, as needed. The Company recorded interest income on short-term investments, inclusive of accretion of its net discounts on its short-term investments, of $0.7 million for the year ended December 31, 2025, which is classified as interest income in the consolidated statements of operations and comprehensive loss. There were no short-term investments for the year ended December 31, 2024.
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At each balance sheet date, the Company assesses available-for-sale debt securities in an unrealized loss position to determine whether the unrealized loss or any potential credit losses should be recognized within the non-operating section of the consolidated statement of operations and comprehensive loss. The Company evaluates whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in the consolidated statements of operations and comprehensive loss accordingly, as needed. The portion that is not credit-related is treated in accordance with other unrealized losses as a component of accumulated other comprehensive income (loss) in stockholders’ equity (deficit). There have been no impairment or credit losses recognized for the years ended December 31, 2025 and 2024.
Deferred Offering Costs
The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the proceeds from the offering, either as a reduction of the carrying value of the preferred stock or in stockholders’ equity (deficit) as a reduction of additional paid-in-capital generated as a result of the offering. Should any planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations and comprehensive loss.
The Company recorded deferred offering costs of $2.8 million as of December 31, 2024. With the addition of the Company’s deferred costs incurred in 2025 prior to the Merger closing, a total of $4.1 million in deferred offering costs were reclassified as a reduction of additional paid-in-capital upon the close of the Merger.
Fair Value Measurements
Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
Level 1 — 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 that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company’s cash equivalents are carried at fair value in Level 1, determined according to the fair value hierarchy described above (refer to Note 4, Fair Value Measurements). The carrying values of the Company’s prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these instruments. The Company’s Convertible Notes were carried at fair value prior to their conversion in April 2025, determined according to level 3 inputs in the fair value hierarchy described above. Refer to Note 4, Fair Value Measurements for further information around the fair value of the Convertible Notes.
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Property and Equipment
The Company records property and equipment at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset, as follows:
Estimated Useful Life
Computer equipment 3 years
Office equipment 5 years
Leasehold improvements Shorter of remaining lease term or estimated useful life
Estimated useful lives are periodically assessed to determine if changes are appropriate. Leasehold improvements are amortized using the straight-line method over the lesser of the lease term or its estimated useful life. Lease terms are based upon the initial lease agreement and do not consider potential renewals or extensions until such time that the renewals or extensions are contracted. Expenditures for maintenance and repairs that do not improve or extend the life of the respective assets are expensed as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are eliminated from the consolidated balance sheets and any resulting gains or losses are included in the consolidated statements of operations and comprehensive loss in the period of disposal.
Depreciation and amortization expense related to property and equipment was less than $0.1 million for each of the years ended December 31, 2025 and 2024.
Intangible Assets
Intangible assets consist of licenses for exclusive use of patent rights owned by a third party, which are amortized using the straight-line method over the estimated periods of benefit, generally the remaining life of the underlying licensed patents.
The Company reviews intangible assets for impairment whenever conditions exist that indicate the carrying value may not be recoverable, such as an economic downturn in the market or a change in the assessment of future operations. No impairment was recorded for the years ended December 31, 2025 and 2024.
Refer to Note 14, License Agreements, for further detail on the Company’s licenses.
Impairment of Long-lived Assets
The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value. For the years ended December 31, 2025 and 2024, the Company did not record any impairment losses on long-lived assets.
Operating Leases
The Company determines whether an arrangement is or contains a lease, as defined by Accounting Standards Update, or ASU, 2016-02, Leases (Topic 842) (or ASC 842), at contract inception by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset. If an arrangement is determined to be or contain a lease, the lease is assessed for classification as either an operating or finance lease at the lease commencement date, defined as the date on which the leased asset is made available for use by the Company, based on the economic characteristics of the lease.
ASC 842 includes certain practical expedients that can be elected for new leases that are executed after the adoption of the new requirements. The Company elected the practical expedient to not separate lease and non-lease components. The Company also
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elected to apply the short-term lease recognition exemption which eliminates the requirement to present on the consolidated balance sheets leases with a term of 12 months or less. These two practical expedients were elected for all classes of underlying assets.
At the lease commencement date, the Company recognizes a lease liability and a right-of-use (ROU) asset representing its right to use the underlying asset over the lease term. The initial measurement of the lease liability is calculated as the present value of the future lease payments in the contract and the ROU asset is measured as the lease liability plus initial direct costs and prepaid lease payments, less lease incentives granted by the lessor. The subsequent measurement of a lease is dependent on whether the lease is classified as an operating lease or a finance lease. Operating lease cost is recognized on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive loss.
The Company’s lease requires other payments such as costs related to taxes, insurance, maintenance, and other expenses. These costs are generally variable in nature and based on the actual costs incurred and required by the lease. As the Company has elected to not separate lease and non-lease components for all classes of underlying assets, all variable costs associated with the lease are expensed in the period incurred and presented and disclosed as variable lease costs. The Company’s lease agreement does not contain any material residual value guarantees or material restrictive financial covenants.
ASC 842 requires that a lessee use the rate implicit in the lease when measuring the lease liability and ROU asset. If the rate implicit in the lease is not readily determinable, the Company is permitted to use its incremental borrowing rate, which is defined as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Since the rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rate when measuring its leases. The incremental borrowing rate is calculated by considering the Company’s credit standing, the lease term and other quantitative and qualitative factors.
Most leases include options to renew and, or, terminate the lease, which can impact the lease term. The exercise of these options is at the Company’s discretion. Periods covered by an option to extend a lease are not included in the lease term as the Company is not reasonably certain it will exercise this option. Additionally, periods covered by an option to terminate the lease are included in the lease term as it is reasonably certain that the Company will not exercise this option.
Redeemable Convertible Preferred Stock
Legacy Tvardi previously issued Series A preferred stock and Series B preferred stock in 2018 and 2021, respectively (collectively, the Preferred Stock). As of December 31, 2024, Legacy Tvardi had authorized the issuance of 29,723,540 shares of Preferred Stock, par value of $0.001 per share, of which 9,499,999 were designated Series A preferred stock and 20,223,541 were designated Series B preferred stock. As of December 31, 2024, Legacy Tvardi had 3,963,910 shares of Preferred Stock outstanding, with an aggregate carrying value of $85,503 and an aggregate liquidation preference of $85,902. The outstanding shares of Preferred Stock as of December 31, 2024 reflect the retroactive application of the Exchange Ratio as discussed in Note 3, Merger Agreement.
Prior to the Merger, the holders of Preferred Stock had certain liquidation rights in the event of a liquidation event or a deemed liquidation event that, in certain situations, were not solely within the control of Legacy Tvardi and called for the redemption of the then outstanding Preferred Stock. Accordingly, as of December 31, 2024, the Preferred Stock was classified as temporary equity on the accompanying consolidated balance sheet. As the Preferred Stock was converted to common stock in accordance with the Merger Agreement in April 2025, there was no Preferred Stock remaining as of December 31, 2025. See Note 3, Merger Agreement, for further information.
Refer to Note 9, Stockholders’ Equity (Deficit), for further information regarding the authorized preferred stock, pursuant to Cara’s amended and restated certificate of incorporation, which was assumed by the Company in connection with the Merger Agreement in April 2025.
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Convertible Notes
At issuance in December 2024, Legacy Tvardi performed an analysis of all terms and features of the Convertible Notes (as defined in Note 4, Fair Value Measurements) and elected the fair value option to account for the Convertible Notes to simplify the accounting for the identified embedded derivatives. The Convertible Notes were remeasured at fair value at each balance sheet date until conversion under the Merger Agreement in April 2025. Changes to the fair value of the Convertible Notes were recorded in other income (expense), net in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2025 and 2024. The Company also elected the option of combining interest expense and the change in fair value as a single line item within the Company’s consolidated statements of operations and comprehensive loss. Refer to Note 4, Fair Value Measurements, for further detail regarding the valuation and conversion of the Convertible Notes.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker (CODM) in deciding how to allocate resources and in assessing performance. The Company’s CODM, its Chief Executive Officer and Chief Financial Officer, view the Company’s operations as a single operating segment, which is the business of discovering and developing novel orally bioavailable, small molecule therapies across a broad range of diseases driven by STAT3 with high unmet need.
All of the Company’s long-lived assets are held in the United States.
Refer to Note 16, Segment Reporting, for additional disclosures related to segment information.
Research and Development Expenses
Research and development expenses are expensed as incurred. Research and development expenses include wages, associated employee benefits, and stock-based compensation expense of employees engaged in research, amortization of licensed intangible assets, external costs of third-party vendors that conduct research and development and manufacturing activities on behalf of the Company, and other operational costs related to the Company’s research and development activities.
Prepaid and Accrued Research and Development Expenses
The Company recognizes research and development expense and records accruals for estimated costs of research and development activities conducted by third-party service providers, which include CROs that conduct research, preclinical studies and clinical trials on the Company’s behalf, including in connection with the Company’s research and development arrangement, and CDMOs that manufacture the Company’s product candidate for use in preclinical studies and clinical trials. The majority of the Company’s service providers invoice in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. The Company makes estimates of its accrued expenses and includes these costs in accrued liabilities in the consolidated balance sheets and within research and development expense in the consolidated statements of operations and comprehensive loss based on facts and circumstances known to the Company at that time. The prepayments and accruals underlying these types of costs are a significant component of the Company’s research and development expenses.
The Company accrues for these costs based on factors such as estimates of the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and in accordance with agreements established with its third-party service providers for such services. The Company makes significant judgments and estimates in determining the accrued research and development liabilities balance at each reporting period. As actual costs become known, the Company adjusts its accrued estimates. To date, there have been no material adjustments to the Company’s estimates of accrued research and development expenses. The Company records advance payments to service providers as prepaid expenses and other current assets, which are expensed as the contracted services are performed. If the actual timing of the performance of services varies from the estimate, or the Company receives any change orders from its third-party providers, then the Company adjusts the amount of the accrued expense or the prepaid expense accordingly.
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General and Administrative Expenses
General and administrative expenses consist primarily of salaries and benefits, including stock-based compensation expense, for employees and consultants in operating and finance functions and directors, as applicable; professional fees for legal, accounting, auditing, tax and consulting services; travel expenses; and facility-related expenses, which include expenses for rent and maintenance of facilities and other operating costs. The Company expenses all general and administrative expenses as incurred.
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 recoverability of the expenditure. Amounts incurred are classified as general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss.
Stock-based Compensation
The Company measures all stock-based awards granted to employees, officers, directors, consultants, and advisors based on the fair value on the date of the grant, and recognizes the resulting fair value over the requisite service period. The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options granted. The Company has elected to recognize stock-based compensation expense for service-based stock options with graded vesting on a straight-line basis over the requisite service period, which is generally the vesting period. The Company accounts for forfeitures as they occur. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss 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.
The Company measures stock-based compensation costs for employees and non-employees at the grant date based on the estimated fair value of the award, which is reviewed periodically, and recognizes compensation expense on a straight-line basis over the vesting period which approximates the requisite service period. Compensation expense is recognized with an offsetting credit to additional paid-in capital.
Net Loss Per Share
Prior to the close of the Merger, as further described in Note 3, Merger Agreement, the Company calculated net loss per share using the two-class method required for participating securities. The Company’s redeemable convertible preferred stock was considered participating as the holders were entitled to receive dividends in preference and priority to the holders of common stock. 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 has been distributed. There was no allocation required under the two-class method during periods of loss prior to the Merger since the participating securities did not have a contractual obligation to share in the losses of the Company. Upon close of the Merger in April 2025, the Company’s redeemable convertible preferred stock converted into shares of the Company’s common stock, and as such, there were no remaining participating securities as of December 31, 2025.
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributed to common stockholders by the weighted-average number of shares of common stock outstanding for the period, excluding potentially dilutive common shares. Diluted net loss per share is computed by: (i) adjusting net loss attributable to common stockholders to (a) reallocate undistributed earnings based on the potential impact of dilutive securities and (b) reverse any current period change in fair value of convertible debt securities and add back any related interest expense (in accordance with the if-converted method) and (ii) dividing the diluted net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, including potential dilutive shares of common stock.
In periods in which the Company reports a net loss available to common stockholders, diluted net loss per share available to common stockholders is generally the same as basic net loss per share available to common stockholders, since dilutive common shares are not assumed to have been issued as their effect is anti-dilutive. However, in periods where the Company has a change in fair value of convertible debt securities, any numerator and denominator adjustments, as described above, are applied accordingly.
As such, although the Company had a net loss for the year ended December 31, 2025, diluted earnings per share was computed by dividing net loss attributable to common stockholders, as adjusted by removing the $7.8 million net gain on the fair value
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remeasurement of its Convertible Notes and adding back the $0.7 million of interest expense, by the weighted-average number of shares of common stock outstanding, adjusted to give effect to potentially dilutive elements.
Income Taxes
The Company provides for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. 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.
The Company utilizes a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources, including unrealized gains and losses on short-term investments held as available-for-sale. For the year ended December 31, 2025, comprehensive loss includes net loss and a net unrealized gain on short-term investments. There was no difference between net loss and comprehensive loss for the year ended December 31, 2024.
Recently Adopted Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (or ASU 2023-09), which focuses on the rate reconciliation and income taxes paid. ASU 2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. For entities other than PBEs, the requirements will be effective for annual periods beginning after December 15, 2025. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all periods presented. As of December 31, 2025, the Company adopted this new ASU retrospectively and it only impacts the Company’s income tax disclosures with no impact to its operations, cash flows, or financial position.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (or ASU 2024-03). The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included in the statements of operations. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the provisions of this guidance and the potential impact on its consolidated financial statements and disclosures.
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3. Merger Agreement
As discussed in Note 1, Nature of the Business and Basis of Presentation, on April 15, 2025, pursuant to the terms of the Merger Agreement entered into on December 17, 2024, Merger Sub merged with and into Legacy Tvardi, with Legacy Tvardi surviving as a wholly-owned subsidiary of Cara.
Upon the closing of the Merger:
● Cara changed its corporate name to Tvardi Therapeutics, Inc.
● the business of Legacy Tvardi continued as the business of the Company.
Immediately following the Merger, the equity holders of Legacy Tvardi prior to the Merger, including the holders of Convertible Notes, owned approximately 84.5% of the outstanding common stock of the combined company on a fully diluted basis.
In addition, on April 15, 2025, immediately prior to the closing of the Merger, Cara (i) effected a 1-for-3 reverse stock split of its common stock and (ii) increased its authorized shares of common stock to 150,000,000.
Upon the closing of the Merger, the Company’s 2025 Equity Incentive Plan (the 2025 Plan) and 2025 Employee Stock Purchase Plan (the 2025 ESPP), both approved during a special meeting of Cara’s stockholders on April 1, 2025, also became effective, following the reverse stock split. Refer to Note 10, Stock-based Compensation and Other Employee Matters, for further information on the 2025 Plan and the 2025 ESPP.
The Merger was accounted for as an in-substance reverse recapitalization of Cara by Legacy Tvardi. Under this method of accounting, Legacy Tvardi was considered the accounting acquirer for financial reporting purposes. A reverse recapitalization does not result in a new basis of accounting, and the consolidated financial statements of the combined entity represent the continuation of the financial statements of Legacy Tvardi in many respects. Accordingly, the assets, liabilities and results of operations of Legacy Tvardi became the historical financial statements of the Company. At the effective time of the Merger, substantially all of the assets of Cara consisted of cash and cash equivalents, as well as other nominal non-operating assets. Under such reverse recapitalization accounting, the assets and liabilities of Cara were recorded at their fair value in the Company’s financial statements at the effective time of the Merger, which approximated book value due to the short-term nature. No goodwill or intangible assets were recognized. Consequently, the consolidated financial statements of the Company reflect the historical operations of Legacy Tvardi for accounting purposes together with the equity transactions of Cara and Legacy Tvardi noted above. The Exchange Ratio was retroactively applied to all outstanding common shares, redeemable convertible preferred stock, Convertible Notes and stock options of Legacy Tvardi.
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As part of the recapitalization, the Company obtained the assets and liabilities listed below (in thousands):
Cash and cash equivalents $ 24,992
Prepaid expenses and other current assets 132
Accounts payable (228)
Accrued expenses and other current liabilities (1,023)
Net assets acquired $ 23,873
The Company incurred total capitalizable transaction costs of $4.1 million, all of which was paid in cash as of December 31, 2025. Of the $4.1 million in transaction costs paid in cash as of December 31, 2025, $1.3 million was paid during fiscal 2024. The total amount of $4.1 million was recorded as a reduction to additional paid-in capital in the consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit) for the year ended December 31, 2025.
4. Fair Value Measurements
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):
Fair Value Measurements as of
Level 1 Level 2 Level 3 Total
Financial assets:
Cash equivalents:
Money market funds $ 20,011 $ — $ — $ 20,011
Short-term investments:
U.S. Treasury Notes 10,077 — — 10,077
Total financial assets $ 30,088 $ — $ — $ 30,088
Fair Value Measurements as of
Level 1 Level 2 Level 3 Total
Financial assets:
Cash equivalents:
Money market funds $ 31,303 $ — $ — $ 31,303
Total financial assets $ 31,303 $ — $ — $ 31,303
Financial liabilities:
Convertible Notes $ — $ — $ 30,259 $ 30,259
Total financial liabilities $ — $ — $ 30,259 $ 30,259
The Company did not have any Level 3 assets or liabilities as of December 31, 2025. There were notransfersbetween Levels during the periods presented.
The unrealized gain on the Company’s short-term investments for the year ended December 31, 2025 was not material.
Convertible Notes
In December 2024, Legacy Tvardi entered into a note purchase agreement to issue and sell convertible notes (the Convertible Notes) in an aggregate principal amount of $28.3 million. The Convertible Notes accrued interest at 8% per annum and had a maturity date of December 31, 2026 (the Maturity Date). As further discussed in Note 3, Merger Agreement, the Company completed its Merger with Cara in April 2025. Upon the closing of the Merger, the Convertible Notes converted into 1,265,757 shares of the Company’s common stock, $0.001 par value per share, in the aggregate.
The fair value of the Convertible Notes as of December 31, 2024 was estimated based on significant inputs not observable in the market, which represented Level 3 measurements within the fair value hierarchy. The Convertible Notes were valued using a scenario-based valuation analysis requiring a probability of inputs including the probability of occurrence of events that would trigger
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conversion of the Convertible Notes and the expected timing of such events. As of December 31, 2024, prior to the closing of the Merger, the events that would trigger the conversion of the Convertible Notes and their respective probabilities were as follows: (i) an automatic conversion of the Convertible Notes into equity securities upon a Qualified or non-Qualified Financing, (ii) an automatic conversion of the Convertible Notes into shares of Legacy Tvardi’s common stock upon an IPO, (iii) an automatic conversion of the Convertible Notes into the combined company’s common stock upon a reverse merger, and (iv) an event of default, dissolution, or liquidation, weighted with 20%, 10%, 60%, and 10%, respectively. Immediately prior to the Merger closing in April 2025, the probability of these events were weighted as 2.5%, 0%, 95%, and 2.5%, respectively.
In addition to the estimated probabilities of the occurrence of events that would trigger conversion, the following table presents the other assumptions, estimates, and contractual features incorporated into the valuation of the Convertible Notes as of December 31, 2024:
As of December 31,
Time to Qualified/non-Qualified financing (in years) 0.25
Time to IPO (in years) 0.25
Time to reverse merger (in years) 0.33