UPB US Equity☆

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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K (this “Annual Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review "Item 1A, Risk Factors" of this Annual Report for a discussion of important 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. Please also see the section titled “Special note regarding forward-looking statements” included elsewhere in this Annual Report.

Overview

We are a clinical-stage biotechnology company developing treatments for inflammatory diseases, with an initial focus on severe respiratory disorders. We are developing verekitug, the only known antagonist currently in clinical development that targets the receptor for Thymic Stromal Lymphopoietin (“TSLP”), a cytokine which is a clinically validated driver of inflammatory response positioned upstream of multiple signaling cascades that affect a variety of immune mediated diseases. Preclinical and clinical data to date demonstrate verekitug’s highly potent inhibition of the TSLP receptor, which we believe will translate to a differentiated product profile, including improved clinical outcomes, substantially extended dosing intervals and the potential to treat a broad spectrum of patients. We have advanced this highly potent monoclonal antibody into separate Phase 2 trials for the treatment of severe asthma, including a long-term safety and efficacy extension study (“Phase 2 LTE”), chronic rhinosinusitis with nasal polyps (“CRSwNP”), and chronic obstructive pulmonary disease (“COPD”). We reported positive top-line results in our CRSwNP Phase 2 trial in September 2025 and positive top-line results in our severe asthma Phase 2 trial in February 2026. We initiated our Phase 2 COPD trial in July 2025. We plan to initiate dosing in Phase 3 trials in both severe asthma and CRSwNP in the first quarter of 2027, prioritizing a Phase 3 development strategy that focuses on maximizing efficacy in both indications, without biomarker restriction, with quarterly at-home administration. Our experienced team is committed to maximizing verekitug’s unique attributes to address the substantial unmet needs for patients underserved by today’s standard of care.

Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, establishing licensing, building our proprietary platform technologies, developing verekitug, establishing our intellectual property portfolio, conducting research, preclinical studies, and clinical trials, establishing arrangements with third parties for the manufacture of verekitug and related raw materials, and providing general and administrative support for these operations. To date, we have financed our operations primarily through the issuance and sale of our redeemable convertible preferred stock and proceeds from our initial public offering (“IPO”). As of December 31, 2025, we have received total gross proceeds of $400.0 million from the issuance and sale of our redeemable convertible preferred stock. In October 2024, we completed our IPO in which we issued and sold 17,250,000 shares of our common stock, including 2,250,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $17.00 per share. As a result of the IPO, we received $268.8 million in net proceeds, after deducting $20.5 million in underwriting discounts and commissions, and $3.9 million in other offering costs.

We have incurred significant net operating losses and negative cash flows since our inception. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development, regulatory approval and eventual commercialization of verekitug and any other potential future product candidates, which we expect will take a number of years. For the years ended December 31, 2025 and 2024, we reported net losses of $143.4 million and $62.8 million, respectively. Our net losses have resulted principally from costs incurred in our research and development activities. As of December 31, 2025, we had an accumulated deficit of $334.2 million, and we had cash, cash equivalents and short-term investments of $341.5 million. Based on our current operating plan, we believe that our existing cash and cash equivalents and short-term investments will be sufficient to fund our operating expenses and capital expenditure requirements through 2027.

We expect to continue to incur significant net operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if, and as we:

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continue to conduct our ongoing clinical trials of verekitug, including our global Phase 2 clinical trials, as well as initiate and complete additional clinical trials of verekitug in new indications or patient populations;

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conduct larger-scale clinical trials for verekitug or any potential future product candidates;

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manufacture, or have manufactured, clinical and commercial supplies of verekitug;

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seek regulatory approvals, prepare for and, if approved, proceed to commercialization for verekitug in current or new indications or any potential future product candidates;

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attract, hire and retain additional clinical, scientific, and management personnel;

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implement operational, financial, and management information systems;

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add quality control, quality assurance, legal, compliance, and other groups to support our operations;

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obtain, maintain, protect, expand and enforce our intellectual property portfolio, including intellectual property obtained through license agreements;

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defend against any claims by third parties that we have infringed, misappropriated or otherwise violated any intellectual property of any such third party;

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make royalty, milestone or other payments under current, and any future, license or collaboration agreements;

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establish a sales, marketing and distribution infrastructure, either ourselves or in partnership with others, to commercialize verekitug, if approved;

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potentially experience any delays, challenges, or other issues associated with the clinical development of verekitug and any potential future product candidates, including with respect to our regulatory strategies; and

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incur additional legal, accounting, investor relations and other general and administrative expenses associated with operating as a public company.

Our net operating losses may fluctuate significantly from period to period, depending upon the timing of our expenditures on research and development activities. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued expenses and other current liabilities.

As a result, we will need additional financing to support our continuing operations. To date, we have funded our operations primarily with the sale of our redeemable convertible preferred stock and the proceeds from our IPO. We do not have any products approved for sale and have not generated any revenue from product sales since our inception. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates and commercialize our products or enter into collaboration arrangements with third parties. Until we can generate sufficient product revenue to finance our cash requirements, if ever, we expect to fund our operations through equity offerings or debt financings, credit or loan facilities, potentially other capital resources, or a combination of one or more of these funding sources. We may be unable to raise additional funds or enter into other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back, or discontinue the development or commercialization of verekitug and one or more potential future product candidates, which could have a material adverse effect on our business, results of operations or financial condition.

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

Asset purchase and license agreements

Below is a summary of the key terms for certain of our asset purchase and license agreements. For a more detailed description of these agreements, see the section titled “Business—Asset purchase and license agreements” included elsewhere in this Annual Report.

Asset purchase agreement with Astellas and related letter agreement with Astellas and Regeneron

In October 2021, we entered into an asset purchase agreement (the “Astellas Asset Purchase Agreement”) with Astellas Pharma, Inc. (“Astellas”). Pursuant to the Astellas Asset Purchase Agreement, we purchased from Astellas the compound designated by Astellas as ASP7266 (the “Compound,” which was subsequently renamed by us as verekitug). There are no future payments owed to Astellas under the Astellas Asset Purchase Agreement.

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In connection with the Astellas Asset Purchase Agreement, we concurrently entered into a letter agreement (the “Regeneron Letter Agreement”) with Astellas and Regeneron Pharmaceuticals, Inc. (“Regeneron”).

The Regeneron Letter Agreement relates to a prior Non-Exclusive License and Material Transfer Agreement (the “Terminated Regeneron License Agreement”) that Regeneron and Astellas entered into in March 2007, as amended in July 2010 and subsequently terminated in June 2018, subject to certain surviving rights and obligations of both Regeneron and Astellas. Under the Terminated Regeneron License Agreement, Astellas utilized Regeneron’s human antibody technology in its internal research programs to discover certain product candidates, including the Compound, which it sold to us under the Astellas Asset Purchase Agreement.

Under the Regeneron Letter Agreement, Astellas assigned and transferred to us and we assumed and accepted certain of Astellas’ surviving rights and obligations under the Terminated Regeneron License Agreement, including Astellas’ royalty payment, reporting and indemnification obligations in connection with activities conducted by us or on our behalf with respect to the Compound. By assuming and accepting Astellas’ surviving obligations under the Terminated Regeneron License Agreement, we are required to pay Regeneron mid-single-digit percentage royalties on aggregate worldwide net sales of any product developed by or on behalf of us that contains the Compound as an ingredient or component of the materials sold (a “Royalty Product”) during the royalty term. The royalties are determined on a product-by-product and country-by-country basis and expire on the later of (i) a specified number of years after the launch of a given Royalty Product in a given country and (ii) the expiration of the last valid claim of royalty bearing company patent rights claiming or covering such Royalty Product in such country. To date, we have not made any royalty payments to Regeneron under the Regeneron Letter Agreement.

Exclusive license agreement with Maruho

In October 2021, we entered into a license agreement with Maruho (as amended, the “Maruho License Agreement”), under which we granted Maruho an exclusive, irrevocable, perpetual, royalty-free, sublicensable (subject to our right of first negotiation) license. Under the Maruho License Agreement, Maruho is responsible for and controls, at its sole expense, (i) the preparation, filing, prosecution, obtaining and maintaining all regulatory approvals in Japan and (ii) the promotion, marketing, sale and commercialization in Japan.

Pursuant to the Maruho License Agreement, we maintain our responsibility for and control the global research and development of the Maruho license product, including in Japan. We will conduct specified clinical trial activities for Japan as part of our global research and development plan. Maruho will reimburse us for the costs of these research and development activities, including the cost of drug supply. Apart from reimbursement of qualifying research and development expenses, Maruho is not obligated to make any future payments under the Maruho License Agreement.

During the years ended December 31, 2025 and 2024, we received payments from Maruho in the amount of $2.8 million and $1.9 million, respectively.

License agreement with Lonza

In October 2021, in connection with the Astellas Asset Purchase Agreement, we entered into a license agreement with Lonza Sales AG (“Lonza”) (as amended, the “Lonza License Agreement”). Pursuant to the Lonza License Agreement, we obtained a worldwide, non-exclusive, sublicensable (subject to Lonza’s right of pre-approval with respect to any sublicense of manufacturing activities) license to certain intellectual property rights owned by Lonza. Lonza was the originator of the master cell bank for the Compound developed by Astellas. As consideration for the rights and licenses granted to us under the Lonza License Agreement, we agreed to pay Lonza certain royalties and annual payments, both payable in Swiss francs, in respect of the manufacturing and sale of the Compound, such amounts to be determined by the party manufacturing the Compound, and range from no annual payment to up to a mid-six figure annual payment, and a less-than-one percent to a low-single-digit percentage royalty on net sales of the Compound. In accordance with the Lonza License Agreement, we entered into a sublicense with Wuxi Biologics (Hong Kong) Limited to manufacture the Compound, requiring us to pay a mid-six-figure annual fee to Lonza pursuant to this provision. Any royalties due under the Lonza License Agreement are payable on a country-by-country basis until ten years from the first commercial sale of the Compound in that particular country. The Lonza agreement continues for an indefinite period of time unless otherwise terminated. We have the right to terminate the Lonza License Agreement at any time by providing prior written notice to Lonza. During each of the years ended December 31, 2025 and 2024, we made an annual payment to Lonza in the amount of $0.5 million pursuant to the Lonza License Agreement. These payments are recognized as research and development expense in the consolidated statements of operations and comprehensive loss. To date, we have not made any royalty payments to Lonza under the Lonza License Agreement.

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Components of our results of operations

Collaboration revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales in the foreseeable future. All of our collaboration revenue has been derived from the Maruho License Agreement. If our development efforts for verekitug or any potential future product candidates are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from product sales, royalties or payments from such collaboration or license agreements, or a combination of product sales and payments from such agreements.

Operating expenses

Research and development expenses

Research and development expenses consist primarily of costs incurred for our preclinical research and clinical development of verekitug, which include:

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expenses incurred under agreements with third parties, including contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and investigative sites that conduct clinical trials on our behalf, and costs related to the Maruho License Agreement;

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salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions and costs related to the Maruho License Agreement;

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costs of outside consultants, including their fees and related travel expenses; and

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costs associated with license agreements to support the development of our technology.

We expense all research and development expenses in the periods in which they are incurred. Our direct research and development expenses are tracked on an indication-by-indication basis and consist of costs that include CROs and investigative sites that conduct clinical trials on our behalf, third party vendors that conduct research and preclinical studies on our behalf and outside consulting costs directly allocable to an indication. We do not allocate costs related to CMOs that manufacture verekitug for use in our preclinical studies and clinical trials as they are not distinguishable by indication but support all current and potential indications under our verekitug program. Additionally, we do not allocate costs for employee costs, including stock-based compensation, consulting, or other indirect costs that cannot be directly allocated to a specific indication.

We expect that our research and development expenses will increase in the future as we advance verekitug through clinical trials and any potential future product candidates that we may develop through preclinical studies and clinical trials, in pursuit of regulatory approval. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

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 verekitug and any potential future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of verekitug or any potential future product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

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the scope, timing, progress, costs and results of the ongoing development of verekitug as well as for potential discovery, preclinical development and clinical trials for other potential future product candidates;

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the number of clinical trials required for regulatory approval of verekitug or our potential future product candidates;

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the costs, timing and outcome of regulatory review of verekitug or our potential future product candidates;

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the costs associated with acquiring or licensing additional product candidates, technologies or assets, including the timing and amount of any milestones, royalties or other payments due in connection with our acquisitions and licenses;

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the cost of manufacturing clinical supplies of verekitug or our potential future product candidates;

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the costs associated with hiring additional clinical, quality control, medical, scientific and other technical personnel to support the ongoing development of verekitug;

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the costs associated with increasing our headcount as we expand our research and development organization and market development and pre-commercial planning activities;

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the effectiveness of our approach to identifying target patient populations;

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our ability to maintain existing, and establish new, strategic collaborations or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;

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the effect of macroeconomic trends including inflation and rising interest rates; and

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addressing any potential supply chain interruptions or delays.

A change in the outcome of any of these factors or underlying variables with respect to the development of a product candidate could significantly change the costs and timing associated with the development of that product candidate.

General and administrative expenses

General and administrative expenses consist primarily of salaries and benefits, including stock-based compensation expense, for personnel in executive, finance, accounting, legal, human resources, business development, information technology, and other administrative functions. General and administrative expenses also include legal fees relating to patents and corporate matters; professional fees for accounting, auditing, tax, and consulting services; insurance costs; travel expenses; and facility-related expenses, which include depreciation costs and expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our headcount and expand our infrastructure to support the continued research and development of our programs and the growth of our business. We also expect to incur increased expenses associated with operating as a public company, including costs of accounting, audit, legal, regulatory, tax-related services, compliance with SEC rules and regulations and listing requirements, director and officer insurance premiums and investor relations costs.

Other income (expense)

Change in fair value of preferred stock tranche right liability

In connection with our Series B redeemable convertible preferred stock (“Series B Preferred Stock”) financing, we issued shares under a stock purchase agreement that provided an obligation for us to issue additional Series B Preferred Stock in subsequent closings upon the satisfaction of certain conditions. The Series B tranche right liability was settled in April 2024 upon the satisfaction of relevant conditions. We classified the preferred stock tranche right as a liability on our consolidated balance sheets and initially recorded it at fair value upon the issuance date of the right. We remeasured the tranche right liability to fair value at each reporting date and immediately prior to being settled, and recognized changes in the fair value of the preferred stock tranche right liability as a component of other income (expense) in our consolidated statements of operations and comprehensive loss. Upon settlement of the tranche right, we derecognized the related liability, and stopped recognizing changes in the fair value of the preferred stock tranche right liability.

Interest income

Interest income consists of interest earned on money market funds, U.S. treasury bills and U.S. government agency bond investments.

Other income (expense), net

Other income (expense), net consists of miscellaneous income and expense unrelated to our core operations.

Income taxes

We recorded a full valuation allowance of our deferred tax asset position as of December 31, 2025 and 2024 as we believe it was more likely than not that we would not be able to utilize our deferred tax assets.

As of December 31, 2025, we had federal and state net operating losses (“NOLs”) carryforwards of $66.9 million and $92.9 million, respectively. The federal NOLs are not subject to expiration and are limited in utilization to 80% of taxable income and

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the state NOLs begin to expire in 2041. As of December 31, 2025, we had federal and state research and development credits of $5.7 million and $1.2 million, respectively, which will, if not utilized, begin to expire in 2043 and 2037, respectively.

On July 4, 2025, new U.S. tax legislation was signed into law (known as the “One Big Beautiful Bill Act” or “OBBBA”) which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, but many are generally not effective until 2026. The impacts of the OBBBA were not material to the 2025 consolidated financial statements; however, we will continue to evaluate impacts to future periods.

Results of operations

Comparison of the years ended December 31, 2025 and 2024

The following table summarizes our results of operations for the years ended December 31, 2025 and 2024:

Year Ended December 31,

(in thousands)

Operating expenses:

Other income (expense):

Change in fair value of preferred stock tranche right liability — 2,859 (2,859 )

Other expense, net (15 ) (24 ) 9

Collaboration revenue

Collaboration revenue was $2.9 million and $2.4 million for the years ended December 31, 2025 and 2024. Revenue during each of the years ended December 31, 2025 and 2024 was primarily related to the work performed associated with our Phase 2 clinical trial in patients with severe asthma under the Maruho License Agreement.

Research and development expenses

Year Ended December 31,

(in thousands)

Direct research and development expenses by program:

Verekitug program:

Unallocated research and development expense:

Personnel expenses (including stock-based compensation) 18,343 9,911 8,432

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Research and development expenses were $136.8 million for the year ended December 31, 2025 compared to $63.0 million for the year ended December 31, 2024. The increase of $73.8 million was primarily driven by an increase of $48.1 million in expenses directly related to our verekitug program and $25.7 million of unallocated research and development expenses.

The increase in direct costs of $31.5 million related to the COPD indication was due to the costs associated with the initiation of our COPD Phase 2 clinical trial for which there were no comparable expenses during the same period in 2024. The increase in direct costs of $19.6 million related to the asthma indication was primarily due to the continued progress associated with our Phase 2 clinical trial and Phase 2 LTE study during the year ended December 31, 2025, compared to the same period in 2024. The decrease in direct costs of $3.0 million related to the CRSwNP indication was primarily due to wind down activities associated with our Phase 2 clinical trial during the year ended December 31, 2025 compared to the same period in 2024.

The increase in manufacturing costs of $16.4 million was primarily attributable to an increase in CMO costs for the development of Phase 3 clinical material, partially offset by a decrease in CMO costs for the development of Phase 2 clinical material during the year ended December 31, 2025, compared to the same period in 2024. The increase in personnel expenses of $8.4 million was primarily due to increased headcount in our research and development functions. Personnel expenses for the years ended December 31, 2025 and 2024 included stock-based compensation expense of $2.9 million and $1.2 million, respectively. The increase of $0.9 million in professional fees was related to consulting services to support our verekitug program.

We begin to separately track program expenses at development candidate nomination. Through December 31, 2025, we have incurred approximately $98.7 million, $37.7 million and $21.5 million in direct external expenses for the development of verekitug for severe asthma, COPD and CRSwNP, respectively, since their development candidate nominations.

General and administrative expenses

Year Ended December 31,

(in thousands)

General and administrative expenses were $26.4 million for the year ended December 31, 2025 compared to $17.2 million for the year ended December 31, 2024. The increase of $9.2 million was primarily driven by an increase in personnel expenses of $4.3 million due to increased headcount in our general and administrative functions. Personnel expenses for the years ended December 31, 2025 and 2024 included stock-based compensation expense of $7.5 million and $4.8 million, respectively. Additionally, there was an increase of $2.4 million in professional fees primarily due to increased market research, recruiting, legal and consulting costs. Other expenses increased by $2.5 million primarily due to an increase in corporate insurance, taxes and occupancy costs.

Other income (expense)

Change in fair value of preferred stock tranche right liability

We recorded other income for the change in the fair value of the preferred stock tranche right liability of $2.9 million for the year ended December 31, 2024 related to the Series B Preferred Stock tranche right liability, for which there was no comparable income during the year ended December 31, 2025 as the Series B tranche right liability was settled in April 2024. The change in fair value of the Series B Preferred Stock tranche right liability was due to changes in the assumptions used in the valuation model during the period, including the estimated fair value of the Series B Preferred Stock, volatility and estimated time to the tranche closing.

Interest income

Interest income was $16.9 million and $12.1 million for the years ended December 31, 2025 and 2024, respectively, representing an increase of $4.8 million. The increase in interest income was due to increased balances in our money market funds, U.S. treasury bills and U.S. government agency bonds held during the year ended December 31, 2025, as compared to the year ended December 31, 2024.

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Liquidity and capital resources

Since our inception, we have incurred significant operating losses. We have not yet commercialized verekitug and we do not expect to generate revenue from product sales of verekitug for the next several years, if at all. To date, we have funded our operations primarily with the sale of our redeemable convertible preferred stock and the proceeds from our IPO. Through December 31, 2025, we have received gross proceeds of $400.0 million from the issuance and sale of our redeemable convertible preferred stock and $268.8 million in net proceeds from our IPO. As of December 31, 2025, we had cash, cash equivalents and short-term investments of $341.5 million.

Cash flows

The following table summarizes our sources and uses of cash for each of the periods presented:

Year Ended December 31,

(in thousands)

Net cash used in operating activities $ (133,275 ) $ (59,172 )

Net cash used in investing activities (93,480 ) (59,485 )

Net cash provided by financing activities 2,441 418,910

Operating activities

During the year ended December 31, 2025, operating activities used $133.3 million of cash, resulting primarily from our net loss of $143.4 million and non-cash amortization of premiums and accretion of discounts on short-term investments of $1.5 million, partially offset by non-cash stock-based compensation expense of $10.3 million and changes in operating assets and liabilities of $0.6 million. Net cash provided by changes in operating assets and liabilities was primarily driven by a $4.0 million increase in accrued expenses and other current liabilities, partially offset by a $1.5 million increase in prepaid expenses and other current assets due to upfront payments to CROs for activities associated with our COPD Phase 2 trial and our Phase 2 LTE study in patients with severe asthma, a $1.3 million decrease in accounts payable and a $0.6 million decrease in operating lease liabilities.

During the year ended December 31, 2024, operating activities used $59.2 million of cash, resulting primarily from our net loss of $62.8 million, non-cash changes in fair value of the preferred stock tranche right liability of $2.9 million and non-cash amortization of premiums and accretion of discounts on short-term investments of $1.7 million, partially offset by changes in operating assets and liabilities of $1.9 million and non-cash stock-based compensation expense of $6.0 million. Net cash provided by changes in operating assets and liabilities was primarily driven by a $2.0 million increase in accounts payable and a $1.5 million increase in accrued expenses and other current liabilities, partially offset by a $1.0 million increase in prepaid expenses and other current assets and a $0.5 million increase in accounts receivable. The increase in accounts receivable resulted primarily from the timing of revenue recognition compared to the timing of payments from Maruho for qualifying reimbursable expenses related to the Maruho License Agreement.

For all periods presented, changes in prepaid expenses and other assets, accounts payable and accrued expenses and other current liabilities not described above were generally due to the growth in our business, the advancement of our clinical programs, and the timing of vendor invoicing and payments.

Investing activities

During the year ended December 31, 2025, net cash used in investing activities was $93.5 million, consisting primarily of purchases of short-term investments of $385.9 million, net of maturities of short-term investments of $292.6 million.

During the year ended December 31, 2024, net cash used in investing activities was $59.5 million, consisting primarily of purchases of short-term investments of $290.6 million, net of maturities of short-term investments of $231.6 million and purchases of property and equipment of $0.5 million.

Financing activities

During the year ended December 31, 2025, net cash provided by financing activities was $2.4 million, consisting primarily of proceeds from the exercise of stock options.

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During the year ended December 31, 2024, net cash provided by financing activities was $418.9 million, consisting of $268.8 million in net proceeds from our IPO after deducting underwriters discounts and commissions, and offering costs, $149.9 million in net proceeds from the issuance of Series B Preferred Stock and $0.2 million in proceeds from the exercise of stock options.

Funding requirements

We expect our research and development and general and administrative expenses and our operating losses will increase in the future as we advance verekitug through clinical trials and any potential future product candidates that we may develop through preclinical studies and clinical trials, in pursuit of regulatory approval. Due to the numerous risks and uncertainties associated with research, development and commercialization of product candidates, changes in the outcome of any factors with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. In addition, we expect to incur increased expenses associated with operating as a public company. Our future capital requirements, both short- and long-term, will depend on a variety of factors, including, but not limited to:

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the rate of progress in the development of verekitug and our potential future product candidates, if any;

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the scope, progress, results and costs of non-clinical studies, preclinical development, laboratory testing and clinical trials for verekitug and any potential future product candidates and associated development programs;

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the number and scope of preclinical studies and clinical trials that we pursue;

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the costs, timing, and outcomes of seeking and obtaining approvals by the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more preclinical studies or clinical trials than those that we currently expect or for such authorities to change their requirements on studies that had previously been agreed to;

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our ability to establish licensing or collaboration agreements or other strategic agreements;

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the achievement of milestones or other developments under any licensing or collaboration agreements;

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the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under any license or collaboration agreements;

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the costs to establish, maintain, expand, enforce, and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing any patents or other intellectual property rights;

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the costs associated with successfully defending against any claims by third parties that we have infringed, misappropriated or otherwise violated any intellectual property of any such third party;

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the costs of acquiring, licensing, or investing in additional businesses, products, product candidates, and technologies that we may identify;

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the costs to manufacture or to have manufactured sufficient, reliable, timely, and affordable supply of materials including commercial-grade product formulations that can be used in clinical trials and for commercial launch;

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the costs of commercializing product candidates, if approved, whether alone or in collaboration with others;

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

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the costs of building or contracting sales, marketing, and/or distribution capabilities, systems, and internal infrastructure for any product candidate that receives marketing approval;

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the impact of competitors’ product candidates and technological advances and other market developments;

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the expenses needed to attract and retain skilled personnel; and

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the size of the markets and degree of market acceptance of any product candidates in territories in which we receive regulatory approval, including product pricing, product coverage, and the adequacy of reimbursement by third-party payors.

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Our business plans may change in the future and we will continue to require additional capital to meet the needs of our operating expenses. See the section titled “Risk factors—Risks related to our limited operating history, financial condition and need for additional capital” included elsewhere in this Annual Report.

We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our operating expenses and capital expenditure requirements through 2027. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we would be required to delay, scale back or discontinue our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual obligations and other commitments

Asset acquisition from Astellas and related letter agreement with Astellas and Regeneron

In October 2021, we entered into the Astellas Asset Purchase Agreement with Astellas, and concurrently entered into the Regeneron Letter Agreement with Astellas and Regeneron.

Under the Regeneron Letter Agreement, Astellas assigned and transferred to us and we assumed and accepted certain of Astellas’ surviving rights and obligations under the Terminated Regeneron License Agreement. By assuming and accepting Astellas’ surviving obligations under the Terminated Regeneron License Agreement, we are required to pay Regeneron mid-single-digit percentage royalties on aggregate worldwide net sales of a Royalty Product during the royalty term.

The royalties are determined on a product-by-product and country-by-country basis and expire on the later of (i) a specified number of years after the launch of a given Royalty Product in a given country and (ii) the expiration of the last valid claim of royalty bearing company patent rights claiming or covering such Royalty Product in such country.

To date, we have not made any royalty payments to Regeneron under the Regeneron Letter Agreement.

License agreement with Lonza

As consideration for the rights and licenses granted to us under the Lonza License Agreement, we agreed to pay Lonza certain royalties and annual payments, both payable in Swiss francs, in respect of the manufacturing and sale of the Compound, such amounts to be determined by the party manufacturing the Compound, and range from no annual payment to up to a mid-six figure annual payment, and a less-than-one percent to a low-single-digit percentage royalty on net sales of the Compound. In accordance with the Lonza License Agreement, we entered into a sublicense with Wuxi Biologics (Hong Kong) Limited to manufacture the Compound, requiring us to pay a mid-six-figure annual fee to Lonza pursuant to this provision.

Any royalties due under the Lonza License Agreement are payable on a country-by-country basis until ten years from the first commercial sale of the Compound in that particular country.

During the years ended December 31, 2025 and 2024, we did not make any royalty payments to Lonza under the Lonza License Agreement. The Lonza agreement continues for an indefinite period of time unless otherwise terminated. We have the right to terminate the Lonza License Agreement at any time by providing prior written notice to Lonza.

During the years ended December 31, 2025 and 2024, we made an annual payment to Lonza in the amount of $0.5 million pursuant to the Lonza License Agreement. These payments were recognized as research and development expense in the consolidated statements of operations and comprehensive loss.

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Lease agreement

In July 2024, we entered into a three-year agreement for office space located at 890 Winter Street in Waltham, Massachusetts. We began paying monthly rent starting one month after lease commencement. Initial base rent was approximately $0.7 million for the first year and approximately $0.8 million for the second and third year. The lease commenced in September 2024.

Research and development

We enter into contracts in the normal course of business with CROs and investigator sites that conduct clinical trials on our behalf, CMOs that manufacture product candidates for use in our preclinical studies and clinical trials, and third-party vendors, including CROs, that conduct research and preclinical studies on our behalf. Prepayments under these arrangements can generally be repurposed or the services themselves cancelable upon prior written notice, though cancellation fees are likely. Payments due upon cancellation consist only of payments for services provided and expenses incurred up to the date of cancellation.

Critical accounting estimates and significant judgments

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and revenues and expenses that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

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

Prepaid and accrued research and development expenses

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

•

expenses incurred under agreements with third parties, including CROs and investigative sites that conduct research, preclinical studies and clinical trials on our behalf, and in connection with the Maruho License Agreement;

•

expenses incurred under agreements with third parties, including CMOs, that develop and manufacture our product candidate for use in our preclinical studies and clinical trials; and

•

other providers and vendors in connection with research and development activities.

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 multiple CROs, investigative sites, CMOs, and third-party vendors that conduct research, preclinical studies, and conduct 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, enrollment of patients, number of sites activated, 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, we adjust the accrual or amount of prepaid expense accordingly. Although

119

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 as 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.

Stock-based compensation

We measure stock-based awards granted to employees, directors, and non-employee service providers based on their fair value on the date of the grant and recognize compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. 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 was legally vested. In March and April 2024, we granted awards with performance-based conditions to our Chief Executive Officer and Chief Financial Officer. Upon achievement of the performance condition, in April 2024, the stock-based compensation for our performance-based stock options was solely subject to continued service until the fourth anniversary of the issuance of Series B Preferred Stock to settle the Series B tranche right.

Prior to our IPO in October 2024, there was no public market for our common stock. As a result, prior to our IPO, the estimated fair value of our common stock was determined by our board of directors as of the date of each option grant, with the input from management, considering our more recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believe were relevant and which may have changed from the date of the most recent valuation through the date of grant. Following our IPO, the fair value of our common stock is determined based on the quoted market price of our common stock.

Recently issued and adopted accounting pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements included elsewhere in this Annual Report.

Emerging growth company and smaller reporting company status

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different effective dates for public and private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until the earlier of the date that we (i) are no longer an emerging growth company or (ii) irrevocably elect to “opt out” of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for non-public companies.

We are also a “smaller reporting company,” as defined in the Securities Exchange Act of 1934, as amended. We may continue to be a smaller reporting company if either (i) the market value of our common stock and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our common stock and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

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

As a smaller reporting company, we are not required to provide this information.

Item 8. Financial Statements and Supplementary Data.

The financial statements required to be filed pursuant to this Item 8 are included in this Annual Report on Form 10-K (this “Annual Report”) beginning on page F-1. An index of those financial statements is found in Item 15, Exhibits and Financial Statement Schedules, of this Annual Report.

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

None.

Item 9A. Controls and Procedures.

Management's evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. As required by Rule 13a-15(b) or Rule 15d-15(b) promulgated by the SEC under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial and Operating Officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K (this “Annual Report”). Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report at the reasonable assurance level.

Management’s annual report on internal controls over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles (“GAAP”). Our internal control over financial reporting includes those policies and procedures that:

•

pertain to the maintenance of records that, in reasonable detail, accurately, and fairly reflect our transactions and dispositions of our assets;

•

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its 2013 Internal Control - Integrated Framework. Based on this assessment, our management has concluded that, as of December 31, 2025, our internal control over financial reporting is effective based on those criteria.

Our independent registered public accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

(a) None.

(b) During the quarter ended December 31, 2025, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408 of Regulation S-K.

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

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2025.

Item 11. Executive Compensation.

The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2025.

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

The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2025.

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

The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2025.

Item 14. Principal Accounting Fees and Services.

Our independent public accounting firm is PricewaterhouseCoopers LLP, Boston, Massachusetts, PCAOB Auditor ID 238.

The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2025.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(1)

Financial Statements.

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

(2)

Financial Statement Schedules.

Certain schedules are omitted because they are not applicable, or are not required by smaller reporting companies.

(3)

Exhibits.

ExhibitNumber Description

10.7#* Amended and Restated Non-Employee Director Compensation Policy.

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19.1* Upstream Bio, Inc. Insider Trading Policy

24.1* Power of attorney (included on signature page).

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

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

* Filed herewith.

** The certifications furnished in Exhibit 32.1 hereto are deemed to be furnished with this Annual Report on Form 10-K and will not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

# Indicates a management contract or compensatory plan, contract or arrangement.

+ Certain exhibits and schedules to these agreements have been omitted pursuant to Item 601(a)(5) and (6) of Regulation S-K. The registrant will furnish copies of any of the exhibits and schedules to the Securities and Exchange Commission upon request.

† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Item 601(b)(10) of Regulation S-K.

Item 16. Form 10-K Summary.

None.

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SIGNATURES

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

UPSTREAM BIO, INC.

Date: March 26, 2026 By: /s/ E. Rand Sutherland

Name: E. Rand Sutherland, M.D.

Title: Chief Executive Officer

POWER OF ATTORNEY

Each individual whose signature appears below hereby constitutes and appoints each of E. Rand Sutherland, M.D. and Michael Paul Gray, M.B.A. as such person’s true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person in such person’s name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that any said attorney-in-fact and agent, or any substitute or substitutes of any of them, may lawfully do or cause to be done by virtue hereof.

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

Name Title Date

/s/ Daniella BeckmanDaniella Beckman Director March 26, 2026

/s/ Erez ChimovitsErez Chimovits, M.B.A., M.Sc. Director March 26, 2026

/s/ H. Edward Fleming, Jr.H. Edward Fleming, Jr., M.D. Director March 26, 2026

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 238) F-2

Consolidated Balance Sheets as of December 31, 2025 and 2024 F-3

Notes to Consolidated Financial Statements F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Upstream Bio, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Upstream Bio, Inc. and its subsidiary (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholder's equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

March 26, 2026

We have served as the Company’s auditor since 2022.

F-2

Upstream Bio, Inc.

Consolidated balance sheets

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

December 31, December 31,

Assets

Current assets:

Prepaid expenses and other current assets 9,620 8,096

Property and equipment, net 559 582

Operating lease right-of-use assets 1,222 1,783

Liabilities and Stockholders’ Equity

Current liabilities:

Accrued expenses and other current liabilities 10,006 5,992

Operating lease liabilities, current portion 720 704

Operating lease liabilities, net of current portion 549 1,130

Commitments and contingencies (Note 13)

Stockholders’ equity:

Accumulated other comprehensive income (loss) 530 (25 )

Total liabilities and stockholders’ equity $ 353,772 $ 481,719

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

F-3

Upstream Bio, Inc.

Consolidated statements of operations and comprehensive loss

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

Year Ended December 31,

Operating expenses:

Other income (expense):

Change in fair value of preferred stock tranche right liability — 2,859

Other expense, net (15 ) (24 )

Redeemable convertible preferred stock cumulative dividends — (13,589 )

Net loss attributable to common stockholders $ (143,443 ) $ (76,395 )

Comprehensive loss:

Unrealized gain (loss) on investments, net of tax 555 (46 )

Total other comprehensive income (loss) 555 (46 )

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

F-4

Upstream Bio, Inc.

Consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit)

(Amounts in thousands, except share amounts)

Shares Amount Shares Amount Capital Deficit Income (Loss) Equity (Deficit)

Exercise of stock options, net of tax withholding — — 39,770 — 159 — — 159

Stock-based compensation expense — — — — 6,004 — — 6,004

Exercise of stock options, net of tax withholding — — 608,155 1 2,278 — — 2,279

Stock-based compensation expense — — — — 10,332 — — 10,332

Unrealized gain on available-for-sale securities, net of tax — — — — — — 555 555

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

F-5

Upstream Bio, Inc.

Consolidated statements of cash flows

(Amounts in thousands)

Year Ended December 31,

Cash flows from operating activities:

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

Depreciation and amortization expense 188 89

Change in fair value of preferred stock tranche right liability — (2,859 )

Changes in operating assets and liabilities:

Accounts receivable (55 ) (515 )

Prepaid expenses and other assets (1,524 ) (1,008 )

Accrued expenses and other current liabilities 4,014 1,512

Operating lease liabilities (565 ) (133 )

Net cash used in operating activities (133,275 ) (59,172 )

Cash flows from investing activities:

Purchases of equipment (165 ) (511 )

Net cash used in investing activities (93,480 ) (59,485 )

Cash flows from financing activities:

Payments of initial public offering costs (34 ) (3,896 )

Proceeds from exercises of stock options 2,279 159

Proceeds from issuance of common stock under employee stock purchase plan 196 —

Net cash provided by financing activities 2,441 418,910

Cash, cash equivalents and restricted cash at beginning of period 326,086 25,833

Cash, cash equivalents and restricted cash at end of period $ 101,772 $ 326,086

Cash, cash equivalents and restricted cash at end of period:

Supplemental cash flow information:

Supplemental disclosure of non-cash investing and financing activities:

Settlement of Series B preferred stock tranche right liability $ — $ 15

Initial public offering costs included in accounts payable $ — $ 34

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

F-6

Upstream Bio, Inc.

Notes to consolidated financial statements

1. Nature of the business and basis of presentation

Upstream Bio, Inc. was incorporated in April 2021, under the laws of the State of Delaware, and along with its consolidated subsidiary (collectively, the “Company” or “Upstream”), is focused on developing treatments for inflammatory diseases, with an initial focus on severe respiratory disorders. Since its inception, the Company has devoted substantially all of its efforts to raising capital and incurring research and development expenses related to advancing verekitug, a clinical-stage monoclonal antibody that targets and inhibits the Thymic Stromal Lymphopoietin receptor.

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, the successful development of verekitug, 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 verekitug. 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.

Stock split

On October 4, 2024, the Company effected a 1.049-for-one stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios of each series of the Company’s preferred stock (Note 8). Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this stock split and adjustment of the preferred stock conversion ratios.

Liquidity

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance of these consolidated financial statements.

The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has historically financed its operations principally through the issuance and sale of redeemable convertible preferred stock and the proceeds from its initial public offering (“IPO”), which was completed in October 2024. In connection with its IPO, the Company issued and sold 17,250,000 shares of common stock, including 2,250,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a price to the public of $17.00 per share. As a result of the IPO, the Company received $268.8 million in net proceeds, after deducting $20.5 million in underwriting discounts and commissions, and $3.9 million in other offering costs. The Company has incurred recurring losses and negative cash flows from operations since its inception and expects to continue to incur losses and negative cash flows for the foreseeable future as it continues the research and development of verekitug. The Company incurred net losses of $143.4 million and $62.8 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, the Company had an accumulated deficit of $334.2 million.

F-7

Upstream Bio, Inc.

Notes to consolidated financial statements

The Company expects its cash, cash equivalents and short-term investments will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the date of issuance of these consolidated financial statements. The Company will need additional financing to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant product revenue, if ever, the Company expects to fund its operations through equity offerings or debt financings, credit or loan facilities, potentially other capital resources, or a combination of one or more of these funding sources. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and its ability to pursue its business strategies. If adequate funds are not available to the Company, the Company may be required to delay, reduce or eliminate clinical programs, obtain funds through arrangements with collaborators on terms unfavorable to the Company or pursue merger or acquisition strategies. There can be no assurances the Company will be able to obtain additional funding. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

Basis of presentation

The accompanying consolidated financial statements reflect the operations of the Company. Intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

2. Summary of Significant Accounting Policies

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities 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 manufacturing organizations (“CMOs”) and other third-party vendors, the valuation of the Company’s common stock prior to the Company’s IPO in October 2024 and stock-based awards and the valuation of the preferred stock tranche right liabilities. Changes in estimates are recorded in the period in which they become known.

Concentration of credit risk and of significant suppliers

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and short-term investments. The Company deposits its cash and cash equivalents in financial institutions in amounts that may exceed federally insured limits, and 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 Company’s short-term investments consist of U.S. treasury securities, government agency bonds and corporate debt securities which the Company believes represent minimal credit risk.

The Company is dependent on third-party manufacturers to supply products for research and development activities related to verekitug, including preclinical and clinical studies and testing. In particular, the Company relies and expects to continue to rely on a small number of manufacturers for the supply of verekitug. The Company’s preclinical and clinical studies and testing could be adversely affected by a significant interruption in the supply.

Foreign currency gains and losses

The functional currency and the reporting currency of the Company is the U.S. dollar. Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the functional currency are included as foreign exchange gains and

F-8

Upstream Bio, Inc.

Notes to consolidated financial statements

losses in other expense, net in the consolidated statements of operations and comprehensive loss. The Company has not recognized material foreign currency transaction gains or losses during the years ended December 31, 2025 and 2024.

Cash and cash equivalents

The Company considers all short-term, highly liquid investments, with an original maturity of three months or less, to be cash equivalents, and as of December 31, 2025 and 2024, includes amounts held in money market funds in the amount of $86.0 million and $321.0 million, respectively and in U.S. treasury securities of $15.0 million and $4.2 million, respectively.

Restricted cash

Restricted cash consisted of a letter of credit totaling $0.2 million as of December 31, 2025 and 2024, that is required to be maintained in connection with the Company's lease arrangements. The letter of credit is in the name of the Company's landlord and is required to fulfill lease requirements in the event the Company should default on its lease obligations. As of December 31, 2025 and 2024, the Company classified its restricted cash as non-current assets on the consolidated balance sheets based on the release date of the restriction.

Short-term investments

Available-for-sale securities consist of investments with original maturities greater than 90 days at acquisition date. The Company classifies any investments with maturities beyond one year as short term, based on their highly liquid nature and because such available-for-sale securities represent the investment of cash that is available for current operations.

The Company’s debt security investments are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains and losses and declines in fair value due to credit-related factors are based on the specific identification method and are included as other expense, net in the consolidated statements of operations and comprehensive loss. The Company recorded interest income on available-for-sale investments of $16.9 million and $12.1 million during the years ended December 31, 2025 and 2024, respectively, which is classified as interest income in the consolidated statements of operations and comprehensive loss.

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 in other expense, net. 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 Company also evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the severity of the impairment, any changes in interest rates, changes to the underlying credit ratings and forecasted recovery, among other factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in other expense, net. 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. There have been no impairment or credit losses recognized during any of the periods presented.

Fair value measurements

Certain assets and liabilities of the Company are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1 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.

F-9

Upstream Bio, Inc.

Notes to consolidated financial statements

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 carrying values of the Company’s accounts receivables, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities. The Company’s cash equivalents, short-term investments and the preferred stock tranche right liability are carried at fair value (Note 3).

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

Lab equipment 5 years

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 economic 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. Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service.

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 if an arrangement is or contains a lease, as defined by ASU 2016-02, Leases (Topic 842) (“ASC 842”), at the lease inception date 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 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.

F-10

Upstream Bio, Inc.

Notes to consolidated financial statements

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 leases require 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 asset, 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 agreements do 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 the impact of collateral.

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.

Classification and accretion of redeemable convertible preferred stock

The holders of Preferred Stock (as defined in Note 8) have certain redemption rights in the event of a deemed liquidation event that, in certain situations, are not solely within the control of the Company and would call for the redemption of the then outstanding Preferred Stock (Note 8). Therefore, the Preferred Stock is classified as mezzanine equity outside of stockholders’ equity on the consolidated balance sheets. The Company recorded the Preferred Stock at fair value upon issuance, net of tranche right liabilities (Note 8) and associated issuance costs. The net carrying value of redeemable convertible preferred stock were accreted to their redemption values through a charge to additional paid-in capital or accumulated deficit over the period from date of issuance to the earliest date on which the holders could, at their option, elect to redeem their shares. In connection with the IPO, all outstanding shares of convertible preferred stock converted into an aggregate of 33,321,149 shares of the Company’s common stock.

Preferred stock tranche right liabilities

The purchase agreements for the Company’s Preferred Stock provide the Company an obligation to issue additional Preferred Stock in subsequent closings upon the satisfaction of certain conditions (the “preferred stock tranche rights”) (Note 8).

The Company classified such preferred stock tranche rights as liabilities on its consolidated balance sheets (the “preferred stock tranche right liabilities”) as each preferred stock tranche right was determined to be a freestanding financial instrument that may require the Company to transfer assets to settle its obligation upon events outside of its control. The preferred stock tranche right liabilities were initially recorded at fair value upon the issuance date and are subsequently remeasured to fair value at each reporting date and immediately prior to being settled. Changes in fair value of the preferred stock tranche right liabilities are recognized as a component of other income, net in the consolidated statements of operations and comprehensive loss. Upon settlement of the tranche rights, the Company derecognized the related liability, and stopped recognizing changes in the fair value of the preferred stock tranche right liability. Any issuance costs allocated to the preferred stock tranche right liabilities were immediately expensed.

Revenue recognition

The Company enters into license arrangements, pursuant to which it may provide research and development services for third parties.

F-11

Upstream Bio, Inc.

Notes to consolidated financial statements

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, Revenue from Contracts with Customers, (“ASC 606”), the Company performs the following five steps: (i) identify the promised goods or services in the contract; (ii) determine whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measure the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue when, or as, the Company satisfies each performance obligation. At contract inception, the Company assesses whether the goods or services promised within each contract are a separate performance obligation. Goods and services that are determined not to be distinct are combined with other promised goods and services until a distinct bundle is identified. The Company then allocates the transaction price, the amount of consideration the Company expects to be entitled to from a customer in exchange for the promised goods or services, to each performance obligation and recognizes the associated revenue when each performance obligation is satisfied.

In determining the appropriate amount of revenue to be recognized, the Company uses judgment to determine: (a) the number of performance obligations; (b) the transaction price; (c) the stand-alone selling price for each performance obligation identified in the contract; and (d) the contract term and pattern of satisfaction of the performance obligations. The Company uses judgment to determine whether milestones or other variable consideration should be included in the transaction price. The transaction price is allocated to the identified performance obligations on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At contract inception, the Company estimates the total costs required to satisfy the performance obligation and subsequently updates the estimate at each reporting period. Accordingly, the Company’s estimates may change in the future and those changes could result in a change in amounts of revenue recognized and could be material.

During the years ended December 31, 2025 and 2024, the Company generated revenue from a research and development arrangement with Maruho Co., Ltd (“Maruho”), which is accounted for under ASC 606. Pursuant to the agreement, the Company provides to Maruho research and development services related to verekitug in Japan, and Maruho reimburses the Company for these costs incurred in performing the research and development services (Note 15).

The Company records accounts receivable when its right to receive consideration is solely based on the passage of time. Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated balance sheets. Amounts expected to be recognized as revenue within one year following the balance sheet date are classified as current deferred revenue. Amounts not expected to be recognized as revenue within one year following the balance sheet date are classified as deferred revenue, net of current portion. Payment terms and conditions generally require payment within 60 days of invoicing.

Segment information

Operating segments are defined as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM, its Chief Executive Officer, views the Company’s operations and manages its business on a consolidated basis as a single operating segment, which is the business of developing treatments for inflammatory diseases, with an initial focus on severe respiratory disorders. Revenue is generated exclusively from certain transactions with Maruho located in Japan and all assets are held in the United States (Note 18).

Research and development expenses

Research and development expenses are expensed as incurred. Research and development expenses include salaries and benefits, stock-based compensation expense, licensed technology, external costs of third-party vendors that conduct research and development activity on behalf of the Company, and other operational costs related to the Company’s research and development activities including costs related to a research and development arrangement with Maruho.

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 CMOs that manufacture the Company’s product candidate for use in preclinical 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 the accrued expenses and includes these costs in accrued liabilities in the consolidated balance sheets and within research and development expense in the

F-12

Upstream Bio, Inc.

Notes to consolidated financial statements

consolidated statements of operations and comprehensive loss based on facts and circumstances known to the Company at that time. These 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, then the Company adjusts the amount of the accrued expense or the prepaid expense accordingly.

General and administrative expenses

General and administrative expenses consist primarily of salaries and benefits, including stock-based compensation expense; 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 and trademarks

Costs to secure, defend and maintain patents, including those in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Stock-based compensation expense

The Company measures all stock-based awards granted to employees, directors, and non-employee service providers based on 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 recognizes expense related to stock options that contain performance conditions only when it is considered probable that the performance condition will be achieved. Stock-based compensation expense for stock options with performance conditions is recognized using graded vesting. 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.

Comprehensive loss

Comprehensive 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 marketable securities held as available for sale. For the years ended December 31, 2025 and 2024, comprehensive loss includes net loss and unrealized gains (losses) on short-term investments.

Net loss per share

The Company calculated basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for companies with participating securities. The Company’s Preferred Stock is considered to be a participating security as the holders are entitled to receive dividends at a dividend rate payable 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 is no

F-13

Upstream Bio, Inc.

Notes to consolidated financial statements

allocation required under the two-class method during periods of loss since the participating securities do not have a contractual obligation to share in the losses of the Company.

Under the two-class method, basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to common stockholders is computed by (i) adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities and (ii) dividing the diluted net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares. For purposes of this calculation, Preferred Stock and stock options to purchase common stock are considered potential dilutive common shares.

The Company has generated a net loss for each of the periods presented. Accordingly, basic and diluted net loss per share attributable to common stockholders are the same because the inclusion of the potentially dilutive securities would be anti-dilutive.

Income taxes

The Company accounts for income taxes under 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.

Recently adopted accounting pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 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. An entity has the option to adopt this ASU prospectively or retrospectively. 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 condition.

Recently issued accounting pronouncements not yet adopted

F-14

Upstream Bio, Inc.

Notes to consolidated financial statements

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

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and related disclosures.

3. 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 at December 31, 2025

Level 1 Level 2 Level 3 Total

Assets:

Cash equivalents:

Short-term investments:

Fair Value Measurements at December 31, 2024

Level 1 Level 2 Level 3 Total

Assets:

Cash equivalents:

Short-term investments:

There were no transfers between Level 1, Level 2 and Level 3 during the years ended December 31, 2025 and 2024.

F-15

Upstream Bio, Inc.

Notes to consolidated financial statements

The Company classifies its U.S. treasury securities, corporate debt securities and government agency bonds as short-term based on each instrument’s availability for use in current operations. The fair value of the Company’s U.S. treasury securities, corporate debt securities and government agency bonds are classified as Level 2 because they are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency.

Short-term investments consisted of the following (in thousands):

AmortizedCost Gross UnrealizedGains Gross UnrealizedLosses FairValue

Short-term investments:

AmortizedCost Gross UnrealizedGains Gross UnrealizedLosses FairValue

Short-term investments:

The contractual maturities of the Company’s short-term investments in available-for-sale securities held were as follows (in thousands):

Valuation of preferred stock tranche right liabilities

The fair value of the preferred stock tranche right liability in the table below is composed of the fair value of the obligation to issue Series B redeemable convertible preferred stock (“Series B Preferred Stock”) (Note 8). The fair value of the preferred stock tranche right liability was based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy.

The fair value of the Series B Preferred Stock tranche right liability was determined using an option pricing model as it represents an option for the Series B Option Shares (as defined in Note 8). The valuation considered as inputs the estimated fair value of the Series B Preferred Stock as of each valuation date, the risk-free interest rate, volatility, expected dividends, and estimated time to the tranche closing.

The most significant assumption in the valuation model impacting the fair value of the preferred stock tranche right liability is the fair value of the Company’s Series B Preferred Stock as of each measurement date. The Company determined the fair value per share of the underlying Series B Preferred Stock by taking into consideration the most recent sales of its Series B Preferred Stock, results obtained from third-party valuations and additional factors the Company deemed relevant. In April 2024, upon satisfaction of certain conditions, the Company issued and sold 8,823,523 shares of Series B Preferred Stock at a price of $17.00 per share, which resulted in the settlement of the associated Series B preferred stock tranche right liability. The fair value of Series B Preferred Stock was $17.002 per share upon the closing.

F-16

Upstream Bio, Inc.

Notes to consolidated financial statements

The following table presents a roll-forward of the fair value of the Series B preferred stock tranche right liability during the year ended December 31, 2024, for which fair value was determined using Level 3 inputs (in thousands):

Series B PreferredStock TrancheRight Liability

Final settlement of Series B preferred stock tranche right liability (15 )

Fair value at December 31, 2024 $ —

4. Prepaid expenses and other current assets

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

December 31, December 31,

Prepaid research and development expense $ 6,204 $ 6,125

Prepaid employee-related costs 155 58

5. Property and equipment, net

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

December 31, December 31,

Leasehold improvements 87 71

Lab Equipment 55 —

Less: Accumulated depreciation and amortization (344 ) (156 )

Property and equipment, net $ 559 $ 582

Depreciation and amortization expense related to property and equipment, net was $0.2 million and less than $0.1 million for of the years ended December 31, 2025 and 2024, respectively.

6. Accrued expenses and other current liabilities

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

December 31, December 31,

Accrued external research and development expenses $ 5,057 $ 2,807

Accrued employee compensation and benefits 4,192 2,697

Accrued consultant and professional fees 757 488

F-17

Upstream Bio, Inc.

Notes to consolidated financial statements

7. Leases

As of December 31, 2025, the Company was a party to a lease related to commercial real estate under a non-cancelable lease term and a short-term lease related to commercial real estate.

In July 2024, the Company entered into an operating lease agreement for office space located at 890 Winter Street in Waltham, Massachusetts. The lease commenced in September 2024 and the Company began paying monthly rent starting one month after the lease commenced. The Company occupies approximately 16,801 square feet of space under a three-year agreement expiring in October 2027. Initial base rent was approximately $0.7 million for the first year and approximately $0.8 million for the second and third year.

During the year ended December 31, 2024, the Company had an operating lease for office space at 460 Totten Pond Road, Waltham, Massachusetts. In July 2024, the Company provided notice of termination. This notice became effective on October 9, 2024, after which the Company’s rights and obligations under this lease ceased. The lease expired on June 30, 2024, after which the Company continued to pay rent on a month-to-month basis until October 9, 2024. Under its lease, the Company pays a proportional share of operating expenses. Such operating expenses are subject to annual adjustment and are accounted for as variable payments in the period in which they are incurred.

The components of lease cost, which are included in the consolidated statements of operations and comprehensive loss, were as follows (in thousands):