ACRS 10-K & 10-Q changes, risk factors and insider trading

Since inception, we have incurred significant net losses. We incurred net losses of $132.1$64.9 million and $88.5$132.1 million for the years ended December 31, 20242025 and 2023,2024, respectively. As of December 31, 2024,2025, we had an accumulated deficit of $902.9$967.8 million. We have financed our operations over the last several years primarily from sales of equity securities and incurringnon-dilutive indebtedness in the form of loans from commercial lenders.financing.

To become and remain profitable, we must succeed in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates and pursuing strategic alternatives, including identifying and consummating transactions with third-party partners,partners for the further development and/or commercialization of our product candidates, as well as discovering and developing additional product candidates. We are in the early stages of most of these activities. We may never succeed in these activities and, even if we do, may never earn revenue from our product candidates that is significant enough to achieve profitability.

We will require additional capital to develop our product candidates and to support our discovery efforts. Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions caused by a variety of factors including geopolitical tensionstensions, tariff policies, and inflationary pressures. If we are unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of our product candidates, we could be forced to curtail our planned operations.

Until such time, if ever, as we can earn substantial revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings and license and partnership agreements.agreements or other non-dilutive financing. To the extent that we raise additional capital through the sale of equity securities or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock. 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 capital expenditures or declaring dividends.

The successful discovery, development, manufacturing and sale of biologics is a long, expensive and uncertain process.process subject to more complex regulatory requirements than small molecule drugs. There are unique risks and uncertainties with biologics. For example, access to and supply of necessary biological materials, such as cell lines, may be limited and governmental regulations restrict access to and regulate the transport and use of such materials. In addition, the development, manufacturing and sale of biologics is subject to regulations that are often more complex and extensive than the regulations applicable to other pharmaceutical products. Manufacturing biologics, especially in large quantities, is often complex and may require the use of innovative technologies. The types of analytical development data necessary for verifying structural biocomparability when changing manufacturing sites is also more difficult and complex to generate for biologics than for other pharmaceutical products. Such manufacturing also requires facilities specifically designed and validated for this purpose and sophisticated quality assurance and quality control procedures. Biologics are also frequently costly to manufacture because production inputs are derived from living animal or plant material, and some biologics cannot be made synthetically. In addition, the regulatory scrutiny of and landscape for the chemistry, manufacturing and analytical controls information is also considered to be more complex for biologics than other pharmaceutical products. Failure to successfully discover, develop and manufacture our biological product candidates would adversely impact our business and future results of operations.

In addition, discovery programs require substantial technical, financial and human resources. We may not be able to maintain sufficient resources and expertise to discover additional product candidates. It could take years to identify a viable product candidate, and there is a risk that we may never do so. If we are unable to identify successful product candidates for preclinical and clinical development and regulatory approval in a timely matter or at all, we could experience significant delays or an inability to successfully pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates, which could harm our business.

If we are unable to successfully develop our product candidates and to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates, or experience significant delays in doing so, our business will be harmed.

We have invested significant efforts and financial resources in the development of our product candidates and the identification of potential product candidates. Our ability to earn substantial revenue from our product candidates will depend heavily on our ability to successfully develop and pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize these product candidates. The success of any product candidates that we develop will depend on several factors, including:

It is possible that our product candidates currently in development will never obtain marketing approval. If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates, which would harm our business.

Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of our product candidates or pursuingthe strategic alternatives, including identifyingidentification and consummatingconsummation of transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates.

A failure of one or more clinical trials can occur at any stage of testing. For example, in 2023 we announced that zunsemetinib failed to meet the endpoints in Phase 2 trials in rheumatoid arthritis and hidradenitis suppurativa, following which we discontinued further development of our MK2 inhibitor programs in immuno-inflammatory diseases. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their drugs.

Additionally, we may utilize an “open-label” clinical trial design. For example, our current Phase 2a trial of ATI-2138 isin patients with atopic dermatitis was an “open-labelopen label” trial. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge. The results from an open-label trial may not be predictive of future clinical trial results of a product candidate when studied in a controlled environment with a placebo or active control.

We may experience numerous unforeseen events during or as a result of clinical trials that could delay or prevent our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates, including:

If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, our costs will increase, our product candidate development process will be slowed, the commercial prospects of our product candidates will be harmed, and our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates will be delayed. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing approval of our product candidates. If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not favorable or if there are safety concerns, we may not be able to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates, and our potential third-party partners may:

If we experience delays or difficulties in the enrollment of subjects in clinical trials, our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates could be delayed or prevented.

Successful and timely completion of clinical trials will require that we enroll a sufficient number of subjects. Recruiting and retaining patients for clinical trials has become increasingly difficult and expensive, which could delay or prevent completion of our trials. Subject enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population. Trials may be subject to delays as a result of subject enrollment taking longer than anticipated or subject withdrawal, including as a result of factors beyond our control. We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. We cannot predict how successful we will be at enrolling subjects in future clinical trials. Subject enrollment is affected by other factors including:

Our inability to enroll a sufficient number of subjects for clinical trials would result in significant delays and could require us or them to abandon one or more clinical trials altogether. Enrollment delays in these clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing. Furthermore, we rely on and expect to continue to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and we will have limited influence over their performance. Any delays in completing clinical trials would delay or prevent our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates.

Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates, or serious adverse or unacceptable side effects or other unfavorable safety findings may be identified during the nonclinical or clinical development of our product candidates, which could increase our costs or necessitate the abandonment or limitation of the development of our product candidates or prevent or delay our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates.

If our product candidates are associated with side effects in clinical trialstrials, exhibit adverse toxicological findings in nonclinical studies or have characteristics that are unexpected, our costs could increase or we may need to abandon their development or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. The FDA or an IRB may also require that we suspend, discontinue, or limit our clinical trials based on nonclinical or clinical safety information. Such findings could further result in regulatory authorities failing to provide marketing authorization for our product candidates. Many product candidates that initially showed promise in early-stage testing have later been found to cause side effects or exhibit toxicological profiles in animal models that prevented further development of the product candidate.

Before any potential third-party partners can obtain marketing approvals for the commercial sale of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication, and failures can occur at any stage of testing. Our nonclinical studies may yield results that are not predictive of future clinical results or that reveal safety concerns that preclude further development. Clinical trials often fail to demonstrate safety and efficacy of the product candidate studied for the target indication.

Additionally, if we or others identify undesirable side effects or unfavorable nonclinical safety findings caused by our product candidates, a number of potentially significant negative consequences could result, including:

Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize the particular product candidate and could significantly harm our business, results of operations and prospects.

From time to time, we may publicly disclose interim, topline or preliminary data from our clinical trials, which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analysis of all data related to the particular trial. For example, we recently announced interim Phase 1a data for ATI-052. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. In addition, we may report preliminary analyses of only certain endpoints rather than all endpoints. As a result, the interim, topline or preliminary results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim, topline and preliminary data should be viewed with caution until the final data are available. We may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as subject enrollment continues and more subject data become available. Adverse differences between interim, topline or preliminary data and final data could significantly harm our reputation and business prospects. Further, disclosure of interim, topline or preliminary data by us or by our competitors could result in volatility in the price of our common stock.

If the interim, topline or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

As product candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and may also require additional testing, FDA notification or FDA approval. Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates.

We have conducted and may in the future conduct clinical trialsor nonclinical studies for our product candidates outside the United States. The FDA, EMA or comparable foreign regulatory authorities may not accept data from such trials.studies.

We have conducted and may in the future conduct clinical trialsand nonclinical studies for our product candidates outside the United States. In addition, our partners may conduct clinical trialsand nonclinical studies for our product candidates outside of the United States that we or our potential third-party partners may try to leverage to seek marketing approval in the United States. The acceptance of trial data from clinical trialsand nonclinical studies conducted outside the United States or another jurisdiction by the FDA or comparable foreign regulatory authorities may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trialsand nonclinical studies are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless the data are applicable to the U.S. population and U.S. medical practice, the trialsstudies were performed by clinical investigators of recognized competence and pursuant to GCP regulations, and the FDA can validate the data through on-site inspections or other appropriate means. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA, EMA or any comparable foreign regulatory authority will accept data from trialsstudies conducted outside of the United States or the applicable jurisdiction. If the FDA, EMA or any comparable regulatory authority does not accept such data, it would result in the need for additional trials,studies, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our product candidates not receiving approval or clearance for commercialization in the applicable jurisdiction.

In addition, any escalation of political tensions, economic instability, military activity or civil hostilities outside the United States could disrupt our ability to conduct trialsstudies outside of the United States, or delay or adversely affect the timeliness of such trials.studies. This could result in the need for alternative trial sites, which could be costly and time-consuming and delay the clinical development of our product candidates.

Third-party payors determine which prescription drug products they will cover and establish reimbursement levels. Reimbursement by a third-party payor may depend upon a number of factors, including: the third-party payor’s determination that a product is safe, effective, and medically necessary; appropriate for the specific patient; cost-effective; supported by peer-reviewed medical journals or current clinical practice guidelines; and whether there are competitive products, either branded or generic, and the pricing of those products. Many private third-party payors, such as managed care plans, manage access to drug products’ coverage partly to control costs for their plans, and may use drug formularies and medical policies to limit their exposure. Obtaining and maintaining favorable reimbursement can be a time-consuming and expensive process, and our potential third-party partners may not be able to negotiate or continue to negotiate reimbursement or pricing terms for our products which receive commercial approval, with third-party payors at levels that are profitable to us, or at all. Further, coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products which receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

In addition to uncertainties surrounding coverage policies, there are periodic changes to reimbursement. Third-party payors regularly update reimbursement amounts and also from time to time revise the methodologies used to determine reimbursement amounts. Accordingly, these updates could impact the demand for our product candidates, if approved. Our product candidates, if approved, may not be considered cost effective, and government and third-party private health insurance coverage and reimbursement may not be available to patients or sufficient to allow our potential third-party partners to sell our product candidates, if approved, on a competitive and profitable basis. Further, the containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of drugs have been a focus in this effort. For example, theHHS IRAimposes amongrebates otheron things,many (1)Medicare directsPart B and Medicare Part D products to penalize price increases that outpace inflation on an annual basis. HHS has also been empowered to negotiate the price of certain single-source drugs and biologics that have been on the market for at least seven (7) years covered under Medicare, and (2) imposes rebates under Medicare Partas B and Medicare Part D to penalize price increases that outpace inflation. Our results of operations could be adversely affected by the Affordable Care Act, the IRA, and by other health care legislative reforms that may be enacted or adopted in the future, particularly in lightpart of the recentMedicare U.S.Drug PresidentialPrice andNegotiation CongressionalProgram. elections.Each Inyear addition,up increasingto emphasistwenty (20) products will be selected by HHS for the Medicare Drug Price Negotiation Program. Products subject to the Medicare Drug Price Negotiation Program are expected to experience a significant reduction in reimbursement from the Medicare program on manageda careper inunit the United States will continue to put pressure on the pricing of pharmaceutical products.basis. Cost control initiatives could decrease the price that our potential third-party partners could receive for any of our product candidates, if approved, and could adversely affect our profitability. We cannot predict how pending and future health care legislation will impact our business, and any changes in coverage and reimbursement that further restricts coverage of our product candidates could harm our business.

We currently use manufacturers in China to manufacture certain product candidates for use in our clinical trials. For example, we currently rely on WuXi Biologics (Hong Kong) Limited (“WuXi Biologics”) for the production of product necessary to complete our upcoming clinical trial for bosakitug. ThereWe havealso beenrely Congressionalon legislativeWuXi proposals,AppTec such(HongKong) asLimited the(“WuXi billAppTec”, titledand thetogether with WuXi Biologics, “WuXi”) to conduct toxicology studies. The BIOSECURE Act, which would,prohibits, among other things, prohibit U.S. federal funding in connection with biotechnology equipment or services produced or provided by certain named Chinese “biotechnology companies of concern” (which includes WuXi“BCCs”) and loans and grants to, and federal contracts with, any entity that uses biotechnology equipment or services from one of these entities in performance of the government contract, grant, or loan. The legislation would also giveWhile the federalenacted government the authority to name additional “biotechnology companies of concern” that are engaged in research activities with the Chinese government and that pose a risk of U.S. national security. We continue to monitor the statusversion of the BIOSECURE Act,Act does not specifically name companies, it establishes a process for the Office of Management and Budget (“OMB”) to publish a list of BCCs by December 18, 2026. Such BCCs will include entities on the U.S. Department of Defense’s annual List of Chinese Military Companies (“1260H List”) and also entities so designated by OMB through a separate designation process. Companies previously identified in legislative drafts, such as WuXi, remain at risk of being designated as BCCs through this process or by inclusion on the 1260H list. The Act includes a five-year grandfathering provision for existing commercial agreements executed prior to the implementation of the Federal Acquisition Regulation (“FAR”) revisions, which are expected by mid-2028. The implementation of the BIOSECURE Act could materially impact our agreementcurrent and future agreements with WuXi or other Chinese companies.manufacturers. If this or similar legislation is adopted, or additional manufacturers are added to the list of companies of concern, we may need to find replacement manufacturers, which we may not be able to do on a timely basis, the result of which could delay, prevent or impair our ability to timely conduct our clinical trialsWuXi or our other developmentpartners effortsare designated as BCCs, we may be required to transition to alternative manufacturers and adverselyservice affectproviders to maintain eligibility for federal contracts, grants, or clinical trial reimbursements. Such a transition could be time-consuming, resource-intensive, and may require FDA supplemental approvals, potentially causing significant delays or impairments to our business.clinical development timelines and business operations.

We expect to continue to depend on third-party contract manufacturers for the foreseeable future. Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates on a timely and competitive basis.

We intend to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates. If those arrangements are not successful, we may not be able to capitalize on the market potential of these product candidates.

We intend to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates. Our likely partners for any such arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we do enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our partners dedicate to the development or commercialization of our product candidates. Our ability to earn revenue from these arrangements will depend on our partners’ abilities to successfully perform the functions assigned to them in these arrangements.

We may not have access to all information regarding our product candidates that are or may in the future become subject to agreements with partners, including potentially material information about clinical trial design, execution and timing, safety and efficacy, clinical trial results, regulatory affairs, manufacturing, marketing, sales and other areas known by our partners or potential partners. In addition, we have and may in the future have confidentiality obligations under our agreements with such partners. Therefore, our ability to keep our stockholders informed about the status of our product candidates will be limited by the degree to which our partners keep us informed and by the degree to which our partners allow us to disclose information to the public or provide such information to the public themselves. For example, we are relying on CTTQ, our partner in China, to share information about its Phase 2 trials of bosakitug in respiratory diseases. If our partners do not timely inform us about the status of our product candidates that are the subject of the partnership, we may make operational and investment decisions that we would not have made had we been fully informed, which may have an adverse impact on our business, prospects, financial condition and results of operations.

Additionally, in cases where third parties conduct clinical trials using our product candidates through partnership or licensing agreements, we face additional risks related to the conduct and outcome of those trials that are outside of our direct control. For example, issues such as poor data integrity, safety concerns, protocol violations, or failure to meet endpoints in these third-party trials could adversely impact the development timeline and regulatory approval process for those product candidates in other indications or territories, require additional studies, create negative market perception affecting future commercial potential, impact our ability to pursueidentify strategicand alternativesconsummate transactions for such product candidates, or result in increased regulatory scrutiny across our programs.

In addition, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit the ability to stop others from using or commercializing similar or identical technology and product candidates, or limit the duration of the patent protection of our technology and product candidates. Our pendingissued U.S. applicationpatent covering bosakitug,bosakitug ifand issued,methods wouldof expireuse expires in 20402043 and our pending PCTU.S. application covering ATI-052, if issued, would also expire in 2043. Our issued U.S. patentpatents directed to ATI-2138 expiresand inmethods 2039.of Our issued U.S. patent covering lepzacitinib expires in 2038. Our issued U.S. patents covering zunsemetinibuse expire in 2034.2039. We are pursuing additional patent protection for our product candidates, such as additional methods of use, polymorphs and methods of manufacture, that may extend the term of patent protection in select countries. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us or our potential third-party partners with sufficient rights to exclude others from commercializing drugs similar or identical to ours.

Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. For example, we only have issued patents and pending applications in the United States, Europe, Japan and South Korea for our TSLP monoclonal antibodies.antibodies, including bosakitug. We have issued U.S. patents directed to ATI-2138, and pending applications in foreign markets directed to ATI-2138. We currently have a pending PCTapplications applicationin the United States, Europe, Japan, South Korea and other major markets directed to ATI-052 and other TSLP and IL4RIL-4R bispecific antibodies. While we have issued U.S. and Chinese patents directed to lepzacitinib, we do not currently have any patents in other foreign markets; rather, we have pending applications in other foreign markets directed to lepzacitinib. Zunsemetinib is currently covered by patents and applications in the United States, European Union and other foreign markets.

Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be compelled under specified circumstances to grant licenses to third parties. In those countries, we may have limited remedies if patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with potential third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates, and consequently our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Our success depends upon our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with potential third-party partners, to develop, obtain marketing approval for and/or commercialize our product candidates and earn revenue from those partnerships, and for our proprietary technologies to be used without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates and technologies, including interference or derivation proceedings before the USPTO. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our product candidates. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Some of our competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the costs of complex patent litigation longer than we could. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business. In addition, the uncertainties associated with litigation could compromise our ability to compete in the marketplace, including compromising our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs, or pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates.

If any of our product candidates advance through development or are approved by the FDA or foreign regulatory authority, one or more third parties may challenge the current patents, or patents that may issue in the future, within our portfolio covering these product candidates. The challenge may come in the form of a patent office proceeding, such as an inter partes review challenging the validity of the patents, or a district court proceeding such as a paragraph IV litigation arising out of the filing of an ANDA or a patent infringement suit arising out of the filing of an abbreviated biologics license application (“aBLA”). Litigation or other proceedings to enforce or defend intellectual property rights are often very complex in nature, may be expensive and time-consuming, may divert our management's attention from our core business, and may result in unfavorable results that could limit our ability to prevent third parties from competing with our product candidates, if approved. Any such challenge could result in the invalidation of, or render unenforceable, some or all of the relevant patent claims or a finding of non-infringement, which would harm our ability to pursue strategic alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates, and earn revenue from such arrangements. In addition, any such challenge on any divested product could harm our ability to earn revenue from the arrangements for such product.

Our success will largely depend on our ability to obtain and maintain patent and other intellectual property in the United States and other countries with respect to our proprietary technology, product candidates and our target indications. Our pendingissued U.S. applicationpatent covering bosakitug,bosakitug if issued, would expireexpires in 2040.2043. Our issued U.S. patent directed to ATI-2138 expires in 2039. Our pending PCT application covering ATI-052, if issued, would expire in 2043. Our issued U.S. patent covering lepzacitinib expires in 2038. Our issued U.S. patents covering zunsemetinib expire in 2034. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting our product candidates might expire before or shortly after such candidates begin to be commercialized. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents.

Our and our potential third-party partners’ relationshipsoperations withmay third-partysubject payors, health care professionalsus and customerssuch in the United States and elsewhere may be subject,partners, directly or indirectly, to broadly applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security and other health care laws and regulations, and any failure to comply with such laws and regulations could have a material adverse effect on our ability to earn revenue from arrangements with such third-party partners for our product candidates.profitability.

Health care providers, physiciansOur and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any of our product candidates for which marketing approval is obtained. Our potential third-party partners’ arrangements with third-party payors, health care professionals and customersactivities may expose themus and them, directly or indirectly, to broadly applicable fraud and abuse and other health care laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal civil False Claims Act, that may constrain the business or financial arrangements and relationships through which they sell, market and distribute any product candidates for which marketing approval is obtained.obtained is sold, marketed and distributed. In addition, we and our potential third-party partners may be subject to transparency laws and patient privacy regulation by the federal government and by the U.S. states and foreign jurisdictions in which we or they conduct business. The applicable federal, state and foreign health care laws and regulations that may affect our or our potential third-party partners’ ability to operate include the following:

Efforts to ensure that our or our potential third-party partners’ business arrangements with third parties will comply with applicable health care laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our or our potential third-party partners’ business practices, including relationships with physicians and other health care providers, some of whom may recommend, purchase and/or prescribe our product candidates, if approved, may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws and regulations. By way of example, some of our consulting arrangements with physicians may not meet all of the criteria of the personal services safe harbor under the federal Anti-Kickback Statute. Accordingly, they may not qualify for safe harbor protection from government prosecution. A business arrangement that does not substantially comply with a safe harbor, however, is not necessarily illegal under the Anti-Kickback Statute, but may be subject to additional scrutiny by the government.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year that became effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, including the BBABipartisan Budget Act of 2018 and the Infrastructure Investment and Jobs Act, will stay in effect through 2032 unless additional Congressional action is taken. Any similar new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our ability to earn revenue from arrangements with our potential third-party partners for our product candidates.candidates that receive marketing approval.

We are a clinical-stage biopharmaceutical company focused on discovering and developing novel small and large molecule product candidates for immuno-inflammatory diseases. Our proprietary KINect drug discovery platform combinedcoupled with our preclinicalintegrated developmentdiscovery capabilitiesapproach allowsto small and large molecules enables us to identify and advance potential product candidates that we may develop independently or in collaboration with third parties. In additiondesigned to identifyinghave superior target affinity, specificity and developingpotency. our novel product candidates, weWe are pursuingseeking strategicto alternatives, including identifyingidentify and consummatingconsummate transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our novel product candidates. WeIn alsoaddition, we provide contract research services to third parties enabled by our early-stage research and development expertise.

Since our inception, we have incurred significant net losses. Our net loss was $64.9 million for the year ended December 31, 2025 and $132.1 million for the year ended December 31, 2024 and $88.5 million for the year ended December 31, 2023.2024. As of December 31, 2024,2025, we had an accumulated deficit of $902.9$967.8 million. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates from discovery through preclinical and clinical development. In addition, our product candidates, even if they are approved by regulatory agencies for marketing, may not achieve commercial success. We may also not be successful in pursuing strategic alternatives, including identifying and consummating transactions with third-party partners,partners to further develop, obtain marketing approval for and/or commercialize our product candidates. Furthermore, we have incurred and expect to continue to incur significant costs associated with operating as a public company, including legal, accounting, investor relations and other expenses. As a result, we will need substantial additional funding to support our continuing operations.

We have historically financed our operations primarily with sales of equity securities and incurringnon-dilutive indebtedness in the form of loans from commercial lenders.financing. In the near term, we expect to finance our operations through these and other capital sources, including potential partnerships with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on commercially acceptable 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 of one or more of our product candidates.

Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations. For example, macroeconomic events, including inflationary pressurepressure, tariff policies, and geopolitical conflicts, have led to economic uncertainty globally. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed. For further discussion of the potential impacts of macroeconomic events on our business, financial condition, and operating results, see the section titled “Risk Factors.”

In November 2024, we entered into an exclusive license agreement (the “Biosion Agreement”) with Biosion, Inc. (“Biosion”) pursuant to which we received the exclusive rights to develop, manufacture and commercialize bosakitug (ATI-045) and ATI-052 worldwide, excluding Mainland China, Macau, Hong Kong and Taiwan (“Greater China”). In connection with the Biosion Agreement, we also entered into a collaboration agreement (the “CTTQ Agreement”, and together with the Biosion Agreement, the “Biosion Agreements”) with Biosion and Chia Tai Tianqing Pharmaceutical Group, Co., Ltd. (“CTTQ”), a licensee of bosakitug in Greater China.

As partial consideration for the rights and licenses under the Biosion AgreementAgreements, and CTTQ Agreement, we agreed to,we, in the aggregate, (i) paypaid $30.0 million in upfront cash consideration, plus $4.5 million for the reimbursement of certain development costs, (ii) issueissued warrants (the “Warrants”) to purchase 14,281,985 shares of our common stock and (iii) paypaid $6.2 million for the reimbursement of certain development costs and drug product materialmaterial. We made cash payments of $6.2 million and $34.5 million as set forth in the Biosion Agreement. We determined that the transaction was an acquisition of assets with no alternative future use and therefore expensed as incurred the fair value of the consideration given of $85.6 million as a component of in-process research and development expenseAgreements during the yearyears ended December 31, 2024.2025 Weand incurred2024, $1.3respectively. millionAs inof expensesDecember related31, to2025, this3,000,000 transactionWarrants whichremained were expensed as incurred.unexercised.

In July 2024, we entered into a royalty purchase agreement with OCM IP Healthcare Portfolio LP, an investment vehicle for Ontario Municipal Employees Retirement System (“OMERS”). Under the royalty purchase agreement, we sold to OMERS a portion of the future royalty payments and the remaining anniversary milestonespayments associated with our existing license to Eli Lilly and Company (“Lilly”), relating to OLUMIANT® (baricitinib) for the treatment of alopecia areata (see “—License Agreement with Eli Lilly and Company”). Under the terms of the royalty purchase agreement, we received an upfront payment of $26.5 million. In exchange, OMERS acquired a portion of the royalty payable by Lilly to us for worldwide net sales of OLUMIANT for the treatment of alopecia areata from April 1, 2024 through the remainder of the royalty term under our license agreement with Lilly, and 100% of the remaining anniversary milestone payments payable by Lilly to us under the license agreement. The royalty payments and milestones we sold to OMERS represent our entire financial interest in the Lilly license agreement after taking into account our other contractual third-party obligations.

We recognized $3.8 million and $1.9 million of non-cash royalty income during the yearyears ended December 31, 2024.2025 and 2024, respectively.

In December 2023, we entered into an exclusive patent license agreement with Sun Pharmaceutical Industries, Inc. (“Sun Pharma”). Under the license agreement, we granted Sun Pharma exclusive rights under certain patents that we exclusively license from a third party. The patents relate to the use of deuruxolitinib, Sun Pharma’s JAK inhibitor, or other isotopic forms of ruxolitinib, to treat alopecia areata or androgenetic alopecia. Under the license agreement, Sun Pharma has paid us anupfront, upfront paymentregulatory and certaincommercial regulatorymilestone payments, and has agreed to pay us other regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a mid single-digit tiered royalty calculated as a percentage of Sun Pharma’s net sales. We have separate contractual obligations under which we have agreed to pay to third parties a portion of the consideration we may receive under the license agreement. We may seek to monetize this asset.

We recognized $3.0$1.2 million and $15.0$3.0 million of licensing revenue during the years ended December 31, 20242025 and 2023,2024, respectively.respectively, a portion of which was payable to third parties.

In November 2022, we entered into a license agreement with Pediatrix Therapeutics, Inc. (“Pediatrix”) under which we granted Pediatrix the exclusive rights to develop, manufacture and commercialize lepzacitinib in Greater China. Pediatrix has paid us an upfront payment, and has agreed to pay us development, regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a tiered royalty ranging from a low-to-high single digit percentage of net sales of lepzacitinib by Pediatrix in Greater China. A portion of the consideration received from Pediatrix is payable to the former Confluence (as defined below) equity holders as described below under the caption “—Agreement and Plan of Merger with Confluence.”

In August 2022, we entered into a non-exclusive patent license agreement with Lilly. Under the license agreement, we granted Lilly non-exclusive rights under certain patents and patent applications that we exclusively license from a third party. The patents and patent applications relate to the use of baricitinib, Lilly’s JAK inhibitor, to treat alopecia areata. Under the license agreement, Lilly has paid us anupfront, upfront payment andanniversary, regulatory and certain commercial milestone payments,payments. andIn addition, Lilly has agreed to pay us anniversary payments and other commercial milestone payments upon the achievement of specified milestones and additional anniversary payments as set forth in the agreement, andas well as a low single-digit royalty calculated as a percentage of Lilly’s net sales of baricitinib for the treatment of alopecia areata. We have separate contractual obligations under which we have agreed to pay to third parties an amount equal to any regulatory and commercial milestone payments we receive under the Lilly license agreement, as well as a portion of the upfront consideration and a portion of the royalties we may receive under the license agreement. In July 2024, we entered into a royalty purchase agreement with OMERS pursuant to which we sold to OMERS a portion of our future royalty payments and the remaining anniversary milestones associated with the license to Lilly (see “—Royalty Purchase Agreement with OCM IP Healthcare Portfolio LP” above).

In October 2019, we sold RHOFADE (oxymetazoline hydrochloride) cream, 1% (“RHOFADE”), to EPI Health, LLC (“EPI Health”) pursuant to an asset purchase agreement. In July 2023, EPI Health filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. Through the bankruptcy process, EPI Health and its parent company, Novan, Inc., sold the RHOFADE assets to a third party, which excluded our asset purchase agreement with EPI Health and the outstanding amounts due. The sale was approved by the bankruptcy court in September 2023. As a result of the bankruptcy proceedings, all amounts that were due and outstanding by EPI Health havehad been fully reserved. In September 2025, we sold all of our right, title and interest in our bankruptcy claims against EPI Health and wrote off the remaining reserved balance as it was deemed uncollectible.

In 2017, we entered into an Agreement and Plan of Merger (the “Confluence Agreement”) with Confluence Life Sciences, Inc. (now known as Aclaris Life Sciences, Inc.) (“Confluence”), Aclaris Life Sciences, Inc., our wholly-ownedwholly owned subsidiary (“Merger Sub”), and Fortis Advisors LLC, as representative of the equity holders of Confluence. Pursuant to the terms of the Confluence Agreement, Merger Sub merged with and into Confluence, with Confluence surviving as our wholly-ownedwholly owned subsidiary.

Under the Confluence Agreement, we have agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement. In addition, we have agreed to pay the former Confluence equity holders future royalty payments calculated as a low single-digit percentage of annual net sales, subject to specified reductions, limitations and other adjustments, until the date that all of the patent rights for that product have expired, as determined on a country-by-country and product-by-product basis or, in specified circumstances, ten years from the first commercial sale of such product. In addition to the payments described above, if we sell, license or transfer any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, we will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances.

In December 2023, our board of directors approved a reduction of our workforce by approximately 46%, which was completed as of December 31, 2024. ForDuring the year ended December 31, 2025, we made cash severance payments of $0.2 million to impacted employees. During the year ended December 31, 2024, we incurredrecognized severance expensesexpense of $2.7 million and made cash severance payments of $5.6 million to impacted employees. In the year ended December 31, 2023, we recorded a restructuring charge of $3.1 million, representing one-time termination benefits for employees with retention periods less than the sixty-day minimum retention period.

General and administrative expenses consist principally of salaries and related costs, including stock-based compensation, for personnel in executive, administrative, financefinance, and legal functions. General and administrative expenses also include facility-related costs, patent filing and prosecution costs, professional fees for legal, auditing and tax services, investor relations costs, business development costs, insurance costscosts, and travel expenses.

Revaluation of contingent consideration consists of changes in the fair value of our contingent consideration liability between reporting dates.dates, as described below.

In-process research and development (“IPR&D”) consists of expenses related to in-licensed assets with no future alternative use and impairment charges recorded for IPR&D intangible assets.use.

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statementsstatements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reported period. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and judgments on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

We record a contingent consideration liability related to future potential payments resulting from the acquisition of Confluence based upon significant unobservable inputsinputs, including the achievement of regulatory and commercial milestones, as well as estimated future sales levels and the discount rates applied to calculate the present value of the potential payments. Significant judgementjudgment is involved in determining the appropriateness of these assumptions. These assumptions are considered Level 3 inputs. Revaluation of our contingent consideration liability can result from changes to one or more of these assumptions. These assumptions are highly dependent on the outcome and timing of the development of certain of our product candidates. We evaluate the fair value estimate of our contingent consideration liability on a quarterly basis with changes, if any, recorded as income or expense in our consolidated statement of operations.operations and comprehensive loss. Any such changes could have a material impact on our financial results.

The fair value of contingent consideration is estimated using a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for commercial milestone and royalty payments and then applying a risk-adjusted discount rate to calculate the present value of the potential payments. Significant assumptions used in our estimates include the probability of achieving regulatory milestones and commencing commercialization,commercialization (collectively referred to as “probability of success”), which are based on an asset’s current stage of development and a review of existing clinical data. Probability of success assumptions ranged between 17%21% and 40% at December 31, 2024.2025. Additionally, estimated future sales levels and the risk-adjusted discount rate applied to the potential payments are also significant assumptions used in calculating the fair value. TheAs of December 31, 2025, the discount rate ranged between 7.4%6.7% and 8.7% depending on the year of each potential payment.

During the year ended December 31, 2024,2025, we adjusted estimated sales and the probability of success for certain product candidates. TheseThis changes,change as well asand the passage of time, partially offset by higher discount rates resulting from higher risk-free rates and changes in credit spreads,time resulted in an overall increase of $2.5$2.3 million in contingent consideration liability during the year ended December 31, 2024.2025.

We measure the compensation expense of stock-based awards granted to employees and directors using the grant date fair value of the award. We have issued stock options and restricted stock unit (“RSU”) awards with service-based vesting conditions, as well as with performance-based vesting conditions. We have not issued awards that include market-based conditions. For service-based awards, we recognize stock-based compensation expense on a straight-line basis over the requisite service period. For performance-based awards, we recognize stock-based compensation expense on a straight-line basis over the requisite service period beginning in the period that it becomes probable the performance conditions will occur. At each balance sheet date, we evaluate whether any performance conditions related to a performance-based award have changed. The effect of any change in performance conditions would be recognized as a cumulative catch-up adjustment in the period such change occurs, and any remaining unrecognized compensation expense would be recognized on a straight-line basis over the remaining requisite service period. The impact of forfeitures is recognized in the period in which they occur.

We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model. We estimate expected volatility based on our stock price's historical volatility, as we have determined that we have adequate historical data regarding the volatility of our own publicly-traded stock price. The expected term of our stock options has been determined using the “simplified” method for awards that qualify as “plain vanilla” options. The expected term of stock options we granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. We use an expected dividend yield of zero because we have not paid cash dividends to date and have no intention of paying cash dividends in the future.

The decreaseincrease in expenses for lepzacitinibbosakitug during the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily due to lowerthe timing of the acquisition of the in-licensed asset, which occurred in November 2024. The expenses consist primarily of product candidate manufacturing costs associatedand with preclinicalclinical development activities and costsexpenses associated with a Phase 2b clinical2 trial in subjects with atopic dermatitis, which was initiated in May 2022 and was completed in January 2024.dermatitis.

The decreaseincrease in expenses for zunsemetinibATI-052 during the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily due to athe decreasetiming of the acquisition of the in-licensed asset, which occurred in costsNovember 2024. The increase primarily consisted of preclinical development activities and clinical development expenses associated with a Phase 21a/1b clinicalprogram, developmentpartially activitiesoffset which were completed in 2023 as well asby a decrease in product manufacturing costs.

The decreaseincrease in personnel and stock-based compensation expenses during the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily due to lowerhigher headcount,headcount. lowerThe terminationincrease benefitsin andstock-based compensation expense during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to higher forfeiture credits asduring athe resultyear of our restructuring that was announced inended December 2023.31, 2024.

The aggregate decreaseincrease in personnel and stock-based compensation expenses during the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily due to lowerhigher headcountheadcount. andThe increase in stock-based compensation expense during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to higher forfeiture credits.credits during the year ended December 31, 2024.

The decrease in professional and legal fees, including accounting, investor relations and corporate communication costs,fees during the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily drivendue byto alegal, decreaseaccounting, and other professional expenses incurred in accounting2024 relatedin expenses,connection whichwith wereacquisition and license agreements, partially offset by an increase in businessinvestor developmentrelations expenses.costs incurred in 2025.

The decrease in facilityother general and supportadministrative services, including general office expenses, information technology costs and other expenses,expenses during the year ended December 31, 20242025 compared to the year ended December 31, 20232024 was primarily drivendue byto the sale of our bankruptcy claims against EPI Health and a decrease in rentinsurance expensecosts andin information technology expenses.2025.

In June 2025, we initiated a Phase 2 trial to evaluate the efficacy, safety, tolerability, pharmacokinetics (“PK”) and pharmacodynamics (“PD”) of bosakitug compared to placebo in 109 patients with moderate to severe atopic dermatitis. The primary endpoint is percent change from baseline in EASI at week 24. Secondary endpoints at week 24 include EASI response (EASI-50, EASI-75, EASI-90), validated IGA response, body surface area (“BSA”) response, and Peak Pruritus Numerical Rating Scale (“PP-NRS”) score, relative to baseline. We expect to announce top-line data in the fourth quarter of 2026.

We initiated a Phase 1b proof-of-concept trial with ATI-052 in atopic dermatitis in January 2026 and a Phase 1b proof-of-concept trial in asthma in February 2026, with top-line data from both studies expected in the second half of 2026. We plan to initiate a Phase 2b program for ATI-052ATI-052, initiallycommencing targetingwith a Phase 2b trial in asthma in the fourth quarter of 2026,2026. withWe also expect to commence startup activities for a Phase 2b trial in atopic dermatitis asand for a potentialproof-of-concept secondtrial indication.in eosinophilic esophagitis.

We are developing ATI-9494, a highly potent, oral, covalent, investigational dual inhibitor of ITK and Resting Lymphocyte Kinase (TXK), and other covalent JAK-sparing ITK inhibitors with differentiated pharmacological properties and selectivity profiles. These inhibitors have the potential to differentially modulate T cell biology across a broad range of disease indications with extended half-lives and potential best-in-class potency, ITK occupancy, and ITK activation at low doses. We expect to file an IND application for ATI-9494 in the secondfourth halfquarter of 2026.

Since our inception, we have incurred significant net losses. Our net loss was $19.8$41.3 million for the threesix months ended MarchJune 31,30, 2026 and $64.9 million for the year ended December 31, 2025. As of MarchJune 31,30, 2026, we had an accumulated deficit of $987.6$1.0 million.billion. We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates from discovery through preclinical and clinical development. In addition, our product candidates, even if they are approved by regulatory agencies for marketing, may not achieve commercial success. We may also not be successful in identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates. Furthermore, we have incurred and expect to continue to incur significant costs associated with operating as a public company, including legal, accounting, investor relations and other expenses. As a result, we will need substantial additional funding to support our continuing operations.

As partial consideration for the rights and licenses under the Biosion Agreements, we, in the aggregate, (i) paid $30.0 million in upfront cash consideration, plus $4.5 million for the reimbursement of certain development costs, (ii) issued warrants (the “Warrants”) to purchase 14,281,985 shares of our common stock and (iii) paid $6.2 million for the reimbursement of certain development costs and drug product material. As of MarchJune 31,30, 2026, Warrants exercisable for 3,000,000 shares of our common stock remained unexercised.

We recognized $0.9 million and $0.8$1.0 million of non-cash royalty income related to the OMERS agreement duringfor each of the three months ended MarchJune 31,30, 2026 and 2025, respectively.and $1.8 million for each of the six months ended June 30, 2026 and 2025.

We recognized $0.2$0.1 million and $0.3 million of licensing revenue related to the Sun Pharma agreement during the three and six months ended MarchJune 31,30, 2026, respectively, a portion of which was payable to third parties.

We recognized $1.3$1.1 million and $1.0$1.3 million of licensing revenue related to the Lilly agreement during the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $2.4 million and $2.3 million during the six months ended June 30, 2026 and 2025, respectively, all of which was payable to third parties.

The fair value of contingent consideration is estimated using a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for commercial milestone and royalty payments and then applying a risk-adjusted discount rate to calculate the present value of the potential payments. Significant assumptions used in our estimates include the probability of achieving regulatory milestones and commencing commercialization (collectively referred to as “probability of success”), which are based on an asset’s current stage of development and a review of existing clinical data. Probability of success assumptions ranged between 21% and 40% at MarchJune 31,30, 2026. Additionally, estimated future sales levels and the risk-adjusted discount rate applied to the potential payments are also significant assumptions used in calculating the fair value. As of MarchJune 31,30, 2026, the discount rate ranged between 7.5% and 9.3%9.5% depending on the year of each potential payment.

There was no change inDuring the fairsix valuemonths ofended June 30, 2026, we recorded a charge to the contingent consideration liability duringof the$0.3 threemillion, monthswhich endedwas March 31, 2026primarily due to offsettingchanges impactsin ofestimated sales levels and the passage of timetime, andpartially offset by changes into market rates.

Comparison of Three and Six Months Ended MarchJune 31,30, 2026 and 2025

The increasedecrease in contract research revenue for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was driven by higherlower overall hours billed, which was partially offset by a lowerhigher average billing rate.

The increase in licensing revenue during the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 was due to higher royalties earned under the Lilly and Sun Pharma license agreements.

The decrease in cost of revenue for the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was driven by a decrease in personnel relatedpersonnel-related costs.

The decreaseincrease in expenses for bosakitug for the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was primarily due to lower product candidate manufacturing costs, partially offset by an increase in clinical development expenses associated with a Phase 2 trial in atopic dermatitis.dermatitis, partially offset by lower product candidate manufacturing costs.

The increase in expenses for ATI-052 for the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was primarily due to an increase in product candidate manufacturing costs and clinical development expenses associated with a Phase 1a program, as well as Phase 1b programs in atopic dermatitis and asthma.asthma, partially offset by a decrease in preclinical development expenses associated with toxicity studies.

The decrease in expenses for ATI-2138modzatinib during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was primarily due to a decrease in preclinical development expenses associated with toxicity studies and clinical development expenses associated with a Phase 2a trial in atopic dermatitis, which was completed in July 2025.2025, partially offset by an increase in product candidate manufacturing costs.

The increase in expenses for ATI-9494 during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was primarily due to an increase in product candidate manufacturing costs and preclinical development expenses associated with toxicity studies to support IND enabling studies.

The increase in discovery expenses during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was primarily due to increased investment in JAK-sparing ITK inhibitors as we progress toward candidate selection.inhibitors.

The increase in other research and development expenses during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was primarily due to an increase in consulting costs associated with our clinical programs during the three months ended March 31, 2026.programs.

The increase in personnel expenses during the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 was primarily due to higher headcount. The decrease in stock-based compensation expense during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was due to the full amortization of awards granted in prior periods.

The increase in personnel expenses during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was primarily due to higher headcount.

The increase in professional and legal fees during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 was primarily due to higher compliance and business development-related expenses during the three and six months ended MarchJune 31,30, 2026.

The increase in licensing expense during the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 was due to higher royalties earned under the Lilly and Sun Pharma license agreements.

The revaluation of contingent consideration loss decreased during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 mainly due to changes into estimatedthe salesprobability levelsof success for certain product candidates and marketlower discount rates being applied to potential payments during the three monthsand ended March 31, 2026, which offset an increase to the liability due to the passage of time. This resulted in no change to the contingent consideration liability during the threesix months ended MarchJune 31,30, 2026.2025.

Interest income decreased during the three and six months ended MarchJune 31,30, 2026 compared to the three and six months ended MarchJune 31,30, 2025 due to a lower average investment balance and lower interest rates during the three and six months ended MarchJune 31,30, 2026.

Non-cash royalty income was consistent during the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 and includes income related to the proceeds from the sale of a portion of our OLUMIANT® royalty payments to OMERS in July 2024.

As of MarchJune 31,30, 2026, we had cash, cash equivalents and marketable securities of $190.8$170.6 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view towards liquidity and capital preservation. Subsequent to June 30, 2026, we raised aggregate gross proceeds of $40.2 million through our at-the-market facility.

Cash and cash equivalents were $28.7$19.2 million as of MarchJune 31,30, 2026 compared to $20.0 million as of December 31, 2025. We also had $162.1$151.5 million in short- and long-term marketable securities as of MarchJune 31,30, 2026 compared to $131.4 million as of December 31, 2025.

Net cash used in operating activities increased for the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025 primarily as a result of higher net losses after adjusting for non-cash items during the threesix months ended MarchJune 31,30, 2026.2026, Thisas well as an increase was partially offset by a net decrease in cash used for accounts payable and accrued expenses, after adjusting for the receipt and corresponding payment of a third-party milestone during the threesix months ended MarchJune 31,30, 2025.

The change in net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 compared to the net cash provided by investing activities for the threesix months ended MarchJune 31,30, 2025 resulted primarily from greater purchases of marketable securities and lower proceeds from sales and maturities of marketable securities during the threesix months ended MarchJune 31,30, 2026.

The change in net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2026 compared to net cash used in financing activities for the threesix months ended MarchJune 31,30, 2025 was primarily due to proceeds from sales under our at-the-market sales agreement in March 2026.

Our aggregate remaining lease payment obligation for these two spaces was $2.3$2.1 million as of MarchJune 31,30, 2026.

We have agreed to certain payment obligations in accordance with and subject to the terms of the Confluence Agreement (see “Overview—Acquisition and License Agreements—Agreement and Plan of Merger with Confluence”). As of MarchJune 31,30, 2026, the balance of our contingent consideration liability was $11.0$11.3 million.