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

We are a clinical-stage biopharmaceutical company and have incurred operating losses in each year since our inception. Our net losses were $26.9$28.9 million and $17.5$20.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Our net losses were $55.8 million and $37.7 million for the six months ended June 30, 2026 and 2025, respectively. We had an accumulated deficit of $292.2$321.2 million and $265.4 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ deficit and working capital.

Our Loan and Security Agreement, or the LSA, with Banc of California provides us with up to $30.0 million of borrowing capacity, of which we have borrowed $15.0 million as of MarchJune 31,30, 2026. Our overall leverage, certain obligations and affirmative and negative covenants contained in the related documentation could adversely affect our financial health and business and future operations by limiting our ability to, among other things, satisfy our obligations under the LSA, refinance our debt on terms acceptable to us or at all, plan for and adjust to changing business, industry and market conditions, use our available cash flow to fund future acquisitions and make dividend payments, and obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity. With certain exceptions, the LSA prohibits us from taking certain actions without Banc of California’s prior consent, including, but not limited to any material transfers of our assets, changes in our business, management, directorship (in certain circumstances), ownership, or business locations; certain mergers or consolidations; incurring any indebtedness, other than permitted indebtedness; granting or permitting liens against our assets, other than permitted liens; making certain capitalized expenditures; entering into any material transaction with any affiliate, other than in the ordinary course of business; or making any payments in respect of any subordinated debt.

We benefit from an exclusive license to PARI’s eRapid® Nebulizer System with eFlow® Technology for AP01’s delivery, and we retain an exclusive right to negotiate a separate license agreement with respect to AP02 and AP03 for exclusive licenses for PARI’s eRapid® Nebulizer System with eFlow® Technology. This exclusivity offers a key competitive advantage, as the proprietary device would be included in any potential U.S. FDA-approved product labels, however, we cannot guarantee that we will maintain preferable commercial terms for such license. We are dependent on the sustained cooperation and effort of PARI both to supply the device and, in some cases, to conduct the studies required for approval or other regulatory clearance of the device, and if received, we expect we will be dependent on PARI for continuing to maintain such approvals or clearances. Failure of PARI to supply the device, to successfully complete studies on the device or for any future devices we may utilize for any of our product candidates in a timely manner, or to obtain or maintain required approvals or clearances of the devices could result in increased development costs, delays in or failure to obtain regulatory approval, and delays in our product candidates reaching the market initially and/or expanding to new indications. For more information on the PARI License Agreement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Material Agreement.”

refusal by the FDA, ECEC, or other regulatory agencies to approve pending applications or supplements to approved applications filed by us or suspension or withdrawal of marketing approvals;

We are dependent on licensed intellectual property rights pursuant to the PARI License Agreement relating to the PARI eFlow® Technology and eRapid® Nebulizer System and we may in the future enter into additional intellectual property licensing agreements on which we could similarly become dependent. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing our product candidates, if approved, on the intended timeline. If we breach the PARI License Agreement or any other future agreements in which we license the use, development and commercialization rights to our product candidates from third parties or, in certain cases, we fail to meet certain deadlines, we could lose license rights that are important to our business.

As of MayJune 1,30, 2026, we had 5455 full-time employees, including 3336 who were engaged in research and development activities. As we continue to build our organization and execute on our strategy, we expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of clinical development, regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management, business, and development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage our growth effectively.

Since our inception in 2011, we have incurred significant operating losses and have not generated any revenue. On May 1, 2026, we completed our IPO, pursuant to which we issued and sold 19,166,667 shares of common stock, which included 2,500,000 shares of common stock sold pursuant to the underwriters' exercise of their option to purchase additional shares. The aggregate net proceeds received by us from the IPO were approximately $316.1$316.6 million, after deducting underwriter discounts and commissions, as well as other estimated offering costs of $4.8$4.2 million. To date, we have funded our operations primarily with aggregate gross proceeds of $733.8 million from the sale and issuance of our common stock, preferred stock, and convertible notes, as well as the proceeds from our IPO and Term Loan (as hereinafter defined).

Due to our significant research, development, and manufacturing expenditures related to the clinical trials, we have accumulated substantial losses and negative cash flows since our inception, including net losses of $26.9$28.9 million and $17.5$20.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and net losses of $55.8 million and $37.7 million for the six months ended June 30, 2026 and 2025, respectively. As of MarchJune 31,30, 2026, we had an accumulated deficit of $292.2$321.2 million.

As of MarchJune 31,30, 2026, we had cash, cash equivalents, and marketable securities of $123.1$413.5 million. We believe, based on our current operating plans, that our cash, cash equivalents and investments in marketable securities, including the net proceeds from our IPO,securities will enable us to fund our operating expenses and capital expenditures into 2029. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See the sections titled “—Liquidity and Capital Resources” and “Risk Factors—Risks Related to Our Financial Condition and Need for Additional Capital” included elsewhere in this Quarterly Report.

As consideration for the PARI License Agreement, we paid a non-refundable up-front initial payment of 400 thousand EUR ($0.4 million). To date, we have met one developmental milestone, for which the payment of 500 thousand EUR ($0.6 million) was expensed to research and development when the milestone was met. There were no regulatory milestones achieved during the year ended December 31, 2025, nor the threesix months ended MarchJune 31,30, 2026 .2026.

personnel-related costs, including salaries, payroll tax, bonuses, benefits, and stock-based compensation for employees engaged in research and development functions,functions; and; facility costs, depreciation, and other expenses.

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

Research and development expenses increased by $7.6$6.8 million to $22.9$24.7 million for the three months ended MarchJune 31,30, 2026, from $15.3$17.9 million for the three months ended MarchJune 31,30, 2025. The increase in research and development expenses was primarily attributedattributable to:

General and administrative expenses increased by $1.6$2.7 million to $5.0$6.6 million for the three months ended MarchJune 31,30, 2026, from $3.4$3.9 million for the three months ended MarchJune 31,30, 2025. The increase in general and administrative expenses was primarily attributable to:

$0.2$0.8 million increase in professional services and fees primarily driven by external legal and general G&A consulting costs to support public company operations; and $0.2$0.5 million increase in facility expenses primarily associated with our office sublease entered in September 2025.

Other income decreasedincreased by $0.2$0.8 million and $0.6 million for the three and six months ended MarchJune 31,30, 2026, respectively, to $1.0$2.4 million from $1.2$1.6 million and $3.4 million from $2.8 million, respectively. The increase was primarily driven by decreasesincome inearned intereston incomethe proceeds from marketablethe securitiesIPO, relatedpartially tooffset aby the impact of lower federal funds rate.rates.

To date, we have funded our operations primarily from the sale of proceeds of preferred stock, convertible notes, and common stock as a result of our IPO, as well as through proceeds received from our Term Loan. As of MarchJune 31,30, 2026, we had $123.1$413.5 million in cash, cash equivalents, and marketable securities. In February 2026, we entered into a loan and security agreement with Banc of California, or the Lender, for the issuance of a term loan facility with an aggregate principal amount of up to $30.0 million. The interest rate on amounts borrowed will be equal to the greater of the prime rate then in effect, or 5.00%. The maturity date for the loan is June 30, 2030. To date, $15.0 million has been borrowed under the Term Loan Facility. In connection with the LSA, we issued warrants to the Lender to purchase 22,500 shares of our common stock. On May 1, 2026, we completed our IPO, pursuant to which we issued and sold 19,166,667 shares of common stock, resulting in net proceeds of approximately $316.1$316.6 million. To date, we have received aggregate gross proceeds of $733.8 million from the sale of our preferred stock, convertible notes, and common stock.

For the threesix months ended MarchJune 31,30, 2026, net cash used in operating activities was $29.8$56.0 million, which was primarily due to our net loss of $26.9$55.8 million, changes in our operating assets and liabilities of $4.1 million, and $1.1$4.0 million of non-cash charges related to stock-based compensation, depreciation, non-cash operating lease expense, and accretion of premiums on marketable securities.

For the threesix months ended MarchJune 31,30, 2025.2025, net cash used in operating activities was $19.3$40.0 million, which was primarily due to our net loss of $17.5$37.7 million, changes in our operating assets and liabilities of $1.8$2.9 million, and $5$0.0 thousandmillion of non-cash charges related to stock-based compensation, depreciation, non-cash operating lease expense, and accretion of premiums on marketable securities.

Net cash providedused byin investing activities was $24.1$63.7 million for the threesix months ended MarchJune 31,30, 2025,2026, which was primarily driven by netpurchases purchasesof marketable securities and property and equipment of $134.8 million and $0.6 million, respectively, offset by sales and maturities of marketable securities of $24.1$71.7 million, partially offset by purchases of property and equipment of $8 thousand.million.

Net cash provided by financing activities was $14.8$331.5 million for the threesix months ended MarchJune 31,30, 2026, which was related to net proceeds of $316.6 million from the sale of common stock in the IPO and the drawdown of the term loan facility, net of debt issuance costs.

In February 2026, the we entered into a debt facility with Banc of California. $15.0 million has been borrowed under the facility and the additional $15.0 million is available for draw downdrawdown through December 31, 2027. For more information on the Company's Term Loan facility, refer to Note 14,13, Term Loan, in our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

In September 2025, we relocated our headquarters and executed a non-cancelable operating sublease in Boston, Massachusetts, or the Boston Sublease. Total fixed payments in connection with the Boston Sublease will beare $1.9 million over the term of the agreement ending in January 2029. In June 2026, we amended the Boston Sublease to expand the subleased premises, resulting in additional fixed payment obligations of $0.9 million over the remaining term of the agreement. This includes our share of facility operating expenses, real-estate taxes, but excludes our share of property management fees that are reimbursable to the landlord under the lease.