RZLT 10-K & 10-Q changes, risk factors and insider trading
Rezolute, Inc. · Nasdaq · Pharmaceutical Preparations · CIK 1509261 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “The supplemental information provided to the FDA to support our belief in the effectiveness of ersodetug in the treatment of congenital HI might not result in a viable path forward.”
New heading “There is no guarantee that the FDA will not consider the results of the sunRIZE trial when it considers additional regulatory steps related to ersodetug and its treatment of other conditions.”
New heading “If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for or commercialize our product candidates.”
New heading “Interim, “topline” and preliminary data from clinical trials may change as more data become available, are not necessarily predictive of the final results of the completed study or the results of other ongoing or future studies and are subject to audit and verification procedures that could result in material changes.”
New heading “Modifications to the upLIFT trial may fail to produce effective results.”
New heading “Failure of our clinical trials could expose us to litigation and other legal claims, which could materially and adversely affect our business, financial condition and results of operations.”
New heading “In the future, we may no longer qualify as a smaller reporting company or non-accelerated filer, which could increase our compliance costs and reporting obligations.”
Removed heading “In the future we may not qualify as are no a “smaller reporting company” within the meaning of the Securities Act and as a result we would be will be subject to certain enhanced disclosure requirements which will require us to incur significant expenses and expend time and resources.”
Removed heading “Operations outside the United States may be affected by different local politics, business and cultural factors, different regulatory requirements and prohibitions between jurisdictions.”
Removed heading “Changes in U.S. tax law could adversely affect our business.”
Removed heading “One Big Beautiful Bill Act (“OBBBA”)”
Largest changes
“As of September 15, 2025, our market capitalization was $678.4 million. If our market capitalization continues on its current trajectory it is possible that as of December 31, 2025, we may no longer qualify as a “smaller reporting company,” and, as a result, we would be required to comply with various disclosure and compliance requirements that did not previously apply, such as the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, the requirement that we hold a nonbinding advisory vote on executive compensation and obtain stockholder approval of any golden …”see in full comparison
“The failure, delay or unfavorable results of any of our clinical trials could give rise to claims or litigation by investors, clinical trial participants, business partners, employees or other parties. Such claims could allege, among other things, that we failed to adequately design, conduct, oversee or disclose the results of our clinical trials, or that our public statements regarding our clinical development programs were inaccurate or misleading. …”see in full comparison
“Failure of our clinical trials could expose us to litigation and other legal claims, which could materially and adversely affect our business, financial condition and results of operations.”see in full comparison
“Interim, “topline” and preliminary data from clinical trials may change as more data become available, are not necessarily predictive of the final results of the completed study or the results of other ongoing or future studies and are subject to audit and verification procedures that could result in material changes.”see in full comparison
“In the future we may not qualify as are no a “smaller reporting company” within the meaning of the Securities Act and as a result we would be will be subject to certain enhanced disclosure requirements which will require us to incur significant expenses and expend time and resources.”see in full comparison
“If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for or commercialize our product candidates.”see in full comparison
Full comparison: every changed paragraph (31)
The supplemental information provided to the FDA to support our belief in the effectiveness of ersodetug in the treatment of congenital HI might not result in a viable path forward.
As discussed in this Annual Report, on March 17, 2026, we met with the FDA to discuss the results of the sunRIZE trial and were asked to submit comprehensive analysis datasets and summary outcomes for the Agency’s independent evaluation. There can be no guarantee that after it analyzes the supplemental information that the FDA will agree to a path forward that is viable, both in terms of required information and cost, or a path that doesn’t require us to conduct a new randomized study. If we are required to either (i) provide additional information that we are unable to provide or (ii) conduct a new randomized study, our current operational plans may change in scope, timeline and required resources, which may require us to make significant operational changes.
There is no guarantee that the FDA will not consider the results of the sunRIZE trial when it considers additional regulatory steps related to ersodetug and its treatment of other conditions.
As discussed in this Annual Report, we have previously asked the FDA whether it will consider the results of the sunRIZE trial when considering additional regulatory steps related to ersodetug, including whether the results of the sunRIZE trial will impact the FDA’s assessment of any results that we may receive from the upLIFT trial. Although the FDA has not historically grouped trial results in this way, in the event the FDA takes this approach in connection with ersodetug this could significantly impact our business and future plans. Specifically, if we are required to delay studying, marketing or monetizing any future potential applications of ersodetug, we may be required to make significant operational changes.
If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for or commercialize our product candidates.
Our preclinical studies or early clinical trials of our product candidates, whether conducted by us or third parties, may not necessarily be predictive of the results of later clinical trials that we conduct. For example, despite promising results in our early clinical trials of ersodetug, our sunRIZE trial failed to meet its primary endpoint or key secondary endpoint. Similarly, even if we are able to complete our planned upLIFT trial, positive results from earlier clinical trial may not be replicated in our subsequent preclinical studies or clinical trials or in real-world results.
Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and we cannot be certain that we will not face further setbacks for any future product candidates. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or efficacy observations made in preclinical studies and clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA, or comparable non-U.S. regulatory authority approval. Furthermore, the approval policies or regulations of the FDA or comparable non-U.S. regulatory authorities may significantly change in a manner that may render our clinical data insufficient for approval, which may lead to the FDA or comparable non-U.S. regulatory authorities delaying, limiting or denying approval of our product candidates.
Interim, “topline” and preliminary data from clinical trials may change as more data become available, are not necessarily predictive of the final results of the completed study or the results of other ongoing or future studies and are subject to audit and verification procedures that could result in material changes.
From time to time, we may announce, publish or report preliminary, topline or interim data from our clinical trials. Such data are subject to the risk that one or more of the clinical outcomes may materially change as patients continue progressing through the study (for example, in oncology studies, a patient may progress from a complete or partial response to progressive disease), as patient enrollment continues and/or as more patient data become available, and such data may not be indicative of final data from such trials, data from future trials or real-world results. In addition, such data may remain subject to audit confirmation and verification procedures that may result in the final data being materially different from the preliminary, topline or interim data disclosed. As a result, all preliminary, topline and interim data should be viewed with caution until the final data are available. Material adverse differences between preliminary, topline or interim data and final data could significantly harm our business, financial condition, cash flows and results of operations.
Modifications to the upLIFT trial may fail to produce effective results.
In an effort to align with FDA guidance and improve the likelihood of demonstrating efficacy, the FDA allowed us to modify the upLIFT trial design. Such modifications include, without limitation to, removing the need to conduct a randomized, double-blind, placebo-controlled trial with hypoglycemia events as the endpoint. However, there can be no guarantees that these modifications are better able to demonstrate drug efficacy or that the upLIFT trial will meet its primary or secondary endpoints.
Failure of our clinical trials could expose us to litigation and other legal claims, which could materially and adversely affect our business, financial condition and results of operations.
The failure, delay or unfavorable results of any of our clinical trials could give rise to claims or litigation by investors, clinical trial participants, business partners, employees or other parties. Such claims could allege, among other things, that we failed to adequately design, conduct, oversee or disclose the results of our clinical trials, or that our public statements regarding our clinical development programs were inaccurate or misleading. Regardless of the merits or ultimate outcome of any such claims, defending litigation could require significant financial and management resources and could result in substantial costs, damages, settlements or other liabilities. In addition, adverse publicity associated with litigation could harm our reputation and relationships with investors, collaborators, regulators and other stakeholders. Any such litigation or related proceedings could therefore materially and adversely affect our business, financial condition, results of operations and prospects. For example, following the release of the results of our sunRIZE trial our stock price suffered a decline. As a result, plaintiffs law firms have announced investigations into potential securities laws violations based on allegations related to the results of the sunRIZE trial. While we believe these allegations are without merit, and no litigation has been commenced to date regarding such allegations, we still face the potential for litigation to be initiated against us.
We have a long history of losses and may not achieve profitability in the future. We will need substantial additional capital to fund our operations. If we fail to obtain additional capital, we will be unable to sustain operations.
We incurred net losses of $74.4$77.6 million and $68.5$74.4 million for the fiscal years ended June 30, 20252026 and 2024,2025, respectively. As of June 30, 2025,2026, we had an accumulated deficit of $403.9$481.4 million. Cash used in our operating activities amounted to $69.1$64.6 million and $57.4$69.1 million for the fiscal years ended June 30, 20252026 and 2024,2025, respectively. We expect that the amount of cash used in our operating activities will continue to increase for the next several years. As of June 30, 2025,2026, we had cash and cash equivalents of $94.1$10.6 million and investments in marketable debt securities of $73.8$97.2 million that is expected to provide us with adequate capital resources to fund planned activities for at least 12 months from the issuance date of the consolidated financial statements for the year ended June 30, 2025.2026.
Federal and state laws impose substantial restrictions on the utilization of net operating loss (“NOL”) carryforwards in the event that certain ownership changes occur as defined in Section 382 of the Internal Revenue Code (“IRC”). Due to our financing activities, we experienced ownership changes that have resulted in significant limitations on the future use of our NOL carryforwards. As of June 30, 2025,2026, we have U.S. federal NOL carryforwards of approximately $201.4$248.9 million, of which $33.4 million will expire without any opportunity for utilization due to the limitations set forth in IRC Section 382. AssumingOur thatability furtherto IRC Section 382 ownership changes do not occur,use the remaining $168.0$215.5 million of U.S. federal NOL carryforwards consist of approximately (i) $10.5 million that are currently available to offset taxable income but if not utilized will expire in 2031 through 2035, (ii) $10.8 million that becomes available through 2038 and that expire by June 30, 2038 if not utilized, and (iii) $146.7 million that never expire. It should be noted that there was an ownership change in 2025 that the $201.4 million will beis subject to goingstrict forward.limitations However,as thea result of prior ownership limitation that occurred in the 2022 fiscal year was more restrictive. It should be noted that with respect to $75.7 million of the $146.7 million of NOL carryforwards that never expire, the $75.7 million are subject to more restrictive prior 382 limitations, and as such will become available in varying annual amounts for an aggregate of approximately $9.9 million through fiscal year 2038, and $1.2 million annually thereafter.changes. It is possible that any future ownership changes could result in further limitations on the use of our NOL carryforwards or other tax attributes, which could adversely affect our future financial position, profitability and cash flows.
We are subject to Section 404 of The Sarbanes-Oxley Act of 2002 (“Section 404”), and the related rules of the SEC which generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting. Effective April 27, 2020, the SEC adopted amendments to the “accelerated filer” and “large accelerated filer” definitions in Rule 12b-2 under theThe Securities and Exchange Act of 1934. The amendments exclude from the “accelerated filer” and “large accelerated filer” definitions an issuer that is eligible to be a smaller reporting company and(“SRC”). thatWe hadcurrently annualmeet revenuesthe definition of lessan than $100 million in the most recent fiscal year for which audited financial statements are available.SRC. We determined that our Company does not meet the accelerated or large accelerated filer definitions as of June 30, 2025.2026. For so long as we remain a smaller reporting company and a non-accelerated filer, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies, including, but not limited to, not being required as a non-accelerated filer to comply with the auditor attestation requirements of Section 404(b). An independent assessment by our independent registered public accounting firm of the effectiveness of internal control over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.
In the future, we may no longer qualify as a smaller reporting company or non-accelerated filer, which could increase our compliance costs and reporting obligations.
We currently qualify as an SRC and a non-accelerated filer under applicable SEC rules. As a result, we are eligible to take advantage of certain reduced disclosure requirements and exemptions from requirements applicable to other public companies, including the exemption from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
Our status as an SRC and non-accelerated filer is determined annually based on, among other factors, our public float and, where applicable, our annual revenues. If our public float increases above applicable thresholds, or if we otherwise cease to qualify as an SRC or non-accelerated filer, we could become subject to additional disclosure, compliance and governance requirements. These additional requirements could include expanded executive compensation disclosures, accelerated filing deadlines and, if applicable, auditor attestation requirements regarding internal control over financial reporting.
Compliance with these additional requirements would increase our legal, accounting and administrative costs and require greater management attention and internal resources. If we are unable to comply with any such requirements in a timely manner, investors may lose confidence in our reported information, the market price of our common stock could decline and we could become subject to regulatory scrutiny or enforcement actions.
In the future we may not qualify as are no a “smaller reporting company” within the meaning of the Securities Act and as a result we would be will be subject to certain enhanced disclosure requirements which will require us to incur significant expenses and expend time and resources.
As of September 15, 2025, our market capitalization was $678.4 million. If our market capitalization continues on its current trajectory it is possible that as of December 31, 2025, we may no longer qualify as a “smaller reporting company,” and, as a result, we would be required to comply with various disclosure and compliance requirements that did not previously apply, such as the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, the requirement that we hold a nonbinding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approved, the requirement to provide full and more detailed executive compensation disclosure and the reduction in the amount of time for filing our periodic and annual reports. Compliance with these additional requirements increases our legal and financial compliance costs and causes management and other personnel to divert attention from operational and other business matters to these additional public company reporting requirements. In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our stock could decline and we could be subject to delisting proceedings by the stock exchange on which our common shares are listed, or sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
Operations outside the United States may be affected by different local politics, business and cultural factors, different regulatory requirements and prohibitions between jurisdictions.
We intend to seek regulatory approval in foreign countries for all of our potential product candidates prior to commercialization. Pharmaceutical therapies are subject to rigorous preclinical testing and clinical trials and other pre-market approval requirements by Regulatory Authorities in foreign countries. Operations outside the United States may be affected by different local business and cultural factors, different regulatory requirements and prohibitions between jurisdictions, including the Foreign Corrupt Practices Act and local laws prohibiting corrupt payments, and changes in regulatory requirements for financing activities.
As of June 30, 2025,2026, we had $7,000$0.1 million in net unrealized losses in our marketable debt securities. Unrealized losses in our marketable debt securities portfolio may increase in the future due to the aforementioned economic factors. While our goal is to hold each security until maturity, that may not be possible in light of our policy to preserve capital and liquidity and because investment in securities with unrealized losses hashave a diminished utility as a source of liquidity prior to maturity. Selling securities with an unrealized loss would result in the realization of such losses, which could have an adverse effect on our financial condition and results of operations.
We typically develop our product candidates using compounds that we have acquired or in-licensed, including the original composition of matter patents and patents that claim the activities and methods for such compounds’ production and use. For example, in 2017 we in-licensed (i) a fully human monoclonal antibody from XOMA Corporation (“XOMA”), who was acquired by Ligand Pharmaceuticals Incorporated on July 14, 2026, as well as (ii) a plasma kallikrein inhibitor portfolio from ActiveSite Pharmaceuticals (“ActiveSite”) and in consideration for such licenses, we will owecontinue to incur milestone payments and royalties as we progress product candidates through development.
Changes in U.S. tax law could adversely affect our business.
Changes to tax laws (which changes may have retroactive application) could adversely affect us or the holders of our common stock. It cannot be predicted whether, when, in what form, or with what effective dates, new tax laws or regulations may be enacted under existing or new tax laws. This could result in an increase in our tax liability or require changes in our business in order to mitigate any adverse effects of changes in tax laws.
One Big Beautiful Bill Act (“OBBBA”)
The recent enactment of the OBBBA may adversely affect our business, financial condition, results of operation and future plans. Because the OBBBA is a wide reaching law, we are assessing its potential impact on our business, financial condition, results of operations and future plans and we plan to provide an update in future SEC filings once this assessment is complete.
Management's Discussion & Analysis (MD&A)
Removed heading “Recent Developments”
Removed heading “Investments in Marketable Debt Securities”
Removed heading “Loss from Change in Fair Value of Derivative Liabilities”
Largest changes
“We account for investments in marketable debt securities as available-for-sale securities whereby they are recorded in our consolidated balance sheets at fair value. Interest income consists of accrued interest earned based on the coupon rate of the security, plus the impact of accreting discounts and amortizing premiums to maturity using the straight-line method which approximates the effective interest method. …”see in full comparison
“The increase in ersodetug program costs of $11.8 million primarily was driven by (i) $6.7 million of manufacturing related costs for process performance qualification batch production of drug product, which will continue to support both phase 3 studies and the EAPs as well as prepare for potential commercialization, (ii) $3.2 million in clinical costs due to costs incurred for the tumor HI phase 3 study for which startup activities were initiated in August 2024 after clearance of our Investigational New Drug (“IND”) application and for which we are anticipating enrollment of the first patient …”see in full comparison
“The $5.7 million increase in G&A compensation and benefits was attributable to an increase of $4.4 million in share-based compensation and an increase of $1.3 million in cash-based compensation and benefits. The increase of $1.3 million in cash-based compensation was due to an increase in the average number of G&A employees from 18 for the fiscal year ended June 30, 2025 to 21 employees for the fiscal year ended June 30, 2026. …”see in full comparison
“For the year ended June 30, 2026, we had an average of 45 R&D employees compared to 48 R&D employees for the year ended June 30, 2025. The $3.4 million increase in R&D compensation and benefits was attributable to an increase of $3.0 million in share-based compensation and an increase of $0.4 million in cash-based compensation and benefits. …”see in full comparison
Full comparison: every changed paragraph (52)
Our priorities going into the second half of 20252026 and first half of 20262027 are to: execute(i) acrossachieve ouralignment twowith the FDA on the path forward in congenital HI following the completion of the sunRIZE study, (ii) complete enrollment and announce topline data for the registrational Phase 3 clinical trials. Our goals include (i) complete the sunRIZEupLIFT study (as defined below) to enable topline data in December 2025, (ii) continue enrollment in the registrational tumor HI study,HI, and (iii) assuming supportive data from sunRIZE,data, submit a Biologics License Application to the FDA for ersodetug in mid-2026.mid-2027.
Our focus as a Company is advancing ersodetug as a potential treatment for refractory hypoglycemia caused by all forms of HI, specifically in two Phase 3 clinical studies for congenital HI and tumor HI. In December 2025, we announced topline results from the Phase 3 sunRIZE study of ersodetug in patients with congenital HI, in which the study did not meet its primary endpoint or key secondary endpoint, despite a favorable safety profile and substantial evidence of clinical activity from the broader clinical development program. Following the topline results, we engaged with the FDA to review the totality of available data from sunRIZE, including continuous glucose monitoring (CGM) and longer-term treatment data. In subsequent interactions, the FDA has continued to acknowledge the challenges associated with conducting randomized, placebo-controlled studies in this rare pediatric patient population, including the potential impact of intensive monitoring and caregiver intervention on measures of hypoglycemia. As of September 2026, the FDA continues to review the substantial body of data generated from the sunRIZE program to determine whether there is a potential regulatory path forward for ersodetug in congenital HI, and no specific timeline has been established for completion of this review. See Item 1A of this Annual Report for the related risks.
Our focus as a Company is advancing ersodetug as a potential treatment for all forms of HI, specifically in two Phase 3 clinical studies for congenital HI and tumor HI. To that end, we have completed enrollment in the pivotal Phase 3 sunRIZE clinical study of ersodetug, which is a randomized, double-blind, placebo-controlled, parallel arm evaluation of ersodetug in participants with congenital HI who are not adequately responding to standard of care medical therapies. Target enrollment of 56 participants was exceeded with 62 participants between 3 months and 45 years of age enrolled, including approximately 15 percent from U.S. sites. Topline results from the study are anticipated to be available in December 2025, but the specific date of the availability of such results may vary.
The upLIFT study in tumor HI is currently enrolling in the U.S. and Europe. At a meeting held with FDA on August 19, 2025, the agencyAgency agreed to modifications to the design of the study including removing the need to conduct a double-blind randomized placebo-controlled trial. The truncated study will include as few as 16 participants and will be limited to the single-arm open-label portion of the upLIFT study. On June 2, 2026, we provided an interim update on the program. Of the initial eight participants enrolled six had already met the responder criterion for the study’s primary endpoint and a seventh participant met the responder criterion following the June interim update. Topline results from the study are anticipated to be available inbefore the second halfend of 2026. See Item 1A of this Annual Report for the related risks.
Recent Developments
Appointment of Chief Commercial Officer. On August 18, 2025, the Board of Directors approved the appointment of Sunil Karnawat to serve as our Chief Commercial Officer. In connection with the appointment, we extended Mr. Karnawat an employment offer letter (the “Offer Letter”). The Offer Letter provides for the following compensation: (i) an annual base salary of $475,000; (ii) a signing bonus of $65,000, (iii) eligibility to receive an annual performance bonus with a target of 40% of Mr. Karnawat’s base salary, on December 31st of each year; (iv) an inducement grant pursuant to Nasdaq Listing Rule 5635(c)(4) in the form of stock options to purchase 275,000 shares (the “Inducement Grant”) of our common stock, and (v) 25,000 shares of RSUs. The stock options issued as the Inducement Grant will vest and become exercisable as to 25% of the underlying shares on the first anniversary of the grant date, and will vest and become exercisable as to the remaining 75% of the underlying shares in 36 equal monthly installments from the first anniversary of the grant date, subject to his continued employment on such vesting dates. If we are acquired during his employment, all remaining options will automatically vest.
2025 Private Placement. In May 2025, we entered into a securities purchase agreement (the “2025 SPA”) with Handok, Inc. and two other investors relating to a private placement (the “2025 Private Placement”), pursuant to which we agreed to sell 1,295,383 shares of common stock at a purchase price of $3.25 per share. Closing of the 2025 Private Placement occurred in June 2025, whereby we received net proceeds of $4.2 million after deduction of offering costs.
2025 Underwritten Offering. On April 23, 2025, we entered into an underwriting agreement for the planned issuance and sale of equity securities in an underwritten public offering (the “2025 Underwritten Offering”). The 2025 Underwritten Offering resulted in the issuance of (i) 20,786,923 shares of common stock at a price of $3.25 per share for gross proceeds of $67.6 million, and (ii) pre-funded warrants to purchase 6,905,385 shares of common stock at a public offering price of $3.249 per pre-funded warrant (the “2025 PFWs”) for gross proceeds of $22.4 million. The Company granted the underwriters a 30-day option to purchase up to an additional 4,153,846 shares of its common stock at a public offering price of $3.25 per share. The underwriters’ option was fully exercised for all 4,153,846 shares of common stock for gross proceeds of $13.5 million received concurrently with the closing of the 2025 Underwritten Offering. Closing occurred on April 24, 2025, whereby the aggregate gross proceeds amounted to $103.5 million. The net proceeds of the 2025 Underwritten Offering amounted to approximately $96.8 million, after deducting underwriting commissions and other offering costs.
We have not generated any meaningful revenues since our inception in March 2010. Over the last several years, we have conducted private placements and public offerings to raise additional capital, conducted pre-clinical and clinical trials, and conducted other research and development activities on our pipeline of product candidates.
Research and development expenses. Research and development (“R&D”) expenses consist primarily of clinicalcash trialand costs,share-based compensation and employee benefits forrelated ourto personnel engaged in R&D activities, clinical trial costs, licensing costs, and consultantsconsulting and outside services. Our R&D costs include an allocable portion of our cash and share-based compensation, employee benefits, and consulting costs related to personnelservices engaged in the design and development of our product candidates and other scientific research projects. WeOur R&D costs also allocateinclude aan allocable portion of our facilities and overhead costs based on the personnel and other resources devoted to R&D activities.
General and administrative expenses. General and administrative (“G&A”) expenses consist primarily of (i) an allocable portion of our cash and share-based compensation and employee benefits related to personnel engaged in our administrative, finance, accounting,accounting and executive functions,functions. Our G&A expenses also include professional fees for business development, commercial planning, legal, auditing, consulting, investor relations, other costs primarily related to our status as a public company, and (ii) an allocable portion of our facilities and overhead costs based on the personnel and other resources devoted to G&A activities. G&A expenses also include travel, legal, auditing, investor relations and other costs primarily related to our operations as a public company.
Loss from change in fair value of derivative liabilities. We recognize liabilities for financial instruments that are required to be accounted for as derivatives, as well as embedded derivatives in our debt agreements. Warrant and embedded derivative liabilities are adjusted to fair value at the end of each reporting period until the contracts are settled, expire, or otherwise meet the conditions for equity classification. We also recognize liabilities for embedded derivatives that arose in connection with our legacy debt agreement. Changes in fair value are reflected as gains and losses in our consolidated statements of operations.
Investments in Marketable Debt Securities
We account for investments in marketable debt securities as available-for-sale securities whereby they are recorded in our consolidated balance sheets at fair value. Interest income consists of accrued interest earned based on the coupon rate of the security, plus the impact of accreting discounts and amortizing premiums to maturity using the straight-line method which approximates the effective interest method. Unrealized gains and losses due to subsequent changes in fair value of the investments are reported in shareholders’ equity as a component of accumulated other comprehensive income (loss). The individual debt securities in our portfolio are subject to credit risk in the event of default by the issuers. We review the components of our portfolio of available-for-sale debt securities, using both quantitative and qualitative factors, to determine if declines in fair value below amortized cost have resulted from a credit-related loss or other factors. To the extent that declines in fair value are due to a deterioration of credit quality of the issuer, we will recognize an allowance for credit losses related to such investments with a corresponding loss in the consolidated statements of operations. Allowances for credit losses may be reversed in subsequent periods if conditions improve and credit-related losses are no longer expected. For a decline in fair value that is solely due to changes in interest rates, impairment is not recognized if we have the ability and intent to hold the investment until maturity. The cost basis of any securities sold prior to maturity will be determined using the specific identification method.
Clinical trial costs are a component of research and development expenses. We accrue and charge torecognize expenses for clinical trial activities performed by third parties based upon estimates of the percentage of work completed over the life of the individual study in accordance with agreements established with clinical research organizations and clinical trial sites. We determine our estimates through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services.
We measure the fair value of services received in exchange for grants of share-based awards based on the fair value of the award as of the grant date. We compute the fair value of equity awards with time-based vesting using the Black-Scholes Merton (“BSM”) option-pricing model and recognize the cost of the equity awards over the period that services are provided to earn the award. For stock option awards that contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized on a straight-line basis over the requisite service period as if the award was, in substance, a single award. Fair value of RSUs is based on the closing market price on the date of grant whereby compensation costs is recognized ratablyon a straight-line basis over the vesting period of the RSUs.
We recognize the impact of forfeitures in the period that the forfeiture occurs, rather than estimating the number of awards that are not expected to vest in accounting for share-based compensation. For stock options that are voluntarily surrendered by employees, all unrecognized compensation is immediately recognized in the period the options are cancelled.
Loss from Change in Fair Value of Derivative Liabilities
We recognize warrant derivative liabilities based on assessment of the warrant’s specific terms and applicable authoritative guidance set forth by Financial Accounting Standards Board (“FASB”) in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments and meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of the end of each subsequent quarterly period while the warrants are outstanding. Liability classified warrants are valued using the BSM option-pricing model at issuance and for each reporting period when applicable. Changes in fair value are reflected as gains and losses in our consolidated statements of operations. We also recognize liabilities for embedded derivatives that arose in connection with a legacy debt agreement.
ResultsOur results of operations for the fiscal years ended June 30, 20252026 and 20242025 reflect net losses of approximately $74.4$77.6 million and $68.5$74.4 million, respectively. Our consolidated statements of operations for the fiscal years ended June 30, 20252026 and 2024,2025, along with the changes between fiscal years, are presentedsummarized below (in thousands, except percentages):
Presented below is a discussion of the key factors that resulted in changes in our results of operations for thesethe periods.fiscal years ended June 30, 2026 and 2025.
Revenue. As a clinical stage company, we did not generate any revenue for the fiscal years ended June 30, 20252026 and 2024.2025. We are at ana earlylate stage of clinical development and do not currently have any commercial products. Our existing product candidates will require extensive additional clinical evaluation, regulatory review, significant marketing efforts and substantial investment before they generate any revenue. We do not expect to be able to market any of our product candidates for several years.
The increasedecrease in R&D expenses of $5.8$7.7 million for the fiscal year ended June 30, 20252026 was primarily attributable to (i) ana increasedecrease of $11.8$7.6 million related to ersodetug clinical and manufacturing costs and (ii) ana increasedecrease of $1.0$4.1 million in other R&D costs. These increasesdecreases amount to $12.8$11.7 million and were partially offset by a $7.0$3.4 million decreaseincrease in costsR&D relatedemployee to RZ402 clinicalcompensation and manufacturingbenefits spendand asan thereincrease areof no$0.6 activemillion RZ402for studiesseverance in the fiscal year ended June 30, 2025.expense.
The decrease in ersodetug program costs of $7.6 million primarily was driven by a decrease of $9.3 million due to lower spending on drug substance and drug product manufacturing, including decreases in activity for process performance qualification (“PPQ”) comparative to prior years PPQ activities to supply the sunRIZE OLE, upLIFT study and expanded access programs. This decrease of $9.3 million was partially offset by (i) an increase of $1.1 million in clinical costs due to startup activities, such as site activations, patient screenings and patient enrollment costs, for the Phase 3 upLIFT study, and (ii) an increase of $0.6 million in clinical trial costs for our congenital HI Phase 3 clinical study, which completed enrollment in May 2025, but still had 56 participants continuing on the OLE as of June 30, 2026. For the fiscal year ended June 30, 2025, we had lower clinical costs incurred for the Phase 3 upLIFT study as startup costs did not commence until January 2025. In addition, clinical costs for the sunRIZE study were lower due to fewer patients that were actively on study protocol or OLE for the fiscal year ended June 30, 2025.
Other R&D costs decreased by $4.1 million primarily due to a $5.0 million decrease in milestone payments under our ersodetug license agreement. The most recent milestone payment of $5.0 million became due in May 2025 upon dosing of the last patient in the Company’s Phase 3 sunRIZE clinical trial for ersodetug. This decrease was partially offset by an increase of $0.9 million in other R&D costs related to quality and patient affairs costs incurred to support the Phase 3 clinical studies.
For the year ended June 30, 2026, we had an average of 45 R&D employees compared to 48 R&D employees for the year ended June 30, 2025. The $3.4 million increase in R&D compensation and benefits was attributable to an increase of $3.0 million in share-based compensation and an increase of $0.4 million in cash-based compensation and benefits. There was $0.9 million of severance expense related for 21 R&D employees that were terminated on December 15, 2025 in connection with a management implemented workforce reduction, compared to $0.3 million of severance expense recognized for the fiscal year ended June 30, 2025.
The increase in ersodetug program costs of $11.8 million primarily was driven by (i) $6.7 million of manufacturing related costs for process performance qualification batch production of drug product, which will continue to support both phase 3 studies and the EAPs as well as prepare for potential commercialization, (ii) $3.2 million in clinical costs due to costs incurred for the tumor HI phase 3 study for which startup activities were initiated in August 2024 after clearance of our Investigational New Drug (“IND”) application and for which we are anticipating enrollment of the first patient in the study in the second half of calendar 2025, and (iii) a $1.9 million increase in costs for the sunRIZE clinical trial which enrolled its first patient in April 2024 and concluded enrollment in May 2025.
Other R&D costs increased by $1.0 million primarily due to a $1.9 million increase in R&D employee compensation and benefits. The increase in R&D employee compensation and benefits was attributable to an increase in the average number of R&D employees from 42 for the fiscal year ended June 30, 2024 to 48 for the fiscal year ended June 30, 2025. These costs were partially offset by a $0.9 million decrease primarily due to preclinical, toxicology and other ersodetug costs that were no longer required to support our efforts to remove the partial clinical hold on the sunRIZE study, which was lifted by the FDA in September 2024.
The increase in G&A expenses of $10.8 million for the fiscal year ended June 30, 2026 was attributable to an increase of $5.7 million in G&A compensation and benefits, an increase of $4.6 million in other G&A costs related to business development and market research and planning activities in preparation for future ersodetug commercial activities, and an increase in severance expense of $0.5 million.
The $5.7 million increase in G&A compensation and benefits was attributable to an increase of $4.4 million in share-based compensation and an increase of $1.3 million in cash-based compensation and benefits. The increase of $1.3 million in cash-based compensation was due to an increase in the average number of G&A employees from 18 for the fiscal year ended June 30, 2025 to 21 employees for the fiscal year ended June 30, 2026. There was $0.6 million of severance expense for eight G&A employees that were terminated on December 15, 2025 in connection with a management implemented workforce reduction, compared to $0.1 million of severance expense recognized in the fiscal year ended June 30, 2025.
The increase in G&A expenses of $3.7 million for the fiscal year ended June 30, 2025 was primarily attributable to an increase in G&A compensation and benefits related to our administrative workforce of $1.8 million. Cash-based G&A compensation and benefits increased by $2.2 million from $5.0 million for the fiscal year ended June 30, 2024 to $7.2 million for the fiscal year ended June 30, 2025. This increase was attributable to an increase in the average number of G&A employees from 15 to 19 and an increase in compensation related to annual performance bonuses. G&A professional fees increased by $1.8 million from $3.5 million for the fiscal year ended June 30, 2024 to $5.3 million for the fiscal year ended June 30, 2025. This increase in G&A professional fees resulted from pre-commercial planning activities, post regulatory approval planning and other professional fee increases.
Interest and other income. For the fiscal year ended June 30, 2025,2026, we recognized $5.5$5.4 million of interest income compared to $4.9$5.5 million of interest income for the fiscal year ended June 30, 2024.2025. This increasedecrease of $0.6$0.1 million was primarily due to lower yields in fiscal year 2026 as the Companyweighted havingaverage yield on interest-earning assets held by us decreased from 4.35% on June 30, 2025 to 3.78% on June 30, 2026. The impact of lower yields was partially offset by a higher average monthly balance of investments in marketable debt securities throughout the fiscal year ended June 30, 2026 compared to the fiscal year ended June 30, 2025.
Change in Fair Value of Warrant Derivative Liability. For the fiscal year ended June 30, 2025, the Company did not have any warrant derivative liabilities. For the fiscal year ended June 30, 2024, we recognized a loss of $2.9 million during the period from March 8, 2024 through May 13, 2024 when the Exchange PFWs were classified as liabilities. This loss was due to an increase of $0.95 per share in our stock price, resulting in an increase in the fair value of the derivative liability that was recognized due to a shareholder approval provision regarding ownership limitations that prohibited equity classification. This liability existed until May 13, 2024 when the Exchange PFW holders agreed to an amendment that eliminated this provision. Our stock price increased from $1.90 per share on March 8, 2024, to $2.85 per share on May 13, 2024 when the Exchange PFWs were modified.
Accordingly, ourOur primary source of liquidity has historically been from the completion of private placements and public offerings of our equity securities, as well as proceeds from the issuance of debt securities. For the fiscal years ended June 30, 2025 and 2024, we received net proceeds from the issuance of equity securities of $107.0 million and $62.6 million, respectively. The completion of equity financings between June 2024 and June 2025 is the primary source of total cash and cash equivalents and investments in marketable debt securities of $167.9$107.8 million as of June 30, 2025. For further information about the key terms and results of our equity financing activities completed in the first and fourth quarter of fiscal year 2025, please refer to the discussion above under the caption Recent Developments.2026.
Based on our cash, cash equivalents and marketable debt security investments totaling $167.9$107.8 million as of June 30, 2025,2026, we believe we have adequate capital resources to meet the Company’sour contractual obligations and carry out ongoing clinical trials and other planned activities for at least 12 months from the issuance date of the consolidated financial statements for the year ended June 30, 2025.2026.
Our most significant long-term contractual obligations consist of a regulatory milestone payment of $25.0 million payable toupon XOMAregulatory approval for ersodetug by any regulatory authority under the Ersodetug Licensing Agreement (as defined below), and additional clinical and regulatory milestone payments up to $25.0 million payable to ActiveSite. Due to uncertainties in the timing associated with clinical trial activities and regulatory approvals, there is even greater uncertainty in forecasting the timing of our long-term future clinical and regulatory milestone payments to XOMA and ActiveSite that may be required during the fiscal year ending June 30, 2027 and thereafter.payments.
In addition to the clinical and regulatory milestone payments discussed above, upon the future commercialization of ersodetug and RZ402compounds from our PKI Portfolio (as defined below) we will be obligated to pay additional milestone payments and alternative indication regulatory approval payments for an aggregate up to $202.5 million and royalties based on the net sales of the related products and alternative indication regulatory approvals to XOMA and ActiveSite for up to an additional $202.5 million.products. These future milestones include $185.0 million in potential payments tounder XOMAthe Ersodetug License Agreement and $17.5 million to ActiveSite for various sales-based milestones and alternative indication regulatory approvals. No assurance can be provided that commercialization will ever be achieved for either ersodetug or RZ402,compounds wherebyfrom our PKI Portfolio, in which case none of these future payments may ever be required.
In addition to our licensing obligations, we also have approximately $0.2 million of long-term contractual obligations under existing operating lease agreements rangingthat betweenexpire approximatelyby $0.2October million to $0.8 million for each of the fiscal years ending June 30, 2027 through 2028.2027. Based on our current forecast, we expect that our existing capital resources will be sufficient to fund our contractualshort-term obligationsliquidity andrequirements. carry out ongoing clinical trials and other planned activities for at least 12 months from the issuance date of the consolidated financial statements for the year ended June 30, 2025. Therefore,However, we will need to obtain additional equity or debt financing in order to fund all of our long-term liquidity requirements.
Presented below is additional discussion about the ongoing requirements pursuant to our license agreements with XOMA and ActiveSite,agreements, along with additional information about our ongoing financing activities that impacted our liquidity and capital resources for the fiscal year ended June 30, 2025.2026.
XOMAErsodetug License Agreement
In December 2017, we entered into a license agreement (the “XOMAErsodetug License Agreement”) with XOMA through its wholly-owned subsidiary, XOMA (U.S.) LLC, pursuant to which XOMA granted an exclusive global license to develop and commercialize XOMA 358 (formerly X358 or RZ358, now ersodetug) for all indications. InOn JanuaryJuly 2019,14, the2026, XOMA License Agreement was amendedacquired withby anLigand updatedPharmaceuticals paymentIncorporated schedule, as well as revisions to the amount we were required to expend on development of ersodetug and related licensed products, and revised provisions with respect to our diligence efforts in conducting clinical studies.(“Ligand”).
UponTo thedate achievementwe have paid a total of certain clinical and regulatory events, we will be required to make up to $37.0$12.0 million in aggregate milestone payments to XOMA. Milestone payments madepursuant to datethe includeErsodetug aLicense $2.0Agreement. The most recent milestone payment of $5.0 million paymentbecame due in JanuaryMay 20222025 forupon the enrollmentdosing of the last patient of the Phase 2 clinical study, $5.0 million paid in May 2024 related to the first patient enrollment in aour Phase 3 study,clinical trial for ersodetug and $5.0 millionwas paid in June 20252025. relatedThe tonext themilestone lastpayment patientof dosed$25.0 inmillion awill Phasebe 3due study.upon regulatory approval for ersodetug by any regulatory authority. We record a liability for milestone payments in our financial statements on the date that we achieve the milestone event. The next milestone payment of $25.0 million will be due upon the first regulatory approval of ersodetug by any regulatory authority. Additionally, upon the future commercialization of ersodetug, we will be required to pay royalties to XOMALigand based on the net sales of the related products, and milestone payments up to an additional $185.0 million if future annualnet sales related to ersodetug exceed annual targets ranging from $100.0 million to $1.0 billion. Through June 30, 2025,2026, no events have occurred that would result in thea requirement to make additional milestone payments, and no royalties have been incurred.incurred to date.
In August 2017, we entered into a Development and License Agreement with ActiveSite (the “ActiveSite License Agreement”) with ActiveSite Pharmaceuticals, Inc. (“ActiveSite”) pursuant to which we acquired the rights to ActiveSite’s Plasma Kallikrein Inhibitor program (“PKI Portfolio”). We areinitially planningfocused on the development of RZ402 as a therapy for diabetic macular edema (“DME”). Following the completion of a Phase 2 clinical study for RZ402, we decided to pause the program to focus our resources on ersodetug. We are currently exploring the use of the PKI Portfolio to develop,develop file, manufacture, market and sell productstherapies for diabetic macular edema and other therapeuticdifferent indications. TheTo ActiveSitedate Licensewe Agreementhave requirespaid variousa total of $4.0 million in milestone payments ranging from $1.0 million to $10.0 million when milestone events occur, up to an aggregate of $46.5 million of aggregate milestone payments.ActiveSite. The firstmost recent milestone payment forof $1.0$3.0 million was paidin February 2023 after dosing the first patient in Decembera 2020Phase after2 completionclinical of preclinical work and submission of an IND to the FDAtrial for RZ402. The secondnext milestone payment forof $3.0$5.0 million becamewill be due upon dosing of the first patient in a Phase 23 studyclinical in February 2023.trial. Remaining milestone payments under the ActiveSite License Agreement for various clinical and regulatory milestones amount to $25.0 million and milestones after commercial success or alternative indication approvals amount to $17.5 million. We will also be required to pay royalties equal to 2.0% of any net sales of products that use the PKI Portfolio. Through June 30, 2025,2026, no events have occurred that would result in the requirement to make additional milestone paymentspayments, and no royalties have been incurred.incurred to date.
For the fiscal year ended June 30, 2025, our non-cash expenses of $7.7 million primarily consisted of share-based compensation expense of $7.1 million and non-cash lease expense of $0.5 million. For the fiscal year ended June 30, 2024, our non-cash expenses of $10.8 million primarily consisted of share-based compensation expense of $7.4 million, a loss from change in the fair value of the warrant derivative liability of $2.9 million, and non-cash lease expense of $0.5 million.
For the fiscal year ended June 30, 2025,2026, our non-cash gainsexpenses of $15.1 million primarily consisted of theshare-based netcompensation impactexpense of accreting$14.5 discountsmillion and amortizingnon-cash premiumslease on investments in marketable debt securitiesexpense of $2.4$0.6 million. For the fiscal year ended June 30, 2024,2025, our non-cash gainsexpenses of $7.7 million primarily consisted of theshare-based netcompensation impactexpense of accreting$7.1 discountsmillion and amortizingnon-cash premiumslease on investments in marketable debt securitiesexpense of $2.8$0.5 million.
For each of the fiscal years ended June 30, 2026 and 2025, non-cash gains consisted of the net impact of accreting discounts and amortizing premiums on investments in marketable debt securities of $2.4 million.
For the fiscal year ended June 30, 2026, net changes in operating assets and liabilities increased operating cash flow by $0.3 million, primarily driven by a decrease in prepaid expenses and other assets of $1.5 million associated with prepayments for clinical trials and manufacturing activities, partially offset by a decrease in accounts payable and other accrued liabilities of $1.2 million. For the fiscal year ended June 30, 2025, net changes in operating assets and liabilities offset for a minimal increase in operating cash flow, primarily driven by an increase accounts payable and other accrued liabilities of $2.1 million, partially offset by an increase in prepaid expenses and other assets of $2.1 million associated with prepayments for clinical trials and manufacturing activities. For the fiscal year ended June 30, 2024, net changes in operating assets and liabilities increased operating cash flow by $3.1 million, primarily driven by an increase in accounts payable and other accrued liabilities of $3.2 million, partially offset by an increase in prepaid expenses and other assets of $0.1 million associated with prepayments for clinical trials and manufacturing activities.
For the fiscal year ended June 30, 2026, net cash used in investing activities amounted to $21.1 million, primarily related to cash outflows used to purchase marketable debt securities of $178.2 million, partially offset by the proceeds from maturities of marketable debt securities of $157.1 million. For the fiscal year ended June 30, 2025, net cash used in investing activities amounted to $14.5 million, primarily related to cash outflows used to purchase marketable debt securities of $128.1 million, partially offset by the proceeds from maturities of marketable debt securities of $113.6 million.
For the fiscal year ended June 30, 2025, net cash used in investing activities amounted to $14.5 million, primarily related to cash outflows used to purchase marketable debt securities of $128.1 million, partially offset by the proceeds from maturities of marketable debt securities of $113.6 million. For the fiscal year ended June 30, 2024, our net cash provided by investing activities amounted to $48.7 million, primarily related to the proceeds from maturities of marketable debt securities of $115.1 million, partially offset by cash outflows used to purchase marketable debt securities of $66.4 million.
Net cash provided by financing activities for the fiscal year ended June 30, 2025 amounted to $107.3 million. This amount consisted of (i) proceeds of $97.3 million from the 2025 Underwritten Offering, (ii) proceeds of $6.0 million from the 2024 Private Placement, and (iii) proceeds of $4.2 million from the 2025 Private Placement. For the fiscal year ended June 30, 2025, we also received proceeds of $0.9 million from the exercise of employee stock options to purchase approximately 341,000 shares of common stock and paid $1.1 million for offering costs.
Net cash provided by financing activities of $2.3 million for the fiscal year ended June 30, 20242026 amountedwas primarily attributable to $63.0cash million. This amount consisted of proceeds of $63.1 million from the 2024 Underwritten Offering. For the fiscal year ended June 30, 2024, we also received proceeds of $0.2 millionreceipts from the exercise of employee stock options to purchase approximately 82,000 shares of common stock and paid $0.3 million for offering costs.options.
Net cash provided by financing activities for the fiscal year ended June 30, 2025 amounted to $107.3 million. This amount consisted of (i) proceeds of $97.3 million from the 2025 Underwritten Offering, (ii) proceeds of $6.0 million from the 2024 Private Placement, and (iii) proceeds of $4.2 million from the 2025 Private Placement. For the fiscal year ended June 30, 2025, we also received proceeds of $0.9 million from the exercise of employee stock options and paid $1.1 million for offering costs.
What changed in the latest 10-Q
Risk Factors
New heading “Modifications to the upLIFT trial may fail to produce effective results.”
New heading “The FDA may reject the additional datasets we are preparing in support of the sunRIZE trial.”
Removed heading “The development of ersodetug could be halted or significantly delayed for various reasons”
Removed heading “If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for or commercialize our product candidates.”
Removed heading “Interim, “topline” and preliminary data from clinical trials may change as more data become available, are not necessarily predictive of the final results of the completed study or the results of other ongoing or future studies and are subject to audit and verification procedures that could result in material changes.”
Removed heading “We may become the subject of litigation.”
Largest changes
“Following the release of the results of our sunRIZE trial our stock price suffered a decline. As a result, plaintiffs law firms have announced investigations into potential securities laws violations based on allegations related to the results of the sunRIZE trial. While we believe these allegations are without merit, and no litigation has been commenced to date regarding such allegations, we still face the potential for litigation to be initiated against us. …”see in full comparison
“Interim, “topline” and preliminary data from clinical trials may change as more data become available, are not necessarily predictive of the final results of the completed study or the results of other ongoing or future studies and are subject to audit and verification procedures that could result in material changes.”see in full comparison
“If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for or commercialize our product candidates.”see in full comparison
“The FDA may reject the additional datasets we are preparing in support of the sunRIZE trial.”see in full comparison
“The development of ersodetug could be halted or significantly delayed for various reasons”see in full comparison
Full comparison: every changed paragraph (14)
Our Risk Factor disclosures are set forth in (i) Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 filed with the Securities and Exchange Commission (“SEC”) on September 17, 2025.2025, and (ii) in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2025 filed with the SEC on February 12, 2026. The risk factors included in ourthe 2025 Form 10-K have not materially changed, except as reflected in the following new risk factors:
Modifications to the upLIFT trial may fail to produce effective results.
In an effort to align with FDA guidance and improve the likelihood of demonstrating efficacy, the FDA allowed us to modify the upLIFT trial design. Such modifications include, without limitation to, removing the need to conduct a randomized, double-blind, placebo-controlled trial with hypoglycemia events as the endpoint. However, there can be no guarantees that these modifications are better able to demonstrate drug efficacy or that the upLIFT trial will meet its primary or secondary endpoints.
The FDA may reject the additional datasets we are preparing in support of the sunRIZE trial.
The FDA has expressed a willingness to accept additional datasets as it assesses the results of the sunRIZE trial to chart a path forward. The FDA encouraged us to submit study reports and analysis datasets from sunRIZE for the agency’s independent evaluation. However, there can be no guarantees that the datasets that we submit to the FDA will be acceptable to the FDA as adequate to support a finding of regulatory approval, efficacy or commercialization.
The development of ersodetug could be halted or significantly delayed for various reasons
Ersodetug is vulnerable to the risks of failure inherent in the drug development process. Our sunRIZE trial failed to meet its primary and secondary endpoints, and we may not be able to obtain regulatory approval for commercialization. We will be meeting with the FDA prior to the end of calendar Q1 2026 to discuss the study results and discuss a potential path forward. There can no guarantee of the outcome of our meeting with the FDA and the path forward, if any, which may require us to expend additional capital or to conduct additional studies and clinical trials which we may be unable to do.
If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for or commercialize our product candidates.
Our preclinical studies or early clinical trials of our product candidates, whether conducted by us or third parties, may not necessarily be predictive of the results of later clinical trials that we conduct. For example, despite promising results in our early clinical trials of ersodetug, our sunRIZE trial failed to meet its primary and secondary endpoints. Similarly, even if we are able to complete our planned upLIFT trial, positive results from earlier clinical trial may not be replicated in our subsequent preclinical studies or clinical trials or in real-world results.
Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and we cannot be certain that we will not face further setbacks for any future product candidates. These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or efficacy observations made in preclinical studies and clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA, or comparable non-U.S. regulatory authority approval. Furthermore, the approval policies or regulations of the FDA or comparable non-U.S. regulatory authorities may significantly change in a manner that may render our clinical data insufficient for approval, which may lead to the FDA or comparable non-U.S. regulatory authorities delaying, limiting or denying approval of our product candidates.
Interim, “topline” and preliminary data from clinical trials may change as more data become available, are not necessarily predictive of the final results of the completed study or the results of other ongoing or future studies and are subject to audit and verification procedures that could result in material changes.
From time to time, we may announce, publish or report preliminary, topline or interim data from our clinical trials. Such data are subject to the risk that one or more of the clinical outcomes may materially change as patients continue progressing through the study (for example, in oncology studies, a patient may progress from a complete or partial response to progressive disease), as patient enrollment continues and/or as more patient data become available, and such data may not be indicative of final data from such trials, data from future trials or real-world results. In addition, such data may remain subject to audit confirmation and verification procedures that may result in the final data being materially different from the preliminary, topline or interim data disclosed. As a result, all preliminary, topline and interim data should be viewed with caution until the final data are available. Material adverse differences between preliminary, topline or interim data and final data could significantly harm our business, financial condition, cash flows and results of operations.
We may become the subject of litigation.
Following the release of the results of our sunRIZE trial our stock price suffered a decline. As a result, plaintiffs law firms have announced investigations into potential securities laws violations based on allegations related to the results of the sunRIZE trial. While we believe these allegations are without merit, and no litigation has been commenced to date regarding such allegations, we still face the potential for litigation to be initiated against us. While we would vigorously defend against any such litigation, regardless of outcome, litigation can be costly and time-consuming, divert the attention of our management team, adversely impact our reputation and brand, and if a plaintiff claim were successful, could result in significant liability, all of which could harm our business and financial condition.
Management's Discussion & Analysis (MD&A)
New heading “Expanded Access Program”
New heading “Nine months ended March 31, 2026 and 2025”
Removed heading “Expanded Access Program (“EAP”)”
Removed heading “Six months ended December 31, 2025 and 2024”
Largest changes
“The $4.4 million increase in G&A compensation and benefits was attributable to an increase of $3.3 million in share-based compensation and an increase of $1.1 million in cash-based compensation and benefits. The increase of $1.1 million in cash-based compensation was due to an increase in the average number of G&A employees from 18 for the nine months ended March 31, 2025 to 21 employees for the nine months ended March 31, 2026. …”see in full comparison
“Presented in a table filed on January 7, 2026, on Form 8-K with the U.S. Securities and Exchange Commission are cumulative data from the initial 9 participants in the EAP, including patient characteristics, ersodetug dosing, and observed outcomes. This same data cohort was provided to FDA last year in support of our request for Breakthrough Therapy Designation and subsequently informed the discussion with FDA that led to revision of the Phase 3 upLIFT study in tumor HI to a single arm, open-label study. …”see in full comparison
“The $1.6 million increase in R&D compensation and benefit related costs was attributable to an increase of $0.9 million in share-based compensation, and an increase of $0.7 million in cash-based compensation and benefits. The increase of $0.7 million in cash-based compensation was due to an increase in the average number of R&D employees from 46 for the three months ended December 31, 2024 to 51 employees for the three months ended December 31, 2025. …”see in full comparison
Full comparison: every changed paragraph (84)
We are a late-stage rare disease company focused on developing biologicstherapies that significantlysubstantially improve the quality of life for patientsindividuals living with hyperinsulinism (“HI”) by alleviating the burden of severe and theirdebilitating families.hypoglycemia.
Our priorities for the second half of 2026 are to progress our two Phase 3 programs in congenital and tumor hyperinsulinism (“HI”). Our goals include: (i) achieve alignment with the U.S. Food and Drug Administration (“FDA”) on the path forward in congenital HI,HI following the completion of the sunRIZE study and (ii) complete enrollment in the registrational tumor HI study and (iii) announce topline data fromfor the registrational tumorPhase HI3 upLIFT study.
On December 11, 2025, we announced that the sunRIZE study did not meet its primary (hypoglycemia events) or key secondary (time in hypoglycemia) endpoints. Although statistical significance for the secondary endpoint (% time in hypoglycemia by continuous glucose monitoring [“CGM”]) was not achieved at the Week 24/End of Treatment evaluation window, larger and often nominally statistically significant glycemic improvements compared to placebo were consistently observed throughout the maintenance dosing phase of the study, across time and numerous pre-specified and post-hoc CGM-based endpoints.
On December 11, 2025,While we announced that the sunRIZE study did not meet its primary (hypoglycemia events) or key secondary (time in hypoglycemia) endpoints. The study demonstrated reductions from baseline in events and time in hypoglycemia in both treatment groups, but not enough to be statistically significant compared to the pronounced study effect in the placebo arm. We believe the pronounced placebo/study effect confounded the results, particularlywith fora particular impact on the primary endpoint of hypoglycemia events by self-monitored glucometer,blood butglucose that(“SMBG”) due to accompanying measurement bias, the totality of the data further supports previous clinical evidence that ersodetug is active against hypoglycemia in patients. Specifically, there was evidence of pharmacologic activity, as target therapeutic drug concentrations were achieved in both treatment groups (5 mg/kg and 10 mg/kg) with highly sensitive biomarker responses (increases in circulating insulin) in the active treatment groups that are directly indicative of reduced insulin activity at its receptor, which biologically implies fewer cell-surface glucose transporters, and a resultant increase in blood glucose.
sunRIZE topline data as well as pre-specified and post-hoc data updates were shared by oral presentation at the Pediatric Endocrine Society Annual Meeting held on May 1, 2026, including CGM-based outcomes that demonstrated significant and consistent improvements in glycemic control in ersodetug treatment arms compared to placebo across multiple pre-specified and post-hoc endpoints.
Summary of Key Additional Data Presented
We met with FDA on March 17, 2026, under our Breakthrough Therapy Designation to discuss next steps for this indication. During the meeting, we presented summary results from sunRIZE including: (i) information to support our belief that the primary endpoint was confounded as a result of behavioral factors; (ii) evidence of pharmacologic activity; (iii) consistent improvements compared to placebo in time in hypoglycemia and a variety of other CGM-based glycemic endpoints, as discussed above; and (iv) preliminary favorable observations from the ongoing open-label extension (“OLE”).
WhileBased additionalon analysesour are ongoing, initialanalyses, observations from sunRIZE inform our belief that the pharmacologic response demonstrates therapeutic activity, which may behave been obscured by the unblinded nature of patient-monitoredSMBG hypoglycemianecessary endpoint,for andpatient hypoglycemia-avoidantstandard confoundingof behaviors.care, along with perceptions of treatment assignment. The magnitude of the placebo response observed for hypoglycemia events by SMBG was a surprise to usunexpected and reveals a significant challenge in studying glucose in an ambulatory setting, where intensivereal-time visits andglycemic monitoring is inevitable and can independently influence outcomes, particularly when the patient-monitored glucose is simultaneously the safety lifeline for patient and families.
During the meeting, FDA acknowledged the challenges posed by the potential impact of varied behavioral factors on clinical trials in this heterogeneous patient population, including the associated limitations of SMBG based metrics in measuring hypoglycemia in congenital HI. While acknowledging these challenges, the agency reiterated the expectation for adequate and well-controlled studies and outcomes as the standard for evaluating substantial evidence of efficacy criteria as the basis for approving new therapies.
As a next step for the program, FDA encouraged us to submit comprehensive analysis datasets and summary outcomes for the agency’s independent evaluation. Following that review, we believe that a determination may be made whether there is sufficient evidence to support the submission of a marketing application for sunRIZE or if additional information and/or clinical studies are required, which could have an impact on our operating plans and cash resources. We expect to have an update on the program in the second half of 2026.
All 59 participants who completed the study elected to continue to receive ersodetug in the OLE. To date, 57 participants remain in the OLE, with an exposure duration ranging from ~6 months for the most recently entered patients, to ~24 months. Preliminary OLE observations demonstrate continued glycemic benefit, including a clinically significant change in glycemic control in the rolled-over placebo participants compared to the controlled period of the study. These glycemic benefits have enabled a concurrent significant overall reduction in background SOC therapies (e.g., diazoxide, somatostatin analogs, and/or regular tube feeds), with a significant number of patients now receiving ersodetug as monotherapy, which we believe is a potential indicator of ersodetug’s underlying efficacy.
In light of these limitations, assessing the potential benefit in the ongoing open-label extension (“OLE”) portion of the study will be important, including blood glucose levels in the placebo group following roll-over to ersodetug. All 59 participants who completed the study elected to continue to receive ersodetug in the OLE. To date, 57 participants remain in the OLE, with an exposure duration ranging from ~3 months for the most recently entered patients, to ~21 months. We believe that a potential indicator of ersodetug’s underlying efficacy is an observed reduction in overall background standard of care (“SOC”) therapies in the OLE, including several children who have discontinued SOC and tube feeds and are now receiving ersodetug as monotherapy.
We will be meeting with the FDA prior to the end of calendar Q1 2026 under our Breakthrough Therapy Designation to further characterize these and other clinical outcomes to discuss the full sunRIZE dataset and next steps for this indication. FDA may require additional clinical studies in order to advance the program, which would have an impact on our operating plans and cash resources.
The Phase 3 sunRIZE study (RZ358-301) was a multi-center, randomized, double-blind, placebo-controlled, parallel arm study designed to evaluate the efficacy and safety of ersodetug in patients with congenital hyperinsulinism (“HI”),HI, ages 3 months to 45 years old, who were experiencing continued hypoglycemia on currently available SOC. Eligible participants were randomized to one of three treatment arms to receive either ersodetug (5 or 10 mg/kg) or matched placebo-control as add on to existing SOC. The initial 8 infant participants (ages 3 months – 1 year old) were enrolled open-label but subsequent participants in this age range could be enrolled into the double-blind randomized, controlled trial (“RCT”). Study drug was administered every other week during an initial loading phase, and then every 4 weeks during the 24-Week controlled pivotal treatment period. Following the pivotal treatment phase of the study, participants could roll-over into an optional open-label extension phase to continue to receive ersodetug.
Congenital HI is the most common cause of recurrent and persistent hypoglycemia in children. Individuals with congenital HI typically present with signs or symptoms of hypoglycemia shortly after birth. Hypoglycemia can result in significant brain injury and death if not recognized and managed appropriately. Additionally, recurrent, or cumulative, hypoglycemia can lead to progressive and irreversible damage over time, including serious and devastating brain injury, seizures, neuro-developmental problems, feeding difficulties,difficulties and significant impact on patient and family quality of life. In cases where individuals have diffuse disease, a near-total pancreatectomy (“NTP”) may be undertaken, although ongoing medical treatment of hypoglycemia is generally required for several years after surgery, before eventual insulin-dependent diabetes ensues. There are no FDA approved therapies for all forms of congenital HI, and the current standard of care treatments are suboptimal. The treatments used by physicians today include glucagon, diazoxide, somatostatin analogues and pancreatectomy. We estimate that in the U.S. alone, the initial addressable pediatric market for congenital HI is more than 1,500 individuals. We believe this addressable population will increase with the elimination of near-total pancreatectomy (“NTP”) and use of ersodetug in patients on diazoxide who experience side effects or are partially responsive.
Ersodetug has received Orphan Drug Designation in the U.S. and European Union for the treatment of congenital HI, as well as Rare Pediatric Disease Designation in the U.S., a prerequisite for a request for a Rare Pediatric Disease Priority Review Voucher upon Biologics License Application (“BLA”) submission. Based on the multinational Phase 2b clinical trial outcomes and the evidence of benefit in this serious condition with substantial unmet medical need, ersodetug was subsequently granted a priority medicines (“PRIME”) designation by the European Medicines Agency (“EMA”), an Innovation Passport designation by the UK Innovative Licensing and Access Pathway (“ILAP”) Steering Group for the treatment of congenital HI, and Breakthrough Therapy Designation by the FDA in the U.S.
In mid-2025 we initiated the Phase 3 registrational study (“upLIFT”) of ersodetug for the treatment of hypoglycemia due to tumor HI. ToplineThe Company anticipates completing enrollment and announcing topline results from the study are anticipated to be available in the second half of calendar 2026, but the specific date of the availability of such results may vary.2026.
At a meeting held with FDA on August 19, 2025, the agency agreed to modifications to the design of the upLIFT study including removing the need to conduct a randomized, double-blind, placebo-controlled trial with hypoglycemia events as the endpoint. The truncatedstreamlined upLIFT study is a Phase 33, registrational, single-arm, open-label, pivotal trial in as few asapproximately 16 participants with insulinoma or paraneoplastic non-islet cell tumors, who are requiringrequire continuous parenteral dextrose because of refractory hypoglycemia. Eligible participants requiring continuous parenteral dextrose will receive ersodetug 9 mg/kg per week for 8 weeks, as an add-on to standard of care. Following this 8-week pivotal treatment period, all participants may receive ersodetug in long-term extension, with the discretion to decrease the dosing frequency to every 2 to 4 weeks. The primary endpoint is the numberproportion of participants able to achieve at least a 50 percent reduction from baseline in the rate of continuous parenteral dextrose (glucose infusion rate; “GIR”), where 60%statistical significance would be achieved if the lower bound of participantsthe would95% needconfidence interval of the point estimate exceeds 30% (equating to reacha theresponder endpointrate toof be~9 consideredof statistically16 significant.participants). Additional endpoints include the time to discontinuation of glucose infusion, time to discharge from the hospital, extent of hypoglycemia events and hypoglycemia time in the outpatient setting by SMBG and CMG, respectively, and patient reported quality of life.
Expanded Access Program (“EAP”)
We maintain an EAP for a variety of HI indications for the purpose of making ersodetug available on a compassionate use basis when available therapeutic options have failed, and an individual’s hypoglycemia is unmanageable. In clinical and real-world experience, ersodetug has been shown to counteract excessive insulin action downstream, at the insulin-receptor on target organs. The unique mechanism of action of ersodetug makes the therapy a potential universal treatment for any form of HI. To date, we have received over 30 unsolicited inbound physician inquiries regarding the use of ersodetug in patients with tumor HI caused by metastatic insulinomas or non-islet cell tumors, which has thus far resulted in the request, approval, and initiation of ersodetug in 15 ICT and NICT patients. In the U.S., these requests have all been individually approved by the FDA's Office of Cardiology, Hematology, Endocrinology and Nephrology - Division of Diabetes, Lipid Disorders, and Obesity (“Division”). The tumor HI patients that have received ersodetug have been refractory to SOC therapies for chronic management of hypoglycemia. These patients have generally required continuous intravenous dextrose or nutritional infusion in order to prevent severe hypoglycemia and were typically hospitalized and in life-threatening or hospice-bound condition at the time of request. Further treatment with tumor-directed therapies (e.g., embolization, radiotherapy, chemotherapy) was often deferred as a result of debilitating hypoglycemia.
Generally, dosing for tumor HI patients has been either 6 mg/kg or 9 mg/kg every 1-4 weeks. Nearly universally, ersodetug has led to substantial reductions in GIR (equating to an improvement in hypoglycemia) and has been well tolerated. Within a relatively short period of time after administration of ersodetug, GIR was discontinued or substantially reduced, and hospitalized patients were able to be discharged and receive maintenance ersodetug doses on an outpatient basis, with durable benefit. In several cases, other background medical therapies to prevent hypoglycemia were able to be weaned or stopped, and patients were able to resume tumor-directed therapies for treatment of their underlying cancer. No participants have discontinued the therapy due to lack of response or safety, and the duration of treatment has ranged from several months to almost 2 years in some instances, in this subset of tumor HI patients with significantly advanced and metastatic tumor burden.
Presented in a table filed on January 7, 2026, on Form 8-K with the U.S. Securities and Exchange Commission are cumulative data from the initial 9 participants in the EAP, including patient characteristics, ersodetug dosing, and observed outcomes. This same data cohort was provided to FDA last year in support of our request for Breakthrough Therapy Designation and subsequently informed the discussion with FDA that led to revision of the Phase 3 upLIFT study in tumor HI to a single arm, open-label study. In summary, 75% of the patients receiving IV dextrose/total parenteral nutrition (“TPN”) in the EAP achieved a complete discontinuation of IV dextrose/TPN.
This outcome is highly relevant to the ongoing upLIFT study and provides additional evidence of the activity and potential efficacy of ersodetug across various forms of HI. Notably, the GIR assessment in the EAP is the primary endpoint in upLIFT, which measures the number of participants (out of ~16) who achieve at least a 50% reduction in GIR, an objective endpoint in a highly controlled hospital setting. For statistical significance, 60% of open-label participants need to achieve this threshold. Topline results are anticipated in the second half of 2026.
Current therapies for insulinomas and NICTs can be grouped into two main categories: (a) tumor-directed de-bulking therapies (e.g., surgery, chemotherapy, radiotherapy), which may indirectly and/or eventually lead to decreased levels of circulating insulin and/or insulin-like substances, and therefore control HI and related hypoglycemia; and/or (b) medical therapies such as Diazoxide and glucocorticoids that are used to attempt to treat the hypoglycemia. Tumor-directed therapies do not directly treat hypoglycemia caused by insulinomas or NICTs. In many cases, tumor-directed therapies are administered concurrently with medical therapies for hypoglycemia and in other cases successful treatment of hypoglycemia often enables the initiation and/or continuation of tumor-directed therapies, as indicated. During the period from diagnosis to surgical treatment, or if surgery is contraindicated or refused, medical treatments are often necessary to directly manage the HI and hypoglycemia induced by the tumor. Additionally, chronic medical management of refractory hypoglycemia is often necessary for patients who cannot be cured by surgery, such as those with extensive disease of the pancreas, multi-focal insulinomas, inoperable or unresectable benign or malignant insulinomas, metastatic insulinomas, non-pancreatic insulinomas,insulinomas or NICT hypoglycemia resulting from a variety of other tumors.
Expanded Access Program
We maintain an expanded access program (“EAP”) for a variety of HI indications for the purpose of making ersodetug available on a compassionate use basis when patients have refractory hypoglycemia and cannot access a clinical trial. In clinical and real-world experience, ersodetug has been shown to counteract excessive insulin action downstream, at the insulin-receptor on target organs. The unique mechanism of action of ersodetug makes the therapy a potential universal treatment for any form of HI. To date, we have received numerous inbound physician inquiries regarding the use of ersodetug in patients with tumor HI caused by metastatic insulinomas or non-islet cell tumors, which led to compassionate use treatment in an expanded access program in more than a dozen patients. In the U.S., these requests have all been individually approved by the FDA’s Office of Cardiology, Hematology, Endocrinology and Nephrology - Division of Diabetes, Lipid Disorders, and Obesity. The tumor HI patients that have received ersodetug have been refractory to SOC therapies for chronic management of hypoglycemia. These patients have generally required continuous parenteral dextrose in order to prevent severe hypoglycemia and were typically hospitalized and in life-threatening or hospice-bound condition at the time of request. Further treatment with tumor-directed therapies (e.g., embolization, radiotherapy, chemotherapy) was often deferred as a result of debilitating hypoglycemia.
Generally, dosing for tumor HI patients in the EAP has been either 6 mg/kg or 9 mg/kg every 1-4 weeks. Nearly universally, ersodetug has led to substantial reductions in GIR (equating to an improvement in hypoglycemia) and has been well tolerated. After initiation of ersodetug, GIR was discontinued or substantially reduced, and hospitalized patients were able to be discharged and receive maintenance ersodetug doses on an outpatient basis, with durable benefit. In several cases, other background medical therapies to prevent hypoglycemia were able to be weaned or stopped, and patients were able to resume tumor-directed therapies for treatment of their underlying cancer. No participants have discontinued the therapy due to lack of response or safety, and the duration of treatment has ranged from several months to almost 2 years in some instances, in this subset of tumor HI patients with significantly advanced and metastatic tumor burden.
Presented in a table filed on January 7, 2026, on Form 8-K with the SEC are cumulative data from the initial 9 participants in the EAP, including patient characteristics, ersodetug dosing and observed outcomes. This same data cohort was provided to FDA last year in support of our request for Breakthrough Therapy Designation and subsequently informed the discussion with FDA that led to revision of the upLIFT study in tumor HI to a single arm, open-label study. In summary, 75% of the patients receiving IV dextrose/total parenteral nutrition (“TPN”) in the EAP achieved a complete discontinuation of IV dextrose/TPN.
Concurrent with the announcement on December 11, 2025 that our Phase 3 sunRIZE clinical trial did not meet its primary endpoint, management approved a reduction in workforce to conserve cash by reducing overall operating expenses based on our changing needs. We reduced our workforce by 29 employees on December 15, 2025. We incurred approximately $1.5 million of one-time severance expenses in the second quarter of fiscal year 2026 consisting of $0.9 million of research and development expense and $0.6 million in general and administrative expenseexpense. in the three and six months ended December 31, 2025. All of the $1.5 million of one-timeTotal severance benefits is included as an accrued liability on the condensed consolidated balance sheet as of December 31, 2025 and included in operating expenses on the condensed consolidated statement of operations for the three and six months ended December 31, 2025. The accrued liability of $1.5 million waswere paid in full to the affected employees in January 2026 and no remaining liabilityobligations related to the one-time severance benefits remain at the issuance dateas of theMarch unaudited31, condensed consolidated financial statements.2026.
We have not generated any meaningful revenuesrevenue since our inception in March 2010. Over the last several years, we have conducted private placements and public offerings to raise additional capital, adopted a licensing model to pursue development of product candidates, conducted pre-clinical and clinical trials, and conducted other research and development activities on our pipeline of product candidates.
Research and development expenses. Research and development (“R&D”) expenses consist primarily of cash and share-based compensation and employee benefits forrelated ourto personnel engaged in R&D activities, clinical trial costs, licensing costs, and consulting and outside services. Our R&D compensation costs include an allocable portion of our cash and share-based compensation, employee benefits, and consulting costs related to personnelservices engaged in the design and development of our product candidates and other scientific research projects. WeOur R&D costs also allocateinclude aan allocable portion of our facilities and overhead costs based on the personnel and other resources devoted to R&D activities.
General and administrative expenses. General and administrative (“G&A”) expenses consist primarily of (i) an allocable portion of our cash and share-based compensation and employee benefits related to personnel engaged in our administrative, finance, accounting,accounting and executive functions,functions. and (ii) an allocable portion of our facilities and overhead costs related to such personnel.Our G&A expenses also include professional fees for business development, legal, auditing, consulting, investor relations andrelations, other costs primarily related to our status as a public company.company, and an allocable portion of our facilities and overhead costs based on personnel and other resources devoted to G&A activities.
Loss from change in fair value of derivative liabilities. We recognize liabilities for financial instruments that are required to be accounted for as derivatives, as well as embedded derivatives in our debt agreements. Derivative liabilities are adjusted to fair value at the end of each reporting period until the contracts are settled, expire,expire or otherwise meet the conditions for equity classification. Changes in fair value are reflected as a gain or loss in our unaudited condensed consolidated statements of operations and comprehensive loss.
With respect to our significant accounting policies that are described in Note 1 to our consolidated financial statements included in Item 8 of ourthe 2025 Form 10-K, we believe that the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.
We measure the fair value of services received in exchange for grants of share-based awards based on the fair value of the award as of the grant date. We compute the fair value of the stock option awards with time-based vesting using the Black-Scholes-Merton option-pricing model and recognize the cost of the equity awards over the period that services are provided to earn the award. For stock option awards that contain a graded vesting schedule, and the only condition for vesting is a service condition, compensation cost is recognized on a straight-line basis over the requisite service period as if the award was, in substance, a single award. We recognize the impact of forfeitures in the period that the forfeiture occurs, rather than estimating the number of awards that are not expected to vest in accounting for share-based compensation. For stock options that are voluntarily surrendered, all unrecognized compensation is immediately recognized in the period the options are cancelled. Fair value of restricted stock units (“RSUs”) is based on the closing market price on the date of grant whereby compensation cost is recognized ratably over the vesting period of the RSUs.
Revenue. As a late-stage rare disease company, we did not generate any revenue for the three and sixnine months ended DecemberMarch 31, 20252026 and 2024.2025. We are at a late stage of clinical development and do not currently have any commercial products. Our existing product candidates will require extensive additional clinical evaluation, regulatory review, significant marketing efforts and substantial investment before they generate any revenues. We do not expect to be able to generate revenue from any of our product candidates until we obtain regulatory approval and commercialize our approved product candidates.
Three months ended DecemberMarch 31, 20252026 and 20242025
Research and development expenses. R&D expenses for the three months ended DecemberMarch 31, 20252026 and 20242025 were as follows (in thousands, except percentages):
The increase in total R&D expenses of $1.7 million for the three months ended December 31, 2025 was attributable to increases of $1.6 million in R&D compensation and benefits, one-time severance benefits of $0.9 million, and an increase of $0.8 million in other R&D costs related to quality and patient affairs costs related to the phase 3 clinical studies. These increases amount to $3.3 million and were partially offset by a decrease of $1.6 million related to ersodetug program costs.
The $1.6 million increase in R&D compensation and benefit related costs was attributable to an increase of $0.9 million in share-based compensation, and an increase of $0.7 million in cash-based compensation and benefits. The increase of $0.7 million in cash-based compensation was due to an increase in the average number of R&D employees from 46 for the three months ended December 31, 2024 to 51 employees for the three months ended December 31, 2025. The $0.9 million of one-time severance benefits related to employees who were terminated on December 15, 2025 in connection with a management implemented workforce reduction.
The $1.6 million decrease in ersodetug R&D costs was driven by a decrease of $2.9 million due to lower spending on drug substance and drug product manufacturing, including decreases in activity surrounding process performance qualification batch productions. This $2.9 million decrease was partially offset by (i) an increase of $1.0 million in clinical trial costs for our congenital HI phase 3 clinical study, which had 57 participants continuing on the open-label extension as of December 31, 2025, and (ii) an increase of $0.3 million in clinical costs due to startup activities in 2025, such as site activations, for the Phase 3 upLIFT study. For the three months ended December 31, 2024, there were de minimis clinical costs incurred for tumor HI related program spend as the Phase 3 upLIFT study had yet to be initiated and clinical costs for the Phase 3 sunRIZE study were lower as we did not complete enrollment of patients until May 2025.
General and administrative expenses. G&A expenses for the three months ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):
The increasedecrease in total GR&AD expenses of $5.4$3.9 million for the three months ended DecemberMarch 31, 20252026 was attributable to ana increasedecrease of $3.1$3.9 million related to ersodetug program costs and a decrease of $0.3 million in other GR&AD costs related to businesspreclinical and other pipeline development andcosts. marketThese researchdecreases amount to $4.2 million and planningwere activitiespartially inoffset preparation for future ersodetug commercial activities,by an increase of $1.7$0.3 million in GR&AD compensation and benefits, and one-time severance benefits of $0.6 million.benefits.
The $1.7 million increase in G&A compensation and benefit related costs was attributable to an increase of $1.1 million in share-based compensation and an increase of $0.6 million in cash-based compensation and benefits. The increase of $0.6 million in cash-based compensation was due to an increase in the average number of G&A employees from 18 for the three months ended December 31, 2024 to 24 employees for the three months ended December 31, 2025. The $0.6 million of one-time severance benefits related to employees who were terminated on December 15, 2025 in connection with a management implemented workforce reduction.
Interest and other income. Interest and other income amounted to $1.4 million for the three months ended December 31, 2025, compared to $1.3 million for the three months ended December 31, 2024. This increase of $0.1 million was primarily due to the higher average balance of investments in marketable debt securities throughout the three months ended December 31, 2025 compared to the three months ended December 31, 2024. The impact of higher investments in marketable debt securities was partially offset by lower yields in 2025 as the weighted average yield on interest-earning assets held by us decreased from 4.82% on December 31, 2024 to 4.06% on December 31, 2025.
Income taxes. For the three months ended December 31, 2025 and 2024, we did not recognize any income tax benefit due to our net losses, and our determination that a valuation allowance was required for all of our deferred income tax assets.
Six months ended December 31, 2025 and 2024
Research and development expenses. R&D expenses for the six months ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):
The increase in total R&D expenses of $2.1 million for the six months ended December 31, 2025 was attributable to increases of $2.9 million in R&D compensation and benefits, an increase of $1.5 million in other R&D costs related to quality and patient affairs costs related to the phase 3 clinical studies, and $0.9 million for one-time severance benefits. These increases amount to $5.3 million and were partially offset by a decrease of $3.2 million related to ersodetug program costs.
The $2.9 million increase in R&D compensation and benefit related costs was attributable to an increase of $1.6 million in cash-based compensation and benefits and an increase of $1.3 million in share-based compensation. The increase of $1.6 million in cash-based compensation was due to an increase in the average number of R&D employees from 44 for the six months ended December 31, 2024 to 52 employees for the six months ended December 31, 2025. The $0.9 million of one-time severance benefits related to employees who were terminated on December 15, 2025 in connection with a management implemented workforce reduction.
The $3.2$3.9 million decrease in ersodetug R&D costs was driven by (i) a decrease of $6.0$3.7 million due to lowerthe spendingtiming onof drug substance and drug product manufacturing, including decreases in activity forsurrounding process performance qualification batch productions.productions, This(ii) $6.0 milliona decrease was partially offset by (i) an increase of $1.5$0.1 million in clinical trial costs for ourthe congenital HI phasePhase 3 clinical sunRIZE study, which had 57 participants continuing on the open-label extension as of DecemberMarch 31, 2025,2026, and (iiiii) ana increasedecrease of $1.3$0.1 million in clinical costs due to startup activities in 2025, such as site activations, related tofor the Phase 3 upLIFT study. For the sixthree months ended DecemberMarch 31, 2024,2025, there were de minimishigher clinical costs incurred for startup activities, such as site activations, for the tumor HI related program spend for the Phase 3 upLIFT study had yet to be initiated and clinical costs for the Phase 3 sunRIZE study were lowerhigher asdue weto didthe not completeongoing enrollment of patients untilwhich fully enrolled in May 2025.
General and administrative expenses. G&A expenses for the six months ended December 31, 2025 and 2024 were as follows (in thousands, except percentages):
The increase in total G&A expenses of $7.9 million for the six months ended December 31, 2025 was attributable to an increase of $4.5 million in other G&A costs related to business development and market research and planning activities in preparation for future ersodetug commercial activities, an increase of $2.8 million in G&A compensation and benefits, and one-time severance benefits of $0.6 million.
The $2.8$0.3 million increase in GR&AD compensation and benefit related costsbenefits was attributable to an increase of $1.8$1.0 million in share-based compensation for stock options and anRSUs increasegranted, partially offset by a decrease of $1.0$0.7 million in cash-based compensation and benefits. The increasedecrease of $1.0$0.7 million in cash-based compensation was due to ana increasedecrease in the average number of GR&AD employees from 1848 for the sixthree months ended DecemberMarch 31, 20242025 to 2336 employees for the sixthree months ended DecemberMarch 31, 2025. The $0.6 million of one-time severance benefits related to employees who were terminated on December 15, 2025 in connection with a management implemented workforce reduction.2026.
General and administrative expenses. G&A expenses for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):
The increase in G&A expenses of $1.2 million for the three months ended March 31, 2026 was attributable to an increase of $1.6 million in G&A compensation and benefits, partially offset by a decrease of $0.4 million in other G&A costs. The $1.6 million increase in G&A compensation and benefits was attributable to an increase of $1.5 million in share-based compensation and an increase of $0.1 million in cash-based compensation and benefits for market adjustments.
The decrease of $0.4 million in other G&A costs was due to pausing certain business development, market research and planning activities in preparation for future ersodetug commercial activities to allow for continued discussions with the FDA regarding the sunRIZE topline results.
Interest and other income. Interest and other income amounted to $3.1$1.2 million for the sixthree months ended DecemberMarch 31, 2025,2026, compared to $2.9$1.1 million for the sixthree months ended DecemberMarch 31, 2024.2025. This increase of $0.2$0.1 million was primarily due to the higher average balance of investments in marketable debt securities throughoutfor the sixthree months ended DecemberMarch 31, 20252026 compared to the sixthree months ended DecemberMarch 31, 2024.2025. The impact of higher investments in marketable debt securities was partially offset by lower yields in 20252026 as the weighted average yield on interest-earning assets held by us decreased from 4.82%4.7% on DecemberMarch 31, 20242025 to 4.06%3.9% on DecemberMarch 31, 2025.2026.
Income taxes. For the sixthree months ended DecemberMarch 31, 20252026 and 2024,2025, we did not recognize any income tax benefit dueattributable to our net losses,loss and our determination thatbecause a valuation allowance was required for all of our deferred income tax assets.
Nine months ended March 31, 2026 and 2025
RZLT insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-02 | Karnawat Sunil Ratilal |
Shares withheld for tax | 2,267 | $4.50 | $10.2K |
| 2026-07-02 | Roberts Brian Kenneth |
Shares withheld for tax | 3,062 | $4.99 | $15.3K |
| 2026-07-02 | Elam Nevan C |
Shares withheld for tax | 8,004 | $4.99 | $39.9K |
| 2026-07-02 | Evans Daron |
Shares withheld for tax | 3,062 | $4.99 | $15.3K |
Well-known investors holding RZLT (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| D. E. Shaw & Co. | 2026-06-30 | 1,839,357 | $9.6M | 0.01% | Added 4% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 1,007,962 | $5.2M | 0.0% | Added 27% |
| Millennium Management (Israel Englander) | 2026-06-30 | 517,234 | $2.7M | 0.0% | Reduced 66% |
| Two Sigma Investments | 2026-06-30 | 431,073 | $2.2M | 0.0% | Reduced 48% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 98,490 | $512.1K | 0.0% | Reduced 15% |
| Renaissance Technologies | 2026-06-30 | 157,711 | $481.0K | — | Sold out |