Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following management’s discussion and analysis of financial condition and results of operations in conjunction with our consolidated financial statements and notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section of this Annual Report on Form 10-K titled “Risk Factors” and elsewhere in this report. You should carefully read the “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section of this report titled “Special Note Regarding Forward-Looking Statements.”
Overview
We are a clinical-stage biopharmaceutical company dedicated to the development of novel therapeutics for high unmet medical needs, including treatment-resistant metastatic breast cancer and amyotrophic lateral sclerosis (“ALS”), with the goal of improving patients’ lives.
Following a review of potential therapeutic and business opportunities, we acquired rights to a promising late-stage asset, lasofoxifene, for the potential treatment of ESR1-mutated (“mESR1”) metastatic breast cancer in December 2025. This late-stage program has generated promising clinical data and we believe it represents a unique and exciting opportunity to diversify our pipeline. We believe this program fits well with our later-stage clinical development experience, and complements our in-house asset, ATH-1105, a Phase-2 ready program for the potential treatment of ALS.
The drug development landscape in both oncology and neuroscience is evolving rapidly, driven by breakthroughs in genetics, disease biology, and molecular pathway research. We are leveraging this scientific momentum to advance a pipeline of innovative, late-stage assets both internally developed and strategically in-licensed with the goal of accelerating their path to market and maximizing their clinical and commercial impact.
Our lead drug candidates, lasofoxifene and ATH-1105 , are novel, small molecule therapies with the potential to address devastating diseases where current treatment options are limited or ineffective. With a strong commitment to scientific excellence and patient-centered innovation, we aim to advance meaningful new therapies that are designed to treat patients with treatment-resistant metastatic breast cancer and ALS.
LeonaBio’s Pipeline
Figure 1 below illustrates the current development stage of our proprietary drug candidates and early discovery and development programs, of which only lasofoxifene and ATH-1105 are currently in clinical development. Each program targets unmet needs in either oncology or neurology, leveraging differentiated mechanisms of action supported by preclinical and clinical evidence. Lasofoxifene, a selective estrogen receptor modulator (“SERM”), is currently being evaluated in an ongoing registrational Phase 3 trial for metastatic breast cancer with ESR1 mutations. ATH-1105, a small-molecule positive modulator of the neurotrophic HGF system, has completed a first-in-human Phase 1 trial, and planning for a Phase 2 clinical trial for the treatment of ALS is underway. We aim to advance these programs with a focus on disciplined clinical strategy and execution, data-driven decision making, and potential commercialization following receipt of applicable regulatory approvals. We are exploring the use of our drug candidates that enhance the neurotrophic HGF system, including ATH-1020, with the goal of improving neuronal health and function
in multiple neurological diseases. In addition, our drug discovery efforts have focused on designing and testing new early compounds directed towards novel targets for a variety of clinical applications.
Figure 1. Summary of Our Preclinical and Clinical Programs.
We were incorporated in March 2011 and since our inception, we have devoted substantially all of our resources to our research and development efforts such as small molecule compound discovery, nonclinical studies and clinical trials, as well as manufacturing activities, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations. We do not have any drug products approved for commercial sale, and we have not generated any revenues related to our drug products since inception. Our ability to generate drug product revenue sufficient to achieve profitability, if ever, will depend on the successful development of one or more of our drug candidates which we expect will take a number of years.
We are focused on the development of small molecule therapeutics which enables us to use well-established and widely available manufacturing processes and infrastructure, formulation processes and drug administration technologies or devices. We do not currently operate our own facilities for manufacturing, storing, or distributing our drug candidates. We utilize third-party CMOs to manufacture and supply our preclinical and clinical materials during the development of our drug candidates. We believe the synthesis of lasofoxifene and ATH-1105 is reliable and reproducible and the synthetic methods can be further optimized to enable large-scale production that continues to avoid use of toxic materials or specialized equipment or handling during the manufacturing process. We plan to continue to optimize the manufacturing process to support future large-scale and commercial supply that may be needed. Our goal is to identify and develop small molecule drug candidates that are cost-effective to manufacture and easily transferable to third party CMOs. We expect to use similar contract resources for commercialization of our drug products, at least until our resources and operations are at a scale that justifies investment in internal manufacturing capabilities.
To date, we have funded our operations primarily through proceeds from the sale of equity securities, including proceeds from the sale and issuance of common stock in our IPO, in a subsequent follow-on public offering and in our December 2025 private placement, the sale and issuance of convertible preferred stock, common stock warrants, and convertible notes, and to a lesser extent from grant income and stock option exercises. From inception to December 31, 2025, we have raised aggregate net cash proceeds of approximately $489.8 million primarily from the issuance of our common stock (excluding option exercises), convertible preferred stock, common stock warrants, and convertible notes. We have incurred significant operating losses to date. Our net losses were $105.6 million and $96.9 million for the years ended
December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $511.8 million and cash, cash equivalents and investments of $88.3 million.
We expect to continue to incur operating losses for the foreseeable future as we:
continue to advance lasofoxifene, ATH-1105 and any other drug candidates through preclinical studies and clinical trials;
advance our pipeline of drug candidates;
continue to invest in our drug development programs;
continue manufacturing activities;
attract, hire and retain personnel;
obtain, maintain, expand, protect and enforce our intellectual property portfolio;
operate as a public company;
maintain our laboratory and office facilities;
implement and maintain operational, financial and management information systems; and
seek regulatory approval for any drug candidates that successfully complete clinical trials.
Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
We will require substantial additional funding to support our continuing operations and further the development of our drug candidates. Until such time as we can generate significant revenue from drug product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, which could include income from collaboration, licensing or similar arrangements, for the foreseeable future. Adequate funding may not be available when needed or on terms acceptable to us, or at all. If we are unable to raise additional capital as needed, we may have to significantly delay, scale back or discontinue development of our drug candidates or other operations. Our ability to raise additional funds may be negatively impacted by potential adverse global economic conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our drug product development programs, commercialization efforts or other operations. Insufficient liquidity may also require us to relinquish rights to drug candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. We cannot assure you that we will ever be profitable or generate positive cash flows from operating activities. Based upon our current operating plan, we estimate that our existing cash, cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months following the date of this report.
Recent Developments
December 2025 Private Placement Financing
In December 2025, in connection with our entry into the Sermonix License and the Ligand Agreement, we entered into a securities purchase agreement (the “PIPE Securities Purchase Agreement”) with a select group of investors, including Commodore Capital LP ("Commodore"), TCG Crossover Management LLC ("TCGX"), Perceptive Life Sciences Master Fund, Ltd, Perceptive Xontogeny Venture Fund II, LP (together with Perceptive Life Sciences Master Fund, Ltd, “Perceptive”) and other accredited investors, one of which is affiliated with a member of our board of directors (collectively, the “PIPE Purchasers”), pursuant to which we issued and sold, by way of a private placement which closed on December 23, 2025 (the “Private Placement”), an aggregate of (a) 5,356,547 shares of our common stock, (b) pre-funded warrants to purchase 8,816,684 shares of our common stock and (c) accompanying warrants to purchase 23,031,494 shares of our common stock and/or shares underlying pre-funded warrants and (d) accompanying warrants
to purchase 21,259,842 shares of our common stock and/or shares underlying pre-funded warrants. Gross proceeds from the Private Placement were approximately $90 million, excluding placement agent fees and offering expenses.
Workforce Reduction
On September 15, 2024, we committed to a workforce reduction that resulted in the termination of approximately 70% of our workforce. We took this step to decrease our costs, extend our cash runway, and create a more streamlined organization to support our strategic priorities, including the continued development of ATH-1105. We substantially completed the Restructuring by December 31, 2024. See Note 14 to our consolidated financial statements included elsewhere in this report for additional information.
Components of Operating Results
Operating Expenses
Research and Development
Research and development expenses consist primarily of direct and indirect costs incurred for our research activities, including our drug discovery efforts and the development of our drug candidates, including lasofoxifene and ATH-1105. Direct costs include laboratory materials and supplies, contracted research and manufacturing, clinical trial costs, consulting fees, and other expenses incurred to sustain our research and development program. Indirect costs include personnel-related expenses, consisting of employee salaries, related benefits, and stock-based compensation expense for employees engaged in research and development activities, and facilities and other expenses consisting of direct and allocated expenses for rent and depreciation, and lab consumables.
We expense research and development costs as incurred. Non-refundable advance payments for goods and services that will be used over time for research and development are capitalized and recognized as goods are delivered or as the related services are performed. In-licensing fees and other costs to acquire technologies used in research and development that have not yet received regulatory approval and that are not expected to have an alternative future use are expensed when incurred. We track direct costs by stage of program, clinical or preclinical. However, we do not track indirect costs on a program specific basis because these costs are deployed across multiple programs and, as such, are not separately classified.
We cannot reasonably determine the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our drug candidates, including lasofoxifene or ATH-1105. Drug candidates in later stages of development generally have higher development costs than those in earlier stages. We expect to continue to incur increased research and development expenses for the foreseeable future as we continue to engage in research and development activities related to developing our drug candidates, including lasofoxifene and ATH-1105, our drug candidates advance into later stages of development, we conduct larger clinical trials, we seek regulatory approvals for any drug candidates that successfully complete clinical trials, we expand or advance our drug product pipeline, we maintain, expand, protect and enforce our intellectual property portfolio, and we incur expenses associated with hiring or retaining personnel to support our research and development efforts.
The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our drug candidates is highly uncertain. Our research and development expenses may vary significantly based on factors such as:
research and development activities related to lasofoxifene and ATH-1105;
the number and scope of preclinical and IND-enabling studies;
the phases of development of our drug candidates;
the progress and results of our research and development activities;
per subject trial costs;
the number of trials required for regulatory approval;
the number of sites included in the trials;
the countries in which the trials are conducted;
the length of time required to enroll eligible subjects and initiate clinical trials;
the number of subjects that participate in the trials;
the drop-out and discontinuation rate of subjects;
potential additional safety monitoring requested by regulatory agencies;
the duration of subject participation in the trials and follow-up;
the cost and timing of manufacturing of our drug candidates;
the receipt of regulatory approvals from applicable regulatory authorities;
the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
the hiring and retention of research and development personnel;
the degree to which we obtain, maintain, defend and enforce our intellectual property rights;
the impact of health epidemics on timelines and clinical operations, which may lead to increased costs; and
the extent to which we establish collaborations, licensing or similar arrangements and the performance of any related third parties.
A change in the outcome of any of these variables with respect to the development of any of our drug candidates could significantly change the costs and timing associated with the development of that drug candidate.
General and Administrative
General and administrative expenses consist primarily of personnel-related costs, consisting of employee salaries, related benefits, and stock-based compensation expense for our employees in the executive, legal, finance and accounting, human resources, and other administrative functions. General and administrative expenses also include third-party costs such as legal costs, insurance costs, accounting, auditing and tax related fees, business development fees, consulting fees and facilities and other expenses not otherwise included as research and development expenses. We expense general and administrative costs as incurred.
We expect to continue to incur general and administrative expenses for the foreseeable future as we maintain our headcount to support our continued research activities and development of our programs. We also anticipate that we will continue to incur expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, and those of any national securities exchange on which our securities are traded, legal, auditing, additional insurance expenses, investor relations activities, and other administrative and professional services.
Other Income, Net
Other income, net consists primarily of interest earned on our cash, cash equivalents and investments and the amortization of premiums and accretion of discounts on our available-for-sale securities. Absent further fundraising, we expect interest earned on our cash, cash equivalents and investments to decrease over the next several quarters as we continue to expend our cash balances to fund our ongoing operations.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
The following table summarizes our results of operations for the periods presented:
Year Ended December 31,
Dollar
Change
Change
(in thousands)
Operating expenses:
Research and development
Acquired in-process research and development
General and administrative
Legal expense
Total operating expenses
Loss from operations
Other income, net
Sermonix pre-funded warrant change in fair value
Net loss
Research and Development Expenses
The following table shows the primary components of our research and development expenses for the periods presented:
Year Ended December 31,
Dollar
Change
Change
(in thousands)
Direct costs:
Acquired in-process research and development
Lasofoxifene
Fosgonimeton (ATH-1017)
ATH-1105
ATH-1020
Preclinical programs and other direct costs
Total direct costs
Indirect costs:
Personnel-related costs, including stock-
based compensation
Facilities and other costs
Total research and development expenses
Research and development expenses increased by $14.9 million, from $70.7 million for the year ended December 31, 2024 to $85.6 million for the year ended December 31, 2025. The increase was driven primarily by acquired in-process research and development costs related to our license of lasofoxifene. Refer to Note 3 to our consolidated financial statements included elsewhere in this report for further discussion of this cost. Additionally there were costs associated with the ELAINE-3 trial for lasofoxifene in 2025. This increase was primarily offset by reductions in spend related to ATH-1017 and ATH-1105 in 2025 compared to 2024, as well as smaller reductions in spend related to ATH-1020 and other preclinical programs and direct costs. The decrease in ATH-1017 costs of $39.2 million were driven by decreases in contract research organization, other third party vendors and clinical site visit costs of $30.0 million following the completion of our Phase 2/3 LIFT-AD clinical trial and the conclusion of our corresponding open-label extension for our Phase 2 ACT-AD and Phase 2/3 LIFT-AD clinical trials in the prior year and a decrease in contract manufacturing costs of $7.0 million. The decrease in ATH-1105 costs of $5.5 million were driven by decreases in contract research organization, other third party vendors and clinical site visit costs of $3.0 million following the completion of the Phase 1 study at the end of 2024 and a decrease in research and development costs of $1.6 million.
General and Administrative Expenses
General and administrative expenses decreased by $9.4 million, from $26.1 million for the year ended December 31, 2024 to $16.7 million for the year ended December 31, 2025. The decrease was primarily due to a decrease in professional services expenses of $5 million, and a decrease in personnel-related expenses of $7.1 million as we operated in 2025 with fewer employees than 2024 as we pursued our strategic alternative review process.
Legal Expense
In connection with the Department of Justice investigation, we recorded a legal expense of $4.1 million during the year ended December 31, 2024. No additional legal expense was incurred in 2025 related to this matter.
Other Income, Net
Other income, net, decreased by $2.7 million, from $4.0 million for the year ended December 31, 2024 to $1.2 million for the year ended December 31, 2025 due to lower income from accretion of discounts on debt securities purchased below par value and held to maturity and lower interest income earned on our available-for-sale securities. These decreases resulted from lower balances of available-for-sale securities held during the year ended December 31, 2025 compared to the year ended December 31, 2024.
Sermonix Pre-Funded Warrant Change in Fair Value
Sermonix pre-funded warrant change in fair value increased by $4.6 million, from $0 million for the year ended December 31, 2024 to $4.6 million for the year ended December 31, 2025. Refer to Note 4 to our consolidated financial statements included elsewhere in this report for further discussion.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have funded our operations primarily with proceeds from the sale and issuance of common stock, convertible preferred stock, common stock warrants, prefunded common stock warrants and convertible notes, and to a lesser extent from grant income and stock option exercises. From our inception through December 31, 2025, we have raised aggregate net cash proceeds of approximately $489.8 million primarily from the issuance of our common stock (excluding option exercises), convertible preferred stock, common stock warrants, prefunded common stock warrants and convertible notes, and as of December 31, 2025, we had $88.3 million in cash, cash equivalents and investments.
On December 18, 2025, we entered into the PIPE Securities Purchase Agreement with a select group of investors, including Commodore, TCGX, Perceptive and other accredited investors, one of which is affiliated with a member of our board of directors, pursuant to which the PIPE Purchasers agreed to purchase and we agreed to issue and sell, by way of the Private Placement, an aggregate of (a) 5,356,547 shares (the “PIPE Initial Shares”) of our common stock and (b) pre-funded warrants (the “PIPE Pre-Funded Warrants”) to purchase 8,816,684 shares of our common stock (the “PIPE Pre-Funded Warrant Shares”) and (c) accompanying warrants (the “PIPE Series A Common Warrants”) to purchase 23,031,494 shares of our common stock and/or shares underlying pre-funded warrants, representing 162.5% of the aggregate of PIPE Initial Shares and the shares of our common stock underlying the PIPE Pre-Funded Warrants (the shares, or the shares issuable pursuant to such pre-funded warrants, the “PIPE Series A Common Warrant Shares”) and (d) accompanying warrants (the “PIPE Series B Common Warrants” and, together with the PIPE Series A Common Warrants and the PIPE Pre-Funded Warrants, the “PIPE Warrants”, and the PIPE Warrants, together with the PIPE Initial Shares, the “PIPE Securities”) to purchase 21,259,842 shares of our common stock and/or shares underlying pre-funded warrants, representing 150% of the aggregate of PIPE Initial Shares and the shares of our common stock underlying the PIPE Pre-Funded Warrants (the shares, or the shares issuable pursuant to such pre-funded warrants, the “PIPE Series B Common Warrant Shares” and, together with the PIPE Initial Shares, the PIPE Pre-Funded Warrant Shares and the PIPE Series A Common Warrant Shares, the “PIPE Shares”). The purchase price for each PIPE Initial Share (including the accompanying PIPE Series A Common Warrants and PIPE Series B Common Warrants) was $6.35 and the purchase price for each PIPE Pre-Funded Warrant (including the accompanying PIPE Series A Common Warrants and PIPE Series B Common Warrants) was $6.349 per each underlying PIPE Pre-Funded Warrant Share. Gross proceeds from the Private Placement were approximately $90 million, excluding placement agent fees and offering expenses. The closing of the Private Placement (the “Private Placement Closing”) occurred on December 23, 2025.
At the Private Placement Closing, we entered into a registration rights agreement (the “PIPE Registration Rights Agreement”) with the PIPE Purchasers pursuant to which we are required to prepare and file a registration statement with the SEC to register the resale of the PIPE Shares within 30 calendar days after the date of the Private Placement Closing, and to use reasonable best efforts to have the registration statement declared effective at the earliest possible date but no later than the earlier of (a) 75 calendar days after the filing date if the SEC notifies us that it will review the registration statement and (b) the fifth business day after we are notified by the SEC that the registration statement will not be reviewed or will not be subject to further review. If we fail to meet certain of the requirements in the PIPE Registration Rights Agreement following the Private Placement Closing, we will pay liquidated damages to the PIPE Purchasers as provided in the PIPE Registration Rights Agreement.
The PIPE Pre-Funded Warrants are exercisable at an exercise price of $0.001 per share, subject to customary adjustments under the terms thereof and are exercisable at any time, subject to the restriction discussed below. The PIPE Series A Common Warrants have an exercise price of $6.35 per share to be paid in cash (unless a resale registration statement is unavailable at the time of exercise, in which case the PIPE Series A Common Warrants will be exercisable on a cashless net exercise basis), subject to adjustments as provided therein, and will be exercisable, subject to the restrictions discussed below, after the earlier of (1) the latest of (a) June 30, 2026, (b) the date on which we publicly announce, by means of a widely disseminated press release or a Current Report on Form 8-K, the enrollment of the 500th subject or the last subject, whichever is earlier, in the ELAINE-3 trial; provided that the total enrollment will be no less than 500 subjects unless the study's Data Safety Monitoring Board recommends stopping enrollment at an earlier time or unless the FDA permits a different number for subject enrollment in a protocol amendment; and (c) the date on which the FDA approves or issues a complete response letter to Eli Lilly & Co.'s marketing application, including a supplement to a new drug application, for imlunestrant in combination with abemaciclib in breast cancer, and (2) October 31, 2026 ( the “Series A Common Warrant Initial Exercise Date”). The PIPE Series A Common Warrants will remain exercisable until the 30th day following the Series A Common Warrant Initial Exercise Date (the “Series A Common Warrant Termination Date”), except that if the Series A Common Warrant Initial Exercise Date has not occurred by December 23, 2030, then December 23, 2030 will be the Series A Common Warrant Termination Date. The PIPE Series B Common Warrants have an exercise price of $7.62 per share payable on a cashless net exercise basis, subject to adjustments as provided therein, and will be exercisable, subject to the restrictions discussed below, after the later of (1) June 30, 2026 and (2) the date of the completion of the public readout of topline results of the ELAINE-3 trial (the later of (1) and (2), the “Series B Common Warrant Initial Exercise Date”). The PIPE Series B Common Warrants will remain exercisable until the 30th day following the Series B Common Warrant Initial Exercise Date (the “Series B Common Warrant Termination Date”), except that if the Series B Common Warrant Initial Exercise Date has not occurred by December 23, 2030, then December 23, 2030 will be the Series B Common Warrant Termination Date.
None of the PIPE Pre-Funded Warrants, the PIPE Series A Common Warrants or the PIPE Series B Common Warrants can be exercised if, immediately prior to or following such exercise, the applicable PIPE Purchaser, together with its affiliates and any other persons whose beneficial ownership of shares of our common stock would be aggregated with the PIPE Purchaser for purposes of Section 13(d) of the Exchange Act, would beneficially own more than 4.99%, 9.99% or 19.99%, at the election of the PIPE Purchaser (in each case, the “PIPE Maximum Percentage”) of the total number of issued and outstanding shares of our common stock following such exercise. If, upon exercise of the PIPE Series A Common Warrants or PIPE Series B Common Warrants, a PIPE Purchaser would exceed the PIPE Maximum Percentage, then the PIPE Series A Common Warrants and PIPE Series B Common Warrants may be exercised for pre-funded warrants to purchase shares of our common stock, which pre-funded warrants will have terms substantially the same as the PIPE Pre-Funded Warrants. The PIPE Maximum Percentage may be increased or decreased by a PIPE Purchaser with 61 days’ written notice to us; provided, however, that such percentage may in no event exceed (x) 19.99% prior to a vote of our stockholders approving the removal of such exercise limitation or (y) with respect to certain PIPE Purchasers, 4.99%.
We will use the net proceeds from the Private Placement for working capital and will not use such proceeds for (1) the repayment of borrowed debt, (2) to redeem any shares of our common stock or any of our securities that would entitle the holder thereof to acquire at any time shares of our common stock, subject to certain exceptions, (3) for the settlement of any litigation that is outstanding as of the Private Placement Closing, and (4) to in-license or develop a drug candidate other than lasofoxifene or any drug or drug candidate in our pipeline as of the Private Placement Closing until the earlier of such time as the topline results of ELAINE-3 become available and the second anniversary of the effective date of the PIPE Securities Purchase Agreement.
Since our inception, we have not generated positive cash flows from operations and we have devoted substantially all of our resources to our research and development efforts such as small molecule compound discovery, nonclinical studies and clinical trials, as well as manufacturing activities, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.
Material Cash and Future Funding Requirements
Our material cash requirements include our operating leases for laboratory and office facilities. As of December 31, 2025, we had lease payment obligations of $0.9 million, with $0.5 million payable within 12 months. For additional information regarding our lease commitments, see Note 7 to our consolidated financial statements included elsewhere in this report. Additionally, we have purchase obligations and open purchase orders that support normal operations and are primarily due in the next 12 months. We also have payment obligations to certain third-party service providers that total approximately $4.0 million, that are primarily due in the near term. These purchase obligations and open purchase orders are generally cancellable in full or in part through the contractual provisions. We expect to continue to incur increased research and development expenses for the foreseeable future as we continue to engage in research and development activities related to developing our drug candidates, including lasofoxifene and ATH-1105, our drug candidates advance into later stages of development, we conduct larger clinical trials, we seek regulatory approvals for any drug candidates that successfully complete clinical trials, we expand or advance our drug product pipeline, we maintain, expand, protect and enforce our intellectual property portfolio, and we incur expenses associated with hiring or retaining personnel to support our research and development efforts We expect to continue to incur increased general and administrative expenses for the foreseeable future as we support our continued research activities and development of our programs.
Based upon our current operating plan, we estimate that our $88.3 million of cash, cash equivalents and investments at December 31, 2025 will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months following the date of this report. We will need to raise substantial additional capital to fund the development of our drug candidates. Until such time as we can generate significant revenue from drug product sales, we expect to finance our operations through the sale of equity securities, debt financings, or other capital, which could include income from collaboration, licensing or similar arrangements with third parties, or receiving research contributions, or grants. For example, in January 2023, we entered into a sales agreement with Cantor Fitzgerald and BTIG to sell shares of our common stock having aggregate sales proceeds of up to $75.0 million, from time to time, subject to any applicable limitations on sales pursuant to SEC rules and regulations, through an ATM equity offering program under which Cantor Fitzgerald and BTIG are acting as sales agents. As of the date of this report, we have not sold any securities pursuant to this ATM offering. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or grant licenses on terms that may not be favorable to us or may reduce the value of our common stock. Adequate funding may not be available when needed or on terms acceptable to us, or at all. Our ability to raise additional funds may be negatively impacted by potential adverse global economic
conditions and disruptions to, and volatility in, the credit and financial markets in the United States and worldwide. If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our drug product development programs, commercialization efforts or other operations. Insufficient liquidity may also require us to relinquish rights to drug candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. We cannot assure you that we will ever be profitable or generate positive cash flows from operating activities.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of biotechnology products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
the scope, timing, progress and results of our ongoing preclinical studies and clinical trials of our drug candidates;
the number of trials required for regulatory approval;
the willingness of the FDA, EMA and any other regulatory agencies to accept lasofoxifene or ATH-1105 clinical trial data, as well as data from any completed and planned clinical and nonclinical studies and other work, as the basis for review and approval of lasofoxifene for breast cancer and ATH-1105 for ALS, and the potential need for additional clinical trials;
the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials of other drug candidates that we may pursue;
our ability to establish and maintain collaborations, licensing or other similar arrangements, and the financial terms of any such arrangements, including the timing and amount of any future milestone, royalty or other payments due thereunder;
the costs, timing and outcome of regulatory review of our drug candidates;
the costs and timing of future commercialization activities, including drug product manufacturing, marketing, sales and distribution, for any of our drug candidates for which we receive marketing approval;
the revenue, if any, received from commercial sales of our drug candidates for which we receive marketing approval;
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;
the costs related to any legal proceedings;
any expenses needed to attract, hire and retain skilled personnel;
the costs of operating as a public company;
the costs associated with any expansion of our laboratory and office facilities; and
the extent to which we acquire or in-license other companies’ product candidates and technologies or engage in other strategic transactions.
A change in the outcome of any of these or other factors with respect to the development of any of our drug candidates could significantly change the costs and timing associated with the development of that drug candidate. Furthermore, our operating plan may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plan.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
(in thousands)
Net cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash, cash equivalents and
restricted cash
Operating Activities
During the year ended December 31, 2025, net cash used in operating activities was $45.7 million. This consisted primarily of a net loss of $105.6 million, offset by non-cash charges of $79.3 million and a decrease in our net operating assets of $19.4 million. The non-cash charges primarily consisted of acquired in-process research and development, stock-based compensation expense, depreciation expense, and amortization of premiums and accretion of discounts on our available-for-sale securities. The decrease in our net operating assets was primarily due to a decrease in accrued liabilities and payment of Sermonix assumed liabilities.
During the year ended December 31, 2024, net cash used in operating activities was $97.2 million. This consisted primarily of a net loss of $96.9 million, partially offset by non-cash charges of $11.7 million and an increase in our net operating assets of $12.0 million. The non-cash charges primarily consisted of stock-based compensation expense, depreciation expense, and amortization of premiums and accretion of discounts on our available-for-sale securities. The increase in our net operating assets was primarily due to a decrease in the accrual for legal settlement expenses related to the securities class action litigation and a net decrease in accounts payable and accrued expenses, partially offset by decreases in prepaid expenses and other current and long-term assets, and the insurance recovery receivable related to the securities class action litigation.
Investing Activities
During the year ended December 31, 2025, net cash used in investing was $15.9 million. This consisted of purchases of available-for-sale securities of $38 million, partially offset by maturities of available-for-sale securities of $22 million.
During the year ended December 31, 2024, net cash provided by investing was $54.8 million. This consisted of maturities of available-for-sale securities of $69.0 million, partially offset by purchases of available-for-sale securities of $14.1 million and property and equipment of less than $0.1 million.
Financing Activities
During the year Ended December 31, 2025, net cash provided by financing activities was $82.5 million, consisting primarily of net proceeds from the Private Placement financing.
During the year ended December 31, 2024, net cash provided by financing activities was $0.2 million, consisting of proceeds received from participation in the Company's employee stock purchase plan and exercises of stock options.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Research and Development Costs
Research and development expenses consist primarily of direct and indirect costs incurred for research activities, including development of the pipeline from the Company’s drug discovery efforts and the development of its drug candidates. Direct costs include laboratory materials and supplies, contracted research and manufacturing, clinical trial costs, consulting fees, and other expenses incurred to sustain the Company’s research and development program. Indirect costs include personnel-related expenses, consisting of employee salaries, related benefits, and stock-based compensation expense for employees engaged in research and development activities, and facilities and other expenses consisting of direct and allocated expenses for rent and depreciation and lab consumables.
Research and development costs, including costs associated with our clinical trials, are expensed as incurred. In-licensing fees and other costs to acquire technologies used in research and development that have not yet received regulatory approval and that are not expected to have an alternative future use are expensed when incurred. Non-refundable advance payments for goods and services that will be used over time for research and development are capitalized and recognized as goods are delivered or as the related services are performed. We estimate the period over which such services will be performed and the level of effort to be expended in each period. If actual timing of performance or the level of effort varies from the estimate, we will adjust the amounts recorded accordingly. We have not experienced any material differences between accrued or prepaid costs and actual costs since inception.
Acquired in-process research and development costs represent amounts incurred to acquire externally developed in-process research and development (“IPR&D”) projects in transactions other than business combinations when the acquired assets have no alternative future use. These costs are expensed as incurred. Amounts included in acquired in-process research and development consist of upfront cash payments, equity instruments issued as consideration, contingent consideration that meets the criteria for recognition, and liabilities incurred to acquire the rights to the underlying IPR&D projects.
In connection with the asset acquisition from Sermonix in December 2025, we recorded $68.1 million of acquired IPR&D expense, consisting of various components of consideration measured at fair value on the acquisition date. Included in this amount were the Sermonix Pre-Funded Warrant, valued at $32.9 million, and a liability-classified contingent milestone payment, valued at $15.1 million. These instruments required significant estimates and judgment in determining their respective fair values on the acquisition date and at December 31, 2025, due to the use of unobservable inputs and are classified in Level 3 of the fair value hierarchy.
The Sermonix Pre-Funded Warrant was redeemable prior to obtaining the Sermonix Stockholder Approval and as a result, is classified as a liability and measured at fair value at the acquisition date and each subsequent reporting period, with changes recognized in earnings. We estimate fair value with reference to the market value of our common stock on the measurement date, adjusted for a discount for lack of marketability (DLOM) to reflect the inability to exercise until stockholder approval is obtained, which exposes the holder to interim changes in our stock price. In selecting the DLOM, we consider the expected time to stockholder approval, estimated volatility of our common stock price, and the risk‑free rate. The Sermonix Stockholder Approval was obtained on March 18, 2026 and, as a result, the Sermonix Pre-Funded Warrant is no longer redeemable.
The valuation of the Sermonix Pre‑Funded Warrant requires significant judgment and is sensitive to movements in our stock price and to assumptions used in determining the DLOM. Different reasonable assumptions could have resulted in a materially different amount of acquired IPR&D expense at the acquisition date, as well as gains or losses recognized in our consolidated statement of operations and comprehensive loss upon recurring fair value remeasurement.
The first contingent milestone payment due to Sermonix under the agreement may be settled in cash or a variable number of shares equal to a fixed monetary amount and is therefore classified as a liability and measured at fair value at the acquisition date and each subsequent reporting period, with changes recognized in earnings. We estimate the fair value using a probability‑weighted present value of the expected net milestone payment, which incorporates our assumptions regarding the cumulative probability of achieving the milestone across the remaining phases of development and approval, expected timing of the payment, and a weighted average cost of capital to discount expected cash flows.
The valuation of the milestone liability requires significant judgment and is sensitive to changes in assumed probabilities, expected timing of payment, and, to a lesser extent, the discount rate. Different reasonable assumptions could have resulted in a materially different amount of acquired IPR&D expense at the acquisition date, as well as gains or losses recognized in our consolidated statement of operations and comprehensive loss upon recurring fair value remeasurement.
Stock-based Compensation
We maintain a stock-based compensation plan as a long-term incentive for employees, non-employee directors and consultants. The plan allows for the issuance of incentive stock options, non-qualified stock options, restricted stock units, and other forms of equity awards.
We recognize stock-based compensation expense for stock options on a straight-line basis over the requisite service period and account for forfeitures as they occur. Our stock-based compensation costs for stock options are based upon the grant date fair value of options estimated using the Black-Scholes option pricing model. To the extent any stock option grants are made subject to the achievement of a performance-based milestone, management evaluates when the achievement of any such performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date.
The Black-Scholes option pricing model utilizes inputs which are highly subjective assumptions and generally require significant judgment. These assumptions include:
Fair Value of Common Stock . The fair value of each share of common stock is based on the closing price of the Company’s common stock on the date of grant, or other relevant determination date, as reported on The Nasdaq Capital Market.
Risk-Free Interest Rate . The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.
Expected Volatility . Because we were previously privately held and did not have sufficient trading history for our common stock prior to our initial public offering, the expected volatility was estimated based on the average volatility for comparable publicly traded life sciences companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on the similar size, stage in life cycle or area of specialty. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.
Expected Term . The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term), as we have limited history of relevant stock option exercise activity.
Expected Dividend Yield . We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.
See Note 10 to our consolidated financial statements included elsewhere in this report for more information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options. Certain of such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.
We recorded stock-based compensation expense of $6 million and $11.0 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, there was $4.5 million of total unrecognized stock-based compensation expense related to non-vested stock options which we expect to recognize over a remaining weighted-average period of 2.49 years. We expect to continue to grant stock options and other equity-based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.
Income Taxes
We recognize deferred income taxes for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. In evaluating our valuation allowance, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Due to our lack of earnings history and uncertainties surrounding our ability to generate future taxable income, the net deferred tax assets have been fully offset by a valuation allowance.
As of December 31, 2025, we had $9.5 million of federal NOL carryforwards and $17.2 million of tax credit carryforwards which expire over a period of 6 to 12 years. As of December 31, 2025, we had $259.8 million of such NOLs that do not expire. As of December 31, 2025, we also had state net operating loss carryforwards of $5 million, which expire over a period of 17 to 20 years.
Under Sections 382 and 383 of the Internal Revenue Code of 1986 (as amended, the "Code'), substantial changes in our ownership may limit the amount of NOL and research and development credit carryforwards that could be used annually in the future to offset taxable income. The tax benefits related to future utilization of federal and state NOL carryforwards, credit carryforwards, and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50% within any three-year period. We have not completed a Section 382/383 analysis under the Code regarding the limitation of NOL and credit carryforwards. If a change in ownership were to have occurred, the annual limitation may result in the expiration of NOL carryforwards and credits before utilization.
We record unrecognized tax benefits as liabilities or reduce the underlying tax attribute, as applicable, and adjust them when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included elsewhere in this report for additional information.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information requested by this item pursuant to Item 305 of Regulation S-K.
Item 8. Financial Statement s and Supplementary Data.
LeonaBio, Inc.
Index to Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 )
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
R eport of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of LeonaBio, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of LeonaBio, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair Value of Milestone Liability — Sermonix License Transaction
Description of the Matter
As discussed in Notes 3 and 4 to the consolidated financial statements, in connection with the Company’s December 2025 license agreement with Sermonix Pharmaceuticals, Inc. (“Sermonix”), the Company recognized a
milestone liability for its contingent obligation to pay Sermonix $50 million in cash or shares upon the first U.S. commercial sale of a licensed product. Auditing the fair value measurement of the milestone liability was challenging due to the significant estimation uncertainty and judgment in determining the probability of milestone achievement.
How We Addressed the Matter in Our Audit
To test the estimated fair value of the milestone liability, we performed audit procedures that included, among others, involving our valuation specialists to assist in evaluating the Company's use of the selected valuation model. In addition, we compared the probability of achievement to published clinical development success-rate data for oncology compounds at comparable stage of development. We also performed a sensitivity analysis of the probability of milestone achievement to evaluate the change in the fair value of the milestone liability resulting from changes in the probability of milestone achievement.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2018.
Seattle, Washington
March 31, 2026
LeonaBio, Inc.
Consolidated B alance Sheets
(in thousands, except share and per share amounts)
December 31,
December 31,
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Prepaid expenses and other current assets
Total current assets
Restricted cash
Property and equipment, net
Operating lease right-of-use asset
Other long-term assets
Total assets
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
Accrued liabilities
Sermonix pre-funded warrant
Current operating lease liability
Total current liabilities
Operating lease liability, less current portion
Milestone liability
Other long-term liabilities
Total liabilities
Stockholders' equity:
Common stock, $ 0.0001 par value; 90,000,000 shares
authorized at December 31, 2025 and December 31, 2024,
respectively; 9,335,913 and 3,904,049 shares issued and
outstanding at December 31, 2025 and December 31, 2024, respectively (1)
Additional paid-in capital
Accumulated other comprehensive (loss) income
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
The accompanying notes are an integral part of these consolidated financial statements.
The Company effected a reverse stock split of its outstanding shares of common stock on September 17, 2025 where every ten shares of its common stock issued and outstanding was converted into one share of common stock. Any fractional post-split shares as a result of the reverse stock split were rounded down to the nearest whole post-split share. Stockholders of the Company previously authorized the Board of Directors to approve a reverse stock split at the Company's annual meeting on May 29, 2025. All share amounts and per share amounts disclosed in this Annual Report on Form 10-K have been restated to reflect the reverse stock split on a retroactive basis in all periods presented.
LeonaBio, Inc.
Consolidated Statements of Ope rations and Comprehensive Loss
(in thousands, except share and per share amounts)
Year Ended December 31,
Operating expenses:
Research and development
Acquired in-process research and development
General and administrative
Legal expense
Total operating expenses
Loss from operations
Other income, net
Sermonix pre-funded warrant change in fair value
Net loss
Unrealized (loss) gain on available-for-sale securities
Comprehensive loss attributable to common stockholders
Net loss per share attributable to common
stockholders, basic and diluted
Weighted-average shares used in computing
net loss per share attributable to common
stockholders, basic and diluted (1)
The accompanying notes are an integral part of these consolidated financial statements.
(1) The Company effected a reverse stock split of its outstanding shares of common stock on September 17, 2025 where every ten shares of its common stock issued and outstanding was converted into one share of common stock. Any fractional post-split shares as a result of the reverse stock split were rounded down to the nearest whole post-split share. Stockholders of the Company previously authorized the Board of Directors to approve a reverse stock split at the Company's annual meeting on May 29, 2025. All share amounts and per share amounts disclosed in this Annual Report on Form 10-K have been restated to reflect the reverse stock split on a retroactive basis in all periods presented.
LeonaBio, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
Accumulated
Common Stock(1)
Additional
Paid-In
Other
Comprehensive
Accumulated
Total
Stockholders’
Shares
Amount
Capital
Income (Loss)
Deficit
Equity
Balance as of January 1, 2024
Issuance of common stock upon exercise of
common stock options
Issuance of common stock upon vesting of
restricted stock units
Issuance of common stock under
employee stock purchase plan
Stock-based compensation
Unrealized gain on available-for-sale securities
Net loss
Balance as of December 31, 2024
Proceeds from PIPE financing, net of underwriters'
discounts and commissions
Issuance of common stock upon exercise of
common stock options
Issuance of common stock upon vesting of
restricted stock units
Issuance of common stock under employee stock purchase plan
Stock-based compensation
Unrealized gain on available-for-sale securities
Net loss
Balance as of December 31, 2025
The accompanying notes are an integral part of these consolidated financial statements.
(1) The Company effected a reverse stock split of its outstanding shares of common stock on September 17, 2025 where every ten shares of its common stock issued and outstanding was converted into one share of common stock. Any fractional post-split shares as a result of the
reverse stock split were rounded down to the nearest whole post-split share. Stockholders of the Company previously authorized the Board of Directors to approve a reverse stock split at the Company's annual meeting on May 29, 2025. All share amounts and per share amounts disclosed in this Annual Report on Form 10-K have been restated to reflect the reverse stock split on a retroactive basis in all periods presented.
LeonaBio, Inc.
Consolidated Statem ents of Cash Flows
(in thousands)
Year Ended December 31,
Operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash consideration for acquired in-process research and development
Change in fair value of Sermonix pre-funded warrant
Stock-based compensation
Depreciation expense
Non-cash lease expense
Amortization of premiums and accretion of discounts on
available-for-sale securities, net
Loss on disposal of equipment
Changes in operating assets and liabilities:
Prepaid expenses and other current and long-term assets, net
Insurance recovery receivable related to legal settlement
Accounts payable and accrued liabilities
Accrued legal settlement
Operating lease liability
Other long-term liabilities
Net cash used in operating activities
Investing activities
Purchases of available-for-sale securities
Maturities of available-for-sale securities
Purchases of property and equipment
Net cash (used in) provided by investing activities
Financing activities
Proceeds from exercise of common stock options and issuance of common stock under employee stock purchase plan
Proceeds from PIPE financing
Issuance costs from PIPE financing
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
The accompanying notes are an integral part of these consolidated financial statements.
LeonaBio, Inc.
Notes to Co nsolidated Financial Statements
1. Description of Business
Organization
LeonaBio, Inc. (the "Company") was incorporated as M3 Biotechnology, Inc. in the state of Washington on March 31, 2011 and reincorporated in the state of Delaware on October 27, 2015 . In April 2019, the Company changed its name to Athira Pharma, Inc and in January 2026 the Company changed its name to LeonaBio, Inc. The Company currently has office and laboratory space in Bothell, Washington. The Company is a clinical-stage biopharmaceutical company dedicated to the development of novel therapeutics for high unmet medical needs, including treatment-resistant metastatic breast cancer and amyotrophic lateral sclerosis.
Liquidity and Capital Resources
Since the Company’s inception, it has funded its operations primarily with proceeds from the sale and issuance of common stock, convertible preferred stock, common stock warrants, prefunded common stock warrants, and convertible notes, and to a lesser extent from grant income and stock option exercises. From the Company’s inception through December 31, 2025, it has raised aggregate net cash proceeds of $ 489.8 million primarily from the issuance of its common stock (excluding option exercises), convertible preferred stock, common stock warrants, prefunded common stock warrants and convertible notes. In December 2025, the Company raised approximately $ 90 million in a Private Placement (as defined below), excluding placement agent fees and offering expenses. See Note 9 for more information.
As of December 31, 2025, the Company had cash, cash equivalents and investments of $ 88.3 million. The Company’s net loss for the year ended December 31, 2025 was $ 105.6 million and cash used in operations for the year ended December 31, 2025 was $ 45.7 million. Since the Company’s inception, it has devoted substantially all of its resources to its research and development efforts such as small molecule compound discovery, nonclinical studies and clinical trials, as well as manufacturing activities, establishing and maintaining the Company’s intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.
Based upon the Company’s current operating plan, it estimates that its $ 88.3 million of cash, cash equivalents and investments at December 31, 2025 will be sufficient to fund its operating expenses and capital expenditure requirements through at least the next 12 months following the date of the Company’s Annual Report on Form 10-K. Historically, the Company has incurred net losses from continuing operations and negative operating cash flows. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs; therefore, the Company expects it will need to continue to raise additional capital to accomplish its operating plan. The Company has a sales agreement in place with Cantor Fitzgerald & Co. and BTIG, LLC for an “at the market” equity offering facility through which it may offer and sell shares of its common stock, however, the Company is currently unable to offer and sell shares under this facility due to its ineligibility to use a Registration Statement on Form S-3 through December 2026. The Company has no t sold any securities pursuant to this ATM offering. Should it be determined to be strategically advantageous, the Company could pursue public and private offerings of its equity securities similar to those the Company has previously completed, debt financings, or other strategic transactions, which could include income from collaboration, licensing or similar arrangements with third parties, or receiving research contributions, or grants.
2 . Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The consolidated financial statements include the operations of LeonaBio, Inc., and its wholly owned Australian subsidiary. All intercompany balances and transactions have been eliminated upon consolidation.
The Company effected a reverse stock split on September 17, 2025 of its outstanding shares of common stock at a ratio of 1-for-10 pursuant to a Certificate of Amendment to the Company's Certificate of Incorporation filed with the Secretary of State of the State of Delaware (the "reverse stock split"). The reverse stock split was reflected on the Nasdaq Capital Market beginning with the opening of trading on September 18, 2025. The reverse stock split did not change the par value of the Company's common stock. The reverse stock split reduced the total number of authorized number of shares of the Company's common stock from 900,000,000 to 90,000,000 and the total number of authorized shares of the Company’s capital from 1,000,000,000 to 190,000,000 . All share amounts and per share amounts disclosed in this Annual Report on Form 10-K have been restated to reflect the reverse stock split on a retroactive basis in all periods presented.
Fair Value Measurements
The Company has certain assets and liabilities that are measured at fair value on a recurring basis according to a fair value hierarchy that prioritizes the inputs, assumptions and valuation techniques used to measure fair value. The three levels of the fair value hierarchy are:
Level 1 —Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 —Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3 —Inputs are generally unobservable and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are determined using model-based techniques, including probability-based simulation methodologies.
The determination of a financial instrument’s level within the fair value hierarchy is based on an assessment of the lowest level of any input that is significant to the fair value measurement. The Company considers observable data to be market data, which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The carrying amounts of certain financial instruments, including cash, cash equivalents, restricted cash, investments, accounts payable and accrued expenses approximate their fair values due to the short-term nature of those amounts.
Cash, cash equivalents and restricted cash
Cash and cash equivalents have a maturity date of less than three months to maturity when acquired by the Company. Restricted cash consists of collateral pledged in connection with the Company's corporate credit cards. The table below reconciles the balances of cash and cash equivalents and restricted cash
reported on the consolidated balance sheets to the balances of cash, cash equivalents and restricted cash reported on the consolidated statements of cash flows.
December 31,
December 31,
Cash and cash equivalents
Restricted cash
Cash, cash equivalents and restricted cash
Short-term Investments
The Company generally invests its excess cash in investment grade short- to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, and short-term investments on the consolidated balance sheets, classified as available-for-sale, and reported at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss). Amortization and accretion are included in other income, net. Realized gains and losses on the sale of these securities are recognized in other income, net.
The Company periodically evaluates whether declines in fair values of its investments below their book value are due to expected credit losses, as well as the Company's ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses are recorded as an allowance through other income, net.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Accounting Standards Codification ("ASC") 480 and ASC 815. This assessment is conducted at the time the warrants are issued and as of each subsequent reporting period while the warrants are outstanding.
For warrants that meet all criteria for equity classification, the warrants are required to be recorded at their initial fair value at the time of issuance, as a component of additional paid-in capital, on the consolidated statement of stockholders’ equity. For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and on each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recorded as a non-cash gain or loss on the consolidated statements of operations and comprehensive loss.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates include those used for fair value of assets and liabilities, fair value of warrant liabilities, fair value of milestone liability, accrued liabilities, valuation allowance for deferred tax assets, and stock-based compensation. Management evaluates related assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates .
Research and Development Expenses
Research and development expenses consist primarily of direct and indirect costs incurred for research activities, including development of the pipeline from the Company’s drug discovery efforts and the development of its drug candidates. Direct costs include laboratory materials and supplies, contracted research and manufacturing, clinical trial costs, consulting fees, and other expenses incurred to sustain the Company’s research and development program. Indirect costs include personnel-related expenses, consisting of employee salaries, related benefits, and stock-based compensation expense for employees
engaged in research and development activities, and facilities and other expenses consisting of direct and allocated expenses for rent and depreciation and lab consumables.
Research and development costs are expensed as incurred. In-licensing fees and other costs to acquire technologies used in research and development that have not yet received regulatory approval and that are not expected to have an alternative future use are expensed when incurred. Non-refundable advance payments for goods and services that will be used over time for research and development are capitalized and recognized as goods are delivered or as the related services are performed. The Company estimates the period over which such services will be performed and the level of effort to be expended in each period. If actual timing of performance or the level of effort varies from the estimate, the Company adjusts the amounts recorded accordingly. The Company has not experienced any material differences between accrued or prepaid costs and actual costs since inception.
Acquired in-process research and development costs represent amounts incurred to acquire externally developed in-process research and development (“IPR&D”) projects in transactions other than business combinations when the acquired assets have no alternative future use. These costs are expensed as incurred. Amounts included in acquired in-process research and development consist of upfront cash payments, equity instruments issued as consideration, contingent consideration that meets the criteria for recognition, and liabilities incurred to acquire the rights to the underlying IPR&D projects.
Asset acquisitions
The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs, and the consideration is allocated to the items acquired based on a relative fair value methodology. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire in-process research and development with no alternative future use is charged to acquired in-process research and development at the acquisition date.
Contingent consideration arrangements
In connection with certain asset acquisitions, the Company may agree to make certain milestone payments to the owners of licensed technology acquired upon the achievement of certain development, clinical and commercial milestones. These obligations may be settled in cash or in the Company’s equity shares.
Contingent consideration payable in cash is first evaluated under ASC 815 to determine whether the arrangement meets the definition of a derivative. If the contingent payment arrangement does not qualify as a derivative under ASC 815, the Company applies the guidance in ASC 450, Contingencies . Under this model, contingent consideration is not included in the cost of the assets acquired until the contingency is resolved. A liability is recognized only when the contingent payment is probable and reasonably estimable.
Contingent consideration that is required or may be settled in the Company’s equity shares is evaluated under ASC 480, Distinguishing Liabilities from Equity , to determine proper classification. Obligations that require or may require the Company to issue a variable number of shares with a monetary value that is fixed, indexed to something other than the Company’s own shares, or based on an obligation to repurchase shares are classified as liabilities under ASC 480.
Contingent consideration arrangements classified as liabilities under ASC 480 are carried at fair value. The Company estimates the fair value by applying a probability-based model that utilizes inputs primarily based upon the achievement and related timing of certain development, clinical and commercial milestones that were unobservable in the market. The estimated fair value of contingent consideration liabilities, initially measured and recorded on the acquisition date, are considered to be a Level 3 fair value measurement and are reviewed quarterly, or whenever events or circumstances occur that indicate a change in fair value. The contingent consideration liabilities are recorded at fair value at the end of each reporting period with
changes in estimated fair values recorded in other income (expense) in the consolidated statements of operations and other comprehensive loss.
Significant changes in any of the probabilities of success or in the probabilities as to the periods in which milestones would be achieved could result in a significantly higher or lower fair value measurement. The Company will continue to adjust the liabilities for changes in fair value until the earlier of the achievement or expiration of the obligations.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, consisting of employee salaries, related benefits, and stock-based compensation expense for employees in the executive, legal, finance and accounting, human resources, and other administrative functions. General and administrative expenses also include third-party costs such as legal costs, insurance costs, accounting, auditing and tax related fees, consulting fees and facilities and other expenses not otherwise included as research and development expenses. General and administrative costs are expensed as incurred.
Leases
The Company adopted Accounting Standards Codification, ("ASC"), Topic 842 – Leases effective January 1, 2020. The Company determines if an arrangement contains a lease at inception. The Company performed an evaluation of contracts in accordance with ASC 842 and has determined it has an operating lease agreement for the laboratory and office facilities that the Company occupies. Operating lease right-of-use ("ROU") assets and operating lease liabilities are recognized at the date the underlying asset becomes available for the Company’s use. Operating lease liabilities are based on the present value of the future minimum lease payments over the lease term. ROU assets are measured at the amount of the lease liability, adjusted for any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. As the Company’s leases generally do not provide an implicit interest rate, the present value of the future minimum lease payments is determined using the Company’s incremental borrowing rate. This rate is an estimate of the collateralized borrowing rate the Company would incur on its future lease payments over a similar term and is based on the information available to the Company at the lease commencement date.
The Company’s leases contain options to extend the leases; lease terms are adjusted for these options only when it is reasonably certain the Company will exercise these options. The Company’s lease agreements do not contain residual value guarantees or covenants.
The Company has made a policy election regarding its real estate leases not to separate non-lease components from lease components, to the extent they are fixed. Non-lease components that are not fixed are expensed as incurred as variable lease expense. The Company’s leases include variable non-lease components, such as common-area maintenance costs. The Company has elected not to record on the balance sheet a lease that has a lease term of 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise. The Company accounts for leases with initial terms of 12 months or less as operating expenses on a straight-line basis over the lease term.
Lease expense is recognized within operating expenses on a straight-line basis over the terms of the leases. Incentives granted under the Company’s facilities lease, including rent holidays, are recognized as adjustments to lease expense on a straight-line basis over the term of the lease.
Stock-based Compensation
The Company measures compensation expense for all stock-based payments to employees, officers and directors based on the estimated fair value of the award at the grant date. For stock options, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model. The grant date fair value of restricted stock units ("RSUs") is based upon the fair market value of the Company’s common stock based on its closing price as reported on the date of grant on the Nasdaq
Capital Market. Compensation expense is recognized over the requisite service period on a straight-line basis. Forfeitures are recognized as they occur.
The Company records compensation expense for stock option and RSU grants subject to performance-based milestone vesting over the remaining implicit service period when management determines that achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date.
Property and Equipment
Property and equipment consist of computer equipment, computer software, laboratory equipment, leasehold improvements and furniture and office equipment. Property and equipment, excluding leasehold improvements, are recorded at cost and depreciation is recognized using the straight-line method based on estimated useful life, generally three to five years . Leasehold improvements are amortized over the shorter of their useful life or the remaining lease term. Maintenance and repairs are charged to expense as incurred, and costs of improvements are capitalized.
The Company reviews long-lived assets for impairment whenever events or circumstances indicate the carrying amount of an asset group may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess of the asset's carrying amount over its fair value. Gains and losses from asset disposals and impairment losses are classified within the consolidated statements of operations and comprehensive loss in accordance with the use of the asset. There were no impairment losses in the years ended December 31, 2025 and 2024 as there have been no events warranting an impairment analysis.
I ncome Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
In assessing the Company’s ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future income, tax planning strategies in making this assessment.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for incomes taxes.
Comprehensive Loss Attributable to Common Stockholders
Comprehensive loss attributable to common stockholders consists of net loss and other gains and losses affecting stockholders’ equity that, under U.S. GAAP, are excluded from net loss. The Company’s comprehensive loss attributable to common stockholders is comprised of net loss and unrealized gains and losses on available-for-sale securities.
Net Loss Per Share Attributable to Common Stockholders
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. Diluted net loss per share attributable to common stockholders is calculated using the more dilutive of the two-class method or treasury method. Diluted net loss per share is the same as basic net loss per share attributable to common stockholders since the effect of potentially dilutive securities is anti-dilutive.
Foreign Currency Transaction Remeasurement Adjustments
Monetary assets and liabilities denominated in foreign currencies were translated into U.S. dollars, the reporting currency, at the exchange rate prevailing at the balance sheet date. Income and expenses denominated in foreign currencies were translated into U.S. dollars at the average exchange rate for the period and the transaction remeasurement adjustments are reported within other income, net in the consolidated statement of operations and comprehensive loss. The functional currency of the Company’s Australian subsidiary is the U.S. dollar.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024 . Early adoption is permitted and the amendments should be applied on a prospective basis. The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures for the year ended December 31, 2025 on a prospective basis.
In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606). Among other things, this ASU refines the scope of Topic 815 to clarify which contracts are subject to derivative accounting. The Company has elected to early adopt this standard prospectively for its annual period ending on December 31, 2025 , with no material impact upon adoption.
3. Asset and License Acquisition
On December 18, 2025 (the “Effective Date”), the Company entered into agreements with Sermonix Pharmaceuticals, Inc. (“Sermonix”) and Ligand Pharmaceuticals Incorporated (“Ligand”), granting the Company exclusive licenses and rights to develop, manufacture and commercialize oral forms of the selective estrogen-receptor modulator known as lasofoxifene in all countries and territories of the world except for Asia and certain countries in the Middle East (the “Retained Territory”).
Sermonix License
Under the Company's license agreement with Sermonix (the "Sermonix License"), the Company received from Sermonix an exclusive (even as to Sermonix), sublicensable license, under relevant patents and know-how owned or in-licensed by Sermonix, to develop, manufacture, commercialize and otherwise
exploit products containing lasofoxifene (the “Licensed Products”) in all countries outside the Retained Territory (the “Licensed Territory”). Such license does not include a sublicense under the patents and know-how that Sermonix previously in-licensed from Ligand because the Company and Ligand entered into a direct license agreement (the “Ligand Agreement”) to replace Sermonix’s license from Ligand with respect to Licensed Products in the Licensed Territory, described in further detail below.
Under the Sermonix License, the Company has the sole right to conduct all development (including regulatory activities), manufacturing and commercialization of Licensed Products in the Licensed Territory, at the Company’s sole cost and expense. The Company is obligated to use commercially reasonable efforts to develop and obtain and maintain regulatory approval for at least one Licensed Product in the Licensed Territory and, following receipt of regulatory approval, to use commercially reasonable efforts to commercialize the applicable Licensed Product in the country of approval. The Company assumed certain of Sermonix’s agreements with third parties that are conducting or supporting the ongoing ELAINE-3 clinical trial of lasofoxifene in the Licensed Territory and certain agreements with third-party contract manufacturers that have been supplying drug substance and drug product for the ELAINE-3 trial. All of Sermonix’s existing inventory of Licensed Product drug substance and drug product was transferred to the Company at no additional cost and the Company agreed to provide a portion of such inventory to Shanghai Henlius Biotech, Inc. ("Henlius") for use in the ELAINE-3 trial in the Retained Territory.
The consideration for the rights granted to the Company under the Sermonix License consists of the following:
Pre-funded warrants to purchase 5,502,402 shares of the Company’s common stock at an exercise price of $ 0.001 per share (the “Sermonix Pre-Funded Warrant”), issued to Sermonix on the Effective Date pursuant to the securities purchase agreement executed between the Company and Sermonix on December 18, 2025 (the “Sermonix Securities Purchase Agreement”),
Assumption of liabilities totaling approximately $ 16.8 million to certain of Sermonix’s third-party service providers for services rendered prior to the Effective Date,
(iii)
Deferred monthly advances payable to Sermonix of $ 75,000 per month, subject to adjustment from time to time upon mutual agreement of the parties. The Company may credit the amount of such monthly payments against all milestone, royalty, and net proceed payments that become due to Sermonix under the Sermonix License, and the Company’s obligation to make such monthly payments will end upon Sermonix’s receipt of the first such milestone, royalty or net proceeds payment.
If the Company or its affiliates achieve certain commercialization or annual net sales milestones with respect to the Licensed Products, the Company will make milestone payments to Sermonix up to a maximum aggregate total of $ 100.0 million. Solely with respect to the first milestone payment of $ 50.0 million due upon the first U.S. commercial sale, the Company may settle such milestone payment in cash or shares of the Company's common stock at the Company’s discretion, with final terms to be negotiated between the parties.
Royalty payments to Sermonix based on the Company’s and its affiliates’ annual net sales of the Licensed Products in the Licensed Territory, with the applicable royalty rates ranging from sub-single digit to low-single digit percentages, subject to customary reductions. Such royalty obligation will expire on a Licensed Product-by-Licensed Product and country-by-country basis on the latest of (i) the expiration of the last valid claim of a patent licensed to the Company by Sermonix that covers such Licensed Product in such country, (ii) the expiration of regulatory
exclusivity of such Licensed Product in such country; and (iii) 10 years after the first commercial sale of such Licensed Product in such country.
If the Company sublicenses or divests its rights to the Licensed Products to a third party, then in lieu of the milestone and royalty payments described above, the Company will pay to Sermonix a percentage of the net proceeds from such sublicensing or divestiture transaction. The applicable percentage is based on the type of payment received by the Company from the third party as well as status of development of the Licensed Products at the time that the sublicense or divestiture transaction is entered into, with rates starting in the high-double digit and decreasing to low-double digit percentages.
(vii)
As consideration for the Company’s payment and other obligations under the Sermonix License, the Company will be eligible to receive from Henlius all milestone and royalty payments that Henlius owes to Sermonix under Sermonix's license agreement with Henlius, other than royalties that Sermonix owes to Ligand on account of Sermonix’s license agreement with Ligand, and with the further exception that, if Henlius and Sermonix later agree to share the costs of developing the Licensed Products in Japan, then the Company will not be entitled to receive Sermonix’s share of income arising from the sublicensing of Japanese rights to the Licensed Product.
The Sermonix License will remain in effect until the Company, its affiliates and its sublicensees are no longer developing or commercializing any Licensed Product in the Licensed Territory. Each party may terminate the Sermonix License in its entirety for the uncured material breach by or insolvency of the other party. The Company may terminate the Sermonix License in its entirety for safety reasons or for convenience at any time after the topline data readout of the ELAINE-3 trial. Upon termination, all rights and licenses granted to Company will revert to Sermonix.
Ligand Agreement
Under the Ligand Agreement, the Company received from Ligand an exclusive (even as to Ligand), sublicensable license, under relevant know-how and certain patents owned or in-licensed by Ligand, to develop, manufacture and sell Licensed Products for oral use in the Licensed Territory. Ligand does not have any restrictions on its ability to develop, manufacture or sell products (other than the Licensed Products) that selectively modulate the estrogen receptor. The Company granted to Ligand a non-exclusive, sublicensable, worldwide license, under the Company’s improvements to Ligand’s licensed technology, to develop, manufacture and sell products containing lasofoxifene for topical and other non-oral uses.
Under the Ligand Agreement, the Company has the sole right to conduct all development (including regulatory activities), manufacturing and commercialization of Licensed Products for oral use in the Licensed Territory, at the Company’s sole cost and expense. The Company is obligated to diligently develop, manufacture and sell oral Licensed Products in the Licensed Territory, to use commercially reasonable efforts to develop oral Licensed Products for treatment of metastatic breast cancer and develop markets for oral Licensed Products in the Licensed Territory, and to obtain all necessary regulatory approvals for its manufacture, use, importation and sale of oral Licensed Products in the Licensed Territory.
The consideration for the rights granted to the Company under the Ligand Agreement consists of the following:
If the Company or its affiliate or sublicensee achieves certain regulatory approval and commercialization milestones with respect to any oral Licensed Product in the Licensed Territory, the Company will make milestone payments to Ligand up to a maximum aggregate
total of $ 4.25 million in regulatory milestones and $ 10.5 million in commercialization milestones per Licensed Product.
Royalty payments to Ligand based on the Company’s and its affiliates’ and sublicensees’ annual net sales of oral Licensed Products in the Licensed Territory, with the applicable royalty rates ranging from mid-single digit to low-double digit percentages, subject to reductions for generic product sales and amounts paid to third parties for certain intellectual property licenses. Such royalty obligation will expire on a Licensed Product-by-Licensed Product and country-by-country basis on the latest of (i) the expiration of the last valid claim of a patent licensed to the Company by Ligand in such country, (ii) the expiration of regulatory exclusivity of such Licensed Product in such country, and (iii) 15 years after the first commercial sale of such Licensed Product in such country.
(iii)
If the Company sublicenses its rights to the oral Licensed Products to a third party, then in addition to the milestone and royalty payments described above, the Company will pay to Ligand a mid-teen percentage of certain amounts received by the Company from such third-party sublicensee.
The Ligand Agreement will remain in effect so long as the Company, its affiliates and its sublicensees are developing, manufacturing, using or commercializing any Licensed Product in the Licensed Territory. Each party may terminate the Ligand Agreement in its entirety for the uncured material breach by or insolvency of the other party. The Company may terminate the Ligand Agreement in its entirety or on a product-by-product or country-by-country basis, prior to regulatory approval, for safety reasons or failure to achieve the primary efficacy endpoint in any clinical trial of a Licensed Product for oral use. Ligand may terminate the Ligand Agreement if the Company or its affiliate or sublicensee challenges the validity or enforceability of any patent licensed to the Company by Ligand. Upon termination, all rights and licenses granted to Company will revert to Ligand and the Company is obligated to transfer to Ligand the Company’s data, regulatory approvals, domain names and trademarks for the oral Licensed Products in the Licensed Territory.
Accounting Treatment
The Company accounted for the transactions as an asset acquisition under ASC 805-50 as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable IPR&D asset. The assets acquired in the transaction were measured based on the estimated fair value of the aggregate consideration of $ 68.1 million. The initial consideration recognized and the fair value of the asset acquired is as follows (in thousands):
Sermonix Pre-Funded Warrant (1)
Assumed liabilities (2)
Milestone liability (3)
Advance liability (4)
Transaction costs
Consideration paid
Assets acquired:
Acquired in-process research and development (5)
Total assets acquired
Reflects the fair value of the Sermonix Pre-Funded Warrant on the Effective Date. See Note 4 for fair value considerations.
Represents approximately $ 16.8 million payable in cash to satisfy certain of Sermonix’s outstanding liabilities owed to third‑party service providers for services rendered in connection with the ELAINE-3 trial prior to the Effective Date.
Of the total milestone payments required under the agreements, the Company is contingently obligated to settle the first milestone due to Sermonix by transferring assets or issuing a variable number of equity shares with a value equal to a fixed monetary amount. As such, the first milestone payment is classified a liability under ASC 480 and the initial fair value on the Effective Date of $ 15.1 million is recognized as part of the initial consideration for the asset acquired. See Note 4 for fair value considerations.
Reflects the initial fair value of the deferred monthly advance of $ 75,000 to be made by the Company to Sermonix, which advances are creditable against all milestone, royalty, and net proceed payments that become due to Sermonix under the Sermonix License.
The cost attributable to the IPR&D was expensed on the Effective Date as the IPR&D has no alternative future use, and is presented as acquired in-process research and development in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2025.
The remaining cash-settled milestone obligations under the Sermonix and Ligand agreements were not recognized as of the Effective Date or as of December 31, 2025 because (i) the arrangements do not qualify as derivatives under ASC 815, and (ii) achievement of the related milestones is not considered probable. Consistent with ASC 450, the Company will recognize the milestone obligations if and when any such milestones become probable and reasonably estimable or when the triggering events occur. Future royalty payments based on annual net sales are exempt from derivative accounting under the ASC 815 scope exception for specified volumes of sales or service revenues.
As consideration for the rights granted to the Company under the Sermonix License on December 18, 2025, the Company issued to Sermonix the Sermonix Pre-Funded Warrant to purchase 5,502,402 shares of the Company’s common stock pursuant to the Sermonix Securities Purchase Agreement.
The Sermonix Pre-Funded Warrant has an exercise price of $ 0.001 per share and are exercisable at any time after the date of approval from the Company’s stockholders as required by Nasdaq, including for purposes of Nasdaq Rule 5635(a), such that the Sermonix Pre-Funded Warrant can be exercised at any time without restriction or additional stockholder approval (the “Sermonix Stockholder Approval”). If the Sermonix Stockholder Approval has not been obtained by the first anniversary of the original issuance of the Sermonix Pre-Funded Warrant, Sermonix shall have the right (the “Sermonix Redemption Right”) at any time and from time to time prior to such time that the Sermonix Stockholder Approval is obtained thereafter, to cause the Company to pay, at the option of Sermonix, an amount up to (a) $ 6.35 (the “Sermonix Redemption Price”) multiplied by (b) the number of shares of common stock with respect to which Sermonix is exercising the Sermonix Redemption Right. The Sermonix Redemption Right shall terminate on the earlier of (1) such time as an aggregate of $ 7.5 million in aggregate Sermonix Redemption Price has been paid by the Company to Sermonix in connection with one or more exercises of the Sermonix Redemption Right; and (2) immediately upon receipt of the Sermonix Stockholder Approval.
As a result of the Sermonix Redemption Right, the Company classified the Sermonix Pre-Funded Warrant as a liability in accordance with ASC 480. Because the redemption feature could require the Company to settle the warrant by transferring assets, the Sermonix Pre-Funded Warrant does not meet the criteria for equity classification.
The Company initially recognized the Sermonix Pre-Funded Warrant at its estimated fair value of approximately $ 32.9 million on the Effective Date of the Sermonix License (See Note 4 for fair value considerations). The Sermonix Pre-Funded Warrant will be remeasured to its fair value each reporting period, with changes in its estimated fair value of the warrants recorded as a non-cash gain or loss on the consolidated statements of operations and comprehensive loss. The Company will reassess the classification of the Sermonix Pre-Funded Warrant at each reporting date.
As of December 31, 2025, the Sermonix Pre-Funded Warrant has not been exercised in full or in part and remains outstanding.
4. Fair Value
The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):
December 31, 2025
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
Money market fund
U.S. government debt and agency
securities
Commercial paper
Total cash equivalents
Short-term investments:
Commercial paper
U.S. government debt and agency
securities
Total short-term investments
Total assets subject to fair value
measurements on a recurring basis
Liabilities:
Sermonix Pre-Funded Warrant
Milestone Liability
Total liabilities subject to fair value
measurements on a recurring basis
December 31, 2024
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
Money market fund
U.S. government debt and agency
securities
Commercial paper
Total cash equivalents
Short-term investments:
Commercial paper
U.S. government debt and agency
securities
Total short-term investments
Total assets subject to fair value
measurements on a recurring basis
U.S government debt and agency securities and commercial paper are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.
The fair value of the Sermonix Pre-Funded Warrant (see Note 3) was determined based on the fair value of the Company’s common stock, adjusted for a discount for lack of marketability, and was classified as Level 3 due to the use of unobservable market data for identical or similar liabilities. The fair value of the Milestone Liability was determined based on the probability weighted present value of the net milestone payment and was classified as Level 3 due to the use of unobservable market data for identical or similar liabilities. The key inputs into the fair value of the Sermonix Pre-Funded Warrant and Milestone Liability at issuance and at December 31, 2025 were as follows:
Sermonix Pre-Funded Warrant
December 31, 2025
December 18, 2025
Fair Value of Common Stock
Volatility
Risk-free rate
Dividend Yield
Holding period years
Milestone Liability
December 31, 2025
December 18, 2025
Weighted Average Cost of Capital
Probability
There were no transfers of financial instruments between Level 1, Level 2, and Level 3.
The following table sets forth a summary of the changes in the fair value of the Sermonix Pre-Funded Warrant and Milestone Liability for the year ended December 31, 2025 (in thousands):
Sermonix Pre-Funded Warrant
Milestone Liability
December 31, 2024
Issuance
Change in fair value
December 31, 2025
The fair value of the Level 3 liabilities may change significantly as additional data is obtained. In evaluating this information, considerable judgment is required to interpret the data used to develop the assumptions and estimates. Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts, and such changes could materially impact the Company’s results of operations in future periods.
The following tables reflect the Company’s financial asset balances measured at fair value on a recurring basis (in thousands):
December 31, 2025
Level
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Cash equivalents:
Money market fund
U.S. government debt and agency
securities
Commercial paper
Total cash equivalents
Short-term investments:
Commercial paper
U.S. government debt and agency
securities
Total short-term investments
December 31, 2024
Level
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Cash equivalents:
Money market fund
U.S. government debt and agency
securities
Commercial paper
Total cash equivalents
Short-term investments:
Commercial paper
U.S. government debt and agency
securities
Total short-term investments
All the commercial paper and U.S. government debt and agency securities designated as short-term investments have an effective maturity date that is equal to or less than one year from the respective balance sheet date.
As of December 31, 2025, the Company does not intend to sell any securities in unrealized loss positions, and it is not more-likely-than-not that the Company will be required to sell such securities prior to the recovery of the amortized cost basis. Based on the Company's assessment, the Company concluded all impairments as of December 31, 2025 to be due to factors other than credit loss, such as changes in interest rates. A credit loss allowance was not recognized and the unrealized losses for available-for-sale securities were recorded in other comprehensive loss
5. Property and Equipment, Net
Property and equipment consisted of the following (in thousands):
December 31,
December 31,
Lab equipment
Office furniture, fixtures, and
computer equipment
Leasehold improvement
Property and equipment, at cost
Less: accumulated depreciation
Property and equipment, net
Depreciation expense was $ 1 million and $ 1 million for the years ended December 31, 2025 and 2024, respectively.
6. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
December 31,
December 31,
Research and development
Employee compensation and benefits
Legal expense
Professional services and other
Total accrued liabilities
7. Segment Reporting
The Company operates as a single operating segment, which is the business of developing and commercializing therapeutics. The Company’s chief operating decision maker ("CODM"), its chief executive officer , reviews financial information on an aggregate basis for the purpose of allocating resources and assessing performance. When deciding how to allocate resources, the CODM reviews the financial results of the Company's drug candidate programs. The measure of segment assets is reported on the consolidated balance sheet as total assets.
The table below is a summary of the segment profit or loss, including significant segment expenses (in thousands):
Year Ended December 31,
Research and development expenses:
Acquired in-process research and development
Lasofoxifene
Fosgonimeton (ATH-1017)
ATH-1105
ATH-1020
Preclinical programs and other costs
Personnel-related costs, excluding stock-
based compensation
Total research and development expenses
General and administrative expenses
Other segment expenses (a)
Total operating expenses
Loss from operations
Other income, net
Sermonix pre-funded warrant change in fair value
Net loss
(a) Other segment expenses includes stock-based compensation and depreciation expenses.
8. Commitments and Contingencies
Legal Proceedings
From time to time, the Company may be subject to various legal proceedings or claims that arise in the ordinary course of business. The Company accrues a liability when the Company's management believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. There were no material litigation-related accruals recorded as of December 31, 2025.
Operating Leases
The Company has operating leases for laboratory and office facilities in Bothell, Washington that expire in August 2027 . The initial terms of the leases range from 6.3 to 7 years and the Company has options to extend the leases for an additional five years that it is not reasonably certain to exercise . As of December 31, 2025, the Company was not party to any finance leases.
The following table reconciles the Company’s undiscounted operating lease cash flows to its operating lease liability (in thousands):
December 31,
Total undiscounted lease payments
Present value adjustment for minimum lease
commitments
Net lease liability
The weighted average remaining lease term and the weighted average discount rate used to determine the operating lease liability were as follows:
December 31,
Weighted average remaining lease term (years)
Weighted average discount rate
Operating lease expense and variable lease expense consisted of the following (in thousands):
Year Ended December 31,
Operating lease expense
Variable lease expense
Indemnifications
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. To date the Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company enters into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has directors’ and officers’ insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid.
9. Common Stock
Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and if declared by the Company’s board of directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No cash dividends have been declared by the board of directors from inception.
The Company has reserved the following shares of common stock for future issuance, on an as-converted basis, as follows:
December 31,
December 31,
Shares issuable upon the exercise of outstanding
common stock options and the vesting of
outstanding common restricted stock
units granted
Shares available for future grant under the 2020
Equity Incentive Plan
Shares available for future grant under the
Employee Stock Purchase Plan
Shares available for future grant under the 2024
Inducement Equity Incentive Plan
PIPE Pre-Funded Warrants
Series A Common Warrants
Series B Common Warrants
Sermonix Pre-Funded Warrant
Total
2025 PIPE Financing
In December 2025, the Company entered into a securities purchase agreement with investors, pursuant to which the Company issued, by way of a private placement (the “Private Placement”) an aggregate of (i) 5,356,547 shares of the Company’s common stock, (ii) pre-funded warrants (the “PIPE Pre-Funded Warrants”) to purchase 8,816,684 shares of common stock, (iii) warrants (the “Series A Common Warrants”) to purchase 23,031,494 shares of common stock and/or shares underlying pre-funded warrants and (iv) warrants (the “Series B Common Warrants”) to purchase 21,259,842 shares of common stock and/or shares underlying pre-funded warrants. The aggregate gross proceeds from the Private Placement was $ 90.0 million. Issuance costs of $ 7.6 million are reflected as deduction from additional paid-in capital.
The PIPE Pre-Funded Warrants are exercisable at an exercise price of $ 0.001 per share, subject to customary adjustments and are exercisable at any time on or after issuance subject to the restriction discussed below.
The Series A Common Warrants have an exercise price of $ 6.35 per share and are exercisable after the earlier of (1) the latest of (a) June 30, 2026, (b) the date on which the Company publicly announces the enrollment of the 500th subject or the last subject, whichever is earlier, in the ELAINE-3 trial; and (c) the date on which the FDA approves or issues a complete response letter to Eli Lilly & Co.'s marketing application, including a supplement to a new drug application, for imlunestrant in combination with abemaciclib in breast cancer, and (2) October 31, 2026 ( the “Series A Common Warrant Initial Exercise Date”). The Series A Common Warrants will remain exercisable until the 30th day following the Series A Common Warrant Initial Exercise Date (the “Series A Common Warrant Termination Date”), except that if the Series A Common Warrant Initial Exercise Date has not occurred by December 23, 2030, then December 23, 2030 will be the Series A Common Warrant Termination Date.
The Series B Common Warrants have an exercise price of $ 7.62 per share and will be exercisable after the later of (1) June 30, 2026 and (2) the date of the completion of the public readout of topline results of the ELAINE-3 trial (the later of (1) and (2), the “Series B Common Warrant Initial Exercise Date”). The Series B Common Warrants will remain exercisable until the 30th day following the Series B Common Warrant Initial Exercise Date (the “Series B Common Warrant Termination Date”), except that if the Series B Common Warrant Initial Exercise Date has not occurred by December 23, 2030, then December 23, 2030 will be the Series B Common Warrant Termination Date. At issuance and at December 31, 2025, the PIPE
Pre-Funded Warrants, Series A Common Warrants and Series B Common Warrants meet the criteria to be classified as equity instruments.
None of the PIPE Pre-Funded Warrants, the Series A Common Warrants or the Series B Common Warrants can be exercised if, immediately prior to or following such exercise, the applicable investor, together with its affiliates and any other persons whose beneficial ownership of shares of common stock would be aggregated with such investor for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), would beneficially own more than 4.99 %, 9.99 % or 19.99 %, at the election of such investor (in each case, the “PIPE Maximum Percentage”) of the total number of issued and outstanding shares of common stock following such exercise. If, upon exercise of the Series A Common Warrants or Series B Common Warrants, an investor would exceed the PIPE Maximum Percentage, then the Series A Common Warrants and Series B Common Warrants may be exercised for pre-funded warrants to purchase shares of common stock, which pre-funded warrants will have terms substantially the same as the PIPE Pre-Funded Warrants. The PIPE Maximum Percentage may be increased or decreased by an investor with 61 days’ written notice to us; provided, however, that such percentage may in no event exceed (x) 19.99 % prior to a vote of our stockholders approving the removal of such exercise limitation or (y) with respect to certain investors, 4.99 %
As of December 31, 2025, no PIPE Pre-Funded Warrants, PIPE Series A Common Warrants or PIPE Series B Common Warrants have been exercised.
Equity Incentive Plans
The Company’s 2020 Equity Incentive Plan (the "2020 Plan") provides for annual increases in the number of shares that may be issued under the 2020 Plan on January 1, 2021 and each subsequent January 1 thereafter by a number of shares equal to the least of (1) 323,000 shares, (2) 5 % of the number of shares of common stock issued and outstanding on the immediately preceding December 31, and (3) an amount determined by the Company’s board of directors.
The Company’s 2020 Employee Stock Purchase Plan (the "ESPP") provides for annual increases in the number of shares that may be issued under the ESPP on January 1, 2021 and each subsequent January 1 thereafter by a number of shares equal to the least of (1) 64,600 shares, (2) 1 % of the number of shares of common stock issued and outstanding on the immediately preceding December 31, and (3) an amount determined by the Company’s board of directors.
In February 2024, the board of directors adopted the LeonaBio, Inc. 2024 Inducement Equity Incentive Plan (the "2024 Inducement Plan"), and, subject to the adjustment provisions of the 2024 Inducement Plan, reserved 75,000 shares of the Company's common stock for issuance pursuant to equity awards granted under the 2024 Inducement Plan.
Effective January 1, 2026, the Company’s 2020 Plan and ESPP reserves increased by 323,000 shares and 64,600 shares, respectively.
10. Stock-based Compensation
Stock‑based compensation expense recognized was as follows (in thousands):
Year Ended December 31,
Research and development
General and administrative
Total stock-based compensation
expense
Valuation Assumptions
The fair value of stock options was determined using the Black-Scholes option-pricing model and the assumptions below. Each of these inputs is subjective and generally required significant judgment.
Fair Value of Common Stock —The fair value of each share of common stock is based on the closing price of the Company’s common stock on the date of grant, or other relevant determination date, as reported on The Nasdaq Capital Market.
Risk-Free Interest Rate —The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.
Expected Volatility —Because the Company was previously privately held and did not have any trading history for its common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded life sciences companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on the similar size, stage in life cycle or area of specialty. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.
Expected Term —The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term) as the Company has limited history of relevant stock option exercise activity.
Expected Dividend Yield —The Company has never paid dividends on its common stock and has no plans to pay dividends going forward. Therefore, it used an expected dividend yield of zero .
The fair value of each stock option was estimated using the Black‑Scholes option‑pricing model with the following weighted-average assumptions:
Year Ended December 31,
Risk-free interest rate
Expected volatility
Expected term (in years)
Expected dividend yield
The grant date fair value of RSUs is based upon the fair market value of the Company’s common stock based on its closing price as reported on the date of grant on the Nasdaq Capital Market.
The fair value of options granted during the years ended December 31, 2025 and 2024 was $ 1.6 million and $ 10.6 million, respectively. The fair value of RSUs granted during the year ended December 31, 2025 and 2024 was $ 0.2 million and $ 0.4 million, respectively.
Stock Option Activity
Changes in shares available for grant under the 2020 Plan and the 2024 Inducement Plan during the year ended December 31, 2025 were as follows:
Shares
Available
for Grant
Shares available for grant at December 31, 2024
2020 Plan reserve increase on January 1, 2025
Options and restricted stock units granted
Options and restricted stock units forfeited,
cancelled, or expired
Shares available for grant at December 31, 2025
A summary of stock option activity under the 2020 Plan and the 2024 Inducement Plan for the year ended December 31, 2025 was as follows:
Shares
Weighted-
Average
Exercise
price
per Share
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
thousands)
Balance at December 31, 2024
Granted
Exercised
Forfeited/expired
Balance at December 31, 2025
Expected to vest
Options exercisable
The total fair value of options granted that vested during the years ended December 31, 2025 and 2024 was $ 7.3 million and $ 11.0 million, respectively.
The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the Company’s common stock underlying all options that were in-the-money at December 31, 2025 . The aggregate intrinsic value of options exercised was $ 0 million and $ 0.2 million during the year ended December 31, 2025 and 2024, respectively, determined as of the date of option exercise. As of December 31, 2025, there was $ 4.5 million of total unrecognized compensation cost related to non-vested stock options. The Company expects to recognize this cost over a remaining weighted-average period of 2.49 years. The Company utilizes newly issued shares to satisfy option exercises.
Stock options outstanding and exercisable under the 2020 Plan and the 2024 Inducement Plan consisted of the following at December 31, 2025:
Exercise Price ($)
Options
Outstanding
Options
Exercisable
Total
Restricted Stock Unit Activity
A summary of RSU, activity for the year ended December 31, 2025 is as follows:
Share
Equivalent
Weighted-
Average
Grant Date
Fair Value
Non-vested at December 31, 2024
Granted
Cancelled
Vested
Non-vested at December 31, 2025
As of December 31, 2025, there was $ 0.4 million of total unrecognized compensation cost related to non-vested RSUs. The Company expects to recognize this cost over a remaining weighted-average period of 0.17 years.
Employee Stock Purchase Plan
Under the ESPP, eligible employees can authorize payroll deductions for amounts up to the lesser of 15 % of their qualifying wages or the statutory limit under the U.S. Internal Revenue Code. The ESPP provides for offering periods of six months in duration with one purchase period per offering period beginning May 18 and November 18 of each year. Participants in an offering period will be granted the right to purchase shares of the Company's common stock at a price per share that is 85 % of the lesser of the fair market value of the shares at (1) the first day of the offering period or (2) the end of each purchase period within the offering period. A maximum of 10,000 shares of common stock may be purchased by each participant at the purchase date during the offering period. The fair market value of the ESPP options granted is determined using the Black-Scholes model and is amortized on a straight-line basis. Stock-based compensation expense recognized during the years ended December 31, 2025 and 2024 associated with the ESPP was $ 0 million and $ 0.1 million, respectively. During the year ended December 31, 2025, the Company issued 16,131 shares of common stock to employees under the ESPP.
11. Income Taxes
Components of Income and Income Tax
The Company did not record a provision (benefit) for income taxes for the years ended December 31, 2025 and 2024. Net loss is attributable to the following tax jurisdictions (in thousands):
Year Ended December 31,
United States
Foreign
Net Loss
The provision for income taxes differs from the amount expected by applying the federal statutory rates to the net loss before taxes as follows:
Year Ended December 31,
Federal statutory income tax rate
State taxes
Stock-based compensation
Non-deductible expenses and others
Tax credits
Change in valuation allowance
Effective income tax rate
The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures for the year ended December 31, 2025 on a prospective basis (in thousands):
Year Ended December 31,
At Statutory Rate
State Income Taxes, net of Federal Effect
Change in Valuation Allowance
Nontaxable or Nondeductible Items
Equity Compensation
Other Nondeductible Items
Tax credits
Worldwide change in UTB
Total
Deferred Tax Assets and Liabilities
The components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
Year Ended December 31,
Deferred tax assets:
Net operating loss carryforwards
Research and development tax credit
carryforwards
Accrued liabilities
Stock-based compensation
Operating lease liability
Property and equipment
Intangibles
Capitalized research and development
Total deferred tax assets
Deferred tax liabilities:
Right of use asset
Prepaid expenses and other
Investments
Total deferred tax liabilities
Less valuation allowance
Net deferred tax assets
Deferred income taxes reflect temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, and operating losses and tax credit carryforwards. The Company considers a number of factors concerning the realizability of its net deferred tax assets, including its history of operating losses, the nature of the deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible, all of which require significant judgment. As of December 31, 2025, the Company has recorded a full valuation allowance on its net deferred tax assets as the Company has concluded that it is not more likely than not that such losses or credits will be utilized. The valuation allowance increased by $ 20.7 million during 2025 and 2024.
At December 31, 2025, the Company has federal net operating loss and tax credit carryforwards of $ 9.5 million and $ 17.2 million, respectively, which expire over a period of 6 to 12 years. Net operating loss carryforwards of $ 259.8 million were generated after 2017, and therefore do not expire. As of December 31, 2025, the Company also had state net operating loss carryforwards of $ 5 million, which expire over a period of 17 to 20 years.
Uncertain Tax Positions
The Company files federal income tax returns. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years prior to 2016. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward and may make adjustments to the amount of the net operating loss or credit carryforward amount. The Company is not currently under examination in any jurisdiction.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for uncertain tax positions were as follows (in thousands):
Year Ended December 31,
Beginning balance
Additions for tax positions taken in prior
years
Additions for tax positions taken in the current
year
Ending balance
If the unrecognized tax benefits for uncertain tax positions as of December 31, 2025 are recognized, there will be no impact to the effective tax rate due to the valuation allowance. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated financial statements. At December 31, 2025, there were no material interest and penalties on uncertain tax benefits. The Company does not anticipate any significant changes to its unrecognized tax benefits in the next 12 months.
12. Employee Benefit Plans
The Company has a 401(k) Plan for all of its employees. The 401(k) Plan allows eligible employees to defer, at the employee’s discretion, up to 100 % of their pretax compensation up to the Internal Revenue Service annual limit. The Company made matching contributions of $ 0.2 million and $ 0.5 million during the years ended December 31, 2025 and 2024, respectively.
13. Net Loss Per Share Attributable to Common Stockholders
The following outstanding shares of potentially dilutive securities were excluded from the computation of the diluted net loss per share attributable to common stockholders for the periods presented because their effect would have been anti-dilutive:
Year Ended December 31,
Stock options to purchase common stock
Non-vested Restricted Stock Units
Employee stock purchase plan
Series A Common Warrants
Series B Common Warrants
Sermonix Pre-Funded Warrant
Total
14. Corporate Restructuring
On September 15, 2024, the Company committed to the Restructuring. (see Note 2). In connection with the Restructuring, the Company incurred costs of $ 2.9 million, consisting primarily of cash severance costs and termination benefits, which the Company recognized during the year ended December 31, 2024. The Company substantially completed the Restructuring by December 31, 2024.
As of December 31, 2024, the accrued liability balance associated with the Restructuring was $ 0.4 million and was included in the accrued expenses line of the accompanying consolidated balance sheet. Cash paid during the year ended December 31, 2024 associated with the termination benefits was $ 2.5 million. The remaining $ 0.4 million accrued as of December 31, 2024 was settled during the twelve months ended December 31, 2025.
15. Subsequent events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated financial statements were issued. Based upon this review, or within these consolidated financial statements, other than as disclosed below, the Company did not identify any subsequent events that would have required recognition or disclosure in the consolidated financial statements.
Special Meeting
On February 23, 2026, the Company filed with the SEC a definitive proxy statement (the “Proxy Statement”) with respect to its special meeting of stockholders to be held on March 18, 2026 at 8:00 a.m. Pacific Time (the “Special Meeting”) to vote upon the proposals detailed in the Proxy Statement including(1) to approve the issuance of 5,502,402 shares of common stock pursuant to the exercise of the Sermonix Pre-Funded Warrant in accordance with Nasdaq Rule 5635(a)(2), (2) to approve the issuance of shares of common stock to Sermonix pursuant to an exercise of the Sermonix Pre-Funded Warrant if, immediately following such exercise, Sermonix, together with its affiliates and any other persons whose beneficial ownership of shares of common stock would be aggregated with Sermonix for purposes of Section 13(d) of the Exchange Act, would beneficially own in excess of 19.99 % of the Company's outstanding common stock, in accordance with Nasdaq Rule 5635(b), (3) to approve the issuance of shares of common stock to Perceptive Life Sciences Master Fund, Ltd and Perceptive Xontogeny Venture Fund II, LP (collectively, “Perceptive”) pursuant to the exercise of warrants if, immediately following such exercise, Perceptive, together with any other persons whose beneficial ownership of shares of common stock would be aggregated with Perceptive for purposes of Section 13(d) of the Exchange Act, would beneficially own in excess of 19.99 % of the Company's outstanding common stock, in accordance with Nasdaq Rule 5635(b), (4) to approve the LeonaBio, Inc. 2026 Equity Incentive Plan, (5) to amend the Company's amended and restated certificate of incorporation to increase the number of authorized shares of common stock and (6) to adjourn the Special Meeting, if necessary or appropriate in the view of the board of directors, including to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt any of Proposal 1, Proposal 2, Proposal 3, Proposal 4 or Proposal 5.
At the Special Meeting, the Company’s stockholders voted on each proposal presented, as described in the Proxy Statement, and approved each proposal. No other items were presented for stockholder approval at the Special Meeting.
