Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties, including those described in the section titled “Special Note Regarding Forward Looking Statements.” Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors” included elsewhere in this report.
Overview
We are a clinical-stage biotechnology company developing therapies for neurodegenerative diseases, with a focus on areas of high unmet medical need. Our work is informed by advances in disease biology, including the roles of misfolded or deficient proteins, lysosomal dysfunction, and immune and neuronal pathway disruption.
Our objective is to develop product candidates that address disease through targeted mechanisms, such as removing pathogenic proteins, replacing deficient proteins, and restoring normal cellular function. We are advancing a portfolio of programs focused on genetically validated targets, supported by our experience in drug development, protein engineering, and antibody discovery.
A key component of our strategy is the development and application of our Alector Brain Carrier (ABC) platform, a proprietary blood-brain barrier (BBB) delivery technology designed to improve central nervous system exposure across multiple therapeutic modalities. We continue to refine and expand this platform to enable effective brain delivery at clinically practical doses of antibodies, enzymes, and siRNA therapeutics. In parallel, we are investing in biomarkers and biomarker assays to guide patient selection, demonstrate target and pathway
engagement, and assess biological impact in the clinic, with the goal of improving development efficiency and the likelihood of technical success.
Our portfolio includes nivisnebart (formerly AL101/GSK4527226), an investigational PGRN-elevating antibody that has completed enrollment in a placebo-controlled, double-blinded Phase 2 study in early Alzheimer’s disease under our July 2021 Collaboration and License Agreement (GSK Agreement) with Glaxo Wellcome UK Limited, a subsidiary of GlaxoSmithKline plc (GSK).
In addition, our wholly owned programs include lead candidates in preclinical development for a brain-penetrant anti-amyloid beta antibody for Alzheimer’s disease (AD) and a brain-penetrant GCase enzyme replacement therapy for Parkinson’s disease (PD). We are also advancing brain-penetrant siRNA programs targeting tau for Alzheimer’s disease, α-synuclein for Parkinson’s disease, and NLRP3, with potential applications across multiple neurodegenerative conditions.
Our operations have been financed primarily through our collaboration with GSK, our previous collaboration with AbbVie, entered into in October 2017 and terminated in February 2025, the issuance and sale of convertible preferred stock and of common stock upon the completion of our initial public offering (IPO), and follow-on equity financings.
To date, we have not had any products approved for sale and have not generated any product or royalty revenue from product sales. Further, we do not expect to generate revenue from product sales until such time, if ever, that we are able to successfully complete the development and obtain marketing approval for one of our product candidates. We will continue to require additional capital to develop our product candidates, advance our research and preclinical programs, and fund operations for the foreseeable future. We have incurred net losses in each year since inception, and we expect to continue to incur net losses for the foreseeable future. Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates. Our net losses were $142.9 million and $119.0 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $972.1 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect our expenses will increase substantially in connection with our ongoing activities, as we:
advance product candidates through preclinical studies and clinical trials;
pursue regulatory approval of product candidates;
discover, validate, and develop additional product candidates;
require the manufacture of drug supply for our research, preclinical studies and clinical trials; and
obtain, maintain, and protect our intellectual property portfolio.
On March 7, 2025, we committed to a plan to reduce our workforce by approximately 13% to better align our resources with our strategic priorities including advancing our preclinical and research pipeline. We initiated such reduction in force impacting approximately 25 employees across the organization. On October 21, 2025, we initiated a reduce in force that impacted approximately 47% our workforce in order to align resources with the Company’s strategic priorities following the results of the Phase 3 INFRONT-3 clinical trial evaluating the safety and efficacy of latozinemab in individuals with frontotemporal dementia due to a progranulin gene mutation (FTD- GRN ). As of December 31, 2025, we had cash, cash equivalents, and marketable securities of $256.0 million, which we anticipate provides runway at least through 2027.
Components of Results of Operations
Revenue
We have not generated any product or royalty revenue from product sales and do not expect to do so in the near future. Our revenue to date has been primarily related to the AbbVie Agreement and GSK Agreement for the license and co-development of product candidates with those parties. We recognized revenue from the upfront payments and the milestone payment received from AbbVie over time as services were provided. We recognize revenue from the upfront payments from GSK at a point in time for a development license and over time for research and development services. Revenues for research and development services are recognized as the program
costs are incurred by measuring actual costs incurred to date compared to the overall total expected costs to satisfy the performance obligation.
Under the terms of the GSK Agreement, we received $700 million in upfront payments, of which $500 million was received in August 2021 and $200 million was received in January 2022. In addition, we may be eligible to receive up to an additional $1.5 billion in clinical development, regulatory, and commercial launch-related milestone payments, subject to successful advancement and commercialization of product candidates in multiple indications under the agreement. Alector and GSK are conducting development jointly. Under the current terms of the GSK Agreement, we are responsible for funding GSK’s and our development costs up to $140.5 million for the conduct of the initial Phase 2 clinical trial of nivisnebart in AD.
In the United States, Alector and GSK agreed to equally share profits and losses from commercialization of product candidates under the agreement. We may opt out of the sharing of development costs and of profit and losses from commercialization in the United States on a product-by-product basis. In such case, we will no longer conduct development or commercialization of that product, we will receive royalties on net sales of the product in the United States instead of a share of profits, and certain milestones will be reduced. Outside of the United States, GSK agreed to responsible for commercialization of latozinemab and nivisnebart for all indications, and we will be eligible for double-digit tiered royalties.
We expect that our revenue for the next several years will be derived primarily from the GSK Agreement. The balance of deferred revenue was $171.2 million as of December 31, 2025, related to the GSK Agreement. The deferred revenue is expected to be recognized over the research and development period of the programs through the completion of the initial Phase 2 clinical trials for specified indications for latozinemab and nivisnebart.
Research and Development Expenses
Research and development expenses account for a significant portion of our operating expenses. We record research and development expenses as incurred. Research and development expenses consist primarily of costs incurred for the discovery and development of our product candidates, which include:
expenses incurred under agreements with third-party contract organizations, preclinical testing organizations, and consultants;
costs related to production of research, preclinical, and clinical materials, including fees paid to contract manufacturers;
laboratory and vendor expenses related to the execution of research, preclinical studies and clinical trials;
personnel-related expenses, including salaries, benefits, and stock-based compensation for personnel engaged in research and development functions;
costs related to the preparation of regulatory submissions;
third-party license fees; and
facilities and other expenses, which include expenses for rent and maintenance of facilities, depreciation and amortization expense, and other supplies.
We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors, collaborators, and third-party service providers. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and as services are performed.
Specific program expenses include expenses associated with the development of our most advanced product candidate, nivisnebart, which is being studied in the PROGRESS-AD Phase 2 clinical trial. We also have expenses related to the research and development of future product candidates and separately tracked expenses related to programs that we expect to move out of preclinical studies and into Phase 1 clinical trials. These expenses primarily relate to salaries and benefits, stock-based compensation, facility expenses, including depreciation, and lab consumables.
Where we share costs with our collaboration partners, such as in our GSK Agreement, research and development expenses may include reimbursements from, or payments to, our partner.
At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We expect our research and development expenses relating to latozinemab and AL002 to decrease in the foreseeable future as a result of the discontinuation and wind-down of clinical trials for latozinemab and AL002. However, we continue to invest in research and development activities related to programs in our research and preclinical pipeline and to the advancement of those programs into clinical trials.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including stock-based compensation, for our personnel in executive, legal, finance and accounting, information technology, human resources, and other administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees paid for accounting, auditing, consulting, and tax services, insurance costs, and facility costs not otherwise included in research and development expenses.
Other Income, Net
Other income, net consists primarily of interest earned on our cash equivalents and marketable securities.
Income Tax Expense
Income tax expense consists of federal and state income tax provisions.
Results of Operations
The following table sets forth selected consolidated statements of operations data for the fiscal years indicated and the percentage change in such data from year to year. These historical operating results may not be indicative of the results for any future period.
Comparison of the Years Ended December 31, 2025 and 2024
Year Ended
December 31,
Dollar
Change
(In thousands)
Collaboration revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income, net
Loss before income taxes
Income tax expense
Net loss
Revenue
Collaboration revenue was $21.0 million for the year ended December 31, 2025, compared to $100.6 million for the year ended December 31, 2024. The decrease of $79.6 million in revenue was primarily due to the satisfaction of the performance obligations associated with the AL002 program and the latozinemab FTD- C9orf72 Phase 2 trial in the fourth quarter of 2024, resulting in lower revenue recognized in 2025. Revenues are recognized as the program costs are incurred by measuring actual costs incurred to date compared to the overall total expected costs to satisfy the performance obligation.
Research and Development Expenses
Research and development expenses were $123.1 million for the year ended December 31, 2025, compared to $185.9 million for the year ended December 31, 2024. The decrease of $62.8 million was mainly due to a decrease in research and development expenses for the AL002 program as well as a decrease in personnel related costs as a result of the reductions in force.
Year Ended
December 31,
Dollar
Change
(In thousands)
Direct research and development expenses
Latozinemab
Nivisnebart
Other programs
Indirect research and development expenses
Personnel related (including stock-based
compensation)
Facilities and other unallocated research and
development expenses
Total research and development expenses
General and Administrative Expenses
General and administrative expenses were $54.0 million for the year ended December 31, 2025, compared to $59.6 million for the year ended December 31, 2024. The decrease of $5.6 million was mainly due to a decrease in personnel related costs as a result of the reductions in force.
Other Income, Net
Other income, net was $13.2 million for the year ended December 31, 2025, compared to $26.1 million for the year ended December 31, 2024. The decrease of $12.9 million was due to lower interest income from a reduction in marketable securities used to fund our operations.
Income Tax Expense
Income tax expense was $0.2 million for the year ended December 31, 2025, compared to $0.1 million for the year ended December 31, 2024.
Liquidity and Capital Resources
Since our inception through December 31, 2025, our operations have been financed primarily by our collaborations with AbbVie and GSK and the issuance and sale of convertible preferred stock and of common stock upon the completion of our IPO and follow-on equity and debt financings.
As of December 31, 2025, we had $256.0 million of cash, cash equivalents, and marketable securities. As of December 31, 2025, we had an accumulated deficit of $972.1 million.
Future Funding Requirements
Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs, and to a lesser extent, general and administrative expenditures. We expect our expenses to continue to increase in connection with our ongoing activities, in particular as we continue to advance our product candidates and our discovery and research programs. In addition, we expect to incur additional costs associated with operating as a public company.
As of December 31, 2025, we had cash, cash equivalents, and marketable securities of $256.0 million, which we anticipate provides runway at least through 2027. We reduced our workforce to better align our resources with
our current strategic priorities and maintain our expectations with respect to our ability to fund our operations. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We may also choose to seek additional financing opportunistically. We may seek to raise capital through public equity or debt financings, license agreements, collaborative agreements or other arrangements with other companies, asset sales, or through other sources of financing. We have an omnibus shelf registration statement on Form S-3 with the SEC, which became effective on May 1, 2023, which permits us to issue up to $400 million in common stock, other equity securities and/or debt securities. We will need to obtain substantial additional funding in the future for our research and development activities and continuing operations. If we are unable to raise capital when needed or on favorable terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.
On November 7, 2023, we entered into an at-the-market sales agreement with TD Securities (USA) LLC (TD Securities, formerly known as Cowen and Company, LLC) pursuant to which we may offer and sell from time to time through TD Securities up to $125,000,000 of shares of our common stock, in such share amounts as we may specify by notice to TD Securities (the Sales Agreement). As of December 31, 2025, we have issued 7,110,162 shares and received approximately $20.0 million in net proceeds from the sale of securities pursuant to the Sales Agreement. On January 17, 2024, we entered into an underwriting agreement with Cantor Fitzgerald & Co. (Cantor), pursuant to which we offered and sold 10,869,566 shares of the Company’s common stock at a price per share of $6.57 paid by Cantor. Additionally, on November 14, 2024, we entered into a loan agreement with our subsidiary, Alector LLC, as a co-borrower, the Lenders, and Hercules Capital, Inc., in its capacity as administrative agent and collateral agent for itself and the Lenders (the Loan Agreement), pursuant to which we may access up to two tranches of Term Loans in an aggregate principal amount of up to $50,000,000. The initial tranche of Term Loans provides for an aggregate principal amount of up to $25,000,000 through June 30, 2026, subject to the satisfaction of certain conditions. The second tranche of Term Loans provides for up to $25,000,000 and is available at the sole discretion of the Lenders. We borrowed $10,000,000 principal amount of the initial tranche of Term Loans on the closing date of the Loan Agreement.
We will need to obtain substantial additional funding in the future for our research and development activities and continuing operations. If we are unable to raise capital when needed or on favorable terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.
Our future capital requirements will depend on many factors, including:
the timing and progress of preclinical and clinical development activities; including, without limitation, our collaboration efforts with GSK;
the number and scope of preclinical and clinical programs we decide to pursue;
successful enrollment in and completion of clinical trials;
our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and, if our product candidates are approved, commercial manufacturing;
the timing and progress of our current research and development programs and our ability to establish new research and development programs;
addition or retention of key research and development personnel;
our efforts to maintain or enhance operational, financial, and information management systems, and hire or retain personnel, including personnel to support development of our product candidates;
the costs associated with workforce reductions;
negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter and performing our obligations in such collaborations;
the timing and amount of milestone and other payments we may receive under our collaboration arrangements;
the costs and timing of regulatory approvals;
our eventual commercialization plans for our product candidates;
the effects of macroeconomic conditions, including inflationary pressures and economic impacts of tariffs and global trade disruptions; and
the costs involved in prosecuting, defending, and enforcing patent claims and other intellectual property claims.
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Year Ended
December 31,
Cash used in operating activities
Cash provided by investing activities
Cash provided by financing activities
Operating Activities
For the year ended December 31, 2025, cash used in operating activities was $184.0 million. This was mainly due to the net loss of $142.9 million. We also had a decrease in deferred revenue of $21.0 million and a decrease in refund liability of $50.0 million. This was offset by a non-cash charge of $26.7 million for stock-based compensation.
For the year ended December 31, 2024, cash used in operating activities was $230.0 million. This was mainly due to the net loss of $119.0 million. We also had a decrease in deferred revenue of $100.6 million and a decrease in refund liability of $46.0 million. This was offset by a non-cash charge of $39.5 million for stock-based compensation.
Investing Activities
For the year ended December 31, 2025, cash provided by investing activities of $196.6 million was primarily related to the maturities of marketable securities of $465.5 million offset by purchases of marketable securities of $271.9 million.
For the year ended December 31, 2024, cash provided by investing activities of $107.1 million was primarily related to the maturities of marketable securities of $573.6 million offset by purchases of marketable securities of $467.7 million.
Financing Activities
For the year ended December 31, 2025, cash provided by financing activities of $20.2 million was primarily from the proceeds from the sale of securities pursuant to the sales agreement with TD Securities.
For the year ended December 31, 2024, cash provided by financing activities of $81.5 million was primarily from the issuance of common stock of $71.1 million upon a public offering and the debt issuance of $9.4 million.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (GAAP). 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 generated 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 and any such differences may be material. 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.
Revenue Recognition
We recognize revenue when control of promised goods or services is transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under arrangements, we perform the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies the performance obligations. If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling price (SSP). The relative SSP for each deliverable is estimated using external sourced evidence if it is available. If external sourced evidence is not available, we use our best estimate of the SSP for the deliverable.
We recognize collaboration revenue at a point in time if control of the promised good or service has been transferred to the customer. We recognize collaboration revenue over time by measuring the progress toward complete satisfaction of the performance obligation using an input measure. In order to recognize revenue over the research and development period, we measure actual costs incurred to date compared to the overall total expected costs to satisfy the performance obligation. Revenues are recognized as the program costs are incurred. We re-evaluate the estimate of expected costs to satisfy the performance obligation each reporting period and make adjustments for any significant changes. Clinical trials are expensive and can take many years to complete, and the outcome is inherently uncertain. Changes in our forecasted costs are likely to occur over time based upon changes in clinical trial procedures set forth in protocols, changes in estimates of manufacturing costs, or feedback from regulators on the design or operation of our clinical trials. We have had changes to the overall expected costs to satisfy the performance obligations from period to period. For the year ended December 31, 2025, we recorded an $8.9 million increase to collaboration revenue under the GSK Agreement due to a decrease in total expected costs to satisfy the performance obligations for the nivisnebart program.
Accrued Research and Development Expenses
We record accrued expenses for estimated preclinical study and clinical trial expenses. Estimates are based on the services performed pursuant to contracts with research institutions, CROs in connection with clinical studies, investigative sites in connection with clinical studies, vendors in connection with preclinical development activities, and contract manufacturing organizations in connection with the production of materials for clinical trials. Further, we accrue expenses related to clinical trials based on the level of patient enrollment and activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and make judgments and estimates in determining the accrued balance in each reporting period. If we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates. To date, we have not experienced significant changes in our estimates of preclinical studies and clinical trial accruals.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
Interest Rate Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. The primary objective of our investment activities is to preserve capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of investments in a variety of securities of high credit quality and generally short-term duration, invested in compliance with our policy. An immediate 100 basis point increase or decrease in interest rates would not have a material effect on the fair value of our cash, cash equivalents and marketable securities.
Foreign Currency Risk
Our expenses are generally denominated in U.S. dollars. However, we have entered into a limited number of contracts with vendors for research and development services with payments denominated in foreign currencies, including the Euro. We are subject to foreign currency transaction gains or losses on our contracts denominated in foreign currencies. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not had a formal hedging program with respect to foreign currency. A 10% increase or decrease in current exchange rates would not have a material effect on our financial results.
Item 8. Financial Statement s and Supplementary Data.
ALECTOR, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Audited Consolidated 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
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Alector, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Alector, 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.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025 , based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2026 expressed an unqualified opinion thereon.
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 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. 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 account or disclosure to which it relates.
Revenue Recognition
Description of the Matter
The Company recorded collaboration revenue of $21 million for the year ended December 31, 2025. As described in Note 2, collaboration revenue is recognized by measuring the progress toward complete satisfaction of the performance obligations using an input measure. In order to recognize collaboration revenue over the research and development period, the Company measures actual costs incurred to date compared to the total expected costs to satisfy the performance obligations. Revenues are recognized as the program costs are incurred.
Auditing total expected costs to be incurred to satisfy the performance obligation was complex due to the extensive data analysis performed by the Company in determining the total expected costs to be incurred.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls addressing the Company’s estimation of the total costs expected to be incurred to satisfy the performance obligation.
Our audit procedures included, among others, testing accuracy and completeness of the data used by management to estimate the total costs expected to be incurred to satisfy the performance obligation, as well as making inquiries of Company personnel involved with supervising the development program.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2017.
San Mateo, California
February 25, 2026
A LECTOR , I NC .
Consolidated Ba lance Sheets
(In thousands, except share and per share data)
December 31,
December 31,
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Restricted cash
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued clinical supply costs
Accrued liabilities
Deferred revenue, current portion
Payable to collaboration partner
Refund liability to collaboration partner, current portion
Operating lease liabilities, current portion
Short-term debt
Total current liabilities
Deferred revenue, long-term portion
Long-term debt
Refund liability to collaboration partner, long-term portion
Operating lease liabilities, long-term portion
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 4)
Stockholders’ equity:
Common stock, $ 0.0001 par value; 200,000,000 shares authorized;
110,362,581 and 99,085,888 shares issued and outstanding as of
December 31, 2025 and December 31, 2024, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
A LECTOR , I NC .
Consolidated Statements of Oper ations and Comprehensive Loss
(In thousands, except share and per share data)
Year Ended December 31,
Collaboration revenue
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income, net
Loss before income taxes
Income tax expense
Net loss
Unrealized gain (loss) on marketable securities
Comprehensive loss
Net loss per share, basic and diluted
Shares used in computing net loss per share, basic and diluted
The accompanying notes are an integral part of these consolidated financial statements.
ALECTOR, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
Common Stock
Additional
Paid-In
Accumulated Other
Shares
Amount
Capital
Comprehensive
Income
Accumulated Deficit
Total Stockholders’ Equity
Balance — December 31, 2023
Vesting of restricted stock units
Purchase of common stock
under employee stock purchase plan
Issuance of common stock upon
public offering, net of issuance costs of $ 3,892
Stock-based compensation
Unrealized gain on marketable securities
Net loss
Balance — December 31, 2024
Exercise of stock options
Vesting of restricted stock units
Issuance of common stock, net of issuance cost of $ 408
Purchase of common stock
under employee stock purchase plan
Stock-based compensation
Unrealized loss on marketable securities
Net loss
Balance — December 31, 2025
The accompanying notes are an integral part of these consolidated financial statements.
A LECTOR , I NC .
Consolidated Statem ents of Cash Flows
(In thousands)
Year Ended December 31,
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization
Stock-based compensation
Amortization of premiums and accretion of discounts on
marketable securities
Amortization of right-of-use assets
Amortization of debt discount and debt issuance costs
Impairment loss of right-of-use assets and leasehold
improvements
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
Other assets
Accounts payable
Accrued liabilities and accrued clinical supply costs
Payable to collaboration partner
Deferred revenue
Refund liability to collaboration partner
Lease liabilities
Other long-term liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchase of property and equipment
Purchase of marketable securities
Maturities of marketable securities
Sale of marketable securities
Net cash provided by investing activities
Cash flows from financing activities:
Proceeds from the exercise of options to purchase
common stock
Proceeds from issuance of stock from employee
stock purchase plan
Proceeds from issuance of common stock, net of issuance costs
Proceeds from debt financing, net of discount and issuance costs
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of period
Cash, cash equivalents, and restricted cash at end of period
Non-cash investing and financing activities:
Interest paid
The accompanying notes are an integral part of these consolidated financial statements.
The Company and Liquidity
Alector, Inc. (Alector or the Company) is a Delaware corporation headquartered in South San Francisco, California. Alector is a clinical stage biotechnology company focused on developing therapies to counteract the devastating progression of neurodegeneration.
Public Offering
On January 19, 2024, the Company completed a public offering through selling and issuing 10,869,566 shares of common stock at a price per share of $ 6.57 , resulting in aggregate net proceeds of $ 71.1 million, after deducting underwriting discounts and commissions and offering costs.
At-the-Market Offering
On November 7, 2023, the Company entered into an at-the-market sales agreement with TD Securities (USA) LLC (TD Securities, formerly known as Cowen and Company, LLC) pursuant to which the Company may offer and sell from time to time through TD Securities up to $ 125,000,000 of shares of its common stock, in such share amounts as the Company may specify by notice to TD Securities (the Sales Agreement). For the year ended December 31, 2025, the Company issued an aggregate of 7,110,162 shares and received approximately $ 20.0 million in net proceeds from the sale of securities pursuant to the Sales Agreement. Since inception of the Sales Agreement, the Company has issued an aggregate of 7,110,162 shares.
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (GAAP) as defined by the Financial Accounting Standards Board (FASB). The consolidated financial statements include the accounts of Alector, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. The Company evaluates its estimates, including those related to revenue recognition, manufacturing accruals, clinical accruals, fair value of assets and liabilities, income taxes uncertainties, stock-based compensation, and 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 materially differ from those estimates .
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and short-term marketable securities. Cash and cash equivalents are deposited in checking and sweep accounts at financial institutions. Such deposits may, at times, exceed federally insured limits.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash and cash equivalents. Cash equivalents, which consist of amounts invested in money market funds, are stated at fair value.
Restricted cash of $ 1.5 million relates to a letter of credit established for a lease entered into in June 2018. Restricted cash of $ 0.3 million was held as collateral to secure the use of corporate cards under a cash pledge agreement entered into in December 2024.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:
Year Ended
December 31,
(In thousands)
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents, and restricted cash
Marketable Securities
All marketable securities have been classified as “available-for-sale” and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio as available for use in current operations. Accordingly, the Company may classify certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date. For available-for-sale debt securities, unrealized gains or losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income and reported as a separate component of stockholders’ equity until realized. The Company assesses available-for-sale debt securities on a quarterly basis to see if any unrealized loss is due to credit-related factors. Factors considered in determining whether an impairment is credit-related include the extent to which the investment’s fair value is less than its cost basis, declines in published credit ratings, changes in interest rates, and any other adverse factors related to the security. If it is determined that a credit-related impairment exists, the Company will measure the credit loss based on a discounted cash flows model. Credit-related impairments on available-for-sale debt securities are recognized as an allowance for credit losses with a corresponding adjustment to other income, net in the Company’s consolidated statement of operations. The unrealized loss position that is not credit-related is recorded, net of any related tax effects, in other comprehensive income until realized. There were no credit-related losses recognized for the periods presented.
The cost of securities sold is based on the specific-identification method. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. In accordance with our investment policy, management invests in money market funds, U.S. treasury securities, corporate bonds, certificates of deposit, and commercial paper. The Company has not experienced any losses on its deposits of cash, cash equivalents, and marketable securities.
Fair Value of Financial Instruments
The Company’s financial instruments include cash and cash equivalents, marketable securities, restricted cash, current and noncurrent prepaid expenses, accounts payable, payable to collaboration partner, and accrued liabilities. The Company's investments in marketable securities are measured at fair value. The Company’s other financial instruments approximate fair value due to their relatively short maturities.
For investments in marketable securities, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets, generally three to five years . Leasehold improvements are amortized over the lesser of their useful lives or the remaining life of the lease. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from the consolidated balance sheet and the resulting gain or loss is reflected in the consolidated statements of operations in the period realized. Maintenance and repairs are charged to the consolidated statements of operations as incurred.
Leases
The Company determines whether an arrangement is or contains a lease at the inception of the arrangement. Leases are recognized on the balance sheet as right-of-use assets and lease liabilities. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received and any prepaid or accrued rent. Rent expense for the operating lease is recognized on a straight-line basis over the lease term and is included in operating expenses on the statements of operations and comprehensive loss. Variable lease payments include lease operating expenses.
The Company excludes balance sheet recognition of operating leases having a term of 12 months or less (short-term leases) and does not separate lease components and non-lease components for its long-term leases.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to the future net undiscounted cash flows which the assets are expected to generate. If the total of the undiscounted future cash flows is less than the carrying amount of the assets, an impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its fair value. For the year ended December 31, 2025 the Company recognized an impairment loss of $ 2.9 million on the right-of-use asset and the leasehold improvements. The Company recognized an impairment loss of $ 2.2 million on the right-of-use assets and leasehold improvements for the year ended December 31, 2024 .
Revenue Recognition
The Company recognizes revenue when control of promised goods or services is transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under contractual arrangements, the Company performs the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies the performance obligation. If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling price (SSP). The relative SSP for each performance obligation is estimated using externally sourced evidence if it is available. If externally sourced evidence is not available, the Company uses its best estimate of the SSP for the performance obligation.
The Company recognizes collaboration revenue at a point in time if control of the promised good or service has been transferred to the customer. The Company recognizes collaboration revenue over time by measuring the progress toward complete satisfaction of the performance obligation using an input measure. In order to recognize revenue over the research and development period, the Company measures actual costs incurred to date compared to the overall total expected costs to satisfy the performance obligation. Revenues are recognized as the program costs are incurred. The Company re-evaluates the estimate of expected costs to satisfy the performance obligation each reporting period.
Research and Development Costs
Research and development costs are expensed as incurred and consist primarily of new product development. Research and development costs include salaries and benefits, consultants’ fees, process development costs,
stock-based compensation, and laboratory supplies, as well as fees paid to third parties that conduct certain research and development activities on the Company’s behalf. In addition, research and development costs include the reimbursable costs incurred for the collaboration agreements, which includes payroll costs for time incurred on projects, laboratory supplies, and third-party research and development activities.
A substantial portion of the Company’s ongoing research and development activities are conducted by third-party service providers. The Company records accrued expenses for estimated preclinical study and clinical trial expenses. Estimates are based on the services performed pursuant to contracts with research institutions, CROs in connection with clinical studies, investigative sites in connection with clinical studies, vendors in connection with preclinical development activities, and contract manufacturing organizations in connection with the production of materials for clinical trials. Further, the Company accrues expenses related to clinical trials based on the level of patient enrollment and activity according to the related agreement. The Company monitors patient enrollment levels and related activity to the extent reasonably possible and make judgments and estimates in determining the accrued balance in each reporting period. If the Company underestimates or overestimates the level of services performed or the costs of these services, actual expenses could differ from estimates. To date, the Company has not experienced significant changes in its estimates of preclinical studies and clinical trial accruals.
Stock-based Compensation
Stock-based compensation is measured on the grant date based on the fair value of the awards. The fair value of options to purchase common stock is measured using the Black-Scholes option-pricing model. Stock-based compensation associated with restricted stock units (RSUs) that vest based only on a service condition is based on the fair value of the Company’s common stock on the grant date, which equals the closing price of the Company’s common stock on the grant date. The Company recognizes expense over the vesting period of the awards. Expense for options and RSUs that vest based only on a service condition is recognized on a straight-line basis.
The fair value of RSUs with market conditions is estimated using a Monte Carlo simulation model. The Monte Carlo model uses the fair value inputs on the grant date to run simulations and take an average of possible outcomes. Assumptions and estimates utilized in the model include the stock price on grant date, risk-free interest rate, dividend yield, expected stock volatility, and estimated period to achieve the market condition. The expense is recognized based on continued employment of the participants, regardless of achievement of the market condition. Expense related to the RSUs with market conditions is recognized using the accelerated attribution method.
The Company accounts for forfeitures as they occur for all awards.
Comprehensive Loss
Comprehensive loss includes net loss and certain changes in stockholders’ equity that are the result of transactions and economic events other than those with stockholders. The Company’s only element of other comprehensive loss was net unrealized gain (loss) on marketable securities.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The deferred tax assets are recognized to the extent the Company believes that these assets are more likely than not to be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company’s historical operating performance and the recorded cumulative net losses in prior periods, the net deferred tax assets have been fully offset by a valuation allowance.
The Company records uncertain tax positions using a two-step process. First, the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position. Second, for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties related to unrecognized tax benefits within the provision for taxes in the consolidated statements of operations. The Company accrued $ 0.2 million and $ 0.2 million interest and penalties for the years ended December 31, 2025 and 2024.
Employee 401(k) Plan
The Company has a qualified contributory savings plan under Section 401(k) of the Internal Revenue Code (the Code) covering substantially all U.S. employees of Alector. The 401(k) plan is designed to provide tax-deferred retirement benefits in accordance with the provisions of Section 401(k) of the Code. Eligible employees may defer up to 100 % of their eligible compensation up to the annual maximum as determined by the Internal Revenue Service. The Company’s contributions to the plan are discretionary. For the years ended December 31, 2025 and 2024, the Company made matching contributions of $ 0.8 million and $ 1.1 million, respectively.
Debt
Debt is initially recognized at cost and presented net of original issue discount and debt issuance costs on the consolidated balance sheets. Amortization of debt discount and debt issuance costs is recognized as interest expense over the period of the debt, using the effective interest rate method.
Segments
The Company operates in one segment. The Company’s chief operating decision maker (CODM), its Chief Executive Officer , manages the Company’s operations on a consolidated basis for purposes of allocating resources. When evaluating the Company’s financial performance, the CODM reviews total revenues, total expenses and expenses by function.
The table below is a summary of the segment profit or loss, including significant segment expenses (in thousands):
Year Ended
December 31,
Collaboration revenue
Less:
Compensation and benefits
Lab expenses and outside research services
Clinical supply costs
Clinical trials
Support functions
Other segment expenses (a)
Total operating expenses
Loss from operations
Other income, net
Segment and consolidated loss before income taxes
(a) Other segment expenses include consultants & contractor expense, contra-R&D expense for GSK collaboration, depreciation expense, impairment loss, restructuring expense, and stock-based compensation expense.
Fair Value Measurements
The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy:
December 31, 2025
Fair Value
Hierarchy
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Market
Value
(In thousands)
Money market funds
Level 1
U.S. government treasury securities
Level 1
Certificates of deposit
Level 2
Commercial paper
Level 2
Corporate bonds
Level 2
Total cash equivalents and marketable securities
December 31, 2024
Fair Value
Hierarchy
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Market
Value
(In thousands)
Money market funds
Level 1
U.S. government treasury securities
Level 1
Certificates of deposit
Level 2
Commercial paper
Level 2
Corporate bonds
Level 2
Total cash equivalents and marketable securities
The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models for which all significant inputs are observable. The Company classifies marketable securities available to fund current operations as current assets. As of December 31, 2025 , the remaining contractual maturities of $ 214.4 million of investments were less than one year and $ 41.0 million of investments were after one year through two years. The Company does not intend to sell the investments that are currently in an unrealized loss position, and it is highly unlikely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity. For the years ended December 31, 2025 and 2024, the Company sold marketable securities for the total proceeds of $ 3.0 million and $ 2.6 million for immaterial realized losses or gains based on the specific identification method.
4. Commitments and Contingencies
Contingencies
From time to time, the Company may be involved in litigation related to claims that arise in the ordinary course of its business activities. The Company accrues for these matters when it is probable that future expenditures will be made and these expenditures can be reasonably estimated. As of December 31, 2025, the Company does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Indemnification
The Company enters into customary indemnification arrangements in the ordinary course of business with vendors, clinical trial sites and other parties. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for certain losses suffered or incurred by the indemnified party. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company has no t recorded a liability related to such indemnification agreements as of December 31, 2025 or 2024. As permitted under Delaware law, the Company has entered into indemnification agreements with its directors and officers that requires it 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 law. The Company also has directors’ and officers’ insurance.
5. Collaboration Agreements
GSK
On July 1, 2021, the Company entered into a Collaboration and License Agreement with Glaxo Wellcome UK Limited, a subsidiary of GlaxoSmithKline plc (GSK), pursuant to which the Company and GSK collaborate on the global development and commercialization of progranulin-elevating monoclonal antibodies, including latozinemab and nivisnebart (formerly AL101/GSK4527226) (GSK Agreement). The GSK Agreement became effective on August 17, 2021 .
Under the terms of the GSK Agreement, the Company received $ 700 million in upfront payments, of which $ 500 million was received in August 2021 and $ 200 million was received in January 2022. In addition, the Company may be eligible to receive up to an additional $ 1.5 billion in clinical development, regulatory, and commercial launch-related milestone payments, subject to successful advancement and commercialization of product candidates in multiple indications under the agreement. In the United States, the Company and GSK will equally share profits and losses from commercialization of product candidates under the agreement. Outside of the United States, the Company will be eligible for double-digit tiered royalties.
The Company and GSK will conduct development jointly, with GSK conducting Phase 3 clinical trials for Alzheimer’s disease, Parkinson’s disease and other non-orphan indications. GSK is conducting the initial Phase 2 trial for nivisnebart in Alzheimer’s disease. Development costs will be shared 60 % by GSK and 40 % by the Company, except that, subject to the GSK Amendment (defined below), the Company will solely bear the development costs of the initial Phase 2 clinical trials under the development plan, and the parties will share manufacturing development costs equally.
In May 2023, the Company and GSK amended the GSK Agreement (GSK Amendment). Under the terms of the GSK Amendment, the Company is responsible for funding and sharing in GSK’s and the Company’s development costs up to $ 140.5 million for the conduct of the initial Phase 2 trial for nivisnebart in Alzheimer’s disease. The GSK Amendment was determined to be a contract modification to the GSK Agreement. The expected cost reimbursement to GSK was accounted for as a refund liability, which reduced the transaction price for the GSK Agreement. The refund liability is an estimate of variable consideration calculated as the difference between the Company’s maximum funding of $ 140.5 million and the Company’s cost budget estimated using the expected value method.
During the three months ended September 30, 2023, as a result of the planned closure of the latozinemab Phase 2 trial and concurrent agreement by the Company to cost-share additional research and development, the Company determined there was a modification of the GSK Agreement, resulting in a decrease of the scope of the performance obligation associated with the latozinemab FTD- C9orf72 Phase 2 trial and an increase in the amount of research and development cost-shared by the Company in future periods. The impact of this additional cost share was accounted
for as a refund liability, which reduced the transaction price for the GSK Agreement. The refund liability is an estimate of variable consideration.
The Company concluded that the GSK Agreement is within the scope of ASC 808, Collaborative Arrangements, as both parties are active participants in the activities and are exposed to significant risks and rewards dependent on the success of the commercialization of latozinemab and nivisnebart. Certain elements are required to be accounted for under ASC 606, Revenue From Contracts With Customers, where the counterparty is a customer for a good or service that is a distinct unit of account.
The Company determined that the distinct performance obligations under ASC 606 consisted of: (i) license and know-how to latozinemab FTD- GRN , and (ii) the research and development activities, including license rights and know-how, relating to products in Phase 2 or earlier stages of development.
The transaction price at inception included fixed consideration consisting of the upfront payments of $ 700 million. The transaction price as of December 31, 2025 was decreased to $ 568.0 million due to the estimated refund liabilities created from the contract modifications. The Company reassessed the remaining estimated refund liabilities to collaboration partner as of December 31, 2025 to be $ 11.4 million. All potential future milestones and other payments were considered constrained at the inception of the GSK Agreement and as of December 31, 2025, since the Company could not conclude it was probable that a significant reversal in the amount of revenue recognized would not occur.
The respective standalone value for each of the performance obligations was allocated to the transaction price. The estimated SSP of each performance obligation was determined using discounted cash flows from the expected commercialization of latozinemab and nivisnebart and estimated research and development costs to be incurred by the Company in each of the initial Phase 2 clinical trials. The estimate of SSP for each performance obligation reflects management’s assumptions, which may include forecasted revenues, development timelines, discount rates, and probabilities of technical and regulatory success. For the license for FTD- GRN , the Company determined that GSK could benefit from the license at the time the license was granted and therefore, the related performance obligation was satisfied at a point in time. For the product candidates in Phase 2 or earlier stages of development, the Company determined that GSK could not benefit from the licenses without the corresponding development services that the Company has committed to perform due the earlier stage of development for these licenses. Except where agreed to otherwise, the Company will perform research and development activities through the end of the initial Phase 2 clinical trials. Revenue will be recognized over time as the research and development activities are performed. The Company will measure progress based on actual costs incurred to date compared to the overall total expected costs to satisfy the performance obligations.
The research and development activities for products in Phase 3 clinical development were determined to be within the scope of ASC 808. Both parties will be active participants in the development, manufacturing, and commercialization of the product and are exposed to significant risks and rewards that are dependent on the commercial success of the products. The Company and GSK participate in profit and loss sharing for each program commensurate with each party’s cost-sharing responsibilities during research and development. ASC 808 does not provide recognition and measurement guidance. As such, the Company determined that ASC 730, Research and Development, was appropriate to analogize to based on the nature of the cost-sharing provision of the agreement. The Company has concluded that payments to or reimbursements from GSK related to these services will be accounted for as an increase to or reduction of research and development expenses, respectively.
Collaboration revenue under the GSK Agreement during the year ended December 31, 2025 , and 2024, was $ 21.0 million and $ 54.1 million, respectively, the entire amount of which was included in deferred revenue at the beginning of the period. The deferred revenue related to the GSK Agreement was $ 171.2 million and $ 195.8 million as of December 31, 2025 and 2024. The deferred revenue is expected to be recognized over the research and development period of the programs through the completion of initial Phase 2 clinical trials. For the year ended December 31, 2025, we recorded an $ 8.9 million increase to collaboration revenue under the GSK Agreement due to a decrease in total expected costs to satisfy the performance obligations for the nivisnebart program. This change in estimate decreased net loss by $ 8.9 million, or $ 0.08 per share.
Costs associated with co-development activities performed under the agreement are included in research and development expenses in the consolidated statements of operations, with any reimbursement of costs by GSK reflected as a reduction of such expenses. For the year ended December 31, 2025 and 2024, the Company recognized a reduction of research and development expense of $ 6.8 million and $ 23.3 million, respectively, under the GSK Agreement.
AbbVie
The Company entered into an agreement in October 2017 with AbbVie Biotechnology, Ltd. (AbbVie) to co-develop antibodies to two program targets in preclinical development (AbbVie Agreement). Under the terms of the AbbVie Agreement, AbbVie made $ 205.0 million in upfront payments, of which $ 5.0 million and $ 200.0 million were received by the Company in October 2017 and January 2018, respectively. The Company was to perform research and development services for the two programs through the end of Phase 2 clinical trials, which were each considered to be separate performance obligations.
In 2022, AbbVie decided to terminate one of the two collaboration programs, the CD33 collaboration program. In February 2023, the Company and AbbVie amended the AbbVie Agreement (AbbVie Amendment), which resulted in the Company receiving a $ 17.8 million milestone payment for the dosing of the first patient in an LTE trial and an additional $ 12.5 million to support the enrollment of additional patients to replace discontinuations in 2023. In November 2024, we decided to stop the long term extension study of our product candidate AL002 based on the results of the INVOKE-2 Phase 2 clinical trial evaluating the safety and efficacy of AL002 in slowing disease progression in individuals with early AD. AL002 failed to meet the primary endpoint in that trial.
The transaction price as of December 31, 2024 included fixed consideration consisting of the upfront payments of $ 205.0 million, the $ 17.8 million LTE milestone payment, and the $ 12.5 million payment for enrollment of additional patients.
Collaboration revenue under the AbbVie Agreement during the years ended December 31, 2024 was $ 46.4 million, all of which was included in deferred revenue at the beginning of the period. Collaboration revenue under the AbbVie Agreement was fully recognized as of December 31, 2024. The performance obligation was satisfied in December 2024, and all remaining deferred revenue has been recognized. In January 2025, AbbVie decided to terminate the TREM2 collaboration program, under which AL002 was being developed, which resulted in termination of the AbbVie Agreement.
6. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consists of the following:
December 31,
(In thousands)
Computer equipment
Furniture and fixtures
Lab equipment
Leasehold improvements
Property and equipment, gross
Less accumulated depreciation and amortization
Total property and equipment, net
Accrued Liabilities
Accrued liabilities consist of the following:
December 31,
(In thousands)
Accrued employee compensation
Accrued research and development costs
Accrued professional services
Other
Total accrued liabilities
7. Leases
In June 2018, the Company signed a lease agreement to lease approximately 105,000 square feet in office and laboratory space in South San Francisco which serves as the Company’s headquarters (the Headquarters). The lease expires in 2029 with an option to renew for a period of ten years . The landlord paid for $ 15.7 million of tenant improvements. In connection with the lease, the Company entered into a letter of credit arrangement in the amount of $ 1.5 million as collateral for the lease, which is classified as restricted cash on the consolidated balance sheets. In October 2020, the Company signed a lease agreement to lease approximately 18,700 square feet of office and laboratory space in Newark, California. The lease term ends on February 6, 2028 with an option to extend for an additional five years . The landlord is obligated to pay for up to $ 0.4 million of tenant improvements. The measurement of the lease liabilities for the leases excludes the options to extend the term of the lease as such extensions are not reasonably certain to occur. Variable lease costs for all of the Company’s leases consist of operating expenses for the spaces.
In October 2023, the Company entered into an agreement to sublease approximately 13,250 square feet of the Headquarters. This sublease expired in November 2024 .
In February 2023, the Company entered into an agreement to sublease approximately 9,300 square feet of the Headquarters. This sublease expired in July 2025 . The sublessee paid its proportionate share of operating expenses for the space.
In August 2024, the Company approved a plan to transition operations from its laboratory and office space in Newark, California to its South San Francisco headquarters. The Company recorded an impairment loss of $ 1.1 million and $ 2.2 million in general and administrative expenses to write-down the right-of-use asset and the leasehold improvements for the year ended December 31, 2025 and 2024.
In February 2025, the Company entered into an agreement to sublease approximately 13,000 square feet of the Headquarters . In August 2025, the subleased area was expanded to approximately 15,200 square feet. This sublease will expire in March 2029 , and the sublessee pays its proportionate share of operating expenses for the space.
In December 2025, the Company entered into an agreement to sublease approximately 7,700 square feet of the Headquarters . This sublease will expire in July 2027 .
For the year ended December 31, 2025, the Company recorded an impairment loss of $ 1.8 million related to the subleased space at its Headquarters, which was included in general and administrative expenses, to write-down the associated right-of-use asset and the leasehold improvements.
The components of lease expense were as follows:
December 31,
(In thousands)
Operating lease cost
Variable lease cost
Sublease income and reimbursement of variable lease cost
Total
As of December 31, 2025 , the weighted-average remaining lease term for operating leases was 3.2 years and the weighted-average discount rate was 8.6 %. Cash paid for amounts included in the measurement of lease liabilities for
the year ended December 31, 2025 and 2024 was $ 9.0 million and $ 8.7 million, respectively, was included in net cash used in operating activities in our consolidated statements of cash flows.
The following are the lease payments owed under the Company’s operating leases as of December 31, 2025:
(In thousands)
Total undiscounted lease payments
Less: Present value adjustment
Total lease liability
8. Stock-based Compensation
The Company recognized stock-based compensation as follows (in thousands):
Year Ended
December 31,
Research and development
General and administrative
Total stock-based compensation
Determination of Fair Value
The estimated grant-date fair value of all the Company’s options to purchase common stock was calculated using the Black-Scholes option pricing model, based on the following assumptions:
Year Ended December 31,
Expected term (in years)
Expected volatility
Risk free interest rate
Dividend yield
The fair value of each stock option was determined by the Company using the methods and assumptions discussed below. Each of these inputs is subjective and generally requires judgment and estimation by management.
Expected Term— The expected term represents the period that stock-based awards are expected to be outstanding. The expected term was derived by using the simplified method which uses the midpoint between the average vesting term and the contractual expiration period of the stock-based award.
Expected Volatility— The Company had limited information on the volatility of stock options as the shares were not actively traded on any public markets prior to February 7, 2019. The expected volatility was derived from the historical stock volatilities of comparable peer public companies within its industry. Those companies were considered to be comparable to the Company’s business over a period equivalent to the expected term of the stock-based awards. In 2020, the Company began giving weight to in its own historical volatility in the determination of expected volatility. Beginning in 2025, we have used only our own historical stock price volatility in the determination of expected volatility.
Risk-Free Interest Rate— The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term.
Expected Dividend Rate— The expected dividend is zero as the Company has not paid nor does it anticipate paying any dividends on its common stock in the foreseeable future.
2019 Equity Incentive Plan and 2022 Inducement Plan
On February 6, 2019, the Company adopted the 2019 Equity Incentive Plan (2019 Plan) under which the Board may issue incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares to the Company’s employees, directors, and consultants. The Company’s 2017 Stock Option and Grant Plan (2017 Plan) was terminated; however, shares subject to outstanding awards granted under it will continue to be governed by the 2017 Plan. Shares reserved for issuance but not issued pursuant to, or not subject to, awards granted under the 2017 Plan were added to the available shares in the 2019 Plan. Shares subject to awards granted under the 2017 Plan that are repurchased by, or forfeited to, the Company will also be reserved for issuance under the 2019 Plan. The board of directors, or a committee appointed by the board of directors, has the authority to determine to whom options or shares will be granted, the number of shares, the term, and the exercise price. Under the 2019 Plan, if an individual owns stock representing 10 % or more of the outstanding shares, then for the individual’s incentive stock options, the exercise price of each share will be at least 110 % of the fair market value and the term of the award will not exceed five years . All other options granted under the 2019 Plan must have an exercise price at least equal to the fair market value on the date of grant and have a term not to exceed ten years . The stock options generally vest over a four-year period with one forty-eighth of the shares vesting each month or over a four-year period with 25 % vesting at the one-year cliff and monthly thereafter. The RSUs generally vest over a period of three years with one-twelfth of the shares vesting quarterly.
On January 1, 2025, 4,954,294 shares were automatically added to the shares reserved for issuance under the 2019 Plan in accordance with the terms of the 2019 Plan. As of December 31, 2025 , the Company had reserved 25,374,512 shares of common stock under the 2019 Plan, of which 10,477,828 shares were available for issuance of future awards.
On January 1, 2022, the Company adopted the 2022 Inducement Plan (Inducement Plan) and reserved 1,630,000 shares for issuance under the Inducement Plan for the grant of equity-based awards to individuals who were not previously employees or non-employee directors of the Company. On September 22, 2022, the Company increased the number of shares available for issuance under the 2022 Inducement Plan to a total of 3,300,000 shares. As of December 31, 2025 , 2,580,302 shares were available for issuance of future awards under the Inducement Plan.
Option activity is shown below:
Number of
Options
Weighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
(In years)
(In thousands)
Outstanding as of December 31, 2024
Granted
Exercised
Forfeited
Outstanding as of December 31, 2025
Exercisable as of December 31, 2025
Vested and expected to vest as of December 31,
For each in-the-money stock option, the aggregate intrinsic value is calculated as the number of shares underlying the stock option multiplied by the difference between the per share exercise price of the stock option and the fair market value of the Company’s common stock on the relevant date. The aggregate intrinsic value of options exercised was less than $ 0.1 million and zero , for the years ended December 31, 2025 and 2024, respectively. The weighted-average grant-date fair value per share of options granted was $ 0.97 and $ 4.45 , for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025 , total unrecognized stock-based compensation related to unvested stock options was $ 3.7 million, which the Company expects to recognize over a remaining weighted-average period of 3.4 years.
Restricted Stock Unit Activity
Activity for the RSUs is shown below. In May 2021 and January 2022, the Company issued RSUs with market conditions to certain executives, which are also included in the table below. The RSUs with market conditions are earned based on stock price performance and continued service by the employee. The RSUs with market conditions
trigger vesting upon the Company’s stock price attaining a specified level over a specified period of time. The shares then vest quarterly over one year after attainment. The Company used a Monte Carlo simulation model to determine the fair value of the awards at the grant date. The Monte Carlo model uses the fair value inputs on the grant date to run simulations and take an average of possible outcomes. The total grant date fair value of the RSUs with market condition was $ 6.6 million to be amortized over an estimated weighted average service period of 2.1 years. Compensation expense related to awards with market-based conditions is recognized regardless of whether the market condition is ultimately satisfied if the related service has been provided.
Number of
Shares
Weighted
Average
Grant
Date Fair
Value per
Share
Unvested restricted stock units as of December 31, 2024
Granted
Vested
Forfeited
Unvested restricted stock units as of December 31, 2025
As of December 31, 2025 , total unrecognized stock-based compensation related to unvested RSUs issued to employees was $ 12.2 million, which the Company expects to recognize over a remaining weighted-average period of 1.7 years.
2019 Employee Stock Purchase Plan
The 2019 Employee Stock Purchase Plan (2019 ESPP) enables eligible employees of the Company to purchase shares of common stock at a discount. Each offering period is approximately six months long beginning on the first trading day on or after June 1 and December 1 each year. ESPP participants purchase shares of common stock at a price per share equal to 85 % of the lesser of (1) the fair market value per share of the common stock on the first trading day of the offering period or (2) the fair market value of the common stock on the purchase date. On January 1, 2025, 591,397 shares were added to the shares reserved for issuance under the 2019 ESPP pursuant to the annual automatic increase. As of December 31, 2025 , there was less than $ 0.1 million in unrecognized compensation expense related to the 2019 ESPP expected to be recognized over five months.
9. Income Taxes
The federal and state income tax provision for the year ended December 31, 2025 and 2024 are summarized as follows (in thousands):
Year Ended December 31,
Current:
Federal
State
Income tax provision
A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows for the years ended December 31, 2025 and 2024 (in thousands):
Year Ended December 31,
US Federal Tax at Statutory Rate
State and Local Effects (A)
Tax credits
Research and Development Credit
Orphan Drug Credit
Changes in valuation allowance
Nontaxable or Nondeductible Items
Stock-based compensation (B)
Other
Changes in Unrecognized Tax Benefits
Other
Income tax provision
(A) For tax year 2025 and 2024, state taxes in California made up the majority (greater than 50 percent) of the tax effect in this category.
(B) Included in stock-based compensation is the reversal of incentive stock options and employee stock purchase plan expenses, shortfalls related to share based compensation, and non-deductible executive compensation under IRC §162(m).
Net cash paid (refunds received) for income taxes consisted of the following (in thousands):
Year Ended December 31,
Federal
State and local jurisdiction
California
Colorado
Illinois
Michigan
North Carolina
Oregon
Other States
Net cash paid (refunds received) for income taxes
*The amount of income taxes paid during the year does not meet the 5 % disaggregation threshold and is included in “Other.”
The tax effects of temporary differences that give rise to significant components of the Company’s deferred tax assets and liabilities consist of (in thousands):
December 31,
Deferred tax assets:
Net operating loss
Accrued bonus
Tax credits
Stock-based compensation
Deferred revenue
Lease liability
Section 174 R&D capitalization
Refund liability
Other
Gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Right-of-use assets
Gross deferred tax liabilities
Deferred tax assets, net
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Evaluating the need for a valuation allowance for deferred tax assets often requires judgment and analysis of all the positive and negative evidence available, including cumulative losses in recent years and projected future taxable income, to determine whether all or some portion of the deferred tax assets will not be realized. As of December 31, 2025 , the Company has utilized a full valuation allowance to offset the net deferred tax assets as the Company believes it is not more likely than not that the net deferred tax assets will be fully realizable. The valuation allowance for deferred tax assets increased by $ 42.9 million during the year ended December 31, 2025.
As of December 31, 2025 , the Company had federal and state net operating loss (NOL) carryforwards of approximately $ 375.6 million and $ 419.1 million, respectively. Federal NOL carryforwards have an indefinite life and deductions cannot exceed 80 % of taxable income. State NOL carryforwards will begin to expire as early as 2030 , if not utilized, or have an indefinite life. As of December 31, 2025 , the Company also had federal and California tax credit carryforward of approximately $ 39.4 million and $ 25.3 million, respectively. The federal tax credits will begin to expire in 2041 while the California tax credits have no expiration date.
Generally, utilization of the NOL carryforwards and credits may be subject to an annual limitation due to the ownership change limitations provided by Section 382, which provides for limitations on NOL carryforwards and certain built-in losses following ownership changes, and Section 383, which provides for special limitations on certain excess credits, etc., of the Code, and similar state provisions. Accordingly, the Company’s ability to utilize NOL carryforwards may be limited as the result of such an “ownership change.” The carryforwards could be subject to an annual limitation, resulting in a reduction in the gross deferred tax assets before considering the valuation allowance. Further, a portion of the carryforwards may expire before being applied to reduce future earnings. The Company is not aware of any changes in ownership that would result in material limitations under Section 382 at this time.
The following table summarizes the activity related to the Company’s unrecognized tax benefits for the years ended December 31, 2025 and 2024 (in thousands):
Balance as of December 31, 2023
Increase related to tax positions taken during the
prior year
Increases related to tax positions taken during the
current year
Balance as of December 31, 2024
Increases related to tax positions taken during the
current year
Balance as of December 31, 2025
If the unrecognized tax benefits for uncertain tax positions as of December 31, 2025 , is recognized, there will be no impact to the effective tax rate as the tax benefit would increase the net deferred tax assets, which is currently offset with a full valuation allowance. The Company’s policy is to include interest and penalties related to unrecognized tax benefits, if any, within the provision for taxes in the consolidated statements of operations. The Company accrued interest and penalties of $ 0.2 million for the year ended December 31, 2025 and of $ 0.2 million for the year ended December 31, 2024.
The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. During the years ended December 31, 2025 and 2024, the Company recorded an uncertain tax position of $ 1.8 million and $ 2.7 million, respectively. The income tax provision for the years ended December 31, 2025 included changes to reserves related to prior year uncertain tax provisions of an increase of zero and decrease of zero , respectively. The income tax provision for the years ended December 31, 2024 included changes to reserves related to prior year uncertain tax provisions of an increase of less than $ 0.1 million and decrease of zero . The Company’s income tax returns generally remain subject to examination by federal and most state tax authorities.
The Company is currently not subject to any federal income tax audits by the IRS but is subject to ongoing tax audits in various state jurisdictions. The statute of limitations for tax liabilities for all years remains open .
10. Debt
On November 14, 2024 (the Closing Date), the Company entered into a loan and security agreement (the Loan Agreement) with its subsidiary Alector LLC as a co-borrower, several banks and other financial institutions from time to time party thereto (collectively, the Lenders) and Hercules Capital, Inc., as administrative agent and collateral agent. The Loan Agreement provides for a senior secured term loan facility in an aggregate principal amount of up to $ 50.0 million, available in up to two tranches (the Term Loans). The initial tranche of Term Loans in an aggregate principal amount of up to $ 25.0 million is available through June 30, 2026, subject to the satisfaction of applicable conditions set forth in the Loan Agreement. The second tranche of Term Loans in an aggregate principal amount of up to $ 25.0 million is available at the sole discretion of the Lenders.
Borrowings under the Loan Agreement accrue interest at a rate equal to the greater of (A) the prime rate plus 1.05 % and (B) 8.05 %. The Term Loans are repayable in monthly interest-only payments until December 1, 2026 (the Interest-Only Payment Period). The Interest-Only Payment Period may be extended by up to twenty-four (24) months, subject to the achievement by the Company of certain milestones as set forth in the Loan Agreement. After the expiration of the Interest-Only Payment Period, the Term Loans are repayable in equal monthly payments of principal and accrued interest until maturity. The Term Loans will mature on December 1, 2028 (the Maturity Date). At the Company’s option, the Company may prepay all or a portion of the outstanding Term Loans, subject to a prepayment premium equal to (a) 1.5% of the Term Loans being prepaid if the prepayment occurs after the 12 month anniversary of the Closing Date but on or prior to the 24 month anniversary of the Closing Date; and (b) 0.5% of the Term Loans being prepaid if the prepayment occurs after 24 months following the Closing Date and prior to the Maturity Date. In addition, the Company will pay an end of term charge of (i) 2.45% if the Term Loans are prepaid or repaid within the first 24 months of the Closing Date; or (ii) 4.75% if the Term Loans are prepaid or repaid after 24 months from the Closing Date (including on the Maturity Date). The Company paid an initial facility charge of $ 250,000 on the Closing Date, and thereafter, the Company will pay a facility charge of 1.00 % upon any draw of the Term Loans under the second tranche. The Company’s obligations under the Loan Agreement are secured by substantially all of the Company’s assets, including intellectual property, subject to certain exceptions, including
exceptions with respect to assets and intellectual property subject to the Company’s existing agreements with each of Adimab LLC and Glaxo Wellcome UK Limited, and previously subject to the agreement with AbbVie Biotechnology, Ltd.
The Loan Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and their subsidiaries to, among other things, dispose of assets, enter into certain licensing arrangements, effect certain mergers, incur debt, grant liens, pay dividends and distributions on their capital stock, make investments and acquisitions, and enter into transactions with affiliates, in each case subject to customary exceptions for a loan facility of this size and type. The Loan Agreement also includes customary events of default, including, among others, payment defaults, material misrepresentations, breaches of covenants following any applicable cure period, cross defaults with certain other indebtedness or material agreements, bankruptcy and insolvency events, judgment defaults and the occurrence of certain events that could reasonably be expected to have a “material adverse effect.” The occurrence of an event of default could result in the acceleration of the Company’s obligations under the Loan Agreement, the termination of the Lenders’ commitments, a 5 % increase in the applicable rate of interest and the exercise by Agent of other rights and remedies provided for under the Loan Agreement.
On November 14, 2024, the Company drew down $ 10 million from the initial tranche and received proceeds of approximately $ 9.6 million after charges payable to Hercules Capital. The Company incurred $ 0.4 million in debt issuance costs in relation to the initial draw. As of December 31, 2025 , the face value of the outstanding balance of the Term Loan was $ 10 million, less unamortized discount and unaccreted value of the End of Term Charge of $ 0.3 million based on the imputed interest rate of 11.5 %. The fair value of the Term Loan as of December 31, 2025 is a Level 3 measurement considered to approximate its carrying value of $ 9.7 million. In 2025, the applicable interest rate averaged approximately 8.4 %. The Term Loan bears interest at a variable rate based on the Prime Rate, subject to an interest rate floor, which limited the impact of changes in benchmark interest rates on the fair value of the Term Loan. In addition, the Term Loan has a remaining maturity of approximately three years, and there have been no significant changes in the Company’s credit risk since inception.
The aggregate maturity of the term loan for the next four years from December 31, 2025 is as follows:
Maturity
Total Principal repayments
11. Net Loss Per Share
The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect :
Year Ended
December 31,
Restricted stock units subject to future vesting
Options to purchase common stock
Shares committed under 2019 ESPP
Total
12. Restructuring
On November 25, 2024, the Company committed to a plan to reduce its workforce by approximately 17 % in order to align resources with the Company's strategic priorities. Based upon the results of the Company's INVOKE-2 Phase 2 clinical trial evaluating the safety and efficacy of AL002 in early Alzheimer’s disease, the Company is stopping the long term extension of the INVOKE-2 study. The Company initiated a reduction in force impacting approximately 41 employees across the organization. For the year ended December 31, 2024, the Company incurred restructuring costs of approximately $ 3.9 million, primarily consisting of personnel expenses such as salaries, severance payments, and
other benefits, which were included in operating expenses. Accrued liabilities associated with restructuring costs were $ 3.9 million as of December 31, 2024. Cash payments related to these expenses were paid out in 2025.
On March 7, 2025, the Company committed to a plan to reduce its workforce by approximately 13 % as part of its cost reduction initiatives in order to align resources with the Company’s strategic priorities, including advancing its preclinical and research pipeline. The Company initiated a reduction in force impacting approximately 25 employees across the organization. For the year ended December 31, 2025, the Company incurred restructuring costs of approximately $ 2.3 million, primarily consisting of personnel expenses such as salaries, severance payments, and other benefits. Cash payments related to these expenses were paid out in 2025.
On October 21, 2025, the Company committed to a plan to reduce its workforce, which impacted approximately 47 % of its workforce, in order to align resources with the Company’s strategic priorities, following the results of the Phase 3 INFRONT-3 clinical trial evaluating the safety and efficacy of latozinemab in individuals with frontotemporal dementia due to a progranulin gene mutation (FTD- GRN ). Total incremental restructuring charges associated with the reduction in force are approximately $ 7.3 million, consisting primarily of severance and related termination benefits. Cash payments related to these expenses will be paid out and the reduction in force is expected to be completed during the first half of 2026. For the year ended December 31, 2025, the Company incurred restructuring costs of $ 7.3 million that were included in operating expenses. Accrued liabilities associated with restructuring costs as of December 31, 2025 were $ 5.0 million.
