Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management’s discussion and analysis of financial condition and results of operations describes the principal factors affecting our results of operations, liquidity, capital resources and contractual cash obligations. This discussion should be read in conjunction with “Item 1A. Risk Factors”, the accompanying audited consolidated financial statements and related notes thereto, as well as other cautionary statements and risks described elsewhere in this Annual Report on Form 10-K.
Overview
We are a clinical-stage immuno-oncology company focused on developing our proprietary Gammabody® platform of bispecific gamma delta ( g d ) T cell engagers to transform the treatment of cancer. Using our Gammabody platform, we are developing a portfolio of novel bispecific antibodies designed to engage and leverage the potency and precision of g d T cells to orchestrate a robust, natural anti-tumor immune response and improve outcomes for cancer patients. We are advancing our Gammabody pipeline for the development of potential therapeutics in both hematologic malignancies and solid tumors.
Our Gammabody platform enables us to develop off-the-shelf bispecific T cell engagers that leverage the advantages of antibody-based treatments including favorable manufacturability and developability characteristics. Our Gammabody platform is designed to recruit the body’s own V g 9V d 2T cells resulting in tumor cell targeting and conditional cancer cell killing. One arm of the Gammabody recruits V g 9V d 2 T cells, while the other arm recognizes and binds to a specific tumor target present on hematological or solid tumors. We designed our Gammabody drug candidates to activate the V g 9V d 2 T cells once the respective arms are bound to the g d T cell and the tumor target, thereby avoiding broad systemic activation. We believe this approach provides a significant opportunity to address unmet medical needs with the potential to elicit potent and durable responses in patients. We also believe this approach may provide a superior therapeutic window compared to other approaches by reducing the risk of on target/off tumor toxicity and avoid activation of Tregs and broad systemic activation that may result in severe CRS.
We have generated preclinical data using patient tumor tissues that demonstrate the ability of our Gammabody platform to exert preferential activity against tumor cells expressing the target with relative sparing of healthy cells. Using surrogate Gammabody molecules, studies in non-human primates showed that our g d T cell engagers were well tolerated and did not induce high-grade CRS.
We designed our Gammabody platform to be fully modular and compatible with existing anti-tumor antibodies to facilitate expedited discovery and development of novel compounds.
We are investigating the Gammabody drug candidate, LAVA-1266. LAVA-1266 is designed using our Gammabody platform to conditionally activate V g 9V d 2 T cells upon crosslinking to CD123 (Interleukin-3 receptor-alpha) to trigger the potent and preferential killing of CD123-positive tumor cells. CD123 is a clinically validated target and is expressed in a range of hematological malignancies, including AML, MDS, acute lymphocytic leukemia (ALL) and Hodgkin Lymphoma.
We are conducting an open-label, multi-center Phase 1, first-in-human study of LAVA-1266 with the study open to recruitment in Australia at four sites. The study includes a dose escalation segment to evaluate LAVA-1266 in up to 50 adults with CD123+ relapsed/refractory (R/R) AML and intermediate, high or extremely high risk MDS. Patients will be dosed every two weeks (Q2W) at the target dose, with an initial
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target dose of 100 µg for the first cohort. We dosed the first patient in this trial in December 2024, and we expect an initial data readout by year-end 2025.
From 2022 through December 2024, we enrolled patients in a first-in-human clinical trial evaluating LAVA-1207 in patients with mCRPC in the United States and Europe. The open-label, multi-center, Phase 1 clinical trial was designed to evaluate safety, tolerability, pharmacokinetics, pharmacodynamics, immunogenicity and preliminary anti-tumor activity of LAVA-1207.
In December 2024, we announced that after no patients remained on treatment, we would discontinue the first-in-human Phase 1 clinical trial for LAVA-1207, an investigational candidate that was designed to target PSMA-expressing cancers for patients with mCRPC.
As a result of the planned discontinuation of the LAVA-1207 clinical trial, we expensed $3.9 million of clinical trial, contract manufacturing, and bioanalytical costs during December 2024.
Recent Developments
In February 2025, we adopted a restructuring plan to extend our capital resources in connection with initiating a process to evaluate strategic alternatives. As part of the restructuring plan, we approved a reduction of approximately 30% of our global workforce to better align our resources with our focus on LAVA-1266. We expect approximately $1.0 million of expenses related to the restructuring to be incurred during the six months ended June 30, 2025, of which approximately $0.3 million of cash payments are expected to be made during 2025.
Financial Overview
Revenue
To date, we have not generated any revenues from product sales, and we do not expect to generate any revenue from the sale of products in the near future. Our success depends primarily on the successful development and regulatory approval of our product candidates, development candidates and collaborator candidates and our ability to finance operations. If our development efforts result in clinical success and regulatory approval for our product candidates, development candidates or collaborator candidates, or we enter into collaboration agreements with third parties for additional product candidates, may generate revenue from those product candidates.
Collaboration Agreement with Pfizer
In September 2022, we entered into an exclusive license agreement with Pfizer (formerly Seagen Inc.) (the “Pfizer Agreement”) to develop, manufacture and commercialize PF-8046052 (formerly LAVA-1223), an advanced preclinical asset that utilizes our proprietary Gammabody technology to target EGFR-expressing solid tumors. Under the Pfizer Agreement, we received a $50.0 million nonrefundable upfront payment in October 2022 and are eligible to receive up to approximately $650.0 million upon the achievement of development, regulatory and commercial milestones, as well as royalties ranging from the low teens to high mid-teens on future sales. The Pfizer Agreement also provided Pfizer with the opportunity to exclusively negotiate rights to apply our proprietary Gammabody platform on up to two additional tumor targets, which Pfizer did not exercise. In March 2024, Pfizer paid us $7.0 million for achieving a clinical milestone.
Pfizer has also granted us a one-time option to obtain increased royalties if we exercise a buy up option within a certain amount of time from certain key early clinical data becoming available for the first licensed product. Following notice, we have a specified period to exercise the buy-up option to pay Pfizer a one-time $35.0 million fee, (the “buy-up fee”). In the event we exercise the buy-up option and pay the buy-up
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fee, we are entitled to receive tiered royalties based on commercial sales levels from low teen to high teen percentages of net sales of licensed products.
Royalties are payable on a licensed product-by-licensed product and country-by-country basis beginning with the first commercial sale of such licensed product in such country of sale and expiring ten years after such sale, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products, and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. For additional information, see “Item 1. Business – Pfizer” and Note 3 of the consolidated financial statements
Collaboration Agreement with J&J
In May 2020, we entered into a research collaboration and license agreement (the “J&J Agreement”) with Johnson & Johnson (J&J) (formerly Janssen Biotech, Inc.). As part of the J&J Agreement, we received a non-refundable upfront payment of $8.0 million, which we recognized on a straight-line basis over the two-year term of the research activities under the J&J Agreement. The straight-line method of recognition materially approximates the cost-to-cost method of revenue recognition. As of January 1, 2023, we had recorded the entirety of the $8.0 million upfront payment as revenue.
In December 2020, we achieved the first Research Milestone, as defined in the J&J Agreement, triggering a milestone payment of $1.0 million. In 2021, we achieved the second Research Milestone, triggering a milestone payment of $1.0 million. In May 2023, within the framework of the J&J Agreement, J&J selected a lead bispecific antibody utilizing the Gammabody platform for an undisclosed tumor associated antigen to progress into development, and we received a $2.5 million milestone payment. In October 2024, a milestone payment of $5.0 million from J&J was triggered under the terms of the J&J Agreement following filing with health authorities to start a Phase 1 clinical trial for JNJ-89853413. Each milestone payment was recorded as revenue when achieved, due to the variable consideration of the milestone payments no longer being constrained.
We are entitled to receive tiered royalties based on commercial sales levels from low to mid-single digit percentages of net sales of licensed products. Royalties are payable on a licensed product-by-licensed product and country-by-country basis beginning with the first commercial sale of such licensed product in such country of sale and expiring ten years after such sale, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products, and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. For additional information, see “Item 1. Business – Our Pipeline – Johnson & Johnson Partnered Program (JNJ-89853413)” and Note 3 of the consolidated financial statements.
Operating Expenses
Our primary categories of operating expenses are research and development expenses and general and administrative expenses.
Research and Development Expenses
Research and development expenses consist primarily of the costs incurred in performing research and development activities and conducting preclinical studies and clinical trial activities. Our research and development expenses consist of:
personnel-related expenses such as compensation, employee benefits and share-based compensation for employees engaged in research and development;
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expenses incurred under agreements with contract manufacturing organizations, or CMOs, contract research organizations, or CROs, and consultants that conduct and support preclinical studies and clinical trial activities;
expenses incurred in connection with the master research services agreement with the Amsterdam UMC; and
expenses including laboratory supplies and research materials, facility expenses, and depreciation of research and development fixed assets
We expense research and development costs as incurred. We do not allocate employee-related costs, costs associated with our discovery efforts, laboratory supplies, depreciation, facility expenses or other indirect costs to specific product development programs because these costs are deployed across multiple programs, and as such, are not separately classified.
General and Administrative Expenses
General and administrative expenses consist of costs incurred for operational expenses such as accounting, legal and insurance, and related activities. Our general and administrative expenses consist of:
accounting, finance, insurance tax, legal and human relations;
expenses for facilities, insurance and related costs;
expenses and legal costs related to the protection of our intellectual property; and
depreciation expenses and other corporate and operating expenses not included in research and development
General and administrative expenses are expensed as incurred.
Income Tax
We are subject to income taxes in the Netherlands, the United States, and Australia. A tax charge was recognized during the year ended December 31, 2024 due to profitable positions in the U.S. and Australia as a result of a cost plus intercompany remuneration in both jurisdictions. As of December 31, 2024, we had Dutch tax loss carryforwards of $106.5 million, which are fully offset by a valuation allowance. Furthermore, an amount of $16.1 million of IP development costs was amortized for tax purposes as of December 31, 2024. The 2024 taxable amount is not final as the 2024 Dutch corporate income tax return is still in draft form and has not been filed with the Dutch tax authorities yet. The 2023 Dutch corporate income tax return is final and has been filed on time. On the basis of the 2024 annual accounts, there are accounting-to-tax differences of $13.0 million. These differences primarily relate to the amortization of IP development costs capitalized for Dutch corporate income tax purposes in preceding years, the capitalization of IP development expenses incurred in 2024 for Dutch corporate income tax purposes and ASC 842 lease amounts. Other differences relate to non-deductible share based payment expenses, expenses which were treated as non-deductible for Dutch corporate income tax purposes and other non-deductible mixed expenses.
For further information on tax loss carryforwards under Dutch corporate income tax law, please refer to Note 13 of the consolidated financial statements.
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Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
The following table summarizes our results of operations for the year ended December 31, 2024 and 2023:
Year Ended December 31,
Increase
(in thousands)
(Decrease)
Revenue:
Revenue from contracts with customers
Total revenue
Cost and expenses:
Cost of revenue
Research and development
General and administrative
Total cost and expenses
Operating loss
Total other income, net
Net loss before taxes
Income tax expense, net
Net loss
Revenue from Contracts with Customers
Our revenue from contracts with customers was $12.0 million and $6.8 million for the years ended December 31, 2024 and 2023, respectively.
In connection with the Pfizer Agreement we entered into in September 2022, we recognized $7.0 million in revenue for the year ended December 31, 2024. This revenue was related to the achievement by Pfizer of a clinical development milestone for PF-08046052. For the year ended December 31, 2023 we recognized $4.3 million in revenue in connection with the Pfizer Agreement. Of that amount, $3.7 million related to the initial supply and manufacturing technology transfer related stability studies and $0.6 million related to reimbursement for additional services.
Additionally, we had revenue of $5.0 million and $2.5 million for the years ended December 31, 2024 and 2023, respectively, attributable to our J&J Agreement. The revenue for the year ended December 31, 2024 related to a $5.0 million milestone that was triggered under the J&J Agreement following J&J’s filing with health authorities to start a Phase 1 clinical trial for JNJ-89853413. The revenue for the year ended December 31, 2023 related to a $2.5 million milestone that was triggered under the J&J Agreement following the selection of a lead bispecific antibody utilizing the Gammabody platform for an undisclosed tumor associated antigen.
Cost of Revenue
Our cost of revenue was $0.0 million and $3.5 million for the years ended December 31, 2024 and 2023, respectively. The cost for 2023 was related to the cost of the initial supply delivery and related stability studies under the Pfizer Agreement.
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Research and Development Expenses
Below are our research and development expenses for the years ended December 31, 2024 and 2023:
Year Ended December 31,
Increase
(in thousands)
(Decrease)
Pre-clinical and clinical trial expenses
Personnel-related expenses
Facilities and other research and development expenses
Share-based compensation expense
Research and development activities expenses
Research and development expenses were $28.5 million for the year ended December 31, 2024, compared to $32.6 million for the year ended December 31, 2023. Pre-clinical and clinical trial expenses decreased by $1.1 million, primarily due to reduced manufacturing costs for LAVA-1266 and other product candidates offset by increased clinical trial activities for LAVA-1207, including shutdown costs of $3.9 million. Personnel-related expenses decreased $1.3 million primarily due to research and development headcount reductions which occurred in the second half of 2023. Facilities and other research and development expenses decreased by $0.8 million due to reduced office and laboratory leases, depreciation and related costs. Share-based compensation expense decreased by $0.5 million due to fewer options issued and a reduction in the Company’s share price. Research and development activity expenses decreased by $0.4 million primarily due to a decrease in research project expenses driven by less headcount and a decrease in ongoing pre-clinical programs in 2024 as compared to 2023.
General and Administrative Expenses
Below are our general and administrative expenses for the years ended December 31, 2024 and 2023:
Year Ended December 31,
Increase
(in thousands)
(Decrease)
Personnel-related expenses
Professional and consultant fees
Insurance, facilities, fees and other related costs
Share-based compensation expense
Patent-related costs
General and administrative expenses were $13.2 million for the year ended December 31, 2024, compared to $14.1 million for the year ended December 31, 2023. Personnel-related expenses increased $0.1 million due to an increase in temporary staffing offset by a decrease in headcount. Professional and consultant fees increased by $0.6 million due to increased audit, accounting, and finance compliance fees due to the transition to United States generally accepted accounting principles (“U.S. GAAP”). Insurance, facilities, fees and other related costs decreased by $0.3 million primarily due to reduced directors and officers insurance premiums and reduced office lease costs. Share-based compensation expense decreased by $1.3 million due to fewer options issued and a reduction in the Company’s share price. Patent-related costs decreased by $0.1 million due to a reduction in the number of patent filings.
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Other income, net
Other income, net was $5.2 million for the year ended December 31, 2024, compared to $1.8 million for the year ended December 31, 2023. The change of $3.4 million is primarily due to the impact of the fluctuation of the USD currency rate compared to the Euro, as both interest income and interest expense increased less than $0.1 million in 2024 as compared to 2023.
Liquidity and Capital Resources
Sources of Liquidity
We have historically funded our operations primarily through issuance of preference shares prior to our IPO, from the sale of common shares in our IPO, and more recently through research and licensing revenue and receipt of milestone payments under our collaboration agreements. Our expenditures are primarily related to research and development activities and general administrative activities to support business operations.
In 2019, we received a $5.5 million Innovation Credit from Rijksdienst voor Ondernemend Nederland (RVO) for the LAVA-051 program. Borrowings under the Innovation Credit, which bear interest at 10.0%, were received in quarterly installments. As of December 31, 2024, we had $4.9 million in borrowings under the Innovation Credit, including accrued interest. In June 2023, we announced the discontinuance of the LAVA-051 program. This discontinuance ended the receipt of future installments. In October 2024, we received notice from the RVO requiring a payment of $0.6 million within six weeks of the notice date. Payment was made within the required period. The remaining balance of $4.9 million, which is inclusive of principal and accrued interest, has been conditionally waived with a further decision to be made within one year from the notice date. Upon satisfaction of certain conditions related to pledged assets in the conditional waiver, we may request a permanent waiver from the remaining payment obligations to the RVO. The liability will remain classified as current, as the waiver lasts one year from the notice date. We have submitted a request for permanent waiver in the first quarter of 2025 and we expect RVO to make their decision on repayment of the Innovation Credit by the third quarter of 2025. The potential repayment of principal and accrued interest is due on September 30, 2025.
In March 2021, we completed our IPO and received net proceeds from the IPO of approximately $89.0 million after deducting underwriting discounts and commissions of $7.0 million and offering costs of $4.5 million. In April 2021, we received additional net proceeds from the IPO of $5.9 million from the exercise of the overallotment option by the underwriters. In addition, in September 2020 and March 2021, we received $56.6 million in net proceeds from our Series C financing, net of repurchasing Series A Preferred and common shares.
Under the Pfizer Agreement, we received a nonrefundable up-front payment of $50.0 million in October 2022 and a clinical milestone payment of $7.0 million in March 2024. Additionally, we were entitled to reimbursement of up to $6.5 million for certain agreed-to research, manufacturing, and supply activities under the Pfizer Agreement. We have received an aggregate amount of $6.4 million for agreed-to reimbursement services and do not anticipate receiving reimbursement for any additional agreed-to services at this time. Under the J&J Agreement, we received a nonrefundable up-front payment of $8.0 million in May 2020 and aggregate clinical milestone payments of $9.5 million to date.
Cash and cash equivalents, and short-term marketable securities are financial instruments that potentially subject us to concentrations of credit risk. As of December 31, 2024 and 2023, cash consists of cash deposited with four financial institutions and account balances exceeding the federally insured limits.
Management believes that we are not exposed to significant credit risk due to the financial strength of these financial institutions.
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Contractual Obligations and Commitments
The following table summarizes our contractual obligations at December 31, 2024, and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:
Payments Due by Period
(in thousands)
Total
Less than 1 Year
1-3 Years
3 - 5 Years
More than 5 Years
Operating lease commitments
The commitment amounts in the table above primarily reflect the minimum payments due under our amended operating lease for office and laboratory space in the Netherlands and the United States. These commitments are also recognized as operating lease liabilities in our balance sheet at December 31, 2024. Refer to Note 5 to our audited consolidated financial statements and related notes included in this Annual Report on Form 10-K for additional discussion of the lease.
Funding Requirements
Based on our current operating plan, we believe that our existing cash, cash equivalents and investments as of December 31, 2024 are sufficient to meet our projected cash requirements for at least 12 months from the date of this annual report. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned. Our future funding requirements will depend on many factors, including, but not limited to, our ability to:
continue the ongoing and planned development of our product candidates, including LAVA-1266 and other early-stage development candidates;
initiate, conduct and complete any ongoing, anticipated or future preclinical studies and clinical trials for our current and future product candidates;
develop processes and scale manufacturing production for our current and future product candidates in accordance with cGMP;
seek regulatory and marketing approvals for LAVA-1266 and any of our other development candidates that successfully complete clinical trials;
discover and develop additional bispecific g d engagers and make further investments in our Gammabody platform to identify additional product candidates;
maintain, protect and expand our intellectual property portfolio; including costs associated with opposing and invalidating competitor patents and licensing other technologies for our product candidates;
establish a sales, marketing, manufacturing and distribution, supply chain and other commercial infrastructure in the future to commercialize any current or future product candidate for which we may obtain marketing approval;
expand our operations in the United States, Europe and Australia;
add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts;
complete our strategic review of our business and acquire or in-license additional product candidates and technologies, pursue a sale, merger or acquisition of the business, or other strategic alternatives;
develop a potential companion diagnostic;
incur additional legal, accounting and other expenses associated with the transition from foreign private issuer to U.S. domestic filer status;
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address any events outside of our control, including, but not limited to, outbreaks of infectious diseases; and
face general economic and market conditions and overall fluctuations in the United States and international equity markets, such as the Russian invasion of Ukraine, the conflict in the Middle East and other geopolitical conditions.
Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through equity offerings, debt financings or other capital sources, which may include strategic collaborations or other arrangements with third parties. Additional funds may not be available to us on acceptable terms or at all. If we raise additional funds by issuing equity or convertible debt securities, our shareholders will suffer dilution and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. Debt financing, if available, may involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities receive any distribution of our corporate assets. If we raise funds through collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to technologies, future revenue streams, product candidates or research programs or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common shares. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide.
Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, scale back or cease our research and development activities, preclinical studies and clinical trials for our product candidates.
Cash Flows
Comparison of the Years Ended December 31, 2024 and 2023
The following table summarizes our cash flows for each of the years presented:
For the Year Ended
December 31,
(in thousands)
Increase
(Decrease)
Net cash used in operating activities
Net cash generated from (used in) investing activities
Net cash used in financing activities
Net decrease in cash and cash equivalents
Operating Activities
Net cash used in operating activities for the year ended December 31, 2024 was $19.5 million, compared to net cash using in operating activities of $40.3 million for the year ended December 31, 2023. The decrease in net cash used in operating activities of $20.7 million was primarily driven by a decrease in net loss of $16.8 million, a foreign currency exchange gain of $0.8 million in 2024 as compared to a $0.8 million foreign currency exchange loss in 2023, a decrease in share-based compensation expense of $3.2 million in 2024 as compared to $5.0 million in 2023, and a net increase in other working capital accounts of $8.3 million in 2024 as compared to 2023.
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Investing Activities
Net cash generated from investing activities for the year ended December 31, 2024 was $12.5 million compared to net cash used in investing activities of $17.6 million for the year ended December 31, 2023. During the year ended December 31, 2024, we received $109.5 million from the maturities of investments, offset by investment purchases of $97.1 million. During the year ended December 31, 2023, we received $73.2 million from the maturities of investments, offset by investment purchases of $90.1 million and equipment purchases of $0.7 million.
Financing Activities
Net cash used in financing activities for the year ended December 31, 2024 of $0.6 million was due to repayments of $0.6 million to the RVO on the innovation credit offset by less than $0.1 million of proceeds from option exercises.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP as issued by the Financial Accounting Standards Board (the “FASB”), which requires us to make judgments, estimates and assumptions that affect the reported amounts of our assets and liabilities and the disclosure of our contingent assets and liabilities at the end of each fiscal period and the reported amounts of revenue and expenses during each fiscal period. Critical accounting policies are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which would potentially result in materially different results under different assumptions and conditions. Based on this definition, we have identified the critical accounting policies and significant judgments addressed below. We also have other accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, but the impact of these estimates, judgments and assumptions on our financial condition or operating performance is not considered material. Please see these policies in the notes to our audited consolidated financial statements included elsewhere in this annual report.
We regularly evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions and our expectations regarding the future based on available information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. We believe the following accounting policies involve the most significant judgments, estimates and assumptions used in the preparation of our consolidated financial statements.
Clinical Trial Accruals
As part of the process of preparing our consolidated financial statements, we are required to estimate our clinical trial expenses. Our clinical trial accrual process seeks to account for expenses resulting from our obligations under contracts with vendors, consultants and CROs and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. Our objective is to reflect the appropriate clinical trial expenses in our consolidated financial statements by matching the appropriate expenses with the period in which services and efforts are expended. We account for these expenses according to the progress of the trial as measured by subject progression and the timing of various aspects of the trial.
We determine accrual estimates based on estimates of the services received and efforts expended that take into account discussion with applicable personnel and outside service providers as to the progress or state of completion of trials. During a clinical trial, we adjust our clinical expense recognition if actual
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results differ from our estimates. We make estimates of our accrued expenses and prepaid assets as of each balance sheet date in our consolidated financial statements based on the facts and circumstances known to us at that time. Our clinical trial accrual and prepaid assets are dependent, in part, upon the receipt of timely and accurate reporting from CROs and other third-party vendors. Although we do not expect our estimates to differ materially from amounts we actually incur, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low for any particular period. Historically we have had no material adjustments to our estimates.
Recently Adopted Accounting Pronouncements
A description of recently issued and adopted accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our audited consolidated financial statements and related notes in this Annual Report on Form 10-K for the year ended December 31, 2024.
