# ALUMIS INC. (ALMS) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ALUMIS INC.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1847367/000184736725000012/tmb-20241231x10k.htm
Accession: 0001847367-25-000012
Filing date: 2025-03-19
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/ALMS/
All MD&A years: /company/ALMS/mda/
Next year: /company/ALMS/mda/fy2025/ (FY 2025)

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 in conjunction with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. This discussion and analysis and other parts of this Annual Report on Form 10-K contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described or implied by these forward-looking statements as a result of several factors, including those set forth under Part I, Item 1A. “Risk Factors” in this Annual Report on Form 10-K. See also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

Our mission is to significantly improve the lives of patients by replacing broad immunosuppression with targeted therapies. Our name, Alumis, captures our mission to enlighten immunology, and is inspired by the words “allumer”—French for illuminate—and “immunis”—Latin for the immune system.

We are a clinical stage biopharmaceutical company with an initial focus on developing our two TYK2 inhibitors: ESK-001, a second-generation inhibitor that we are developing to maximize target inhibition and optimize tolerability, and A-005, a CNS penetrant molecule. ESK-001 has demonstrated significant therapeutic effect in our Phase 2 program in patients with PsO, and is currently being evaluated in an additional Phase 2 clinical trial in patients with SLE, for which we expect to report results in 2026. With the favorable results in our Phase 2 clinical trial in PsO, we have initiated our Phase 3 ONWARD clinical program, which consists of two parallel Phase 3 clinical trials of ESK-001 in this indication and for which we expect to report topline results in the first quarter of 2026. These parallel Phase 3 clinical trials also include one LTE study, ONWARD3. In addition, the OLE of our Phase 2 clinical trial in PsO remains ongoing. TYK2 genetic mutations are associated with a strong protective effect in MS, motivating us to develop our second product candidate, A-005, as a CNS-penetrant, allosteric TYK2 inhibitor for neuroinflammatory and neurodegenerative diseases. In April 2024, we initiated our Phase 1 program of A-005 in healthy volunteers and reported initial results in December 2024.

Alumis was incubated by Foresite Labs and incorporated on January 29, 2021, as a Delaware corporation under the name FL2021-001, Inc. FL2021-001, Inc.’s name was changed to Esker Therapeutics, Inc. in March 2021, and to Alumis Inc. in January 2022.

Since our inception, we have devoted substantially all of our efforts to organizing our company, hiring personnel, business planning, acquiring and developing our product candidates, performing research and development, conducting preclinical studies and clinical trials, establishing and protecting our intellectual property portfolio, raising capital and providing general and administrative support for these activities. We do not have any products approved for sale and have not generated any revenue from product sales. We expect to continue to incur significant and increasing expenses and increasing substantial losses for the foreseeable future as we continue our development of and seek regulatory approvals for our product candidates and commercialize any approved products, seek to expand our product pipeline and invest in our organization. Our ability to achieve and sustain profitability will depend on our ability to successfully develop, obtain regulatory approval for and commercialize our product candidates. There can be no assurance that we will ever earn revenue or achieve profitability, or if achieved, that the revenue or profitability will be sustained on a continuing basis.

To date, we have primarily funded our operations with proceeds from sales of shares of our common stock and redeemable convertible preferred stock and the issuance of convertible promissory notes in private placements. In July 2024, we closed our IPO and the Concurrent Private Placement and received $233.3 million in net proceeds, after deducting underwriting discounts and commissions and offering expenses payable by the Company. As of December 31, 2024, we had $288.3 million in cash, cash equivalents and marketable securities.

We have incurred significant operating losses and negative cash flows since our inception. Our net loss for the years ended December 31, 2024 and 2023 was $294.2 million and $155.0 million, respectively. As of December 31, 2024, we had an accumulated deficit of $658.6 million. Substantially all of our net losses have resulted from costs incurred in connection

103

Table of Contents

with our research and development efforts, including acquisitions of in-process research and development assets, and, to a lesser extent, from general and administrative costs associated with our operations. Our net losses and operating losses may fluctuate from quarter to quarter and year to year depending primarily on the timing of acquisition of any new product candidates, the timing of our preclinical studies and clinical trials, our other research and development expenses, and the timing and amount of any milestone or royalty payments due under our existing or future license agreements. In addition, we have incurred and will continue to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer liability insurance costs, investor and public relations costs, and other expenses that we did not incur as a private company.

We anticipate that our expenses will increase significantly in connection with our ongoing activities, particularly if and as we:

[[GREPCENT_TABLE]]
[["","\u25cf","continue to progress the development of our product candidates in multiple clinical trials in parallel;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","continue committing substantial capital resources to the contemplated Merger, and if the Merger closes, the anticipated integration and development activities related to the acquired ACELYRIN business;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","explore additional indications for our existing product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","hire additional clinical, scientific and operational personnel;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","obtain, maintain, expand and protect our intellectual property rights;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","make royalty, milestone, or other payments under the FronThera Acquisition agreement and any future license or collaboration agreements;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","seek to identify, acquire or in-license new technologies or product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical trials, if any;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","procure manufacturing and supply chain capacity for our product candidates, including commercial manufacturing readiness and scale-up;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","experience any delays, challenges or other issues associated with the clinical development and regulatory approvals of our product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","add operational, legal, financial and management information systems and personnel to support our product development, clinical execution and planned future commercialization efforts, as well as to support our transition to a public company;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain marketing approval; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","operate as a public company."]]
[[/GREPCENT_TABLE]]

We do not have any products approved for sale and have not generated any revenue from product sales since our inception. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates and commercialize our products or enter into collaboration agreements with third parties. Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we may never achieve or sustain profitability and, unless and until we are able to develop and commercialize our product candidates, we will need to continue to raise additional capital. Until such time as we can generate significant revenue

104

Table of Contents

from product sales, if ever, we expect to finance our operations through public or private equity or debt financings, or potentially other capital sources, such as collaboration or licensing arrangements with third parties or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise capital as and when needed, or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our product candidates or scale back or terminate our pursuit of new in-licenses and acquisitions.

We do not currently own or operate any manufacturing facility. We rely on CMOs to produce our product candidates in accordance with the FDA current cGMP regulations for use in our clinical studies. We have entered into development and manufacturing agreements with various CMOs relating to process development, manufacturing of drug substance and drug product, and quality testing of our product candidates. We expect to rely on our CMOs in the future for the manufacturing of our product candidates in order to expedite readiness for future clinical trials. Most of these CMOs have demonstrated capability in preparation of materials for commercialization. Additionally, we may decide to build our own manufacturing facility in the future to provide us greater flexibility and control over our clinical or commercial manufacturing needs.

Given our stage of development, we do not yet have a marketing or sales organization or commercial infrastructure; however, we intend to build the necessary sales, marketing and commercialization capabilities and infrastructure over time as our product candidates advance through clinical development. We expect to spend a significant amount in commercial development and marketing costs prior to obtaining regulatory and marketing approval of one or more of our product candidates.

IPO and Concurrent Private Placement

On June 27, 2024, our Registration Statement on Form S-1 for our IPO was declared effective, and, on July 1, 2024, we completed our IPO, pursuant to which we issued and sold 13,125,000 shares of our common stock at $16.00 price per share to the public. Net proceeds from the IPO were $193.3 million, after deducting underwriting discounts and commissions and other offering costs totaling $16.7 million.

In connection with the IPO, an existing investor and a holder of more than 5% of our capital stock, purchased an additional 2,500,000 shares of our common stock at the IPO price per share for total gross and net proceeds of $40.0 million in the Concurrent Private Placement. The closing of the Concurrent Private Placement was contingent on the closing of the IPO. The sale of such shares is not registered under the Securities Act, and as such, the shares may not be offered or sold absent registration or an applicable exemption from registration. The shares sold in connection with the Concurrent Private Placement are subject to existing resale registration rights and were subject to a 180-day lock-up agreement with the underwriters in the IPO. The Concurrent Private Placement closed on July 17, 2024.

Immediately prior to the closing of the IPO on July 1, 2024, all of the shares of our redeemable convertible preferred stock then outstanding converted into 28,855,656 shares of Class A common stock and 7,184,908 shares of Class B common stock at a 1-for-4.675 conversion ratio. All outstanding Class A common stock shares and all outstanding Class B common stock shares were redesignated immediately thereafter into the same number of shares of common stock and non-voting common stock, respectively.

Macroeconomic Trends

Our business and results of operations may be affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges and uncertainty in the markets, including severely diminished liquidity and credit availability, rising inflation and monetary supply shifts, rising interest rates, labor shortages, declines in consumer

105

Table of Contents

confidence, declines in economic growth, increases in unemployment rates, recession risks and uncertainty about economic and geopolitical stability (for example, related to the ongoing conflicts in Ukraine and Israel and the surrounding areas). Further, the United States and other countries have imposed and may continue to impose new trade restrictions and export regulations, have levied tariffs and taxes on certain goods, and could significantly increase tariffs on a broad array of goods. For example, the current Trump administration has proposed or enacted tariffs and substantial changes to trade policies, which could adversely affect our business, including imposing tariffs on certain foreign products, most recently from China, that have and may result in retaliatory tariffs on U.S. goods and services. The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods. Moreover, negative macroeconomic conditions could adversely impact our ability to obtain financing in the future on terms acceptable to us, or at all. To date, the macroeconomic trends discussed above have not had a material adverse impact on our business, financial condition or results of operations. If, however, economic uncertainty increases or the global economy worsens, our business, financial condition and results of operations may be harmed.

Recent Development

On February 6, 2025, we entered into the Merger Agreement, with ACELYRIN and Merger Sub. Under the terms of the Merger Agreement, Merger Sub will merge with and into ACELYRIN, with ACELYRIN continuing as a direct wholly owned subsidiary of ours. The Merger Agreement was approved by the disinterested directors on our board and the board of directors of ACELYRIN and is subject to stockholder approval by the stockholders of each company and the satisfaction or waiver of other closing conditions.

In connection with the Merger, all of the issued and outstanding shares of common stock of ACELYRIN will be cancelled and converted into the right to receive 0.4274 shares of our common stock, without interest and, if applicable, cash in lieu of fractional shares, subject to any applicable withholding. ACELYRIN’s outstanding and unexercised stock options with exercise prices of $18.00 or less, outstanding and unvested RSUs and performance RSUs will be converted into options to purchase shares of our common stock and restricted stock awards based on the Exchange Ratio. Stock options’ exercise price will be adjusted based on the Exchange Ratio as well. ACELYRIN’s outstanding and unexercised stock options with exercise prices more than $18.00 will be cancelled. The Merger Agreement contains certain termination rights for both ACELYRIN and us, including the right of either party to terminate the Merger Agreement if the transactions have not been consummated prior to July 7, 2025. ACELYRIN or we will pay a termination fee of $10.0 million or $10.0 million, respectively, under certain circumstances, including termination to accept and enter into a definitive agreement with respect to a superior proposal.

Immediately following the Merger, our pre-Merger equityholders are expected to collectively own approximately 55% of the shares of the combined company and the pre-Merger equityholders of ACELYRIN as of immediately prior to the Merger are expected to collectively own approximately 45% of the combined company, in each case, calculated on a fully diluted basis as of January 31, 2025.

For additional information on the Merger and Merger Agreement, see Note 15 to our consolidated financial statements, in Part II, Item 8. of this Annual Report on Form 10-K.

Components of Results of Operations

Operating Expenses

Our operating expenses consist of (i) research and development expenses and (ii) general and administrative expenses.

Research and Development Expenses

Research and development expenses consist of external and internal costs primarily related to acquiring and developing our research pipeline and technologies and clinical development of our product candidates.

106

Table of Contents

External costs include:

[[GREPCENT_TABLE]]
[["","\u25cf","costs associated with acquiring technology and intellectual property licenses that have no alternative future uses and costs incurred under in-license or assignment agreements, including milestone payments;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","expenses incurred in connection with the discovery and preclinical development of our pipeline programs;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","costs incurred in connection with the clinical development of our product candidates, including under agreements with CROs, CMOs and other third parties that conduct clinical trials and manufacture clinical supplies, product candidates and components on our behalf; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","costs for third-party professional research and development consulting services."]]
[[/GREPCENT_TABLE]]

Internal costs include:

[[GREPCENT_TABLE]]
[["","\u25cf","research and development personnel-related costs, including salaries, annual bonuses, benefits, travel and meals expenses and stock-based compensation expense; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","allocated facilities and other overhead costs, including software licenses, computer supplies and accessories and other miscellaneous expenses."]]
[[/GREPCENT_TABLE]]

We have acquired and may continue to acquire the rights to develop and commercialize new product candidates. Upfront and milestone payments are accrued for and expensed as in process research and development (“IPR&D”) assets expense when the achievement of the milestone is probable up to the point of regulatory approval and, absent obtaining such approval, have no alternative future use. Milestone payments made after a product’s regulatory approval will be capitalized and amortized over the remaining useful life of the related product.

We expense research and development costs as incurred. Costs of certain activities are recognized based on an evaluation of the progress to completion of specific tasks. However, payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as research and development prepaid expenses in our consolidated balance sheets. The capitalized amounts are recognized as expense as the goods are delivered or services are performed. Since our inception and through December 31, 2024, our external research and development expenses were primarily related to the discovery and advancement of programs under our TYK2 platform, including our two most advanced product candidates, ESK-001 and A-005. We use internal resources primarily for managing our research, process development, manufacturing and clinical development activities. In particular, with respect to internal costs, we deploy our personnel across all of our research and development activities as our employees work across multiple programs, and therefore the costs cannot be allocated to a particular product candidate or research program.

We expect our research and development expenses to increase substantially for the foreseeable future as we advance our product candidates into and through clinical trials, pursue regulatory approval of our product candidates, build our operational and commercial capabilities for marketing our products, if approved, and expand our pipeline of product candidates. The process of conducting the necessary clinical research to obtain regulatory approval is time-consuming, expensive and uncertain. The actual probability of success for our product candidates may be affected by a variety of factors, including the safety and efficacy of our product candidates, clinical data, investment in our clinical programs, competition, manufacturability and commercial viability. It is possible that we may never receive regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion of costs of our research and development projects or if, when and to what extent we will generate revenue from the commercialization and sale of our product candidates, if approved by the FDA and other comparable foreign regulatory authorities.

Our future research and development costs may vary significantly based on factors such as:

[[GREPCENT_TABLE]]
[["","\u25cf","the timing and progress of our preclinical and clinical development activities;"]]
[[/GREPCENT_TABLE]]

107

Table of Contents

[[GREPCENT_TABLE]]
[["","\u25cf","the number and scope of preclinical and clinical programs we decide to pursue;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs and timing of manufacturing of our product candidates"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the amount and timing of any milestone payment due under our existing asset acquisition agreement and any future license or collaboration agreements;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the number of patients that participate in our clinical trials, and per participant clinical trial costs;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the number and duration of clinical trials required for approval of our product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the number of sites included in our clinical trials, and the locations of those sites;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","delays or difficulties in adding trial sites and enrolling participants;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","patient drop-out or discontinuation rates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","additional safety monitoring if requested by regulatory authorities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the phase of development of our product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the timing, receipt and terms of any approvals from applicable regulatory authorities including the FDA and comparable foreign regulatory authorities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","changes in the competitive outlook;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the extent to which we establish additional strategic collaborations or other arrangements; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the impact of any business interruptions to our operations or to those of the third parties with whom we work."]]
[[/GREPCENT_TABLE]]

A change in the outcome of any of these 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. We anticipate that our total research and development expenses in 2025 will increase compared to 2024 due primarily to higher costs for the development of our product candidates and ACELYRIN research and development activities, if the Merger closes.

General and Administrative Expenses

Our general and administrative expenses consist primarily of personnel-related costs, legal and consulting services, including those relating to intellectual property and corporate matters, marketing expenses and allocated facilities and other overhead costs, including software licenses, computer supplies, insurance and other miscellaneous expenses. Personnel-related costs include salaries, annual bonuses, benefits, travel and meal expenses and stock-based compensation expense for our general and administrative personnel.

We expect that our general and administrative expenses will increase substantially in the future as a result of expanding our operations, including hiring personnel, preparing for potential commercialization of our product candidates and facility occupancy costs, and support of general operations and ACELYRIN general and administrative activities, if the Merger closes. We also expect an increase in costs associated with being a public company, including costs related to accounting, audit, legal, consulting fees, regulatory and tax-related services associated with maintaining compliance with applicable Nasdaq and SEC requirements, additional director and officer insurance costs, and investor and public relations costs.

108

Table of Contents

Other Income (Expense)

Other income (expense) consists primarily of interest income, including amortization of premiums and accretion of discounts on marketable securities and change in fair value of derivative liability.

In May 2023 and in March 2024, in connection with our redeemable convertible preferred stock financings, we issued options to purchase additional shares of redeemable convertible preferred stock at a specified price, which were accounted for as derivative liabilities. Changes in fair value of these derivative liabilities were included in the other income (loss) in the consolidated statement of operations and comprehensive loss for each reporting period until the derivatives were exercised or expired.

Results of Operations

Comparison of the Years Ended December 31, 2024 and 2023

The following table summarizes our results of operations for the years ended December 31, 2024 and 2023 (dollars in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Year Ended December 31,","","Change","\u200b"],["\u200b","","2024","\u200b","2023","\u200b","$","\u200b","%","\u200b"],["Operating expenses:","","\u200b","","","\u200b","","\u200b","\u200b","\u200b","\u200b"],["Research and development expenses","\u200b","$","265,554","\u200b","$","137,676","\u200b","$","127,878","\u200b","93","%"],["General and administrative expenses","\u200b","\u200b","35,200","\u200b","\u200b","20,498","\u200b","\u200b","14,702","\u200b","72","%"],["Total operating expenses","\u200b","\u200b","300,754","\u200b","\u200b","158,174","\u200b","\u200b","142,580","\u200b","90","%"],["Loss from operations","\u200b","\u200b","(300,754)","\u200b","\u200b","(158,174)","\u200b","\u200b","(142,580)","\u200b","90","%"],["Other income (expense):","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Interest income","\u200b","\u200b","12,020","\u200b","\u200b","3,368","\u200b","\u200b","8,652","\u200b","257","%"],["Change in fair value of derivative liability","\u200b","\u200b","(5,406)","\u200b","\u200b","(119)","\u200b","\u200b","(5,287)","\u200b","*","\u200b"],["Other income (expense), net","\u200b","\u200b","(93)","\u200b","\u200b","(68)","\u200b","\u200b","(25)","\u200b","37","%"],["Total other income (expense), net","\u200b","\u200b","6,521","\u200b","\u200b","3,181","\u200b","\u200b","3,340","\u200b","105","%"],["Net loss","\u200b","$","(294,233)","\u200b","$","(154,993)","\u200b","$","(139,240)","\u200b","90","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["*","not meaningful"]]
[[/GREPCENT_TABLE]]

Research and Development Expenses

The following table summarizes our external and internal research and development expenses for the years ended December 31, 2024 and 2023 (dollars in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","Year Ended December 31,","\u200b","Change"],["\u200b","2024","\u200b","2023","\u200b","$","\u200b","%"],["External costs:","\u200b","","","\u200b","","\u200b","","","\u200b","","\u200b"],["Milestones related to previously acquired IPR&D assets","$","23,000","\u200b","$","\u2014","\u200b","$","23,000","\u200b","*","\u200b"],["CRO, CMO and clinical trials","","151,422","\u200b","","68,967","\u200b","","82,455","\u200b","120","%"],["Professional consulting services","","19,154","\u200b","","13,155","\u200b","","5,999","\u200b","46","%"],["Other research and development costs","","10,258","\u200b","","11,463","\u200b","","(1,205)","\u200b","(11)","%"],["Internal costs:","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Personnel-related costs","\u200b","46,774","\u200b","","32,068","\u200b","","14,706","\u200b","46","%"],["Facilities and overhead costs","","14,946","\u200b","","12,023","\u200b","","2,923","\u200b","24","%"],["Total research and development expense","$","265,554","\u200b","$","137,676","\u200b","$","127,878","\u200b","93","%"]]
[[/GREPCENT_TABLE]]

*       not meaningful

​

109

Table of Contents

Research and development expenses increased by $127.9 million, to $265.6 million for the year ended December 31, 2024, from $137.7 million for year ended December 31, 2023.

Milestones related to previously acquired IPR&D assets for the year ended December 31, 2024, included a $23.0 million clinical milestone payment made in connection with the FronThera Acquisition. No clinical milestones were achieved or probable during the year ended December 31, 2023.

CRO, CMO and clinical trials expenses increased by $82.5 million, to $151.4 million for the year ended December 31, 2024, from $69.0 million for the year ended December 31, 2023, primarily due to an increase in clinical trial and CRO expenses due to increased activities related to our clinical trials for ESK-001 and A-005 and an increase in CMO expenses associated with manufacturing of clinical supplies to support our trials.

Professional consulting services expenses increased by $6.0 million, to $19.2 million for the year ended December 31, 2024, from $13.2 million for the year ended December 31, 2023, primarily due to increased support for our clinical trials for ESK-001, A-005 and other research programs.

Other research and development costs decreased by $1.2 million, to $10.3 million for the year ended December 31, 2024, from $11.5 million for the year ended December 31, 2023, primarily due to timing of preclinical studies to support our clinical trials for ESK-001 and A-005.

Personnel-related costs increased by $14.7 million, to $46.8 million for the year ended December 31, 2024, from $32.1 million for the year ended December 31, 2023, primarily due to increased research and development headcount and included an increase in stock-based compensation expense of $5.4 million as a result of additional stock options granted, which included awards granted under the 2024 POP.

Facilities and overhead costs increased by $2.9 million, to $14.9 million for the year ended December 31, 2024, from $12.0 million for the year ended December 31, 2023, primarily due to an increase in software license costs and depreciation expenses allocated to research and development activities.

External Costs by Program

During the years ended December 31, 2024 and 2023, our external research and development expenses were primarily related to the clinical development of our ESK-001 program and, to a lesser extent, advancing our A-005 product candidate and research pipeline. The following table summarizes our external costs by program for the years ended December 31, 2024 and 2023 (in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","Year Ended December 31,"],["\u200b","2024","\u200b","2023"],["ESK-001","$","149,941","\u200b","$","70,414"],["A-005","\u200b","19,035","\u200b","\u200b","7,161"],["Other programs and research and development activities","\u200b","34,858","","\u200b","16,010"],["Total external research and development expense","$","203,834","\u200b","$","93,585"]]
[[/GREPCENT_TABLE]]

​

General and Administrative Expenses

General and administrative expenses increased by $14.7 million, to $35.2 million for the year ended December 31, 2024, from $20.5 million for the year ended December 31, 2023.

Personnel-related expenses increased by $9.0 million, to $20.0 million for the year ended December 31, 2024, from $11.0 million for the year ended December 31, 2023, primarily due to increased general and administrative headcount and included an increase in stock-based compensation expense of $5.5 million as a result of additional stock options granted, which included awards granted under the 2024 POP.

110

Table of Contents

Professional consulting services expenses increased by $5.4 million, to $13.3 million for the year ended December 31, 2024, from $7.9 million for the year ended December 31, 2023, primarily due to an increase in consulting services to support our growth, public company requirements, business development and market analysis, and an increase in recruiting costs.

Other Income (Expense), Net

Other income (expense), net increased by $3.3 million, to $6.5 million for the year ended December 31, 2024, from $3.2 million for the year ended December 31, 2023.

Interest income increased by $8.7 million, to $12.0 million for the year ended December 31, 2024, from $3.4 million for the year ended December 31, 2023, primarily as a result of higher balances of cash equivalents and marketable securities.

We recognized a change in fair value of a derivative liability loss of $5.4 million for the year ended December 31, 2024, related to the derivative liability recognized in connection with our Series C redeemable convertible preferred stock financing entered into in March 2024. The derivative liability was re-measured at fair value and settled in May 2024, when we closed the second tranche of the Series C financing.

We recognized a change in fair value of a derivative liability loss of $0.1 million for the year ended December 31, 2023, related to the derivative liability recognized in connection with our Series B-2 redeemable convertible preferred stock financing entered into in May 2023. The derivative liability was re-measured at fair value and settled in October 2023, when we closed the second tranche of the Series B-2 financing. See Note 3 to our consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional information.

Liquidity, Capital Resources and Capital Requirements

Sources of Liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. To date, we have primarily funded our operations with proceeds from sales of shares of our common stock and redeemable convertible preferred stock and the issuance of convertible promissory notes in private placements and, more recently, from our IPO and Concurrent Private Placement. In July 2024, we closed our IPO and the Concurrent Private Placement and received net proceeds of $193.3 million and $40.0 million, respectively. See “—Recent Development” above for a discussion of the proposed Merger.

Based on our current operating plan, our existing cash, cash equivalents and marketable securities of $288.3 million as of December 31, 2024, will not be sufficient to meet our operating and capital requirements for at least 12 months from the date of issuance of our consolidated financial statements included in Part II, Item 8. of this Annual Report on Form 10-K and there is substantial doubt about our ability to continue as a going concern. We expect to continue to incur substantial losses for the foreseeable future, and our transition to profitability will depend upon successful development, approval and commercialization of our product candidates and upon achievement of sufficient revenues to support our cost structure. We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates. We may never achieve profitability, and unless we do and until then, we will need to continue to raise additional capital. We will need to raise significant additional capital to fund ongoing research and development activities and maintain future operations. We plan to monitor expenses and may raise additional capital through a combination of public and private equity, debt financings, strategic alliances, and licensing arrangements. Our ability to access capital when needed is not assured and, if capital is not available to us when, and in the amounts, needed, on the terms which are favorable, we could be required to delay, scale back, or abandon some or all of our planned development programs and other operations, which could materially harm our business, financial condition and results of operations.

​

111

Table of Contents

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 anticipate that we will continue to incur significant and increasing expenses for the foreseeable future as we continue to advance our product candidates, expand our corporate infrastructure, including the costs associated with being a public company, further our research and development initiatives for our product candidates, and incur costs associated with potential commercialization. In addition, we anticipate committing substantial capital resources to the transactions contemplated by the Merger Agreement and, assuming the consummation of those transactions, the anticipated integration and development activities related to the acquired ACELYRIN business. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.

We do not have any products approved for sale and have not generated any revenue from product sales since our inception. We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates and commercialize our products or enter into collaboration agreements with third parties. Because of the numerous risks and uncertainties associated with biopharmaceutical product development, we may never achieve or sustain profitability and, unless and until we are able to develop and commercialize our product candidates, we will need to continue to raise additional capital. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through public or private equity or debt financings, or potentially other capital sources, such as collaboration or licensing arrangements with third parties or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans when needed on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration or licensing arrangements with third parties or other strategic transactions, we may have to relinquish rights to our intellectual property, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise capital as and when needed, or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our product candidates or scale back or terminate our pursuit of new in-licenses and acquisitions.

Because of the numerous risks and uncertainties associated with research, development and commercialization of our products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including the following:

[[GREPCENT_TABLE]]
[["","\u25cf","the timing, scope, progress and results of our preclinical studies and clinical trials for our current and future product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the number, scope and duration of clinical trials required for regulatory approval of our current and future product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities for our product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the cost of manufacturing clinical and commercial supplies as well as scale up of our current and future product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the increase in the number of our employees and expansion of our physical facilities to support growth initiatives;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","our ability to establish new, strategic collaborations, licensing or other arrangements;"]]
[[/GREPCENT_TABLE]]

112

Table of Contents

[[GREPCENT_TABLE]]
[["","\u25cf","the cost of filing and prosecuting our patent applications, and maintaining and enforcing our patents and other intellectual property rights;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the extent to which we acquire or in-license other product candidates and technologies;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against our product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the timing of when we pay our operating expenses;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the effect of competing technological and market developments;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","our implementation of various computerized informational systems and efforts to enhance operational systems;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs associated with being a public company; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","other factors, including economic uncertainty and geopolitical tensions, which may exacerbate the magnitude of the factors discussed above."]]
[[/GREPCENT_TABLE]]

Cash Flows

The following table summarizes our cash flows for the years ended December 31, 2024 and 2023 (in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended December 31,"],["\u200b","\u200b","2024","","2023"],["Net cash used in operating activities","\u200b","$","(255,078)","\u200b","$","(129,975)"],["Net cash (used in) provided by investing activities","\u200b","\u200b","(113,790)","\u200b","\u200b","60,472"],["Net cash provided by financing activities","","","492,367","","","89,682"],["Net increase in cash, cash equivalents and restricted cash","","$","123,499","","$","20,179"]]
[[/GREPCENT_TABLE]]

Operating Activities

Net cash used in operating activities was $255.1 million and $130.0 million for the years ended December 31, 2024 and 2023, respectively.

Net cash used in operating activities for the year ended December 31, 2024, was due to our net loss for the period of $294.2 million, partially offset by changes in non-cash items totaling $24.4 million and changes in operating assets and liabilities of $14.8 million. Non-cash items included $19.5 million related to stock-based compensation expense, $5.4 million related to the change in fair value of the derivative liability and $3.2 million related to depreciation and amortization, partially offset by net accretion of discounts on marketable securities of $3.7 million. The changes in operating assets and liabilities primarily included an increase of $18.2 million in research and development accrued expenses, an increase of $8.5 million in accounts payable and a $3.5 million increase in other accrued expenses and current liabilities, partially offset by an increase of $10.8 million in research and development prepaid expenses, an increase of $2.9 million in other prepaid expenses and other assets and a decrease of $1.9 million in operating lease liabilities.

Net cash used in operating activities for the year ended December 31, 2023, was due to our net loss for the period of $155.0 million, partially offset by changes in non-cash items of $13.0 million and changes in operating assets and liabilities of

113

Table of Contents

$12.0 million. Non-cash items primarily included $8.6 million of stock-based compensation expense, $2.0 million of non-cash lease expense and $1.3 million of depreciation and amortization. The changes in operating assets and liabilities primarily included a decrease of $5.5 million in research and development prepaid expenses, an increase of $5.2 million in research and development accrued expenses and an increase of $2.5 million in other accrued expenses and current liabilities.

Investing Activities

Net cash used in investing activities of $113.8 million for the year ended December 31, 2024, was related to purchases of marketable securities of $240.1 million and purchases of property and equipment of $1.7 million, partially offset by proceeds from maturities of marketable securities of $128.0 million.

Net cash provided by investing activities of $60.5 million for the year ended December 31, 2023, was related to proceeds from maturities of marketable securities of $76.3 million, partially offset by purchases of marketable securities of $11.3 million and purchases of property and equipment of $4.5 million.

Financing Activities

Net cash provided by financing activities of $492.4 million for the year ended December 31, 2024, included net proceeds of $258.5 million from the issuance of our Series C redeemable convertible preferred stock and related derivative liability, net of offering costs, $193.3 million net proceeds from our IPO, net of underwriter discounts and commissions and other offering costs, gross and net proceeds of $40.0 million from a private placement transaction and proceeds of $0.6 million from the issuance of common stock upon exercise of stock options.

Net cash provided by financing activities of $89.7 million for the year ended December 31, 2023, was primarily related to net proceeds from the issuance of our Series B-2 and Series B-2A redeemable convertible preferred stock financing.

Contractual Obligations and Commitments

We enter into contracts in the normal course of business with suppliers, CROs, CMOs and clinical trial sites. These agreements provide for termination at the request of either party generally with less than one-year notice and are therefore cancellable contracts. We do not currently expect any of these agreements to be terminated and did not have any non-cancelable obligations under these agreements as of December 31, 2024.

On March 5, 2021, we entered into a stock purchase agreement to acquire FronThera U.S. Holdings, Inc. and its wholly owned subsidiary, FronThera U.S. Pharmaceuticals LLC. The transaction was accounted for as an asset acquisition. Under the agreement, we are obligated to pay contingent consideration of up to an aggregate of $120.0 million based on the achievement of specified clinical and approval milestones, for up to an aggregate of $70.0 million payable for clinical milestones, and for up to an aggregate of $50.0 million payable for approval milestones, all related to technology acquired under the agreement. In the year ended December 31, 2022, we incurred and made a $37.0 million milestone payment for the first administration of ESK-001 to a patient enrolled in a Phase 2 clinical trial of ESK-001, which was recorded in research and development expenses in the consolidated statements of operations and comprehensive loss. In July 2024, we met a milestone in connection with the first administration of ESK-001 to a patient enrolled in a Phase 3 clinical trial of ESK-001 and made a $23.0 million milestone payment in August 2024, which was recorded in research and development expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024. No other milestones were achieved or were probable of being achieved as of December 31, 2024.

We have operating lease arrangements for office and laboratory space in South San Francisco, California. As of December 31, 2024, we had total undiscounted lease payment obligations under non-cancelable leases of $5.0 million payable in the 12 months following December 31, 2024 and $43.4 million payable thereafter.

In December 2024, we entered into a lease agreement for approximately 22,000 square feet of additional office space in South San Francisco, California. Total undiscounted lease payments over the lease term beginning in January 2025 will be approximately $1.9 million.

114

Table of Contents

See Note 7 to our consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional information.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional information.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported expenses during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including but not limited to those related to research and development expenses and accruals, stock-based compensation expense, the fair value of our common stock and the fair value of our derivative liability prior to our IPO. These estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates and assumptions could occur in the future. 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. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.

Although our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Research and Development Expenses and Accruals

Research and development costs are expensed as incurred. As part of the process of preparing our financial statements, we are required to estimate our research and development accrued expenses, including those related to clinical trials and manufacturing clinical and preclinical materials. This process involves reviewing open contracts and purchase orders and communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the services when we have not yet been invoiced or otherwise notified of actual costs. Our service providers invoice us in arrears, as well as on a pre-determined schedule or when contractual milestones are met. We make estimates of our research and development accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make adjustments if necessary. Examples of estimated research and development accrued expenses include fees paid to:

[[GREPCENT_TABLE]]
[["","\u25cf","vendors in connection with preclinical and clinical development activities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","CROs in connection with clinical trials; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","CMOs in connection with the process development and scale-up activities and the production of preclinical and clinical trial materials."]]
[[/GREPCENT_TABLE]]

Costs for clinical trials and manufacturing activities are recognized based on an evaluation of our vendors’ progress towards completion of specific tasks, using data such as participant enrollment, clinical site activations or information provided to us by our vendors regarding their actual costs incurred. Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services were performed. We determine accrual estimates through reports from and discussions with applicable personnel and outside service

115

Table of Contents

providers as to the progress or state of completion of studies, or the services completed. Our estimates of research and development accrued expenses as of each balance sheet date are based on the facts and circumstances known at the time. Costs that are paid in advance of performance are deferred as a prepaid expense and amortized over the service period as the services are provided.

Although we do not expect our estimates to be materially different from amounts actually incurred, 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 reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of research and development accrued expenses. However, due to the nature of estimates, we cannot assure that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.

Stock-Based Compensation Expense

We grant stock-based awards to employees, directors and non-employee consultants in the form of stock options to purchase shares of our common stock. Compensation expense for stock options with service-based vesting conditions is measured at the fair value of the award on the grant date and is recognized over the requisite service period, which is generally the vesting period, using the straight-line method. We estimate the fair value of each stock option with service-based vesting on the date of grant using the Black-Scholes option pricing model. This model requires the use of subjective assumptions to determine the fair value of each stock-based award, including:

​

[[GREPCENT_TABLE]]
[["","\u25cf","Fair value of common stock. See the subsection titled \u201c\u2014Determination of Fair Value of Common Stock\u201d below."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Expected term. The expected term represents the weighted-average period the stock options are expected to remain outstanding and is based on the options\u2019 vesting terms and contractual terms as we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Expected volatility. As the Company did not have sufficient trading history of its common stock, the expected volatility was estimated based on the average historical volatilities of common stock of comparable publicly traded entities over a period equal to the expected term of the stock option grants. The comparable industry peers were chosen based on their size, stage of their life cycle or area of specialty. We will continue to apply this process until enough historical information regarding the volatility of our stock price becomes available."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term of the awards."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Expected dividend yield. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero."]]
[[/GREPCENT_TABLE]]

The Company has also granted stock options with graded vesting based on market, service and performance conditions. At the grant date, the fair value of these stock options was estimated using a Monte Carlo simulation model, which uses a distribution of potential outcomes over the vesting period. The assumptions utilized in the calculation included the Company’s expected common stock price, expected volatility, risk-free rate and expected term. Stock-based compensation expense for these awards is recognized on a straight-line basis over the requisite service period, which is the longer of the explicit service period of the service condition and the derived service period of the market condition, as determined for each separately vesting portion of the awards as if each award was, in substance, multiple awards.

We account for forfeitures of stock-based awards as they occur rather than applying an estimated forfeiture rate to stock-based compensation expense.

We recorded stock-based compensation expense of $19.5 million and $8.6 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, there was unrecognized stock-based compensation expense of $54.4

116

Table of Contents

million related to unvested stock options, which we expect to recognize over a remaining weighted-average period of 2.5 years. We expect to continue to grant equity-based awards in the future, and to the extent that we do, our stock- based compensations expense recognized in future periods will likely increase.

See Note 10 to our consolidated financial statements in Part II, Item 8. of this Annual Report on Form 10-K for additional information about the assumptions we used to determine the estimated fair value of our stock options granted in the periods presented.

Determination of Fair Value of Common Stock

Prior to our IPO, the fair value of our common stock underlying our share-based awards was determined by our board of directors with assistance from management and external valuation experts. The approach in estimating the fair value of our common stock was consistent with the methods outlined in the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (the “Practice Aid”).

In addition to considering the results of independent third-party valuations, we considered various objective and subjective factors to determine the fair value of common stock as of each grant date, including:

[[GREPCENT_TABLE]]
[["","\u25cf","the prices at which we sold shares of our preferred stock and the superior rights, preferences and privileges of our preferred stock relative to those of our common stock at the time of each grant;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the progress of our research and development programs, including the status of preclinical studies and clinical trials for our product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","our stage of development and our business strategy, and material risks related to our business;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","external market conditions affecting the biotechnology industry and trends within the biotechnology industry;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the competitive landscape for our product candidates;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","our financial position, including cash on hand, and our historical and forecasted performance and operating results;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the lack of an active public market for our common stock and our preferred stock;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the likelihood of achieving a liquidity event, such as an IPO or a sale of our company, given prevailing market conditions; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the economy in general."]]
[[/GREPCENT_TABLE]]

Prior to May 2023, we utilized an Option Pricing Method (“OPM”) based analysis, primarily the OPM backsolve methodology, to determine the estimated fair value of our common stock. Within the OPM framework, we determined the backsolve method was the most appropriate method for determining the fair value of our common stock. The backsolve method is used for inferring the total equity value implied by a recent financing transaction, or by an estimated equity value of our pipeline product candidates, involves the construction of an allocation model that takes into account our capital structure and the rights, preferences and privileges of each class of stock, then assumes reasonable inputs for the other OPM variables (expected time to liquidity, volatility and risk-free rate). The total equity value is then iterated in the model until the model output value for the equity class sold in a recent financing round equals the price paid in that round. The OPM is generally utilized when specific future liquidity events are difficult to forecast (i.e., the enterprise has many choices and options available), and the enterprise’s value depends on how well it follows an uncharted path through the various possible opportunities and challenges. The resulting equity value was then assigned to each class of equity securities using the OPM, which treats ordinary shares and preferred shares as call options on the equity value, with

117

Table of Contents

exercise prices based on the liquidation preference of our preferred stock. The shares of common stock are modeled as a call option with a claim on the equity value at an exercise price equal to the remaining value immediately after our preferred stock is liquidated. After the equity value was determined and allocated to the various classes of equity securities, we applied discounts to reflect the lack of marketability of our common stock based on the weighted-average expected time to liquidity. The estimated fair value of the common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.

For valuations performed in or after May 2023, and before June 27, 2024, we utilized a hybrid method that combined the Probability-Weighted Expected Return Method (“PWERM”), an accepted valuation method described in the Practice Aid, and the OPM. We determined this was the most appropriate method for determining the fair value of our common stock based on our stage of development and other relevant factors. The PWERM is a scenario-based analysis that estimates the value per share of common stock based on the probability-weighted present value of expected future equity values for the common stock, under various possible future liquidity event scenarios, considering the rights and preferences of each class of shares, discounted for a lack of marketability. Under the hybrid method, an OPM was utilized to determine the fair value of our common stock in certain of the PWERM scenarios (capturing situations where our development path and future liquidity events were difficult to forecast), potential exit events were explicitly modeled in the other PWERM scenarios. A discount for lack of marketability was applied to the value derived under each scenario to account for a lack of access to an active public market to estimate our common stock fair value. We also considered the amount of time between the independent third-party valuation dates and the grant dates and performed an interpolation of the fair value between the two valuation dates to estimate common stock fair value at each grant date. This determination included an evaluation of whether the subsequent valuation indicated that any significant change in valuation had occurred between the previous valuation and the grant date.

The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could be materially different.

Once a public trading market for our common stock was established in connection with our IPO, it was no longer necessary for our board of directors to estimate the fair value of our common stock in connection with accounting for granted stock options and other such awards we may grant, as the fair value of our common stock was based on the IPO price per share and thereafter on our publicly traded common stock price, as listed on the Nasdaq Global Select Market under the ticker “ALMS.”

Derivative Liability

We determined that the obligation to issue additional shares of redeemable convertible preferred stock upon the occurrence of certain events, including our board of directors’ consent, represented a freestanding financial instrument. The instrument was classified as a liability in the consolidated balance sheets prior to the IPO and was subject to re-measurement at each balance sheet date and at the settlement date. Any change in fair value was recognized in the statements of operations and comprehensive loss.

We utilized the Black-Scholes option pricing model, which incorporates assumptions and estimates, to value the derivative liability. On a quarterly basis, we assessed these assumptions and estimates as additional information impacting the assumptions was obtained. Significant estimates and assumptions impacting fair value included the estimated time and probability of closing of the second tranche financing, preferred stock fair value and estimated stock volatility.

We determined the fair value per share of the underlying redeemable convertible preferred stock by taking into consideration our most recent sales of our preferred stock as well as additional factors that we deemed relevant. We were a private company and lacked company-specific historical and implied volatility information of our stock. Therefore, we determined expected stock volatility based on the historical volatility of the prices of shares of common stock of publicly traded peer companies. We estimated the risk-free interest rate by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the outstanding tranche liability. We assumed a 0% dividend considering that our board of directors had no history of declaring dividends and did not intend to declare any.

118

Table of Contents

In May 2023, we estimated the fair value of the derivative liability of $2.1 million at the issuance date. We recognized changes in fair value of $0.1 million as other expense in the consolidated statement of operations and comprehensive loss in the year ended December 31, 2023. The derivative liability was settled in October 2023, when investors purchased shares of Series B-2 and Series B-2A redeemable convertible preferred stock in a second tranche closing.

In connection with the Series C redeemable convertible preferred stock financings in March 2024 and May 2024, we issued to investors two freestanding financial instruments and estimated their fair value of $8.9 million at the issuance date. The derivative liability was re-measured at fair value of $14.3 million and was settled in May 2024, when we closed the second tranche of the Series C financing. The change in fair value of derivative liability was recognized in other income (expense), net in the consolidated statement of operations and comprehensive loss in the year ended December 31, 2024.

Off-Balance Sheet Arrangements

During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

JOBS Act Transition Period and Smaller Reporting Company Status

We are an “emerging growth company” as defined in the JOBS Act. Under the JOBS Act, an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards and delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from complying with new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation exemptions to the requirements for (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (the “PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of (a) the last day of the fiscal year (A) following the fifth anniversary of the completion of our IPO, (B) in which we have total annual gross revenues of at least $1.235 billion or (C) in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock and non- voting common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We are also a “smaller reporting company,” meaning that the market value of our common stock and non-voting common stock held by non-affiliates plus the aggregate amount of gross proceeds expected from our IPO was less than $700.0 million as of June 30, 2024, and our annual revenue was less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our common stock and non-voting common stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our common stock and non-voting common stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

119

Table of Contents