# Tarsus Pharmaceuticals, Inc. (TARS) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Tarsus Pharmaceuticals, Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1819790/000181979025000011/tars-20241231.htm
Accession: 0001819790-25-000011
Filing date: 2025-02-25
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/TARS/
All MD&A years: /company/TARS/mda/
Previous year: /company/TARS/mda/fy2023/ (FY 2023)
Next year: /company/TARS/mda/fy2025/ (FY 2025)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our “Selected Financial Data” and our financial statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those discussed under the section titled “Risk Factors” and elsewhere in this Annual Report on 10-K. See the section titled “Note Regarding Forward-Looking Statements” elsewhere in this Annual Report on Form 10-K.

Overview

Our Business

We are a commercial stage biopharmaceutical company focused on the development and commercialization of therapeutics, starting with eye care. We launched XDEMVY® (lotilaner ophthalmic solution) 0.25%, formerly known as TP-03, for the treatment of Demodex blepharitis, in August 2023 after receiving the U.S. Food and Drug Administration ("FDA") approval in July 2023. Demodex blepharitis is caused by the infestation of Demodex mites. Blepharitis (“Blephar” is a reference to eyelid and “itis” is a reference to inflammation) is an ophthalmic lid margin disease characterized by inflammation of the eyelid margin, redness and ocular irritation, including a specific type of eyelash dandruff called collarettes, which are pathognomonic for Demodex blepharitis. Poorly controlled and progressive blepharitis can lead to corneal damage over time and, in extreme cases, blindness. There may be as many as approximately 25 million people in the U.S. who suffer from Demodex blepharitis. XDEMVY is the first and only therapeutic approved by the FDA and we believe is the definitive standard of care for the treatment of Demodex blepharitis.

XDEMVY targets and eradicates the root cause of Demodex blepharitis – Demodex mite infestation. The active pharmaceutical ingredient ("API") of XDEMVY, lotilaner, paralyzes and eradicates mites and other parasites through the inhibition of parasite-specific gamma-aminobutyric acid-gated chloride ("GABA-Cl") channels with no GABA-Cl inhibition in humans.

To date, we have completed seven clinical trials that include a Phase 3 Saturn-2 trial, a Phase 2b/3 Saturn-1 trial, four Phase 2 trials, and a Phase 1 trial for XDEMVY in Demodex blepharitis, all of which met their primary, secondary and/or certain exploratory endpoints, with the drug well tolerated throughout each trial. We have also completed, and/or have ongoing clinical trials for the potential treatment of Demodex blepharitis in patients with Meibomian Gland Disease ("MGD"), including the Ersa clinical trial involving XDEMVY, and the Rhea clinical trial involving an XDEMVY vehicle; TP-04 for the potential treatment of Ocular Rosacea; and TP-05 for potential Lyme disease prophylaxis, among others.

We intend to further advance our pipeline with the lotilaner API to address several diseases in human medicine, including eye care, and infectious disease prevention. We are investigating the development of our product candidates to address targeted diseases with high unmet medical needs, which currently include TP-04, a novel gel formulation of lotilaner for the potential treatment of Ocular Rosacea, and TP-05, a novel investigational oral formulation of lotilaner, for potential Lyme disease prophylaxis and community malaria reduction.

Recent Business and Clinical Highlights

XDEMVY

•We recognized $66.4 million and $180.1 million in XDEMVY net product sales for the fourth quarter and full year 2024, respectively.

•We dispensed more than 58,500 and 163,000 bottles of XDEMVY to patients during the fourth quarter and full year 2024, respectively.

•We established broad Eye Care Professional ("ECP") utilization across more than 15,000 targets.

•The expanded sales force deployed in the third quarter 2024 started to deliver meaningfully to the increased ECP utilization and prescription volumes reported for the fourth quarter 2024.

•Broad commercial, Medicare, and Medicaid reimbursement of XDEMVY now extends to more than 90% of covered lives, as of February 25, 2025.

◦Recognized a gross-to-net discount of approximately 45% in the fourth quarter and full year 2024.

98

Table of Content

•We activated a memorable and action-oriented Direct-to-Consumer ("DTC") campaign on streamlining platforms in the fourth quarter 2024 and initiated a trial-run on network televisions in January 2025, including spots on the Golden Globes, the GRAMMYs and the National Football League playoffs.

◦The initial patient response from this campaign has been positive across multiple leading indicators, including the downloading of materials, taking the Demodex blepharitis quiz and utilizing the "find an eye doctor tool on the XDEMVY website.

◦DTC initiatives will continue on streamlining platforms and will meaningfully expand into a network television campaign beginning in the first quarter of 2025.

TP-03 Demodex blepharitis in patients with Meibomian Gland Disease, Ersa and Rhea Trials

In December 2023, we announced positive topline results of the Ersa trial evaluating XDEMVY administered twice daily ("BID") or three times a day ("TID") for 6 weeks and 12 weeks for the treatment of MGD in patients with Demodex mites. XDEMVY demonstrated statistically significant and clinically meaningful improvements compared to baseline in two objective measures of the disease: the presence and quality of liquid secretion as measured by the Meibomian Gland Secretion Score; and the number of glands secreting normal or clear liquid. In November 2024, additional positive data was presented from the Ersa trial as well as data from the Rhea trial, a pilot study evaluating XDEMVY vehicle for the treatment of MGD in patients with Demodex mites, at the American Academy of Optometry ("AAOpt") Annual Meeting 2024. The Rhea trial enrolled a similar patient population as the Ersa trial, and evaluated the same outcomes, with the same dosing regimens, except the Rhea trial participants received XDEMVY vehicle. Both the Ersa and Rhea trials also assessed patient reported outcomes for some of the most commonly reported patient symptoms in Demodex blepharitis and MGD, namely fluctuating vision, itching, redness, and burning.

The AAOpt presentation, which combined the Ersa and Rhea trials data in a pooled analysis, demonstrated that XDEMVY provided statistically significant and clinically meaningful improvements from baseline and when compared to vehicle. These improvements were shown across three objective measures of MGD: 1) the presence and quality of liquid secretion as measured by the Meibomian Gland Secretion Score; 2) the number of glands secreting normal or clear liquid; and 3) the number of glands yielding any liquid. Improvements were also demonstrated across certain patient reported outcomes, including fluctuating vision, itching and redness. Further, XDEMVY demonstrated statistically significant rates of collarette cure and lid margin erythema cure that are consistent with previous XDEMVY studies. No statistically significant differences were observed between the BID and TID treatment arms in both the Ersa and Rhea trials, respectively, and XDEMVY and the XDEMVY vehicle were well tolerated. Given the positive results of these trials, plus the FDA’s feedback that these patients are already covered under XDEMVY’s label for the treatment of Demodex blepharitis, our medical affairs team is moving forward with sharing this data with ECPs.

TP-04 Rosacea, Galatea Trial

In March 2023, we initiated the Galatea trial, a Phase 2a trial evaluating TP-04, a novel gel formulation of lotilaner, for the treatment of rosacea. In February 2024, we announced positive topline results from the Galatea trial evaluating TP-04 for the treatment of rosacea which demonstrated statistically significant improvements (p0.05) in inflammatory lesions and Investigator's Global Assessment score (change in baseline and success rate) were observed compared to vehicle at week 12. TP-04 was generally well tolerated. After review of this data with the FDA and Key Opinion Leaders, we decided to pursue development of TP-04 for the potential treatment for Ocular Rosacea. In January 2025, we announced plans to initiate a Phase 2 study in the second half of 2025 for the potential treatment of Ocular Rosacea.

TP-05 Lyme Disease, Carpo Trial

In February 2024, we announced positive topline results from the Carpo trial, which demonstrated statistical significance in the mortality of ticks compared to vehicle (p0.001), regardless of treatment arm, and was well tolerated. The Carpo trial is designed to evaluate TP-05, a novel investigational oral, non-vaccine pharmacological prophylactic for the potential prevention of Lyme disease in humans. The Carpo trial evaluated the efficacy of TP-05 in killing lab grown, non-disease carrying ticks after they have attached to the skin of healthy volunteers, as well as confirm the safety, tolerability, and blood concentration of TP-05.

In December 2024, we met with the FDA about our Lyme disease program. The FDA agreed to our proposed approach for a Phase 2b clinical trial, which would include several hundred subjects. Additionally, the FDA confirmed that a Phase 3 clinical study would require a disease prevention field study that would likely require the enrollment of thousands of patients. We continue to believe that the best approach to get this potential prophylactic therapy to patients is to partner this program either prior to the initiation of the Phase 2b study or after the completion of the study.

99

Table of Content

We believe TP-05 is currently the only non-vaccine, drug-based prophylaxis in development that targets ticks, and potentially prevents Lyme disease transmission. It is designed to rapidly and durably provide systemic blood levels of lotilaner potentially sufficient to kill infected ticks attached to the human body before they can transmit the Borrelia bacteria that causes Lyme disease.

Officer and Board Appointments

We expanded and strengthened our eye care leadership with two key appointments to our executive team and Board of Directors. Elizabeth Yeu, M.D. was appointed Chief Medical Officer in November 2024. Dr. Yeu is a distinguished ophthalmologist with more than two decades of experience who transitioned from her role as our Chief Medical Advisor and a member of our Board of Directors. Katherine H. Goodrich, M.D., MHS was appointed to our Board of Directors in November 2024. Dr. Goodrich is currently the Chief Medical Officer of Humana Inc., and brings decades of experience driving innovative and value-based initiatives designed to improve patient outcomes.

Additional Potential Growth Drivers in 2025 and Beyond

We are on track for potential European regulatory approval of a preservative-free formulation of XDEMVY for the potential treatment of Demodex blepharitis in 2027. We have initiated market development work, including Key Opinion Leader engagement, disease education and scientific presentations at major conferences.

In Japan, we expect to share results from a Demodex blepharitis prevalence study in the first half of 2025 and meet with Japanese regulatory authorities to help determine a regulatory path forward.

The Chinese regulatory agency, National Medical Products Administration, accepted the New Drug Application ("NDA") submitted by our partner, Grand Pharmaceutical Group Ltd., for TP-03 for Demodex blepharitis.

Corporate and Financial Overview

We were incorporated as a Delaware corporation in November 2016, and our headquarters are located in Irvine, California. Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, acquiring intellectual property, clinical development of our product candidates, commercializing XDEMVY, building our research and development capabilities, raising capital, and enhancing our corporate infrastructure.

To date we have financed our operations through private placements of preferred stock, convertible promissory notes, net proceeds from issuance of common stock in our Initial Public Offering ("IPO"), our subsequent follow-on public offerings in May 2022 (the "May 2022 Public Offering"), August 2023 (the "August 2023 Public Offering"), and March 2024 (the "March 2024 Public Offering", collectively the "Follow-On Public Offerings"), and our Open Market Sale AgreementTM (the "2023 ATM Prospectus"), as well as proceeds from net product sales, our China Out-License, and drawdowns from the Credit Facilities.

We have incurred significant net operating losses ("NOLs") in every year since our inception and expect to continue to incur significant operating expenses as we commercialize XDEMVY for Demodex blepharitis, and, as we advance our other product candidates through clinical trials, regulatory submissions, and potential commercialization. Our net losses were $115.6 million, $135.9 million and $62.1 million for the years ended December 31, 2024, 2023, and 2022, respectively. Our net losses may fluctuate significantly from quarter to quarter and year to year and could be substantial. We anticipate that our operating expenses will increase significantly as we:

•continue to commercialize XDEMVY and our other product candidates for which we obtain regulatory approvals;

•maintain regulatory approval for XDEMVY and seek regulatory approval for our other product candidates that successfully complete clinical development, if any;

•advance the clinical development of TP-04 for the potential treatment of Ocular Rosacea and TP-05 for the potential Lyme disease prophylaxis;

•engage with contract manufacturers to ensure a sufficient supply chain capacity to provide commercial quantities of XDEMVY and any other products for which we may obtain marketing approval;

•maintain, expand and protect our intellectual property portfolio;

100

Table of Content

•hire additional staff, including clinical, scientific, technical, regulatory, marketing, sales, operations, financial, and other support personnel, to execute our business plan; and

•add information systems and personnel to support our product development and commercialization efforts, and to enable us to operate as a public company.

We began generating product sales during the year ended December 31, 2023, following the FDA approval of XDEMVY in July 2023 and our subsequent commercial launch in August 2023. Our reported revenue within license fees and collaboration revenue is from our China Out-License and clinical supply agreement; we expect to report additional revenue under this caption in future periods.

Until such time as we can generate significant revenue from product sales and achieve profitability, if ever, we expect to finance our operations through public equity or debt financings, or collaborations, strategic alliances, or licensing arrangements with third parties. Adequate funding may not be available to us when needed on acceptable terms, or at all. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable 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 additional capital or enter into such agreements as and when needed, we could be forced to significantly delay, scale back, or discontinue our product development and/or commercialization plans, which would negatively and adversely affect our financial condition.

Because of the numerous risks and uncertainties associated with drug product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate significant revenue from net product sales we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels.

As of December 31, 2024, our aggregate cash, cash equivalents and marketable securities was $291.4 million – see the section below titled "Management's Discussion and Analysis of Financial Condition and Results of Operations —

Liquidity and Capital Resources."

Impact of the Macroeconomic Environment

Recently, the economy has experienced downward pressure, and together with high rates of inflation and energy supply issues experienced in certain regions, war and geopolitical conflicts, have led to regional and/or global macroeconomic challenges, the effects of which may be of an extended duration.

In addition, we may be exposed to credit risk on deposits at financial institutions to the extent our account balances exceed the amount insured by the Federal Deposit Insurance Corporation (“FDIC”). We maintain cash held in deposit at financial institutions in the U.S. While these deposits are insured by the FDIC in an amount up to $250,000 for any depositor, to the extent we hold cash deposits in amounts that exceed the FDIC insurance limitation, we may incur a loss in the event of a failure of any of the financial institutions where we maintain deposits. We invest our excess cash in highly liquid investments, including money market fund accounts, that are readily convertible into cash without penalty. We believe the Company is not exposed to significant credit risk due to the financial position of the depository institutions and the types of accounts we hold, but we will continue to monitor regularly and adjust, if needed, to mitigate risk, including any ongoing or new events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions.

See the section titled "Risk Factors" for a further discussion of the potential adverse impact of unfavorable global and geopolitical economic conditions on our business, results of operations and financial condition.

Components of our Results of Operations

Product Sales, Net

We recognize product sales, net when a customer obtains control of promised goods or services, which occurs at a point in time, typically upon delivery of the Company's product to the customer. We record the amount of revenue that reflects the consideration we expect to receive in exchange for those goods or services. We apply the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are capable of being distinct; (iii) measurement of the transaction

101

Table of Content

price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue as each performance obligation is satisfied.

We sell XDEMVY to customers in the U.S., which became available for commercial sale during the third quarter of 2023. We sell XDEMVY to a limited number of specialty pharmacies and distributors (i.e., its customers) who in turn sell it directly to clinics, hospitals, pharmacies and federal healthcare programs. Revenue from product sales is primarily recognized upon physical delivery of the product (when the customer obtains control of the product), in return for agreed-upon consideration. Shipping and handling activities are considered to be fulfillment activities rather than a separate performance obligation and are recorded within selling, general and administrative expenses in the Statements of Operations and Comprehensive Loss.

Revenues from product sales are recorded at the net sales price, or the transaction price, which may include fixed or variable consideration for (i) invoice discounts for prompt payment and distribution service fees, (ii) commercial and government rebates, chargebacks, discounts and fees, (iii) product returns and (iv) costs of co-pay assistance programs for patients, as well as other incentives. Estimates of variable consideration are calculated based on the actual product sales each reporting period and the nature of the variable consideration related to those sales. Where appropriate, we utilize the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as the current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The amount of variable consideration that is included in the transaction price may be constrained and is included in product sales, net only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates reflect our best estimate of the amount of consideration to which we expect to be entitled based on the terms of the contract. Actual amounts of consideration ultimately received may differ materially from estimates. If actual results in the future vary from estimates, we will adjust these estimates, which would affect product sales, net and earnings in the period such variances are adjusted. We categorize product sales deduction estimates as follows:

Distribution Service Fees: We engage with wholesalers and specialty pharmacies to distribute our products to end customers. We pay the wholesalers and certain specialty pharmacies a fee for services such as: inventory management, chargeback administration, and service level commitments. We estimate the amount of distribution services fees to be paid to the customers and adjust the transaction price with the amount of such estimate at the time of sale to the customer. An accrued liability is recorded for unpaid distribution service fees.

Prompt Pay Discounts: We provide our customers with a percentage discount on their invoice if the customers pay within the agreed upon timeframe. We expect that our customers will earn prompt pay discounts. We estimate the probability of customers paying promptly based on the percentage of discount outlined in the purchase agreement between the two parties, and deduct the full amount of these discounts from gross product sales and accounts receivable at the time revenue is recognized.

Product Returns: Our customers are contractually permitted to return the product within the contractual allowable time before and after the applicable expiration date. In the initial sales period, we estimate a provision for returns based on industry data and adjust the transaction price at the time of the product sale to the customer. Once sufficient history has been collected for product returns, we will utilize that history to inform our returns estimate. Once the product is returned, it is destroyed since it cannot be resold.

Chargebacks: A chargeback is the difference between our invoice price to the wholesaler and the wholesaler’s customer's contract price. The wholesaler tracks these sales and charges us back for the difference between the negotiated prices paid between the wholesaler's customers and the wholesaler's acquisition cost. We estimate the percentage of goods sold that are eligible for chargeback and adjust the transaction price and accounts receivable at the time of sale of the product to the customer.

Co-payment Assistance: Patients who meet certain eligibility requirements may receive co-payment assistance funded by the Company. We record contra-revenue for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators. An accrued liability is recorded on unredeemed co-payment assistance related to products for which control has been transferred to the customer.

Rebates: We accrue rebates for contractually agreed-upon discounts with commercial payers and mandated discounts under government programs such as the Medicaid Drug Rebate Program, Medicare Part D Prescription Drug Program, and other government health care programs in the U.S. Our estimates for expected utilization of commercial payer rebates based on data received from our customers. The estimates for rebates under government programs are based on

102

Table of Content

statutory discount rates and expected utilization as well as historical data we have accumulated since product launch. We calculate the accruals for commercial and government rebates based on various assumptions, including payer mix, with actual rebates potentially requiring accrual adjustments affecting product sales, net. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current period's activity, plus an accrual balance for known prior periods’ unpaid rebates. An accrued liability is recorded for unpaid rebates related to product for which control has transferred to the customer.

License Fees and Collaboration Revenue

License fees and collaboration revenue is primarily attributable to contractual milestones under the China Out-License. These amounts represent the contractual milestones achieved or allocated under the China Out-License that had been fully or partially completed by period end. These allocated amounts represented the satisfaction of the transfer of license rights to LianBio and GrandPharma and the completion of related performance obligations. License fees and collaboration revenue also includes the satisfaction of performance obligations under an existing clinical supply agreement.

We will recognize additional license fees and collaboration revenue under the China Out-License to the extent other events occur, specifically related to (i) milestone achievement of an additional drug supply agreement execution, (ii) milestone achievement of certain regulatory events in the China Territory, and (iii) royalties and milestones from our licensee's product sales of TP-03 in the China Territory. As of the date of this filing, it is uncertain if and when we will receive any royalties or future milestone consideration under the China Out-License, including but not limited to the milestone achievement of an additional drug supply agreement execution.

Cost of Sales

Cost of sales consists of direct and indirect costs related to the manufacturing and distribution of XDEMVY, including raw materials, third-party manufacturing costs, packaging services, freight-in, third-party royalties payable on our product sales, net and amortization of capitalized intangible assets associated with XDEMVY. Cost of sales may also include period costs related to certain inventory warehouse and distribution operations and inventory adjustment charges. Prior to FDA approval of XDEMVY, manufacturing and other inventory costs were recorded to research and development expenses in the Statements of Operations and Comprehensive Loss. As of December 31, 2024, we have sold materially all inventory that was recorded to research and development expense prior to FDA approval of XDEMVY.

Cost of License Fees and Collaboration Revenue

Cost of license fees and collaboration revenue includes the expense recognized under the terms of the China Out-License payable under the terms of our in-license agreement for lotilaner.

Research and Development Expenses

Research and development expenses consist of expenses incurred in connection with the development of our product candidates, including:

•fees paid to third parties to conduct certain research and development activities on our behalf, including under agreements with CROs;

•payments under licensing agreements, such as our upfront in-license fee for lotilaner;

•consulting costs and certain allocated payroll, employee benefit and other employee-related costs (including stock-based compensation, salaries, payroll taxes) for personnel engaged in research and development functions;

•costs related to compliance with clinical regulatory requirements;

•costs of procuring drug products for use in our preclinical studies and clinical trials; and

•facilities expenses, which include direct and allocated expenses for rent of our laboratory.

We expense both internal and external research and development expenses as incurred or as certain upfront or milestone payments become contractually due to licensors upon achievement of clinical or regulatory events. We recognize external research and development costs based on an evaluation of the progress-to-completion of (i) specific tasks performed or

103

Table of Content

deliverables provided by CROs and CMOs and (ii) patient visits for dosing or other follow-up. To estimate period expense for recognition, we use information provided to us by our service providers and we then apply the corresponding fee schedule.

We track our external research and development expenses on a program-by-program basis, such as fees paid to CROs, CMOs, and research laboratories in connection with our pre-clinical development, process development, manufacturing and clinical development activities. However, we do not currently track employee time on a program-by-program basis. Prior to commercialization of XDEMVY, the vast majority of our external and internal research and development expenses were attributable to the development of XDEMVY.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of personnel-related costs including salaries, benefits, stock-based compensation and other personnel-related expenses for our executive, finance, sales and marketing, and other administrative functions. Selling, general and administrative expenses also include sales and marketing costs to support our commercial launch starting in August 2023, consulting fees, legal services, rent and other facilities costs, patient assistance donations, the U.S. healthcare reform federal excise fee on Branded Pharmaceutical Manufacturers and Importers, and other general operating expenses, not otherwise classified as research and development expenses.

We expect that our selling, general and administrative expenses will increase substantially in the future as a result of expanding our operations, including hiring personnel, continued commercialization of XDEMVY, preparing for potential commercialization of our other product candidates, and additional facility occupancy costs, as well as various incremental costs associated with being a public company, including: increased legal and accounting fees, regulatory costs associated with maintaining compliance with the rules of Nasdaq and SEC regulations, investor relations activities, directors and officers liability insurance premiums, and other accompanying compliance and governance costs.

Other Income, Net

Other income, net primarily consists of (i) interest income earned on our cash, cash equivalents, and marketable securities, (ii) interest expense on the Credit Facilities, and (iii) the change in estimated fair value of the LianBio equity warrants and LianBio common stock we received as part of the China Out-License.

104

Table of Content

Results of Operations

Comparison of the Years Ended December 31, 2024 and 2023

The following table summarizes our results of operations for the periods indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","Change"],["","(in thousands)"],["Revenues:"],["Product sales, net","$","180,059","","","$","14,729","","","$","165,330"],["License fees and collaboration revenue","2,894","","","2,718","","","176"],["Total revenues","182,953","","","17,447","","","165,506"],["Operating expenses:"],["Cost of sales","12,826","","","1,593","","","11,233"],["Research and development","53,386","","","50,312","","","3,074"],["Selling, general and administrative","237,310","","","108,700","","","128,610"],["Total operating expenses","303,522","","","160,605","","","142,917"],["Loss from operations","(120,569)","","","(143,158)","","","22,589"],["Other income (expense):"],["Interest income","15,014","","","10,337","","","4,677"],["Interest expense","(7,849)","","","(3,346)","","","(4,503)"],["Loss on debt extinguishment","(1,944)","","","\u2014","","","(1,944)"],["Other income (expense), net","586","","","(102)","","","688"],["Realized/unrealized (loss) gain on equity investments","(591)","","","259","","","(850)"],["Change in fair value of equity warrants issued by licensee","(201)","","","117","","","(318)"],["Total other income, net","5,015","","","7,265","","","(2,250)"],["Net loss","$","(115,554)","","","$","(135,893)","","","$","20,339"]]
[[/GREPCENT_TABLE]]

Product Sales, Net

Product sales, net increased by $165.3 million for the year ended December 31, 2024 to $180.1 million, as compared to the prior year period. This increase was primarily driven by more than 163,000 bottles of XDEMVY dispensed to patients, compared to 17,400 bottles dispensed to patients in the prior year period. XDEMVY was approved by the FDA in July 2023 and was commercially launched in August 2023.

License Fees and Collaboration Revenue

For the year ended December 31, 2024, we recognized $2.9 million of license fees and collaboration revenue including (i) $2.5 million for the Termination Payment related to the Novation Agreement, and (ii) $0.4 million for the Warrant Termination Payment. For the year ended December 31, 2023, we recognized $2.7 million related to (i) the achievement of a $2.5 million contractual milestone under the China Out-License, and (ii) $0.2 million from the satisfaction of performance obligations under an existing clinical supply agreement. These allocated amounts represented the satisfaction of the transfer of license rights to LianBio and the completion of related performance obligations.

We will recognize additional license fees and collaboration revenue under the China Out-License to the extent other events occur, specifically related to (i) milestone achievement of regulatory events and/or patent issuance in the China Territory, and (ii) royalties and milestones from our licensee's product sales of TP-03 in the China Territory.

Cost of Sales

Cost of sales increased by $11.2 million for the year ended December 31, 2024 to $12.8 million, as compared to the prior year period as a result of the increase in bottles of XDEMVY that were dispensed. Cost of sales consists of direct and indirect costs related to the manufacturing and distribution of XDEMVY, including raw materials, third-party manufacturing costs, packaging services, and freight-in, as well as third-party royalties payable on our product sales, net and amortization of capitalized intangible assets associated with XDEMVY.

105

Table of Content

Research and Development Expenses

[[GREPCENT_TABLE]]
[["","December 31,","","Change"],["","2024","","2023"],["Direct external expenses:"],["TP-03 program","$","15,520","","","$","14,311","","","$","1,209"],["TP-04 program","1,415","","","2,583","","","(1,168)"],["TP-05 program","2,602","","","5,261","","","(2,659)"],["Other early-stage programs","623","","","619","","","4"],["Indirect expenses:"],["Compensation and personnel-related","27,591","","","24,129","","","3,462"],["Other","3,135","","","2,409","","","726"],["Elanco milestone expenses","2,500","","","1,000","","","1,500"],["Total research and development expenses","$","53,386","","","$","50,312","","","$","3,074"]]
[[/GREPCENT_TABLE]]

Research and development expenses increased by $3.1 million for the year ended December 31, 2024 to $53.4 million, as compared to the prior year period. The increase was primarily due to (i) $3.5 million of increased indirect expenses related to payroll and personnel-related costs (including increased stock-based compensation expense of $1.0 million) for employee additions to drive our product development initiatives, (ii) $0.7 million of increased other indirect expenses, (iii) a $1.5 million increase in milestone expense related to our in-license agreements (see Note 9), and (iv) $1.2 million of increased TP-03 program expenses. These increases were partially offset by (i) $2.7 million of decreased TP-05 program expenses including $1.5 million for the food effect study and $1.2 million for the Carpo trial, and (ii) a $1.2 million decrease in TP-04 program expenses related to completion of the Galatea trial.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $128.6 million for the year ended December 31, 2024, to $237.3 million as compared to the prior year period. The increase was primarily due to (i) $39.7 million of increased payroll and personnel-related costs (including increased stock-based compensation expense of $6.6 million) for commercial and corporate employee additions to support our business growth and commercial leadership hires for XDEMVY, (ii) $52.0 million of increased commercial and marketing costs as we continued our commercial expansion of XDEMVY, (iii) $36.8 million of increased information technology applications, legal, professional and other corporate expenses. Our field sales headcount and associated vendor expenses continued to increase during 2024 due to further growth and expansion of our commercial activities for XDEMVY. XDEMVY was approved by the FDA in July 2023 and was commercially launched in August 2023.

Other Income, Net

Other income, net decreased by $2.2 million for the year ended December 31, 2024 due to (i) $1.9 million of loss on debt extinguishment related to the termination of our 2022 Credit Facility (defined below), (ii) $4.5 million of increased interest expense related to the Credit Facilities, (iii) a $0.9 million decrease related to the change in fair value of the LianBio common stock sold in June, and (iv) a $0.3 million decrease related to the change in fair value related to the final mark-to-market adjustment on the unvested third tranche equity warrant. These decreases were partially offset by (i) $4.7 million of increased interest income earned on our cash, cash equivalents and marketable securities, and (ii) $0.7 million of dividend income from LianBio.

Comparison of the Years Ended December 31, 2023 and 2022

For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.

106

Table of Content

Liquidity and Capital Resources

Sources of Liquidity

Overview

Since our inception, we have financed our operations substantially through private placements of preferred stock, net proceeds from the issuance of common stock through our IPO, Follow-on Public Offerings, and the 2023 ATM Prospectus, as well as proceeds from product sales, net, the China Out-License, and drawdowns from our Credit Facilities. As of December 31, 2024, we had cash, cash equivalents and marketable securities of $291.4 million.

Follow-On Public Offerings

In August 2023, we completed the August 2023 Public Offering in which 5,714,285 shares of our common stock were sold at a public offering price of $17.50 per share. In September 2023, the underwriters partially exercised an option to purchase an additional 355,164 shares of common stock at the public offering price of $17.50 per share. After giving effect to the exercise of the underwriters' option, we sold a total of 6,069,449 shares and received aggregate net proceeds of $99.3 million, after deducting underwriting discounts, commissions, and other offering-related expenses.

In February 2024, we filed an automatic shelf registration statement on Form S-3 ASR (the "2024 Shelf Registration Statement"). In March 2024 we completed the March 2024 Public Offering. The 2024 Public Offering was an underwritten follow-on public offering under the 2024 Shelf Registration Statement, pursuant to which we sold 2,812,500 shares of our common stock, and, in lieu of common stock to a certain investor, pre-funded warrants to purchase 312,500 shares of our common stock. The price to the public was $32.00 per share and $31.9999 per pre-funded warrant, which was the price to the public of each share of common stock sold in the March 2024 Public Offering, minus the $0.0001 exercise price per pre-funded warrant. We also granted the underwriters a 30-day option to purchase up to 468,750 additional shares of its common stock at the public offering price of $32.00 per share, which the underwriters exercised in full in March 2024. We received $107.7 million in aggregate net proceeds, after deducting underwriting discounts, commissions, and other estimated offering-related expenses.

Open Market Sales Agreement

During the year ended December 31, 2023, we sold 1,000,000 shares of our common stock for $20.00 per share under a sales agreement prospectus filed in November 2023, pursuant to the 2023 Shelf Registration Statement (defined below) covering the sale of up to $100.0 million of our common stock pursuant to the 2023 ATM Prospectus with Jefferies LLC ("Jefferies"). This resulted in net proceeds of $19.2 million, after deducting broker commissions and offering related expenses.

During the year ended December 31, 2024, there were no sales of our common stock pursuant to the 2023 ATM Prospectus.

China Out-License

As of the date of this filing, we have received $86.1 million of total proceeds in connection with our China Out-License comprised of (i) $15.0 million of initial consideration, (ii) $67.5 million for the achievement of specified milestones, (iii) $0.7 million related to a special cash dividend, (iv) $2.5 million related to the Novation Agreement, and (v) $0.4 million related to the Warrant Termination Agreement.

As of December 31, 2024 we are eligible to receive further consideration from GrandPharma upon the achievement of additional TP-03 events, including: (i) $20.0 million of potential future regulatory and/or patent milestones; (ii) $100.0 million of potential future China-based TP-03 sales threshold milestones; and (iii) tiered low-to-high-teen royalties for China Territory TP-03 product sales.

Credit Facilities

In February 2022, we executed the Credit Facility with Hercules Capital, Inc. and SVB (the "2022 Credit Facility"). Concurrent with the execution of the 2022 Credit Facility we drew $20.0 million. The 2022 Credit Facility was amended in January 2023 and August 2023. The Credit Facility, as amended, set a maximum interest rate, updated the terms of prepayment and included an extended period to drawdown the tranche associated with the NDA submission. During 2023, we made two

107

Table of Content

separate draws for an aggregate of $10.0 million from the $25.0 million tranche associated with the NDA submission of TP-03. We did not incur lender fees as part of the 2022 Credit Facility.

In April 2024, we executed the 2024 Credit Facility with Pharmakon with maturity in April 2029 (collectively, with the 2022 Credit Facility, the “Credit Facilities”). The 2024 Credit Facility is collateralized by substantially all of the Company's presently existing and subsequently acquired assets. Upon execution, we made a $75.0 million draw from the initial tranche, a portion of which was utilized to repay all outstanding indebtedness associated with the 2022 Credit Facility, for total net proceeds of $39.6 million. The 2024 Credit Facility provides for three potential additional term loan tranches in principal amounts up to $25.0 million, $50.0 million, and $50.0 million, respectively, subject to customary conditions to funding and, in the case of the last two tranches, achieving minimum net sales milestones. The three additional tranches may be requested on or prior to December 31, 2024, June 30, 2025 and December 31, 2025, respectively.

The 2024 Credit Facility bears interest at a floating rate based upon the secured overnight financing rate (“SOFR”), plus a margin of 6.75% per annum. The SOFR is subject to a 3.75% floor. The 2024 Credit Facility contains representations and warranties, affirmative and negative covenants in each case. There is also no warrant coverage to the lenders and no financial covenants associated with the financing.

Funding Requirements

Liquidity

Our operating expenditures currently consist of cost of sales, research and development costs (including activities within our preclinical, clinical, regulatory, and drug manufacturing initiatives) and selling, general and administrative costs. Our use of cash is impacted by the timing and extent of payments for each of these activities and other business requirements. We have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $360.2 million and $244.7 million as of December 31, 2024 and 2023, respectively.

We believe that our cash, cash equivalents and marketable securities of $291.4 million as of December 31, 2024 is sufficient to fund our current and planned operations for at least the next twelve months from the date of filing this Annual Report on Form 10-K. We also have additional availability from our 2024 Credit Facility of $100.0 million contingent on maintaining certain sales milestones. Our cash runway estimate is predicated on current assumptions for future revenue, operating expenses, and debt availability and may require future adjustments. Accordingly, we may be required to raise additional capital earlier than we currently expect based on our cash requirements and market dynamics.

Shelf Registration Statements

In February 2024, we filed the 2024 Shelf Registration Statement, which permits us to offer and sell from time to time, in one or more series of issuances and on terms that we will determine at the time of the offering, our common stock, preferred stock, debt securities, warrants, units or any combination of such securities.

In November 2023, we filed a shelf registration statement on Form S-3 that was declared effective by the SEC on November 21, 2023, (the "2023 Shelf Registration Statement"), which replaced the November 2021 Shelf Registration Statement, as defined below, and permits us to offer up to $300.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, including in units from time to time.

As part of the 2023 Shelf Registration Statement, we concurrently filed the 2023 ATM Prospectus with Jefferies covering the sale of up to $100.0 million of our common stock pursuant to an Open Market Sales AgreementTM we entered into with Jefferies in 2021 (the "ATM Sales Agreement"). Under the terms of the 2023 ATM Prospectus and ATM Sales Agreement, Jefferies will act as the Company's sales agent and is entitled to compensation for its services equal to 3% of the gross proceeds of any shares of common stock sold. We have not sold any shares of our common stock under the 2023 ATM Prospectus during the year ended December 31, 2024. In December 2023, we sold 1,000,000 shares of our common stock under the 2023 ATM Prospectus for $20.00 per share and received net proceeds of $19.2 million, after deducting broker commission and offering-related expenses.

In November 2021, we filed a shelf registration statement on Form S-3 that was declared effective by the SEC on November 5, 2021 (the “2021 Shelf Registration Statement”), which permitted us to offer up to $300.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, including in units from time to time. The 2023 Shelf Registration Statement replaced the 2021 Shelf Registration Statement.

108

Table of Content

Also, as part of the 2021 Shelf Registration Statement, we concurrently filed a sales agreement prospectus (the “2021 ATM Prospectus”) covering the sale of up to $100.0 million of our common stock pursuant to an Open Market Sale AgreementTM. We did not sell any shares of our common stock under the 2021 ATM Prospectus. In July 2023, in connection with the August 2023 Public Offering, we terminated the sales agreement prospectus relating to the 2021 ATM Prospectus.

Other Liquidity Risks

We expect to incur significant operating losses for the foreseeable future, and for these losses to further increase, as we expand our clinical development programs for our other product candidates and continue to commercialize XDEMVY. We may also encounter unforeseen expenses, difficulties, complications, delays and other currently unknown factors that could adversely affect our business.

We may require additional capital to fully develop our product candidates and to execute our business strategy. Our requirements of a future capital raise will depend on many factors, including:

•the amount of revenue received from commercial sales of XDEMVY or our product candidates, should any of our product candidates receive marketing approval;

•the cost and timing associated with commercializing XDEMVY or our product candidates, if they receive marketing approval;

•the scope, timing, rate of progress and costs of our drug discovery efforts, preclinical development activities, laboratory testing and clinical trials for our product candidates;

•the number and scope of clinical programs we decide to pursue;

•the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates;

•the scope and costs of development and commercial manufacturing activities;

•the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time;

•the availability of our 2024 Credit Facility;

•the extent to which we acquire or in-license other product candidates and technologies;

•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

•our ability to establish and maintain collaborations on favorable terms, if at all;

•our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates and, ultimately, the sale of our products, following FDA approval;

•our implementation of various computerized information systems;

•impact of health epidemics on our clinical development or operations; and

•the costs associated with being a public company.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay

109

Table of Content

dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

Adequate funding may not be available to us on acceptable terms or at all. Our potential inability to raise capital when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds as required, we may need to delay, reduce, or terminate some or all development programs and clinical trials. We may also be required to sell or license our rights to product candidates in certain territories or indications that we would otherwise prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to address our liquidity needs, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially and adversely affect our business and financial prospects. See the section of this Annual Report on Form 10-K titled “Risk Factors” for additional risks associated with our substantial capital requirements.

Contractual Obligations and Commitments

We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Such arrangements include those related to the contractual obligations described below:

Lease Commitments

Our operating lease commitments reflect payments due for our active lease agreements in Irvine, California, for adjacent office and laboratory suites. In December 2024, we entered into a lease agreement for office space located in Irvine, California for a 10-year lease term. The lease payments are expected to commence in late 2025 following the earlier of: (i) eleven months following the lease execution date, or (ii) the date the Company commences its regular business activities at the premises following completion of tenant improvements. The base rent for the first year of the lease will be approximately $2.5 million and is subject to annual increases of 3% thereafter. The Company is entitled to an abatement of base rent for the first five full calendar months from the beginning of the lease commencement date for an aggregate amount of $0.7 million. As of December 31, 2024, our contractual commitments for our leases were $0.8 million, which will be paid over the remaining lease term of 0.8 years.

Purchase Obligations

As of December 31, 2024, we have entered into manufacturing supply agreements for the commercial supply of XDEMVY. These amounts do not represent all of our anticipated purchases, but instead represent the contractually obligated minimum purchases or firm commitments of non-cancelable minimum amounts, as follows:

[[GREPCENT_TABLE]]
[["","","Amounts"],["2025","","$","1,943"],["2026","","4,072"],["2027","","3,744"],["2028","","4,445"],["2029","","4,534"],["Thereafter","","\u2014"],["Total","","$","18,738"]]
[[/GREPCENT_TABLE]]

Milestone Obligations

The terms of our Eye and Derm Elanco Agreement, All Human Uses Elanco Agreement, and Other In-License Agreement requires us to make future development milestone payments aggregating up to $9.0 million and future commercial and sales-based milestone payments aggregating up to $249.0 million upon our achievement of the specified milestones. The amount and timing of such obligations are unknown or uncertain as of December 31, 2024.

Summary Statement of Cash Flows

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below:

110

Table of Content

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["","(in thousands)"],["Net cash (used in) provided by:"],["Operating activities","$","(83,027)","","","$","(117,493)"],["Investing activities","(199,195)","","","140,604"],["Financing activities","154,656","","","130,176"],["Net (decrease) increase in cash and cash equivalents","$","(127,566)","","","$","153,287"]]
[[/GREPCENT_TABLE]]

Net Cash Used in Operating Activities

Net cash used in operating activities was $83.0 million for the year ended December 31, 2024, which primarily consisted of our net loss of $115.6 million, partially offset by net increases in non-cash and other charges of $28.7 million and net operating assets and liabilities of $3.8 million. The increase in net non-cash and other charges were primarily related to stock-based compensation expense of $27.8 million and a loss on debt extinguishment of $1.9 million. The increase in net operating assets and liabilities was primarily due to cash increases in accounts payable and other accrued liabilities of $40.3 million and $2.6 million of accrued payroll and benefits, partially offset by cash decreases including $30.1 million of accounts receivable, $7.0 million of prepaid expenses, and $2.0 million of inventory.

Net cash used in operating activities was $117.5 million for the year ended December 31, 2023, which primarily consisted of our net loss of $135.9 million, partially offset by net increases in non-cash and other charges of $18.1 million and net operating assets and liabilities of $0.3 million. The increase in net non-cash and other charges primarily related to stock-based compensation of $19.8 million. The increase in net operating assets and liabilities was primarily due to cash increases in accounts payable and other accrued liabilities of $13.2 million, accrued payroll and benefits of $7.7 million, partially offset by cash decreases including $16.6 million of account receivables, $2.9 million of prepaid expenses, and $0.7 million of other non-current assets.

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities was $199.2 million for the year ended December 31, 2024, and consisted of (i) $262.6 million of purchased marketable securities, (ii) $3.0 million of purchased long-term investments, (iii) $5.0 million of intangible asset additions, and (iv) $1.6 million of purchased property, plant and equipment. These cash decreases were partially offset by $73.0 million of proceeds from maturities of marketable securities.

Net cash provided by investing activities was $140.6 million for the year ended December 31, 2023, and consisted of $174.8 million of proceeds from maturities of marketable securities, partially offset by (i) $28.7 million of purchased marketable securities, (ii) $4.0 million of intangible asset additions, and (iii) $1.5 million of purchased property, plant and equipment.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $154.7 million for the year ended December 31, 2024, and consisted of (i) $98.3 million of net proceeds from the issuance of common stock from our March 2024 Public Offering, (ii) $9.4 million from the issuance of pre-funded warrants related to the March 2024 Public Offering, (iii) $75.0 million of proceeds from an initial draw against our 2024 Credit Facility, (iv) $5.6 million of proceeds from the exercise of vested employee stock options, and (v) $1.8 million of proceeds from our Employee Stock Purchase Plan ("ESPP"). These increases to cash were partially offset by $31.9 million of debt extinguishment payments on the 2022 Credit Facility and $3.5 million of cash paid for loan issuance costs on the 2024 Credit Facility.

Net cash provided by financing activities was $130.2 million for the year ended December 31, 2023, and consisted of (i) $99.4 million of net proceeds from the issuance of common stock from our August 2023 Public Offering, (ii) $19.2 million of net proceeds from common stock sold under the 2023 ATM Prospectus, (iii) $10.0 million of proceeds from our 2022 Credit Facility, (iv) $1.0 million of proceeds from our ESPP, and (v) $0.6 million of proceeds from the exercise of vested employee stock options.

For a discussion of the statement of cash flows for the year ended December 31, 2022, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.

111

Table of Content

Critical Accounting Policies, Significant Judgments and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Financial Statements, as well as the reported revenue earned and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions. Historically, revisions to our estimates have not resulted in a material change to the financial statements.

While our significant accounting policies are described in the notes to our financial statements also included in this Annual Report on Form 10-K, we believe this critical accounting policy is the most important to understanding and evaluating our reported financial results.

Rebates

We accrue rebates for contractually agreed-upon discounts with commercial payers and mandated discounts under government programs such as the Medicaid Drug Rebate Program, Medicare Part D Prescription Drug Program, and other government health care programs in the U.S. Our estimates for expected utilization of commercial payer rebates are based on data received from our customers. The estimates for rebates under government programs are based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launch. We calculate the accruals for commercial and government rebates based on various assumptions, including payer mix, with actual rebates potentially requiring accrual adjustments affecting product sales, net. Rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current period's activity, plus an accrual balance for known prior periods’ unpaid rebates. If actual rebates vary from estimates, we may need to adjust accruals, which would affect product sales, net in the period of adjustment. An accrued liability is recorded for unpaid rebates related to product for which control has transferred to the customer.

Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in the notes to which they relate within our financial statements.

Indemnification Agreements

As permitted under Delaware law and in accordance with our bylaws, we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. We are also party to indemnification agreements with our officers and directors. We believe the fair value of the indemnification rights and agreements is minimal. Accordingly, we have not recorded any liabilities for these indemnification rights and agreements as of December 31, 2024.

112

Table of Content