Tonix Pharmaceuticals Holding Corp. (TNXP)

ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This
Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking
statements that reflect Management’s current views with respect to future events and financial performance. You can identify
these statements by forward-looking words such as “may” “will,” “expect,” “anticipate,”
“believe,” “estimate” and “continue,” or similar words. Those statements include statements
regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which
such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of
future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by
such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures
made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors known to us could
cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update
or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating
results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations.
No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.
Factors that could cause differences include, but are not limited to: our need for additional financing; risks related to the failure
to successfully market any of our products; risks related to the failure to obtain FDA clearances or approvals and noncompliance with
FDA regulations; risks related to the timing and progress of clinical development of our product candidates; uncertainties of patent protection
and litigation; uncertainties of government or third party payor reimbursement; limited research and development efforts and dependence
upon third parties; and substantial competition.

Business
Overview

We
are a fully-integrated biopharmaceutical company commercializing and developing innovative therapies for central nervous system
(“CNS”) disorders, infectious diseases, immunology, and rare diseases. Our portfolio consists of both commercial and
development-stage programs.

We market TONMYA® (cyclobenzaprine
HCl sublingual tablets) for the treatment of fibromyalgia in adults in the U.S., as well as Zembrace® SymTouch® (sumatriptan injection)
and Tosymra® (sumatriptan nasal spray) for the treatment of acute migraine in adults in the U.S. Tonix received approval from the
U.S. Food and Drug Administration (“FDA”) for TONMYA for the treatment of fibromyalgia in August 2025 and commercially launched
TONMYA in November 2025. TONMYA is our first internally developed product to become FDA approved and is the first new medicine for fibromyalgia
in more than 15 years. TONMYA is a centrally acting, non-opioid analgesic designed for bedtime administration and long-term use, for which
the Company holds worldwide commercialization rights. Tonix’s commercial platform includes sales, marketing, market access, distribution,
and patient support capabilities.

We are advancing a diversified
development pipeline generated through internal discovery, in-licensing, acquisitions, and collaborations with academic and non-profit
institutions. The Company’s pipeline addresses conditions that span CNS, infectious disease, immunology, and rare disease, with
multiple programs in clinical and preclinical development. TONMYA’s proprietary cyclobenzaprine HCl sublingual tablet formulation
is referred to as “TNX-102 SL” outside of the fibromyalgia indication. We are exploring the utility of TNX-102 SL (cyclobenzaprine
HCl sublingual tablets) in Phase 2 clinical trials for major depressive disorder (MDD) and acute stress disorder (ASD)/acute stress reaction
(ASR). A potentially pivotal Phase 2 study of TNX-102 SL as a first-line monotherapy in adults with MDD, the HORIZON study, commenced
in June 2026.

TNX-102 SL is being developed
to treat ASD/ASR under an Investigator-Initiated investigational new drug application (“IND”) at the University of North Carolina
in the ongoing OASIS study funded by a grant they received from the U.S. Department of Defense (“DoD”). Topline data from
the OASIS study is expected to be reported mid-2027.

Our clinical stage infectious
disease portfolio includes monoclonal antibody TNX-4800 (anti Borrelia OspA human monoclonal antibody) for the prevention of Lyme
disease in the U.S. which has no FDA-approved vaccines or prophylactics. We received positive, final minutes from the FDA following a
Type C meeting in early third quarter of 2026. The minutes support the planned initiation of an adaptive Phase 2 field in the first quarter
of 2027. TNX-4800 was licensed from UMass Chan Medical School. Our clinical-stage immunology development portfolio includes TNX-1500,
which is a Phase 2 ready Fc-modified humanized monoclonal antibody targeting CD40-ligand (CD40L or CD154) being developed for the prevention
of kidney transplant rejection, and for the treatment of autoimmune diseases. A Phase 2, open-label, investigator-initiated study in adult
kidney transplant patients at Massachusetts General Hospital (MGH) is expected to initiate in the second half of 2026 pending FDA clearance
of MGH’s IND application. Another CNS candidate in clinical development is TNX-1300 (double-mutant cocaine esterase), which is in
Phase 2 for the treatment of cocaine intoxication. TNX-1300 has been granted Breakthrough Therapy designation by the FDA and a Phase 2a
study was completed. We intend to meet with the FDA in 2026 to help inform the clinical design of its next Phase 2 study. Finally, our
clinical-stage rare disease portfolio includes TNX-2900, intranasal oxytocin potentiated with magnesium, in development for Prader-Willi
syndrome and expected to start a Phase 2 study in the second half of 2027.

Our pre-clinical, pre-IND infectious disease portfolio includes TNX-801 (horsepox,
live virus vaccine), a potential vaccine for mpox and smallpox, which is expected to enter a Phase 1 study in 2027 pending FDA clearance
of an IND. We own a facility in Dartmouth, MA that was purpose-built to manufacture TNX-801 under Good Manufacturing Practices (GMP) to
support clinical development and potential commercialization. The GMP suites were decommissioned in 2024 and may be reactivated the earlier
of 2028 or in the case of a national or international emergency. Our pre-IND infectious disease portfolio also includes TNX-4200, which
is a small molecule broad-spectrum antiviral agent targeting CD45 for the prevention or treatment of high lethality infections to improve
the medical readiness of military personnel in biological threat environments. The TNX-4200 program is supported by a $34 million contract
over five years from the U.S. DoD’s Defense Threat Reduction Agency (DTRA). We own and operate a state-of-the art research facility
in Frederick, Maryland that supports this research. Our pre-IND pre-clinical immunology portfolio includes TNX-1700, which is a fusion
protein of TFF2 and albumin, is in preclinical development for the treatment of gastric and colorectal cancer in combination with PD-1
blockade in collaboration with Columbia University. Finally, our pre-clinical, pre-IND CNS portfolio also includes TNX-4900, a highly
selective small-molecule Sigma-1 receptor (“S1R”) antagonist for neuropathic pain licensed from Rutgers University.

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Our
product candidates in development are investigational new drugs or biologics and have not been approved for any indication.

Zembrace
SymTouch and Tosymra are registered trademarks of Tonix Medicines. TONMYA is a registered trademark of Tonix Pharma Limited. All
other marks are the property of their respective owners. We are led by a management team with significant industry experience
in drug development.

Results
of Operations

We
anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the sale of
our commercialized assets, progress of our research and development efforts and the timing and outcome of regulatory submissions.
Due to these uncertainties, accurate predictions of future operations are difficult or impossible to make.

Three
Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

The
following table sets forth our operating results for the quarter ended June 30, 2026 and 2025 (in thousands):

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Revenues. Revenue
recognized for the three months ended June 30, 2026 and 2025, was $13.5 million and $2.0 million, respectively. The increase is predominately
due to the launch of TONMYA in November 2025. Gross-to-net allowances decreased by approximately $1.3 million due to changes in prior
estimates related to a prior year resulting in an additional $1.3 million of revenue being recognized during the three months ended
June 30, 2026.

The
Company’s net product revenues are summarized below:

Cost
of Sales. Cost of sales recognized for the three months ended June 30, 2026 and 2025, was
$0.7 million and $3.3 million, respectively. For the three months ended June 30, 2025, cost of sales includes write-downs related to Tosymra
and Zembrace finished goods inventory of approximately $2.3 million, based on an assessment of inventory on hand and projected sales.
The decrease in cost of sales is driven by a change in product mix and sale of product which had previously been written off.

Research
and Development Expenses. Research and development expenses for the three months ended June 30, 2026 were $19.4 million,
an increase of $8.6 million, or 80%, from $10.8 million for the three months ended June 30, 2025. This increase is predominately
due to increased clinical expenses of $1.3 million and manufacturing expenses of $4.5 million as a result of advancing our prioritized pipeline period over period, as well as increased employee-related costs of $2.5 million due to increased headcount.

The
table below summarizes our direct research and development expenses for our product candidates and development platform for the
three months ended June 30, 2026, and 2025.

[Excerpt truncated for page length; source filing is linked above.]

Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking
statements that reflect Management’s current views with respect to future events and financial performance. You can identify
these statements by forward-looking words such as “may” “will,” “expect,” “anticipate,”
“believe,” “estimate” and “continue,” or similar words. Those statements include statements
regarding the intent, belief or current expectations of us and members of its management team as well as the assumptions on which
such statements are based and should be read together with the “Risk Factors” section of this Annual Report on Form
10-K for a discussion of important factors that could cause actual results to differ materially from the results described in
or implied by the forward-looking statements contained in the following discussion and analysis. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed
below and elsewhere in this Annual Report and in other reports we file with the Securities and Exchange Commission, particularly
those under “Risk Factors”.

We
are a fully-integrated biopharmaceutical company commercializing and developing innovative therapies for central nervous system
(“CNS”) disorders, immunology, infectious diseases, and rare diseases. Our portfolio consists of both commercial and
development-stage programs.

In
August 2025, we received approval from the FDA for TONMYA™ (cyclobenzaprine
HCl sublingual tablets) for the treatment of fibromyalgia. TONMYA, our first internally developed product to become FDA approved,
was commercially launched by us in the United States on November 17, 2025. TONMYA is the first new medicine for fibromyalgia in
more than 15 years and is a centrally acting, non-opioid analgesic designed for bedtime administration and long-term use. The
approval and launch of TONMYA marked major milestones in our evolution. We hold worldwide commercialization rights to TONMYA.
In addition to TONMYA, we market two FDA-approved prescription products for the treatment of acute migraine: Zembrace® SymTouch®
(sumatriptan injection) and Tosymra® (sumatriptan nasal spray). Our commercial platform includes sales, marketing, market
access, distribution, and patient support capabilities.

We maintain a diversified development pipeline generated through internal
discovery, in-licensing, acquisitions, and collaborations with academic and non-profit institutions. The Company’s pipeline addresses
conditions that span central nervous system (“CNS”), infectious disease, immunology, and rare disease, with multiple programs
in clinical and preclinical development. The proprietary cyclobenzaprine HCl sublingual tablet formulation contained in TONMYA is referred
to as “TNX-102 SL” outside of the fibromyalgia indication. We are exploring the utility of TNX-102 SL (sublingual cyclobenzaprine)
in Phase 2 clinical trials for major depressive disorder and acute stress disorder. TNX-102 SL is being developed to treat acute stress
reaction and acute stress disorder under an Investigator-Initiated investigational new drug application (“IND”) at the University
of North Carolina in the ongoing OASIS study funded by the U.S. Department of Defense (“DoD”). A Phase 2 study of TNX-102
SL for major depressive disorder is expected to commence mid-2026 under a Tonix IND that has been cleared by FDA.

Our clinical stage infectious
disease portfolio includes monoclonal antibody TNX-4800 (anti-OspA from Borrelia burgdorferi) for seasonal prevention of Lyme disease,
for which initiation of a Phase 2 field study is planned for the first half of 2027 and a Phase 2 human challenge study is planned for
2028, pending FDA clearances.

Our clinical-stage immunology development portfolio consists of biologics
to address organ transplant rejection and autoimmunity, including TNX-1500, which is a Phase 2- ready Fc-modified humanized monoclonal
antibody targeting CD40-ligand (CD40L or CD154) being developed for the prevention of allograft rejection and for the treatment of autoimmune
diseases.

Another CNS candidate in clinical
development is TNX-1300 (double-mutant cocaine esterase), which is in Phase 2 for the treatment of cocaine intoxication. TNX-1300 has
been granted Breakthrough Therapy designation by the FDA.

Our clinical-stage rare disease
portfolio includes TNX-2900, intranasal oxytocin potentiated with magnesium, in development for Prader-Willi syndrome and expected to
start a Phase 2 study in the first quarter of 2027.

Our pre-clinical, pre-IND infectious disease portfolio includes TNX-801
(horsepox, live virus vaccine), as vaccine for mpox and smallpox. We own a facility in Dartmouth, MA that was purpose-built to manufacture
TNX-801 under Good Manufacturing Practices (GMP) to support clinical development and potential commercialization. The facility was decommissioned
in 2024 and may be reactivated on the earlier of 2027 or in the case of a national or international emergency.

Our pre-IND infectious disease
portfolio also includes TNX-4200, which is a small molecule broad-spectrum antiviral agent targeting CD45 for the prevention or treatment
of high lethality infections to improve the medical readiness of military personnel in biological threat environments. The TNX-4200 program
is supported by a $34 million contract over five years from the U.S. DoD’s Defense Threat Reduction Agency (DTRA). We own and operate
a state-of-the art research facility in Frederick, Maryland that supports this research.

Our pre-IND pre-clinical immunology
portfolio includes TNX-1700, which is a fusion protein of TFF2 and albumin is in preclinical development for the treatment of gastric
and colorectal cancer in combination with PD-1 blockade in collaboration with Columbia University.

Our pre-clinical, pre-IND CNS
portfolio also includes TNX-4900, a highly selective small-molecule Sigma-1 receptor (“S1R”) antagonist for neuropathic pain.

Our
product development candidates are investigational new drugs or biologics and have not been approved for any indication.

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Zembrace
SymTouch and Tosymra are registered trademarks of Tonix Medicines. TONMYA is a registered trademark of Tonix Pharma Limited. All
other marks are the property of their respective owners. We are led by a management team with significant industry experience
in drug development.

We
complement our management team with a network of scientific, clinical, and regulatory advisors that includes recognized experts
in their respective fields.

Results
of Operations

We
anticipate that our results of operations will fluctuate for the foreseeable future due to several factors, such as the sale of
our commercialized assets, progress of our research and development efforts and the timing and outcome of regulatory submissions.
Due to these uncertainties, accurate predictions of future operations are difficult or impossible to make.

Fiscal
Year Ended December 31, 2025 Compared to Fiscal Year Ended December 31, 2024

The
following table sets forth our operating expenses for the fiscal years ended December 31, 2025 and 2024 (in thousands):

Revenues.
Revenue recognized for the year ended December 31, 2025 and 2024 was $13.1 and $10.1 million, respectively.

The
Company’s net product revenues are summarized below:

Cost
of Sales. Cost of goods sold during the year ended December 31, 2025, was $6.6 million, including write-downs related to Tosymra
and Zembrace finished goods inventory of approximately $0.7 million based on an assessment of inventory on hand and projected
sales prior to the respective expiration dates. Cost of sales recognized for the year ended December 31, 2024, was $7.8 million,
including write-downs related to Tosymra and Zembrace finished goods inventory of approximately $1.5 million based on an assessment
of inventory on hand and projected sales prior to the respective expiration dates.

Research
and Development Expenses. Research and development expenses for the fiscal year ended December 31, 2025, were $44.5 million,
an increase of $4.5 million, or 11%, from $40.0 million for the fiscal year ended December 31, 2024. This increase is predominately
due to increased manufacturing expenses of $6.8 million and non-clinical expenses of $2.9 million as a result of pipeline prioritization
period over period, and in employee-related expenses of $0.6 million due to increased headcount, offset by a decrease in regulatory
expenses of $1.7 million and office-related expenses of $1.8 million due to a reduction in expenditures, as well as a decrease
in clinical expenses of $2.0 million as a result of fewer clinical trials.

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In
August 2022, we received a Cooperative Agreement grant from the National Institute on Drug Abuse (“NIDA”), part of
the National Institutes of Health, to support the development of its TNX-1300 product candidate for the treatment of cocaine intoxication.
During the years ended December 31, 2025 and 2024, we recorded $0.6 and $1.6 million, respectively in funding as a reduction of
related research and development expenses.

The
table below summarizes our direct research and development expenses for our product candidates and development platform for the
years ended December 31, 2025, and 2024.

Our
direct research and development expenses consist principally of external costs for clinical, nonclinical, and manufacturing, such
as fees paid to contractors, consultants and CROs in connection with our development work. Included in “Internal Staffing,
Overhead and Other” is overhead, supplies, research and development employee costs (including stock option expenses), travel,

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]