qncx-20250331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________

FORM 10-Q

________________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number: 001-38890

________________________________________________________

Quince Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

________________________________________________________


Delaware			90-1024039
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
611 Gateway Boulevard, Suite 273 South San Francisco, California			94080
(Address of principal executive offices)			(Zip Code)
Registrant’s telephone number, including area code: (415) 910-5717

________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

QNCX

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 6, 2025, the registrant had 45,468,782 shares of common stock, $0.001 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		34

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Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy, drug candidates, planned preclinical studies and clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "would," "expect," "objective," "plan," "potential," "seek," "grow," "target," "if," and similar expressions intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission (the "SEC"). It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur, and actual results may differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our ability to successfully execute on our current strategic direction;

•future research and development activities, including the scope, success, cost and timing of any future development activities, preclinical studies and clinical trials, including clinical trials of eDSP or other pipeline compounds we advance through the drug development process;

•the timing and focus of any potential future clinical trials, and the reporting of data from those trials;

•our ability and timing of seeking and obtaining FDA and any other regulatory approvals for our drug candidates;

•the willingness of the FDA or other regulatory authorities to accept any future completed or planned clinical and preclinical studies and other work, as the basis for review and approval of our drug candidates for their respective indications;

•whether regulatory authorities determine that additional trials or data are necessary in order to accept a new drug application for review and/or approval;

•the ability of any future clinical trials to demonstrate safety and efficacy of eDSP and other drug candidates, and other positive results;

•our financial performance;

•our ability to continue as a going concern, the sufficiency of our existing cash and cash equivalents to fund our future operating expenses and capital expenditure requirements;

•the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;

•our expectations related to the use of our available cash;

•our ability to service our debt obligations and maintain compliance with associated covenants;

•our ability to obtain funding for our operations, including funding necessary to develop and commercialize our drug candidates;

•our expectations regarding the potential market size and the size of the patient populations for our drug candidates, if approved for commercial use, and the potential market opportunities for commercializing our drug candidates;

•our plans relating to commercializing our drug candidates, if approved;

•our plans and ability to establish sales, marketing and distribution infrastructure to commercialize any drug candidates for which we obtain approval;

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•our ability to attract and retain key scientific and clinical personnel;

•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•our reliance on third parties to conduct clinical trials of our drug candidates, and for the manufacture of our drug candidates for preclinical studies and clinical trials;

•dependence upon the integrity of our supply chain, including multiple single-source suppliers;

•our reliance on third-party suppliers for certain of our raw materials and components;

•our ability to expand our drug candidates into additional indications and patient populations;

•the success of competing therapies that are or may become available;

•the beneficial characteristics, safety and efficacy of our drug candidates;

•governmental or regulatory delays, information requests, clinical holds, and regulatory developments in the United States and other jurisdictions;

•our ability to obtain and maintain regulatory approval of our drug candidates, and any related restrictions, limitations and/or warnings in the label of any approved drug candidate;

•our ability to obtain and maintain CE Certificates of conformity for the medical device components of our eDSP System in accordance with applicable legislation governing medical devices;

•our ability to transition CE Certifications under the previous Medical Device Directive, to a regulatory framework under MDR;

•our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;

•the scope of protection we are able to establish and maintain for intellectual property rights covering our drug candidates and technology;

•potential claims relating to our intellectual property;

•our ability to grow our organization and increase the size of our facilities to meet our anticipated growth; and

•our ability to maintain compliance with Nasdaq listing requirements.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we do not intend to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations.

You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

This Quarterly Report on Form 10-Q contains estimates, projections and other information concerning our industry, our business and the markets for our drug candidates. We obtained the industry, market and similar data set forth in this report from our own internal estimates and research and from academic and industry research, publications, surveys and studies conducted by third parties, including governmental agencies. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. While we believe that the data we use from third parties are reliable, we have not separately verified these data. Further, while we believe our internal research is reliable, such research has not been verified by any third party. You are cautioned not to give undue weight to any such information, projections and estimates.

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DEFINED TERMS

Unless the context requires otherwise, references to “Quince,” “the Company,” “we,” “us,” or “our” in this Quarterly Report on Form 10-Q refer to Quince Therapeutics, Inc. and its consolidated subsidiaries. We also have used several other terms in this Quarterly Report on Form 10-Q, most of which are explained or defined below.


Abbreviated Term			Defined Term

AIDE			Autologous Intracellular Drug Encapsulation
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
A-T			Ataxia-Telangiectasia
ATTeST			Ataxia Telangiectasia Trial with the eDSP System
the Code			Internal Revenue Code of 1986, as amended
CODM			Chief Operating Decision Maker
COVID-19			Coronavirus disease
Credits			Tax credits
CRO			Contract Research Organization
CTR			European Union pharmaceutical legislation known as the Clinical Trials Regulation
Debt Agreement			Unsecured line of credit agreement between EryDel and the European Investment Bank, which the Company guaranteed on October 20, 2023 in connection with the EryDel Acquisition
DMD			Duchenne muscular dystrophy
DSP			Dexamethasone Sodium Phosphate
EC			European Commission
EryDel			Quince Therapeutics, S.p.A (previously named EryDel S.p.A.)
eDSP			Encapsulated dexamethasone sodium phosphate encapsulated in patient's own red blood cells (previously referred to as EryDex)
eDSP System			Automated combination product to encapsulate dexamethasone sodium phosphate in red blood cells
EIB			European Investment Bank
EU			European Union
EIB Loan			Unsecured line of credit between EryDel and the European Investment Bank
Exchange Act			Securities Exchange Act of 1934, as amended
FASB			Financial Accounting Standards Board
FDA			United States Food and Drug Administration
GAAP			generally accepted accounting principles in the United States
GMP			Good Manufacturing Practice
HHS			United States Department of Health and Human Services
ICARS			International Cooperative Ataxia Rating Scale
IPR&D			In-process Research and Development
IRA			Inflation Reduction Act of 2022
Lighthouse			Lighthouse Pharmaceuticals, Inc.
MAA			Marketing Authorization Application
MDR			Medical Devices Regulation 2017/745
MPEEM			Multi-Period Excess Earnings Method
Nasdaq			The Nasdaq Stock Market LLC
NDA			New Drug Application

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NEAT			eDSP Phase 3 Clinical Trial (Neurological Effects of eDSP on Subjects with A-T)
Novosteo			Novosteo, Inc.
OLE			Open-Label Extension Clinical Trial
PD			Pharmacodynamic
PK			Pharmacokinetic
PRF			Purdue Research Foundation
R&D			Research and Development
RBC			Red Blood Cell
RSA			Restricted Stock Awards
RSU			Restricted Stock Units
SAE			Serious Adverse Event
Sarbanes-Oxley Act			The Sarbanes-Oxley Act of 2002
SEC			United States Securities and Exchange Commission
Securities Act			Securities Act of 1933
SPA			Special Protocol Assessment

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

QUINCE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands except share amounts)



	March 31, 2025		December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	7,771	$	6,212
Short-term investments	23,828		34,572
Prepaid expenses and other current assets	2,230		3,252
Total current assets	33,829		44,036
Property and equipment, net	448		315
Operating lease right-of-use assets	493		498
Intangible assets	62,365		60,045
Other assets	9,954		9,584
Total assets	$	107,089	$	114,478

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,008	$	2,903
Accrued expenses and other current liabilities	5,348		4,375
Total current liabilities	8,356		7,278
Long-term debt	15,266		14,321
Long-term operating lease liabilities	383		394
Long-term contingent consideration	58,615		56,691
Deferred tax liabilities	5,172		4,963
Other long-term liabilities	716		685
Total liabilities	88,508		84,332
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 authorized, no shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively.	—		—
Common stock, $0.001 par value, 100,000,000 shares authorized, 44,089,142 and 44,001,643 issued and outstanding as of March 31, 2025 and December 31, 2024, respectively.	44		44
Additional paid in capital	408,082		406,609
Accumulated other comprehensive income (loss)	1,957		(35)
Accumulated deficit	(391,502)		(376,472)
Total stockholders’ equity	18,581		30,146
Total liabilities and stockholders’ equity	$	107,089	$	114,478

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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QUINCE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended March 31,
		2025		2024
Operating expenses:
Research and development		$	8,145	$	3,702
General and administrative		4,789		4,971
Fair value adjustment for contingent consideration		1,924		2,545
Total operating expenses		14,858		11,218
Loss from operations		(14,858)		(11,218)
Fair value adjustment for long-term debt		(444)		(388)
Interest income		406		887
Other expense, net		(87)		(399)
Net loss before provision for income taxes		(14,983)		(11,118)
Income tax expense		(47)		(31)
Net loss		(15,030)		(11,149)
Other comprehensive loss:
Foreign currency translation adjustments		2,045		(1,229)
Unrealized gain (loss) on available-for-sale securities		(53)		7
Total comprehensive loss		$	(13,038)	$	(12,371)
Net loss per share - basic and diluted		$	(0.34)	$	(0.26)
Weighted average shares of common stock outstanding - basic and diluted		43,941,185		43,010,212

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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QUINCE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands, except share and per share amounts)


For the three months ended March 31, 2025 and 2024
	Common Stock			Additional Paid in		Accumulated Other Comprehensive Income / (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance as of December 31, 2024	44,001,643	$	44	$	406,609	$	(35)	$	(376,472)	$	30,146
Issuance of common stock on exercise of stock options	87,499	—		87		—		—		87
Stock based compensation	—	—		1,386		—		—		1,386
Foreign currency translation adjustment	—	—		—		2,045		—		2,045
Unrealized gain (loss) on available for sale investments	—	—		—		(53)		—		(53)
Net loss	—	—		—		—		(15,030)		(15,030)
Balance as of March 31, 2025	44,089,142	$	44	$	408,082	$	1,957	$	(391,502)	$	18,581

Balance as of December 31, 2023	42,973,215	$	43	$	401,638	$	3,047	$	(319,644)	$	85,084
Issuance of common stock on exercise of stock options	242,018	—		190		—		—		190
Stock based compensation	—	—		1,274		—		—		1,274
Foreign currency translation adjustment	—	—		—		(1,229)		—		(1,229)
Unrealized gain (loss) on available for sale investments	—	—		—		7		—		7
Net loss	—	—		—		—		(11,149)		(11,149)
Balance as of March 31, 2024	43,215,233	$	43	$	403,102	$	1,825	$	(330,793)	$	74,177

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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QUINCE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2025		2024
Cash flows from operating activities
Net Loss	$	(15,030)	$	(11,149)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation	1,386		1,274
Depreciation and amortization	32		40
Change in the fair value of contingent consideration liabilities	1,924		2,545
Change in fair value of long-term debt	391		388

Amortization of discount on available-for-sale investments	(355)		(646)
Changes in operating assets and liabilities, net of acquisitions:
Prepaid expenses and other current assets	944		(440)
Right of use assets, operating leases and operating lease liabilities	24		(35)
Other assets	163		(8)
Accounts payable	22		59
Accrued expenses and other current liabilities	898		(381)
Net cash used in operating activities	(9,601)		(8,353)
Cash flow from investing activities:
Purchase of investments	(1,954)		(39,292)
Proceeds from maturities of investments	13,000		48,245

Purchase of property and equipment	(148)		(39)
Net cash provided by investing activities	10,898		8,914
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options	87		190
Net cash provided by financing activities	87		190
Effect of exchange rate changes on cash	175		310
Net increase in cash and cash equivalents	1,559		1,061
Cash and cash equivalents at beginning of period	6,212		20,752
Cash and cash equivalents at end of period	$	7,771	$	21,813

Supplemental disclosures of cash flow information:
Cash interest payment on long-term debt	(53)		—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	227

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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QUINCE THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Organization

Description of Business

Quince Therapeutics, Inc. is a late-stage biotechnology company dedicated to unlocking the power of a patient’s own biology for the treatment of rare diseases.

The Company's proprietary AIDE technology is an innovative drug/device combination platform that uses an automated process to encapsulate a drug into a patient’s own red blood cells. Our Phase 3 lead asset, eDSP, leverages the AIDE technology to encapsulate DSP into a patient’s own red blood cells, and is targeted to treat a rare pediatric neurodegenerative disease, A-T.

Liquidity and Capital Resources

The Company has incurred losses and negative cash flows from operations since inception and expects to continue to generate operating losses for the foreseeable future. As of March 31, 2025, the Company had an accumulated deficit of $391.5 million. Since inception through March 31, 2025, the Company has funded operations primarily with the net proceeds from the issuance of convertible promissory notes, from the issuance of redeemable convertible preferred stock, from the net proceeds from the Company’s initial public offering (the “IPO”) and from the net proceeds of the private investment in public equity transaction (“PIPE Financing”). As of March 31, 2025, the Company had cash, cash equivalents, and short-term investments of $31.6 million.

The Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that these unaudited condensed consolidated financial statements are issued. The transition to profitability is dependent upon the successful development, approval and commercialization of our product candidate, and the achievement of a level of revenues adequate to support our cost structure. Based on its current operating plan, the Company believes that its cash and cash equivalents balance as of March 31, 2025 will not be sufficient to fund operations and capital expenditures for at least the twelve months following the issuance of these unaudited condensed consolidated financial statements, and the Company will need to obtain additional funding. The Company intends to obtain additional funding through available financing sources which may include additional public offerings of common stock, private financing of debt or equity, and/or the pursuit of strategic partnerships, licensing arrangements or collaborations. Management’s belief with respect to the Company's ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional funding sooner than would otherwise be expected. There can be no assurance that the Company will be able to obtain additional funding on acceptable terms, if at all. If the Company is unable to obtain sufficient funding, it may be required to delay development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects. Because of the uncertainty in securing additional funding and the insufficient amount of cash and cash equivalent resources as of March 31, 2025, management concluded that substantial doubt exists with respect to the Company's ability to continue as a going concern within one year after the date that these unaudited condensed consolidated financial statements are issued.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

In connection with the acquisition of EryDel on October 20, 2023 (the “EryDel Acquisition”), the Company became a guarantor in respect of an unsecured line of credit between EryDel and the European Investment Bank (the “EIB Loan” or “Debt Agreement” ). As of March 31, 2025, the Company had 10.0 million euros ($10.8 million) outstanding on the EIB Loan, with an original requirement to maintain a minimum cash balance of 14.65 million euros ($15.8 million) until full repayment (the “Minimum Cash Covenant”). The Company could voluntarily prepay, and in cases of default or change in control, EIB could accelerate the debt. In November 2024, the Company amended the Debt Agreement (the “Amendment”), waiving the Minimum Cash Covenant from January 1, 2025, to December 31, 2025, or until its restoration. As of March 31, 2025, the Minimum Cash Covenant had not been restored. Under the terms of the Amendment, the

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Company agreed to amendments requiring monthly cash balance reporting, restrictions on acquisitions, quarterly payments of 2% out of the total 9% deferred interest during the waiver period, and a one-time fee of 20 thousand euros ($22 thousand).

Management expects to incur additional losses in the future to fund the Company's operations and conduct product research and development and may need to raise additional capital to fully implement its business plan. The Company may raise additional capital through the issuance of equity securities, debt financings or other sources including out-licensing or partnerships, in order to further implement its business plan. However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of product candidates.

Note 2. Summary of Significant Accounting Policies

Basis of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Quince Therapeutics, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and pursuant to the instructions of the SEC on Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included.

The condensed consolidated balance sheet as of March 31, 2025, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025 and 2024, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2025 and 2024, the condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024, and the financial data and other financial information disclosed in the notes to the condensed consolidated financial statements are unaudited. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2024 included in the Company’s Form 10-K filed with the SEC on March 24, 2025. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 or for any other future annual or interim period.

Risks and Uncertainties

The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the Company’s potential drug candidates, uncertainty of market acceptance of the Company’s drug candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals and sole source suppliers. The Company’s drug candidates will require approvals from the FDA and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any drug candidate will receive the necessary approvals.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses, as well as related disclosure of contingent assets and liabilities. The most significant estimates used in the Company’s consolidated financial statements relate to the determination of the fair value of identifiable assets and liabilities in connection with business combinations including associated intangible assets and goodwill, contingent consideration, accruals for research and development costs, useful lives of long-lived assets, stock-based compensation and related assumptions, the incremental borrowing rate for leases and income tax uncertainties, including a valuation allowance for deferred tax assets, eligibility of expenses for the Australia research and development refundable tax credits, impairment of intangible assets, including

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goodwill; and contingencies. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from the Company’s estimates.

Foreign Currency Translation and Transactions

The functional currency of the Company’s wholly-owned subsidiaries are the Euro and Australian Dollar. The Company's financial results and financial position are translated into U.S. dollars using exchange rates at balance sheet dates for assets and liabilities and using average exchange rates for income and expenses. The resulting translation differences are presented as a separate component of accumulated other comprehensive income (loss), as a separate component of equity.

Foreign currency transactions are translated into the functional currencies using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses, resulting from the settlement of such transactions and from the re-measurement of monetary assets and liabilities denominated in foreign currencies using exchange rates at balance sheet date and non-monetary assets and liabilities using historical exchange rates, are recognized in the condensed consolidated statements of operations and comprehensive loss.

Segment Information

The Company manages its business activities on a consolidated basis and operates as one operating and reportable segment, which is the business of developing and commercializing the Company's proprietary AIDE technology platform. The key factors used to identify the reportable segments are the organization of its business and alignment of the Company's internal operations and the nature of its AIDE technology. Operating segments are defined as components of an enterprise for which discrete financial information is available and is evaluated regularly by the CODM, in deciding how to allocate resources and assess performance.

The Company’s Chief Executive Officer, who is the CODM, reviews financial information on a consolidated basis for purposes of allocating and evaluating financial performance. The CODM evaluates the Company’s performance and resource allocation by analyzing consolidated financial information. See Note 13 Segment Information for further details.

Intangible Assets

Definite lived Intangible Assets

Intangible assets with a definite useful life are amortized on a straight-line basis over the estimated useful life of the related assets. The Company regularly reviews whether current conditions or events suggest that the carrying values of its acquired definite lived intangible assets might not be recoverable. When such conditions are identified, an estimate of the undiscounted future cash flows from these assets, or relevant asset groupings, is compared to their carrying value to determine if an impairment exists. If an impairment is identified, the loss is calculated as the difference between the carrying value of the intangible asset and its fair value, which is based on the net present value of the estimated future cash flows.

Indefinite lived Intangible Assets

Intangible assets with an indefinite useful life are not amortized. Intangible assets acquired in a business combination or an acquisition that are used in research and development activities (regardless of whether they have an alternative future use) shall be considered indefinite lived until the completion or abandonment of the associated research and development efforts. Intangible assets acquired in a business combination are initially recorded at fair value. During the period that those assets are considered indefinite lived, they shall not be amortized but shall be tested for impairment. Once the research and development efforts are completed or abandoned, the entity shall determine the useful life of the assets. An indefinite lived intangible asset shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the intangible asset is less than its carrying amount. If that is the case, the Company performs a quantitative impairment test, and, if the carrying amount of the Company exceeds its fair value, then

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the Company will recognize an impairment charge for the amount by which its carrying amount exceeds its fair value, not to exceed the carrying amount of the intangible asset. Qualitative factors to be considered include but are not limited to:

•Cost factors such as increases in raw materials, labor, or other costs that have a negative effect on future expected earnings and cash flows

•Legal/regulatory factors or progress and results of clinical trials

•Other relevant entity-specific events such as changes in management, key personnel, strategy, or customers; contemplation of bankruptcy; or litigation that could affect significant inputs used to determine the fair value of the indefinite-lived intangible asset

•Industry and market considerations such as a deterioration in the environment in which an entity operates, an increased competitive environment

•Macroeconomic conditions such as deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreign exchange rates, or other developments in equity and credit markets that could affect significant inputs used to determine the fair value of the indefinite-lived intangible asset.

Contingent Consideration

The Company determines the acquisition date fair value of contingent consideration using a probability-weighted discounted cash flow method, with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC Topic 820, Fair Value Measurement. The significant inputs in the Level 3 measurement not supported by market activity included our probability assessments of expected future cash flows related to the Company's acquisition of EryDel in October 2023, during the contingent consideration period, appropriately discounted considering the uncertainties associated with the earnout obligation, and calculated in accordance with the terms of the definitive agreement. The liabilities for the contingent consideration are established at the time of the acquisition and will be evaluated on a quarterly basis based on additional information as it becomes available. Any change in the fair value adjustment is recorded in the earnings of that period. During the three months ended March 31, 2025, the Company recorded an adjustment of $1.9 million to increase the fair value of its contingent consideration related to the acquisition of EryDel. The adjustment is reflected within operating loss on the consolidated statement of operations and comprehensive loss. Changes in the fair value of the contingent consideration obligations may result from changes in probability assumptions with respect to the likelihood of achieving the various contingent payment obligations. Significant increases or decreases in the inputs noted above in isolation would result in a significantly lower or higher fair value measurement.

Cash, Cash Equivalents and Investments

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash equivalents include marketable securities. Management determines the appropriate classification of its investments in debt securities at the time of purchase and at the end of each reporting period. Investments with maturities beyond three months at the date of purchase and which mature at, or less than twelve months from the balance sheet date are classified as short-term investments. Collectively, cash equivalents, short-term investments and long-term investments are considered available-for-sale and are recorded at fair value. Unrealized gains and losses are recorded as a component of other comprehensive income (loss) in the consolidated statements of operations and included as a separate component of consolidated statements of stockholders’ equity. Realized gains and losses are included in interest income in the consolidated statements of operations and comprehensive loss.

Premiums (discounts) are amortized (accreted) over the life of the related investment as an adjustment to yield using the straight-line interest method. Dividend and interest income are recognized when earned. These amounts are recorded in “interest income” in the consolidated statements of operations and comprehensive loss.

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Recently Adopted Accounting Pronouncements

There were no new accounting standards adopted during the three months ended March 31, 2025.

Recent Accounting Pronouncements Not Yet Adopted

The following are new accounting pronouncements that the Company is evaluating for future impacts on its financial statements:

ASU 2023-09, Improvements to Income Tax Disclosures (ASC 740). In December 2024, the FASB issued this ASU to establish new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under this ASU, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation. They must also further disaggregate income taxes paid. The ASU is effective beginning after December 2025 under a prospective approach. Early adoption is permitted. The Company is evaluating the disclosure requirements related to the new standard.

ASU 2024-03, Disaggregation of Income Statement Expenses (“DISE”). In November 2024, the FASB issued a new accounting standard to improve the disclosures about an entity’s expenses and address requests from investors for more detailed information about the types of expenses included in commonly presented expense captions. The new standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with retrospective application permitted. The Company is evaluating the disclosure requirements related to the new standard.

All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

Note 3. Fair Value Measurements

The fair value of the Company's financial instruments reflects the amounts that the Company estimates that it would receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The Company discloses and recognizes the fair value of the assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs other than quoted prices that are observable for the assets or liability either directly or indirectly, including inputs in markets that are not considered to be active.

Level 3 - Inputs that are unobservable. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company's financial instruments are carried in the accompanying consolidated balance sheets at amounts that approximate fair value.

The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the three months ended March 31, 2025 and year ended December 31, 2024.

The Company elected the fair value option for the EIB Loan guaranteed by the Company in connection with the EryDel Acquisition. The Company adjusted the EIB Loan to fair value through the change in fair value of debt in the accompanying consolidated statements of operations and comprehensive loss. Subsequent unrealized gains and losses on items for which the fair value option is elected are reported in earnings. The Company will breakout any change in value

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due to credit loss in accumulated other comprehensive loss. For the three months ended March 31, 2025 and year ended December 31, 2024, there was no change in value due to credit loss.

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of March 31, 2025 and December 31, 2024 are presented in the following tables (in thousands):


	Fair Value Measurements as of March 31, 2025
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	5,685	$	5,685	$	—	$	—

Government and agency notes	23,828		—		23,828		—
Total Assets	$	29,513	$	5,685	$	23,828	$	—
Liabilities:
Contingent consideration	58,615		—		—		58,615
Long-term debt	15,266		—		—		15,266
Total	$	73,881	$	—	$	—	$	73,881


	Fair Value Measurements as of December 31, 2024
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	3,702	$	3,702	$	—	$	—

Government and agency notes	34,572		—		34,572		—
Total Assets	$	38,274	$	3,702	$	34,572	$	—
Liabilities:
Contingent consideration	56,691		—		—		56,691
Long-term debt	14,321		—		—		14,321
Total	$	71,012	$	—	$	—	$	71,012

The Company classifies government and agency notes as Level 2 investments as the Company uses quoted prices for similar assets sourced from certain third-party pricing services. The third-party pricing services generally utilize industry standard valuation models for which all significant inputs are observable, either directly or indirectly, to estimate the price or fair value of the securities. The primary input generally includes reported trades of or quotes on the same or similar securities. The Company does not make additional judgments or assumptions made to the pricing data sourced from the third-party pricing services.

Level 3 Assets and Liabilities

Contingent Consideration

The following table reflects the changes in present value of acquisition related accrued earnouts of contingent consideration liability using significant unobservable inputs (Level 3) for the three months ended March 31, 2025 and 2024:


	2025		2024



Beginning contingent consideration balance, December 31	$	56,691	$	57,706
Change in fair value of contingent consideration	1,924		2,545
Ending contingent consideration balance, March 31	$	58,615	$	60,251

To estimate the fair value of the contingent consideration, the Company used a probability-weighted discounted cash flow model with an expected present value valuation technique with significant unobservable fair value inputs and is therefore classified as a Level 3 measurement. The estimates of fair value are uncertain and changes in the estimated inputs may result in significant adjustments to the fair value. The unobservable inputs consisted of the expected timing of milestone

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completion dates, probability of achievement, and discount rate. The change in the fair value of the contingent consideration is primarily driven by the passage of time related to the contingent consideration earnout.

The following table summarizes the assumptions used in the valuation of the contingent consideration (in thousands except for percentages):


	March 31, 2025	December 31, 2024
Expected timing of milestones completion dates	2026 - 2038	2026 - 2038
Discount rate	14.5%	14.5%
Probability of achievement	1% - 56.5%	1% - 56.5%

Long-term Debt

The following table presents the changes in the fair value of the Level 3 EIB Loan for the three months ended March 31, 2025:


	(in thousands)



Balance as of December 31, 2024	$	14,321
Change in fair value	444
Interest payment	(54)
Due to foreign currency translation	555
Balance as of March 31, 2025	$	15,266

To estimate the fair value of the EIB Loan, the Company used an expected present value valuation technique with significant unobservable inputs resulting in classification as a Level 3 measurement. The estimate of fair value is uncertain and changes in the estimated inputs may result in significant adjustments to the fair value. The unobservable inputs consisted of discount rate which includes the credit quality of the Company and credit spreads for comparable debt.

The following table summarizes the assumptions including the unobservable inputs related to the Company's long-term debt (in thousands except for percentages):


	March 31, 2025	December 31, 2024
Discount rate	13%	13%

Note 4. Cash, Cash Equivalents and Investments

The following tables categorize the fair values of cash, cash equivalents and investments measured at fair value on a recurring basis on our balance sheets (in thousands):


	March 31, 2025		December 31, 2024
Cash and cash equivalents:
Cash	$	2,086	$	2,510
Money market funds	5,685		3,702

Total cash and cash equivalents	$	7,771	$	6,212

Short-term investments:

Government and agency notes	23,828		34,572
Total short-term investments	$	23,828	$	34,572

The Company's investments are classified as available-for-sale securities. As of March 31, 2025, the weighted average remaining contractual maturities of available-for-sale securities was approximately 2 months. The unrealized gain (loss) activity related to the Company’s available-for-sale securities is included in the Company’s accumulated other

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comprehensive income. There were no significant realized gains or losses recognized on the sale or maturity of available-for-sale securities for the three months ended March 31, 2025 and 2024, and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income. Based on the Company’s review of its available-for-sale securities, the Company has no available-for-sale securities in loss positions as of March 31, 2025. No other-than-temporary impairments on these securities were recognized for the three months ended March 31, 2025 and 2024.

The Company periodically assesses its investment in available-for-sale securities for impairment losses and credit losses. The amount of credit losses is determined by comparing the difference between the present value of future cash flows expected to be collected on these securities and the amortized cost. Factors considered in assessing credit losses include the position in the capital structure, vintage and amount of collateral, delinquency rates, current credit support, and geographic concentration. There have been no impairment and credit losses related to available-for-sale securities for the three months ended March 31, 2025 and 2024.

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value and recognized in interest and other income, net in the statement of operations and comprehensive loss. If neither criteria is met, the Company evaluates whether the decline in fair value is related to credit-related factors or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. Credit-related impairment losses, limited by the amount that the fair value is less than the amortized cost basis, are recorded through an allowance for credit losses in interest and other income, net.

Any unrealized losses from declines in fair value below the amortized cost basis as a result of non-credit factors are recognized in accumulated other comprehensive income, net of tax as a separate component of stockholders’ equity, along with unrealized gains. Realized gains and losses and declines in fair value, if any, on available-for-sale securities are included in interest and other income, net in the statement of operations and comprehensive loss.

For purposes of identifying and measuring credit-related impairments, the Company’s policy is to exclude applicable accrued interest from both the fair value and amortized cost basis of the related security. The Company has elected to write-off uncollectible accrued interest receivable balances in a timely manner, which is defined by the Company as when interest due becomes 90 days delinquent. The accrued interest write-off will be recorded by reversing interest income. Accrued interest receivable is recorded in other current assets on the balance sheets.

The following table summarizes the available-for-sale securities (in thousands):


	Fair Value Measurements as of March 31, 2025
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Money market funds	$	5,685	$	—	$	—	$	5,685

Government and agency notes

SEC Form 10-Q filed by Quince Therapeutics Inc.