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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 September 30, 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: 001-38692

EQUILLIUM, INC.

(Exact name of registrant as specified in its charter)


Delaware	82-1554746
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2223 Avenida de la Playa, Suite 105, La Jolla, CA	92037
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (858) 240-1200

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	EQ	The Nasdaq Capital Market

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 ☐ No

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 ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer	☒
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. ☐

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

As of November 10, 2025, the registrant had 60,893,283 shares of common stock, par value $0.0001 per share, outstanding.

EQUILLIUM, INC.

TABLE OF CONTENTS


		Page No.
PART I	FINANCIAL INFORMATION	1
ITEM 1.	FINANCIAL STATEMENTS	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 Condensed Consolidated Financial Statements	5
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	17
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	26
ITEM 4.	CONTROLS AND PROCEDURES	26
PART II	OTHER INFORMATION	27
ITEM 1.	LEGAL PROCEEDINGS	27
ITEM 1A.	RISK FACTORS	27
ITEM 5.	OTHER INFORMATION	75
ITEM 6.	EXHIBITS	76
SIGNATURES		78

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Equillium, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and par value data)


	September 30,			December 31,
	2025			2024
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	33,120		$	18,085
Short-term investments		-			4,490
Prepaid expenses and other current assets		459			2,403
Total current assets		33,579			24,978
Operating lease right-of-use assets		753			364
Property and equipment, net		174			262
Total assets	$	34,506		$	25,604
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,082		$	2,676
Accrued expenses		1,740			3,483
Current portion of operating lease liabilities		272			197
Total current liabilities		3,094			6,356
Long-term operating lease liabilities		473			187
Total liabilities		3,567			6,543
Commitments and contingencies
Stockholders' equity:
Common stock, $0.0001 par value; 200,000,000 shares authorized as of September 30, 2025 and December 31, 2024; 60,676,837 and 35,557,563 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively		5			3
Additional paid-in capital		243,094			212,084
Accumulated other comprehensive income		270			781
Accumulated deficit		(212,430	)		(193,807	)
Total stockholders' equity		30,939			19,061
Total liabilities and stockholders' equity	$	34,506		$	25,604

See accompanying notes.

Equillium, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)


	Three months Ended September 30,						Nine months Ended September 30,
	2025			2024			2025			2024
Revenue	$	-		$	12,161		$	-		$	36,703
Operating expenses:
Research and development		1,301			9,562			11,307			30,113
General and administrative		3,274			3,278			8,365			10,161
Total operating expenses		4,575			12,840			19,672			40,274
Loss from operations		(4,575	)		(679	)		(19,672	)		(3,571	)
Other income, net:
Interest income		235			331			530			1,142
Other income, net		110			341			519			156
Total other income, net		345			672			1,049			1,298
Net loss	$	(4,230	)	$	(7	)	$	(18,623	)	$	(2,273	)
Other comprehensive loss, net:
Unrealized gain (loss) on available-for-sale securities, net		-			21			(3	)		(6	)
Foreign currency translation loss		(115	)		(275	)		(508	)		(137	)
Total other comprehensive loss, net		(115	)		(254	)		(511	)		(143	)
Comprehensive loss	$	(4,345	)	$	(261	)	$	(19,134	)	$	(2,416	)
Net loss per share:
Basic	$	(0.06	)	$	(0.00	)	$	(0.41	)	$	(0.06	)
Diluted	$	(0.06	)	$	(0.00	)	$	(0.41	)	$	(0.06	)
Weighted-average number of common shares outstanding:
Basic		65,322,753			35,424,388			45,651,900			35,324,092
Diluted		65,322,753			35,424,388			45,651,900			35,324,092

See accompanying notes.

Equillium, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)


					Additional			Accumulated Other						Total
	Common Stock				Paid-in			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital			Income			Deficit			Equity
Balance at December 31, 2023		35,254,752	$	3	$	208,170		$	140		$	(185,740	)	$	22,573
Stock-based compensation expense		-		-		972			-			-			972
Other comprehensive income		-		-		-			283			-			283
Net loss		-		-		-			-			(2,734	)		(2,734	)
Balance at March 31, 2024		35,254,752	$	3	$	209,142		$	423		$	(188,474	)	$	21,094
Issuance of common stock under employee stock purchase plan		169,636		-		91			-			-			91
Stock-based compensation expense		-		-		952			-			-			952
Other comprehensive loss		-		-		-			(172	)		-			(172	)
Net income		-		-		-			-			468			468
Balance at June 30, 2024		35,424,388	$	3	$	210,185		$	251		$	(188,006	)	$	22,433
Stock-based compensation expense		-		-		1,005			-			-			1,005
Other comprehensive loss		-		-		-			(254	)		-			(254	)
Net loss		-		-		-			-			(7	)		(7	)
Balance at September 30, 2024		35,424,388	$	3	$	211,190		$	(3	)	$	(188,013	)	$	23,177

					Additional			Accumulated Other						Total
	Common Stock				Paid-in			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital			Income			Deficit			Equity
Balance at December 31, 2024		35,557,563	$	3	$	212,084		$	781		$	(193,807	)	$	19,061
Stock-based compensation expense		-		-		621			-			-			621
Exercise of stock options		52,344		-		38			-			-			38
Issuance of common stock under ATM, net of issuance costs		109,410		-		(438	)		-			-			(438	)
Other comprehensive loss		-		-		-			(50	)		-			(50	)
Net loss		-		-		-			-			(8,654	)		(8,654	)
Balance at March 31, 2025		35,719,317	$	3	$	212,305		$	731		$	(202,461	)	$	10,578
Stock-based compensation expense		-		-		563			-			-			563
Other comprehensive loss		-		-		-			(346	)		-			(346	)
Net loss		-		-		-			-			(5,739	)		(5,739	)
Balance at June 30, 2025		35,719,317	$	3	$	212,868		$	385		$	(208,200	)	$	5,056
Stock-based compensation expense		-		-		401			-			-			401
Exercise of stock options		1,532,571		-		1,191			-			-			1,191
Issuance of common stock under ATM, net of issuance costs		1,610,075		-		727			-			-			727
Issuance of common stock under private placement of equity securities, net of issuance costs		21,814,874		2		27,907			-			-			27,909
Other comprehensive loss		-		-		-			(115	)		-			(115	)
Net loss		-		-		-			-			(4,230	)		(4,230	)
Balance at September 30, 2025		60,676,837	$	5	$	243,094		$	270		$	(212,430	)	$	30,939

See accompanying notes.

Equillium, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



	Nine Months Ended September 30,
	2025			2024
Operating activities:
Net loss	$	(18,623	)	$	(2,273	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		93			102
Stock-based compensation		1,585			2,929
Net unrealized gain on foreign currency transactions		(531	)		(183	)
Amortization of investments, net		(14	)		(685	)
Deferred revenue		-			(13,661	)
Changes in operating assets and liabilities:
Accounts receivable		-			(1,274	)
Prepaid expenses and other current assets		1,584			1,998
Accounts payable		(1,904	)		(1,046	)
Accrued expenses		(1,776	)		(1,630	)
Right-of-use assets and lease liabilities, net		(27	)		(4	)
Net cash used in operating activities		(19,613	)		(15,727	)
Investing activities:
Purchases of property and equipment		(4	)		(81	)
Purchases of short-term investments		-			(17,601	)
Maturities of short-term investments		4,500			25,500
Net cash provided by investing activities		4,496			7,818
Financing activities:
Proceeds from exercise of stock options		1,232			-
Proceeds from issuance of common stock under employee stock purchase plan		-			91
Proceeds from issuance of common stock under ATM facility, net of issuance costs		819			-
Proceeds from private placement of equity securities, net of issuance costs		28,093			-
Net cash provided by financing activities		30,144			91
Effect of exchange rate changes on cash and cash equivalents		8			50
Net increase (decrease) in cash and cash equivalents		15,035			(7,768	)
Cash and cash equivalents at beginning of period		18,085			23,216
Cash and cash equivalents at end of period	$	33,120		$	15,448
Supplemental cash flow information:
Right-of-use assets obtained in exchange for lease obligations	$	548		$	-
ATM facility issuance costs reclassed from other current assets	$	392		$	-
ATM facility issuance costs in accounts payable	$	138		$	-
Private placement issuance costs in accounts payable and accrued expenses	$	184		$	-
Exercise of stock options issuance costs in accrued expenses	$	3		$	-

See accompanying notes.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Accounting Pronouncements

Description of Business

Equillium, Inc., together with its wholly owned subsidiaries (the Company), was incorporated in the state of Delaware on March 16, 2017.

The Company is a biotechnology innovator developing novel therapies to treat severe autoimmune and inflammatory disorders with the mission to develop life-changing therapeutics for patients. The Company's primary goal is to advance EQ504, its novel aryl hydrocarbon receptor modulator, into and through clinical development.

The Company is headquartered in La Jolla, California, and it manages its business as one operating segment. Refer to Note 5 for additional information.

Liquidity and Business Risks

As of September 30, 2025, the Company had $33.1 million in cash and cash equivalents. From inception through September 30, 2025, substantially all of the Company’s efforts have been focused on research, development and the advancement of the Company’s clinical and pre-clinical product candidates. The Company has not yet generated product sales and as a result has incurred significant operating losses and negative cash flows from operations. As a result, the Company has an accumulated deficit of $212.4 million as of September 30, 2025. The Company expects to incur additional losses in the future to conduct research and development for which it will need to raise additional capital to implement.

During the third quarter of 2025, the Company completed an equity financing with gross proceeds of approximately $30 million with the ability to raise an additional $20 million subject to achieving certain clinical and pricing related milestones. Refer to Note 8 for additional information. Management believes that the Company's cash and cash equivalents as of September 30, 2025 will be sufficient to fund operations for at least the next 12 months from the date this Quarterly Report on Form 10-Q is filed with the Securities and Exchange Commission (SEC).

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the SEC related to a quarterly report on Form 10-Q. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) promulgated by the Financial Accounting Standards Board (FASB). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2025.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Foreign Currency Translation

The Company’s wholly-owned subsidiary in Australia uses its local currency as its functional currency. Assets and liabilities are translated into U.S. dollars at quarter-end exchange rates and revenues and expenses are translated at average exchange rates during the quarter and year-to-date periods. Foreign currency translation adjustments for the reported periods are included in other comprehensive loss, net in the Company’s condensed consolidated statements of comprehensive loss, and the cumulative effect is included in the stockholders’ equity section of the Company’s condensed consolidated balance sheets.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires annual disclosures of specific categories in the rate reconciliation, additional information for reconciling items that meet a

quantitative threshold and a disaggregation of income taxes paid, net of refunds. ASU 2023-09 also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. ASU 2023-09 is effective for the Company beginning with the Company's Annual Report on Form 10-K for the year ending December 31, 2025. Early adoption is permitted. ASU 2023-09 should be applied prospectively. Retrospective adoption is permitted. The Company is currently assessing the impact this standard will have on the Company’s consolidated financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, to improve disclosures around an entity's expenses. Upon adoption, companies will be required to disclose in the notes to the financial statements a disaggregation of certain expense categories included within the expense captions on the face of the income statement. The standard is effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted, and can be applied either prospectively or retrospectively. The Company plans to adopt the standard in its 2027 annual period and is currently assessing the impact this standard will have on the Company's consolidated financial statement disclosures.

No other new accounting pronouncements or legislation issued or effective as of September 30, 2025 have had, or are expected to have, a material impact on the Company’s condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one segment, which is the business of developing novel therapeutics to treat severe immuno-inflammatory disorders with high unmet medical need. See Note 5 for more information on segment reporting.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the condensed consolidated financial statements and accompanying notes. Significant estimates in the Company’s condensed consolidated financial statements relate to accrued research and development expense, revenue recognition and the valuation of equity awards. Management evaluates its estimates on an ongoing basis. Although estimates are based on the Company’s historical experience, knowledge of current events, and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments which potentially subject the Company to significant concentration of credit risk consist of cash and cash equivalents and short-term investments. The Company maintains deposits in federally insured financial institutions in which the majority of deposits are in excess of federally insured limits. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company’s investment policy includes guidelines for the quality of the related institutions and financial instruments and defines allowable investments that the Company may invest in, which the Company believes minimizes the exposure to concentration of credit risk.

Comprehensive Loss

The Company is required to report all components of comprehensive loss, including net loss, in the condensed consolidated financial statements in the period in which they are recognized. Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on investments and foreign currency translation gains and losses. Other comprehensive loss, net includes unrealized gains or losses on short-term investments as well as foreign currency translation gains or losses.

Cash and Cash Equivalents

Cash and cash equivalents include cash in readily available checking and savings accounts, and money market funds. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents. At September 30, 2025 and December 31, 2024, the Company's cash and cash equivalents were primarily comprised of money market funds.

Short-Term Investments

Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in comprehensive loss. The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in other income or expense. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	September 30,		December 31,
	2025		2024
Australian research and development tax incentive	$	-	$	966
Other current assets		110		429
Prepaid insurance		81		426
Prepaid other		145		369
Other receivables		123		178
Prepaid clinical development		-		35
Total prepaid expenses and other current assets	$	459	$	2,403

Property and Equipment

Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets (generally three to five years).

Leases

The Company determines if an arrangement is a lease at inception. Lease right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. For operating leases with an initial term greater than 12 months, the Company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of lease payments over the lease term at the commencement date. Operating lease right-of-use assets are comprised of the lease liability plus any lease payments made and excludes lease incentives. Lease terms include options to renew or terminate the lease when the Company is reasonably certain that the renewal option will be exercised or when it is reasonably certain that the termination option will not be exercised. For the Company's operating leases, if the interest rate used to determine the present value of future lease payments is not readily determinable, the Company estimates its incremental borrowing rate as the discount rate for the lease. The Company's incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in similar economic environments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has elected the practical expedient to not separate lease and non-lease components.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. While the Company’s current and historical operating losses and negative cash flows are indicators of impairment, management believes that future cash flows to be received support the carrying value of its long-lived assets and, accordingly, has not recognized any impairment losses since inception.

Accrued Research and Development Expense

The Company is required to estimate its expenses resulting from its obligations under contracts with vendors, consultants and contract research organizations, in connection with conducting research and development activities. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. The Company reflects research and development expenses in its condensed consolidated financial statements by matching those expenses with the period in which services and efforts are expended. The Company accounts for these expenses according to the progress of the non-clinical or clinical study as measured by the timing of various aspects of the study or related activities. The Company determines accrual estimates through review of the underlying contracts along with preparation of financial models taking into account discussions with research and development personnel as to the progress of studies, or other services being conducted. During the course of a study, the Company adjusts its rate of expense

recognition if actual results differ from its estimates. The Company classifies its estimates for accrued research and development expenses as accrued expenses on the accompanying condensed consolidated balance sheets.

Australian Research and Development Tax Incentive

Equillium Australia Pty Ltd (Equillium Australia), a wholly-owned subsidiary of Equillium, Inc., is eligible under the Australian Research and Development Tax Incentive Program (the Tax Incentive) to obtain a cash refund from the Australian Taxation Office (ATO) for eligible research and development expenditures. The cash refund is received by Equillium Australia upon filing of a Tax Incentive claim in connection with Equillium Australia’s annual income tax return.

The Tax Incentive is a self-assess program whereby Equillium Australia must assess each year (i) if the entity is eligible, (ii) if the specific research and development activities are eligible and (iii) if the individual research and development expenditures have nexus to such research and development activities. Equillium Australia evaluates its eligibility under the Tax Incentive as of each balance sheet date based on the most current and relevant data available. Equillium Australia is able to continue to claim refunds under the Tax Incentive for as long as it remains eligible and continues to incur eligible research and development expenditures.

Although Equillium Australia believes that it has complied with all relevant conditions of eligibility under the program for all periods claimed, the ATO has the right to review Equillium Australia’s qualifying programs and related expenditures for a period of up to four years. Additionally, the period open for review is indefinite if the ATO suspects fraud. If such a review were to occur, the ATO may have different interpretations of certain eligibility requirements. If the ATO disagreed with Equillium Australia’s assessments and any related subsequent appeals, it could require adjustment to and potential repayment of current or previous years’ claims already received. If Equillium Australia was unable to demonstrate a reasonably arguable position taken on such claims, the ATO could also assess penalties and interest on potential adjustment amounts. The Company has not provided any allowance for any such potential adjustments, should they occur in the future.

The estimated Tax Incentive refund amounts are recognized as a reduction to research and development expense when there is reasonable assurance that the Tax Incentive refund amounts will be received, the relevant expenditure has been incurred, and the amount can be reliably measured. During the three and nine months ended September 30, 2025, the Company did not record a reduction to research and development expenses related to the Tax Incentive due to the substantial completion of its EQ101 and EQ102 clinical trials in Australia. During the three and nine months ended September 30, 2024, the Company recorded $0.2 million and $1.6 million, respectively, as a reduction to research and development expenses related to the Tax Incentive. The Company classifies its estimates for the Tax Incentive refunds as prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets. As of September 30, 2025, there were no amounts recorded within prepaid and other current assets attributed to the Tax Incentive. As of December 31, 2024, the Company recorded $1.0 million within prepaid and other current assets attributed to the Tax Incentive.

Distinguishing Liabilities from Equity

The Company evaluates equity or liability classification for freestanding financial instruments, including warrants and options, pursuant to the guidance under ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480). The Company classifies as liabilities all freestanding financial instruments that are (i) mandatorily redeemable, (ii) represent an obligation to repurchase the Company’s equity shares by transferring assets, or (iii) represent an unconditional obligation (or conditional obligation if the financial instrument is not an outstanding share) to issue a variable number of shares predominantly based on a fixed monetary amount, variations in something other than the fair value of the Company’s equity shares, or variations inversely related to changes in fair value of the Company’s equity shares.

If a freestanding financial instrument does not represent an outstanding equity share and does not meet liability classification under ASC 480, the Company then assesses whether the freestanding financial instrument is indexed to its own stock and meets equity classification pursuant to ASC 815-40, Derivatives and Hedging (ASC 815). The Company further assesses whether the freestanding financial instruments should be classified as temporary equity. Freestanding financial instruments that are redeemable for cash or other assets at a fixed or determinable date, at the option of the holder, or upon the occurrence of an event are classified in temporary equity in accordance with ASC 480. Otherwise, the freestanding financial instruments are classified in permanent equity.

See Note 8, Stockholders' Equity, for additional information on the freestanding financial instruments assessed under ASC 480 and ASC 815-40 for equity or liability classification.

Revenue Recognition

The Company recognizes revenue in a manner that depicts the transfer of control of a product or a service to a customer and reflects the amount of the consideration the Company is entitled to receive in exchange for such product or service. In doing so, the Company

follows a five-step approach: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) the customer obtains control of the product or service. The Company considers the terms of a contract and all relevant facts and circumstances when applying the revenue recognition standard. The Company applies the revenue recognition standard, including the use of any practical expedients, consistently to contracts with similar characteristics and in similar circumstances.

Research and Development

Research and development expenses include salaries and related overhead expenses, non-cash stock-based compensation expense, external research and development expenses incurred under arrangements with third parties, costs of services performed by consultants and contract research organizations, and regulatory costs including those related to preparing and filing INDs with the FDA. Research and development costs are expensed as incurred.

Patent Costs

The Company expenses all costs as incurred in connection with patent applications (including direct application fees, and the legal and consulting expenses related to making such applications) and such costs are included in general and administrative expenses in the condensed consolidated statements of operations.

Stock-Based Compensation

The Company measures employee and non-employee stock-based awards, including stock options and stock purchase rights, at grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the award. The Company uses the Black-Scholes option pricing model to value its stock option awards. Estimating the fair value of stock option awards requires management to apply judgment and make estimates of certain assumptions, including the volatility of the Company’s common stock, the expected term of the Company’s stock options, the expected dividend yield and the fair value of the Company’s common stock on the measurement date. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the condensed consolidated financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company recognizes deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

Pursuant to the Internal Revenue Code of 1986, as amended (IRC), specifically Sections 382 and 383, the Company’s ability to use tax attribute carryforwards to offset future taxable income is limited if the Company experiences a cumulative change in ownership of more than 50% within a three-year testing period. The Company completed an ownership change analysis through December 31, 2024 pursuant to IRC Section 382 and determined that the Company’s ability to offset taxable income in 2024 is not expected to be impacted by ownership changes occurring prior to that date. If ownership changes within the meaning of IRC Section 382 are identified as having occurred, the amount of remaining tax attribute carryforwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company’s deferred tax assets associated with such tax attributes could be significantly reduced or eliminated upon realization of an ownership change within the meaning of IRC Section 382. If eliminated, the related asset would be removed from the deferred tax asset schedule, with a corresponding reduction in the valuation allowance. Additionally, limitations on the utilization of the Company’s tax attribute carryforwards can increase the amount of taxable income and current income tax expense recognized. Due to the existence of the valuation allowance, ownership change limitations that are not significant may not impact the Company's effective tax rate.

The Company records uncertain tax positions on the basis of a two-step process whereby (1) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more- likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is

more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax liability.

Net Loss per Share

Basic and diluted net loss per share is determined by dividing the net loss by the weighted-average number of common shares outstanding for the period. For all periods presented, the Company’s potentially dilutive securities include outstanding options under the Company’s 2018 Equity Incentive Plan, 2024 Inducement Plan and outstanding warrants to purchase common stock, each of which have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. Pre-funded warrants to purchase 30,816,705 shares of common stock are included in the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2025, as the pre-funded warrants are exercisable for nominal consideration. There were no pre-funded warrants to purchase common stock in the three and nine months ended September 30, 2024. For all periods presented, there is no difference in the number of shares of common stock or common stock equivalents used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Potentially dilutive securities not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive are as follows (in common stock equivalent shares):


	Three and Nine Months Ended September 30,
	2025		2024
Common stock options		11,278,434		9,193,927
Common stock warrants		1,366,141		1,366,141
Total		12,644,575		10,560,068

3. Fair Value of Financial Instruments

The following tables summarize the Company’s assets that require fair value measurements on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):


			Fair Value Measurements Using
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Unobservable
	September 30,		for Identical		Observable		Inputs
	2025		Assets (Level 1)		Inputs (Level 2)		(Level 3)
Assets:
Money Market funds (a)	$	32,416	$	32,416	$	-	$	-
Total assets at fair value	$	32,416	$	32,416	$	-	$	-

			Fair Value Measurements Using
			Quoted Prices in		Significant		Significant
			Active Markets		Other		Unobservable
	December 31,		for Identical		Observable		Inputs
	2024		Assets (Level 1)		Inputs (Level 2)		(Level 3)
Assets:
Money Market funds (a)	$	14,457	$	14,457	$	-	$	-
U.S. treasury securities (b)		4,490		4,490		-		-
Total assets at fair value	$	18,947	$	18,947	$	-	$	-

(a) Money Market funds included in cash and cash equivalents in the condensed consolidated balance sheets, are valued at quoted market prices in active markets.

(b) U.S. treasury securities included in short-term investments in the condensed consolidated balance sheets, are recorded at fair market value, which is determined based on the most recent observable inputs for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable.

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, prepaid and other current assets, accounts payable, and accrued liabilities, approximate fair value due to their short maturities.

The Company did not hold any Level 1, 2 or 3 financial liabilities that are recorded at fair value on a recurring basis as of September 30, 2025 or December 31, 2024.

4. Certain Financial Statement Caption Information

Short-Term Investments

The following table summarizes the Company’s short-term investments (in thousands):


	Maturity	Amortized		Unrealized		Unrealized		Estimated
	(in years)	Cost		Gains		Losses		Fair Value
December 31, 2024
U.S. treasury securities	1 or less	$	4,487	$	3	$	-	$	4,490
Total		$	4,487	$	3	$	-	$	4,490

The Company does not have any available-for-sale securities as of September 30, 2025. All of the Company’s available-for-sale securities are available to the Company for use in its current operations. As a result, the Company categorizes all of these securities as current assets.

There were no impairments considered other-than-temporary during the periods presented, as it is management’s intention and ability to hold the securities until a recovery of the cost basis or recovery of fair value. Unrealized gains and losses are included in accumulated other comprehensive income.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):


	September 30,		December 31,
	2025		2024
Accrued payroll and other employee benefits	$	1,036	$	437
Clinical development		263		1,962
Other accruals		253		303
Biocon clinical development related to ulcerative colitis study - related party		95		223
Biocon and its subsidiaries chemistry, manufacturing and controls services - related party		76		43
Non-clinical research		-		150
Income tax accruals		17		365
Total accrued expenses	$	1,740	$	3,483

5. Segment Reporting

The Company operates through a single operating and reportable segment focused on the business of developing novel therapeutics to treat immuno-inflammatory disorders with high unmet medical need. The Company manages all business activities on a consolidated basis. The Company’s chief operating decision maker (CODM) is the Chief Executive Officer.

The accounting policies of the operating segment are the same as those described in Note 2, Summary of Significant Accounting Policies. The CODM evaluates the performance of the operating segment and allocates resources based on net loss that also is reported on the condensed consolidated statements of operations and comprehensive loss as net loss. The measure of the operating segment assets is reported on the condensed consolidated balance sheets as total assets.

The CODM uses net loss to monitor budget versus actual results and to analyze cash flows in assessing performance of the segment and allocating resources. The significant expense categories regularly provided to the CODM include research and development and general and administrative expenses. These expense categories are reported as separate line items in our condensed consolidated statements of operations and comprehensive loss. All our revenue is attributable to the United States and to our single operating segment.

6. Leases

In September 2025, the Company entered into a non-cancelable operating lease for laboratory space in San Diego, California which expires in January 2028. Upon lease commencement, the Company recognized a right-of-use asset and a corresponding lease liability

of $0.5 million. The Company's lease for laboratory space in La Jolla, California expired in August 2025 and the Company did not renew that lease. The Company also leases office space located in La Jolla that expires in February 2027.

The terms of the Company’s non-cancelable operating lease arrangements typically contain fixed lease payments which increase over the term of the lease at fixed rates and include rent holidays and provide for additional renewal periods. Lease expense is recognized over the term of the lease on a straight-line basis. All of the Company’s leases are classified as operating leases. The Company has determined that periods covered by options to extend the Company’s leases are excluded from the lease term as the Company is not reasonably certain the Company will exercise such options. Operating lease expense, including expenses related to short-term leases, was $0.2 million and $0.1 million for the three months ended September 30, 2025 and 2024, respectively. Operating lease expense, including expenses related to short-term leases, was $0.4 million for each of the nine months ended September 30, 2025 and 2024.

Under the lease arrangements, the Company may be required to pay directly, or reimburse the lessor for real estate taxes, insurance, utilities, maintenance and other operating costs. Such amounts are variable and therefore not included in the measurement of the right-of-use assets and related lease liability but are instead recognized as variable lease expense in the Company's condensed consolidated statements of operations when they are incurred. Variable lease expense, including expenses related to short-term leases, was $0.1 million for each of the three months ended September 30, 2025 and 2024. Variable lease expense, including expenses related to short-term leases, was $0.2 million for each of the nine months ended September 30, 2025 and 2024, respectively.

The Company records its right-of-use (ROU) assets within other assets (long term) and its operating lease liabilities within other current and long-term liabilities.

Additional information related to the Company’s leases as of and for the nine months ended September 30, 2025 and 2024, respectively, is as follows (in thousands, except lease term and discount rate):


	Nine Months Ended September 30,
	2025			2024
Operating cash flows from operating leases	$	205		$	355
Weighted-average remaining lease term - operating leases (in years)		2.06			1.87
Weighted-average discount rate - operating leases		9.68	%		8.25	%

As of September 30, 2025, the Company does not have any leases that have not yet commenced that create significant rights and obligations.

7. Partnerships

Asset Purchase Agreement with Ono Pharmaceutical Co., Ltd.

On December 5, 2022, the Company and Ono, a Japan kabushiki kaisha, entered into an Asset Purchase Agreement pursuant to which the Company granted Ono the exclusive right, but not the obligation, to acquire the Company’s rights to itolizumab (the Option). These rights included all therapeutic indications and the rights to commercialize itolizumab in the United States, Canada, Australia, and New Zealand. In exchange for the Option, Ono paid the Company a one-time, upfront payment of an amount equal to JPY 3.5 billion, or $26.4 million.

The Company was responsible for conducting all research and development of itolizumab, which had been funded by Ono from July 1, 2022 through October 30, 2024, the end of the option period. On October 30, 2024, the option period expired and the Asset Purchase Agreement automatically terminated pursuant to its terms.

During the three and nine months ended September 30, 2025, there was no revenue recognized under the Asset Purchase Agreement. During the three and nine months ended September 30, 2024, the Company recognized revenue of $12.2 and $36.7 million, respectively, under the Asset Purchase Agreement. Such revenue was comprised of $8.1 million and $25.2 million associated with development funding for the three and nine months ended September 30, 2024, respectively, and $4.1 million and $11.5 million associated with the amortization of the upfront payment for the three and nine months ended September 30, 2024, respectively.

Termination of Biocon Collaboration and License Agreement

On September 30, 2025 (the Termination Date), the Company entered into a termination agreement with Biocon Limited (Biocon and the agreement, the Termination Agreement) pursuant to which the Company and Biocon terminated the License Agreement, the Memorandum of Understanding dated April 7, 2022 and certain other corresponding agreements (collectively Biocon Agreements), with all licenses granted by Biocon to the Company under the Biocon Agreements, including with respect to itolizumab, terminating and reverting to Biocon. See Note 10 for additional details regarding the Biocon Agreements. As consideration for certain technical

services the Company is obligated to provide to Biocon following the Termination Date, Biocon agreed to pay the Company a technical service fee of $363,000. In lieu of Biocon paying the technical service fee to the Company, Biocon will set off amounts owed by the Company to Biocon under or in connection with the Biocon Agreements through the Termination Date, with the amount of such set-off to equal such technical service fee, plus any other amount that has been or may be invoiced by the Company to Biocon for work performed by the Company with respect to itolizumab through the Termination Date, and to be limited to the aggregate amounts that have been or may be invoiced by Biocon to the Company, or are or may be otherwise owed by the Company to Biocon, under or in connection with the Biocon Agreements through the Termination Date. The Company has not yet recorded the technical service fee in its condensed consolidated financial statements as the services have not yet been completed as of September 30, 2025.

8. Stockholders’ Equity

Securities Purchase Agreement

On August 10, 2025, the Company entered into a Securities Purchase Agreement (the Purchase Agreement) with certain institutional and accredited investors (the Investors), pursuant to which the Company agreed to sell and issue shares (Shares) of the Company’s common stock and pre-funded warrants to purchase shares of common stock (Warrant Shares), in up to two closings in a private placement transaction (the Private Placement).

The initial closing of the Private Placement occurred on August 12, 2025, (the Initial Closing). At the Initial Closing, the Company issued and sold 21,814,874 Shares at a purchase price of $0.57 per share (the Share Price) and pre-funded warrants to purchase up to 30,816,705 Warrant Shares at a purchase price of $0.5699 per Warrant Share (the Warrant Price) to the Investors for gross proceeds to the Company of approximately $30.0 million. Net proceeds from the Private Placement were $27.9 million, after deducting placement agent fees and offering expenses totaling $2.1 million.

Pursuant to the Purchase Agreement, subject to the occurrence of the Milestone Closing Trigger (defined below), the Investors have agreed to purchase at a closing (the Milestone Closing) up to 35,087,717 Shares or pre-funded warrants in lieu thereof at a purchase price per Share and pre-funded warrant equal to the Share Price and the Warrant Price, respectively, for gross proceeds to the Company of up to approximately $20.0 million. The Milestone Closing trigger means: (A) the achievement of either of the following prior to the five-year anniversary of the date of the Purchase Agreement (i) the clearance of an investigational new drug application for EQ504 or (ii) the dosing of the first patient in a single ascending dose or a multiple ascending dose trial of EQ504 in Australia or New Zealand (the first such event to occur, the Milestone Event), and (B) (x) the achievement of a volume weighted average price per share of $2.50 (subject to appropriate, proportional adjustment for any stock splits or combinations of the common stock occurring after the date of the Purchase Agreement) measured during any 10 consecutive trading days during the 30 trading days following the date the Company first announces via a press release or Current Report on Form 8-K the occurrence of the Milestone Event (such period the Measurement Period and such price threshold requirement, the Price Threshold), or (y) the Company’s receipt of a waiver of the Price Threshold signed by the Investors who hold a majority of the securities issued in the Private Placement (determined as if all of the Warrant Shares underlying pre-funded warrants then outstanding have been issued without regard to any limitations on the exercise of such pre-funded warrants) and delivered to the Company during the Measurement Period (the achievement or occurrence of (A) and (B) are collectively, the Milestone Closing Trigger). In the event the Milestone Closing Trigger occurs as a result of a Price Threshold Waiver, only the waiving Investors will be obligated to purchase Shares or pre-funded warrants at the Milestone Closing.

The pre-funded warrants have an exercise price of $0.0001 per Warrant Share, subject to customary adjustments, and are exercisable at any time and will not expire until exercised in full. The pre-funded warrants will also be exercisable on a net exercise “cashless” basis. The pre-funded warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof immediately following such exercise would exceed a specified beneficial ownership limitation, not to exceed 19.99%.

The Company assessed the 30,816,705 pre-funded warrants issued at the Initial Closing and the 35,087,717 Shares or pre-funded warrants in lieu thereof to be issued at the Milestone Closing subject to the occurrence of the Milestone Closing Trigger and determined that they do not require liability classification pursuant to ASC 480. The pre-funded warrants at the Initial Closing and the Shares or pre-funded warrants contingent to be issued at the Milestone Closing do not have any net cash settlement provisions that would preclude equity classification under ASC 815-40. Accordingly, the pre-funded warrants were recorded to additional paid-in capital in the condensed consolidated balance sheets. As of September 30, 2025 and through the date of the filing of this Quarterly Report on Form 10-Q, the pre-funded warrants issued at the Initial Closing have not been exercised.

Registration Rights Agreement

In connection with the Private Placement, the Company entered into a Registration Rights Agreement (the Registration Rights Agreement) with the Investors at the Initial Closing, pursuant to which the Company agreed to prepare and file, within 30 days of the Initial Closing and, if applicable, the Milestone Closing, subject to certain allowable delays, one or more registration statements with the SEC to register for resale the Shares and, as applicable, the Warrant Shares, in each case that were issued under the Purchase

Agreement, and generally to cause the applicable registration statements to promptly become effective. Certain cash penalties will apply to the Company in the event of registration failures.

On September 9, 2025, the Company filed a registration statement on Form S-3 (File No. 333-290138) for the resale of the Shares as well as the shares of common stock issuable upon the exercise of the pre-funded warrants that were issued at the Initial Closing, and it was declared effective on September 18, 2025.

2023 ATM Facility

In October 2023, the Company entered into an at-the-market facility with Jefferies LLC (Jefferies) under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $21.95 million from time to time through Jefferies acting as the Company's sales agent (the 2023 ATM Facility). There were no shares sold under the 2023 ATM Facility from October 2023 through December 31, 2024. In March 2025, there were 109,410 shares of common stock sold under the 2023 ATM Facility for gross proceeds of $55,000. Issuance costs related to the 2023 ATM Facility totaled $0.5 million through March 31, 2025.

On August 3, 2025, the Company entered into Amendment No. 1 to the 2023 ATM Facility pursuant to which Jefferies was replaced by LifeSci Capital LLC as the sales agent under the 2023 ATM Facility. During the three months ended September 30, 2025, there were 1,610,075 shares of common stock sold under the 2023 ATM Facility, as amended, for gross proceeds of approximately $0.9 million and net proceeds totaling $0.7 million, after deducting for issuance costs of $0.2 million. During the nine months ended September 30, 2025, there were 1,719,485 shares of common stock sold under the 2023 ATM Facility for gross proceeds of $1.0 million and net proceeds totaling $0.3 million, after deducting for issuance costs incurred inception-to-date of $0.7 million.

On September 19, 2025, the Company filed a prospectus supplement with the SEC under which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $75.0 million, pursuant to the 2023 ATM Facility, as amended.

As of September 30, 2025 and through the date of the filing of this Quarterly Report on Form 10-Q, there were no additional shares sold under the 2023 ATM Facility, as amended.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2025:


	Outstanding Options			Weighted- Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands) (a)
Balances as of December 31, 2024		9,023,792		$	0.87
Granted		6,413,000		$	1.44
Exercised		(1,584,915	)	$	0.78
Forfeitures and cancellations		(2,573,443	)	$	0.89
Balances as of September 30, 2025		11,278,434		$	1.20		7.62	$	4,384
Options exercisable as of September 30, 2025		4,714,008		$	0.90		5.04	$	2,945

(a)

Aggregate intrinsic value in this table was calculated as the positive difference, if any, between the closing price per share of the Company’s common stock on September 30, 2025 of $1.43 and the price of the underlying options.

At September 30, 2025, unamortized stock compensation for stock options was $8.4 million, with a weighted-average recognition period of 3.73 years.

Stock-Based Compensation Expense

The non-cash stock-based compensation expense for all stock awards, net of forfeitures recognized as they occur, that was recognized in the condensed consolidated statements of operations is as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Research and development	$	123	$	424	$	513	$	1,162
General and administrative		278		581		1,072		1,767
Total	$	401	$	1,005	$	1,585	$	2,929

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance is as follows:


	September 30,		December 31,
	2025		2024
Stock options issued and outstanding		11,278,434		9,023,792
Warrants for common stock		32,182,846		1,366,141
Common stock or pre-funded warrants subject to milestone closing		35,087,717		-
Awards available under the 2018 Equity Incentive Plan		209,430		340,109
Awards available under the 2024 Inducement Plan		1,350,000		1,500,000
Employee stock purchase plan		1,369,497		1,026,222
Total		81,477,924		13,256,264

9. Income Taxes

The Company is subject to income tax in the United States (U.S.) as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for U.S. deferred income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are reinvested indefinitely.

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, the Company makes a cumulative adjustment in that quarter. The Company’s quarterly tax provision, and its quarterly estimate of its annual effective tax rate, are subject to significant volatility due to several factors, including the Company’s ability to accurately predict its pre-tax income and loss in multiple jurisdictions.

There was no income tax expense recorded for the three and nine months ended September 30, 2025 and 2024, respectively. The Company does not record a deferred tax provision as there is a full valuation allowance offsetting the Company’s net deferred tax assets.

10. Related Party Transactions

On April 7, 2022, the Company entered into an agreement with Biocon, who was a holder of more than 5% of the Company's common stock, to collaborate on and co-fund a Phase 2 clinical study of itolizumab in subjects with ulcerative colitis that was being conducted by Biocon in India. The Company's share of the total clinical study costs was approximately $1.4 million. During the three and nine months ended September 30, 2025, the Company recognized $39,000 and $43,000 of research and development expenses related to its portion of the total clinical study costs, respectively. During the three and nine months ended September 30, 2024, the Company recognized $15,000 and $0.4 million of research and development expenses related to its portion of the total clinical study costs, respectively. As of September 30, 2025 and December 31, 2024, the Company had accrued expenses totaling $0.1 million and $0.2 million, respectively, and $0.1 million and $25,000, respectively, was invoiced by and payable to Biocon related to the Company's portion of the total clinical study costs.

In February 2020, the Company entered into a master services agreement with Syngene International Limited (Syngene), a wholly-owned subsidiary of Biocon, for chemistry, manufacturing and controls (CMC) services associated with itolizumab development (the Syngene MSA). In July 2023, the Company issued a signed work order under the Syngene MSA totaling $5.4 million for CMC activities. The Company stopped the majority of the work related to this work order in the third quarter of 2024. In addition, the Company entered into a work order for stability studies with Syngene in September 2024 totaling $0.1 million, which was completed as of September 30, 2025. In 2024, the Company entered into purchase orders for CMC projects and purchases of drug product with Biocon totaling approximately $6.5 million. As of October 30, 2024, the Company paused the majority of work related to those CMC projects. During the three and nine months ended September 30, 2025, the Company recognized research and development expenses totaling $20,000 and $0.1 million, respectively, related to the Biocon and Syngene CMC agreements. During the three and nine months ended September 30, 2024, the Company recognized research and development expenses totaling $1.0 million and $3.1 million, respectively, related to the Biocon and Syngene CMC agreements. As of September 30, 2025 and December 31, 2024, the Company had accrued expenses totaling $0.1 million and $43,000, respectively, and $0.1 million and $0.6 million, respectively, was invoiced by and payable to Biocon and Syngene.

On September 30, 2025, the Company entered into a Termination Agreement with Biocon with all licenses granted by Biocon to the Company under the Biocon Agreements, including with respect to itolizumab, terminating and reverting to Biocon. Refer to Note 7 for additional details.

The majority of the aforementioned expenses incurred through September 30, 2024 associated with work performed by Biocon or its affiliates related to itolizumab development were reimbursed by Ono pursuant to the terms of the Asset Purchase Agreement during the Ono option period which expired on October 30, 2024.

The Company classifies its accruals related to these activities as accrued expenses on the accompanying condensed consolidated balance sheets. The Company classifies amounts invoiced by and payable to Biocon and Syngene as accounts payable on the accompanying condensed consolidated balance sheets.

Item 2. 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 unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2024 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 27, 2025. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Equillium, Inc.

Forward-Looking Statements

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

Overview

We are a biotechnology innovator developing novel therapies to treat severe autoimmune and inflammatory disorders with the mission to develop life-changing therapeutics for patients. Our primary goal is to advance EQ504, our novel aryl hydrocarbon receptor modulator, into and through clinical development.

As of September 30, 2025, we had $33.1 million in cash and cash equivalents. From inception through September 30, 2025, substantially all of our efforts have been focused on research, development and the advancement of our clinical and pre-clinical product candidates. We have not yet generated product sales and as a result have incurred significant operating losses and negative cash flows from operations. As a result, we had an accumulated deficit of $212.4 million as of September 30, 2025. The Company expects to incur additional losses in the future to conduct research and development for which we will need to raise additional capital to implement.

On August 10, 2025, we entered into a Securities Purchase Agreement, the Purchase Agreement, with certain institutional and accredited investors, the Investors, pursuant to which we agreed to sell and issue shares of our common stock, par value $0.0001 per share, and pre-funded warrants to purchase shares of common stock, in up to two closings in a private placement transaction, the Private Placement. The initial closing of the Private Placement occurred on August 12, 2025. At the Initial Closing, we issued and sold 21,814,874 shares of common stock at a purchase price of $0.57 per share and pre-funded warrants to purchase up to 30,816,705 shares of common stock at a purchase price of $0.5699 per warrant share, the Warrant Price, to the Investors for gross proceeds to us of approximately $30.0 million. The Purchase Agreement also provides for a potential second closing for up to approximately $20.0 million in gross proceeds in exchange for up to approximately 35,087,717 shares of common stock, subject to achieving certain specified milestones related to clinical study initiation and stock price conditions or waiver thereof. For additional information, see Note 8 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

We intend to use the net proceeds from the Private Placement to fund the further development of EQ504, working capital and general corporate purposes.

We intend to commence a Phase 1 proof-of-mechanism study for EQ504, a novel aryl hydrocarbon receptor, or AhR, modulator, by mid-2026, with data expected to follow approximately six months thereafter; provided, however, we cannot provide any assurances that we will be able to obtain data within those time frames or that the data which may be obtained will be favorable to the further clinical development of EQ504. Modulation of AhR has been shown to have a beneficial impact on tissue barrier function, inflammation, cell development and tumor suppression. We initially intend to develop EQ504 for the treatment of ulcerative colitis, or UC, with potential indication expansion opportunities in pouchitis and in lung diseases. We acquired the exclusive worldwide rights to EQ504 through the acquisition of Ariagen, Inc., or Ariagen, in October 2024. Ariagen was majority owned by Decheng Capital, a stockholder of Equillium.

On September 30, 2025, the Termination Date, we entered into a termination agreement with Biocon Limited, Biocon and the agreement, the Termination Agreement, pursuant to which we terminated that certain (i) collaboration and license agreement with Biocon, dated May 22, 2017, as amended September 28, 2018, April 22, 2019, December 10, 2019, and April 14, 2021 (the Biocon License), (ii) the Memorandum of Understanding dated April 7, 2022, the MoU, and (iii) certain other corresponding agreements, collectively with the Biocon License and MoU, the Biocon Agreements, with all licenses granted by Biocon to us under the Biocon Agreements, including with respect to itolizumab, terminating and reverting to Biocon. As consideration for certain technical services that we are obligated to provide to Biocon following the Termination Date, Biocon agreed to pay us a technical service fee of $363,000. In lieu of Biocon paying the technical service fee to us, Biocon will set off amounts which we owe to Biocon under or in connection with the Biocon Agreements through the Termination Date, with the amount of such set-off to equal such technical service fee, plus any other amount that have been or may be invoiced by us to Biocon for work performed by us with respect to itolizumab through the Termination Date, and to be limited to the aggregate amounts that have been or may be invoiced by Biocon to us, or are or may be otherwise owed to Biocon, under or in connection with the Biocon Agreements through the Termination Date.

We acquired the exclusive worldwide rights to EQ302 and a proprietary platform for discovering additional, novel multi-cytokine targeting product candidates, such as EQ302, through the acquisition of Bioniz Therapeutics, Inc., or Bioniz, in February 2022. That product discovery platform can be leveraged to design novel peptides to target and inhibit multiple cytokines that are involved in validated biological and disease pathways.

EQ302 is a preclinical-stage, first-in-class, selective, bi-specific inhibitor of IL-15 and IL-21 formulated for oral delivery. Inhibiting IL-15 and IL-21 is believed to be an effective treatment approach for certain gastrointestinal indications, including celiac disease. Preclinical and translational data has shown that EQ302 is a potent inhibitor of those two cytokines and is stable and permeable in the gut. Based on the unique mechanism of action of EQ302 and its product profile, including the advantage of oral delivery, we believe that EQ302 has the potential to be an attractive therapeutic option for gastrointestinal diseases, such as celiac disease. Currently we are not expending internal resources to advance EQ302 and are exploring partnering opportunities that would support further development of the program.

Since our inception, substantially all of our efforts have been focused on organizing and staffing our company, business planning, raising capital, in-licensing product rights, conducting preclinical development, filing Investigational New Drug applications, or INDs, conducting clinical development, conducting chemistry, manufacturing and controls, or CMC, and formulation development activities, conducting business development activities and the general and administrative activities associated with operating a public biotech company focused on advancing novel therapeutics. We have generated revenue from our Asset Purchase Agreement with Ono, related to a one-time, upfront payment from Ono in exchange for an exclusive option to acquire our rights to itolizumab (EQ001), or the Option, as well as from itolizumab (EQ001) development funding from Ono. Ono made a strategic business decision to allow its Option to expire on October 30, 2024 and, as a result, the Asset Purchase Agreement automatically terminated on that date pursuant to its terms. We have not generated any revenue from product sales, milestone payments or royalties. Since inception, we have primarily financed our operations through debt and equity financings and revenue generated from the Asset Purchase Agreement.

We have incurred losses since our inception. For the nine months ended September 30, 2025 and 2024, our net losses were $18.6 million and $2.3 million, respectively. As of September 30, 2025, we had an accumulated deficit of $212.4 million. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development activities, preclinical and clinical activities and general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and operating losses into the foreseeable future. We anticipate our expenses will increase substantially as we advance our research and development activities for EQ504, potentially pursue any future development of EQ302, potentially expand the indications for which we conduct clinical development of our product candidates, potentially acquire or develop new product candidates, including preclinical drug candidates identified through our multi-cytokine targeting drug discovery platform, seek regulatory approval for and potentially commercialize any approved product candidates, hire additional personnel, protect our intellectual property, and incur general corporate costs. We expect that our existing cash and cash equivalents as of September 30, 2025 will enable us to fund our operations through 2027.

We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for EQ504, EQ302, or any future product candidate, which is unlikely to happen within the next 12 months, if ever. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings, and collaboration and license agreements. However, we may not be able to secure additional financing or enter into such other arrangements in a timely manner or on favorable terms, if at all. As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, potential government shutdowns, bank failures, tariffs, inflationary pressures on the economy and monetary policy responses by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including from diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability. If equity and

credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, reduce or terminate our research and development programs or other operations, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Financial Overview

Revenue

To date, we have not generated any revenues from therapeutic product sales, developmental milestones or royalties. In 2022, 2023 and 2024, our revenues were derived from an upfront payment under the Asset Purchase Agreement as well as from development funding from Ono. In the future, we may generate revenue from collaboration or license agreements we may enter into with respect to our product candidates, as well as product sales from any approved product, which approval is unlikely to happen within the next 12 months, if ever. Our ability to generate product revenues will depend on the successful development and eventual commercialization of EQ504 and any future product candidates. If we fail to complete the development of EQ504, or any future product candidates in a timely manner, or to obtain regulatory approval for our product candidates, our ability to generate future revenue and our results of operations and financial position would be materially adversely affected.

Asset Purchase Agreement with Ono Pharmaceutical Co., Ltd.

On December 5, 2022, we entered into the Asset Purchase Agreement pursuant to which we granted Ono the Option in exchange for a one-time, upfront payment of an amount equal to JPY 3.5 billion, or $26.4 million. These rights included all therapeutic indications and the rights to commercialize itolizumab in the United States, Canada, Australia, and New Zealand.

We were responsible for conducting all research and development of itolizumab, which was funded by Ono on a quarterly basis from July 1, 2022, through October 30, 2024, the end of the option period. On October 30, 2024, the option period expired and the Asset Purchase Agreement automatically terminated pursuant to its terms.

As of December 31, 2024, there was no further deferred revenue related to the Asset Purchase Agreement.

Research and Development Expenses

Research and development expenses primarily consist of costs associated with our non-clinical research and clinical development of our product candidates. Our research and development expenses include:

•

salaries and other related costs, including stock-based compensation and benefits, for personnel in research and development functions;

•

per patient clinical study costs;

•

external research and development expenses incurred under arrangements with third parties, such as consultants and advisors for research and development;

•

costs of services performed by third parties, such as contract research organizations, or CROs, that conduct research and development activities on our behalf;

•

costs related to preparing and filing INDs with the FDA and other regulatory interactions and submissions;

•

pharmacovigilance costs related to global drug safety monitoring and reporting;

•

external expenses related to CMC and supply of drug product; and

•

costs related to general overhead expenses such as travel, insurance, rent expenses, lab supplies and equipment associated with our research and development activities.

We expense research and development costs as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.

Our direct research and development expenses consist principally of external costs, such as fees paid to CROs and consultants in connection with our non-clinical research and clinical development.

Equillium Australia Pty Ltd, or Equillium Australia, a wholly-owned subsidiary of Equillium, Inc., is eligible under the Australian Research and Development Tax Incentive Program, or the Tax Incentive, to obtain a cash refund from the Australian Taxation Office,

or ATO, for eligible research and development expenditures. The cash refund is received by Equillium Australia, upon filing of a claim in connection with Equillium Australia’s annual income tax return. The Tax Incentive is a self-assess program whereby Equillium Australia must assess its eligibility each year to determine (i) if the entity is eligible, (ii) if the specific research and development activities are eligible and (iii) if the individual research and development expenditures have nexus to such research and development activities. Equillium Australia evaluates its eligibility under the Tax Incentive as of each balance sheet date based on the most current and relevant data available. Equillium Australia is able to continue to claim the Tax Incentive for as long as it remains eligible and continues to incur eligible research and development expenditures. The estimated Tax Incentive refund amounts are recognized as a reduction to research and development expense when there is reasonable assurance that the Tax Incentive refund amounts will be received, the relevant expenditure has been incurred, and the amount can be reliably measured.

We plan to continue to incur substantial research and development expenses for the foreseeable future as we advance the development of EQ504, and potentially EQ302, potentially expand the number of indications for which we are developing those product candidates, and potentially acquire or develop new product candidates. The successful development of EQ504 and EQ302 is highly uncertain. At this time, due to the inherently unpredictable nature of preclinical and clinical development, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of our product candidates or the period, if any, in which material net cash inflows from the sales from our product candidates may commence. Clinical development timelines, the probability of success, and development costs can differ materially from expectations.

Completion of planned or future clinical studies may take several years or more, and the length of time generally varies according to the type, complexity, novelty, and intended use of a product candidate. The cost of any planned or potential future clinical studies may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:

•

per patient clinical study costs;

•

the number of planned or future clinical studies required for approval;

•

the number of sites and the number of countries included in our planned or future clinical studies;

•

the length of time required to enroll suitable patients;

•

the inefficiencies and additional costs related to any delays and potential restarts of planned or future clinical studies;

•

the number of doses that patients receive;

•

the number of patients that participate in our planned or future clinical studies;

•

the drop-out or discontinuation rates of patients in our planned or future clinical studies;

•

the duration of patient follow-up;

•

potential additional safety monitoring or other studies requested by regulatory agencies;

•

the number and complexity of procedures, analyses and tests performed during our planned or future clinical studies;

•

the costs of procuring drug product for our planned or future clinical studies;

•

the phase of development of the product candidate; and

•

the efficacy and safety profile of the product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation and benefits, and consulting fees for executive, human resources, investor relations, finance and accounting functions. Other significant costs include legal fees relating to patent and corporate matters, insurance, travel, board expenses, facility costs and taxes.

We anticipate that our general and administrative expenses will increase in future periods, reflecting an expanding infrastructure, increased legal, audit, tax and other professional fees associated with being a public company and maintaining compliance with stock exchange listing and SEC requirements, director and officer insurance premiums associated with being a public company, and accounting and investor relations costs. In addition, if we obtain regulatory approval for any product candidate, we expect to incur expenses associated with building the infrastructure and capabilities to commercialize such product. However, the timing of any such approval is highly uncertain, and it may be several years, if ever, that we receive any such regulatory approval.

Interest Income

Interest income consists primarily of interest income earned on cash, cash equivalents and short-term investments, and is recognized when earned.

Other Income, net

Other income, net consists primarily of net foreign currency transaction gains and losses related to our Australian subsidiary.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

The following table sets forth our results of operations for the three and nine months ended September 30, 2025 and 2024 (in thousands):


	Three Months Ended September 30,							Nine Months Ended September 30,
	2025		2024		Change			2025		2024		Change
Revenue	$	-	$	12,161	$	(12,161	)	$	-	$	36,703	$	(36,703	)
Research and development		1,301		9,562		(8,261	)		11,307		30,113		(18,806	)
General and administrative		3,274		3,278		(4	)		8,365		10,161		(1,796	)
Interest income		235		331		(96	)		530		1,142		(612	)
Other income, net		110		341		(231	)		519		156		363

Revenue

During the three and nine months ended September 30, 2025, there was no revenue recognized under our Asset Purchase Agreement with Ono. During the three and nine months ended September 30, 2024, we recognized revenue of $12.2 million and $36.7 million, respectively, under our Asset Purchase Agreement with Ono. For the three months ended September 30, 2024, development funding represented $8.1 million and amortization of the upfront payment represented $4.1 million. For the nine months ended September 30, 2024, development funding represented $25.2 million and amortization of the upfront payment represented $11.5 million. Ono made a strategic business decision to allow its Option to expire on October 30, 2024 and, as a result, the Asset Purchase Agreement automatically terminated on that date pursuant to its terms.

Research and Development Expenses

The following table sets forth our direct external research and development expenses by product candidate and clinical study as well as indirect research and development expenses for the three and nine months ended September 30, 2025 and 2024 (in thousands):


	Three Months Ended September 30,									Nine Months Ended September 30,
	2025			2024			Change			2025		2024		Change
Direct external expenses:
Itolizumab (EQ001) - EQUATOR	$	(962	)	$	5,856		$	(6,818	)	$	4,947	$	17,689	$	(12,742	)
Itolizumab (EQ001) - EQUALISE		17			(196	)		213			52		660		(608	)
Itolizumab - Biocon ulcerative colitis study - related party		39			157			(118	)		93		547		(454	)
EQ101 - alopecia areata		27			333			(306	)		101		1,243		(1,142	)
EQ102 - celiac disease		2			76			(74	)		18		402		(384	)
Other programs		24			274			(250	)		604		477		127

Indirect expenses:
Employee compensation and benefits (including stock-based compensation)		1,890			2,613			(723	)		4,665		7,748		(3,083	)
Overhead		264			449			(185	)		827		1,347		(520	)
Total research and development	$	1,301		$	9,562		$	(8,261	)	$	11,307	$	30,113	$	(18,806	)

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We separate our research and development costs into two broad categories: direct and indirect. Additionally, with respect to direct research and development expenses, we further divide expenses into the following product

candidate categories: Itolizumab (EQ001), EQ101, EQ102 and other programs, which include EQ504 and EQ302. Itolizumab (EQ001) includes sub-categories for the clinical studies associated with itolizumab (EQ001) including our EQUATOR, EQUALISE and ulcerative colitis study with Biocon. For direct research and development expenses, we track specific project research and development expenses that are directly attributable to our preclinical and clinical development product candidates that have been selected for further development. Such direct research and development expenses include non-clinical and clinical trial activities, external expenses related to CMC and supply of drug product and consulting expenses.

All remaining research and development expenses are categorized as indirect research and development expenses. Such indirect research and development expenses include employee compensation and benefits (including stock-based compensation expenses) and general overhead costs such as costs associated with our facilities and lab supplies. These expenses are not directly tied to any individual product candidate or clinical study and are generally deployed across multiple studies. As such, we do not maintain information regarding those costs incurred on an individual product candidate or clinical study basis.

Research and development expenses were $1.3 million and $11.3 million for the three and nine months ended September 30, 2025, respectively, compared to $9.6 million and $30.1 million for the three and nine months ended September 30, 2024, respectively.

Research and development expenses decreased by $8.3 million and $18.8 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024. Direct external expenses decreased significantly for the three and nine months ended September 30, 2025 compared to the same periods in 2024 due to the wind down of our clinical studies in 2025 including lower clinical development expenses, lower CMC activities with Biocon and lower consulting expenses primarily related to the wind down of our EQUATOR study. In addition, we negotiated discounts with our clinical vendors on outstanding accounts payable which were recorded as a reduction to research and development expense during the three months ended September 30, 2025. Indirect expenses decreased for the three and nine months ended September 30, 2025 compared to the same periods in 2024 driven by lower employee compensation and benefits due to lower headcount caused by the wind down of our clinical studies.

We expect research and development expenses in future periods to increase primarily due to the advancement of EQ504, our novel aryl hydrocarbon receptor modulator, into and through clinical development.

General and Administrative Expenses

General and administrative expenses were $3.3 million and $8.4 million for the three and nine months ended September 30, 2025, respectively, compared to $3.3 million and $10.2 million for the three and nine months ended September 30, 2024, respectively.

There was an immaterial change for the three months ended September 30, 2025, compared to the same period in 2024. The decrease of $1.8 million in general and administrative expenses for the nine months ended September 30, 2025, compared to the same period in 2024, was primarily related to decreases of (i) $0.8 million in employee compensation and benefits driven by reduced headcount, (ii) $0.4 million in overhead primarily due to lower franchise taxes, directors and officers insurance costs and travel, (ii) $0.3 million in legal expenses and (iii) $0.3 million in consulting expenses.

Interest Income

Interest income was $0.2 million and $0.5 million for the three and nine months ended September 30, 2025, respectively, compared to $0.3 million and $1.1 million for the three and nine months ended September 30, 2024, respectively. The decrease in interest income for the three and nine months ended September 30, 2025 compared to the same periods in 2024, was primarily due to lower average cash, cash equivalents and short-term investment balances.

Other Income, net

Other income, net was other income of $0.1 million and $0.5 million for the three and nine months ended September 30, 2025, respectively, compared to other income of $0.3 million and $0.2 million for the three and nine months ended September 30, 2024, respectively. The change in other income, net for the three and nine months ended September 30, 2025, compared to the same periods in 2024, was primarily due to fluctuations in net foreign currency transaction unrealized gains and losses.

Liquidity and Capital Resources

From inception through September 30, 2025, we have financed our operations primarily through the sale of equity and debt securities and income generated from our Asset Purchase Agreement with Ono as described in more detail in the Sources of Liquidity section below. As of September 30, 2025, we had an accumulated deficit of $212.4 million and anticipate that we will continue to incur net losses for the foreseeable future. As of September 30, 2025, we had $33.1 million in cash and cash equivalents.

Sources of Liquidity

Securities Purchase Agreement

On August 10, 2025, we entered into the Purchase Agreement with the Investors, pursuant to which we agreed to sell and issue shares of our common stock, par value $0.0001, and pre-funded warrants to purchase shares of common stock, in up to two closings in the Private Placement.

The Initial Closing of the Private Placement occurred on August 12, 2025. At the Initial Closing, we issued and sold 21,814,874 shares of common stock at a purchase price of $0.57 per share and pre-funded warrants to purchase up to 30,816,705 shares of common stock at a purchase price of $0.5699 per warrant share, the Warrant Price, to the Investors for gross proceeds to us of approximately $30.0 million. Net proceeds from the Private Placement were $27.9 million, after deducting placement agent fees and offering expenses totaling $2.1 million.

The Purchase Agreement also provides for a potential second closing for up to approximately $20.0 million in gross proceeds in exchange for up to approximately 35,087,717 shares of common stock, subject to achieving certain specified milestones related to clinical study initiation and stock price conditions or waiver thereof. There can be no assurance that the specified milestones will be met or that the investors will purchase additional shares of common stock or pre-funded warrants in a second closing. For additional information, see Note 8 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

2023 ATM Facility

In October 2023, we entered into an at-the-market facility with Jefferies LLC, or Jefferies, under which we may offer and sell shares of our common stock having an aggregate offering price of up to $21.95 million from time to time through Jefferies acting as our sales agent, or the 2023 ATM Facility. There were no shares sold under the 2023 ATM Facility from October 2023 through December 31, 2024. In March 2025, there were 109,410 shares sold under the 2023 ATM Facility for gross proceeds of $55,000. Issuance costs related to the 2023 ATM Facility totaled $0.5 million through March 31, 2025.

On August 3, 2025, we entered into Amendment No. 1 to the 2023 ATM Facility pursuant to which Jefferies was replaced by LifeSci Capital LLC as the sales agent under the 2023 ATM Facility. During the three months ended September 30, 2025, there were 1,610,075 shares of common stock sold under the 2023 ATM Facility, as amended, for gross proceeds of approximately $0.9 million. Issuance costs related to the 2023 ATM, as amended, totaled $0.2 million.

On September 19, 2025, we filed a prospectus supplement with the SEC under which we may offer and sell shares of our common stock having an aggregate offering price of up to $75.0 million, pursuant to the 2023 ATM Facility, as amended.

As of September 30, 2025 and through the date of the filing of this Quarterly Report on Form 10-Q, there were no additional shares of common stock sold under the 2023 ATM Facility, as amended.

Funding Requirements

We expect our expenses to increase substantially as we advance our research and development activities, including resuming development of our preclinical asset, EQ504 and potentially resuming development of EQ302. We expect that our primary uses of capital will be for non-clinical research, clinical development, CMC activities, formulation development, product supply, potential acquisition of new products, legal and other regulatory compliance expenses, employee compensation and related expenses, insurance premiums, working capital and other general overhead costs.

We believe that our cash and cash equivalents as of September 30, 2025 can fund operations through 2027. We have based these estimates on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Furthermore, our operating plans may change, and we may need additional funds sooner than planned. Additionally, the process of testing product candidates in clinical studies is costly, and the timing of progress in these studies is uncertain. Because the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of EQ504 and EQ302, or any of our other product candidates or whether, or when, we may achieve profitability.

Our future capital requirements will depend on many factors, including:

•

the initiation, progress, timing, costs and results of our planned or future non-clinical and clinical studies of EQ504 and EQ302 and other future product candidates, including as such activities may be adversely impacted by public health epidemics or outbreaks, the evolving conflict between Russia and Ukraine, the conflict in the Middle East, bank failures, tariffs and inflationary pressures on the economy;

•

the advancement and cost of preclinical research of EQ504, EQ302 and other novel preclinical drug candidates;

•

the number and scope of indications we decide to pursue for the development of our product candidates;

•

the cost, timing and outcome of regulatory review of any Biologics License Application, or BLA, or New Drug Application, or NDA, we may submit for our product candidates;

•

the costs and timing of manufacturing EQ504 and other product candidates;

•

the costs of drug formulation research and device development;

•

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

•

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;

•

the costs associated with being a public company;

•

our ability to enter into partnerships or otherwise monetize our pipeline through strategic transactions on a timely basis, on terms that are favorable to us, or at all;

•

the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;

•

the extent to which we acquire or in-license other product candidates and technologies or engage in in-house discovery and preclinical research of new product candidates;

•

the legal and other transactional costs associated with our business development activities; and

•

the cost associated with commercializing EQ504 or any of our other product candidates, if approved for commercial sale.

Until such time as we can generate product revenues, if ever, we expect to finance our cash needs through a combination of equity offerings, debt financings, and collaboration and license agreements. The sale of additional equity or convertible debt could result in additional dilution to our stockholders and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. The incurrence of debt financing would result in debt service obligations and the governing documents would likely include operating and financing covenants that would restrict our operations. As a result of the conflict between Russia and Ukraine, the conflict in the Middle East, potential government shutdowns, bank failures, tariffs, inflationary pressures on the economy and monetary policy responses taken by government agencies and other macroeconomic factors, the global credit and financial markets have experienced extreme volatility, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult to obtain, more costly and/or more dilutive. If we raise additional funds through collaboration or license agreements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or other operations. Any of these actions could have a material effect on our business, financial condition and results of operations. We have experienced net losses and negative cash flows from operating activities since our inception and expect to continue to incur net losses into the foreseeable future. We had an accumulated deficit of $212.4 million as of September 30, 2025. We expect operating losses and negative cash flows to continue for at least the next several years as we incur costs related to the development of EQ504, EQ302 and any of our other product candidates.

Material Cash Requirements

Our expected material cash requirements are comprised of contractually obligated expenditures, including amounts due under our operating leases. For additional information relating to our leases, see Note 6 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. We have no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis. Our expected material cash requirements do not include potential contingent payments upon the achievement by us of regulatory and commercial milestones that we may be required to make under the terms of the merger agreement pursuant to which we acquired Bioniz or potential contingent payments upon the achievement by us of regulatory milestones that we may be required to make under the terms of our stock purchase agreement with Ariagen, nor do they include potential contingent payments upon the achievement by us of regulatory and commercial milestones or royalty payments that we may be required to make under license agreements we may enter into with various entities.

Cash Flows

The following table sets forth the primary sources and uses of cash for each of the periods set forth below (in thousands):


	Nine Months Ended September 30,
	2025			2024
Net cash provided by (used in):
Operating activities	$	(19,613	)	$	(15,727	)
Investing activities		4,496			7,818
Financing activities		30,144			91
Effect of exchange rate changes on cash		8			50
Net increase (decrease) in cash and cash equivalents	$	15,035		$	(7,768	)

Operating Activities

During the nine months ended September 30, 2025, cash used in operating activities was $19.6 million compared to $15.7 million during the nine months ended September 30, 2024. Cash used in operating activities during the nine months ended September 30, 2025 primarily related to our net loss of $18.6 million, adjusted for non-cash items of $1.1 million, primarily consisting of non-cash stock-based compensation expenses, and net cash outflows from changes in other operating assets and liabilities of $2.1 million. Cash used in operating activities during nine months ended September 30, 2024 primarily related to our net loss of $2.3 million, adjusted for non-cash items of $2.2 million, primarily consisting of non-cash stock-based compensation expenses, and net cash outflows from changes in deferred revenue and other operating assets and liabilities of $15.6 million.

Investing Activities

Net cash provided by investing activities was $4.5 million during the nine months ended September 30, 2025 and primarily consisted of maturities of our short-term investments.

Net cash provided by investing activities was $7.8 million during the nine months ended September 30, 2024 and primarily consisted of maturities of our short-term investments totaling $25.5 million offset by purchases of our short-term investments totaling $17.6 million as well as $0.1 million of purchases of property and equipment.

Financing Activities

Net cash provided by financing activities totaled $30.1 million during the nine months ended September 30, 2025 and primarily consisted of net proceeds from the sale of shares under the Private Placement transaction totaling $28.1 million, proceeds totaling $1.2 million from the exercise of stock options and net proceeds from the sale of shares under our 2023 ATM Facility totaling approximately $0.8 million.

Net cash provided by financing activities totaled $0.1 million during the nine months ended September 30, 2024 and was attributed to cash received from employee stock purchases related to our Employee Stock Purchase Plan.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, and similarly did not and do not have any holdings in variable interest entities. We do have certain contingent consideration liabilities in the form of potential milestone payments that are included in our Biocon License, in our merger agreement with Bioniz and our stock purchase agreement with Ariagen which are not reflected in our balance sheet. However, based on our current operating plans and our assessment of the probability and potential timing of such payments, we believe those payments, if any, are remote and highly unlikely to come due within the next 12 months.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. The preparation of our condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and related disclosures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

There have been no changes to our critical accounting policies and estimates described in the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 27, 2025, that have had a material impact on our condensed consolidated financial statements and related notes.

Recently Issued Accounting Pronouncements

Equillium, Inc. 10-Q