Avalyn Pharma Inc., or the Company or Avalyn, is a clinical-stage biopharmaceutical company developing inhaled medicines to treat rare respiratory diseases, including progressive pulmonary fibrosis, idiopathic pulmonary fibrosis, and other interstitial lung diseases. The Company was incorporated in the state of Delaware on May 27, 2011, and has its headquarters in Boston, Massachusetts.

As used in these consolidated financial statements, unless the context otherwise requires, references to the “Company” or “Avalyn,” refer to Avalyn Pharma Inc. and its wholly owned subsidiary, Avalyn Pharma Pty. Ltd.

Risks and Uncertainties

The Company is subject to the risks and challenges associated with other biopharmaceutical companies at a similar stage of development, including dependence on key individuals, successful development of its products and services, dependence on key vendors, compliance with government regulations, protection of proprietary technology, competition from substitute products and services and larger companies which have greater financial resources, technical management, and the ability to secure adequate financing to support future growth. There can be no assurance that any future products or services can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products or services will be successfully marketed, if at all. These factors could have a material adverse effect on the Company’s future operating results, financial position and cash flow.

Existing or future products developed by the Company will require approvals or clearances from the U.S. Food and Drug Administration or the FDA, or other similar international regulatory agencies prior to commercial sales. If the Company were denied or delayed in receiving such approvals or clearances, it would have a material adverse effect on the Company.

Reverse Stock Split

The Company’s Board approved a 1-for-19.2417 reverse stock split of its issued and outstanding common stock, which also resulted in a proportional adjustment to the conversion price for each series of its preferred stock, and to the exercise prices and number of outstanding stock options, and warrants, which became effective on April 22, 2026. Accordingly, all shares of common stock, stock options, warrants, and per share information presented in the accompanying financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split. The per share par value and authorized number of both common and preferred shares were not adjusted as a result of the split.

Initial Public Offering

On May 1, 2026, the Company completed its initial public offering, or IPO, in which the Company sold an aggregate of 19,166,667 shares of its common stock at a public offering price of $18.00 per share, which included 2,500,000 shares of its common stock sold to the underwriters pursuant to the full exercise of their option to purchase additional shares, resulting in aggregate net proceeds of approximately $316.1 million, after deducting underwriter discounts, commissions and other offering expenses. Immediately prior to the closing of the IPO, the Company's outstanding redeemable convertible preferred stock automatically converted into 23,918,194 shares of common stock. Following the closing of the IPO, no shares of redeemable convertible preferred stock were outstanding. In connection with the closing of the IPO, the Company's certificate of incorporation was amended and restated to authorize 700,000,000 shares of common stock, par value $0.001 per share, including 500,000,000 shares of voting common stock and 200,000,000 shares of non-voting common stock; to eliminate all references to the previously-existing series of preferred stock, and authorize 10,000,000 shares of preferred stock, par value $0.001 per share.

Going Concern

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

Since its inception, the Company has funded its operations with proceeds from convertible notes, its IPO, and with proceeds from the issuance of Series A, Series B, Series C-1, Series C-2 and Series D preferred stock. The Company has incurred net losses, and utilized cash, cash equivalents, and marketable securities in operations since inception, has an accumulated deficit as of March 31, 2026 of $292.2 million, and expects to incur future additional losses. As of March 31, 2026, the Company had cash, cash equivalents, and

marketable securities of $123.1 million. The Company has determined that its existing cash, cash equivalents, and marketable securities, together with the additional proceeds received from the IPO, will be sufficient to fund the Company’s operating expenses and capital expenditures requirements for at least 12 months from the issuance date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2026, and the condensed consolidated statements of comprehensive loss, consolidated statements of changes in redeemable convertible preferred stock and stockholders' deficit, and consolidated statements of cash flows for the three months ended March 31, 2026 and 2025, are unaudited. The condensed consolidated interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2026, and the results of its operations and its cash flows for the three months ended March 31, 2026 and 2025. The financial data and other information disclosed in these notes related to the three months ended March 31, 2026 and 2025, are also unaudited. The results for the three months ended March 31, 2026 are not necessarily indicative of results to be expected for the year ending December 31, 2026, or for any other subsequent period.