ACELYRIN Merger

The Company completed its acquisition of ACELYRIN on May 21, 2025 (the “Closing Date”) and accounted for the transaction as an acquisition under ASC Topic 805, Business Combinations. ACELYRIN was a late-stage biopharma company focused on identifying, acquiring, and accelerating the development and commercialization of transformative medicines. ACELYRIN’s portfolio consisted of lonigutamab, a subcutaneously delivered, monoclonal antibody targeting IGF-1R for the potential treatment of Thyroid Eye Disease (“TED”). The ACELYRIN Merger strengthened the Company’s balance sheet and its cash position and added the lonigutamab product candidate to the Company’s development portfolio as of the Closing Date. The ACELYRIN Merger was accounted for as a business combination with the Company being treated as the accounting acquirer.

As of the Closing Date, the Company (i) issued 48,653,549 shares of its common stock in exchange for ACELYRIN’s issued and outstanding common stock shares and paid cash for fractional shares, (ii) assumed ACELYRIN’s stock options with an exercise price of $18.00 or less outstanding and unexercised immediately prior to the Closing Date, which were exercisable into 4,712,186 shares of the Company’s common stock, (iii) assumed ACELYRIN’s restricted stock units (“RSUs”) outstanding and unvested immediately prior to the Closing Date, which were converted into 1,323,905 of the Company’s RSUs, and (iv) assumed ACELYRIN’s performance RSUs outstanding and unvested immediately prior to the Closing Date, which were converted into 146,963 of the Company’s RSUs subject only to a service vesting condition.

Outstanding shares, stock options, RSUs and performance RSUs were exchanged at the exchange ratio of 0.4814 shares of the Company’s common stock for each share of ACELYRIN’s common stock (the “Exchange Ratio”). ACELYRIN’s outstanding and unexercised stock options with exercise prices more than $18.00 were cancelled. Exercise prices for the assumed stock options were determined as the product of the original exercise prices multiplied by the reciprocal of the Exchange Ratio. Converted ACELYRIN stock options and RSUs continue to vest in accordance with their original terms. Assumed performance RSUs were deemed to have 100% satisfied their performance conditions and vest in two equal installments on May 15 of calendar years 2026 and 2027, subject to the holder of the converted performance RSUs remaining in service with the Company or any of its subsidiaries on such date.

The purchase price consideration consisted of the Company’s shares of common stock issued as of the Closing Date and the additional stock-based compensation related to the fair value of replacement awards attributable to pre-combination services, and was calculated as follows (in thousands, except share and per share amounts):

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The following table presents the final purchase price allocation of the fair value of the net assets acquired and liabilities assumed as of the Closing Date (in thousands):

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Intangible assets consist of an acquired IPR&D intangible asset related to the lonigutamab product candidate that was in development as of the Closing Date. The acquired IPR&D intangible asset was initially recognized at a fair value of $51.0 million, determined using the multi-period excess earnings method, which reflected the present value of projected incremental after-tax cash flows attributable to the asset as of the Closing Date. The valuation utilized a discount rate of 24.0% representing management’s best estimate of a market participant's after-tax weighted average cost of capital. Projected future cash flows were based on significant estimates, including estimated revenues, costs and probabilities of achieving technical and regulatory milestones, among other factors. See Note 6 for additional information.

The Company acquired a prepaid credit voucher for clinical manufacturing issued by one of ACELYRIN’s contract manufacturers that is applied towards payments of clinical product manufacturing invoices issued by the vendor. The balance of $11.4 million as of the Closing Date was not adjusted from its carrying amount as its fair value approximated its carrying value as of this date.

The Company acquired two operating leases and a sublease. See Note 10 for additional details. The Company estimated the fair value of lease liabilities as the present value of the remaining lease payments, as if the acquired leases were new leases of the acquirer as of the Closing Date. The Company measured the right-of-use asset at the same amount as the lease liability as adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms. As ACELYRIN entered into a sublease in February 2025, these sublease terms were considered at market terms. As of the Closing Date, the fair value of operating lease liabilities, current, increased by $0.2 million and the fair value of operating lease liabilities, non-current, increased by $0.5 million. As of the Closing Date, the fair value of operating lease right-of-use assets, net, decreased by $0.1 million.

Because the fair value of the identifiable assets acquired and liabilities assumed exceeded the fair value of the purchase consideration transferred, the Company recorded a gain on bargain purchase of $187.9 million as of the Closing Date. Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed in accordance with ASC 805-30-25-4 and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate. Gain on bargain purchase was primarily related to the market value of ACELYRIN’s common stock trading below the carrying value of net assets and the Exchange Ratio being fixed at the time the Merger Agreement was signed and not adjusted for subsequent changes in the market price of the Company’s common stock. Gain on bargain purchase was recognized as other income in the consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2025. The Company recognized a deferred tax liability of $10.7 million related to the acquired IPR&D intangible asset as of the Closing Date.

The Company had additional severance-related obligations under the Merger Agreement that were separate from the assets and liabilities acquired in the Merger. In accordance with the ACELYRIN severance plan, ACELYRIN employees who were terminated without cause within 12 months of the Closing Date were entitled to severance benefits, including cash severance, accelerated vesting of outstanding equity awards and an extension of the post-termination exercise period of outstanding stock options of generally up to 12 months.

The Company estimated total cash severance obligation, including related payroll taxes, of $11.9 million. The severance obligation was recognized over the remaining requisite service periods of the affected employees and was substantially paid by December 31, 2025. The Company recognized $5.2 million as general and administrative expenses and $3.7 million as research and development expenses related to severance expenses for the three and six months ended June 30, 2025. The Company recognized $6.5 million as general and administrative expenses and $5.4 million as research and development expenses related to severance expenses for the year ended December 31, 2025. No severance expense was recognized for the three and six months ended June 30, 2026.

The Company estimated stock-based compensation expense of $13.1 million related to the accelerated vesting of equity awards and the post-termination exercise period extensions granted to affected employees, which was fully recognized during the year ended December 31, 2025. The Company recognized stock-based compensation expense of $10.8 million related to these arrangements for the three and six months ended June 30, 2025, consisting of $7.8 million in general and administrative expenses and $3.0 million in research and development expenses. The Company recognized stock-based compensation expense of $13.1 million for the year ended December 31, 2025, consisting of $9.0 million in general and administrative expenses and $4.1 million in research and development expenses. No stock-based compensation expense related to these arrangements was recognized for the three and six months ended June 30, 2026.

In addition, the Company recognized ACELYRIN Merger transaction costs of $7.1 million and $14.8 million in general and administrative expenses for the three and six months ended June 30, 2025, respectively. No ACELYRIN Merger transaction costs were recognized during the three and six months ended June 30, 2026.

Following the Closing Date, the operating results of ACELYRIN have been included in the Company’s consolidated financial statements.

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The ACELYRIN Merger is intended to be a reorganization under Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) Section 368(a). The Merger Agreement outlines the “plan of reorganization” within the meaning of the regulations issued under Internal Revenue Code Section 368(a) and the ACELYRIN Merger is intended to qualify as a tax-free reorganization for U.S. federal and state income tax purposes.