UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2023

OR

For the transition period from _________________ to _________________

Commission File Number: 001-41837

Mural Oncology plc

(Exact Name of Registrant as Specified in its Charter)

+353-1-905-8020

(Registrant’s telephone number, including area code)

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

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.

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 December 1, 2023, the registrant had 16,689,733 ordinary shares, nominal value $0.01 per share, outstanding.

Table of Contents

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report in Form 10-Q includes forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risk and uncertainties. All statements in this Quarterly Report, other than statements of historical facts, including statements about future events, future financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements that involve certain risks and uncertainties. Use of the words “may,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “seeks,” “intends,” “evaluates,” “pursues,” “anticipates,” “continues,” “designs,” “impacts,” “affects,” “forecasts,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal” or the negative of those words or other similar expressions may identify forward-looking statements that represent our current judgment about possible future events, but the absence of these words does not necessarily mean that a statement is not forward-looking.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

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See Part II, Item 1A, “Risk Factors” for a further description of these and other factors. Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report. If any of these risks materialize, or if any of the above assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report and our other filings with the Securities and Exchange Commission. Any forward-looking statement made by us in this Quarterly Report speaks only as of the date thereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law.

SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to a number of risks that, if realized, could materially affect our business, prospects, operating results and financial condition. These risks are discussed more fully in the “Risk Factors” section of this Quarterly Report on Form 10-Q. These risks include, but are not limited to, the following:

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Mural Oncology plc

Condensed Combined Balance Sheets

(Unaudited)

See accompanying notes to the unaudited condensed combined financial statements.

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Mural Oncology plc

Condensed Combined Statements of Operations and Comprehensive Loss

(Unaudited)

See accompanying notes to the unaudited condensed combined financial statements.

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Mural Oncology plc

Condensed Combined Statements of Changes in Net Parent Investment

(Unaudited)

See accompanying notes to the unaudited condensed combined financial statements.

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Mural Oncology plc

Condensed Combined Statements of Cash Flows

(Unaudited)

See accompanying notes to the unaudited condensed combined financial statements.

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Mural Oncology plc

Notes to Condensed Combined Financial Statements

(Unaudited)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed combined financial statements and related notes included in this quarterly report on Form 10-Q and the audited annual combined financial statements as of and for the year ended December 31, 2022 and the related notes included in Exhibit 99.1 to our Registration Statement on Form 10, which was most recently filed with the Securities and Exchange Commission (the “SEC”) on October 26, 2023 (the “Form 10”). This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, including those set forth under “Risk Factors” appearing elsewhere in this report, our actual results may differ materially from those anticipated in these forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

We are a clinical-stage oncology business focused on discovering and developing immunotherapies that may meaningfully improve the lives of patients with cancer. By leveraging our core competencies in immune cell modulation and protein engineering, we have developed a portfolio of investigational cytokine therapies designed to address areas of unmet need for patients with a variety of cancers. Our lead product candidate, nemvaleukin alfa (“nemvaleukin”), is an investigational, engineered interleukin-2 (“IL-2”) cytokine designed to capture and expand the therapeutic benefits of high-dose recombinant human IL-2, while mitigating its hallmark toxicities. In our clinical proof of concept study, nemvaleukin generated durable responses as a single agent and in combination with pembrolizumab across a range of tumor types. Nemvaleukin is currently in two potentially registrational studies, one for the treatment of mucosal melanoma as a monotherapy and one for the treatment of platinum-resistant ovarian cancer (“PROC”) in combination with pembrolizumab. We plan to report topline results from both of these trials in the first quarter of 2025. In addition to nemvaleukin, we are also developing engineered therapies targeting the interleukin-18 (“IL-18”) and interleukin-12 (“IL-12”) pathways, which have demonstrated therapeutic potential in third-party preclinical and clinical studies. We are currently conducting discovery-phase activities for our IL-18 and IL-12 programs, and we plan to nominate a product candidate in each program in 2024.

ARTISTRY-1, our Phase 1/2 clinical proof of concept study for nemvaleukin in which nemvaleukin is administered intravenously, was designed to assess whether nemvaleukin could recapitulate the anti-tumor activity of high-dose rhIL-2 and to assess nemvaleukin’s safety profile. ARTISTRY-2 is a Phase 1/2 open-label study of subcutaneous nemvaleukin in combination with pembrolizumab in patients with advanced solid tumors. ARTISTRY-3 is a Phase 1/2 open-label study of IV nemvaleukin in patients with advanced solid tumors after treatment failure or intolerance to one to three prior FDA-approved targeted therapies. In addition, we are currently evaluating nemvaleukin in two potentially registrational studies: ARTISTRY-6, a Phase 2 study in which Cohort 2 is evaluating nemvaleukin as a monotherapy in patients with advanced mucosal melanoma, and ARTISTRY-7, a Phase 3 study which is evaluating nemvaleukin in combination with pembrolizumab in patients with PROC.

Separation from Alkermes

On November 2, 2022, Alkermes plc (the “Parent” or “Alkermes”) announced its intent, as approved by its board of directors, to explore separation (the “Separation”) of its neuroscience business and oncology business. On November 14, 2023, in connection with the Separation, Mural received a cash contribution of $275.0 million from Alkermes. Alkermes effected the Separation through the distribution of the ordinary shares of Mural to Alkermes’ shareholders (the “Distribution”) on November 15, 2023.

As part of the Separation on November 15, 2023, Alkermes transferred the assets, liabilities and operations of the historical oncology business to us, pursuant to the terms of a separation agreement, entered into between Alkermes and us. On the effective date of the Distribution, we issued our ordinary shares to Alkermes shareholders on a pro rata basis, with each Alkermes shareholder receiving one ordinary share of Mural for every ten ordinary shares of Alkermes held as of close of business on November 6, 2023, the record date for the Distribution. Registered shareholders received cash in lieu of any fractional Mural ordinary shares that they would have received as a result of the application of the distribution ratio. Following the Separation and Distribution, we operate as an independent, publicly traded company. For additional information on the Separation and Distribution, see Note 12, Subsequent Events, in the notes to our unaudited condensed combined financial statements included elsewhere in this Form 10-Q.

Our historical financial statements have been prepared on a standalone basis and are derived from Alkermes’s consolidated financial statements and accounting records. Our unaudited condensed combined financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”). See Note 2, Basis of Presentation and Summary of Significant Accounting Policies, in the notes to our unaudited condensed combined financial statements for additional information on the preparation and basis of presentation of our audited combined financial statements and unaudited condensed combined financial statements. Our financial position, results of operations and cash flows historically operated as part of Alkermes’ financial position,

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results of operations and cash flows prior to and until the Distribution. The unaudited condensed combined financial statements may not be indicative of our future performance and do not necessarily reflect what our results of operations, financial condition and cash flows would have been had we operated as a separate, publicly traded company during the periods presented. We expect that changes will occur in our operating structure and our capitalization as a result of the Separation from Alkermes.

Components of Results of Operations

Historically, our operations have been managed in the normal course of business as part of the Parent. Accordingly, certain shared costs have been allocated to us and reflected as expenses in the unaudited condensed combined financial statements, as described in greater detail in the notes to the unaudited condensed combined financial statements appearing elsewhere in this report. We considered the allocation methodologies used to be a reasonable and appropriate reflection of the historical Parent expenses attributable to us for purposes of the standalone financial statements. The expenses reflected in the unaudited condensed combined financial statements may not be indicative of expenses that will be incurred by us in the future. The following discussion summarizes the key factors we believe are necessary for an understanding of our unaudited condensed combined financial statements.

Revenue

To date, we have not recognized any revenue and do not expect to generate substantial product revenue in the near future, if at all, as we do not currently have an approved product. If our development efforts for our product candidates are successful and result in marketing approval or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from product sales or payments from such collaboration or license agreements, or a combination of product sales and payments from such agreements.

Research and Development Expenses

Research and development (“R&D”) expenses are recognized as incurred, and payments made prior to the receipt of goods or services to be used in R&D are capitalized until the goods or services are received. Our R&D expenses include both external and internal expenses. External R&D expenses include fees for clinical and non-clinical activities performed by contract research organizations (“CROs”), consulting fees and costs related to laboratory services, the purchase of drug product materials and third-party manufacturing development activities. Internal R&D expenses related to the oncology programs include employee-related expenses, occupancy costs and depreciation related to the oncology business.

The amounts set forth in the tables below are not necessarily predictive of future R&D expenses. In an effort to allocate our R&D spending most effectively, we continually evaluate our product candidates under development based on the performance of such product candidates in preclinical and/or clinical trials, our expectations regarding the likelihood of their regulatory approval and our view of their future potential commercial viability, among other factors. For more information regarding risks related to future R&D expenses, please see “Risk Factors—Risks Related to Discovery, Product Development and Regulatory Approval of Our Product Candidates.”

General and Administrative Expenses

General and administrative (“G&A”) expenses consist primarily of an allocation of salaries and related costs for personnel, including share-based compensation and travel expenses for the Parent’s employees in executive, operational, finance, legal, business development, information technology, and human resource functions. Other G&A expenses include an allocation of the Parent’s facility-related costs, professional fees for accounting, tax, legal and consulting services, directors’ fees and expenses associated with obtaining and maintaining patents. We recognize all G&A expenses as incurred. We expect G&A expenses to increase after the Separation as we operate as a standalone public company.

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Results of Operations

Comparison of the Three Months Ended September 30, 2023 and 2022

The following table sets forth our R&D expenses for the three months ended September 30, 2023 and 2022:

The decrease in expenses related to nemvaleukin in the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 was primarily due to decreased spend on the ARTISTRY-2 and ARTISTRY-1 trials as activities related to these trials wind down, partially offset by increased spend on the ARTISTRY-7 trial. The decrease in employee-related expense was primarily related to a reduction in the headcount attributable to Mural.

General and Administrative Expenses

The following table sets forth our G&A expenses for the three months ended September 30, 2023 and 2022:

The increase in G&A expense was primarily due to an increase in allocable G&A expenses of the Parent, including fees for professional services, such as legal and audit fees, and costs specifically incurred for oncology-related market research.

Income Tax Provision

The following table sets forth our income tax provision for the three months ended September 30, 2023 and 2022:

The income tax provisions were primarily due to the capitalization and amortization of R&D expenses in accordance with Section 174 of the Internal Revenue Code of 1986, as amended (the “Code”). The increased tax provision for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 was primarily due to lower R&D tax credits available in 2023. The income tax provisions were calculated on a separate return basis and are not necessarily representative of the tax provision that may arise in the future. As noted in Note 7, Income Taxes, in the notes to our unaudited combined condensed financial

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statements included elsewhere in this Form 10-Q, we continue to maintain a valuation allowance on our Irish net operating losses and other Irish and U.S. deferred tax assets as of September 30, 2023.

Comparison of the Nine Months Ended September 30, 2023 and 2022

The following table sets forth our R&D expenses for the nine months ended September 30, 2023 and 2022:

The increase in expenses related to nemvaleukin in the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to increased spend on the ARTISTRY-7 trial related to increased enrollment and associated clinical trial expenses, partially offset by decreased spend on the ARTISTRY-1 and ARTISTRY-2 trials as activities related to these trials wind down. The decrease in employee-related expense was primarily related to a reduction in the headcount attributable to Mural.

General and Administrative Expenses

The following table sets forth our G&A expenses for the nine months ended September 30, 2023 and 2022:

The increase in G&A expense in the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to an increase in allocable G&A expenses of the Parent, including fees for professional services, such as legal and audit fees.

Income Tax Provision

The following table sets forth our income tax provision for the nine months ended September 30, 2023 and 2022:

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The income tax provisions for the nine months ended September 30, 2023 and 2022 were primarily due to the capitalization and amortization of R&D expenses in accordance with Section 174 of the Code. The increased tax provision for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily due to lower R&D tax credits available in 2023. The provisions were calculated on a separate return basis and are not necessarily representative of the tax provision that may arise in the future. As noted in Note 7, Income Taxes , in the notes to our unaudited combined condensed financial statements included elsewhere in this Form 10-Q, we continue to maintain a valuation allowance on our Irish net operating losses and other Irish and U.S. deferred tax assets as of September 30, 2023.

Liquidity and Capital Resources

We have historically participated in the Parent’s centralized approach to cash management, and, therefore, there were no cash amounts specifically attributable to us for the historical periods presented. Historically, the primary source of liquidity for our business was funding by the Parent of the expenses allocated to the oncology business from the Parent. Prior to the Separation, transfers of cash to and from the Parent have been reflected in net parent investment in the unaudited condensed combined balance sheets, statements of cash flows and statements of changes in net parent investment. We have not reported cash or cash equivalents for the periods presented in the unaudited condensed combined balance sheets. The Parent continued to fund the cash needs of the oncology business through the date of the Separation. On November 14, 2023, in connection with the Separation, we received a cash contribution of $275.0 million from the Parent.

Funding Requirements

Our expenses may increase in connection with our ongoing activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. In addition, following the Distribution, we have incurred and expect to continue to incur additional costs associated with operating as a public company. Our expenses may also increase as we:

• leverage our programs to continue advancing our product candidates into preclinical and clinical development;

• seek regulatory approvals for any product candidates that successfully complete clinical trials;

• hire additional clinical, quality control and scientific personnel;

• build out commercial infrastructure, as needed, in the event our products obtain marketing approval;

• expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development and our operations as a public company; and

• maintain, expand and protect our intellectual property portfolio.

We believe that the contribution of $275.0 million from the Parent to us immediately prior to and in connection with the Separation will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements. The scope of our future funding requirements will depend on, and could increase significantly as a result of, many factors, including:

• the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinical trials;

• the costs, timing and outcome of regulatory review of our product candidates;

• the costs of future activities, including medical affairs, manufacturing and distribution, if any of our product candidates receive marketing approval;

• the cost and timing of hiring new employees to support our continued growth;

• the cost of establishing sales, marketing and distribution capabilities if any of our product candidates receive regulatory approval;

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

• the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates or products, if any.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Until such time, if ever, as we can generate substantial revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of holders of our ordinary shares. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. In addition, debt financing would result in increased fixed payment obligations.

If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs, products or product candidates or grant licenses on terms that may not be favorable to us.

Furthermore, for the four-year period beginning two years before and ending two years after the Distribution, we will be restricted from entering into certain transactions pursuant to a tax matters agreement we entered into with the Parent. We will be prohibited under the tax matters agreement, except in specific circumstances, from certain actions, including: (i) entering into or approving any transaction involving the acquisition of outstanding or newly issued Mural equity that, when combined with other non-excepted changes in ownership of our ordinary shares, results in a change in ownership of more than a specified percentage; (ii) liquidating or partially liquidating, or merging or consolidating (unless we are the survivor); (iii) making or changing any entity classification election; (iv) ceasing to be engaged in an active trade or business, or selling, transferring or disposing of more than a specified percentage of the assets of any active trade or business or reducing the number of full-time employees engaged in any active trade or business by more than a specified percentage; (v) amending any of our organizational documents or taking any action affecting the voting rights of our ordinary shares; (vi) redeeming or otherwise repurchasing any of our outstanding shares or options; or (vii) taking or failing to take any other action that would prevent the separation and distribution, in relevant part and together with certain related transactions, from qualifying as transactions that are tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, except for cash received in lieu of fractional ordinary shares. For more information, see “Risk Factors — Risks Related to Tax Matters”.

If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product candidate development or future commercialization efforts, or grant rights to third parties to develop and market product candidates that we would otherwise prefer to develop and/or market ourselves. See section entitled “Risk Factors—Risks Related to Our Financial Position and Capital Needs.” We will need to raise additional funding to advance our product candidates, which may not be available on acceptable terms, or at all. If we are unable to obtain additional funding when needed, we may have to delay or scale back some of our programs or grant rights to third parties to develop and market our product candidates.”

Going Concern

We have evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited condensed combined financial statements are issued.

As the Parent managed our cash and financing arrangements prior to the Separation, excess cash generated, if any, was deemed remitted to the Parent and all sources of cash were deemed funded by the Parent. We have generated operating losses for all historical periods presented and expect to continue to generate operating losses for the foreseeable future.

We expect to fund operations and capital needs through the funding received from the Parent through the date of the Separation. As described in Note 12, Subsequent Events, in the notes to the unaudited condensed combined financial statements, on November 14, 2023, in connection with the Separation, we received a cash contribution of $275.0 million from the Parent, which alleviated the conditions that previously raised substantial doubt about our ability to continue as a going concern. We believe that our cash

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resources, including the funding received subsequent to September 30, 2023, will be sufficient to fund our anticipated operations and capital needs into the fourth quarter of 2025.

Our continued operations are dependent on the funding received from the Parent through the Separation and on our ability to generate cash from operating activities and to raise additional capital to finance our future operations subsequent to the Separation. If we are unable to obtain additional funding on a timely basis, we may be forced to significantly curtail, delay, or discontinue one or more of our planned R&D programs or be unable to expand or continue operations. There is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.

Cash Flows

As Alkermes managed Mural’s cash and financing arrangements prior to the Separation, excess cash generated, if any, was deemed remitted to the Parent and all sources of cash were deemed funded by the Parent. The following table summarizes our cash flow activity:

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2023 was $151.5 million which was primarily the result of our net loss of $147.9 million, partially offset by non-cash charges of $10.8 million. The most significant non-cash charge we incurred was share-based compensation of $8.9 million. We also used $14.4 million in cash from working capital, primarily related to a $15.3 million decrease in accounts payable and accrued expenses and a $4.4 million decrease in operating lease liabilities, partially offset by a $5.6 million decrease in our right-of-use assets.

Net cash used in operating activities for the nine months ended September 30, 2022 was $130.7 million which was primarily the result of our net loss of $141.2 million, partially offset by non-cash charges of $9.8 million. The most significant non-cash charge we incurred was share-based compensation of $8.7 million. Working capital provided $0.7 million in cash, primarily related to a $4.5 million decrease in right-of-use assets and a $3.1 million increase in accounts payable and accrued expenses, partially offset by a $4.4 million decrease in operating lease liabilities.

Investing Activities

Net cash used in investing activities was $2.3 million and $5.4 million for the nine months ended September 30, 2023 and 2022, respectively, which was attributed to the purchase of property and equipment.

Financing Activities

As the Parent managed our cash and financing arrangements until the Separation, all sources of cash were deemed funded by the Parent. Net cash provided by financing activities for the nine months ended September 30, 2023 and 2022 was due to the funding of our operating and investing activities by the Parent.

Contractual Obligations and Commitments

Our only lease as of September 30, 2023 and December 31, 2022 was an operating lease for approximately 180,000 square feet of corporate office space, administrative areas and laboratories at 850 and 852 Winter Street in Waltham, Massachusetts, which includes 34,000 square feet of laboratory space (as amended, the “Winter Street Lease”). Under the terms of the Winter Street Lease, we also have the ability to sub-lease our corporate office and laboratory space. The original lease commenced in 2010 and was extended, at Alkermes’ option, for approximately five years in 2020. The extension term commenced in March 2021 for approximately 163,000 square feet of space and in September 2021 for the remaining approximately 17,000 square feet of space. The Winter Street Lease expires in 2026 and includes a tenant option to extend the term of the Winter Street Lease for an additional

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five-year period, which we are not reasonably certain to exercise. The Winter Street Lease was assigned to us in connection with the Separation and will be used solely for our operations. The Parent has been primarily obligated to the landlord for the Winter Street Lease, and, following the Separation, the Parent is jointly and severally liable with us for, and will continue to guarantee, all obligations under the Winter Street Lease. Furthermore, the Parent is the applicant with respect to the letter of credit security deposit that secures the obligations of the tenant under the Winter Street Lease. The Parent maintained a $1.9 million collateralized letter of credit related to such security deposit as of September 30, 2023. As we did not have legal ownership over any bank accounts as of September 30, 2023, there were no cash or cash equivalents balances specifically attributable to us for the historical periods presented and, accordingly, no amount is reflected in the unaudited condensed combined financial statements related to the letter of credit.

As of September 30, 2023, the remaining contractual operating lease liability associated with the Winter Street Lease was $16.5 million. For additional information on our operating lease, see Note 5, Leases, in the notes the unaudited condensed combined financial statements.

We enter into contracts in the normal course of business with CROs, clinical supply manufacturers and vendors for pre-clinical studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination after a notice period. Payments due upon cancellation consist of payments for services provided or expenses incurred.

Critical Accounting Policies and Significant Judgments and Estimates

Our accompanying combined financial statements have been prepared on a standalone basis and are derived from Alkermes’ consolidated financial statements and accounting records. Our management’s discussion and analysis of our financial condition and results of operations is based on those combined financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the related disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, share-based compensation, leases, income taxes and the allocation of corporate expenses. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, in the notes to the unaudited condensed combined financial statements appearing elsewhere in this report, we believe the following accounting policies and estimates to be most critical to the preparation of our financial statements.

Allocation of Expenses

Our combined financial statements include general corporate expenses for certain business and support functions that are provided on a centralized basis, such as senior management, legal, human resources, accounting and finance, facilities, information technology and other corporate services. In addition, our combined financial statements include an allocation of certain R&D costs not directly attributable to individual programs. These costs have been allocated to us for the purposes of preparing the combined financial statements based on proportional cost allocation methods using headcount, square footage or proportional hours worked supporting us and other organizational activities, as applicable, which are considered to be a reasonable reflection of the utilization of services provided or benefit received by us during the periods presented. Management considers that such allocations have been made on a reasonable basis; however, these allocations may not necessarily be indicative of the costs that would have been incurred if we had operated on a standalone basis for the periods presented and, therefore, may not reflect our results of operations, financial position and cash flows had we operated as a standalone entity during the periods presented. All such costs have been deemed to have been incurred and settled through net parent investment in the period when the costs were recorded.

Accrued Research and Development

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We confirm the accuracy of our estimates with the service providers and make adjustments, if necessary. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced.

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We base our expenses related to research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract-to-contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

Share-Based Compensation Expense

Share-based compensation expense represents the cost of the grant date fair value of equity awards recognized that are expected to vest over the requisite service period of the awards (usually the vesting period) on a straight-line basis. We estimate the fair value of stock option awards using the Black-Scholes option pricing model. The fair value of time-vesting restricted stock unit awards is equal to the ordinary share price on the date of grant and the fair value of performance-vesting restricted stock unit awards is estimated using a Monte Carlo simulation model. Estimating the fair value of equity awards as of the grant date using valuation models, such as the Black-Scholes option pricing model, is affected by assumptions regarding a number of variables, including the risk-free interest rate, the expected share price volatility, the expected term of share options, the expected dividend yield and the fair value of the underlying ordinary shares on the date of grant. Forfeitures are estimated based on historical experience at the time of grant and are revised in subsequent periods if actual forfeitures differ from those estimates. Changes in the assumptions can materially affect the fair value and ultimately how much share-based compensation expense is recognized. The assumptions used were those of the Parent and the share-based compensation expense we recognized in our financial statements is an allocation of Alkermes’ historical share-based compensation expense. These inputs are subjective and generally require significant analysis and judgment to develop.

Leases

We account for leases under Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”). At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the relevant facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable. We do not have material financing leases.

Leases contain both lease and non-lease components. Non-lease components may include maintenance, utilities, and other operating costs. We combine the lease and non-lease components in our lease arrangements as a single lease component. Variable costs, such as utilities or maintenance costs, are not included in the measurement of right-of-use assets and lease liabilities, but rather are expensed when the event determining the amount of variable consideration to be paid occurs.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded at the lease commencement date based on the present value of lease payments over the expected remaining lease term. Certain adjustments to right-of-use assets may be required for items such as prepaid or accrued lease payments as well as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, we utilize an incremental borrowing rate to discount lease payments, which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. To estimate the incremental borrowing rate, a credit rating applicable to us is estimated using a synthetic credit rating analysis since we do not currently have a rating agency-based credit rating.

We have elected not to recognize leases with an original term of one year or less on the balance sheet. We typically only include an initial lease term in our assessment of a lease arrangement. Options to renew a lease are not included in our assessment unless there is reasonable certainty that we will renew.

Assumptions that we made at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

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Income Taxes

In preparing the combined financial statements for us, the Parent has determined the tax provision for those operations on a separate return basis. We recognize income taxes under the asset and liability method. Deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence including our past operating results, the existence of cumulative losses in the most recent fiscal years, changes in the business in which we operate and our forecast of future taxable income. In determining future taxable income, we are responsible for assumptions utilized, including the amount of Irish and non-Irish pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that we are using to manage the underlying business.

Recently Issued and Adopted Accounting Pronouncements

A description of recently issued and adopted accounting pronouncements, if any, that may potentially impact our financial position and results of operations is disclosed in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, in the notes to the audited combined financial statements included in the Form 10 and in the notes to the unaudited condensed combined financial statements included elsewhere in this Form 10-Q.

Transition From Alkermes and Costs to Operate as an Independent Company

The combined financial statements reflect our operating results and financial position as our business was operated by the Parent during the periods presented, rather than as an independent company. We have incurred and expect to continue to incur additional ongoing operating expenses to operate as an independent company. These costs include the cost of various corporate headquarters functions, incremental information technology-related costs and incremental costs to operate standalone accounting, legal and other administrative functions. We may also incur non-recurring expenses and non-recurring capital expenditures.

As an independent company, our information technology operating costs may be higher than the costs allocated in the historical combined financial statements. In addition, we will incur non-recurring expenses and capital expenditures to establish independent information technology systems.

We continued to build our administrative infrastructure through the date of the Separation. We entered into transition services agreements with the Parent that will provide us with certain services and resources for an initial term of two years following the Separation. Historically, the Parent has provided our business with significant corporate and shared services and resources related to corporate functions such as finance, human resources, internal audit, research and development, financial reporting, and information technology, which we refer to collectively as the “Alkermes Services.” We pay the Parent fees for the Alkermes Services under the transition services agreements, which fees are based on the Parent’s cost of providing the Alkermes Services. These transition services agreements allow us to operate our business independently prior to establishing a standalone infrastructure. During the transition from the Parent, we will incur non-recurring expenses to establish and expand our infrastructure.

It is not practicable to estimate the costs that would have been incurred in each of the periods presented in the historical financial statements for the functions described above. Actual costs that would have been incurred if we operated as a standalone company during these periods would have depended on various factors, including organizational design, outsourcing and other strategic decisions related to corporate functions, information technology and back-office infrastructure.

Transactions with Related and Certain Other Parties

Prior to the Distribution, we entered into certain agreements with the Parent relating to the Separation, including a separation agreement, transition services agreements, a tax matters agreement and an employee matters agreement. The terms of these agreements, including information on the business purpose of such agreements, transaction prices, related ongoing contractual commitments and any related special risks or contingencies are discussed in greater detail in the section captioned “Certain Relationships and Related Person Transactions,” in our Form 10.

Emerging Growth Company and Smaller Reporting Company Status