Avalyn Pharma Inc.

Previous wording

We are a clinical-stage biopharmaceutical company and have incurred operating losses in each year since our inception. Our net losses were $26.9 million and $17.5 million for the three months ended March 31, 2026 and 2025, respectively. We had an accumulated deficit of $292.2 million and $265.4 million as of March 31, 2026 and December 31, 2025, respectively. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ deficit and working capital.

Current wording

We are a clinical-stage biopharmaceutical company and have incurred operating losses in each year since our inception. Our net losses were $28.9 million and $20.2 million for the three months ended June 30, 2026 and 2025, respectively. Our net losses were $55.8 million and $37.7 million for the six months ended June 30, 2026 and 2025, respectively. We had an accumulated deficit of $321.2 million and $265.4 million as of June 30, 2026 and December 31, 2025, respectively. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ deficit and working capital.

Previous wording

We benefit from an exclusive license to PARI’s eRapid® Nebulizer System with eFlow® Technology for AP01’s delivery, and we retain an exclusive right to negotiate a separate license agreement with respect to AP02 and AP03 for exclusive licenses for PARI’s eRapid® Nebulizer System with eFlow® Technology. This exclusivity offers a key competitive advantage, as the proprietary device would be included in any potential U.S. FDA-approved product labels, however, we cannot guarantee that we will maintain preferable commercial terms for such license. We are dependent on the sustained cooperation and effort of PARI both to supply the device and, in some cases, to conduct the studies required for approval or other regulatory clearance of the device, and if received, we expect we will be dependent on PARI for continuing to maintain such approvals or clearances. Failure of PARI to supply the device, to successfully complete studies on the device or for any future devices we may utilize for any of our product candidates in a timely manner, or to obtain or maintain required approvals or clearances of the devices could result in increased development costs, delays in or failure to obtain regulatory approval, and delays in our product candidates reaching the market initially and/or expanding to new indications. For more information on the PARI Agreement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Material Agreement.”

Current wording

We benefit from an exclusive license to PARI’s eRapid® Nebulizer System with eFlow® Technology for AP01’s delivery, and we retain an exclusive right to negotiate a separate license agreement with respect to AP02 and AP03 for exclusive licenses for PARI’s eRapid® Nebulizer System with eFlow® Technology. This exclusivity offers a key competitive advantage, as the proprietary device would be included in any potential U.S. FDA-approved product labels, however, we cannot guarantee that we will maintain preferable commercial terms for such license. We are dependent on the sustained cooperation and effort of PARI both to supply the device and, in some cases, to conduct the studies required for approval or other regulatory clearance of the device, and if received, we expect we will be dependent on PARI for continuing to maintain such approvals or clearances. Failure of PARI to supply the device, to successfully complete studies on the device or for any future devices we may utilize for any of our product candidates in a timely manner, or to obtain or maintain required approvals or clearances of the devices could result in increased development costs, delays in or failure to obtain regulatory approval, and delays in our product candidates reaching the market initially and/or expanding to new indications. For more information on the PARI License Agreement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Material Agreement.”

Previous wording

We are dependent on licensed intellectual property rights pursuant to the PARI Agreement relating to the PARI eFlow® Technology and eRapid® Nebulizer System and we may in the future enter into additional intellectual property licensing agreements on which we could similarly become dependent. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing our product candidates, if approved, on the intended timeline. If we breach the PARI Agreement or any other future agreements in which we license the use, development and commercialization rights to our product candidates from third parties or, in certain cases, we fail to meet certain deadlines, we could lose license rights that are important to our business.

Current wording

We are dependent on licensed intellectual property rights pursuant to the PARI License Agreement relating to the PARI eFlow® Technology and eRapid® Nebulizer System and we may in the future enter into additional intellectual property licensing agreements on which we could similarly become dependent. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing our product candidates, if approved, on the intended timeline. If we breach the PARI License Agreement or any other future agreements in which we license the use, development and commercialization rights to our product candidates from third parties or, in certain cases, we fail to meet certain deadlines, we could lose license rights that are important to our business.

Previous wording

As of May 1, 2026, we had 54 full-time employees, including 33 who were engaged in research and development activities. As we continue to build our organization and execute on our strategy, we expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of clinical development, regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management, business, and development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage our growth effectively.

Current wording

As of June 30, 2026, we had 55 full-time employees, including 36 who were engaged in research and development activities. As we continue to build our organization and execute on our strategy, we expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of clinical development, regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing and distribution. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management, business, and development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to manage our growth effectively.

Previous wording

We received net proceeds of approximately $316.1 million from the sale of 19,166,667 shares of common stock at a price of $18.00 per share, which included 2,500,000 shares of common stock sold pursuant to the underwriters' exercise of their option to purchase additional shares. None of the expenses associated with the IPO were paid to directors, officers, persons owning 10% or more of any class of equity securities, or to our affiliates.

Current wording

We received net proceeds of approximately $316.6 million from the sale of 19,166,667 shares of common stock at a price of $18.00 per share, which included 2,500,000 shares of common stock sold pursuant to the underwriters' exercise of their option to purchase additional shares. None of the expenses associated with the IPO were paid to directors, officers, persons owning 10% or more of any class of equity securities, or to our affiliates.