Equibles

8-K/A

Tvardi Therapeutics, Inc. (TVRD)

8-K/A 2025-05-13 For: 2025-04-15
View Original
Added on April 09, 2026

UNITED STATES

SECURITIES AND

EXCHANGE COMMISSION

Washington, D.C.

20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 OR 15(d) ofThe Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) April 15, 2025

TVARDI

THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware 001-36279 75-3175693
(State or other jurisdiction<br><br>of incorporation) (Commission<br><br>File Number) (IRS Employer<br><br>Identification No.)
3 Sugar Creek Ctr. Blvd.Suite 525Sugar Land, Texas 77478
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (713) 489-8654

N/A

(Former Name or Former Address, if Changed SinceLast Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:

Title of each class TradingSymbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share TVRD The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ¨

Explanatory Note

This Amendment No. 1 on Form 8-K/A (this “Amendment No. 1”) amends the Current Report on Form 8-K filed by Tvardi Therapeutics, Inc. (f/k/a Cara Therapeutics, Inc.) (the “Company”) on April 15, 2025 (the “Original Report”), in which the Company reported, among other events, the completion of the Merger pursuant to which CT Convergence Merger Sub, Inc. merged with and into Tvardi Operating Company, Inc. (f/k/a Tvardi Therapeutics, Inc.) (“Private Tvardi”). This Amendment No. 1 is filed to (i) update Item 2.01 information to reflect Management’s Discussion and Analysis of Financial Condition and Results of Operations of Private Tvardi for the quarter ended March 31, 2025; and (ii) amend the historical financial statements provided under Item 9.01(a) in the Original Report to include the unaudited interim financial statements of Private Tvardi for the quarter ended March 31, 2025. This Amendment No. 1 does not amend any other item of the Original Report or purport to provide an update or a discussion of any developments at the Company subsequent to the filing date of the Original Report.

Capitalized terms used but not defined herein have the meanings given in the Original Report.

Item 2.01. Completion of Acquisition or Dispositionof Assets.

Management’s Disclosure and Analysisof Financial Condition and Results of Operations

The Form 10 information in Item 2.01 of the Original Report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is hereby amended and supplemented by adding the following: “Management’s Discussion and Analysis of Financial Condition and Results of Operations for Tvardi for the quarter ended March 31, 2025 is set forth in Exhibit 99.7 to this Amendment No. 1, which is incorporated herein by reference.”

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statementsof Business Acquired

The unaudited financial statements of Private Tvardi for the quarter ended March 31, 2025 are filed as Exhibit 99.6 to this Amendment No. 1 and are incorporated herein by reference.

(d) Exhibits

Exhibit No. Description
99.6 Condensed Financial Statements of Tvardi Therapeutics, Inc. for the quarter ended March 31, 2025 (Unaudited).
99.7 Management’s Discussion and Analysis of Financial Condition and Results of Operations for Private Tvardi for the quarter ended March 31, 2025.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document). 
1

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TVARDI THERAPEUTICS, INC.
Date: May 13, 2025 By: /s/<br> Imran Alibhai
Name: Imran Alibhai
Title: Chief Executive Officer 
2

Exhibit 99.6

Tvardi Therapeutics, Inc.

INDEX TO CONDENSED FINANCIALSTATEMENTS (UNAUDITED)

Page
Condensed balance sheets as of March 31, 2025 and December 31, 2024 F-2
Condensed statements of operations and comprehensive loss for the three months ended March 31, 2025 and 2024 F-3
Condensed statements of redeemable convertible preferred stock and stockholders’ deficit for the three months ended March 31, 2025 and 2024 F-4
Condensed statements of cash flows for the three months ended March 31, 2025 and 2024 F-5
Notes to condensed financial statements F-6

Tvardi Therapeutics, Inc.

Condensed Balance Sheets

(Unaudited, amounts in thousands,except share and per share amounts)

As of December 31,
2024
Assets
Current assets:
Cash and cash equivalents 11,439 $ 31,614
Short-term investments 10,871 -
Prepaid expenses and other current assets 1,148 72
Total current assets 23,458 31,686
Property and equipment, net 76 84
Intangible assets, net 369 385
Operating lease right-of-use assets 199 216
Deferred offering costs 3,690 2,811
Other non-current assets 17 17
Total assets 27,809 $ 35,199
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders' Deficit
Current liabilities:
Accounts payable 1,686 2,186
Accrued expenses 5,206 8,078
Operating lease liabilities, current portion 106 103
Total current liabilities 6,998 10,367
Operating lease liabilities, net of current portion 174 201
Convertible Notes 35,759 30,259
Total liabilities 42,931 40,827
Commitments and contingencies (Note 14)
Redeemable convertible preferred stock (Series A, B), 0.001 par value; 29,723,540 shares authorized as of March 31, 2025 and December 31, 2024; 29,555,538 shares issued and outstanding as of March 31, 2025 and December 31, 2024; aggregate liquidation preference of 85,902 as of March 31, 2025 and December 31, 2024 85,503 85,503
Stockholders' Deficit:
Common stock, 0.001 par value; 58,251,629 shares authorized as of March 31, 2025 and December 31, 2024; 19,203,330 and 19,197,914 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 19 19
Additional paid-in capital 1,169 1,086
Accumulated other comprehensive income 2 -
Accumulated deficit (101,815 ) (92,236 )
Total stockholders' deficit (100,625 ) (91,131 )
Total liabilities, redeemable convertible preferred stock, and stockholders' deficit 27,809 $ 35,199

All values are in US Dollars.

The accompanying notes are an integral part of these condensed financial statements.

F-2

Tvardi Therapeutics, Inc.

Condensed Statements of Operationsand Comprehensive Loss

(Unaudited, amounts in thousands,except share and per share amounts)

For the Three Months Ended March 31,
2025 2024
Operating expenses:
Research and development $ 3,111 $ 3,721
General and administrative 1,243 727
Total operating expenses 4,354 4,448
Loss from operations (4,354 ) (4,448 )
Interest income 275 246
Other expense (5,500 ) -
Net loss $ (9,579 ) $ (4,202 )
Net loss per share attributable to common stockholders, basic and diluted $ (0.50 ) $ (0.22 )
Weighted-average common shares outstanding, basic and diluted 19,203,089 19,181,898
Comprehensive loss:
Net loss $ (9,579 ) $ (4,202 )
Unrealized gain on short-term investments 2 -
Comprehensive loss $ (9,577 ) $ (4,202 )

The accompanying notes are an integral part of these condensed financial statements.

F-3

Tvardi Therapeutics, Inc.

Condensed Statements of RedeemableConvertible Preferred Stock and Stockholders’ Deficit

(Unaudited, amounts in thousands,except share amounts)

Redeemable<br> Convertible<br><br> Preferred Stock Common<br> Stock Additional<br><br><br> Paid-In Accumulated Accumulated<br><br> Other<br><br> <br>Comprehensive Total<br> Stockholders'
Shares Amount Shares Amount Capital Deficit Income Deficit
Balances as<br> of December 31, 2024 29,555,538 $ 85,503 19,197,914 $ 19 $ 1,086 $ (92,236 ) $ - $ (91,131 )
Exercise of stock options - - 5,416 - 3 - - 3
Stock-based<br> compensation - - - - 80 - - 80
Unrealized<br> gain on short-term investments - - - - - - 2 2
Net loss - - - - - (9,579 ) - (9,579 )
Balances as of March 31,<br> 2025 29,555,538 $ 85,503 19,203,330 $ 19 $ 1,169 $ (101,815 ) $ 2 $ (100,625 )
Balances as of December<br> 31, 2023 29,555,538 $ 85,503 19,134,164 $ 19 $ 762 $ (62,839 ) $ - $ (62,058 )
Exercise of stock options - - 63,750 - 5 - - 5
Stock-based<br> compensation - - - - 81 - - 81
Net loss - - - - - (4,202 ) - (4,202 )
Balances as of March 31,<br> 2024 29,555,538 $ 85,503 19,197,914 $ 19 $ 848 $ (67,041 ) $ - $ (66,174 )

The accompanying notes are an integral part of these condensed financial statements.

F-4

Tvardi Therapeutics, Inc.

Condensed Statements of CashFlows

(Unaudited, amounts in thousands)

For the Three Months Ended March 31,
2025 2024
Cash flows from operating activities:
Net loss $ (9,579 ) $ (4,202 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense 24 24
Stock-based compensation expense 80 81
Change in fair value of Convertible Notes 4,942 -
Non-cash lease expense 17 14
Accretion of discounts on short-term investments (71 ) -
Interest accrued on Convertible Notes 558 -
Changes in operating assets and liabilities:
Prepaid expenses and other assets (992 ) 224
Accounts payable and accrued expenses (2,644 ) (257 )
Operating lease liabilities (24 ) (22 )
Net cash used in operating activities (7,689 ) (4,138 )
Cash flows from investing activities:
Purchases of short-term investments (16,377 ) -
Maturities of short-term investments 5,494 -
Net cash used in investing activities (10,883 ) -
Cash flows from financing activities:
Proceeds from exercise of stock options 3 5
Payments of deferred offering costs (1,606 ) -
Net cash (used in) provided by financing activities (1,603 ) 5
Net decrease in cash and cash equivalents (20,175 ) (4,133 )
Cash and cash equivalents - beginning of period 31,614 22,919
Cash and cash equivalents - end of period $ 11,439 $ 18,786
Non-cash investing and financing activities
Deferred offering costs included in accounts payable and accrued expenses $ 781 $ -

The accompanying notes are an integral part of these condensed financial statements.

F-5

Tvardi Therapeutics, Inc.

Notes to Condensed FinancialStatements (Unaudited)

1. Nature of the Business and Basis of Presentation

Tvardi Therapeutics, Inc., Tvardi or the Company, incorporated on December 20, 2017, is a Delaware corporation headquartered in Houston, Texas. The Company is a clinical-stage biopharmaceutical company focused on the development of novel, oral, small molecule therapies targeting STAT3 to treat fibrosis-driven diseases with significant unmet need. Based upon its founder’s seminal work and deep understanding of the transcription factor STAT3, the Company has designed an innovative approach to directly inhibit STAT3, a highly validated, yet historically undruggable target. Leveraging this expertise, the Company is developing a pipeline of STAT3 inhibitors with a differentiated mechanism of action and convenient oral dosing. The Company’s lead product candidate, TTI-101, is currently in Phase 2 clinical development for the treatment of fibrosis-driven diseases, with an initial focus on idiopathic pulmonary fibrosis (IPF) and hepatocellular carcinoma (HCC). Tvardi’s second product candidate, TTI-109, is also an oral, small molecule STAT3 inhibitor that is structurally related to, yet chemically distinct from, TTI-101 and is designed to enhance Tvardi’s ability to target STAT3.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, successful development of TTI-101 and TTI-109, the development of new technological innovations by competitors, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations and the ability to secure additional capital to fund operations and commercial success of TTI-101 and TTI-109. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be maintained, that any therapeutic products developed will obtain required regulatory approval or that any approved or consumer products will be commercially viable. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will generate significant product sales.

Additionally, the Company is subject to risks and uncertainties as a result of global business, political and macroeconomic events and conditions, including increasing financial market volatility and uncertainty, inflation, interest rate fluctuations, uncertainty with respect to the federal budget and debt ceiling and potential government shutdowns related thereto, potential instability in the global banking system, cybersecurity events, the impact of war or military conflict, including regional conflicts around the world, and public health pandemics. The extent to which business, political and macroeconomic factors, including increasing financial market volatility and uncertainty, will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

Merger

On December 17, 2024 the Company entered into an agreement and plan of merger and reorganization (the Merger Agreement) with Cara Therapeutics, Inc. (Cara), and CT Convergence Merger Sub, Inc., a wholly-owned subsidiary of Cara (Merger Sub), pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly-owned subsidiary of Cara (such transaction, the Merger). As further discussed in Note 19, Subsequent Events, the Merger closed on April 15, 2025.

Liquidity and Going Concern

The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

As of March 31, 2025, the Company had cash and cash equivalents and short-term investments of $11.4 million and $10.9 million, respectively. Additionally, the Company consummated its Merger with Cara in April 2025, through which it received approximately $23.8 million in cash and cash equivalents (As further discussed in Note 19, Subsequent Events). Since inception, the Company has incurred net operating losses and negative cash flows from operations. During the three months ended March 31, 2025, the Company incurred a net loss of $9.6 million and used $7.7 million of cash in operating activities. As of March 31, 2025, the Company had an accumulated deficit of $101.8 million. The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. Losses are expected to continue as the Company continues to invest in research and development activities. The assessment of the Company’s ability to meet its future obligations is inherently judgmental, subjective and susceptible to change. Given the inherent uncertainties in the forecast, the Company considered both quantitative and qualitative factors that are known or reasonably knowable as of the date that these condensed financial statements are issued and concluded that there are conditions present in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern.

F-6

To date, the Company has no products approved for marketing and sale and it has not yet recorded any revenue from product sales. The Company’s ability to achieve profitability is dependent on its ability to successfully develop its lead compound, conduct clinical trials, obtain regulatory approvals, and support commercialization activities for its product candidates. Any products developed will require approval of the U.S. Food and Drug Administration, or the FDA, or a foreign regulatory authority prior to commercial sale.

Since inception, the Company has relied primarily on sales of redeemable convertible preferred stock and issuance of convertible debt to fund its operations. The Company’s product candidates are still in the early stages of development, and substantial additional financing will be needed by the Company to fund its operations and ongoing research and development efforts prior to the commercialization of its product candidates.

Significant additional funding is necessary to maintain current operations and to advance the Company’s research and development activities. The Company plans to seek additional funding through equity offerings or debt financings, credit or loan facilities, and strategic alliances and licensing arrangements. The Company’s ability to access capital when and in the amount needed is not assured. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

The accompanying condensed financial statements do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

Basis of Presentation

The accompanying condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The accompanying financial statements represent the accounts of the Company. The Company does not maintain ownership in any subsidiaries and therefore does not consolidate any other entities within the presented condensed financial statements.

The condensed financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position of the Company as of March 31, 2025, and results of operations and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for the full year ending December 31, 2025.

2. Summary of Significant Accounting Policies

Other than policies noted below, there have been no significant changes from the significant accounting policies and estimates disclosed in Note 2 of the “Notes to financial statements” in the Company’s audited annual financial statements as of and for the years ended December 31, 2024 and 2023, as filed as Exhibit 99.1 to Cara’s Current Report on Form 8-K, which was filed with the SEC on April 1, 2025.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses as of and during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those estimates. Significant estimates and assumptions reflected within these financial statements include, but are not limited to, prepaid and accrued research and development expenses, including those related to contract research organizations, or CROs, contract development manufacturing organizations, or CDMOs, and other third-party vendors, and the valuation of the Company’s common stock, stock- based awards, and Convertible Notes. Changes in estimates are recorded in the period in which they become known.

F-7

Concentration of Credit Risk and ofSignificant Suppliers

The Company’s cash and cash equivalents represent potential concentrations of credit risk. The Company deposits its cash and cash equivalents in financial institutions in amounts that may exceed federally insured limits, has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The following table presents information about the Company’s significant suppliers:

For the Three Months Ended March 31, As of March 31, As of December 31,
2025 2024 2025 2024
% of operating expenses % of accounts payable
Vendor A 34 % 50 % 49 % 43 %
Vendor B 1 % 3 % 2 % 2 %
Vendor C 9 % 5 % 4 % 8 %
Vendor D 2 % - 11 % -
46 % 58 % 66 % 53 %

The Company’s preclinical studies and clinical trials and testing could be adversely affected by a significant interruption in the supply chain from its significant suppliers.

Cash and Cash Equivalents

The Company considers all highly liquid investments, with an original maturity of three months or less, to be cash equivalents. Cash equivalents include amounts held in money market funds in the amount of $10.7 million and $31.3 million as of March 31, 2025 and December 31, 2024, respectively.

The Company recorded interest income on its cash equivalents of $0.2 million and $0.2 million for the three months ended March 31, 2025 and 2024, respectively, on its statements on operations and comprehensive loss.

Short-term Investments

The Company invests excess cash in short-term investments with high credit ratings. These securities consist primarily of U.S. Treasury Notes that are classified as “available-for-sale.” The Company classifies any investments as short-term if the maturity date is less than or equal to one year from the balance sheet date or as long-term if the maturity date is in excess of one year from the balance sheet date.

The Company’s short-term investments are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income in stockholders’ deficit. Realized gains and losses and declines in fair value due to credit-related factors are based on the specific identification method and would be included within the non-operating section of the condensed statements of operations and comprehensive loss, as needed. The Company recorded interest income on short-term investments, inclusive of accretion of its discounts on its short-term investments, of $0.1 million during the three months ended March 31, 2025, which is classified as interest income in the condensed statements of operations and comprehensive loss. There was no interest income on short-term investments for the three months ended March 31, 2024.

At each balance sheet date, the Company assesses available-for-sale debt securities in an unrealized loss position to determine whether the unrealized loss or any potential credit losses should be recognized within the non-operating section of the condensed statement of operations and comprehensive loss. The Company evaluates whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. The credit-related portion of unrealized losses, and any subsequent improvements, would be recorded in the condensed statement of operations and comprehensive loss accordingly. The portion that is not credit-related is treated in accordance with other unrealized losses as a component of accumulated other comprehensive income in stockholders’ deficit. There have been no impairment or credit losses recognized during any of the periods presented.

F-8

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the proceeds from the offering, either as a reduction of the carrying value of the preferred stock or in stockholders’ deficit as a reduction of additional paid-in-capital generated as a result of the offering. The Company recorded deferred offering costs of $3.7 million and $2.8 million as of March 31, 2025 and December 31, 2024, respectively.

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources, including unrealized gains and losses on short-term investments held as available-for-sale. For the three months ended March 31, 2025, comprehensive loss includes net loss, partially offset by a net unrealized gain on short-term investments. There was no difference between net loss and comprehensive loss for the three months ended March 31, 2024.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU 2023-07. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The Company adopted the guidance in the fiscal year beginning January 1, 2024. There was no impact on the Company’s reportable segments identified and additional required disclosures have been included in Note 17, Segment Reporting.

Recently Issued Accounting PronouncementsNot Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires public business entities to disclose additional information in specified categories with respect to the reconciliation of the effective tax rate to the statutory rate (the rate reconciliation) for federal, state, and foreign income taxes. It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold (if the effect of those reconciling items is equal to or greater than 5% of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). In addition to new disclosures associated with the rate reconciliation, ASU 2023-09 requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The amendments are effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted. As of March 31, 2025, the Company has not yet adopted this new ASU however the Company expects no impact to its operations, cash flows, financial condition, or any related disclosures, upon adoption.

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense DisaggregationDisclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included in the statement of operations. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the provisions of this guidance and the potential impact on its financial statements and disclosures.

F-9
3. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):

Fair Value Measurements as of
March 31, 2025
Level 1 Level 2 Level 3 Total
Financial assets:
Cash equivalents:
Money market funds $ 10,708 $ - $ - $ 10,708
Short-term investments:
U.S. Treasury Notes 10,871 - - 10,871
Total financial assets $ 21,579 $ - $ - $ 21,579
Financial liabilities:
Convertible Notes $ - $ - $ 35,759 $ 35,759
Total financial liabilities $ - $ - $ 35,759 $ 35,759
Fair Value Measurements as of
--- --- --- --- --- --- --- --- ---
December 31, 2024
Level 1 Level 2 Level 3 Total
Financial assets:
Cash equivalents:
Money market funds $ 31,303 $ - $ - $ 31,303
Total financial assets $ 31,303 $ - $ - $ 31,303
Financial liabilities:
Convertible Notes $ - $ - $ 30,259 $ 30,259
Total financial liabilities $ - $ - $ 30,259 $ 30,259

There were no transfers between Levels during the periods presented.

The unrealized gain on the Company’s short-term investments for the three months ended March 31, 2025 was not material.

The following table presents the changes in the fair value of the Level 3 Convertible Notes (in thousands):

Amounts
Balance as of December 31, 2024 $ 30,259
Interest accrued during the three months ended March 31, 2025 558
Change in fair value of the Convertible Notes 4,942
Balance as of March 31, 2025 $ 35,759

Valuation of Convertible Notes

In December 2024, the Company issued and sold Convertible Notes (as defined in Note 8, Convertible Notes) in an aggregate principal amount of $28.3 million. The fair value of the Convertible Notes as of March 31, 2025 and December 31, 2024 was estimated based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy. The Convertible Notes were valued using a scenario-based valuation analysis requiring a probability of inputs including the probability of occurrence of events that would trigger conversion of the Convertible Notes and the expected timing of such events.

F-10

The following table presents the assumptions, estimates, and contractual features incorporated into the valuation of the Convertible Notes as of March 31, 2025 and December 31, 2024:

As of March 31, As of December 31,
2025 2024
Time to Qualified/non-Qualified financing (in years) 0.08 0.25
Time to IPO (in years) n/a 0.25
Time to reverse merger (in years) 0.04 0.33
Time to dissolution (in years) n/a n/a
Interest rate (risk-free) 4.38% 4.37%
Conversion discount rate 20.00% 20.00%

In addition to the inputs in the table, the Company’s assumptions and estimates incorporated into the valuation included probabilities assigned to each of the scenarios above, including a Qualified/non-Qualified financing (as defined in Note 8, Convertible Notes), IPO, reverse merger, and dissolution. Refer to Note 8, Convertible Notes, for further details surrounding the Qualified/non-Qualified Financing, IPO, reverse merger, and other settlement scenarios.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of March 31, 2025 and December 31, 2024 (in thousands):

As of March 31, As of December 31,
2025 2024
Prepaid research and development expenses $ 1,113 $ 18
Other prepaid expenses 35 54
Total prepaid expenses and other current assets $ 1,148 $ 72
5. Intangible Assets
--- ---

Intangible assets consisted of the following as of March 31, 2025 and December 31, 2024 (in thousands):

As of March 31, As of December 31,
2025 2024
Licensed patent rights $ 826 $ 826
Less: accumulated amortization (457 ) (441 )
Total intangible assets, net $ 369 $ 385

As of March 31, 2025, the expected remaining amortization expense is as follows (in thousands):

Year Ended December 31, Amount
2025 (remaining nine months) $ 47
2026 63
2027 63
2028 63
2029 63
Thereafter 70
Total $ 369

The Company recognized less than $0.1 million for amortization expense for each of the three months ended March 31, 2025 and 2024. Amortization expense is included in research and development expense in the condensed statements of operations and comprehensive loss.

F-11
6. Accrued Expenses

Accrued expenses consisted of the following as of March 31, 2025 and December 31, 2024 (in thousands):

As of March 31, As of December 31,
2025 2024
Accrued research and development expenses $ 4,037 $ 5,172
Accrued employee compensation and benefits 551 1,142
Accrued professional fees 607 1,756
Other accrued expenses 11 8
Total accrued expenses $ 5,206 $ 8,078
7. Leases
--- ---

The Company has one operating lease pertaining to 5,969 square feet of corporate office space in Sugar Land, Texas pursuant to a lease agreement that commenced April 1, 2022. As of March 31, 2025 the remaining term of lease was 2.33 years. The lease requires monthly lease payments that are subject to annual increases throughout the lease term.

The components of lease costs, which are included within general and administrative expenses in the Company’s condensed statements of operations and comprehensive loss were as follows (in thousands):

For the Three Months Ended March 31,
2025 2024
Lease costs:
Operating lease cost $ 24 $ 22
Variable lease cost 22 21
Total lease costs $ 46 43

Supplemental disclosure of cash flow information related to the lease were as follows (in thousands):

For the Three Months Ended March 31,
2025 2024
Operating cash flows from operating leases $ 50 $ 49

The weighted-average discount rate and remaining lease term were as follows:

For the Three Months Ended March 31,
2025 2024
Weighted-average discount rate 9.50 % 9.50 %
Weighted-average remaining lease term 2.33 3.33 
F-12

As of March 31, 2025, the maturities of the Company’s operating lease liabilities were as follows (in thousands):

Year Ended December 31, Amount
2025 (remaining nine months) $ 95
2026 129
2027 88
Total lease payments 312
Less: imputed interest (32 )
Present value of lease liabilities 280
Less: operating lease liabilities, current portion $ 106
Operating lease liabilities, net of current portion $ 174
8. Convertible Notes
--- ---

In December 2024, Tvardi entered into a note purchase agreement to issue and sell convertible notes (the Convertible Notes) in an aggregate principal amount of $28.3 million. The Convertible Notes accrued interest at 8% per annum and had a maturity date of December 31, 2026 (the Maturity Date). As of March 31, 2025, the Company has recorded $0.7 million in accrued interest.

Pursuant to the terms of the note purchase agreement, the Convertible Notes may be converted into shares of common stock or other equity securities upon (i) a Qualified Financing or non-Qualified Financing (both as defined below), (ii) an IPO, or (iii) a reverse merger, as further discussed below.

Conversion upon a Qualified Financing

In the event that the Company issued and sold shares of its equity securities to investors while the Convertible Notes remained outstanding in an equity financing with total proceeds of at least $15.0 million (a Qualified Financing), then the outstanding principal amount of the Convertible Notes and any unpaid accrued interest would have automatically converted into equity securities sold in the Qualified Financing at a conversion price equal to the lesser of (i) the price paid per share of the equity securities by the investors in the Qualified Financing multiplied by 0.8 and (ii) the quotient resulting from dividing $252.0 million by the number of outstanding shares of common stock of the Company immediately prior to the Qualified Financing.

Optional conversion upon a non-QualifiedFinancing

In the event that the Company consummated, while the Convertible Notes remained outstanding, an equity financing pursuant to which it sold shares of the Company’s preferred stock in a transaction that did not constitute a Qualified Financing, the noteholders holding a majority of the outstanding principal amount of the Convertible Notes would have the option to treat such equity financing as a Qualified Financing and thereby cause the Convertible Notes to convert into equity securities pursuant to the terms of the Qualified Financing.

Conversion upon on IPO

In the event that the Company consummated, while the Convertible Notes remained outstanding, an underwritten IPO, then the outstanding principal amount of the Convertible Notes and any unpaid accrued interest would have automatically converted into shares of the Company’s common stock at a conversion price equal to the lesser of (i) 80% of the initial public offering price per share in the IPO and (ii) the price obtained by dividing $300.0 million by the number of outstanding shares of the Company’s common stock immediately prior to the IPO.

Conversion upon a reverse merger

In the event that the Company consummated, while the Convertible Notes remained outstanding, a reverse merger transaction with a public traded company, the primary purposes of which transaction or series of related transactions is the public listing of the Company and pursuant to which the stockholders of the Company prior to such transactions shall beneficially own greater than 50% of the surviving entity or the parent entity, then the outstanding principal amount of the Convertible Notes and any unpaid accrued interest would have automatically converted into common stock of such publicly traded company upon the closing of such reverse merger at a conversion price equal to the lesser of (i) the price obtained by dividing $300.0 million by the number of outstanding shares of common stock of the Company immediately prior to the consummation of the reverse merger or (ii) 80% of the implied valuation of the combined company common stock in the Merger.

F-13

Payout upon a change of control

In the event that the Company consummated a change of control (as defined within the note purchase agreement to be events other than a reverse merger) while the Convertible Notes remained outstanding, the Company would have been obligated to repay the note holders in cash an amount equal to (i) the outstanding principal amount of the Convertible Notes plus any unpaid accrued interest on the original principal, plus (ii) a repayment premium equal to 100% of the outstanding principal amount of the Convertible Notes.

Maturity date conversion

In the event the Convertible Notes remained outstanding on or following the Maturity Date, the noteholders would have the option to elect to have the outstanding principal balance of the Convertible Notes and any unpaid accrued interest thereon convert into shares of the Company’s Series B Preferred Stock at a conversion price per share equal to $3.8095.

The Convertible Notes were recorded at fair value of $28.3 million upon issuance and were remeasured to the fair value of $35.0 million and $30.1 million as of March 31, 2025 and December 31, 2024, respectively. The change in the fair value of the Convertible Notes of $4.9 million was recorded within other expense, on the Company’s condensed statement of operations and comprehensive loss for the three months ended March 31, 2025. For the three months ended March 31, 2025 the Company recognized $0.6 million in interest expense related to the Convertible Notes, which is recorded in other expense on the condensed statement of operations and comprehensive loss. Refer to Note 3, Fair Value Measurements, for a rollforward of the fair value of the Convertible Notes from December 31, 2024 to March 31, 2025.

The future minimum principal payments under the Convertible Notes, if not otherwise converted pursuant to the terms above, as of March 31, 2025 are as follows (in thousands):

Year Ended December 31, Principal Payments
2025 (remaining nine months) $ -
2026 28,298
Thereafter -
Total $ 28,298

Subsequent events

As further discussed in Note 19, Subsequent Events, the Company completed its Merger with Cara in April 2025. Upon the closing of the Merger, the Convertible Notes converted into 1,265,757 shares of common stock of Cara, $0.001 par value per share (Cara common stock), pursuant to the terms described within the “Conversion upon a reverse merger” scenario above.

9. Redeemable Convertible Preferred Stock

The Company issued Series A preferred stock and Series B preferred stock, which are collectively referred to as the Preferred Stock. As of March 31, 2025 and December 31, 2024, the Company authorized the issuance of 29,723,540 shares of Preferred Stock, par value of $0.001 per share, of which 9,499,999 have been designated Series A preferred stock and 20,223,541 have been designated Series B preferred stock.

Series A Preferred Stock

During 2018, the Company entered into the Series A preferred stock purchase agreements for 8,550,340 shares of Series A preferred stock with par value of $0.001 each at a price $1.00 per share, or the Series A Original Issue Price, with a group of investors for net proceeds of $8.4 million, or the Series A Financing. In addition, in connection with the closing of the Series A Financing, then outstanding convertible promissory notes of $0.4 million were converted into 449,659 shares of Series A preferred stock at the Series A Original Issue Price paid by the Series A Financing investors.

F-14

Series B Preferred Stock

In June 2021, the Company entered into the Series B preferred stock purchase agreements for 17,452,411 shares of Series B preferred stock with par value of $0.001 each at a price $3.8095 per share, or the Series B Original Issue Price, with a group of investors for net proceeds of $66.3 million, or the Series B Financing. In addition, in connection with the closing of the Series B Financing, (i) then outstanding convertible promissory notes of $7.9 million were converted into 2,603,128 shares of Series B preferred stock at 80% of the Series B Original Issue Price paid by the Series B Financing investors and (ii) a then outstanding translational research grant of $0.5 million was converted into 500,000 shares of Series A preferred stock at a conversion price of $1.00 per share pursuant to the terms of grant agreement, dated as of March 2018.

The following tables summarize the Company’s redeemable convertible preferred stock as of March 31, 2025 and December 31, 2024 (in thousands except share and per share amounts):

Preferred Stock Common Stock
Preferred Stock Issued and Carrying Liquidation Issuable Upon
Par Value Authorized Outstanding Value Preference Conversion
Series A preferred stock $ 0.001 9,499,999 9,499,999 $ 9,327 $ 9,500 9,499,999
Series B preferred stock 0.001 20,223,541 20,055,539 76,176 76,402 20,055,539
29,723,540 29,555,538 $ 85,503 $ 85,902 29,555,538

The key terms of Preferred Stock are as follows:

Dividends

The Company would not have declared, paid or set aside any dividends on shares or any other class or series of capital stock (other than dividends on shares of the Company’s common stock payable in shares of common stock) unless first the holders of Series B preferred stock would have first received, or simultaneously received, a dividend on each outstanding preferred stock, and second, the holders of the Series A preferred stock would have next received, or simultaneously received a dividend on each outstanding preferred stock. If the Company declared, paid or set aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Company, the dividend payable to the holders of Preferred Stock would have been calculated based upon the dividend on the class or series of capital stock that would have resulted in the highest dividend. There have been no dividends declared by the Company’s board of directors, or the Board, as of March 31, 2025 and December 31, 2024.

Voting Rights

The holder of each share of Series A and Series B preferred stock would have had the right to one vote for each share of common stock into which such Series A and Series B preferred stock could have then been converted.

Right to Elect Directors

Holders of Series A preferred stock would have been entitled to elect two directors of the Company. The holders of Series B preferred stock would have been entitled to elect one director of the Company. The holders of the Company’s common stock would have been entitled to elect one director of the Company. The holders of Preferred Stock and Common Stock (voting together as a single class and not as separate series and on as-converted basis) would have been entitled to elect any remaining director of the Company.

Conversion

Each share of Preferred Stock would have been convertible at the option of the holder, at any time, and without the payment of additional consideration by the holder. In addition, each share of Preferred Stock would have automatically converted into shares of common stock at the applicable conversion ratio then in effect upon either (i) the closing of a firm-commitment underwritten public offering of the Company’s common stock at a price of at least $5.7143 per share resulting in at least $50.0 million of gross proceeds to the Company, or (ii) the vote or written consent of the holders of a majority of the outstanding shares of Preferred Stock, voting as a single class.

The conversion ratio of Series A and Series B preferred stock would have been determined by dividing the respective original issue price by the applicable conversion price in effect at the time of conversion. The conversion price would have been $1.00 and $3.8095 per share for Series A and Series B preferred stock, respectively. As of March 31, 2025 and December 31, 2024, each outstanding share of Preferred Stock would have been convertible into the Company’s common stock on a one-for-one basis.

F-15

Liquidation

In the event of liquidation, dissolution, or winding up of the Company or upon the occurrence of a Deemed Liquidation Event (as defined below), the holders of Series B preferred stock then outstanding would have been entitled to distribution of the Company’s assets or funds, before the holders of Series A preferred stock and common stock, in an amount per share equal to the greater of (i) the Series B Original Issue Price ($3.8095 per share), plus any dividends declared but unpaid, or (ii) the amount per share that would have been payable had all shares of Series B preferred stock been converted to common stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If the assets of the Company would have been insufficient to pay holders of the Series B preferred stock the full amount to which they would have been entitled, they would have been paid ratably in proportion to the respective amounts they would have received had they been paid in full.

In the event of liquidation, dissolution, or winding up, after the Series B preferred stock holders would have been paid in full, the holders of Series A preferred stock would have been entitled to distribution of the Company’s assets or funds, before the common stock, in amount per share equal to the greater of (i) the Series A Original Issue Price ($1.00 per share), plus any dividends declared but unpaid, or (ii) the amount per share that would have been payable had all shares of Series A preferred stock been converted to common stock immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If the assets or funds of the Company would have been insufficient to pay holders of the Series A preferred stock the full amount to which they would have been entitled, they would have been paid ratably in proportion to the respective amounts they would have received had they been paid in full. After payment of all preferential amounts to Series A preferred stock holders, the remaining assets available for distribution would have been distributed to the holders of common stock pro rata based on the number of shares held.

Unless the holders of a majority in voting power of the then outstanding shares of Series B preferred stock elected otherwise, a Deemed Liquidation Event would have included a merger or consolidation (other than one in which stockholders of the Company owned a majority by voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposal of all or substantially all of the Company’s assets.

Redemption

The holders of the Company’s Preferred Stock would have had no voluntary rights to redeem shares. Upon the occurrence of a Deemed Liquidation Event that would have been outside of the Company’s control, the holders of the Preferred Stock may have caused redemption of the Preferred Stock. Accordingly, the Preferred Stock would have been considered contingently redeemable and as such is classified as temporary equity on the accompanying balance sheets.

Subsequent Events

As further discussed in Note 19, Subsequent Events, the Company completed its Merger with Cara in April 2025. Upon the closing of the Merger, the Company’s Preferred Stock converted into 3,963,910 shares of Cara common stock.

10. Common Stock

As of March 31, 2025 and December 31, 2024, the Company’s amended and restated certificate of incorporation authorized the issuance of 58,251,629 shares of $0.001 par value common stock. The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth above. As of March 31, 2025 and December 31, 2024, there were 19,203,330 shares and 19,197,914 shares of common stock issued and outstanding, respectively.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the Board, if any, subject to the preferential dividend rights of the Preferred Stock. When dividends are declared on shares of common stock, the Company must declare at the same time a dividend payable to the holders of Preferred Stock equivalent to the dividend amount they would receive if each share of Preferred Stock were converted into common stock. The Company may not pay dividends to common stockholders until all dividends accrued or declared but unpaid on the Preferred Stock have been paid in full. As of March 31, 2025 and December 31, 2024, no dividends were declared.

F-16

As of March 31, 2025 and December 31, 2024, the Company had reserved 36,009,537 and 36,014,953 shares of common stock, respectively, for the conversion of outstanding shares of Preferred Stock (see Note 9, Redeemable Convertible Preferred Stock), the exercise of outstanding stock options, and the issuance of stock options remaining available for grant under the Company’s 2018 Stock Incentive Plan (see Note 11, Stock-based compensation).

Subsequent Events

As further discussed in Note 19, Subsequent Events, the Company completed its Merger with Cara in April 2025. Upon the closing of the Merger, the Company’s common stock converted into 2,575,494 shares of Cara common stock.

11. Stock-based Compensation

Stock Incentive Plan

In March 2018, the Company established the 2018 Stock Incentive Plan, or the 2018 Plan, under which the Company may grant incentive stock options, non-statutory options, stock appreciation rights, awards of restricted stock, restricted stock units and other stock-based awards, collectively referred to as the Awards. Employees, officers, directors, consultants and advisors are eligible to receive awards under the 2018 Plan; however incentive stock options may only be granted to employees.

As of March 31, 2025 and December 31, 2024, the total number of shares of common stock reserved for issuance under the 2018 Plan was 6,657,329 shares. Shares of unused common stock underlying any Awards that are forfeited, canceled or reacquired by the Company prior to vesting will again be available for the grant of Awards under the 2018 Plan. Shares underlying any Awards that are forfeited, canceled, or reacquired by the Company prior to vesting, satisfied without the issuance of stock or otherwise terminated and shares that are withheld upon exercise of an option of settlement of an award to cover the exercise price or tax withholding shall be added back to the shares available for issuance under the 2018 Plan. As of March 31, 2025 and December 31, 2024, the Company had 1,038,786 shares and 1,023,786 shares, respectively, remaining available for grant under the 2018 Plan.

The 2018 Plan is administered by the Board. The Board determines the exercise prices for stock options, which may not be less than 100% of the fair market value of the Company’s common stock on the date of grant, vesting terms, and other restrictions. The Board also determines the fair value the Company’s common stock, taking into consideration its most recently available valuation of common stock performed by third parties as well as additional factors which may have changed since the date of the most recent contemporaneous valuation through the date of grant. Stock options granted under the 2018 Plan expire ten years after the grant date, unless the Board sets a shorter term, and typically vest over four years.

Subsequent events

As further discussed in Note 19, Subsequent Events, the Company completed its Merger with Cara in April 2025. Upon closing of the Merger, the Company’s 2025 Equity Incentive Plan (the 2025 Plan) and 2025 Employee Stock Purchase Plan (the 2025 ESPP), both approved during a special meeting of Cara’s stockholders on April 1, 2025, also became effective.

Fair Value Inputs

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model.The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected option term is calculated based on the simplified method for awards with service-based conditions, which uses the midpoint between the vesting date and the contractual term, as the Company does not have sufficient historical data to develop an estimate based on participant behavior. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

F-17

The following table presents, on a weighted-average basis, the assumptions used in the Black-Scholes option-pricing model to determine the fair value of stock options granted:

For the Three Months
Ended March 31,
2024
Per share fair value of common stock $ 0.62
Expected volatility 73.8 %
Expected dividends 0 %
Expected term (in years) 5.9
Risk-free rate 3.93 %

There were no options granted during the three months ended March 31, 2025.

Stock Options

The following table summarizes option activity during the three months ended March 31, 2025:

Weighted- Weighted-Average
Number of Average Exercise Remaining Contractual Intrinsic Value (In
Options Price Term (In Years) Thousands)
Outstanding as of January 1, 2025 5,435,629 $ 0.43 6.06 $ 2,914
Exercised (5,416 ) 0.63
Forfeited/expired (15,000 ) 0.09
Outstanding as of March 31, 2025 5,415,213 $ 0.43 5.82 $ 2,899
Options exercisable as of March 31, 2025 4,775,534 $ 0.39 5.61 $ 2,747
Vested and expected to vest as of March 31, 2025 5,415,213 $ 0.43 5.82 $ 2,899

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised during each of the three months ended March 31, 2025 and 2024 was less than $0.1 million.

The following table illustrates the classification of stock-based compensation in the condensed statements of operations and comprehensive loss (in thousands):

For the Three Months Ended March 31,
2025 2024
Research and development $ 29 $ 29
General and administrative 51 52
Total stock-based compensation $ 80 $ 81

As of March 31, 2025, there was $0.3 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 1.25 years.

12. Income Taxes

For the three months ended March 31, 2025 and 2024, there was no current or deferred income tax expense or benefit due to the Company’s current year losses and full valuation allowance. As of March 31, 2025, the Company evaluated all available evidence and concluded that a valuation allowance is still required against its net deferred tax assets because it is more likely than not they will not be realized in the foreseeable future.

F-18

13. Net Loss Per Share

Basis and diluted net loss per share attributable to common stockholders was calculated as follows (dollar amounts in thousands):

For the Three Months Ended March 31,
2025 2024
Numerator:
Net loss attributable to common stockholders $ (9,579 ) $ (4,202 )
Denominator:
Weighted-average common shares outstanding, basic and diluted 19,203,089 19,181,898
Net loss per share attributable to common stockholders, basic and diluted $ (0.50 ) $ (0.22 )

The Company’s potentially dilutive securities, which include stock options to purchase common stock and Preferred Stock, have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The following potentially dilutive securities have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

For the Three Months Ended March 31,
2025 2024
Preferred stock (as converted to common stock) 29,555,538 29,555,538
Stock options to purchase common stock 5,415,213 5,455,629

The Company’s Convertible Notes are also potentially dilutive securities, with the amount of shares issued upon conversion to be determined based on the manner in which they are settled. As further discussed in Note 19, Subsequent Events, the Company’s Convertible Notes converted into 1,265,757 shares of Cara common stock upon closing of the Merger in April 2025.

In addition, upon the closing of the Merger, the Company’s Preferred Stock converted into 3,693,910 shares of Cara common stock. Refer to Note 19, SubsequentEvents, for further information on the closing of the Merger.

14. Commitment and Contingencies

Legal Matters

The Company is subject to contingent liabilities, such as legal proceedings and claims, that arise in the ordinary course of business activities. The Company accrues for loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability on the balance sheets. The Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but not probable; however, it discloses the range of reasonably possible losses. As of March 31, 2025 and December 31, 2024, the Company was not a party to any material legal proceedings or claims and no liabilities were recorded for loss contingencies.

Contracts

The Company enters into contracts in the normal course of business with various third parties for preclinical research studies, clinical trials, testing, manufacturing, and other services. These contracts generally provide for termination upon notice and are cancellable without significant penalty or payment, and do not contain any minimum purchase commitments.

F-19

Guarantees and Indemnifications

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with all members of the Board that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any claims under indemnification arrangements that could have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its financial statements as of March 31, 2025 and December 31, 2024.

Other Commitments

In addition to our obligation to make potential royalty payments under the BCM First Agreement and BCM Second Agreement (both as discussed and defined in Note 15, License Agreements), the Company is also obligated to pay royalties to each of its founders in an amount equal to 1% each on the worldwide net sales of TTI-101 and any derivative formulations, or any Royalty Bearing Products. These royalty obligations last, on a country-by-country basis, for the later of (i) the date on which the sale of any Royalty Bearing Products are no longer covered by a Covered Patent (as defined below) in such country, or (ii) 15 years after the first commercial sale of royalty bearing product in such country. The timing of when these royalty payments will actually be made is uncertain as the payments are contingent upon future activities, including the successful development, regulatory approval and commercialization of any Royalty Bearing Products. A Covered Patent means, subject to certain customary exceptions, an issued patent that is owned by the Company or an affiliate, or for which all rights to develop and commercialize pharmaceutical products for the treatment of any human disorder, are exclusively licensed to us or an affiliate by the owner of such patent, with the Company’s right or its affiliate’s right to grant sublicenses.

15. License Agreements

In July 2012, Stem Med Limited Partnership, or StemMed, entered into a license agreement, or the BCM First Agreement, with Baylor College of Medicine, or BCM, for the exclusive, worldwide, sublicensable license to certain patents and patent applications related to STAT3 inhibitors in oncology and certain non-oncology indications, or the BCM Patent Rights, which are referred to together with certain cell lines, biological materials, compounds, know-how and technologies as the BCM Technology, in all fields of use. Under the license for the BCM First Agreement, the Company is permitted to make, have made, use, market, sell offer to sell, lease and import products, processes or services that incorporate, utilize, or are made with the use of the BCM Patent Rights or BCM Technology, which is referred to together as the BCM1 Licensed Products, in all fields of use.

In June 2015, StemMed entered into a second license agreement with BCM, or the BCM Second Agreement, which is referred to together with the BCM First Agreement as the BCM License Agreements, for the exclusive, worldwide, sublicensable license to certain patents and patent applications co-owned by BCM and the National Institutes of Health, or NIH, related to methods and compositions for the use of STAT3 inhibitors in certain conditions like anaphylaxis, or the Licensed Patent Rights. Under the license for the Second BCM Agreement, the Company is permitted to make, have made, use, market, sell, offer to sell, lease and import products, processes or services that incorporate, utilize or are made with the use of the Licensed Patent Rights, or the BCM2 Licensed Products, in all fields of use.

StemMed assigned the BCM First Agreement and the BCM Second Agreement to the Company in connection with the transfer of all or substantially all of the assets and businesses to which the BCM License Agreements relate to in January and February 2018.

In accordance with BCM License Agreements, and in consideration for the rights and licenses granted to the Company, the Company agreed to pay BCM the following:

a. Annual maintenance fees, ranging from $30,000 to $50,000 per year, per license.
b. Milestone payments, up to a low-seven digit figure in the aggregate.
--- ---
c. Royalty fees, set at a low-single-digit percentage of net sales of any BSM1 Licensed Products or BSM2 Licensed Products.
--- --- 
F-20

Milestones include new drug filings, clinical trial stages, and New Drug Application approval by the FDA.

As of March 31, 2025, the Company accrued $12,500 in maintenance fees. As of December 31, 2024, the full amount of $50,000 in annual maintenance fees had already been paid and thus no accrual was needed. No payments for maintenance or milestone fees were made during the three months ended March 31, 2025 and 2024. To date, no royalty fees have been incurred. All related license costs are expensed as incurred within research and development on the condensed statements of operations and comprehensive loss.

16. Retirement Savings Plan

The Company maintains a 401(k) Plan which is available to all employees. Under the terms of the 401(k) Plan, participants may elect to contribute up to 80% of their compensation or the statutory prescribed limits. The Company does not make any matching contributions to deferrals made by participants.

17. Segment Reporting

The Company has one reportable segment relating to the discovery and development of novel orally bioavailable, small molecule therapies across a broad range of diseases driven by STAT3 with high unmet need.

The Company’s CODM, its Chief Executive Officer and Chief Financial Officer, manages the Company’s operations on company-wide level for the purposes of allocating resources. The key measure of segment profit or loss that the CODM uses to allocate resources and assess financial performance is the Company’s net loss, which is utilized to evaluate the progress of its research and development programs and other expense categories. The CODM makes decisions using this information on a company-wide basis.

The table below shows a reconciliation of the Company’s net loss, including the significant expense categories regularly provided to and reviewed by the CODM, as computed under GAAP, to the Company’s net loss in the condensed statements of operations and comprehensive loss (in thousands):

For the Three Months Ended March 31,
**** 2025 **** 2024 ****
Direct research and development expenses by program:
TTI-101:
HCC $ 437 $ 1,417
IPF 1,033 616
mBC - 210
Pre-clinical, CMC, and other<br> (unallocated) ^(1)^ 175 356
TTI-109 358 216
Unallocated research and development expense: -
Personnel costs 858 795
Consultant fees and other costs ^(2)^ 250 111
General and administrative expense:
Personnel costs 609 523
Other general and administrative<br> expenses ^(3)^ 634 204
Interest income (275 ) (246 )
Other expense 5,500 -
Net loss $ (9,579 ) $ (4,202 )
^(1)^ Pre-clinical, CMC, and other (unallocated) costs includes pre-clinical testing, CMC, and other direct research and development expenses<br>that are not allocated to a specific program.
--- ---
^(2)^ Consultant fees and other costs includes expenses incurred for research and development consultants as well as payroll costs for employees<br>within the research and development function.
--- ---
^(3)^ Other general and administrative expenses include professional fees, accounting services, rent, and other overhead and administrative<br>expenses.
--- ---

Assets provided to the CODM are consistent with those reported on the balance sheets.

F-21
18. Related-party Transactions

During the three months ended March 31, 2025 and 2024, the Company did not have any transactions with related parties. The Company evaluates transactions with counterparties who may be considered related parties, including owners, members of management or affiliates and then discloses the nature and amounts of those transaction in the notes to its financial statements.

19. Subsequent Events

Management has evaluated all subsequent events through May 13, 2025, which was the date the financial statements were available to be issued. The Company has determined that there are no subsequent events to be reported other than those listed below.

As discussed in Note 1, Descriptionof Business and Basis of Presentation, on April 15, 2025, pursuant to the terms of the Merger Agreement entered into on December 17, 2024, Merger Sub merged with and into the Company, with the Company surviving as a wholly-owned subsidiary of Cara. The Merger will be accounted for as an in-substance reverse recapitalization of Cara by Tvardi. Under this method of accounting, Tvardi will be considered the accounting acquirer for financial reporting purposes.

Upon the closing of the Merger:

· Cara changed its corporate name to Tvardi Therapeutics, Inc.
· the business of the Company continues as the business of the surviving corporation.
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· each outstanding share of common stock of Tvardi (including the shares of common stock issuable upon conversion of all shares of preferred<br>stock of Tvardi prior to the Merger), $0.001 par value per share (Tvardi common stock), was converted into 6,539,404 shares of Cara common<br>stock in the aggregate, based on a ratio calculated in accordance with the Merger Agreement (the Exchange Ratio);
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· The Company received approximately $23.8 million in cash and cash equivalents in accordance with the Merger Agreement.
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· the outstanding Convertible Notes of Tvardi were converted into 1,265,757 shares of Cara common stock, pursuant to the terms of the<br>Convertible Notes.
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· each then outstanding and unexercised option to purchase shares of Tvardi common stock immediately prior to Closing were assumed by<br>Cara and was converted into an option to purchase Cara common stock, with necessary adjustments to the number of shares and exercise price<br>to reflect the Exchange Ratio.
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Immediately following the Merger, stockholders of Tvardi owned approximately 84.5% of the outstanding common stock of the combined company on a fully diluted basis.

In addition, on April 15, 2025, immediately prior to the closing of the Merger, Cara (i) effected a 1-for-3 reverse stock split of its common stock and (ii) increased its authorized shares of common stock to 150,000,000.

Upon the closing of the Merger, the Company’s 2025 Equity Incentive Plan (the 2025 Plan) and 2025 Employee Stock Purchase Plan (the 2025 ESPP), both approved during a special meeting of Cara’s stockholders on April 1, 2025, also became effective, following the reverse stock split.

As of the effective time of the Merger, there were 935,554 and 93,555 shares of the Company’s common stock available for grant under the 2025 Plan and 2025 ESPP, respectively. The number of shares initially reserved and available for issuance under the 2025 Plan may be increased at the discretion of the Company’s board of directors on January 1 of each year for a period of five years, commencing on January 1, 2026 and ending on January 1, 2030, in an amount not to exceed 5% of the total number of shares of the Fully Diluted Common Stock (as defined in the 2025 Plan) determined on December 31 of the preceding year. The number of shares initially reserved for issuance under the 2025 will automatically increase on January 1 of each year for a period of up to ten years, beginning on January 1, 2026 and continuing through and including January 1, 2035, by an amount equal to the lesser of (i)  1% of the total number of shares of the Fully Diluted Common Stock (as defined in the 2025 ESPP) determined on December 31 of the preceding year, and (ii) a number of shares equal to three times the Initial Share Reserve. Notwithstanding the foregoing, the Company’s board of directors may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares.

F-22

Exhibit 99.7

TVARDI MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should readthe following discussion of Tvardi’s financial condition and results of operations in conjunction with Tvardi’s unauditedcondensed financial statements and the related notes filed as Exhibit 99.6 to this Current Report on Form 8-K/A (this Report).In addition to historical financial information, this discussion contains forward-looking statements based upon current expectations thatinvolve risks and uncertainties. Tvardi’s actual results could differ materially from those anticipated in these forward-lookingstatements as a result of various factors. Factors that could cause or contribute to these differences include, but are not limited to,those discussed below and elsewhere in the Company’s Quarterly Report on Form 10-Q, filed with the Securities and ExchangeCommission on May 13, 2025 (the Quarterly Report), particularly in the sections titled “Risk Factors” and “CautionaryNote Regarding Forward-Looking Statements.” Unless otherwise stated or the context otherwise requires, the references to “Tvardi”refer to Tvardi Therapeutics, Inc. prior to the Merger (as defined below), which was named Tvardi Operating Company, Inc. followingthe Merger, references to “Cara” refer to Cara Therapeutics, Inc. prior to the Merger, which was renamed Tvardi Therapeutics, Inc.following the Merger and references to the “Company’ refer to the combined company following the closing of the Merger.

Overview

Tvardi is a clinical-stage biopharmaceutical company focused on the development of novel, oral, small molecule therapies targeting STAT3 to treat fibrosis-driven diseases with significant unmet need. Based upon Tvardi’s founder’s seminal work and deep understanding of the transcription factor STAT3, Tvardi has designed an innovative approach to directly inhibit STAT3, a highly validated, yet historically undruggable target. Leveraging this expertise, Tvardi is developing a pipeline of STAT3 inhibitors with a differentiated mechanism of action and convenient oral dosing. Tvardi’s lead product candidate, TTI-101, is currently in Phase 2 clinical development for the treatment of fibrosis-driven diseases, with an initial focus on idiopathic pulmonary fibrosis (IPF) and hepatocellular carcinoma (HCC). Tvardi expects to report unblinded data from its Phase 2 IPF clinical trial in the second half of 2025 and anticipate preliminary topline data from its Phase 1b/2 HCC clinical trial in the first half of 2026. Tvardi’s second product candidate, TTI-109, is also an oral, small molecule STAT3 inhibitor that is structurally related to, yet chemically distinct from, TTI-101 and is designed to enhance Tvardi’s ability to target STAT3. Tvardi expects to submit an Investigational New Drug (IND) application for TTI-109 in the first half of 2025.

Since commencing operations in 2017, Tvardi has devoted substantially all of its efforts and financial resources to developing its product candidates, organizing and staffing its company, business planning, raising capital, establishing its intellectual property portfolio and performing research and development of its product candidates, signaling and biology, medicinal chemistry and clinical insights to discover and develop novel therapies for the treatment of fibrosis-driven diseases. Through the date of this filing, Tvardi has historically financed its operations principally through the issuance and sale of its preferred stock and convertible debt. As of March 31, 2025, it has received $28.3 million from the sale and issuance of its Convertible Notes (as defined below) in December 2024 and $83.4 million from the issuance and sale of its preferred Stock and historical convertible debt, which was converted into preferred Stock, in 2018 and 2021.

As of March 31, 2025, Tvardi had $11.4 million in cash and cash equivalents and $10.9 million in short-term investments. As further discussed below, in April 2025, Tvardi completed its Merger (as defined below) with Cara, through which Tvardi received approximately $23.8 million in cash and cash equivalents Tvardi has incurred net losses since inception. As of March 31, 2025 and December 31, 2024, its accumulated deficit was $101.8 million and $92.2 million, respectively. For the three months ended March 31, 2025 and 2024, Tvardi reported net losses of $9.6 million and $4.2 million, respectively. Tvardi’s net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of its clinical development activities and other research and development activities. Tvardi expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. Losses are expected to continue as Tvardi continues to invest in research and development activities. The assessment of Tvardi’s ability to meet its future obligations is inherently judgmental, subjective and susceptible to change. Given the inherent uncertainties in the forecast, Tvardi considered both quantitative and qualitative factors that are known or reasonably knowable as of the date that these condensed financial statements are issued and concluded that there are conditions present in the aggregate that raise substantial doubt about Tvardi’s ability to continue as a going concern. Tvardi has based this estimate on assumptions that may prove to be wrong, and it could exhaust its capital resources as of March 31, 2025 sooner than it expects. See the subsection titled “— Liquidity and Capital Resources” below for further discussion.

Tvardi will require additional funding in order to finance operations and complete its ongoing and planned clinical trials. Access to such funding on acceptable terms cannot be assured.

Tvardi expects that its expense and capital requirements will increase substantially in connection with its ongoing activities and for the foreseeable future, particularly if Tvardi, among other things:

· advances TTI-101, TTI-109 and its other product candidates through clinical development and, if successful, later-stage clinical trials;
· discovers and develops additional product candidates;
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· advances its preclinical development programs into clinical development;
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· experiences delays or interruptions to preclinical studies, clinical trials, receipt of services from its third-party service providers<br>on whom it relies, or its supply chain;
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· seeks and maintains regulatory approvals for any product candidates that successfully complete clinical trials;
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· commercializes TTI-101, TTI-109, its other product candidates and any future product candidates, if approved;
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· hires additional clinical development, quality control, scientific and management personnel;
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· expands its operational, financial and management systems and increase personnel, including personnel to support its clinical development<br>and manufacturing efforts and operations as a public company;
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· establishes a sales, marketing, medical affairs and distribution infrastructure to commercialize any products for which Tvardi may<br>obtain marketing approval and intend to commercialize on its own or jointly with third parties;
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· maintains, expands and protects its intellectual property portfolio;
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· invests in or in-licenses other technologies or product candidates;
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· continues to build out its organization to engage in such activities; and
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· incurs additional legal, accounting, investor relations and other general and administrative expenses associated with operating as<br>a public company.
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Given Tvardi’s stage of development, to date it has not had any products approved for sale and has not generated any revenue. Tvardi does not expect to generate any revenues from product sales unless and until it successfully completes development and obtains regulatory approval for one or more of its product candidates, which may not be for several years, if ever. If Tvardi obtains regulatory approval for any of its product candidates, it expects to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, that Tvardi can generate substantial product revenue, it expects to finance its cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, Tvardi may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. If Tvardi does raise additional capital through public or private equity offerings, the ownership interest of its existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect its stockholders’ rights. If Tvardi raises additional capital through debt financing, it may be subject to covenants or other restrictions limiting its ability to engage in specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any failure to raise capital as and when needed could have a negative impact on its financial condition and on its ability to pursue its business plans and strategies, including its research and development activities. If Tvardi is unable to raise capital, Tvardi will need to delay, reduce or terminate planned activities, including its ongoing and planned clinical trials, to reduce costs.

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Additionally, Tvardi is subject to risks and uncertainties as of result of global business, political and macroeconomic events and conditions, including increasing financial market volatility and uncertainty, inflation, interest rate fluctuations, uncertainty with respect to the federal budget and debt ceiling and potential government shutdowns related thereto, potential instability in the global banking system, cybersecurity events, the impact of war or military conflict, including regional conflicts around the world, and public health pandemics. Tvardi’s business, financial condition and results of operations could be materially and adversely affected by further negative impact on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen.

Although, to date, Tvardi’s business has not been materially impacted by these global economic and geopolitical conditions, it is impossible to predict the extent to which its operations will be impacted in the short and long term, or the ways in which such instability could impact its business and results of operations. The extent and duration of these market disruptions, other geopolitical tensions, record inflation, tariffs or otherwise, are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in the Quarterly Report.

Recent Developments

Reverse Merger

On December 17, 2024, Tvardi entered into an agreement and plan of merger and reorganization (the Merger Agreement) with Cara and CT Convergence Merger Sub, Inc., a wholly-owned subsidiary of Cara (Merger Sub), pursuant to which, on April 15 2025, Merger Sub merged with and into Tvardi, with Tvardi surviving as a wholly-owned subsidiary of Cara (the Merger). Upon completion of the Merger, Cara changed its name to Tvardi Therapeutics, Inc., and Tvardi’s business will continue as the business of the combined company.

Pursuant to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the Effective Time):

· each outstanding share of Tvardi’s common stock (including the shares of common stock issuable upon conversion of all shares<br>of Tvardi’s preferred stock prior to the Merger), $0.001 par value per share (Tvardi common stock), converted into 6,539,404 shares<br>of the Company, $0.001 par value per share (Company common stock) in the aggregate, based on a ratio calculated in accordance with the<br>Merger Agreement (the Exchange Ratio);
· Tvardi received approximately $23.8 million in cash and cash equivalents in accordance with the Merger Agreement.
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· Tvardi’s outstanding Convertible Notes converted into 1,265,757 shares of Company common stock, pursuant to the terms of the<br>Convertible Notes (as defined below).
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· all outstanding and unexercised options to purchase shares of Tvardi common stock were assumed by the Company and converted into options<br>to purchase shares of Company common stock based on the Exchange Ratio.
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Immediately following the Merger, equityholders of Tvardi owned approximately 84.5% of the outstanding common stock of the Company on a fully diluted basis.

The Merger will be accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States (U.S. GAAP). Tvardi is deemed to be the accounting acquirer for financial reporting purposes.

In addition, on April 15, 2025, immediately prior to the closing of the Merger, Cara (i) effected a 1-for-3 reverse stock split of its common stock and (ii) increased its authorized shares of common stock to 150,000,000.

3

Upon the closing of the Merger, the Company’s 2025 Equity Incentive Plan (the 2025 Plan) and 2025 Employee Stock Purchase Plan (the 2025 ESPP), both approved during a special meeting of Cara’s stockholders on April 1, 2025, also became effective, following the reverse stock split.

As of the Effective Time, there were 935,554 and 93,555 shares of the Company’s common stock available for grant under the 2025 Plan and 2025 ESPP, respectively. The number of shares initially reserved and available for issuance under the 2025 Plan may be increased at the discretion of the Company’s board of directors on January 1 of each year for a period of five years, commencing on January 1, 2026 and ending on January 1, 2030, in an amount not to exceed 5% of the total number of shares of the Fully Diluted Common Stock (as defined in the 2025 Plan) determined on December 31 of the preceding year, if the Company’s board of directors acts prior to January 1 of a given year to provide that the increase for such year will occur and to determine the applicable number of additional shares of the Company’s common stock. In the absence of action by the Company’s board of directors, no such increase will automatically occur. The number of shares initially reserved for issuance under the 2025 ESPP will automatically increase on January 1 of each year for a period of up to ten years, beginning on January 1, 2026 and continuing through and including January 1, 2035, by an amount equal to the lesser of (i)  1% of the total number of shares of the Fully Diluted Common Stock (as defined in the 2025 ESPP) determined on December 31 of the preceding year, and (ii) a number of shares equal to three times the Initial Share Reserve. Notwithstanding the foregoing, Company’s board of directors may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares.

Convertible Notes

In December 2024, Tvardi entered into a note purchase agreement, pursuant to which it issued and sold convertible promissory notes (the Convertible Notes) in an aggregate principal amount of approximately $28.3 million. The Convertible Notes accrued interest at 8% per annum and had a maturity date of December 31, 2026 (the Maturity Date). As of March 31, 2025, Tvardi has recorded $0.7 million in accrued interest under the Convertible Notes.

Upon the closing of the Merger, pursuant to the terms of the note purchase agreement, the outstanding principal balance of the Convertible Notes and all unpaid accrued interest automatically converted into 1,265,757 shares of Cara common stock.

License Agreements

In July 2012 and June 2015, Stem Med Limited Partnership (StemMed) entered into license agreements with Baylor College of Medicine (BCM) referred to herein as the BCM First Agreement and BCM Second Agreement, respectively. StemMed assigned the BCM First Agreement and BCM Second Agreement to Tvardi in connection with the transfer of all or substantially all of the assets and businesses to which BCM First Agreement and BCM Second Agreement relate in January 2018 and February 2018, respectively. Under both the BCM First Agreement and BCM Second Agreement, Tvardi obtained exclusive, worldwide, sublicense licenses under certain of BCM’s patents and patent applications and additionally in the case of the BCM First Agreement, certain BCM technology. Under these licenses, Tvardi is permitted to make, have made, use, market, sell, offer to sell, lease and import products, processes or services that incorporate, utilize or are made with the use such patents and patent applications or technologies (respectively, the BCM1 Licensed Products and BCM2 Licensed Products) in all fields of use. The licenses, patents and patent applications and technologies applicable to the BCM First Agreement and BCM Second Agreement are further discussed below.

First License Agreement with BaylorCollege of Medicine

Under the BCM First Agreement, Tvardi obtained an exclusive, worldwide, sublicensable license under BCM’s rights to certain patents and patent applications related to STAT3 inhibitors in oncology and certain non-oncology indications, which Tvardi refers to as the BCM Patent Rights, together with certain cell lines, biological materials, compounds, know-how and technologies, which Tvardi collectively refers to as the BCM Technology, to make, have made, use, market, sell, offer to sell, lease and import BCM1 Licensed Products, in all fields of use.

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Pursuant to the terms of the BCM First Agreement, StemMed owed an initial license fee of $75,000 as consideration for the license rights. Upon the assignment of the agreement to Tvardi, Tvardi became responsible for the payment of annual maintenance fees on the anniversary of the agreement, which range from $30,000 to $50,000. Tvardi is also required to pay BCM royalties in the amount of a low-single-digit percent of net sales of BCM1 Licensed Products during the term, which expires, on a country-by-country basis, on the later of (i) the date of expiration of the last-to-expire of the BCM Patent Rights, or, (ii) if no BCM Patent Rights issued in such country, the tenth anniversary of the first commercial sale of the BCM1 Licensed Product in such country. Tvardi currently expects the BCM Patent Rights to expire April 18, 2039. Upon the initiation of the Phase 2 clinical trials for two BCM1 Licensed Products, Tvardi paid BCM development milestone payments of $250,000 in the aggregate. Upon the achievement of additional specified development and regulatory milestones, Tvardi is required to pay BCM one-time milestone payments of up to $2,200,000 in the aggregate for the first BCM1 Licensed Product in an oncology indication and for the first BCM1 Licensed Product in a non-oncology indication to achieve such milestones. Further, in connection with the initiation of the Phase 3 clinical trial, Tvardi would expect to incur approximately $400,000 of oncology-related costs and approximately $300,000 of non-oncology-related costs. Tvardi is additionally required to pay BCM a tiered low-double-digit percentage of sublicensing revenue obtained in connection with any sublicense granted by Tvardi under the BCM Patent Rights or BCM Technology.

Tvardi may terminate the BCM First Agreement at its convenience following a specified notice period upon advance written notice to BCM. The BCM First Agreement may also be terminated by BCM for Tvardi’s default or failure to perform any of terms of the BCM First Agreement, following a specified notice and cure period. Additionally, BCM may terminate the BCM First Agreement if Tvardi undergoes specified bankruptcy or insolvency events, following the expiration of a specified period. Upon expiration of the term of the BCM First Agreement in a given country, the license grant from BCM to Tvardi will be fully-paid and perpetual in such country.

The BCM First Agreement was amended in April 2015 to update the schedule of BCM Patent Rights and description of description of BCM Technology covered by the license for immaterial consideration. The BCM First Agreement was further amended in August 2019 to amend Tvardi’s diligence and insurance obligations as well as to further update the schedule of BCM Patent Rights.

Under the BCM First Agreement, Tvardi accrued $12,500 in maintenance fees as of March 31, 2025. As of December 31, 2024, the full amount of $50,000 in annual maintenance fees had already been paid and thus no accrual was needed. No payments for maintenance or milestone fees were made during the three months ended March 31, 2025 and 2024. No royalty fees have been incurred to date.

Second License Agreement with BaylorCollege of Medicine

Under the BCM Second Agreement, Tvardi obtained an exclusive, worldwide, sublicensable license under certain patents and patent applications co-owned by BCM and the National Institutes of Health (NIH), related to methods and compositions for the use of STAT3 inhibitors in certain conditions like anaphylaxis, which rights Tvardi refers to as the Licensed Patent Rights, to make, have made, use, market, sell, offer to sell, lease and import the BCM2 Licensed Products, in all fields of use.

Pursuant to the terms of the BCM Second Agreement, StemMed owed an initial license fee of $5,000 in consideration for the license rights. Upon the assignment of the agreement to Tvardi, it became responsible for the payment of maintenance fees on the anniversary of the agreement, which range from $30,000 to $50,000. Tvardi is also required to pay BCM royalties in the amount of a low-single-digit percent of net sales of BCM2 Licensed Products during the term, which expires, on a country-by-country basis, on the later (i) of the date of expiration of the last to expire of the Licensed Patent Rights, or, (ii) if no Licensed Patent Rights issued in such country, the tenth anniversary of the first commercial sale of the BCM2 Licensed Product in such country. Tvardi currently expects the Licensed Patent Rights to expire July 18, 2034. Upon the achievement of additional specified development and regulatory milestones, Tvardi is required to pay BCM one-time milestone payments of up to $1,225,000 in the aggregate for the first BCM2 Licensed Product to achieve such milestones. Further, in connection with the initiation of the Phase 3 clinical trial, Tvardi would expect to incur approximately $300,000 in costs. Tvardi is additionally required to pay BCM a tiered low-double-digit percentage of sublicensing revenue obtained in connection with any sublicense granted by Tvardi under the Licensed Patent Rights.

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Tvardi may terminate the BCM Second Agreement at its convenience following a specified notice period upon advance written notice to BCM. The BCM Second Agreement may also be terminated by BCM for Tvardi’s default or failure to perform any of terms of the BCM Second Agreement, following a specified notice and cure period. Additionally, BCM may terminate the BCM Second Agreement if Tvardi undergoes specified bankruptcy or insolvency events, following the expiration of a specified period. The NIH may terminate its license to BCM if Tvardi fails to fulfill certain obligations. Upon expiration of the term of the BCM Second Agreement in a given country, the license grant from BCM to Tvardi will be fully-paid and perpetual in such country.

The BCM Second Agreement was amended in June 2019 to amend Tvardi’s diligence and insurance obligations. Tvardi entered into a second amendment April 2023 to further amend its diligence obligations and to terminate the obligation to pay annual maintenance fees until the first anniversary of the achievement of certain patent milestones and annually thereafter.

Under the BCM Second Agreement, no payments were made or incurred during the three months ended March 31, 2025 and 2024. No royalty fees have been incurred to date.

Components of Operating Results

Revenue

Tvardi has not generated any revenue since its inception and does not expect to generate any revenue from the sale of products in the near future, if at all. If Tvardi’s development efforts for TTI-101, TTI-109 or additional product candidates that it may develop in the future are successful and result in marketing approval, or if Tvardi enters into collaboration or license agreements with third parties, it may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements***.***

Operating Expenses

Tvardi’s operating expenses since inception have consisted primarily of research and development expenses and general and administrative costs.

Research and Development Expenses

Tvardi’s research and development expenses consist primarily of direct and indirect costs incurred in performing clinical and preclinical development activities.

Direct costs include:

· expenses incurred under agreements with consultants and third-party contract research organizations (CROs) that conduct research and<br>development activities on Tvardi’s behalf;
· costs related to production of preclinical and clinical materials, including fees paid to contract manufacturers; and
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· costs associated with license agreements.
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Indirect costs include:

· personnel costs, which includes salaries, benefits, stock-based compensation expense and travel expenses, for personnel engaged in research<br>and development functions;
· facilities, amortization and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance<br>and other supplies; and
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· costs related to compliance with quality and regulatory requirements.
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Pursuant to U.S. GAAP and Tvardi’s internal policies, including its clinical trial accrual policy, Tvardi expenses all research and development costs in the periods in which they are incurred, including the costs of treatment center start-up activities, patient enrollment, and study reporting. Costs for certain other research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to Tvardi by its vendors and third-party service providers. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in Tvardi’s unaudited condensed financial statements as prepaid or accrued research and development expenses.

The majority of Tvardi’s clinical spending in the three months ended March 31, 2025 and 2024 was on TTI-101, for which certain direct research and development costs are tracked by clinical trial. Spending for the development of TTI-109 primarily began in 2023 and all costs incurred for TTI-109 for the three months ended March 31, 2025 and 2024 are related to chemistry, manufacturing and control (CMC) costs.

Tvardi expects its research and development expenses to increase substantially for the foreseeable future as it continues to invest in the development of TTI-101 and TTI-109, support its ongoing preclinical programs and discover any new product candidates, as well as increase its headcount. In particular, clinical development, as opposed to preclinical development, generally has higher development costs, primarily due to the increased size and duration of later-stage clinical trials. Moreover, the costs associated with Tvardi’s clinical activities, which are managed by its CROs, and Contract Development and Manufacturing Organizations (CDMOs), to manufacture materials for Tvardi’s product candidates and future commercial products, are much more costly as compared to early-stage preclinical development. Tvardi cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of its current and future candidates due to the inherently unpredictable nature of preclinical and clinical development. Preclinical and clinical development timelines, the probability of success and development costs can differ materially from expectations. Tvardi anticipates that it will make determinations as to which therapeutic candidates to pursue and how much funding to direct to each therapeutic candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and Tvardi’s ongoing assessments as to each therapeutic candidate’s commercial potential. Tvardi will need substantial additional capital in the future to support these efforts. In addition, Tvardi cannot forecast which therapeutic candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect its development plans and capital requirements.

At this time, Tvardi cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any of its product candidates. Tvardi is also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of its product candidates. This is due to the numerous risks and uncertainties associated with drug development, including:

· negative or inconclusive results from Tvardi’s preclinical studies or clinical trials or the clinical trials of others for product<br>candidates similar to Tvardi’s, leading to a decision or requirement to conduct additional preclinical testing or clinical trials<br>or abandon a program;
· undesirable product-related side effects experienced by subjects in Tvardi’s clinical trials or by individuals using drugs or<br>therapeutics similar to its product candidates;
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· poor efficacy of Tvardi’s product candidates during clinical trials;
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· delays in submitting IND applications or comparable foreign applications or delays or failure in obtaining the necessary approvals<br>from U.S. Food and Drug Administration (FDA) or other comparable foreign regulatory authorities to commence a clinical trial, or a suspension<br>or termination of a clinical trial once commenced;
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· conditions imposed by the FDA or comparable foreign regulatory authorities regarding the scope or design of Tvardi’s clinical<br>trials;
· delays in enrolling subjects in clinical trials, including due to operational challenges or competition with other clinical trials;
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· high drop-out rates or screening failures of subjects from clinical trials;
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· inadequate supply or quality of product candidates or other materials necessary for the conduct of Tvardi’s clinical trials;
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· greater than anticipated clinical trial costs;
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· inability to compete with other therapies;
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· failure to secure or maintain orphan designation in some jurisdictions;
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· unfavorable FDA or other regulatory agency inspection and review of a clinical trial site;
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· failure of Tvardi’s third-party contractors or investigators to comply with regulatory requirements or otherwise meet their<br>contractual obligations in a timely manner, or at all;
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· delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight<br>around clinical testing generally or with respect to Tvardi’s technology in particular; or
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· varying interpretations of data by the FDA and other comparable foreign regulatory authorities.
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A change in the outcome of any of these variables with respect to the development of any of Tvardi’s product candidates or potential future product candidates could mean a significant change in the costs and timing associated with the development of that product candidate or potential future product candidate. For example, if the FDA or another regulatory authority were to require Tvardi to conduct clinical trials beyond those that it anticipates would be required for the completion of clinical development of a product candidate or potential future product candidate, or if Tvardi experiences significant delays in its clinical trials due to slower than expected patient enrollment or other reasons, it would be required to expend significant additional financial resources and time on the completion of clinical development. Tvardi may never obtain regulatory approval for any of its product candidates, and, even if Tvardi does, drug commercialization takes several years and millions of dollars in development costs.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, for personnel in Tvardi’s executive, finance, corporate and business development and administrative functions. General and administrative expenses also include outside professional services, such as legal, audit and accounting services, insurance costs and facility-related expenses, which includes direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

Tvardi expects its general and administrative expenses to increase over the next several years as it continues its research and development activities, prepares for potential commercialization of its current and future product candidates, as well as expands its operations and begins operating as a public company following the Merger. These increases will likely include increases related to the hiring of additional personnel and legal, regulatory and other fees and services associated with maintaining compliance with listing rules and SEC requirements, director and officer insurance premiums and investor relations costs associated with being a public company.

Interest Income

Interest income for the three months ended March 31, 2025 consisted of interest earned on Tvardi’s cash equivalents as well as interest earned on short-term investments and the accretion of the discount of its short-term investments. Interest income for the three months ended March 31, 2024 consisted of interest earned on Tvardi’s cash equivalents.

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Other Expense

Other expense consists of the change in fair value of Tvardi’s Convertible Notes, for which it has elected the fair value option as well as interest accrued on the Convertible Notes. See “—Recent Developments—Convertible Notes” for further discussion of Tvardi’s Convertible Notes.

Results of Operations

Comparison of the Three Months EndedMarch 31, 2025 and 2024

The following table sets forth Tvardi’s results of operations for the three months ended March 31, 2025 and 2024 (in thousands, except percentages):

Three Months Ended March 31, Change
2025 2024 Amount Percent
Operating expenses:
Research and development $ 3,111 $ 3,721 $ (610 ) (16.4 )%
General and administrative 1,243 727 516 71.0 %
Total operating expenses 4,354 4,448 (94 ) (2.1 )%
Loss from operations (4,354 ) (4,448 ) 94 (2.1 )%
Interest income 275 246 29 11.8 %
Other income (expense), net (5,500 ) - (5,500 ) n/a
Net loss $ (9,579 ) $ (4,202 ) $ (5,377 ) 128.0 %

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2025 and 2024 were comprised of the following (in thousands, except percentages):

Three Months Ended March 31, Change
2025 2024 Amount Percent
Direct research and development expenses by program:
TTI-101:
HCC $ 437 $ 1,417 $ (980 ) (69.2 )%
IPF 1,033 616 417 67.7 %
mBC - 210 (210 ) (100.0 )%
Pre-clinical, CMC, and other (unallocated) 175 356 (181 ) (50.8 )%
TTI-109 358 216 142 65.7 %
Unallocated research and development expense:
Personnel costs (including stock-based compensation) 858 795 63 7.9 %
Consultant fees and other costs 250 111 139 125.2 %
Total research and development expenses $ 3,111 $ 3,721 $ (610 ) (16.4 )%

Research and development expenses were $3.1 million for the three months ended March 31, 2025, compared to $3.7 million for the three months ended March 31, 2024. The decrease of $0.6 million was primarily driven by costs associated with Tvardi’s product candidate TTI-101, including decreases of $1.0 million and $0.2 million related to Tvardi’s HCC trial and metastatic breast cancer (mBC) trial, respectively, as well as a $0.2 million decrease in pre-clinical CMC costs. The decrease in Tvardi’s HCC trial was attributable to the changes in patient enrollments, while the decrease in Tvardi’s mBC trial was due to the discontinuation of the trial in January 2024. These decreases in costs were partially offset by a $0.4 million increase in costs related to Tvardi’s IPF trial, due to changes in patient enrollments and overall changes in trial costs due to estimated clinical trial change orders.

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The increase of $0.1 million related to Tvardi’s product candidate TTI-109 was primarily related to CMC costs to start production of Active Pharmaceutical Ingredients (API).

The increase of personnel costs of less than $0.1 million was primarily related to increases in compensation across the research and development functions. The $0.1 million increase in consultant fees and other costs was primarily related to other research and development costs such as costs to maintain intellectual property.

General and Administrative Expenses

General and administrative expenses were $1.2 million for the three months ended March 31, 2025, compared to $0.7 million for the three months ended March 31, 2024. The increase of $0.5 million was primarily driven by increases in professional fees of $0.4 million, attributable to increased accounting and audit fees incurred as a result of the Merger.

Interest Income

Interest income was $0.3 million for the three months ended March 31, 2025, compared to $0.2 million for the three months ended March 31, 2024. The $0.3 million of interest income for the three months ended March 31, 2025 includes interest earned on Tvardi’s cash, cash equivalents and previously outstanding short-term investments, as well as the accretion of the discount on its short-term investments. The $0.2 million of interest income for the three months ended March 31, 2024 was driven by interest income earned on Tvardi’s cash equivalents.

Other Expense

Other expense of $5.5 million for the three months ended March 31, 2025 was primarily attributable to a $4.9 million remeasurement of Tvardi’s Convertible Notes, for which Tvardi has elected the fair value option, as well as $0.6 million in interest accrued on the Convertible Notes during the three months ended March 31, 2025. There were no financial instruments requiring valuation or interest expense for the three months ended March 31, 2024.

Liquidity and Capital Resources

Sources of Liquidity

Since inception, Tvardi has not generated any revenue from product sales or any other sources and has incurred significant operating losses. Tvardi has not yet commercialized any products and does not expect to generate revenue from sales of any product candidates for several years, if ever. To date, Tvardi has financed its operations primarily through the (i) issuance and sale of its Convertible Notes in December 2024 for gross proceeds of $28.3 million (ii) the issuance and sale of preferred stock and historical convertible debt (which converted into preferred stock in 2018 and 2021) for total gross proceeds of $83.4 million, and (iii) as discussed above in “—Recent Developments,” its Merger with Cara in April 2025. To date Tvardi has devoted substantially all of its efforts and financial resources to developing its product candidates, organizing and staffing its company, business planning, raising capital, establishing its intellectual property portfolio and performing research and development of its product candidates, signaling and biology, medicinal chemistry and clinical insights to discover and develop novel therapies for the treatment of fibrosis-driven diseases. As of March 31, 2025, Tvardi had $11.4 million in cash and cash equivalents and $10.9 million in short-term investments. In April 2025, Tvardi received approximately $23.8 million of Cara’s cash and cash equivalents in connection with the closing of the Merger.

See “—Recent Developments” above for further discussion of the Merger and Convertible Notes.

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Funding Requirements

Tvardi’s primary uses of cash are to fund its operations, which consist primarily of research and development costs related to the development of its product candidates, and, to a lesser extent, general and administrative costs. Tvardi has incurred significant operating losses since its inception, and as of March 31, 2025, had an accumulated deficit of $101.8 million. Management has determined that its present capital resources as of March 31, 2025 will not be sufficient to fund its planned operations for at least one year from the issuance date of the unaudited condensed financial statements, filed as Exhibit 99.6 to this Report, which raises substantial doubt as to Tvardi’s ability to continue as a going concern. In April 2025, as further discussed above, Tvardi completed its Merger with Cara, through which it received approximately $23.8 million in cash and cash equivalents. Subsequent to the completion of the Merger, the Company plans to seek additional funding through equity offerings or debt financings, credit or loan facilities, and strategic alliances and licensing arrangements. However, there can be no assurance that such funding will be available to the Company, will be obtained on terms favorable to the Company, or will provide the Company with sufficient funds to meet its objectives.

The Company anticipates that it will continue to incur significant and increasing expenses for the foreseeable future as it continues to advance its product candidates, expand its corporate infrastructure, including the costs associated with being a public company following the Merger, further the Company’s research and development initiatives for its product candidates and incur costs associated with the potential commercialization of its product candidates, if approved. The Company is subject to all of the risks typically related to the development of new drug candidates, and may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect its business. The Company anticipates that it will need substantial additional funding in connection with its continuing operations. However, the Company may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. If the Company raises additional capital through public or private equity offerings, the ownership interest of its existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect its stockholders’ rights. If the Company raises additional capital through debt financing, it may be subject to covenants or other restrictions limiting its ability to engage in specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any failure to raise capital as and when needed could have a negative impact on the Company’s financial condition and on its ability to pursue its business plans and strategies. If the Company is unable to raise capital, it will need to delay, reduce or terminate planned activities to reduce costs.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, the Company is unable to estimate the exact amount of its operating capital requirements.

The Company’s future funding requirements will depend on many factors, including, but not limited to:

· the initiation, progress, timing, costs and results of preclinical studies and clinical trials for its potential future product candidates;
· the clinical development plans the Company establishes for its product candidates;
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· the timelines of its clinical trials and the overall costs to conduct and complete the clinical trials, including any increased costs<br>due to disruptions caused by marketplace conditions, including the effects of health epidemics, or other geopolitical and macroeconomic<br>conditions;
--- ---
· the cost and capital commitments required for manufacturing its product candidates at clinical and if, approved, commercial scales;
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· the number and characteristics of product candidates that the Company develops;
· the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
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· whether the Company is able to enter into future collaboration agreements and the terms of any such agreements;
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· the ability to achieve and timing of achieving a favorable pricing and reimbursement decision by the pricing authorities in the markets<br>of interest;
--- ---
· the cost of filing, prosecuting, defending and enforcing its patent claims and other intellectual property rights, including patent<br>infringement actions brought by third parties against the Company or its product candidates;
--- ---
· the effect of competing technological and market developments;
--- ---
· the cost and timing of completion of commercial-scale outsourced manufacturing activities; and
--- ---
· the cost of establishing sales, marketing and distribution capabilities for any product candidates for which the Company may receive<br>regulatory approval in regions where it chooses to commercialize its products on its own.
--- ---

A change in the outcome of any of these or other variables with respect to the development of any of the Company’s current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. See the section titled “Risk Factors” set forth in the Quarterly Report for additional risks associated with the Company’s substantial capital requirements.

Cash Flows

The following table summarizes Tvardi’s cash flows for the periods indicated (in thousands):

Three Months Ended March 31,
2025 2024
Net cash used in operating activities $ (7,689 ) $ (4,138 )
Net cash used in investing activities (10,883 ) -
Net cash (used in) provided by financing activities (1,603 ) 5
Net decrease in cash and cash equivalents $ (20,175 ) $ (4,133 )

Operating Activities

Net cash used in operating activities was $7.7 million for the three months ended March 31, 2025, reflecting a net loss of $9.6 million, net of changes in operating assets and liabilities of $3.7 million, and non-cash changes of $5.5 million. The net changes in operating assets and liabilities of $3.7 million was primarily driven by (i) a $1.0 million increase in prepaid expenses and other current assets, attributable to the timing of patient enrollments and (ii) a $2.6 million decrease in accounts payable and accrued expenses, driven by the timing of invoices and payments. The $5.5 million in non-cash expenses was primarily driven by $4.9 million related to the change in fair value of Tvardi’s Convertible Notes, and $0.6 million in interest accrued on its Convertible Notes during the first quarter of 2025.

Net cash used in operating activities was $4.1 million for the three months ended March 31, 2024, reflecting a net loss of $4.2 million and net changes in operating assets and liabilities of less than $0.1 million, partially offset by non-cash changes for depreciation and amortization, stock-based compensation expense, and non-cash lease expense of $0.1 million. The net changes in operating assets and liabilities of less than $1.0 million was primarily driven by (i) a $0.2 million decrease in prepaid expenses and other current assets, attributable to the timing of patient enrollments, partially offset by (ii) a $0.3 million decrease in accounts payable and accrued expenses, driven by the timing of invoices and payments.

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Investing Activities

Net cash used in investing activities was $10.9 million for the three months ended March 31, 2025, attributable to purchases of short-term investments of $16.4 million, partially offset by maturities of short-term investments of $5.5 million.

There was no net cash provided by investing activities for the three months ended March 31, 2024.

Financing Activities

The net cash used in financing activities for the three months ended March 31, 2025 was primarily due to the payments of deferred offering costs.

The immaterial net cash provided by financing activities for the three months ended March 31, 2024 was due to proceeds from the exercise of stock options.

Contractual Obligations and Commitments

Lease Obligations

Tvardi leases space under one operating lease agreement for corporate office space in Sugar Land, Texas, which expires in August 2027. As of March 31, 2025, Tvardi had future operating lease liabilities of $0.3 million.

License Agreements

As discussed above, Tvardi has license agreements with BCM for exclusive use of patent rights of TTI-101. The license agreements contain terms for annual maintenance fees, milestone payments and net revenue royalties. Annual maintenance fees range from $30,000 to $50,000 per year, per license. Potential milestone payments are up to $1,225,000 in the aggregate per license. Milestones include new drug filings, clinical trial stages, and NDA approval by the FDA. Tvardi is obligated to pay BCM royalties in the amount of a low-single-digit percent of net sales of BCM1 Licensed Products or BCM2 Licensed Products during the term, which expire, on a country-by-country basis, on the later of (i) the date of expiration of BCM Patent Rights or Licensed Patent Rights, whichever is the last to expire, or, (ii) if no BCM Patent Rights or Licensed Patent Rights are issued in such country, the tenth anniversary the first commercial sale of the BCM1 Licensed Products or BCM2 Licensed Products in such country. License fees are expensed as incurred within research and development within Tvardi’s statements of operations. No payments for maintenance or milestone fees were made or incurred during the three months ended March 31, 2025 and 2024. No royalty fees have been incurred to date.

Other Capital Requirements and AdditionalRoyalty Obligations

Tvardi enters into agreements in the normal course of business with various third-party providers for the provision of research and development services, which include preclinical studies and clinical trial services with CROs and the manufacturing of product candidates for use in its preclinical studies and clinical trials with CDMOs. These agreements may include certain provisions for purchase obligations and termination obligations that could require payments for the cancellation of committed purchase obligations or for early termination of the agreements. The amount of the cancellation or termination payments vary and are based on the timing of the cancellation or termination and the specific terms of the agreement. These obligations and commitments are not presented separately.

In addition to Tvardi’s obligation to make potential royalty payments under the BCM First Agreement and BCM Second Agreement discussed above, pursuant to Tvardi’s founder restricted stock purchase agreements with each of its founders, David J. Tweardy, M.D. and Ron DePinho, M.D., Tvardi is also obligated to pay royalties to each such founder in an amount equal to 1% each on the worldwide net sales of TTI-101 and any derivative formulations (a Royalty Bearing Product). These royalty obligations last, on a country-by-country basis, for the later of (i) the date on which the sale of Royalty Bearing Product is no longer covered by a Covered Patent (as defined below) in such country, or (ii) 15 years after the first commercial sale of Royalty Bearing Product in such country. The timing of when Tvardi’s royalty payments will actually be made is uncertain as the payments are contingent upon future activities, including the successful development, regulatory approval and commercialization of Royalty Bearing Product. A Covered Patent means, subject to certain customary exceptions, an issued patent that is owned by us or an affiliate, or for which all rights to develop and commercialize pharmaceutical products for the treatment of any human disorder, are exclusively licensed to Tvardi or an affiliate by the owner of such patent, with Tvardi’s right or Tvardi’s affiliate’s right to grant sublicenses.

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Critical Accounting Estimates

Tvardi’s unaudited condensed financial statements are prepared in accordance with U.S. GAAP. The preparation of the unaudited condensed financial statements and related disclosures requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses in Tvardi’s unaudited condensed financial statements. Tvardi bases its estimates on historical experience, known trends and events and various other factors that management believes are 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. Management evaluates estimates and assumptions on a periodic basis. Tvardi’s actual results may differ from these estimates.

While Tvardi’s significant accounting policies are described in more detail in Note 2 to the unaudited condensed financial statements for the three months ended March 31, 2025 and 2024, filed as Exhibit 99.6 to this Report, management believes that the following accounting policies are critical to understanding Tvardi’s historical and future performance, as the policies relate to the more significant areas involving management’s judgments and estimates used in the preparation of the unaudited condensed financial statements.

Prepaid and Accrued Research and DevelopmentCosts

Accounting for preclinical studies and clinical trials relating to activities performed by CROs and other external vendors requires management to exercise significant estimates in regard to the timing and accounting for these expenses. Tvardi estimates costs of research and development activities conducted by service providers, which include costs to properly initiate and manage ongoing preclinical studies and clinical trials. The diverse nature of services being provided under contracts with Tvardi’s CROs, CDMOs and other arrangements, the different compensation arrangements that exist for each type of service and the lack of timely information related to certain pre-clinical and clinical activities complicates the estimation of accruals for services rendered by the CROs, CDMOs and other vendors in connection with preclinical studies and clinical trials.

Examples of estimated accrued research and development expenses include:

· expenses incurred under agreements with third parties, including Tvardi’s CROs that conducts research, preclinical studies and<br>clinical trials on its behalf;
· expenses incurred under agreements with third parties, including its CDMOs, that develop and manufacture its product candidate for<br>use in Tvardi’s preclinical studies and clinical trials; and
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· other providers and vendors in connection with research and development activities.
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Tvardi bases its expenses related to preclinical studies and clinical trials on its estimates of the services received and efforts expended pursuant to quotes and contracts with its CROs, CDMOs and other third-party vendors that conduct research, preclinical studies and clinical trials on its 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 Tvardi’s vendors will exceed the level of services provided and result in a prepayment of the expense.

Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing fees, Tvardi estimates the time period over which services will be performed, the enrollment of patients 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 Tvardi’s estimate, or if Tvardi receives any change orders from its third-party providers, it adjusts the accrual or amount of prepaid expense accordingly. Although Tvardi does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in Tvardi reporting amounts that are too high or too low in any particular period. To date, Tvardi has not made any material adjustments to its prior estimates of accrued research and development expenses.

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Tvardi also record advance payments to service providers as prepaid expenses and other current assets, which are expensed when the contracted services are performed. If the actual timing of the performance of services varies from the estimate, then Tvardi adjusts the amount of the accrued expense or the prepaid expense accordingly.

Convertible Notes

Tvardi elected to account for its Convertible Notes pursuant to the fair value option under Accounting Standards Codification (ASC) 825, FinancialInstruments (ASC 825). In accordance with ASC 825 and the fair value option, Tvardi recorded its Convertible Notes at fair value with changes in fair value recorded as component of other income (expense), net in its statements of operations. As a result of the fair value option, any issuance costs related to the Convertible Notes were expensed as incurred and were not deferred.

The fair value of the Convertible Notes was determined using a scenario-based valuation analysis that requires a probability of inputs, including the probability of occurrence of events that would trigger conversion of the Convertible Notes and the expected timing of such events.

As of March 31, 2025, Tvardi assessed the probability of (i) an automatic conversion of the Convertible Notes into equity securities upon a Qualified or non-Qualified Financing, (ii) an automatic conversion of the Convertible Notes into shares of Tvardi’s common stock upon an IPO, (iii) an automatic conversion of the Convertible Notes into the combined company’s common stock upon a reverse merger, and (iv) an event of default, dissolution, or liquidation, weighted with 2.5%, 0%, 95%, and 2.5%, respectively.

Additional assumptions and estimates used to estimate the fair value of the Convertible Notes include the: (i) fixed price conversion option, which was valued using a Black-Scholes option model, (ii) aggregate call value of each scenario, which was synthesized using a bond plus call option model, (iii) expected volatility, (iv) risk-free interest rate, and (v) the fair value of the Convertible Notes under the reverse merger scenario, which was estimated using a forward contract structure.

Stock-Based Compensation Expense andFair Value of Stock-Based Awards

Stock-Based Compensation Expense

Tvardi measures and records the expense related to stock-based awards granted to employees, directors, consultants and advisors based upon their respective fair value at the date of grant. Generally, Tvardi issues stock option awards with service-based vesting conditions and record the expense for these awards using the straight-line method such that the aggregate amount of expense recognized is at least the fair value of what has legally vested. Tvardi estimates the grant date fair value of each common stock option using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions and management’s best estimates. These estimates involve inherent uncertainties and management’s judgement. If factors change and different assumptions are used, Tvardi’s stock-based compensation could be materially different in the future.

These assumptions are estimated as follows:

· Fair Value — Because Tvardi’s common stock was not yet publicly traded prior to the Merger, it had to estimate<br>the fair value of its common stock. Tvardi’s board of directors considers numerous objective and subjective factors to determine<br>the fair value of its common stock at each meeting in which awards are approved. 
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· Expected Volatility — Because Tvardi did not have any trading history for its common stock prior to the Merger, the expected<br>volatility was estimated using averages of the historical volatility of its peer group of companies for a period equal to the expected<br>term of the stock options granted. Tvardi’s peer group of publicly traded companies was chosen based on their similar size, stage<br>in the life cycle or area of specialty. Tvardi intends to continue to consistently apply this process using the same or a similar peer<br>group of public companies, until a sufficient amount of historical information regarding the volatility of its own common stock price<br>becomes available.
· Expected Term — Derived from the life of the options granted under the option plan and is based on the simplified method<br>which is essentially the weighted average of the vesting period and contractual term.
--- ---
· Risk-Free Interest Rate — The risk-free interest rate is based on the implied yield currently available on U.S. Treasury<br>zero-coupon issues with a term that is equal to the options’ expected term at the grant date.
--- ---
· Dividend Yield — Tvardi has not declared or paid dividends to date and does not anticipate declaring dividends. As such,<br>the dividend yield has been estimated to be zero.
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Changes in the foregoing assumptions can materially affect the estimate of fair value and ultimately how much share-based compensation expense is recognized; and the resulting change in fair value, if any, is recognized in Tvardi’s statements of operations during the period the related services are rendered. These inputs are subjective and generally require significant analysis and judgment to develop.

Fair Value of Stock-Based Awards

As a privately held company prior to the Merger, there had been no public market for Tvardi’s common stock. The estimated fair value of Tvardi’s common stock had been determined by its board of directors as of the date of each option grant, with input from management, considering the most recently available third-party valuations of its common stock and its board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute ofCertified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

Tvardi’s third-party valuations of common stock were prepared using the option-pricing method (OPM), which used a market approach to estimate Tvardi’s enterprise value. The OPM treats common stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger.

These third-party valuations resulted in a valuation of Tvardi’s common stock of $0.92 and $0.82 as of June 30, 2023 and June 30, 2022, respectively. In addition to considering the results of these third-party valuations, Tvardi’s board of directors considered various objective and subjective factors to determine the fair value of its common stock as of each grant date, including:

· the prices at which Tvardi sold shares of its preferred stock and the superior rights and preferences of the preferred stock relative<br>to its common stock at the time of each grant;
· the lack of an active public market, for Tvardi’s common stock and preferred stock;
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· the progress of Tvardi’s research and development programs, including the status and results of preclinical studies and clinical<br>trials for its product candidates;
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· Tvardi’s stage of development and commercialization and its business strategy, and material risks to its business;
· external market conditions affecting the pharmaceutical and biopharmaceutical industry and trends within each industry;
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· Tvardi’s financial position, including cash on hand, and its historical and forecasted performance and operating results;
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· the likelihood of achieving a liquidity event, such as an initial public offering or sale of Tvardi in light of prevailing market<br>conditions; and
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· the analysis of initial public offerings and the market performance of similar companies in the biopharmaceutical industry.
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The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if Tvardi had used significantly different assumptions or estimates, the fair value of its common stock and its stock-based compensation expense could have been materially different. For the three months ended March 31, 2025, if there was a 10% increase in the valuation of its common stock at each of the valuation dates listed above and to the underlying exercise price of stock options granted during the year assuming that such options were granted with an exercise price equal to the fair value of common stock, the impact to its stock-based compensation expense would not be material. If there was a 10% decrease in the valuation of its common stock at each of the valuation dates listed above and to the underlying exercise price of stock options granted during the year assuming that such options were granted with an exercise price equal to the fair value of common stock, the impact to its stock-based compensation expense would not be material for the three months ended March 31, 2025. Tvardi’s estimate of fair value is reviewed and approved by its board of directors.

Following the Merger and the establishment of a public trading market for the Company’s common stock, it is no longer be necessary for Tvardi’s board of directors to estimate the fair value of its common stock in connection with its accounting for stock options and other such awards the Company may grant, as the fair value of the Company’s common stock will be determined based on the quoted market price of its common stock.

Options Granted

The following table summarizes by grant date the number of shares subject to options granted from January 1, 2023 through immediately prior to the closing of the Merger on April 15, 2025, the per share exercise price of the options, the per share fair value of common stock underlying the options on each grant date and the per share estimated fair value of the options:

Number of shares Per share fair ^^
subject to options Per share exercise value of common ^^ Per share estimated
Grant Date granted price of options stock ^^ fair value of options
January 12, 2023 607,129 $ 0.82 $ 0.82 ^^ $ 0.52
June 27, 2023 60,000 $ 0.82 $ 0.82 ^(1)^ $ 0.52
June 27, 2023 20,000 $ 0.82 $ 0.82 ^(1)^ $ 0.53
January 31, 2024 25,000 $ 0.92 $ 0.92 ^^ $ 0.62
(1) At the time of the options grants on June 27, 2023, Tvardi’s<br>board of directors determined that the fair value of its common stock of $0.82 per share, calculated by its third-party valuation as<br>of June 30, 2022, reasonably reflected the per share fair value of its common stock as of the grant date. Tvardi applied the fair<br>value of common stock from its retrospective fair value assessment to determine the fair value of the June 27, 2023 awards, noting<br>an immaterial incremental stock-based compensation expense to be recorded for accounting purposes of approximately $2,000.
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Recently Issued and Adopted AccountingPronouncements

A description of recently issued accounting pronouncements that may potentially impact Tvardi’s financial position and results of operations is disclosed in Note 2 to the unaudited condensed financial statements for the three months ended March 31, 2025 and 2024, filed as Exhibit 99.6 to this Report.

Quantitative and Qualitative DisclosuresAbout Market Risks

Interest Rate Risk

As of March 31, 2025 and December 31, 2024, Tvardi had $11.4 million and $31.6 million in cash and cash equivalents, respectively, which are primarily maintained in accounts with multiple financial institutions in the United States. Tvardi may maintain cash and cash equivalent balances in excess of Federal Deposit Insurance Corporation limits. Tvardi does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. Tvardi’s primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term duration and low risk profile of Tvardi’s cash equivalents, it believes an immediate 10% change in interest rates would not have a material effect on their fair market value.

Effects of Inflation

Inflation generally affects Tvardi by increasing the cost of labor and research and development contract costs. Tvardi does not believe inflation has had a material effect on its results of operations during the periods presented in its unaudited condensed financial statements filed as Exhibit 99.6 to this Report.

Foreign Currency Exchange Risk

All of Tvardi’s employees and its operations are currently located in the United States, and expenses are generally denominated in U.S. dollars. As such, Tvardi is not exposed to financial risks from exchange rate fluctuations between U.S. dollars and other currencies.

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