Savara Inc (SVRA) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those identified under Item 1A. Risk Factors in this report.

Overview

Savara Inc. (together with its subsidiaries “Savara,” the “Company,” “we,” “our” or “us”) is a clinical-stage biopharmaceutical company focused on rare respiratory diseases. Our sole program, MOLBREEVI, is an inhaled biologic, specifically, inhaled granulocyte-macrophage colony-stimulating factor ("GM-CSF") in Phase 3 development for aPAP. Savara previously announced positive top-line results from the Phase 3 clinical trial and plans to complete a Biological License Application submission with the FDA in the first quarter of 2025. Savara, together with its wholly-owned subsidiaries, which include Aravas Inc. and Savara ApS, operate in one segment with its principal office in Langhorne, Pennsylvania, though a majority of our employees work remotely.

Since inception, we have devoted substantially all of our efforts and resources to identifying and developing our product candidates, recruiting personnel, and raising capital. We have incurred operating losses and negative cash flow from operations and have no product revenue from inception to date. From inception to December 31, 2024, we have raised net cash proceeds of approximately $594.9 million, primarily from underwritten offerings of our common stock, private placements of common stock, and debt financings.

We have never been profitable and have incurred operating losses in each year since inception. Our net losses were $95.9 million and $54.7 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $489.3 million. Our operating losses primarily resulted from expenses attributed to our research and development programs and from general and administrative costs associated with our operations.

We have chosen to operate by outsourcing our manufacturing and most of our clinical operations. We expect to incur significant additional expenses and continue to incur operating losses for at least the next several years as we initiate and continue the clinical development of, and seek regulatory approval for, our product candidate. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical development programs and efforts to achieve regulatory approval.

As of December 31, 2024, we had cash and cash equivalents of $15.1 million and short-term investments of $181.2 million. Although we have sufficient capital to fund many of our planned activities, we may need to continue to raise additional capital to further fund the development of, and seek regulatory approvals for, our product candidate and begin to commercialize any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.

Recent Events

BLA Submission Complete

On March 26, 2025, Savara announced that it had completed its submission of the BLA to the FDA for MOLBREEVI for the potential treatment of aPAP, a chronic and debilitating rare lung disease characterized by the abnormal build-up of surfactant in the alveoli of the lungs. This follows our reporting, in June 2024, of top line results from our pivotal IMPALA-2 trial for the treatment of aPAP that demonstrated significant improvement in gas exchange, or DLCO, and clinical benefit, as measured SGRQ. MOLBREEVI was also well tolerated throughout the 48-weeks and no unexpected safety signals were seen. Previously, on December 18, 2024, the Company announced that it had initiated a rolling submission of a BLA to the FDA for MOLBREEVI. MOLBREEVI was also granted Fast Track and Breakthrough Therapy Designations in 2019 for the treatment of patients with aPAP.

Debt Financing

On March 26, 2025, the Company announced that it had entered into a Loan and Security Agreement (the “Hercules Loan Agreement”) with the lenders party thereto (the “Lenders”) and Hercules Capital, Inc., as administrative agent and collateral agent (the “Agent”). The Hercules Loan Agreement provides for the Company to borrow up to $200 million of term loans (the “Term Loan”) that may be advanced in multiple tranches.

The initial advance of $30 million under the Hercules Loan Agreement was drawn on March 26, 2025 and used to repay all outstanding obligations under the Company’s Amended Loan Agreement with Silicon Valley Bank as described in Footnote 7. Debt Facility and extinguish the Company’s obligations thereunder, to pay the Company’s expenses in

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connection with the Hercules Loan Agreement, including fees and expenses relating to termination of the Silicon Valley Bank term loan, and for general corporate purposes. Further Term Loan draws may be made by the Company under the Hercules Loan Agreement as follows:

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Subject to FDA approval of MOLBREEVI for the treatment of aPAP (the “Approval Milestone”), the Company may draw (a) up to $40 million on or prior to March 15, 2026 and (b) up to $40 million on or prior to December 15, 2026.

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Subject to the Company achieving a trailing six months net product revenue from the sale of MOLBREEVI of at least seventy-five percent of an agreed upon revenue plan for any reporting period following March 31, 2027 (the “Revenue Milestone”), the Company may draw up to $20 million on or prior to December 31, 2027.

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Subject to approval by the Lenders’ investment committees, the Company may draw up to $70 million of additional funds.

Continued Funding of Federal Government Operations and Federal Debt Limit

On December 20, 2024, the U.S. Congress advanced the American Relief Act, 2025 (H.R. 10545), a continuing resolution ("CR") that funds the federal government until March 14, 2025. On March 14, 2025, the 119th U.S. Congress, voted to pass an additional stopgap CR, as subsequently executed by President Trump, which continues the funding of the federal government through September 2025 and avoids interruptions to the operations of the government. The U.S. Congress will also have to address the federal debt limit, as the Fiscal Responsibility Act ("FRA") suspended the debt limit on January 2, 2025. The outcome and impact of a potential future government shutdown and adequately addressing the federal debt limit to our operations is uncertain; however, we are actively assessing and monitoring the potential impacts and situation.

Impact of Potential Tariffs

Effective February 1, 2025, U.S. President Donald Trump announced the potential implementation of a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China, while energy resources from Canada are subject to a lower 10% tariff. The tariffs since have been subject to delay, changes, and in some cases implemented. President Trump has similarly communicated the potential implementation of additional tariffs on additional imported goods and imported goods from other countries. Collectively, these tariffs could affect a substantial portion of available U.S. marketed medical devices and drug substances that are manufactured solely outside of the U.S. We continue to monitor and assess the potential impacts of potential tariffs on our operations and supply chain.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Refer to Note 2. Summary of Significant Accounting Policies in the notes to our consolidated financial statements in this annual report on Form 10-K for additional discussion.

Accrued Research and Development Expenses

We record the costs associated with research, nonclinical and clinical trials, and manufacturing development as incurred. These costs are a significant component of our research and development expenses, with a substantial portion of our on-going research and development activities conducted by third party service providers, including contract research, regulatory support, and manufacturing organizations.

We accrue for expenses resulting from obligations under agreements with CROs, CMOs, and other outside service providers for which payment flows do not match the periods over which materials or services are provided to us. Accruals are recorded based on estimates of services received and efforts expended pursuant to agreements established with CROs, CMOs, and other outside service providers. These estimates are typically based on contracted amounts applied to the activities performed and determined through analysis with internal personnel and external service providers as to the progress or stage of completion of the services. We make significant judgments and estimates in determining the accrual balance in each reporting period. In the event advance payments are made to a CRO, CMO, or outside service provider,

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the payments will be recorded as a prepaid asset which will be amortized or expensed as the contracted services are performed. As actual costs become known, we adjust our prepaids and accruals and related expense. Inputs, such as the services performed, the number of patients enrolled, or the trial duration, may vary from our estimates, resulting in adjustments to research and development expense in future periods. Changes in these estimates that result in material changes to our accruals could materially affect our results of operations. To date, we have not experienced any material deviations between accrued and actual research and development expenses.

Acquired IPR&D

In accordance with ASC Topic 350, Intangibles – Goodwill and Other, our IPR&D is determined to have an indefinite life and, therefore, is not amortized. Instead, it is tested for impairment annually and between annual tests if we become aware of an event or a change in circumstances that would indicate the carrying value may be impaired.

With respect to the impairment testing of acquired IPR&D, ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment, and ASU 2012-02, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, provide us a two-step impairment process with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads us to determine that it is more-likely-than not (that is, a likelihood of more than 50%) that our acquired IPR&D is impaired. If we choose to first assess qualitative factors and we determine that it is more-likely-than not acquired IPR&D is not impaired, we are not required to take further action to test for impairment.

When we perform a quantitative assessment of acquired IPR&D, we compare its carrying value to its estimated fair value to determine whether an impairment exists. In previous years, due to a lack of Level 1 or Level 2 inputs, the Multi-Period Excess Earnings Method (“MPEEM”), which is a form of the income approach, was used to estimate the fair value of acquired IPR&D when performing a quantitative assessment. Under the MPEEM, the fair value of an intangible asset is equal to the present value of the asset’s projected incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life. We evaluate potential impairment of our acquired IPR&D annually on September 30th, utilizing a qualitative approach and determining if it was more-likely-than not that the fair value was impaired.

Our determinations as to whether, and if so, the extent to which acquired IPR&D become impaired are highly judgmental and, in the case of applying the MPEEM approach to estimate fair value, are based on significant assumptions regarding our projected future financial condition and operating results, changes in the manner of our use of the acquired assets, development of our acquired assets or our overall business strategy, and regulatory, market, and economic environment and trends.

If the associated research and development effort is abandoned, the related asset will be written-off, and we will record a non-cash impairment loss on our consolidated statements of operations and comprehensive loss. For those products that reach regulatory approval or commercialization, the IPR&D asset will be amortized over its estimated useful life.

Financial Operations Overview

Research and Development Expenses

We recognize research and development expenses as they are incurred. These expenses consist primarily of the following:

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expenses incurred under agreements with CROs, consultants, and clinical trial sites that conduct research and development activities on our behalf;

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laboratory and vendor expenses related to the execution of our clinical trials;

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contract manufacturing expenses, primarily for the production of clinical supplies; and

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internal costs that are associated with activities performed by our research and development organization, which primarily consist of:

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personnel costs, which include salaries, benefits, and stock-based compensation expense;

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facilities and other expenses, which include expenses for maintenance of facilities and depreciation expense; and

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regulatory expenses and technology license fees related to development activities.

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We expect research and development expenses will remain significant in the future as we advance our MOLBREEVI product candidate through clinical trials and pursue regulatory approvals, which will require a significant increased investment in regulatory support and contract manufacturing activities, including investing in the development of second source manufacturers and clinical supplies.

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for our product candidate. The probability of success of our product candidate may be affected by numerous factors, including clinical data, competition, intellectual property rights, manufacturing capability, and commercial viability. As a result, we are unable to accurately determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of MOLBREEVI.

General and Administrative Expenses

General and administrative (“G&A”) expenses consist primarily of salaries, benefits, and related costs for personnel in executive, finance and accounting, legal, and investor relations; as well as professional and consulting fees for accounting, legal, investor relations, business development, human resources, and information technology services. Other G&A expenses include facility lease and insurance costs.

Other Income, Net

Other income (expense) includes amortization expense related to capitalized debt issuance costs and debt discount under our Amended Loan Agreement with Silicon Valley Bank. Interest expense is typically reported net of interest income, which includes interest earned on our cash, cash equivalent, and short-term investment balances. Other income (expense) also includes net unrealized and realized gains and losses from foreign currency transactions, foreign exchange derivatives not designated as hedging, refundable tax credits generated by some of our foreign subsidiaries, and securities subject to fair value accounting as well as any other non-operating gains and losses.

Results of Operations – Comparison of Years Ended December 31, 2024 and 2023

Research and Development

Research and development expenses increased $33.8 million, or 76.3%, to $78.0 million for the year ended December 31, 2024 from $44.3 million for the year ended December 31, 2023. This increase is primarily due to the performance of tasks related to our MOLBREEVI program which includes approximately $19.9 million of costs related to our chemistry, manufacturing, and controls activities, primarily driven by initiatives to establish our second drug substance manufacturer, $2.8 million of costs related to our IMPALA-2 trial, IMPACT trial, and Savara EAP, including CRO-related activities, $4.1 million of costs related to regulatory affairs and quality assurance, and $7.0 million due to an increase in personnel and related costs and other departmental overhead.

General and Administrative

General and administrative expenses increased $9.4 million, or 59.8%, to $25.0 million for the year ended December 31, 2024 from $15.7 million for the year ended December 31, 2023. The increase is due to personnel and related costs of $4.3 million, certain commercial activities of $3.8 million, and other overhead of $1.3 million primarily driven by patient advocacy activities and consultant costs.

Other Income, Net

Other income, net increased $2.0 million to $7.3 million for the year ended December 31, 2024 from $5.3 million for the year ended December 31, 2023. The increase is primarily related to an increase in interest income as a result of higher

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balances and more favorable rates and returns on our short-term investments following various equity financings. Refer to Note 9. Stockholders’ Equity of the consolidated financial statements in this annual report on Form 10-K for additional discussion of the July 2024 Offering.

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2024, we had $15.1 million in cash and cash equivalents, $181.2 million in short-term investments, and an accumulated deficit of $489.3 million. Since inception through December 31, 2024, our operations have been financed primarily by net cash proceeds of approximately $594.9 million, primarily from underwritten offerings of our common stock, private placements of common stock, and debt financings.

We have used and intend to use the net proceeds from these offerings for working capital and general corporate purposes, which include, but are not limited to, the funding of clinical development of and pursuing regulatory approval for our product candidate and general and administrative expenses. As we continue to progress on the IMPALA-2 trial, pursue regulatory approval, and invest in pre-commercial activities, we will continue to monitor our liquidity and capital requirements.

Debt Facility

As discussed in Note 16. Subsequent Events in the notes to the consolidated financial statements in this annual report on Form 10-K, on March 26, 2025, we entered into the Hercules Loan Agreement which provides for a loan facility of up to $200 million. Proceeds from the initial $30 million tranche drawn under the Hercules Loan Agreement were used to repay all outstanding obligations under the Amended Loan Agreement with Silicon Valley Bank, a division of First Citizens BancShares, with a carrying value of $26.6 million as described in Note 16. Subsequent Events, to pay certain expenses incurred in connection with the financing, and for general corporate purposes. Subject to satisfaction of certain conditions, including attainment of FDA approval of MOLBREEVI for the treatment of aPAP, we may draw future tranches under the Hercules Loan Agreement to fund our ongoing business operations including the development, regulatory approval, marketing and commercialization of MOLBREEVI.

Common Stock Sales Agreement

Evercore Sales Agreement

On July 6, 2021, the Company entered into a Common Stock Sales Agreement with Evercore Group L.L.C. (“Evercore”), as sales agent (the “Sales Agreement”), pursuant to which the Company may offer and sell, from time to time, through Evercore, shares of Savara’s common stock, par value $0.001 per share (the “Shares”), having an aggregate offering price of not more than $100.0 million. The Sales Agreement was effective on July 16, 2021, the date the Company’s Registration Statement on Form S-3 (File No. 333-257709) (the “2021 Registration Statement”), filed with the SEC on July 6, 2021, was declared effective by the SEC. From July 16, 2021 through May 20, 2024, Shares were sold pursuant to the 2021 Registration Statement. Since May 21, 2024, the Shares have been offered and sold pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-279274), filed with the SEC on May 9, 2024 (the “2024 Registration Statement”). Subject to the terms and conditions of the Sales Agreement, Evercore will use commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. The Company has provided Evercore with customary indemnification rights, and Evercore will be entitled to a commission at a fixed commission rate equal to 3% of the gross proceeds per Share sold. Sales of the Shares, if any, under the Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended. The Company has no obligation to sell any of the Shares and may at any time suspend sales under the Sales Agreement or terminate the Sales Agreement.

During the year ended December 31, 2024 and 2023, we sold 6,038,650 shares of the Company’s common stock resulting in net proceeds of $24.4 million and 2,071,511 shares of common stock resulting in net proceeds of $8.8 million, in each case, to a single institutional investor pursuant to the Sales Agreement, respectively.

Recent Underwritten Offerings of Common Stock

July 2024

On July 1, 2024, we sold an aggregate of 26,246,720 shares of our common stock, par value $0.001 per share, pursuant to an underwritten offering of our common stock (the "July 2024 Offering") at an offering price of $3.81 per share. The July 2024 Offering resulted in net proceeds of $93.8 million as discussed in Note 9. Stockholders’ Equity in the notes to the consolidated financial statements included in this annual report on Form 10-K.

July 2023

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On July 17, 2023, we completed an underwritten offering of our common stock and pre-funded warrants (the "July 2023 Offering") resulting in net proceeds of approximately $74.9 million as discussed in Note 9. Stockholders’ Equity in the notes to the consolidated financial statements included in this annual report on Form 10-K.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

Cash flows from operating activities

Cash used in operating activities for the year ended December 31, 2024 was $89.1 million, consisting of a net loss of $95.9 million offset by a net increase in operating assets and liabilities of $1.8 million and $5.0 million of net noncash charges. The change in our net operating assets and liabilities was primarily due to an increase in accrued liabilities, specifically, compensation and research and development costs for MOLBREEVI. Net noncash charges are mainly comprised of amortization of debt issuance costs, accretion on discount to short-term investments, and stock-based compensation.

Cash used in operating activities for the year ended December 31, 2023 was $51.1 million, consisting of a net loss of $54.7 million and a net increase in operating assets and liabilities of $4.1 million. The change in our net operating assets and liabilities was primarily due to an increase in accrued liabilities, specifically, compensation and research and development costs for MOLBREEVI. This was partially offset by approximately $0.5 million of non-cash charges, mainly comprised of amortization of debt issuance costs, accretion on discount/amortization on premium to short-term investments, and stock-based compensation.

Cash flows from investing activities

Cash used in or provided by investing activities for the years ended December 31, 2024 and 2023 was primarily the result of net sale and maturities of short-term investments.

Cash flows from financing activities

Cash provided by financing activities of $117.6 million for the year ended December 31, 2024 was primarily the result of net proceeds from the July 2024 Offering and at the market offerings. Refer to Note 9. Stockholders’ Equity of the consolidated financial statements in this annual report on Form 10-K for additional discussion of the July 2024 Offering.

Cash provided by financing activities of $82.8 million for the year ended December 31, 2023 was primarily the result of net proceeds from the July 2023 Offering and at the market offerings. Refer to Note 9. Stockholders’ Equity of the consolidated financial statements in this annual report on Form 10-K for additional discussion of the July 2023 Offering.

Future Funding Requirements

We have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize our product candidate. At the same time, we expect our expenses to increase in connection with our ongoing development and manufacturing activities, particularly as we continue the research, development, manufacture, and clinical trials of, and seeking regulatory approval for, our product candidate. In addition, subject to obtaining regulatory approval of our product candidate, we anticipate we may need additional funding in connection with our continuing operations.

As of December 31, 2024, we had cash, cash equivalents, and short-term investments of $196.3 million. Although we have sufficient capital to fund our planned activities, including those discussed in Note 10. Commitments – Manufacturing and Other of the consolidated financial statements in this annual report on Form 10-K, we may need to raise additional capital to further fund the development of, and seek regulatory approvals for our product candidate and to begin commercialization of any approved product. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when

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needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to develop our product candidate.

Although we believe we are well capitalized based on our current operations, until we can generate a sufficient amount of product revenue to finance our cash requirements, we may finance our future cash needs primarily through the issuance of additional equity securities and potentially through borrowings, grants, and strategic alliances with partner companies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or commercialization efforts or grant rights to develop and market product candidate to third parties that we would otherwise prefer to develop and market ourselves.

Manufacturing and Other Commitments and Contingencies

We are subject to various manufacturing royalties and payments and other commitments related to MOLBREEVI.

For a summary of the contingent milestone payments and commitments, refer to Note 10. Commitments – Manufacturing and Other, of the consolidated financial statements in this annual report on Form 10-K.

Other Contracts

We enter into contracts in the normal course of business with various third parties for research studies, clinical trials, testing, and other services. These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

Recent Accounting Pronouncements

Refer to Note 2. Summary of Significant Accounting Policies – Recent Accounting Pronouncements, of the consolidated financial statements in this annual report on Form 10-K milestone for a discussion of recent accounting pronouncements and their effect, if any, on us.