Zura Bio Limited — Q1 2023 Form 10-Q
Business context and reporting period
For the three months ended March 31, 2023. Zura is a clinical-stage biotechnology company developing therapies for immune and inflammatory disorders, including ZB-168 and torudokimab. It has no approved products, has generated no product revenue, and reports that it has not conducted clinical trials itself. The March 20, 2023 business combination with JATT was accounted for as a reverse recapitalization; historical results reflect Legacy Zura.
Financial results and liquidity
| Metric | Q1 2023 | Comparable 2022 period |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.884 million | $7.500 million |
| General and administrative expense | $2.835 million | $0.319 million |
| Total operating expenses / operating loss | $7.719 million | $7.819 million |
| Net loss | $9.592 million | $7.819 million |
| Net loss attributable to Class A shareholders | $9.795 million | $7.819 million |
| Operating cash flow | $(3.257) million | $(0.280) million |
The 2022 comparison is for the period from inception on January 18 through March 31, 2022, rather than a full three-month operating history. No meaningful operating margin is available because the company had no revenue. Q1 2023 net loss included a $2.244 million loss from remeasuring the note payable, partly offset by a $0.177 million gain on private placement warrants.
At March 31, 2023, cash was $43.963 million, total assets $44.385 million, current liabilities $4.993 million, total liabilities $6.530 million, and accumulated deficit $41.851 million. The $10 million note payable was repaid at the business-combination closing; no note payable remained at quarter-end. Net cash provided by financing was $45.653 million, including $56.683 million of business-combination proceeds, offset by note repayment and transaction-cost payments. Investing cash flow was zero.
Changes versus the comparable period
- R&D expense declined 35%, mainly because the prior period included $7.5 million of Pfizer license acquisition expense; Q1 2023 included $2.2 million of Pfizer anti-dilution share compensation and $1.9 million of remeasurement expense on the Lilly license consideration liability.
- G&A expense rose $2.516 million, primarily from personnel and share-based compensation and higher public-company legal and accounting costs.
- Net loss increased $1.976 million. The note-payable remeasurement loss and redeemable noncontrolling-interest accounting contributed to the change.
- The business combination generated $56.7 million in proceeds, materially increasing cash and converting the company into a Nasdaq-listed public company. The former $7.756 million note liability and $2.634 million license-consideration liability were settled.
Outlook, risks, and unusual items
- Management expects substantial operating losses and negative operating cash flows to continue, with expenses rising as research, development, manufacturing, regulatory, and public-company activities expand. It expects no product revenue for at least the next few years and may never become profitable.
- Management stated that proceeds from the business combination and the subsequent private placement were expected to fund operating expenses and capital requirements through at least the next 12 months, subject to assumptions and faster-than-expected cash use.
- In April 2023, Zura entered a private placement expected to generate approximately $80 million gross. The initial May 1 closing raised about $15.9 million; an additional approximately $64.1 million was committed for a second closing following shareholder approval. These are post-quarter events and proceeds are before fees and expenses.
- Effective April 26, 2023, Zura entered a new Lilly license for ZB-106, with a $5.8 million upfront cash payment, 1 million shares, a further $5 million payment upon receipt of specified materials, and potential development, sales, and royalty obligations.
- Material risks include clinical and regulatory failure, the need for additional capital, uncertain development costs and timelines, competition, manufacturing and intellectual-property risks, and future milestone and royalty obligations to Pfizer and Lilly. The filing says deposits at Silicon Valley Bank were restored after the bank’s failure, but cash balances at financial institutions can exceed insured limits.
- Potential Pfizer development and regulatory milestones total up to $70 million, with sales milestones up to $525 million; Lilly’s existing license includes up to $155 million in development and regulatory milestones and up to $440 million in sales milestones. Additional contingent obligations arise under the subsequent ZB-106 license.
- The company reported no material litigation. Management concluded disclosure controls were effective at a reasonable assurance level as of March 31, 2023.
Important facts for investors to verify
- Completion and final net proceeds of the second private-placement closing, including shareholder approval, fees, and resulting share and warrant dilution.
- Cash runway after the private placement, the new Lilly license payments, and planned clinical and manufacturing spending.
- Development status, trial initiation plans, and regulatory timelines for ZB-168, torudokimab, and ZB-106; the filing does not provide clear trial-start dates or detailed forward guidance.
- Potential dilution from outstanding warrants, options, restricted share units, and securities issued in the private placement; the filing reported 27,052,155 Class A shares outstanding as of May 12, 2023.
- Future contingent license costs and the effect of milestone, royalty, and share-based compensation obligations on capital needs.