Zura Bio Limited — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2023. Unless otherwise noted, financial amounts below are in U.S. dollars. Comparisons for the nine-month period are against the period from inception on January 18, 2022, through September 30, 2022, rather than a full comparable nine-month period.
Business context
Zura Bio is a clinical-stage biotechnology company developing treatments for immune and inflammatory disorders. It has no approved products and has not generated product revenue. Its licensed programs include ZB-168 (Pfizer), torudokimab (Lilly), and ZB-106 (Lilly). The company completed its business combination on March 20, 2023, and raised additional capital in an April 2023 private placement.
Financial performance and position
| Metric | Q3 2023 / September 30, 2023 | Comparable period / December 31, 2022 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.0 million for Q3; $37.1 million for nine months | $0.4 million for Q3 2022; $8.0 million from inception through September 2022 |
| General and administrative expense | $6.2 million for Q3; $14.7 million for nine months | $0.7 million for Q3 2022; $1.8 million from inception through September 2022 |
| Net loss | $8.3 million for Q3; $51.9 million for nine months | $1.1 million for Q3 2022; $9.8 million from inception through September 2022 |
| Net loss attributable to Class A shareholders | $8.3 million for Q3; $63.0 million for nine months | $1.1 million for Q3 2022; $9.8 million from inception through September 2022 |
| Basic and diluted loss per share | $(0.18) for Q3; $(2.22) for nine months | $(2.87) for Q3 2022; $(57.14) from inception through September 2022 |
| Cash and cash equivalents | $103.9 million | $1.6 million at December 31, 2022 |
| Total liabilities | $19.0 million, including $2.0 million of private placement warrants | $14.8 million at December 31, 2022 |
| Shareholders’ equity | $64.8 million | Deficit of $32.1 million at December 31, 2022 |
Margins are not meaningful because the company has no revenue. For the first nine months of 2023, operating cash use was $11.0 million, investing cash use was $8.0 million, and financing cash provided was $121.3 million. Financing included business-combination proceeds, private-placement proceeds, and repayment of the $10.0 million note. The note was repaid in March 2023; no note payable remained at September 30.
Material changes and unusual items
- Operating expenses rose substantially as the company expanded development and public-company activities. Q3 R&D expense increased $3.6 million year over year, principally from manufacturing and clinical/regulatory consulting costs. Q3 G&A increased $5.6 million, mainly from personnel compensation, professional fees, and travel and office costs.
- Nine-month R&D expense included significant license-related and other acquired research costs. Management cited $27.2 million of Lilly license and milestone fees, alongside Pfizer anti-dilution share compensation and other license-related remeasurement costs.
- A $10.9 million deemed dividend related to amended Stone Peach arrangements increased the nine-month loss attributable to Class A shareholders above reported net loss. The company and Stone Peach were renegotiating the call-option exercise terms.
- April’s private placement raised $80.0 million gross through ordinary shares and pre-funded warrants. At September 30, 43.1 million Class A shares were outstanding; warrants, options, and restricted share units represented potential additional dilution.
- Accounts payable and accrued expenses were $17.0 million, including $10.0 million accrued for the 2023 Lilly license and $3.8 million of accrued R&D costs.
Liquidity, outlook, and risks
Management stated that available liquidity was sufficient to fund operations for at least the next 12 months. It expects continued operating losses and negative operating cash flows, rising development and manufacturing expenses, and a need for substantial additional funding. The company does not expect product revenue for at least the next few years and cautioned that its runway estimate depends on assumptions that may prove incorrect.
License agreements create substantial potential future obligations. The Pfizer agreement includes up to $70 million in development and regulatory milestones and up to $525 million in sales milestones, plus royalties. Lilly agreements include substantial development, regulatory, and sales milestones, royalties, and other contingent payments. Timing and amounts depend on future events and are not included as fixed contractual obligations where uncertain. A $0.4 million Lonza milestone became due in October 2023 after the company began manufacturing with a third party.
Key risks include clinical and regulatory uncertainty, dependence on additional financing, development and manufacturing execution, competition, intellectual-property protection, and the possibility that candidates never obtain approval or reach commercial success. The filing reports no material legal proceedings. Management concluded disclosure controls were effective at a reasonable-assurance level as of September 30, 2023, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Cash burn, spending plans, and whether the stated 12-month liquidity runway remains valid as development advances.
- Clinical-development status, trial timelines, and funding needs for ZB-168, torudokimab, and ZB-106.
- Potential milestone, royalty, and other payment obligations under the Pfizer, Lilly, Stone Peach, BAFFX17, Lonza, and WuXi arrangements.
- Fully diluted share count and potential dilution from public and private warrants, pre-funded warrants, options, and restricted share units.
- The status and financial impact of the renegotiated Stone Peach call-option arrangements and the recorded $10.9 million deemed dividend.