UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from                      to                   

Commission File Number: 001-42270

Zenas BioPharma, Inc.

(Exact name of registrant as specified in its charter)

Delaware	93-2749244
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1000 Winter Street, North Building, Suite 1200

Waltham, MA 02451

(Address of Principal Executive Offices)

(857) 271-2954

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☐   No  ☒  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	¨
Non-accelerated filer	☒	Smaller reporting company	☒	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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading symbol	Name of Exchange on which registered
Common stock, par value $0.0001 per share	ZBIO	Nasdaq Global Select Market

As of October 31, 2024, there were 41,791,037 of the registrant’s common stock, par value $0.0001 per share, outstanding.

TABLE OF CONTENTS

		Page
Part I	Financial Information
Item 1.	Financial Statements (Unaudited)	7
	Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	7
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2024 and 2023	8
	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2024 and 2023	9
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	11
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	44
Part II	Other Information
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	103
Item 3.	Defaults Upon Senior Securities	104
Item 4.	Mine Safety Disclosures	104
Item 5.	Other Information	104
Item 6.	Exhibits	104
Exhibit Index		105
Signatures		106

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements concerning:

• the commercial opportunities stemming from the development of obexelimab for multiple I&I diseases;

• our ability to develop and, if approved, ultimately commercialize obexelimab and, with partners, our other programs;

• our ability to obtain or maintain orphan drug designation for certain of our product candidates;

• the initiation, timing, progress, results, and cost of our development programs, and our current and future preclinical and clinical studies, including statements regarding the timing of initiation and completion of our clinical trials, and the period during which the results of the trials will become available;

• the success, cost and timing of our clinical development of our product candidates;

• our ability to establish clinical differentiation of our product candidates;

• our ability to develop product candidates that have broad therapeutic potential;

• our ability to utilize our business development strategy and expertise to build a balanced portfolio;

• our ability to identify collaborations and strategic partnerships to maximize the value of our portfolio;

• our ability to build our operational and commercial capabilities for supplying and marketing our products, if approved, in key markets;

• market conditions in the biopharmaceutical sector and issuance of securities analysts’ reports or recommendations;

• the trading volume of our common stock;

• an inability to obtain additional funding;

• our ability to initiate, recruit and enroll patients in and conduct our clinical trials at the pace that we project;

• our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations or warnings in the label of any of our product candidates, if approved;

• our reliance on third parties to manufacture drug substance and drug product for use in our clinical trials;

• our ability to retain and recruit key personnel;

• our ability to obtain and maintain adequate intellectual property rights;

• our expectations regarding government and third-party payor coverage and reimbursement;

• our estimates of our expenses, ongoing losses, capital requirements and our needs for or ability to obtain additional financing;

3

• our existing cash and the sufficiency of our existing cash and proceeds from future capital-raising efforts, if any, to fund our future operating expenses and capital expenditure requirements;

• the potential benefits of strategic collaboration agreements;

• our ability to enter into strategic collaborations or arrangements, including potential business development opportunities and potential licensing partnerships, and our ability to attract collaborators with development, regulatory and commercialization expertise;

• sales of our stock by us, our insiders or our stockholders, as well as the anticipation of lock-up releases or expiration of market stand-off or lock-up agreements;

• our expectations regarding the time during which we will be an emerging growth company and smaller reporting company under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”);

• general economic, industry, geopolitical and market conditions, such as military conflict or war, inflation and financial institution instability, or pandemic or epidemic disease outbreaks, many of which are beyond our control;

• additions or departures of senior management, directors or key personnel;

• our financial performance;

• developments and projections relating to our competitors or our industry; and

• other risks and uncertainties, including those included in the section titled “Risk Factors.”

The forward-looking statements in this Quarterly Report may prove incorrect. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely on these statements. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as guarantees of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual future results, levels of activity, performance and events and circumstances could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risks and uncertainties may emerge from time to time, and management cannot predict all risks and uncertainties. Except as required by applicable law, we do not undertake to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

4

SUMMARY RISK FACTORS

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in Part II, Item 1A. “Risk Factors” in this Quarterly Report. These risks include the following:

• We are a clinical-stage biopharma company with a limited operating history and no products approved for commercial sale; we have incurred substantial losses since our inception, and we anticipate incurring substantial and increasing losses for the foreseeable future;

• We will require substantial additional financing to achieve our goals, and failure to obtain additional capital when needed, or on acceptable terms, would cause us to delay, limit, reduce or terminate our product development efforts;

• Raising additional capital may cause dilution to our stockholders, imposing restrictions on our operations or require us to relinquish rights to our product candidates;

• Clinical development is lengthy and expensive, characterized by uncertain outcomes, with results of earlier studies and trials often failing to predict future trial results or results in other indications of a product candidate. We may incur additional costs or experience delays in completing, or fail to complete, the development and commercialization of our current product candidates or any future product candidates;

• Delays or difficulties in the enrollment and dosing of patients in clinical trials delay or prevent receipt of necessary regulatory approvals;

• Any significant adverse events or undesirable side effects caused by our product candidates may delay or prevent regulatory approval or market acceptance of our product candidates, or result in significant negative consequences following marketing approval, if any;

• We face potential competition from different sources that have made substantial investments into the rapid development of novel treatments for immunological indications, including large and specialty pharmaceutical and biotechnology companies, many of which already have approved therapies in our current indications;

• We may not realize the benefits of our current or future collaborations or licensing arrangements and may be unsuccessful in consummating future partnerships;

• Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize any product candidate in the United States or any other jurisdiction, and any such approval may be for a more narrow indication than we seek;

• We are dependent on the services of our senior management and other clinical and scientific personnel, and if we are not able to retain these individuals or recruit additional management or clinical and scientific personnel, our business will suffer;

• We will need to grow our organization, and we may experience difficulties in managing our growth and expanding our operations, which could adversely affect our business;

• The manufacturing of our product candidates is complex, and our third-party manufacturers may encounter difficulties in production. If our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials, our ability to obtain marketing approval, or provide commercial supply of our products, if approved, could be delayed or halted;

5

• If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates or any future product candidates we may develop, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors or other third parties could develop and commercialize products similar or identical to ours, and our ability to successfully develop and commercialize our product candidates may be adversely impacted;

• We have relied and expect to continue to rely on third parties to conduct our preclinical studies and clinical trials. If those third parties do not perform as contractually required, fail to satisfy legal or regulatory requirements, miss deadlines or terminate the relationship, our development programs could be delayed, more costly or unsuccessful, and we may never be able to seek or obtain regulatory approval for or commercialize our product candidates;

• Our rights to develop and commercialize our product candidates are subject, in large part, to the terms and conditions of licenses granted to us by others, such as Xencor, Inc. (“Xencor”). If we fail to comply with our obligations in the agreements under which we in-license or acquire development or commercialization rights to product candidates, or data from third parties, we could lose such rights that are important to our business;

• The operations of our suppliers, many of which are located outside of the United States, including our current sole contract manufacturing organization (“CMO”) for drug substance and drug product, WuXi Biologics (Hong Kong) Limited (“WuXi Biologics”), which is located in China, are subject to additional risks that are beyond our control and that could harm our business, financial condition, results of operations and prospects;

• An active and liquid trading market for our common stock may not be sustained; and

• The market price of our common stock may be volatile, which could result in substantial losses for investors.

If we are unable to adequately address these and other risks we face, our business, results of operations, financial condition and prospects may be harmed.

NOTE REGARDING TRADEMARKS

The Zenas BioPharma word mark and logos are trademarks of Zenas BioPharma, Inc. or its affiliated companies.

We have, in certain cases, omitted the ® and ™ designations for these and other trademarks used in this Quarterly Report. Nevertheless, all rights to such trademarks are reserved. These and other trademarks referenced in this Quarterly Report are the property of their respective owners.

6

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

Zenas BioPharma, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)

	September 30,		December 31,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	360,038	$	56,857
Short-term investments		26,761		—
Prepaid expenses and other current assets		6,979		2,947
Total current assets		393,778		59,804
Property and equipment, net		146		193
Operating lease right-of-use assets, net		399		821
Restricted cash		89		86
Other assets		9,020		7,276
Total assets	$	403,432	$	68,180
Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable (includes $594 and $21 owed to related parties, respectively)	$	15,082	$	5,396
Accrued expenses (includes $1,873 and $404 owed to related parties, respectively)		28,531		17,306
Operating lease liabilities, current		384		556
Total current liabilities		43,997		23,258
Operating lease liabilities, non-current		—		257
Convertible notes, at fair value		—		20,300
Total liabilities		43,997		43,815
Commitments and contingencies (Note 14)
Convertible preferred stock:
Series Seed convertible preferred stock, par value $0.0001 per share; 0 and 1,785,714 shares authorized, issued and outstanding as of September 30, 2024 and December 31, 2023, respectively; liquidation preference of $0 as of September 30, 2024		—		956
Series A convertible preferred stock, par value $0.0001 per share; 0 and 17,589,380 shares authorized, issued and outstanding as of September 30, 2024 and December 31, 2023, respectively; liquidation preference of $0 as of September 30, 2024		—		55,840
Series B convertible preferred stock, par value $0.0001 per share; 0 and 81,242,587 shares authorized, issued and outstanding as of September 30, 2024 and December 31, 2023, respectively; liquidation preference of $0 as of September 30, 2024		—		193,290
Stockholders’ equity (deficit):
Preferred stock, par value $0.0001 per share; 25,000,000 and no shares authorized as of September 30, 2024 and December 31, 2023, respectively; no shares issued and outstanding as of September 30, 2024 and December 31, 2023		—		—
Common stock, par value $0.0001 per share; 175,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 41,780,938 and 1,576,854 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		4		—
Additional paid-in capital		694,163		4,645
Accumulated other comprehensive income		54		37
Accumulated deficit		(334,786)		(230,403)
Total stockholders’ equity (deficit)		359,435		(225,721)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	403,432	$	68,180

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

7

Zenas BioPharma, Inc.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(Unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Revenue:
Collaboration revenue	$	—	$	50,000	$	—	$	50,000
Total revenue		—		50,000		—		50,000
Operating expenses:
Research and development (includes $1,375, $612, $3,247 and $2,704 from related parties, respectively)		33,530		9,352		89,982		39,615
General and administrative (includes $0, $3, $0 and $71 from related parties, respectively)		7,454		5,024		18,283		12,753
Acquired in-process research and development		—		—		—		10,000
Total operating expenses		40,984		14,376		108,265		62,368
(Loss) income from operations		(40,984)		35,624		(108,265)		(12,368)
Other income (expense), net:
Fair value adjustments to convertible notes		—		—		(846)		—
Other income (expense), net		2,378		(16)		4,727		(169)
Total other income (expense), net		2,378		(16)		3,881		(169)
Net (loss) income	$	(38,606)	$	35,608	$	(104,384)	$	(12,537)
Net (loss) income per share attributable to common stockholders - basic	$	(5.02)	$	2.42	$	(28.83)	$	(8.21)
Net (loss) income per share attributable to common stockholders - diluted	$	(5.02)	$	1.96	$	(28.83)	$	(8.21)
Weighted-average common stock outstanding - basic		7,697,695		1,537,918		3,621,276		1,527,730
Weighted-average common stock outstanding - diluted		7,697,695		1,898,391		3,621,276		1,527,730
Comprehensive loss:
Net (loss) income		(38,606)		35,608		(104,384)		(12,537)
Other comprehensive income:
Foreign currency translation adjustment		(50)		9		16		165
Comprehensive (loss) income	$	(38,656)	$	35,617	$	(104,368)	$	(12,372)

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

8

Zenas BioPharma, Inc.

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and

Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share data)

															Accumulated
	Convertible Preferred Stock												Additional		Other				Total
	Series Seed			Series A			Series B			Common Stock			Paid-in		Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Income (Loss)		Deficit		Deficit
Balance at December 31, 2022	1,785,714	$	956	17,589,380	$	55,840	77,052,632	$	183,290	1,549,275	$	—	$	1,034	$	(41)	$	(193,279)	$	(192,286)
Exercises of common stock options	—		—	—		—	—		—	15,835		—		55		—		—		55
Stock-based compensation expense	—		—	—		—	—		—	—		—		687		—		—		687
Net loss	—		—	—		—	—		—	—		—		—		—		(19,098)		(19,098)
Foreign currency translation adjustment	—		—	—		—	—		—	—		—		—		(4)		—		(4)
Balance at March 31, 2023	1,785,714	$	956	17,589,380	$	55,840	77,052,632	$	183,290	1,565,110	$	—	$	1,776	$	(45)	$	(212,377)	$	(210,646)
Issuance of Series B convertible preferred stock as payment of Xencor milestone	—		—	—		—	4,189,955		10,000	—		—		—		—		—		—
Exercises of common stock options	—		—	—		—	—		—	3,108		—		11		—		—		11
Stock-based compensation expense	—		—	—		—	—		—	—		—		669		—		—		669
Net loss	—		—	—		—	—		—	—		—		—		—		(29,047)		(29,047)
Foreign currency translation adjustment	—		—	—		—	—		—	—		—		—		160		—		160
Balance at June 30, 2023	1,785,714	$	956	17,589,380	$	55,840	81,242,587	$	193,290	1,568,218	$	—	$	2,456	$	115	$	(241,424)	$	(238,853)
Exercises of common stock options	—		—	—		—	—		—	—		—		—		—		—		—
Stock-based compensation expense	—		—	—		—	—		—	—		—		1,004		—		—		1,004
Net income	—		—	—		—	—		—	—		—		—		—		35,608		35,608
Foreign currency translation adjustment	—		—	—		—	—		—	—		—		—		9		—		9
Balance at September 30, 2023	1,785,714	$	956	17,589,380	$	55,840	81,242,587	$	193,290	1,568,218	$	—	$	3,460	$	124	$	(205,816)	$	(202,232)

9

Zenas BioPharma, Inc.

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and

Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share data)

																			Accumulated				Total
	Convertible Preferred Stock																Additional		Other				Stockholders'
	Series Seed			Series A			Series B			Series C				Common Stock			Paid-in		Comprehensive		Accumulated		Equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares		Amount		Shares	Amount		Capital		Income		Deficit		(Deficit)
Balance at December 31, 2023	1,785,714	$	956	17,589,380	$	55,840	81,242,587	$	193,290	$	—	$	—	1,576,854	$	—	$	4,645	$	37	$	(230,403)	$	(225,721)
Repurchase of unvested restricted stock awards	—		—	—		—	—		—		—		—	(21,172)		—		—		—		—		—
Exercises of common stock options	—		—	—		—	—		—		—		—	7,035		—		42		—		—		42
Stock-based compensation expense	—		—	—		—	—		—		—		—	—		—		947		—		—		947
Net loss	—		—	—		—	—		—		—		—	—		—		—		—		(27,800)		(27,800)
Foreign currency translation adjustment	—		—	—		—	—		—		—		—	—		—		—		37		—		37
Balance at March 31, 2024	1,785,714	$	956	17,589,380	$	55,840	81,242,587	$	193,290		—	$	—	1,562,717	$	—	$	5,634	$	74	$	(258,203)	$	(252,495)
Issuance of Series C convertible preferred stock, net of $619 issuance costs	—		—	—		—	—		—		116,275,239		199,526	—		—		—		—		—		—
Stock-based compensation expense	—		—	—		—	—		—		—		—	—		—		1,536		—		—		1,536
Exercises of common stock options	—		—	—		—	—		—		—		—	15,655		—		124		—		—		124
Net loss	—		—	—		—	—		—		—		—	—		—		—		—		(37,977)		(37,977)
Foreign currency translation adjustment	—		—	—		—	—		—		—		—	—		—		—		30		—		30
Balance at June 30, 2024	1,785,714	$	956	17,589,380	$	55,840	81,242,587	$	193,290		116,275,239	$	199,526	1,578,372	$	—	$	7,294	$	104	$	(296,180)	$	(288,782)
Conversion of convertible preferred stock to common stock upon closing of initial public offering	(1,785,714)		(956)	(17,589,380)		(55,840)	(81,242,587)		(193,290)		(116,275,239)		(199,526)	24,978,715		2		449,610		—		—		449,612
Issuance of common stock from initial public offering, net of $6,250 of issuance costs	—		—	—		—	—		—		—		—	15,220,588		2		234,384		—		—		234,386
Stock-based compensation expense	—		—	—		—	—		—		—		—	—		—		2,843		—		—		2,843
Exercises of common stock options	—		—	—		—	—		—		—		—	3,263		—		32		—		—		32
Net loss	—		—	—		—	—		—		—		—	—		—		—		—		(38,606)		(38,606)
Foreign currency translation adjustment	—		—	—		—	—		—		—		—	—		—		—		(50)		—		(50)
Balance at September 30, 2024	—	$	—	—	$	—	—	$	—		—	$	—	41,780,938	$	4	$	694,163	$	54	$	(334,786)	$	359,435

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

10

Zenas BioPharma, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	Nine Months Ended
	September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(104,384)	$	(12,537)
Adjustments to reconcile net loss to net cash used in operating activities:
Acquired in-process research and development		—		10,000
Depreciation expense		104		83
Stock-based compensation expense		5,326		2,360
Change in fair value of convertible notes		846		—
Non-cash lease expense		423		571
Changes in operating assets and liabilities:
Prepaid expenses and other assets		475		(4,714)
Accounts payable		6,319		(