10-Q: Surrozen Reports Q3 2025 Loss, Advances Ophthalmology Pipeline

Surrozen, Inc. reported a significant net loss of $71.6 million for Q3 2025, driven by non-cash charges and increased R&D for its ophthalmology pipeline, while discontinuing its SZN-043 program and facing termination of a key research collaboration.

Summary

• Net loss for the three months ended September 30, 2025, was $71.6 million, a significant increase from $1.4 million for the same period in 2024.
• Net loss for the nine months ended September 30, 2025, was $58.9 million, compared to $35.5 million for the nine months ended September 30, 2024.
• Total revenue for Q3 2025 was $983 thousand, a 90% decrease from $10.0 million in Q3 2024, primarily due to the recognition of a milestone under the Collaboration and License Agreement with Boehringer Ingelheim in September 2024.
• Research and development expenses increased by 50% to $7.8 million in Q3 2025, driven by a $2.7 million increase in manufacturing costs, lab expenses, and consulting fees for ophthalmology programs, partially offset by a $0.8 million decrease in clinical expenses due to the discontinuation of SZN-043.
• General and administrative expenses increased by 15% to $4.1 million in Q3 2025, mainly due to higher professional service fees.
• Cash and cash equivalents increased to $81.3 million as of September 30, 2025, from $34.6 million at December 31, 2024.
• The accumulated deficit reached $344.1 million as of September 30, 2025.
• The company completed the first tranche of a $175.0 million private placement (2025 PIPE) in March 2025, raising approximately $71.2 million in net proceeds.
• The second tranche of the 2025 PIPE, for $98.6 million, is contingent upon FDA IND clearance for SZN-8141 by October 31, 2026, and may not occur prior to September 27, 2026.
• Development of SZN-043 for severe alcohol-associated hepatitis was discontinued in Q1 2025 due to insufficient early clinical benefit.
• The strategic research collaboration with TCGFB, Inc., which generated related-party research service revenue, was terminated by TCGFB, effective November 13, 2025.

Sentiment

Score: 3

Explanation: The company reported a substantially increased net loss and a significant drop in revenue due to the absence of a prior year milestone and the termination of a related-party collaboration. The discontinuation of a clinical program (SZN-043) is a setback. While the 2025 PIPE first tranche provided a cash infusion and the ophthalmology pipeline shows preclinical promise, the overall financial performance and loss of revenue streams indicate significant challenges and increased cash burn. The contingent nature of the second PIPE tranche adds uncertainty to future funding.

Positives

• Cash and cash equivalents significantly increased to $81.3 million as of September 30, 2025, from $34.6 million at December 31, 2024, providing a longer operational runway.
• Successfully closed the first tranche of the 2025 PIPE, raising $71.2 million in net proceeds, specifically earmarked to fund multiple ophthalmology programs through initial Phase 1 studies.
• Nominated SZN-8141 and SZN-8143 as development candidates for retinal diseases in Q3 2024, with SZN-8141 expected to commence clinical studies in 2026.
• Preclinical data for SZN-8141 and SZN-8143 demonstrated positive effects, including Wnt signaling stimulation, normal retinal vessel regrowth, and suppression of pathological vessel growth.
• SZN-113, targeting Fuchs Endothelial Corneal Dystrophy and Geographic Atrophy, showed promising preclinical results, enhancing human corneal endothelial cell proliferation and demonstrating wound healing and reduced corneal thickness.
• Interest income increased by 111% to $911 thousand in Q3 2025, reflecting improved returns on cash and cash equivalents.

Negatives

• Net loss dramatically increased to $71.6 million in Q3 2025 from $1.4 million in Q3 2024, primarily driven by non-cash charges related to tranche liability and warrant liabilities.
• Total revenue decreased by 90% in Q3 2025 to $983 thousand from $10.0 million in Q3 2024, due to the absence of a significant collaboration milestone payment received in the prior year.
• The discontinuation of SZN-043 development in severe alcohol-associated hepatitis in Q1 2025 represents a pipeline setback due to insufficient early clinical benefit.
• The strategic research collaboration with TCGFB, Inc., a source of related-party research service revenue, was terminated by TCGFB, effective November 13, 2025, removing a revenue stream.
• The accumulated deficit grew to $344.1 million as of September 30, 2025, indicating continued unprofitability since inception.
• The second tranche of the 2025 PIPE ($98.6 million) is contingent on FDA IND clearance for SZN-8141 by October 31, 2026, introducing uncertainty regarding future funding access.
• Significant non-cash losses were recorded, including a $40.7 million loss on change in fair value of tranche liability in Q3 2025 and a $71.1 million loss on execution of the 2025 PIPE for the nine months ended September 30, 2025.

Risks

• The company has a history of losses and expects to continue incurring significant losses, potentially never achieving or maintaining profitability.
• Substantial additional funds will be needed to advance product candidates, and there is no guarantee of sufficient funds being available in the future.
• None of the product candidates have received regulatory approval; profitability depends on obtaining regulatory approval and successful commercialization.
• Product candidates may demonstrate undesirable safety or tolerability side effects or safety concerns in clinical trials or after marketing approval, compromising marketability and revenue.
• Future equity or debt issuances or other financing transactions may have dilutive or adverse effects on existing stockholders.
• Reliance on third parties to conduct preclinical studies and clinical trials means less control over timing, quality, and other aspects, and third parties may not perform satisfactorily.
• Clinical development activities could be delayed or adversely affected for various reasons, including difficulties in patient enrollment and retention.
• The manufacturing of product candidates is complex, and difficulties in production by third-party manufacturers could delay or halt supply for clinical trials or commercial sale.
• The company faces intense competition from entities developing novel treatments and therapeutic platforms, which may develop products more rapidly or effectively.
• Inability to maintain proper and effective internal controls over financial reporting could adversely affect financial reporting accuracy and stock price.
• Operating in foreign markets subjects the company to additional regulatory burdens and other risks and uncertainties.
• International trade policies, including tariffs, sanctions, and trade barriers, may adversely affect the business, financial condition, results of operations, and prospects.
• Business, operations, and clinical development plans and timelines could be adversely affected by health epidemics, natural disasters, and other events.
• Dependence on collaborations for development and commercialization means that if collaborations are unsuccessful, the company may not capitalize on market potential.
• Collaborations are complex and time-consuming to negotiate; failure to enter new strategic relationships could materially adversely affect the business.
• Inability to obtain or protect intellectual property rights, or inadequate intellectual property rights, could impair competitive effectiveness.
• In-licensed intellectual property may be subject to federal regulations such as march-in rights and U.S.-based manufacturing preferences, limiting exclusive rights and ability to contract with non-U.S. manufacturers.
• Clinical development is a lengthy and expensive process with an uncertain outcome; negative results and non-predictive earlier trial results are possible.
• Obtaining regulatory approval in one jurisdiction does not guarantee success in others.
• A few stockholders, including a director, control significant voting rights, potentially exercising power in a manner that adversely affects the company or other stockholders.
• The stock price may be volatile, and purchasers of common stock could incur substantial losses.
• Management has flexibility in allocating cash, and its use may not always align with investor expectations or yield favorable returns.
• Issuance of additional shares or exercise of warrants/options would dilute ownership interest and may depress the market price of common stock.
• No anticipated cash dividends; capital appreciation is the sole source of gain for the foreseeable future.
• Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult and may prevent attempts by stockholders to replace or remove current management.
• Exclusive forum provisions in charter documents could limit stockholders' ability to obtain a favorable judicial forum for disputes.
• Claims for indemnification by directors and officers may reduce available funds to satisfy successful third-party claims.
• Emerging Growth Company and Smaller Reporting Company status may make securities less attractive to investors and comparisons with other public companies more difficult.
• The company may amend the terms of public warrants in a manner adverse to holders with the approval of at least 50% of outstanding public warrants.
• The company may redeem unexpired public warrants prior to their exercise at a time disadvantageous to holders, potentially making them worthless.

Future Outlook

The company expects operating expenses to remain significant due to ongoing preclinical studies and preparations for clinical studies, anticipating the need for additional capital to execute its long-range business plan. Management believes existing cash and cash equivalents are sufficient for at least the next 12 months. FDA clearance of SZN-8141's IND application is expected to trigger the $98.6 million second tranche of the 2025 PIPE, which would fund operations through initial Phase 1 safety, tolerability, and efficacy studies for SZN-8141 and SZN-8143. The company expects to file an IND and commence clinical studies for SZN-8141 in 2026 and will need to raise additional capital in the long-term through various financing methods.

Management Comments

• Management believes that the existing cash and cash equivalents are sufficient for the Company to continue operating activities for at least the next 12 months from the date of issuance of its unaudited condensed consolidated financial statements.
• If the Company's cash burn is greater than anticipated, the Company could use its capital resources sooner than expected which may result in the need to reduce future planned expenditures and/or raise additional capital to continue to fund the operations.
• We expect to continue to incur losses for the foreseeable future and expect to incur increased expenses as we expand our pipeline and advance our product candidates through clinical development and regulatory submissions.
• The Food and Drug Administration clearance of SZN-8141's IND application would trigger funding of the $98.6 million private placement tranche (2025 PIPE), which is expected to fund operations through efficacy, safety and tolerability studies for SZN-8141 and SZN-8143.

Industry Context

The company operates in the highly competitive and rapidly advancing biotechnology industry, specifically targeting the Wnt pathway for tissue repair, with a current strategic focus on ophthalmology. Its lead candidates, SZN-8141 and SZN-8143, aim to differentiate from existing anti-VEGF monotherapies for retinal diseases by combining Fzd4 agonism with VEGF and/or IL-6 antagonism. The discontinuation of the SZN-043 program underscores the inherent high-risk nature and frequent setbacks in early-stage drug development, a common challenge across the biopharmaceutical sector. The company's reliance on collaborations and private placements for funding is typical for clinical-stage biotech firms, reflecting the substantial capital requirements for R&D.

Comparison to Industry Standards

• The company's preclinical data for SZN-8141 and SZN-8143, demonstrating Wnt signaling stimulation and normal retinal vessel regrowth while suppressing pathological vessel growth, suggests a potentially differentiated mechanism compared to current anti-VEGF monotherapies, which are the standard of care for diabetic retinopathy, retinal vein occlusion, and wet AMD.
• The discontinuation of the SZN-043 program due to insufficient early clinical benefit is a common outcome in the biopharmaceutical industry, where a high percentage of drug candidates fail in clinical trials, particularly in complex indications like severe alcohol-associated hepatitis.
• The company's strategy to combine Fzd4 agonism with VEGF and IL-6 antagonism in SZN-8143 aims to offer benefits over single-agent treatments, aligning with an industry trend towards multi-targeted therapies for complex diseases.

Corporate Governance

Legal Proceedings

• Not currently a party to or aware of any proceedings that are believed to have a material adverse effect on the business, financial condition, or results of operations. Litigation, regardless of outcome, can have an adverse impact due to defense and settlement costs, diversion of management resources, and other factors.

Related Party Transactions

• **TCGFB Collaboration:** In October 2024, the company entered into a strategic research collaboration with TCGFB, Inc. (a company founded and controlled by entities affiliated with The Column Group, a significant stockholder of Surrozen). The company provided antibody discovery services for a fixed monthly fee (up to $6.0 million aggregate) and received a warrant for up to 3.4 million shares of TCGFB common stock. Recognized $1.0 million (Q3 2025) and $2.9 million (9 months 2025) as research service revenue. TCGFB elected to terminate this collaboration in October 2025, effective November 13, 2025.
• **2024 Private Placement:** In April 2024, the company issued and sold 2,948 shares of common stock to members of management at a purchase price of $16.96 per share, which included 2024 PIPE Warrants (Series A, B, C, D). The exercise prices for Series A and B warrants held by management were reduced to $12.45 per share in March 2025. Series C and D warrants were cancelled in March 2025.
• **Nura Bio Sublease:** In April 2024, the company entered into a sublease agreement with Nura Bio, Inc. (a related party due to common board member and significant stockholder affiliation) for approximately 6,102 square feet of office and laboratory space. The sublease term was extended in July 2025 until May 2026. Recognized sublease income of $0.2 million (Q3 2025) and $0.5 million (9 months 2025) as reductions to operating expenses.

Stakeholder Impact

• **Shareholders:** Face significant dilution risk from future equity offerings and warrant exercises. The stock price is likely to remain volatile. No cash dividends are anticipated in the foreseeable future. Concentrated ownership by a few stockholders, including a director, could significantly influence corporate decisions.
• **Employees:** The adoption of the 2025 Equity Inducement Plan aims to attract and retain key personnel. However, the company's history of losses and need for future capital raises could impact job security or compensation in the long term.
• **Customers/Collaborators:** The termination of the TCGFB collaboration removes a revenue stream and partnership. The ongoing collaboration with Boehringer Ingelheim for SZN-413 remains a key strategic relationship.
• **Creditors:** Increased liabilities from warrants and tranche liability, coupled with ongoing operating losses, could impact the company's creditworthiness and ability to secure future debt financing.
• **Suppliers:** Reliance on third-party manufacturers and suppliers, some of which are sole source, creates supply chain risks that could affect the timely development and commercialization of product candidates.

Next Steps

• File an Investigational New Drug (IND) application for SZN-8141.
• Commence clinical studies for SZN-8141 in 2026.
• Continue preclinical studies and prepare for clinical studies for other ophthalmology programs (SZN-8143, SZN-113).
• Potentially access the second tranche of the 2025 PIPE upon FDA IND clearance for SZN-8141.
• Evaluate the impact of adopting new accounting standards (ASU 2024-03 and ASU 2023-09).
• Potentially sell shares under the 2025 ATM program.
• Seek additional capital in the long-term through various financing methods.

Key Dates

Recommendation

While the company reported a substantial net loss and a significant revenue decline, primarily due to non-cash charges and the absence of a prior year milestone, it successfully completed the first tranche of a major private placement, securing $71.2 million. This capital, along with the potential second tranche, is crucial for advancing its ophthalmology pipeline, which shows preclinical promise. The discontinuation of SZN-043 and the termination of the TCGFB collaboration are setbacks, but the company is refocusing resources. The stock is highly speculative given the early stage of its pipeline and continued operating losses, but the recent capital infusion provides a runway for key development milestones. A 'hold' recommendation reflects the high-risk, high-reward nature, acknowledging both the significant financial challenges and the strategic funding for its core pipeline.

Keywords

biotechnology, Wnt pathway, ophthalmology, retinal diseases, SZN-8141, SZN-8143, SZN-113, drug development, clinical trials, SEC filing, 10-Q, biopharmaceutical, capital raise, warrants, intellectual property, corporate governance, risk management, Diabetic Macular Edema, Age-Related Macular Degeneration, Fuchs Endothelial Corneal Dystrophy, Geographic Atrophy