10-Q: Zenas BioPharma Q3 2025: Losses Mount, Pipeline Advances

Zenas BioPharma reports increased Q3 2025 net losses and significant cash burn, while advancing its immunology pipeline and securing new financing.

Summary

• Net loss for the three months ended September 30, 2025, was $51.5 million, compared to $38.6 million for the same period in 2024.
• Net loss for the nine months ended September 30, 2025, was $137.3 million, compared to $104.4 million for the same period in 2024.
• The accumulated deficit as of September 30, 2025, reached $524.7 million.
• Cash, cash equivalents, and investments totaled $301.6 million as of September 30, 2025.
• The company completed a Private Investment in Public Equity (PIPE) in October 2025, raising approximately $120.0 million in gross proceeds.
• Management concluded that substantial doubt exists regarding the company's ability to continue as a going concern, as existing capital (including the PIPE) is expected to fund operations only into the fourth quarter of 2026, not for at least twelve months from the filing date.
• Obexelimab's MoonStone trial for relapsing multiple sclerosis (RMS) met its primary endpoint, demonstrating a statistically significant 95% relative reduction in new gadolinium-enhancing T1 hyperintense lesions (p=0.0009) over weeks 8 and 12 compared to placebo.
• Target enrollment for the INDIGO Phase 3 trial of obexelimab in IgG4-Related Disease (IgG4-RD) was completed in Q4 2024, with topline results expected around year-end 2025.
• Topline results from the SunStone trial of obexelimab in systemic lupus erythematosus (SLE) are expected in mid-2026.
• In October 2025, the company in-licensed orelabrutinib, ZB021, and ZB022 from InnoCare Pharma Inc., involving a $35.0 million upfront cash payment and the issuance of 5,000,000 common shares, plus potential future milestones.
• A Phase 3 clinical trial for orelabrutinib in Primary Progressive Multiple Sclerosis (PPMS) was initiated in September 2025.
• A Royalty Purchase Agreement with Royalty Pharma Investments 2019 ICAV was entered into in September 2025, providing a $75.0 million upfront payment and potential for an additional $225.0 million upon achievement of certain milestones.
• License and collaboration revenue for the nine months ended September 30, 2025, was $10.0 million, primarily from the Zai License Agreement.
• Research and development expenses increased by $22.4 million for the nine months ended September 30, 2025, compared to the same period in 2024, driven by obexelimab development and personnel costs.
• General and administrative expenses increased by $19.4 million for the nine months ended September 30, 2025, compared to the same period in 2024, due to increased headcount for pre-commercialization activities and public company operating costs.

Sentiment

Score: 4

Explanation: While there are positive clinical trial results and successful capital raises, the significant increase in net losses, substantial cash burn, and explicit "going concern" doubt indicate considerable financial instability. The company's financial health remains a major concern despite pipeline progress.

Positives

• Obexelimab's MoonStone trial for relapsing multiple sclerosis (RMS) met its primary endpoint, showing a statistically significant 95% relative reduction in new gadolinium-enhancing T1 hyperintense lesions (p=0.0009).
• Successfully closed a Private Investment in Public Equity (PIPE) financing in October 2025, raising approximately $120.0 million in gross proceeds.
• Secured a $75.0 million upfront payment from Royalty Pharma through a Revenue Participation Right Purchase and Sale Agreement, with potential for an additional $225.0 million upon achievement of certain milestones.
• Expanded the pipeline through the strategic in-licensing of orelabrutinib, ZB021, and ZB022 from InnoCare Pharma, adding new immunology assets.
• Initiated a Phase 3 clinical trial for orelabrutinib in Primary Progressive Multiple Sclerosis (PPMS) in September 2025.
• Completed target enrollment for the INDIGO Phase 3 trial for obexelimab in IgG4-RD in Q4 2024, moving closer to potential topline results.

Negatives

• Reported substantial net losses of $51.5 million for Q3 2025 and $137.3 million for the nine months ended September 30, 2025, representing a significant increase year-over-year.
• Accumulated deficit reached $524.7 million as of September 30, 2025, indicating a history of significant operating losses.
• Management explicitly stated "substantial doubt exists with respect to its ability to continue as a going concern," as current funding (even with subsequent capital raise) is not sufficient for the next 12 months.
• Net cash used in operating activities increased to $119.9 million for the nine months ended September 30, 2025, from $81.2 million in the prior year, reflecting a higher cash burn rate.
• Increased operating expenses, with Research and Development expenses up $22.4 million and General and Administrative expenses up $19.4 million for the nine months ended September 30, 2025.
• Reliance on single third-party manufacturers (WuXi Biologics for obexelimab and InnoCare for orelabrutinib), both located in China, exposes the company to supply chain and geopolitical risks, including potential impacts from legislation like the BIOSECURE Act.
• Orelabrutinib previously faced a partial clinical hold by the FDA for its RMS trial, and other BTK inhibitors have experienced similar holds, indicating potential regulatory challenges for this class of drugs in MS.

Risks

• The company is a clinical-stage biopharma company with a limited operating history and no products approved for commercial sale, having incurred substantial and increasing losses since inception.
• Substantial additional financing will be required to achieve goals; failure to obtain capital on acceptable terms would delay, limit, reduce, or terminate product development efforts.
• Raising additional capital may cause dilution to stockholders, impose restrictions on operations, or require relinquishing rights to product candidates.
• Clinical development is lengthy, expensive, and characterized by uncertain outcomes, with earlier study results often failing to predict future trial results.
• Delays or difficulties in patient enrollment and dosing in clinical trials could delay or prevent necessary regulatory approvals.
• Any significant adverse events or undesirable side effects caused by product candidates may delay or prevent regulatory approval or market acceptance.
• The company faces intense competition from large and specialty pharmaceutical and biotechnology companies, many of which have approved therapies in its current indications.
• Benefits of current or future collaborations or licensing arrangements may not be realized, and future partnerships may be unsuccessful.
• Cannot predict when or if regulatory approval will be obtained, and any approval may be for a more narrow indication than sought.
• Dependence on senior management and other clinical and scientific personnel; inability to retain or recruit could harm the business.
• Need to grow the organization, which may lead to difficulties in managing growth and expanding operations.
• Manufacturing of product candidates is complex, and third-party manufacturers may encounter difficulties, delaying supply for clinical trials, marketing approval, or commercial supply.
• Inability to obtain and maintain sufficient intellectual property protection for product candidates could allow competitors to develop and commercialize similar products.
• Reliance on third parties to conduct preclinical studies and clinical trials; non-performance could lead to delays, increased costs, or unsuccessful development programs.
• Rights to develop and commercialize product candidates are subject to in-licenses (e.g., Xencor, InnoCare); failure to comply with obligations could lead to loss of such rights.
• Operations of suppliers, many located outside the U.S. (e.g., WuXi Biologics, InnoCare in China), are subject to additional risks beyond control, including geopolitical tensions and potential legislation like the BIOSECURE Act.
• An active and liquid trading market for common stock may not be sustained, and the market price may be volatile, potentially resulting in substantial losses for investors.
• Interim, initial, top-line, and preliminary data from clinical trials are subject to audit and verification and may differ materially from final data.
• Clinical trials, even if successfully completed, may not be sufficient for marketing approval for the applicable indication.
• Limited resources may be expended on particular product candidates or indications, potentially failing to capitalize on more profitable opportunities.
• Conducting clinical trials outside the U.S. carries risks, and the FDA and comparable foreign regulatory authorities may not accept data from such trials.
• Even with U.S. marketing approval, regulatory approval to market outside the U.S. may never be received.
• Successful commercialization depends on broad coverage, adequate reimbursement levels, and favorable pricing from governmental authorities and other third-party payors.
• May not be able to obtain or maintain orphan drug designations or the benefits associated with them, including market exclusivity.
• May seek fast track, breakthrough therapy, and/or priority review designations but may be unable to obtain or maintain the associated benefits.
• May seek accelerated approval for some product candidates but may not be able to obtain it, or may face post-market confirmatory study requirements.
• Misconduct or other improper actions by employees, independent contractors, consultants, commercial partners, and vendors expose the company to potential noncompliance with regulatory standards and requirements.
• Estimates of commercial opportunities for product candidates and forecasts of market growth may prove to be smaller than believed.
• Future growth may depend on operating in foreign markets, subject to additional regulatory burdens and risks.
• Strategic transactions could impact liquidity, increase expenses, and present significant distractions to management.
• Compromised, unavailable, or disrupted internal information technology systems or those of third parties could lead to material adverse consequences.
• Significant product liability risk; ability to obtain sufficient insurance coverage could be adversely affected.
• Public opinion and scrutiny of immunology and inflammation (I&I) treatments may impact public perception and business plans.
• Changes in patent law in the U.S. and other jurisdictions could diminish the value of patents in general.
• No solely owned issued patents relating to product candidates; relies on in-licensed patent portfolios.
• May be involved in lawsuits to protect or enforce patents or other intellectual property, which could be expensive, time-consuming, and unsuccessful.
• Intellectual property rights of third parties could adversely affect the ability to commercialize current or future product candidates.
• Patent terms may be inadequate to protect the competitive position for an adequate amount of time.
• Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, and fee payment requirements.
• If patent term extension is not obtained for product candidates, the business may be materially harmed.
• Approved product candidates may face competition from biosimilar or generic products approved through abbreviated regulatory pathways.
• Inability to protect the confidentiality of trade secrets would harm the business and competitive position.
• Inadequate protection of trademarks and trade names could impede name recognition and adversely affect the business.
• May be subject to claims asserting wrongful use or disclosure of alleged trade secrets of current or former employers or claims asserting ownership of intellectual property.
• The regulatory approval process is highly uncertain, and U.S. or foreign regulatory approval may be delayed or unobtainable.
• Even with regulatory approval, ongoing regulatory obligations and continued review may result in significant additional expense, labeling restrictions, or market withdrawal.
• Disruptions at the FDA or comparable foreign regulatory authorities caused by funding shortages or global health concerns could hinder their ability to review and approve products.
• Recently enacted legislation, future legislation, and other healthcare reform measures may increase the difficulty and cost of obtaining marketing approval and commercializing product candidates.
• Failure to comply with healthcare and other regulations could lead to substantial penalties.
• Governments outside the U.S. tend to impose strict price controls, which may adversely affect revenue.
• Subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, and policies related to data privacy and security.
• Subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations.
• Significant political, trade, and regulatory developments, including changes in relations between the U.S. and China, may adversely impact the business.

Future Outlook

The company expects its existing cash, cash equivalents, and investments, including the $120.0 million gross proceeds from the October 2025 PIPE, to fund operating and capital expenditures into the fourth quarter of 2026. However, this is not sufficient to fund operations for at least twelve months from the filing date, leading to substantial doubt about its ability to continue as a going concern. The company anticipates reporting 24-week data from the MoonStone trial (obexelimab for RMS) in Q1 2026 and topline results from the INDIGO trial (obexelimab for IgG4-RD) around year-end 2025. If INDIGO results are positive, a Biologics License Application (BLA) with the FDA is expected in H1 2026, followed by an EMA Marketing Authorization Application. Topline results from the SunStone trial (obexelimab for SLE) are expected in mid-2026, potentially leading to a Phase 3 program in H1 2027. Plans include initiating a second global Phase 3 trial for orelabrutinib in Secondary Progressive Multiple Sclerosis (SPMS) in Q1 2026 and submitting IND applications for ZB021 and ZB022 to initiate Phase 1 clinical studies in 2026. The company expects to continue incurring significant and increasing losses for the foreseeable future and will need to raise substantial additional capital.

Management Comments

• "We are a clinical-stage global biopharmaceutical company committed to being a leader in the development and commercialization of transformative immunology-based therapies for patients in need."
• "Our core business strategy combines disciplined product candidate acquisition with strategic deployment of internal expertise and effective use of external resources."
• "We expect that our existing cash, cash equivalents and investments... will be sufficient to fund our operating and capital expenditures into the fourth quarter of 2026, however it will not be sufficient to fund our operations and capital expenditure requirements for at least twelve months from the date these condensed consolidated financial statements were issued. Therefore, the Company has concluded that substantial doubt exists with respect to its ability to continue as a going concern."
• "We expect to continue to incur significant and increasing losses for the foreseeable future."

Industry Context

The company operates in the highly competitive and rapidly advancing biopharmaceutical industry, with a specialized focus on immunology and inflammation (I&I) diseases. Its strategy of disciplined product candidate acquisition and leveraging external resources aligns with common industry practices for building a diversified portfolio. The development of novel treatments for immunological indications is a significant area of investment, with many established pharmaceutical and biotechnology companies actively competing. The company's focus on B-cell inhibition (obexelimab) and BTK/IL-17AA/AF/TYK2 inhibition (orelabrutinib, ZB021, ZB022) reflects current trends in targeted immunology therapies. The recent FDA approval of UPLIZNA (inebilizumab-cdon) for IgG4-RD highlights the competitive landscape and the need for Zenas's obexelimab to demonstrate superior clinical benefits. The reliance on Chinese contract manufacturing organizations (CMOs) is a global industry practice but introduces significant supply chain and geopolitical risks, particularly with the ongoing U.S.-China trade tensions and potential legislative actions like the BIOSECURE Act.

Comparison to Industry Standards

• The company's lead candidate, obexelimab, is being developed for IgG4-RD, where UPLIZNA (inebilizumab-cdon), an anti-CD19 antibody, was FDA-approved in April 2025. Zenas's obexelimab is also an anti-CD19 antibody, but bifunctional, targeting CD19 and FcRIIb, aiming for a potentially differentiated safety profile over B-cell depleting agents.
• For SLE and MS, obexelimab will compete with existing approved therapies and numerous product candidates in clinical development by other companies, requiring strong clinical differentiation for market penetration.
• Orelabrutinib, a Bruton's Tyrosine Kinase (BTK) inhibitor, is being developed for MS, an area where other BTK inhibitors have faced partial clinical holds by the FDA, indicating a challenging regulatory environment for this class of drugs in MS.
• The company's reliance on single third-party manufacturers (WuXi Biologics for obexelimab and InnoCare for orelabrutinib) in China is a common industry practice but exposes it to significant supply chain and geopolitical risks, especially with potential legislation like the BIOSECURE Act, which could impact the global biopharmaceutical supply chain.

Legal Proceedings

• Not presently a party to any material legal proceedings that would reasonably be expected to have a material adverse effect on the company's financial results.
• A putative securities class action was filed in April 2025 against the company, certain directors and officers, and underwriters of its IPO, asserting claims under Sections 11, 12, and 15 of the Securities Act of 1933, as amended.

Related Party Transactions

• Xencor, Inc.: Previously a related party due to convertible preferred stock, now holds less than 10% of outstanding common stock as of September 30, 2025. The company has in-licensed intellectual property relating to obexelimab, ZB002, and ZB004 from Xencor.
• Viridian Therapeutics, Inc.: Considered a related party because Fairmount Funds Management LLC, a 10% or greater stockholder of Viridian and with a seat on Zenas's Board, also has two seats on Viridian's board of directors. Zenas licensed ZB001 from Viridian.
• Zai Lab (Hong Kong) Limited: Considered a related party as Zenas's CEO and Chairman is a member of Zai's board of directors. Zenas granted Zai an exclusive sublicense to develop, manufacture, and commercialize ZB001 and related programs in greater China.
• InnoCare Pharma Inc.: A new license agreement was entered into in October 2025, granting Zenas exclusive rights to develop, manufacture, and commercialize orelabrutinib, ZB021, and ZB022. InnoCare will receive 5,000,000 shares of common stock in a private placement as part of the upfront consideration.

Stakeholder Impact

• Shareholders face potential for significant dilution from future equity capital raises (PIPE, ATM program) and volatility in stock price due to clinical trial results, financial performance, and broader market conditions. The explicit "going concern" doubt highlights a material risk to investment.
• Employees are expected to increase in number to support R&D and pre-commercialization activities, with stock-based compensation being a notable component of overall compensation.
• Future customers could benefit from new immunology-based therapies (obexelimab, orelabrutinib, ZB021, ZB022) for autoimmune and rare diseases, if approved.
• Suppliers and partners, particularly third-party CMOs like WuXi Biologics and InnoCare, are critical to the company's operations but introduce risks related to performance, compliance, and geopolitical factors (e.g., BIOSECURE Act).
• Creditors, such as Royalty Pharma, hold a Revenue Participation Right and a Back-Up Security Interest. The "going concern" doubt could impact the company's ability to secure future debt financing on favorable terms.

Next Steps

• Report 24-week data from the MoonStone trial (obexelimab for RMS) in Q1 2026.
• Report topline results from the INDIGO trial (obexelimab for IgG4-RD) around year-end 2025.
• File a Biologics License Application (BLA) with the FDA for obexelimab in IgG4-RD in H1 2026, if topline results are positive.
• File a Marketing Authorization Application with the EMA for obexelimab in IgG4-RD, if approved by the FDA.
• Report topline results from the SunStone trial (obexelimab for SLE) in mid-2026.
• May initiate a Phase 3 program for obexelimab in SLE in H1 2027, based on the outcome of the SunStone trial.
• Initiate a second global Phase 3 clinical trial for orelabrutinib in Secondary Progressive Multiple Sclerosis (SPMS) in Q1 2026.
• Submit Investigational New Drug (IND) applications for ZB021 and ZB022 and initiate Phase 1 clinical studies in 2026, subject to IND-enabling studies.
• Continue to raise substantial additional capital to fund operations and pursue growth strategy.

Key Dates

Recommendation

Zenas BioPharma presents a mixed outlook. The positive topline data for obexelimab in RMS and the strategic expansion of the pipeline through the InnoCare licensing agreement are significant advancements that could drive future value. The successful PIPE and royalty financing provide a temporary cash runway. However, the substantial and increasing net losses, coupled with the explicit "going concern" warning, indicate significant financial instability and a high need for further capital. While the pipeline progress offers long-term potential, the immediate financial risks and the competitive landscape for I&I therapies warrant a cautious "Hold" recommendation. Investors should monitor upcoming clinical data, progress on regulatory filings, and the company's ability to secure additional non-dilutive financing.

Keywords

Biopharmaceutical, Immunology, Inflammation, Autoimmune Diseases, Obexelimab, Orelabrutinib, IgG4-RD, Systemic Lupus Erythematosus, Multiple Sclerosis, Clinical Trials, Phase 3, Phase 2, BTK Inhibitor, IL-17AA/AF Inhibitor, TYK2 Inhibitor, SEC Filing, 10-Q, Financial Results, Going Concern, Capital Raise, Royalty Pharma, InnoCare Pharma, Xencor, WuXi Biologics, Regulatory Approval, FDA, EMA, Intellectual Property, Risk Factors