XBiotech Inc

Previous wording

Following the Janssen Transaction in December 2019, the tender offer in February 2020, and the dividends paid in July 2021, the accumulated deficit as of September 30, 2024 was ($80.3) million. We had net losses before income tax of $5.0 million and $28.0 million for the three months and nine months ended September 30, 2024, respectively, compared to $7.1 million and $19.6 million for the three months and nine months ended September 30, 2023, respectively. During the next year, we don’t expect any revenues. In addition, we expect to incur significant and increasing operating losses for the foreseeable future as we advance our drug candidates from discovery through preclinical testing and clinical. In addition to these increasing research and development expenses, we expect general and administrative costs to increase, particularly in consideration of current inflationary trends. We will need to generate significant revenues to achieve or sustain profitability, and we may never do so. As of September 30, 2024, we had 92 employees.

Current wording

Following the Janssen Transaction in December 2019, the tender offer in February 2020, and the dividends paid in July 2021, accumulated deficit as of March 31, 2025 was ($101.7) million. We had net losses of $10.9 million and $10.0 million for the three months ended March 31, 2025 and 2024, respectively. We do not expect to generate any revenue in 2025. In addition, we expect to incur significant and increasing operating losses for the foreseeable future as we advance our drug candidates from discovery through preclinical testing and clinical. In addition to these increasing research and development expenses, we expect general and administrative costs to increase, particularly in consideration of current inflationary trends. We will need to generate significant revenues to achieve or sustain profitability, and we may never do so. As of March 31, 2025, we had 90 employees.

Previous wording

Research and development expense consists of expenses incurred in connection with identifying and developing our drug candidates. These expenses consist primarily of salaries and related expenses, stock-based compensation, the purchase of equipment, laboratory and manufacturing supplies, facility costs, costs for preclinical and clinical research, development of quality control systems, quality assurance programs and manufacturing processes. We charge all research and development expenses to operations as incurred.

Current wording

Research and development expense consists of expenses incurred in connection with identifying and developing our drug candidates. These expenses consist primarily of salaries and related expenses, stock-based compensation, the purchase of equipment, laboratory and manufacturing supplies, facility costs, costs for preclinical and clinical research, development of quality control systems, quality assurance programs and manufacturing processes. We charge all research and development expenses to operating expenses as incurred.

Previous wording

Clinical development timelines, likelihood of success and total costs vary widely. We do not currently track our internal research and development costs or our personnel and related costs on an individual drug candidate basis. We use our research and development resources, including employees and our drug discovery technology, across multiple drug development programs. As a result, we cannot state precisely the costs incurred for each of our research and development programs or our clinical and preclinical drug candidates. From inception through September 30, 2024, we have recorded total research and development expenses, including share-based compensation, of $303.7 million. Our total research and development expenses for the three months and nine months ended September 30, 2024 were $7.1 million and $29.9 million, respectively, compared to $7.5 million and $25.05 million for the three months and nine months ended September 30, 2023, respectively. Share-based compensation related to research and development accounted for $0.2 million and $0.7 million for the three months and nine months ended September 30, 2024, respectively, compared to $0.8 million and $2.2 million for the three months and nine months ended September 30, 2023, respectively.

Current wording

Clinical development timelines, likelihood of success and total costs vary widely. We do not currently track our internal research and development costs or our personnel and related costs on an individual drug candidate basis. We use our research and development resources, including employees and our drug discovery technology, across multiple drug development programs. As a result, we cannot state precisely the costs incurred for each of our research and development programs or our clinical and preclinical drug candidates. From inception through March 31, 2025, we have recorded total research and development expenses, including share-based compensation, of $361.3 million. Our total research and development expenses for the three months ended March 31, 2025 and 2024 were $11.6 million and $9.8 million, respectively. Share-based compensation accounted for $2.7 million and $255 thousand for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

Research and development expenses, as a percentage of total operating expenses for the three months and nine months ended September 30, 2024 were 90% and 89%, respectively, compared to 89% and 87% for the three months and nine months ended September 30, 2023, respectively. The percentages of research and development expenses compared to total operating expenses, excluding share-based compensation, for the three months and nine months ended September 30, 2024 were 91% and 90%, respectively, compared to 89% and 87% for the three months and nine months ended September 30, 2023.

Current wording

Research and development expenses, as a percentage of total operating expenses for the three months ended March 31, 2025 and 2024 were 86% and 91%, respectively. The percentages, excluding stock-based compensation, for the three months ended March 31, 2025 and 2024, were 88% and 91%.

Previous wording

General and administrative expense consists primarily of salaries and related expenses for personnel in administrative, finance, business development, and human resource functions, as well as the legal costs of pursuing patent protection of our intellectual property and patent filing, maintenance expenses, share–based compensation, and professional fees for legal services. Our total general and administration expenses for the three months and nine months ended September 30, 2024 were $0.8 million and $3.8 million, respectively, compared to $1.0 million and $3.9 million for the three months and nine months ended September 30, 2023, respectively. Share-based compensation related to general and administration accounted for $0.1 million and $0.7 million for the three months and nine months ended September 30, 2024, respectively, and $0.1 million and $0.4 million for the three months and nine months ended September 30, 2023, respectively.

Current wording

General and administrative expense consists primarily of salaries and related expenses for personnel in administrative, finance, business development and human resource functions, as well as the legal costs of pursuing patent protection of our intellectual property and patent filing and maintenance expenses, stock–based compensation, and professional fees for legal services. Our total general and administration expenses for the three months ended March 31, 2025 and 2024 were $1.9 million and $1.0 million, respectively. Share-based compensation accounted for $668 thousand and $126 thousand for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

General and administrative expenses, as a percentage of total operating expenses for the three months and nine months ended September 30, 2024 were 10% and 11%, respectively, compared to 11% and 13% for the three months and nine months ended September 30, 2023, respectively. The percentages of general and administrative expense compared to total operating expenses, excluding share-based compensation, for the three months and nine months ended September 30, 2024 were 9% and 10%, respectively, compared to 11% and 13% for the three months and nine months ended September 30, 2023.

Current wording

General and administrative expense, as a percentage of total operating expenses for the three months ended March 31, 2025 and 2024 were 14% and 9%, respectively. The percentages, excluding stock-based compensation, for the three months ended March 31, 2025 and 2024, were 12% and 9%.

Previous wording

Our significant accounting policies are more fully described in the notes to our financial statements appearing in this Quarterly Report on Form 10-Q.

Current wording

While our significant accounting policies are more fully described in the notes to our financial statements appearing in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are the most critical to understanding and evaluating our reported financial results.

Previous wording

Research and development expenses increased $4.9 million to $29.9 million for the nine months ended September 30, 2024, compared to $25.0 million for the nine months ended September 30, 2023. The increase was primarily due to the rise in the clinical trial activities, related to the new study being initiated in the second quarter of 2023. The increase of salaries and related expenses was mainly due to a company-wide bonus distributed in January 2024 and the bonus to the Chief Executive Officer. In addition, there is a decrease in share-based compensation, which was due to the decreased stock option expense per share of new grants compared to the expense of fully amortized grants.

Current wording

Research and development expenses increased $1.8 million to $11.6 million for the three months ended March 31, 2025, compared to $9.8 million for the three months ended March 31, 2024. The increase of salaries and related expenses was mainly due to the $4.0 million bonus to the Chief Executive Officer in March 2025 in which 85%, or $3.4 million was allocated to research and development expenses compared to the $1.5 million company-wide bonus distributed in January 2024. Stock-based compensation increased due to the issuance of stock options with immediate vesting and grant date fair value at $3.0 million to the Chief Executive Officer in March 2025, with 85% or $2.5 million of the expense allocated to research and development. In addition, there is a reduction in clinical trials and sponsored research expenses, as no trials were active during the first quarter of 2025.

Previous wording

The following table summarizes other income (in thousands):

Current wording

The following table summarizes other income (loss) (in thousands):

Previous wording

The interest income for the three months and nine months ended September 30, 2024 and 2023 was from the interest generated from the Company’s Canadian bank account and interest bearing time deposit. The interest expense for the three months and nine months ended September 30, 2024, was the interest for the related party convertible loan. In June 2023, the Company received a sum of $750 thousand from American Stock Transfer & Trust Company, LLC which was recorded as other income, in accordance with the terms outlined in the settlement agreement. Foreign exchange gain (loss) was mainly due to the fluctuation between the US dollar and the Canadian dollar in the three months and nine months ended September 30, 2024 compared to 2023.

Current wording

The interest income for the three months ended March 31, 2025 and March 31, 2024 was mainly from the interest generated from the Company’s Canadian bank accounts. The interest expenses for the three months periods ended March 31, 2025 and March 31, 2024 were the interest for the convertible loans. The other income during the three months ended March 31, 2025 was the cancellation of a penalty by the Canada Revenue Agency for the 2020 tax year. In accordance with the settlement agreement, a portion of the cancelled amount was allocated to American Stock Transfer & Trust Company, LLC. Foreign exchange gain (loss) was due to the fluctuation between the US dollar and the Canadian dollar in the three months ended March 31, 2025 and March 31, 2024.

Previous wording

Since our inception on March 22, 2005, we have funded our operations principally through private placements and public offerings of equity securities, which have provided aggregate cash proceeds of approximately $118.4 million as of September 30, 2024. We received $675 million in cash proceeds from the Janssen Transaction in the year ended December 31, 2019. In June 2021, we received the remaining $75 million in cash from the escrow receivable from the same transaction. In July 2021, we paid $75 million in dividends to shareholders. At September 30, 2024, we had cash and cash equivalents of $183.1 million as compared to cash and cash equivalents of $202.2 million at September 30, 2023. The following table summarizes our sources and uses of cash (in thousands):

Current wording

Since our inception on March 22, 2005 through March 31, 2025, we have funded our operations principally through private placements and public offerings of equity securities, which have provided aggregate cash proceeds of approximately $278.6 million, excluding the February 2020 tender offer cash payment. We received $675 million in cash proceeds from the Janssen Transaction in the year ended December 31, 2019. In June 2021, we received the remaining $75 million in cash from the escrow receivable from the same transaction. In July 2021, we paid $75 million in dividends to shareholders. At March 31, 2025, we had cash and cash equivalents of $155.9 million as compared to cash and cash equivalents of $201.0 million at March 31, 2024. The following table summarizes our sources and uses of cash (in thousands):

Previous wording

During the nine months ended September 30, 2024 and 2023, our operating activities used net cash of $24.4 million and $15.2 million, respectively. The use of net cash in each of these periods primarily resulted from our net losses. The increase in net cash used in operations for the nine months ended September 30, 2024 in comparison to the nine months ended September 30, 2023 was mainly due to the increase in salaries and related expenses and clinical trial expense.

Current wording

During the three months ended March 31, 2025 and 2024, our operating activities used net cash $6.7 million and $7.2 million, respectively. The use of net cash in each of these periods primarily resulted from our net losses. The decrease in net loss from operations for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was mainly due to the decrease in clinical trial expense.

Previous wording

During the nine months ended September 30, 2024, our financing activities provided net cash of $10.2 million. On January 3, 2024, we entered into a Convertible Loan Agreement (the “Loan”) with John Simard, the Company’s Founder, President, Chief Executive Officer and Chairman, which provided $10 million net cash for the construction of a new, state-of-the-art research and development facility at the Company's property at 5217 Winnebago Lane in Austin, Texas. Additionally, during the nine months ended September 30, 2024, employees exercised stock options to purchase 42,442 shares of our common stock for approximately $167 thousand in net proceeds. On June 20, 2023, we used approximately $14 thousand to purchase 3,561 common shares at a price of $4.00 per share, relating to the tender offer completed in June 2023. During the nine months ended September 30, 2023, employees exercised stock options to purchase 1,250 shares of our common stock for approximately $5 thousand in net proceeds.

Current wording

During the three months ended March 31, 2025 and 2024, the net cash from our financing activities was mainly related to the related party Convertible Loan. On January 3, 2024, we entered into a Convertible Loan Agreement (the “Loan”) with John Simard, the Company’s Founder, President, Chief Executive Officer and Chairman, which provided $10 million net cash for the construction of a new, state-of-the-art research and development facility at the Company's property at 5217 Winnebago Lane in Austin, Texas. On January 31, 2025, the Loan was terminated upon full repayment of the principal and the interest by the Company. Additionally, during the three months ended March 31, 2024, employees exercised stock options to purchase 13,917 shares of our common stock for approximately $55 thousand in net proceeds.

Previous wording

We expect to continue to incur operating losses in the future. We do not expect to receive any additional revenue under the clinical manufacturing agreement with Janssen. Further, we may not receive any product revenue until a drug candidate has been approved by the FDA, EMA or similar regulatory agencies in other countries and successfully commercialized. As of September 30, 2024, our principal sources of liquidity were our cash and cash equivalents, which totaled approximately $183.1 million.

Current wording

We expect to continue to incur operating losses in the future. Further, we may not receive any product revenue until a drug candidate has been approved by the FDA, EMA or similar regulatory agencies in other countries and successfully commercialized. As of March 31, 2025, our principal sources of liquidity were our cash and cash equivalents, which totaled approximately $155.9 million.