XBiotech Inc.

Previous 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.

Current 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 June 30, 2025 was ($103.5) million. We had net losses of $1.8 million and $12.6 million for the three months and six months ended June 30, 2025, respectively, compared to $13.0 million and $23.0 million for the three months and six months ended June 30, 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 June 30, 2025, we had 92 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 operating expenses as incurred.

Current wording

Research and development expenses consist 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.

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 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.

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 June 30, 2025, we have recorded total research and development expenses, including share-based compensation, of $366.6 million. Our total research and development expenses for the three months and six months ended June 30, 2025 were $5.3 million and $17.0 million, respectively, compared to $13.0 million and $22.8 million for the three months and six months ended June 30, 2024, respectively. Share-based compensation accounted for $19 thousand and $2.7 million for the three months and six months ended June 30, 2025, respectively, compared to $0.2 million and $0.5 million for the three months and six months ended June 30, 2024, respectively, related to research and development.

Previous 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%.

Current wording

Research and development expenses, as a percentage of total operating expenses for the three months and six months ended June 30, 2025 were 84% and 85%, respectively, compared to 87% and 89% for the three months and six months ended June 30, 2024, respectively. The percentages, excluding share-based compensation, for the three months and six months ended June 30, 2025 were 85% and 87%, respectively, compared to 85% and 86% for the three months and six months ended June 30, 2024.

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 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.

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, share–based compensation, and professional fees for legal services. Our total general and administration expenses for the three months and six months ended June 30, 2025 were $1.0 million and $2.9 million, respectively, compared to $2.0 million and $3.0 million for the three months and six months ended June 30, 2024, respectively. Share-based compensation accounted for $88 thousand and $0.8 million for the three months and six months ended June 30, 2025, respectively, and $0.1 million and $0.3 million for the three months and six months ended June 30, 2024, respectively, related to general and administrative expenses.

Previous 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%.

Current wording

General and administrative expenses, as a percentage of total operating expenses for the three months and six months ended June 30, 2025 were 16% and 15%, respectively, compared to 13% and 12% for the three months and six months ended June 30, 2024, respectively. The percentages, excluding share-based compensation, for the three months and six months ended June 30, 2025 were 15% and 13%, respectively, compared to 13% and 11% for the three months and six months ended June 30, 2024.

Previous wording

Expense accruals related to clinical trials are based on actual services received and efforts expended pursuant to contracts with third party service providers which conduct and manage clinical trials on the Company’s behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. The Company accrues costs based on the actual services rendered in the period over which services were performed and the level of effort expended in each period based upon patient enrollment, clinical site activations, or information provided to the Company by its vendors on their actual costs incurred. Any estimates of the level of services performed or the costs of these services could differ from actual results.

Current wording

Expense accruals related to clinical trials are based on the Company’s estimates of services received and efforts expended pursuant to contracts with third party service providers conduct and manage clinical trials on the Company’s behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing costs, the Company estimates the period over which services will be performed and the level of effort to be expended in each period based upon patient enrollment, clinical site activations, or information provided to the Company by its vendors on their actual costs incurred. Any estimates of the level of services performed or the costs of these services could differ from actual results.

Previous 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.

Current wording

Research and development expenses decreased $5.9 million to $17.0 million for the six months ended June 30, 2025, compared to $22.8 million for the six months ended June 30, 2024. The decrease was primarily due to clinical trials and sponsored research expenses, as no trials were in progress during the six months ended June 30, 2025. The decrease in salaries and related expenses was mainly due to the $4.0 million bonus to the Chief Executive Officer in March 2025, compared to $5.0 million in June 2024, in which 85% was allocated to research and development expenses. In addition, 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% of the expense allocated to research and development.

Previous wording

General and administrative expenses increased $0.9 million to $1.9 million for the three months ended March 31, 2025, compared to $1.0 million for the three months ended March 31, 2024. The increase in salaries and related expenses was primarily due to the $4.0 million bonus to the Chief Executive Officer in March 2025, in which 15% or $0.6 million was allocated to general and administrative expenses. Stock-based compensation increased due to the issuance of $3.0 million in stock options to the Chief Executive Officer in March 2025, with 15% or $0.5 million of the expenses allocated to general and administrative department.

Current wording

Compared to the six months ended June 30, 2024, the decrease in the general and administrative expense in the six months ended June 30, 2025 was also primarily due to the decrease in salaries and related expenses and other expenses. 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 15% of the expense allocated to general and administrative expenses.

Previous 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.

Current wording

The interest income for the three months and six months ended June 30, 2025 and 2024 was from the interest generated from the Company’s Canadian bank accounts. The interest expense for the three months and six months ended June 30, 2025 and 2024 was the interest for the convertible loans. The other income during the six months ended June 30, 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 mainly due to the fluctuation between the US dollar and the Canadian dollar in the three months and six months ended June 30, 2025 compared to 2024.

Previous 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):

Current wording

Since our inception on March 22, 2005 through June 30, 2025, we have funded our operations principally through private placements and public offerings of equity securities, which have provided aggregate cash proceeds of approximately $276.3 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 June 30, 2025, we had cash and cash equivalents of $152.9 million as compared to cash and cash equivalents of $188.5 million at June 30, 2024. The following table summarizes our sources and uses of cash (in thousands):

Previous 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.

Current wording

During the six months ended June 30, 2025 and 2024, our operating activities used net cash of $12.7 million and $18.6 million, respectively. The use of net cash in each of these periods primarily resulted from our net losses. The decrease in net cash used in operations for the six months ended June 30, 2025 in comparison to the six months ended June, 2024 was mainly due to the decrease in clinical trial expenses.

Previous wording

During the three months ended March 31, 2025 and 2024, our investing activities used net cash of $94 thousand and $255 thousand, respectively. The decrease was due to greater costs incurred on preparation for the construction of a new facility during the three months ended March 31, 2024.

Current wording

During the six months ended June 30, 2025 and 2024, our investing activities used net cash of $145 thousand and $882 thousand, respectively. The use of cash was for fixed asset purchases and the preparation for the construction of a new facility.

Previous 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.

Current wording

During the six months ended June 30, 2025 and 2024, the net cash from our financing activities was mainly related to the 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 interest by the Company. Additionally, during the six months ended June 30, 2024, employees exercised stock options to purchase 26,192 shares of our common stock for approximately $103 thousand in net proceeds.

Previous 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.

Current 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 June 30, 2025, our principal sources of liquidity were our cash and cash equivalents, which totaled approximately $152.9 million.