Zura Bio Ltd

Previous wording

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited financial statements as of December 31, 2023, included on Form 10-K filed with the SEC on March 28, 2024, and in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited financial statements as of December 31, 2023, included on Form 10-K filed with the SEC on March 28, 2024, and in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report.

Previous wording

In addition to historical information, this discussion and analysis contains forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those discussed in the section titled “Risk Factors” in our Form 10-K filed with the SEC on March 28, 2024, that could cause actual results to differ materially from historical results or anticipated results. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Zura,” “we,” “us,” and “our” refer to Zura Bio Limited, a Cayman Islands exempted company formerly known as JATT Acquisition Corp., and its consolidated subsidiaries. References to JATT Acquisition Corp. or “JATT” refer to the Company prior to the consummation of the Business Combination.

Current wording

In addition to historical information, this discussion and analysis contains forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those discussed in the section titled “Risk Factors” in our Form 10-K filed with the SEC on March 28, 2024, that could cause actual results to differ materially from historical results or anticipated results. You should carefully read the information under “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Zura,” “we,” “us,” and “our” refer to Zura Bio Limited, a Cayman Islands exempted company formerly known as JATT Acquisition Corp., and its consolidated subsidiaries. References to JATT Acquisition Corp. or “JATT” refer to the Company prior to the consummation of the Business Combination.

Previous wording

We have a limited operating history. Since our inception, our operations have focused on organizing and staffing our company, business planning, raising capital and entering into collaboration agreements for conducting manufacturing, and research and development activities. Our lead product candidates are in the clinical testing stage; however, we have not conducted any clinical tests ourselves, nor have any been conducted during the period since our inception. We do not have any product candidates approved for sale and have not generated any revenue from product sales. We funded our operations up until June 30, 2024 through (i) the sale of equity, raising an aggregate of $10.0 million of gross proceeds from the sale of shares of convertible preferred stock of Zura Bio UK through March 31, 2023; (ii) the issuance of a promissory note, receiving net proceeds of $7.6 million in December 2022; (iii) proceeds from the Business Combination of $56.7 million in March 2023; (iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and Pre-Funded Warrants during the year ended December 31, 2023; and (v) the April 2024 Private Placement, raising an aggregate of $112.5 million of gross proceeds from the sale of Class A Ordinary Shares and Pre-Funded Warrants.

Current wording

We have a limited operating history. Since our inception, our operations have focused on organizing and staffing our company, business planning, raising capital and entering into collaboration agreements for conducting manufacturing, and research and development activities. Our lead product candidates are in the clinical trial planning stage; however, we have not conducted any clinical trials ourselves, nor have any been conducted during the period since our inception. We do not have any product candidates approved for sale and have not generated any revenue from product sales. We funded our operations up until September 30, 2024 through (i) the sale of equity, raising an aggregate of $10.0 million of gross proceeds from the sale of shares of convertible preferred stock of Zura Bio UK through March 31, 2023; (ii) the issuance of a promissory note, receiving net proceeds of $7.6 million in December 2022; (iii) proceeds from the Business Combination of $56.7 million in March 2023; (iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and Pre-Funded Warrants during the year ended December 31, 2023; (v) the April 2024 Private Placement, raising an aggregate of $112.5 million of gross proceeds from the sale of Class A Ordinary Shares and Pre-Funded Warrants; and (vi) the sale of 1,500,000 Class A Ordinary Shares at a price of $3.80 per share under the ATM (as defined below) for net proceeds of $5.5 million, after commissions, less $0.6 million offering costs incurred in connection with establishing the ATM.

Previous wording

Since our inception, we have incurred significant operating losses. Our net loss for the three and six months ended June 30, 2024, was $10.3 million and $18.1 million, respectively. As of June 30, 2024, we had an accumulated deficit of $121.6 million. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

Current wording

Since our inception, we have incurred significant operating losses. Our net loss for the three and nine months ended September 30, 2024, was $20.7 million and $38.8 million, respectively. As of September 30, 2024, we had an accumulated deficit of $142.3 million. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

Previous wording

The Business Combination generated approximately $56.7 million in net proceeds. On March 21, 2023, our Class A Ordinary Shares and public warrants began trading on the Nasdaq under the symbols “ZURA” and “ZURAW,” respectively.

Current wording

The Business Combination generated approximately $56.7 million in net proceeds. On March 21, 2023, our Class A Ordinary Shares and public warrants began trading on the Nasdaq under the symbols “ZURA” and “ZURAW,” respectively. On August 27, 2024, the Public Warrants (as defined below) were no longer listed on the Nasdaq in connection with the completion of the Warrant Exchange (as defined below).

Previous wording

On July 12, 2024, the Company commenced an exchange offer (the “Exchange Offer”) and consent solicitation (the “Consent Solicitation”) relating to its outstanding (i) public warrants that were issued in connection with its initial public offering to purchase Class A ordinary shares of the Company, par value $0.0001 per share, and (ii) private placement warrants that were issued in connection with its initial public offering to purchase Class A ordinary shares (together with the public warrants, the “IPO warrants”). The Company offered to all holders of the IPO warrants the opportunity to receive 0.30 Class A ordinary shares in exchange for each outstanding IPO warrant tendered by the holder and exchanged pursuant to the Exchange Offer. Concurrently with the Exchange Offer, the Company also solicited consents from holders of the IPO warrants to amend that certain warrant agreement, dated as of July 16, 2021, by and between the Company and Continental Stock Transfer & Trust Company (“CST”), as warrant agent (the “Warrant Agreement”) to permit the Company to require that each IPO warrant outstanding upon the closing of the Exchange Offer be exchanged for 0.27 Class A ordinary shares, which is a ratio 10% less than the exchange ratio applicable to the Exchange Offer. Pursuant to the terms of the Warrant Agreement, all except certain specified modifications or amendments require the vote or written consent of holders of at least a majority of the outstanding public warrants and a majority of the outstanding private placement warrants.

Current wording

On July 12, 2024, we commenced an exchange offer (the “Exchange Offer”) and consent solicitation (the “Consent Solicitation”) relating to our outstanding warrants that we assumed in connection with the business combination, including (i) public warrants to purchase 5,910,000 Class A Ordinary Shares (the “Public Warrants”) that were held by JATT, and (ii) private placement warrants to purchase 6,899,996 Class A Ordinary Shares (the “Private Placement Warrants”) that were held by JATT shareholders (together with the Public Warrants, the “IPO warrants”). We offered to all holders of the IPO warrants the opportunity to receive 0.30 Class A ordinary shares in exchange for each outstanding IPO warrant tendered by the holder and exchanged pursuant to the Exchange Offer. Concurrently with the Exchange Offer, we also solicited consents from holders of the IPO warrants to amend that certain warrant agreement, dated as of July 16, 2021, by and between Zura and Continental Stock Transfer & Trust Company (“CST”), as warrant agent (the “Warrant Agreement”) to permit the us to require that each IPO warrant outstanding upon the closing of the Exchange Offer be exchanged for 0.27 Class A ordinary shares, which is a ratio 10% less than the exchange ratio applicable to the Exchange Offer. Pursuant to the terms of the Warrant Agreement, all except certain specified modifications or amendments require the vote or written consent of holders of at least a majority of the outstanding public warrants and a majority of the outstanding private placement warrants.

Previous wording

On August 12, 2024, the Company completed the Exchange Offer and Consent Solicitation and issued 3,235,184 Class A ordinary shares in exchange for 10,784,008 IPO warrants. In connection with its completion of the Exchange Offer, the Company entered into an amendment, dated August 12, 2024 (the “Warrant Amendment”), to the Warrant Agreement to provide the Company with the right to mandatorily exchange the Company’s remaining outstanding IPO warrants for Class A ordinary shares at an exchange ratio of 0.27 Class A ordinary shares for each IPO warrant. The Company has exercised its right to exchange all remaining untendered IPO warrants in accordance with the terms of the Warrant Amendment (the “Post-Offer Exchange”). The Company has fixed the date for such exchange as August 27, 2024.

Current wording

On August 12, 2024, we completed the Exchange Offer and Consent Solicitation and issued 3,235,184 Class A ordinary shares in exchange for 10,784,008 IPO warrants and entered into an amendment to the Warrant Agreement (the “Warrant Amendment”). Pursuant to the Warrant Amendment, we had the right to mandatorily exchange our remaining outstanding IPO warrants for Class A ordinary shares at an exchange ratio of 0.27 Class A ordinary shares for each IPO warrant. On August 27, 2024, we issued 547,006 Class A Ordinary Shares in exchange for the remaining 196,568 outstanding Public Warrants and 1,829,420 outstanding Private Placement Warrants. As a result, there were no outstanding IPO warrants as of September 30, 2024.

Previous wording

On April 18, 2024, we also entered into subscription agreements (the “April 2024 Insider Agreements” and together with the April 2024 Investor Agreements, the “April 2024 Private Placement”) with certain officers, directors and affiliates of the Company (“Insiders” and together with the Investors, the “2024 Subscribers”), whereby the Company issued 1,357,827 Class A Ordinary Shares, par value $0.0001 per share sold a purchase price of $3.13 per Class A Ordinary Share for an aggregate purchase price of $4.2 million.

Current wording

On April 18, 2024, we also entered into subscription agreements (the “April 2024 Insider Agreements” and together with the April 2024 Investor Agreements, the “April 2024 Private Placement”) with certain of our officers, directors and affiliates (“Insiders” and together with the Investors, the “2024 Subscribers”), whereby we issued 1,357,827 Class A Ordinary Shares, par value $0.0001 per share sold a purchase price of $3.13 per Class A Ordinary Share for an aggregate purchase price of $4.2 million.

Previous wording

On April 26, 2023, the Company entered into its second PIPE subscription agreement (the “April 2023 Private Placement”) with certain accredited investors (the “Subscribers”), whereby the Company issued 15,041,530 Class A Ordinary Shares, par value $0.0001 per share and pre-funded warrants (the “2023 Pre-Funded Warrants”) to purchase up to 3,782,000 Class A Ordinary Shares. Each Class A Ordinary Share was sold at a price of $4.25 per Class A Ordinary Share and each Pre-Funded Warrant was sold at a price of $4.249 per Pre-Funded Warrant for an aggregate purchase price of $80.0 million.

Current wording

On April 26, 2023, we entered into a second PIPE subscription agreement (the “April 2023 Private Placement”) with certain accredited investors (the “Subscribers”), whereby we issued 15,041,530 Class A Ordinary Shares, par value $0.0001 per share and pre-funded warrants (the “2023 Pre-Funded Warrants”) to purchase up to 3,782,000 Class A Ordinary Shares. Each Class A Ordinary Share was sold at a price of $4.25 per Class A Ordinary Share and each Pre-Funded Warrant was sold at a price of $4.249 per Pre-Funded Warrant for an aggregate purchase price of $80.0 million.

Previous wording

On April 26, 2023, the Company’s newly formed subsidiary ZB17 LLC (“ZB17”) entered into a license agreement (the “2023 Lilly License” and, together with the 2022 Lilly License, the “Lilly Licenses”) with Lilly, for an exclusive license to develop, manufacture and commercialize a certain bispecific antibody relating to IL-17 and BAFF (“ZB-106”). ZB17 made a payment of $5.0 million to Lilly during the six months ended June 30, 2024, in connection with the receipt of certain know-how, data, information and materials that Lilly was required to provide under the license agreement.

Current wording

On April 26, 2023, our newly formed subsidiary ZB17 LLC (“ZB17”) entered into a license agreement (the “2023 Lilly License” and, together with the 2022 Lilly License, the “Lilly Licenses”) with Lilly, for an exclusive license to develop, manufacture and commercialize a certain bispecific antibody relating to IL-17 and BAFF (“ZB-106”). ZB17 made a payment of $5.0 million to Lilly during the nine months ended September 30, 2024, in connection with the receipt of certain know-how, data, information and materials that Lilly was required to provide under the license agreement.

Previous wording

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, ZB17 granted Stone Peach the right, but not the obligation, to purchase 4.99% of the fully diluted equity of ZB17 for $1.0 million (the “Stone Peach Call Right”). The Stone Peach Call Right is not exercisable until after the last patient is dosed in any single next clinical trial with ZB-106 and expires one year from the date of first indication approval for ZB-106 by the FDA or the European Medicines Agency (“EMA”). The Stone Peach Call Right represents noncontrolling interest in the Company’s subsidiary, ZB17.

Current wording

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, ZB17 granted Stone Peach the right, but not the obligation, to purchase 4.99% of the fully diluted equity of ZB17 for $1.0 million (the “Stone Peach Call Right”). The Stone Peach Call Right is not exercisable until after the last patient is dosed in any single next clinical trial with ZB-106 and expires one year from the date of first indication approval for ZB-106 by the FDA or the European Medicines Agency (“EMA”). The Stone Peach Call Right represents noncontrolling interest in our subsidiary, ZB17.

Previous wording

As additional consideration, Stone Peach receives annual payments first of $0.6 million, and increasing by 10% annually, so long as the Company maintains its license for ZB-106 on May 1 st of each year. An annual payment of $0.7 million became due and was paid during the three months ended June 30, 2024.

Current wording

As additional consideration, Stone Peach receives annual payments first of $0.6 million, and increasing by 10% annually, so long as we maintain our license for ZB-106 on May 1 st of each year. An annual payment of $0.7 million became due and was paid during the three months ended June 30, 2024.

Previous wording

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, we agreed to make a one-time milestone payment of $5.0 million to BAFFX17, Ltd (“BAFFX17”) upon the occurrence of either: (i) a change of control transaction, (ii) the closing of an issuance of equity or equity-linked securities by the Company of at least $100.0 million (iii) the consummation of a sale of assets resulting in net proceeds in excess of $100.0 million, or (iv) the Company’s fully diluted shares outstanding exceed 52,500,000 shares (on a split adjusted basis). As the Company’s fully diluted shares outstanding exceeded 52,500,000 shares prior to December 31, 2023, the $5.0 million fee was recorded in accounts payable and accrued expenses in the condensed consolidated balance sheet as of June 30, 2024.

Current wording

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, we agreed to make a one-time milestone payment of $5.0 million to BAFFX17, Ltd (“BAFFX17”) upon the occurrence of either: (i) a change of control transaction, (ii) our closing of an issuance of equity or equity-linked securities of at least $100.0 million (iii) the consummation of a sale of assets resulting in net proceeds in excess of $100.0 million, or (iv) our fully diluted shares outstanding exceed 52,500,000 shares (on a split adjusted basis). As our fully diluted shares outstanding exceeded 52,500,000 shares prior to December 31, 2023, the $5.0 million fee was recorded in accounts payable and accrued expenses in the condensed consolidated balance sheet as of September 30, 2024.

Previous wording

The Company is obligated to make 4 development milestone payments to Lilly up to an aggregate of $155.0 million, and sales milestone payments up to an aggregate of $440 million based on respective thresholds of net sales of products developed from ZB-106. The Company is also obligated to pay Lilly over a multi-year period (twelve years, or upon the later expiration of regulatory exclusivity of ZB-106 in a country) an annual earned royalty at a marginal royalty rate in the mid-single digits to low-double digits, with increasing rates depending on net sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of years. The Company is also obligated to pay BAFFX17 a fee equal to 3% of any milestone or royalty payments due to Lilly pursuant to the terms of either the 2022 Lilly License and the 2023 Lilly License with Lilly. Upon receiving written approval from the FDA, EMA, or similar regulatory authority of the Investigational New Drug (“IND”) and commencement and the commencement of a clinical trial in the applicable jurisdiction for ZB-106, Stone Peach will also receive a one-time payment of $4.5 million. Stone Peach will also receive a one-time milestone payment of $25 million upon either (i) certain equity-related transactions, or (ii) the receipt of regulatory approval from the applicable regulatory authority for any new indication in the applicable jurisdiction. Furthermore, Stone Peach was granted a royalty of 2% of the aggregate net sales of any products developed from the Compound. As of June 30, 2024, none of the contingent payments were due.

Current wording

We are obligated to make 4 development milestone payments to Lilly up to an aggregate of $155.0 million, and sales milestone payments up to an aggregate of $440 million based on respective thresholds of net sales of products developed from ZB-106. We are also obligated to pay Lilly over a multi-year period (twelve years, or upon the later expiration of regulatory exclusivity of ZB-106 in a country) an annual earned royalty at a marginal royalty rate in the mid-single digits to low-double digits, with increasing rates depending on net sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of years. We are also obligated to pay BAFFX17 a fee equal to 3% of any milestone or royalty payments due to Lilly pursuant to the terms of either the 2022 Lilly License and the 2023 Lilly License with Lilly. Upon receiving written approval from the FDA, EMA, or similar regulatory authority of the Investigational New Drug (“IND”) and commencement and the commencement of a clinical trial in the applicable jurisdiction for ZB-106, Stone Peach will also receive a one-time payment of $4.5 million. Stone Peach will also receive a one-time milestone payment of $25 million upon either (i) certain equity-related transactions, or (ii) the receipt of regulatory approval from the applicable regulatory authority for any new indication in the applicable jurisdiction. Furthermore, Stone Peach was granted a royalty of 2% of the aggregate net sales of any products developed from the Compound. As of September 30, 2024, none of the contingent development milestone payments were due.

Previous wording

On December 8, 2022, the Company’s consolidated subsidiary, Z33 Bio Inc. (“Z33”), entered into a license agreement (the “2022 Lilly License”) with Lilly pursuant to which Lilly granted Z33 an exclusive (even as to Lilly), royalty-bearing global license to develop, manufacture, and commercialize certain intellectual property owned by Lilly relating to its IL-33 compound.

Current wording

On December 8, 2022, our consolidated subsidiary, Z33 Bio Inc. (“Z33”), entered into a license agreement (the “2022 Lilly License”) with Lilly pursuant to which Lilly granted Z33 an exclusive (even as to Lilly), royalty-bearing global license to develop, manufacture, and commercialize certain intellectual property owned by Lilly relating to its IL-33 compound.

Previous wording

As a finder’s fee in connection with arranging the acquisition, Z33 issued to Stone Peach Properties, LLC (“Stone Peach”) 4,900,222 shares of Z33 Series Seed Preferred Shares, which was included in the measurement of the cost of the acquired asset. As of June 30, 2024, we have the right, but not the obligation to purchase up to 50% of the Series Seed Preferred Shares issued to Stone Peach at a price per share of $2.448869 for a period of two years from the date of the agreement (the “Call Option”). Stone Peach has the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to Zura for a price per share of $2.040724 (the “Put Option”). Stone Peach also has the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to Zura in exchange for 2,000,000 Class A Ordinary Shares (the “Put Right”). Stone Peach may exercise its Put Option and Put Right at any time between April 24, 2024 and April 24, 2028. The Z33 Series Seed Preferred Shares represent redeemable noncontrolling interest in our subsidiary, Z33.

Current wording

As a finder’s fee in connection with arranging the acquisition, Z33 issued to Stone Peach Properties, LLC (“Stone Peach”) 4,900,222 shares of Z33 Series Seed Preferred Shares, which was included in the measurement of the cost of the acquired asset. We have the right, but not the obligation to purchase up to 50% of the Series Seed Preferred Shares issued to Stone Peach at a price per share of $2.448869 for a period of two years from the date of the agreement (the “Call Option”). Stone Peach has the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to Zura for a price per share of $2.040724 (the “Put Option”). In April 2023, we agreed to exercise our Call Option and we amended the settlement terms to settle the Call Option by issuing 2,000,000 Class A Ordinary Shares (the “Amended Terms”). In November 2023, the Amended Terms were voided and our rights and obligations under the Call Option reverted to those in the original agreement (the “Second Amended Terms”). In connection with the Second Amended Terms, we also provided Stone Peach with the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to Zura in exchange for 2,000,000 Class A Ordinary Shares (the “Put Right”). Stone Peach may exercise its Put Option and Put Right at any time between April 24, 2024 and April 24, 2028. Each of the Amended Terms and the Second Amended Terms were considered an extinguishment and reissuance of the Z33 Series Seed Preferred Shares. The Z33 Series Seed Preferred Shares represent redeemable noncontrolling interest in our subsidiary, Z33.

Previous wording

The Company is obligated to pay $3.0 million to Lilly under the 2022 Lilly License upon the completion of a financing by the Company with gross proceeds exceeding $100 million, in cash or in services, paid to Z33. If the $3.0 million milestone payment is not made by December 7, 2025, Lilly may terminate the 2022 Lilly License and reclaim the asset. The Company is further obligated to make 10 commercial, development and regulatory milestone payments up to an aggregate of $155.0 million and sales milestone payments up to an aggregate of $440.0 million based on respective thresholds of net sales of products developed from the licensed compound. The Company will also pay an annual earned royalty to Lilly at a marginal royalty rate between in the mid-single to low-double digits (less than 20%), with increasing rates based on net sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of the year. The Company will account for these contingent payments when they become due. As of June 30, 2024, none of the contingent payments were due.

Current wording

We are obligated to pay $3.0 million to Lilly under the 2022 Lilly License upon the completion of a financing by Zura with gross proceeds exceeding $100 million, in cash or in services, paid to Z33. If the $3.0 million milestone payment is not made by December 7, 2025, Lilly may terminate the 2022 Lilly License and reclaim the asset. We are further obligated to make 10 commercial, development and regulatory milestone payments up to an aggregate of $155.0 million and sales milestone payments up to an aggregate of $440.0 million based on respective thresholds of net sales of products developed from the licensed compound. We will also pay an annual earned royalty to Lilly at a marginal royalty rate between in the mid-single to low-double digits (less than 20%), with increasing rates based on net sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of the year. We will account for these contingent milestone payments when they become due. As of September 30, 2024, none of the contingent milestone payments were due.

Previous wording

On March 22, 2022, the Company entered into a license agreement and a Series A-1 Subscription and Shareholder’s Agreement (collectively, the “Pfizer Agreement”) with Pfizer. The Company is obligated to make 11 future development and regulatory milestone payments aggregating up to $70.0 million and sales milestone payments up to an aggregate of $525.0 million based on respective thresholds of net sales of products (developed from the licensed compound) (the “Products”). The Company will also pay an annual earned royalty at a marginal royalty rate in the mid-single digits to low double digits (less than 20%), based on thresholds of net sales of Products. Royalties are payable on a country-by-country basis for a certain period of years or upon the later expiration of regulatory exclusivity of the Company’s Products in a country.

Current wording

On March 22, 2022, we entered into a license agreement and a Series A-1 Subscription and Shareholder’s Agreement (collectively, the “Pfizer Agreement”) with Pfizer. We are obligated to make 11 future development and regulatory milestone payments aggregating up to $70.0 million and sales milestone payments up to an aggregate of $525.0 million based on respective thresholds of net sales of products (developed from the licensed compound) (the “Products”). We will also pay an annual earned royalty at a marginal royalty rate in the mid-single digits to low double digits (less than 20%), based on thresholds of net sales of Products. Royalties are payable on a country-by-country basis for a certain period of years or upon the later expiration of regulatory exclusivity of our Products in a country.

Previous wording

The Company does not owe any other amounts under the Pfizer Agreement as of June 30, 2024.

Current wording

We do not owe any other amounts under the Pfizer Agreement as of September 30, 2024.

Previous wording

Macroeconomic conditions, including uncertainties associated with the Israel-Hamas war, the ongoing conflict between Ukraine and Russia, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Current wording

Macroeconomic conditions, including uncertainties associated with the upcoming U.S. presidential election, Israel-Hamas war, the ongoing conflict between Ukraine and Russia, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition. We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows. The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Previous wording

R&D expenses include the cost of in-process research and development (“IPR&D”) assets purchased in an asset acquisition transaction. IPR&D assets are expensed unless the assets acquired are deemed to have an alternative future use, provided that the acquired asset did not also include processes or activities that would constitute a “business” as defined under U.S. GAAP, the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use. Acquired IPR&D payments are immediately expensed in the period in which they are incurred and include upfront payments, as well as transaction fees and subsequent pre-commercial milestone payments. Research and development costs incurred after the acquisition are expensed as incurred. R&D expenses also include the remeasurement of the research and development license consideration liability. The research and development license consideration liability represented an obligation to issue either preferred shares of the Company’s subsidiary or Class A Ordinary Shares to Lilly as consideration for the 2022 Lilly License, which was ultimately settled through the issuance of Class A Ordinary Shares upon the closing of the Business Combination.

Current wording

R&D expenses include the cost of in-process research and development (“IPR&D”) assets purchased in an asset acquisition transaction. IPR&D assets are expensed unless the assets acquired are deemed to have an alternative future use, provided that the acquired asset did not also include processes or activities that would constitute a “business” as defined under U.S. GAAP, the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use. Acquired IPR&D payments are immediately expensed in the period in which they are incurred and include upfront payments, as well as transaction fees and subsequent pre-commercial milestone payments. Research and development costs incurred after the acquisition are expensed as incurred. R&D expenses also include the remeasurement of the research and development license consideration liability. The research and development license consideration liability represented an obligation to issue either preferred shares of our subsidiary or Class A Ordinary Shares to Lilly as consideration for the 2022 Lilly License, which was ultimately settled through the issuance of Class A Ordinary Shares upon the closing of the Business Combination.

Previous wording

Research and development expenses decreased by $22.7 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This was primarily due to $27.2 million related to the acquisition of an IPR&D license from Lilly during the three months ended June 30, 2023. This decrease was partially offset by an increase of $1.5 million in expenses related to compensation for personnel in research and development functions including share-based compensation and an increase of $2.3 million of costs incurred for consulting services and manufacturing of our product candidates, in addition to an increase of $0.7 million for an annual milestone payment related to the 2023 Lilly License incurred during the three months ended June 30, 2024.

Current wording

Research and development expenses increased by $2.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This was primarily due to an increase of $1.7 million in expenses related to personnel compensation for research and development functions including share-based compensation and an increase of $0.9 million for consulting costs for preparation of clinical trials, partially offset by a decrease of $0.7 million in our manufacturing costs.

Previous wording

General and administrative expenses increased by $0.5 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily due to increases of $0.4 million in expenses related compensation for personnel in executive and administrative functions including share-based compensation, as well as an increase of $0.1 million in professional fees for legal and accounting costs incurred related to our ongoing operations as a public company, as well as travel and office expenses.

Current wording

General and administrative expenses increased by $7.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily due to a $5.9 million non-cash share-based compensation expense charge for the modification of awards for the former CEO, an increase of $2.1 million in professional fees for legal and accounting costs, including $1.6 million related to the Warrant Exchange and $0.5 million related to ongoing operations as a public company, partially offset by a decrease of $0.7 million in expenses related to compensation for personnel in executive and administrative functions including share-based compensation.

Previous wording

Other income increased by a nominal amount for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This increase was primarily due to a foreign exchange transaction gain for the three months ended June 30, 2024.

Current wording

Other income increased by a nominal amount for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was primarily due to foreign exchange transaction gains for the three months ended September 30, 2024.

Previous wording

Interest income increased by $2.2 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. This is due to an increase in our cash and cash equivalents balance during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to the proceeds generated from the April 2024 Private Placement.

Current wording

Interest income increased by $1.6 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. This is due to an increase in cash and cash equivalents balance during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to the proceeds generated from the April 2024 Private Placement.

Previous wording

Dividend income decreased by $0.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. We held no dividend-generating cash equivalents during the three months ended June 30, 2024.

Current wording

Dividend income decreased by $1.0 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. We held no dividend-generating cash equivalents during the three months ended September 30, 2024.

Previous wording

Revaluation loss on the liability-classified private placement warrants assumed in the Business Combination was $0.8 million for the three months ended June 30, 2024 as compared to $0.5 million for the three months ended June 30, 2023.

Current wording

Revaluation loss on the liability-classified Private Placement Warrants assumed in the Business Combination was $3.9 million for the three months ended September 30, 2024 as compared to a $0.1 million gain for the three months ended September 30, 2023. During the three months ended September 30, 2024, the Private Placement Warrants were recorded at their settlement value upon completion of the Warrant Exchange, which was the fair value of the Class A Ordinary Shares exchanged for the Private Placement Warrants.

Previous wording

Accretion of redeemable noncontrolling interest to redemption value increased by $2.3 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. This increase is due to modifications of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach and the resulting remeasurements to redemption value.

Current wording

Accretion of redeemable noncontrolling interest to redemption value increased by $2.2 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. This increase is due to modifications of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach and the resulting remeasurements to redemption value.

Previous wording

Research and development expenses decreased by $24.0 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This was primarily due to $27.2 million related to the acquisition of an IPR&D license from Lilly during the six months ended June 30, 2023 and a decrease of $1.9 million related to the change in fair value of our research and development license consideration liability during the three months ended June 30, 2023. This decrease was partially offset by an increase of $0.7 million in expenses related to compensation for personnel in research and development functions including share-based compensation and an increase of $3.7 million of costs incurred for consulting services and manufacturing of our product candidates, in addition to an increase of $0.7 million for an annual milestone payment related to the 2023 Lilly License incurred during the six months ended June 30, 2024.

Current wording

Research and development expenses decreased by $21.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This was primarily due to $27.4 million related to the acquisition of an IPR&D license from Lilly during the nine months ended September 30, 2023 and a decrease of $1.9 million related to the change in fair value of the research and development license consideration liability during the three months ended September 30, 2023. This decrease was partially offset by an increase of $2.8 million in manufacturing costs for our product candidates, $2.3 million in expenses related to personnel compensation for research and development functions excluding share-based compensation and an increase of $1.2 million of costs incurred for consulting services for our product candidates, in addition to an increase of $0.7 million for an annual milestone payment related to the 2023 Lilly License incurred during the nine months ended September 30, 2024.

Previous wording

General and administrative expenses increased by $2.5 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was primarily due to increases of $2.0 million in expenses related compensation for personnel in executive and administrative functions including share-based compensation, as well as an increase of $0.3 million in professional fees for legal and accounting costs incurred related to our ongoing operations as a public company and an increase of $0.2 million of travel and office expenses.

Current wording

General and administrative expenses increased by $9.6 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The increase was primarily due to a $5.9 million non-cash share-based compensation expense charge for the modification of awards for the former CEO, an increase of $2.4 million in professional fees for legal and accounting costs, including $1.6 million related to the Warrant Exchange and $0.8 million related to our ongoing operations as a public company and an increase of $1.2 million in expenses related to compensation for personnel in executive and administrative functions including share-based compensation.

Previous wording

Interest income increased by $3.4 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. This is due to an increase in our cash and cash equivalents balance during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Current wording

Interest income increased by $5.1 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. This is due to an increase in cash and cash equivalents balance during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Previous wording

Dividend income decreased by $0.4 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. We held no dividend-generating cash equivalents during the six months ended June 30, 2024.

Current wording

Dividend income decreased by $1.4 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. We held no dividend-generating cash equivalents during the nine months ended September 30, 2024.

Previous wording

Revaluation loss on the liability-classified private placement warrants assumed in the Business Combination was $1.4 million during the six months ended June 30, 2024 compared to a revaluation loss of $0.4 million for the six months ended June 30, 2023.

Current wording

Revaluation loss on the liability-classified Private Placement Warrants assumed in the Business Combination was $5.2 million during the nine months ended September 30, 2024 compared to a revaluation loss of $0.2 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Private Placement Warrants were recorded at their settlement value upon completion of the Warrant Exchange, which was the fair value of the Class A Ordinary Shares exchanged for the Private Placement Warrants.

Previous wording

Revaluation loss on the note payable was $2.2 million for the six months ended June 30, 2023, as the note was remeasured to its settlement value and settled at the closing of the Business Combination.

Current wording

Revaluation loss on the note payable was $2.2 million for the nine months ended September 30, 2023, as the note was remeasured to its settlement value and settled at the closing of the Business Combination.

Previous wording

Net loss attributable to redeemable noncontrolling interest was $0.2 million for the six months ended June 30, 2023, representing the noncontrolling shareholder’s interest in the net loss of our consolidated subsidiary, Z33. Z33 had an immaterial amount of net loss for the six months ended June 30, 2024.

Current wording

Net loss attributable to redeemable noncontrolling interest was $0.2 million for the nine months ended September 30, 2023, representing the noncontrolling shareholder’s interest in the net loss of our consolidated subsidiary, Z33. Z33 had an immaterial amount of net loss for the nine months ended September 30, 2024.

Previous wording

Deemed dividend to the redeemable noncontrolling interest was $10.9 million for the three months ended June 30, 2023, due to the modification of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach. The Z33 Series Seed Preferred Shares were not modified during the three months ended June 30, 2024.

Current wording

Deemed dividend to the redeemable noncontrolling interest was $10.9 million for the nine months ended September 30, 2023, due to the modification of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach (see*“—2022 Lilly License”* above). The Z33 Series Seed Preferred Shares were not modified during the nine months ended September 30, 2024.

Previous wording

During the six months ended June 30, 2024, redeemable noncontrolling interest was adjusted from its redemption value to its initial fair value, decreased for the noncontrolling shareholder’s interest in net loss of Z33. This $7.0 million adjustment was the result of a decrease in the redemption price below the initial fair value, less the noncontrolling shareholder’s interest in net loss of Z33 as of March 31, 2024. The redeemable noncontrolling interest was remeasured to its redemption value as of June 30, 2024 resulting in accretion of redeemable noncontrolling interest to redemption value of $2.3 million for the six months ended June 30, 2024 as compared to $0.2 million for the six months ended June 30, 2023.

Current wording

During the nine months ended September 30, 2024, redeemable noncontrolling interest of the Z33 Series Seed Preferred Shares are recorded at the greater of the redemption value or the initial fair value, less noncontrolling shareholder’s interest in net loss of Z33. For the nine months ended September 30, 2024, the adjustment of redeemable noncontrolling interest from redemption value of $7.0 million resulted from a decrease in the redemption value of the Z33 Series Seed Preferred Shares below its initial fair value, less the noncontrolling shareholder’s interest in net loss of Z33, as of March 31, 2024. Subsequent to March 31, 2024, there was an accretion of the redeemable noncontrolling interest when remeasuring the Z33 Series Seed Preferred Shares to its redemption value, which was greater than its initial fair value, less noncontrolling shareholder’s interest in the net loss of Z33. Accordingly, the accretion is included in accretion of redeemable noncontrolling interest to redemption value (see above).

Previous wording

Since our inception, we have not generated any revenue and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of June 30, 2024, we had cash and cash equivalents of $188.4 million. As of June 30, 2024, we have funded our operations through (i) the sale of equity, raising an aggregate of $10.0 million of gross proceeds from the sale of our convertible preferred shares; (ii) the issuance of a promissory note, receiving net proceeds of $7.6 million; (iii) proceeds from the Business Combination of $56.7 million in March 2023; and (iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and pre-funded warrants in May and June 2023 and the April 2024 Private Placement, raising an additional $112.5 million of gross proceeds from the sale of Class A Ordinary Shares and pre-funded warrants.

Current wording

Since our inception, we have not generated any revenue and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of September 30, 2024, we had cash and cash equivalents of $188.2 million. As of September 30, 2024, we have funded our operations through (i) the sale of equity, raising an aggregate of $10.0 million of gross proceeds from the sale of our convertible preferred shares; (ii) the issuance of a promissory note, receiving net proceeds of $7.6 million; (iii) proceeds from the Business Combination of $56.7 million in March 2023; (iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and pre-funded warrants in May and June 2023; (v) the April 2024 Private Placement, raising an additional $112.5 million of gross proceeds from the sale of Class A Ordinary Shares and pre-funded warrants; and (vi) the sale under the ATM of 1,500,000 Class A Ordinary Shares at a price of $3.80 per share for net proceeds of $5.5 million, after commissions, less $0.6 million of offering costs incurred in connection with establishing the ATM.

Previous wording

We will also be responsible to Pfizer and Lilly for significant future contingent payments under the Pfizer Agreement, the 2022 Lilly License, and the 2023 Lilly License (collectively with the 2022 Lilly License, the “Lilly Licenses”) upon the achievement of certain development, regulatory, and sales milestones, as well as ongoing royalties on net commercial sales. The size and timing of these milestone payments will vary greatly depending upon a number of factors, and it is therefore difficult to estimate the total payments that could become payable to Pfizer and Lilly and when those payments would be due. If we achieve all of the milestones, we would be obligated to pay multimillion dollar development and regulatory milestone payments and sales milestone payments. We will be required to pay certain of these milestone payments prior to the time at which we are able to generate sufficient revenue, if any, from commercial sales of any of our product candidates. We intend to fund these milestone payments using a portion of the proceeds from the Business Combination, the April 2023 Private Placement, and the April 2024 Private Placement. In addition to milestone payments, we are also required to pay Pfizer and Lilly under the Pfizer Agreement and Lilly Licenses, respectively, ongoing royalties in the mid-single digits to low double-digits (less than 20%) percentage range based upon thresholds of net sales of products.

Current wording

We will also be responsible to Pfizer and Lilly for significant future contingent payments under the Pfizer Agreement, the 2022 Lilly License, and the 2023 Lilly License (collectively with the 2022 Lilly License, the “Lilly Licenses”) upon the achievement of certain development, regulatory, and sales milestones, as well as ongoing royalties on net commercial sales. The size and timing of these milestone payments will vary greatly depending upon a number of factors, and it is therefore difficult to estimate the total payments that could become payable to Pfizer and Lilly and when those payments would be due. If we achieve all of the milestones, we would be obligated to pay multimillion dollar development and regulatory milestone payments and sales milestone payments. We will be required to pay certain of these milestone payments prior to the time at which we are able to generate sufficient revenue, if any, from commercial sales of any of our product candidates. We intend to fund these milestone payments using a portion of the proceeds from the Business Combination, the April 2023 Private Placement, the April 2024 Private Placement and sales under the ATM. In addition to milestone payments, we are also required to pay Pfizer and Lilly under the Pfizer Agreement and Lilly Licenses, respectively, ongoing royalties in the mid-single digits to low double-digits (less than 20%) percentage range based upon thresholds of net sales of products.

Previous wording

We intend to devote most of the net proceeds from the Business Combination, the April 2023 Private Placement, and the April 2024 Private Placement to the preclinical and clinical development of our product candidates, our public company compliance costs and certain milestone payments. Based on our current business plans, we believe that our existing cash, cash equivalents and investments should be sufficient to fund our operating expenses and capital requirements through at least the next twelve months. Our estimate as to how long we expect our existing cash, cash equivalents and investments to be able to fund our operating expenses and capital requirements is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could result in less cash available to us or cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

Current wording

We intend to devote most of the net proceeds from the Business Combination, the April 2023 Private Placement, the April 2024 Private Placement and sales under the ATM to the preclinical and clinical development of our product candidates, our public company compliance costs and certain milestone payments. Based on our current business plans, we believe that our existing cash, cash equivalents and investments should be sufficient to fund our operating expenses and capital requirements through at least the next twelve months. Our estimate as to how long we expect our existing cash, cash equivalents and investments to be able to fund our operating expenses and capital requirements is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could result in less cash available to us or cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.