Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of financial condition and operating results together with our consolidated financial statements and the related notes and other financial information included in Item 8 in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the section of the Annual Report captioned “Risk Factors” and elsewhere in this Annual Report, our actual results may differ materially from those anticipated in these forward- looking statements.
Restatement of Prior Period Financial Statements
We have restated our previously issued unaudited condensed consolidated financial statements for the quarterly periods and year-to-date periods ended March 31, 2025 and December 31, 2024, as contained in this Annual Report on Form 10-K. Refer to the “Explanatory Note” Preceding Item 1, Business, for background on the restatement, the periods impacted, control considerations, and other information. In addition, we have restated certain previously reported financial information for the quarterly periods and year-to-date periods ended March 31, 2025 and December 31, 2024 in this Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Results of Operations section. See Note 3, Restatement of Prior Period Financial Statements, in the notes to the consolidated financial statements in this Annual Report on Form 10-K, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our consolidated financial statements.
Overview
We endeavor to become the leader in discovery, development, and commercialization of therapeutic agents capable of addressing significant unmet medical need via the application of the silence and replace approach to the treatment of genetic disorders.
Benitec Biopharma Inc. (“Benitec” or the “Company” or in the third person, “we” or “our”) is a clinical-stage biotechnology company focused on the advancement of novel genetic medicines with headquarters in Hayward, California. The proprietary platform, called DNA-directed RNA interference, or ddRNAi, combines RNA interference, or RNAi, with gene therapy to create medicines that facilitate sustained silencing of disease-causing genes following a single administration. The unique therapeutic constructs also enable the simultaneous delivery of wildtype replacement genes, facilitating the proprietary “silence and replace” approach to the treatment of genetically defined diseases. We are developing a silence and replace-based therapeutic (BB-301) for the treatment of Oculopharyngeal Muscular Dystrophy (OPMD), a chronic, life-threatening genetic disorder.
BB-301 is a silence and replace-based genetic medicine currently under development by Benitec. BB-301 is an AAV-based gene therapy designed to permanently silence the expression of the disease-causing gene (to slow, or halt, the biological mechanisms underlying disease progression in OPMD) and to simultaneously replace the mutant gene with a wildtype gene (to drive restoration of function in diseased cells). This fundamental therapeutic approach to disease management is called “silence and replace.” The silence and replace mechanism offers the potential to restore the normative physiology of diseased cells and tissues and to improve treatment outcomes for patients suffering from the chronic, and potentially fatal, effects of OPMD. BB-301 has been granted Orphan Drug Designation in the United States and the European Union.
The targeted gene silencing effects of RNAi, in conjunction with the durable transgene expression achievable via the use of modified viral vectors, imbues the silence and replace approach with the potential to produce permanent silencing of disease-causing genes along with simultaneous replacement of the wild type gene function following a single administration of the proprietary genetic medicine. We believe that this novel mechanistic profile of the current and future investigational agents developed by Benitec could facilitate the achievement of robust and durable clinical activity while greatly reducing the frequency of drug administration traditionally expected for medicines employed for the management of chronic diseases. Additionally, the
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achievement of permanent gene silencing and gene replacement may significantly reduce the risk of patient non-compliance during the course of medical management of potentially fatal clinical disorders.
Royalties, milestone payments and other license fees
We have been and in the future may be required to pay royalties, milestone payments and other license fees in connection with our licensing of intellectual property from third parties, including as discussed below.
Foreign Currency Translation and Other Comprehensive Income (Loss)
The Company’s functional currency and reporting currency is the United States dollar. BBL’s functional currency is the Australian dollar (AUD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency translation are included in the consolidated statements of operations and comprehensive income (loss) as other comprehensive income (loss).
Financing and Financing-Related Transactions During the Year Ended June 30, 2025
ATM Agreement
On October 11, 2024, we entered into a Sales Agreement (the “Sales Agreement”) with Leerink Partners LLC (the “Agent”). Pursuant to the terms of the Sales Agreement, we may offer and sell shares of our common stock having an aggregate offering amount of up to $75 million from time to time through the Agent. The Agent will use its commercially reasonable efforts, as the agent and subject to the terms of the Sales Agreement, to sell the shares offered. Sales of the shares, if any, may be made in sales deemed to be an “at-the-market offering” as defined in Rule 415 under the Securities Act of 1933, as amended. We may also agree to sell shares to the Agent as principal for its own account on terms agreed to by us and the Agent. The Agent will be entitled to a commission from us of 3.0% of the gross proceeds from the sale of shares sold under the Sales Agreement. In addition, we have agreed to reimburse certain expenses incurred by the Agent in connection with the offering. Shares sold pursuant to the Sales Agreement, if any, will be sold pursuant to our shelf registration statement on Form S-3 (File No. 333-277310), that was filed with the Securities and Exchange Commission, including the related prospectus, dated March 5, 2024, as supplemented by a prospectus supplement. As of June 30, 2025, we have not sold any shares of common stock pursuant to the Sales Agreement.
March 2025 Capital Raise
On March 25, 2025, we entered into an Underwriting Agreement with Leerink Partners LLC and TD Securities (USA) LLC, as representatives of the several underwriters named therein, pursuant to which we agreed to issue and sell, in an underwritten offering by us (the “Underwritten Offering”), (i) 1,143,000 shares of our common stock, par value $0.0001 per share (the “Common Stock”) at a purchase price to investors of $13.00 per share, and (ii) pre-funded warrants to purchase 300,000 shares of Common Stock at an exercise price of $0.0001 per share at a purchase price to investors of $12.999 per warrant. In connection with the Underwritten Offering, we entered into a Securities Purchase Agreement with entities affiliated with each of Suvretta Capital, a greater than 5% beneficial owner prior to the offering (together, the “Purchasers”), pursuant to which we agreed to issue and sell to the Purchasers an aggregate of 900,000 shares of Common Stock at a purchase price of $13.00 per share in a registered direct offering (the “Direct Offering,” and together with the Underwritten Offering, the “Offerings”), the same price per share as the offering price in the Underwritten Offering. We received gross proceeds of approximately $30.5 million and net proceeds of approximately $28.2 million from the Offerings.
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Results of Operations
Quarterly Financial Information (Unaudited)
As a result of the restatement described above, we are restating our comparisons of expenses for the impacted periods as follows:
Operating Expenses
The following table sets forth a summary of our expenses for each of the periods:
Three Months Ended
March 31,
Nine Months Ended
March 31,
2025
2024
2025
2024
(US$’000)
Operating Expenses:
Royalties and License Fees
$
—
$
(3
)
$
—
$
(108
)
Research and development (as restated)
6,495
2,566
15,465
12,097
General and administrative (as restated)
8,840
1,578
16,466
4,953
Total operating expenses (as restated)
$
15,335
$
4,141
$
31,931
$
16,942
During the three and nine months ended March 31, 2025, respectively, we incurred $6.5 million and $15.5 million in research and development expenses, respectively, as compared to $2.6 million and $12.1 million for the comparable periods ended March 31, 2024. Research and development expenses relate primarily to ongoing clinical development of BB-301 for the treatment of OPMD. The year-over-year increase for the three and nine months ended March 31, 2025, reflects the timing of contract manufacturing activity and the timing of payments for the OPMD Natural History and Dosing study.
General and administrative expense totaled $8.8 million and $16.5 million for the three and nine months ended March 31, 2025, compared to $1.6 million and $5.0 million for the comparable periods ended March 31, 2024. The increase for the three month period, 2025 relates primarily to an increase in share-based compensation of $7.4 million, travel expenses of $176 thousand and salaries and wages of $254 thousand. The increase in the nine month period relates to an increase in share-based compensation of $10.9 million, and higher corporate costs related to an increase in legal fees, and higher travel expenses as well as an increase in salaries and wages.
The following table sets forth a summary of our expenses for each of the periods:
Three Months Ended
December 31,
Six Months Ended
December 31,
2024
2023
2024
2023
(US$’000)
Operating Expenses:
Royalties and License Fees
—
$
1
—
$
(105
)
Research and development (as restated)
5,385
5,102
8,970
9,531
General and administrative (as restated)
5,420
1,824
7,626
3,375
Total operating expenses (as restated)
$
10,805
$
6,927
$
16,596
$
12,801
During the three and six months ended December 31, 2024, respectively, we incurred $5.4 million and $9.0 million in research and development expenses, respectively, as compared to $5.1 million and $9.5 million for the comparable periods ended December 31, 2023. Research and development expenses relate primarily to ongoing clinical development of BB-301 for the treatment of OPMD. The year-over-year decrease for the three and
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six-month periods ended December 31, 2024 reflects the timing of contract manufacturing activity and the timing of payments for the OPMD Natural History and Dosing study.
General and administrative expense totaled $5.4 million and $7.6 million for the three and six months ended December 31, 2024, compared to $1.8 million and $3.4 million for the comparable periods ended December 31, 2023. The increase for the three and six-month period ended December 31, 2024 relates primarily to an increase in share-based compensation of $2.7 million and $3.4 million and corporate costs related to the filing of an At-the-Market offering and related legal fees of $643 thousand and $945 thousand, respectively.
Years Ended June 30, 2025 and 2024
Revenues
We did not generate or recognize any revenue during the years ended June 30, 2025 and 2024.
Royalties and License Fees
Royalties and license fees consist primarily of payments we are required to remit for royalties and other payments related to in-licensed intellectual property. We cannot precisely predict the amount, if any, of royalties we will owe in the future, and if our calculations of royalty payments are incorrect, we may owe additional royalties, which could negatively affect our results of operations. Furthermore, we may enter into additional license agreements in the future, which may also include royalty, milestone, and other payments.
Research and Development Expenses
Research and development expenses relate primarily to the cost of conducting clinical and preclinical trials. Preclinical and clinical development costs are a significant component of research and development expenses. We record accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of preclinical studies and clinical trials, and contract manufacturing activities. We record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in trade and other payables on the consolidated balance sheets and within research and development expenses on the consolidated statements of operations and comprehensive loss.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related benefits, travel, and equity-based compensation expense. General and administrative expenses also include facility expenses, professional fees for legal, consulting, accounting and audit services and other related costs.
We anticipate that our general and administrative expenses may increase as we focus on the continued development of the clinical OPMD program. We also anticipate an increase in expenses relating to accounting, legal and regulatory-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and other similar costs.
Ms. Boston was appointed as our Chief Financial Officer effective January 1, 2025. On December 9, 2024, the Compensation Committee approved increases of the base salaries of Dr. Jerel Banks and Megan Boston to $667,000 and $415,000, respectively, each adjustment being effective as of January 1, 2025. The Compensation Committee further determined that the target annual discretionary bonus with respect to our 2025 fiscal year for Dr. Jerel Banks and Megan Boston will be 55% and 40% of their base salary, respectively. On December 9, 2024, the Board of Directors appointed Sophie Mukadam as Chief Operating Officer, effective as of January 1, 2025. Sophie Mukadam will receive a base salary of $500,000 and a target annual bonus of 40% of base salary. On February 13, 2025, the Compensation Committee of our board of directors approved a change to the base salary of Megan Boston, CFO, from USD$415,000 to USD$531,900 to be effective March 1, 2025. The base salary change was approved in anticipation of Ms. Boston relocating from Australia to Los Angeles, California.
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In connection with such relocation, the Compensation Committee also approved moving and transitional housing allowances in aggregate amounts of approximately $5,000 and $18,000, respectively.
Operating Expenses
The following table sets forth a summary of our expenses for each of the periods:
Year Ended June 30,
2025
2024
(US$’000)
Expenses:
Royalties and license fees
$
—
$
(108
)
Research and development
18,332
15,609
General and administrative
23,433
6,989
Total expenses
$
41,765
$
22,490
During the years ended June 30, 2025 and 2024, we incurred royalties and license fees expenses of zero and $(108) thousand, respectively. The credits to expense during the year ended June 30, 2024, relates to the reversal of accruals for license fees no longer due.
During the year ended June 30, 2025, we incurred $18.3 million in research and development expenses, as compared to $15.6 million for the comparable year ended June 30, 2024. Research and development expenses relate primarily to ongoing clinical development of BB-301 for the treatment of OPMD. The year-over-year increase for the year ended June 30, 2025, reflects the timing of contract manufacturing activity and the timing of payments for the OPMD Natural History and Dosing study.
General and administrative expenses totaled $23.4 million for the year ended June 30, 2025, compared to $7.0 million for the comparable year ended June 30, 2024. The increase for the year ended June 30, 2025, relates primarily to increases in share-based compensation of $14.5 million, legal fees of $492 thousand, consulting fees of $605 thousand, travel expenses of $219 thousand, and salaries and wages of $685 thousand.
Other Income (Expense)
The following table sets forth a summary of our other income (loss) for each of the periods:
Year Ended June 30,
2025
2024
(US$’000)
Other Loss:
Foreign currency transaction gain (loss)
$
(71
)
$
40
Interest income, net
3,286
904
Other expense, net
(131
)
(204
)
Gain on extinguishment of liabilities
764
—
Unrealized loss on investment
—
(1
)
Total other income (loss), net
$
3,848
$
739
Other income (loss), net during the year ended June 30, 2025, which consists of foreign currency transaction gain (loss), interest income other expense, net, gain on extinguishment of liabilities, and unrealized loss on investment, totaled $3,848 thousand. Other income (loss), net during the year ended June 30, 2024, which consists of foreign currency transaction gain (loss), interest expense, other income (expense), and unrealized loss on investment, totaled $739. Foreign currency transaction gains and losses reflect changes in foreign exchange
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rates. Net interest income increased for year ended June 30, 2025, in comparison the year ended June 30, 2024, reflects the increase in our cash and cash equivalent balances. Other expense, net recognized during the years ended June 30, 2025 and 2024 relate to recognition of a franchise tax expenses. Gain on extinguishment of liabilities is due to us settling outstanding trade payables and accrued clinical development project costs of $1.2 million with a vendor for $495 thousand due to a contractual dispute regarding contract performance and deliverables. This settlement resulted in a gain of $764 thousand in the current year.
Liquidity and Capital Resources
We have incurred cumulative losses and negative cash flows from operations since our predecessor’s inception in 1995. We had accumulated losses of $218 million as of June 30, 2025. We expect that our research and development expenses will increase due to the continued development of the OPMD program. It is also likely that there will be an increase in the general and administrative expenses due to the obligations of being a domestic public company in the United States.
We had no borrowings as of June 30, 2025 and do not currently have a credit facility. As of June 30, 2025, we had outstanding warrants to purchase 20,443,496 shares of Common Stock consisting of the following:
June 30,
2025
June 30,
2024
Purchase Warrants to purchase Common Stock
—
6,300
September 2022 Pre-Funded Warrants to purchase Common Stock
588,236
588,236
Series 2 Warrants to purchase Common Stock
101,537
1,655,464
August 2023 Pre-Funded Warrants to purchase Common Stock
12,179,739
14,172,919
Common Warrants to purchase Common Stock
5,071,148
15,263,988
April 2024 Pre-Funded Warrants to purchase Common Stock
2,202,836
2,584,239
March 2025 Pre-Funded Warrants to purchase Common Stock
300,000
—
Total
20,443,496
34,271,146
As of June 30, 2025, we had cash and cash equivalents of approximately $97.7 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our cash and cash equivalents are held in bank accounts. On October 11, 2024, we entered into the Sales Agreement as discussed above, which provides for the sale of up to $75 million of our common stock from time-to-time in “at-the-market offerings”. On March 25, 2025, we completed a financing which raised $30.5 million.
The following table sets forth a summary of the net cash flow activity for each of the periods set forth below:
Year Ended
June 30,
2025
2024
(US$’000)
Net cash provided by (used in):
Operating activities
$
(23,588
)
$
(19,403
)
Investing activities
(18
)
(179
)
Financing activities
70,485
68,029
Effects of exchange rate changes on cash and cash equivalents
49
(8
)
Net increase in cash, cash equivalents, and restricted cash
$
46,928
$
48,439
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Operating activities
Net cash used in operating activities for the years ended June 30, 2025 and 2024 was $23.6 million and $19.4 million, respectively. Net cash used in operating activities was primarily the result of our net loss, partially offset by non-cash expenses, and changes in working capital, including a decrease in payables and trade and other receivables and increases in prepaids.
Investing activities
Net cash used in investing activities for the years ended June 30, 2025 and 2024 was $18 thousand and $179 thousand, respectively. Cash used in investing activities in the years ended June 30, 2025 and 2024 was related to the purchase of furniture and fixtures and lab equipment, respectively.
Financing activities
Net cash provided by financing activities was $70.5 million and $68.0 million for the years ended June 30, 2025 and 2024, respectively. Cash from financing activities in the year ended June 30, 2025 was related to the issuance of common stock from the exercise of pre-funded warrants, Series 2 warrants, and common warrants, and an underwritten and direct offering with net proceeds of $72.8 million, partially offset by $2.3 million in share issuance costs. Cash from financing activities in the year ended June 30, 2024 was related to the issuance of common stock, pre-funded warrants, and common warrants, with gross proceeds of $73.9 million, partially offset by $5.9 million in share issuance costs.
Funding Requirements
The future of us as an operating business will depend on its ability to manage operating costs and budgeted amounts and obtain adequate financing.
We do not have any products approved for sale and have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates.
Unless and until we establish significant revenues from licensing programs, strategic alliances or collaboration arrangements with pharmaceutical companies, or from product sales, we anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of product candidates and begin to prepare to commercialize any product that receives regulatory approval. We are subject to the risks inherent in the development of new gene therapy products, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. We estimate that our cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months from the date of this report.
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development, and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
•
the timing and costs of our clinical trials for our ddRNAi and silence and replace product candidates;
•
the timing and costs of our preclinical studies for our ddRNAi and silence and replace product candidates;
•
the number and characteristics of product candidates that we pursue;
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•
the outcome, timing, and costs of seeking regulatory approvals;
•
revenue received from commercial sales of any of our product candidates that may receive regulatory approval;
•
the terms and timing of any future collaborations, licensing, consulting, or other arrangements that we may establish;
•
the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against intellectual property related claims; and
•
the extent to which we need to in-license or acquire other products and technologies.
Contractual Obligations and Commercial Commitments
On October 1, 2016, we entered into an operating lease for office space in Hayward, California that originally expired in April 2018. We have entered into lease amendments that extended the lease through December 2027. We also entered into a new lease in Los Angeles, California, which has an initial expiration date in July 2026. See Note 9 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.
We enter into contracts in the normal course of business with third-party contract research organizations, contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for termination on notice and, therefore, are cancellable contracts and not considered contractual obligations and commitments.
Critical Accounting Policies and Significant Accounting Estimates
The preparation of consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make judgments, assumptions and estimates that affect the amounts reported. Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies.
A critical accounting policy is defined as one that is both material to the presentation of our consolidated financial statements and requires us to make difficult, subjective, or complex judgments that could have a material effect on our financial condition or results of operations. Specifically, these policies have the following attributes: (1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and (2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included
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in the consolidated financial statements as soon as they became known. In addition, we are periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. These uncertainties are discussed in the section above entitled “Risk Factors.” Based on a critical assessment of its accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our consolidated financial statements are fairly stated in accordance with accounting principles generally accepted in the United States of America and provide a meaningful presentation of our financial condition and results of operations.
We believe that the following are critical accounting policies:
Research and Development Expense
Preclinical and clinical trial costs are a significant component of our research and development expenses. We accrue for preclinical and clinical development costs based on factors such as estimates of the work completed and in accordance with agreements established with our third-party service providers. We make significant judgments and estimates in determining the accrued liabilities balance at the end of each reporting period. As actual costs become known, we adjust our accrued liabilities accordingly on a prospective basis and will do so in the period in which the facts that give rise to the revision become reasonably certain.
Share-based Compensation Expense
We record share-based compensation in accordance with ASC 718, Stock Compensation . ASC 718 requires the fair value of all share-based employee compensation awarded to employees and non-employees to be recorded as an expense over the shorter of the service period or the vesting period. We determine employee and non-employee share-based compensation based on grant-date fair value using the Black-Scholes Option Pricing Model and allocate the resulting compensation expense over the corresponding requisite service period using the graded vesting attribution method. We account for forfeitures of share-based awards as they occur.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements that we have adopted and have not yet adopted, see Note 2 to our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company and not required to provide this information.
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