Zenas BioPharma, Inc. 10-Q

Item 1. Financial Statements Zenas BioPharma, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2024 2023 Assets ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 360,038 ​ $ 56,857 Short-term investments ​ ​ 26,761 ​ ​ — Prepaid expenses and other current assets ​ ​ 6,979 ​ ​ 2,947 Total current assets ​ ​ 393,778 ​ ​ 59,804 Property and equipment, net ​ ​ 146 ​ ​ 193 Operating lease right-of-use assets, net ​ ​ 399 ​ ​ 821 Restricted cash ​ ​ 89 ​ ​ 86 Other assets ​ ​ 9,020 ​ ​ 7,276 Total assets ​ $ 403,432 ​ $ 68,180 Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit) ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable (includes $ 594 and $ 21 owed to related parties, respectively) ​ $ 15,082 ​ $ 5,396 Accrued expenses (includes $ 1,873 and $ 404 owed to related parties, respectively) ​ ​ 28,531 ​ ​ 17,306 Operating lease liabilities, current ​ ​ 384 ​ ​ 556 Total current liabilities ​ ​ 43,997 ​ ​ 23,258 Operating lease liabilities, non-current ​ ​ — ​ ​ 257 Convertible notes, at fair value ​ ​ — ​ ​ 20,300 Total liabilities ​ ​ 43,997 ​ ​ 43,815 Commitments and contingencies (Note 14) ​ ​ ​ ​ ​ ​ Convertible preferred stock: ​ ​ ​ ​ ​ ​ Series Seed convertible preferred stock, par value $ 0.0001 per share; 0 and 1,785,714 shares authorized , issued and outstanding as of September 30, 2024 and December 31, 2023, respectively; liquidation preference of $ 0 as of September 30, 2024 ​ ​ — ​ ​ 956 Series A convertible preferred stock, par value $ 0.0001 per share; 0 and 17,589,380 shares authorized , issued and outstanding as of September 30, 2024 and December 31, 2023, respectively; liquidation preference of $ 0 as of September 30, 2024 ​ ​ — ​ ​ 55,840 Series B convertible preferred stock, par value $ 0.0001 per share; 0 and 81,242,587 shares authorized , issued and outstanding as of September 30, 2024 and December 31, 2023, respectively; liquidation preference of $ 0 as of September 30, 2024 ​ ​ — ​ ​ 193,290 Stockholders’ equity (deficit): ​ ​ ​ ​ ​ ​ Preferred stock, par value $ 0.0001 per share; 25,000,000 and no shares authorized as of September 30, 2024 and December 31, 2023, respectively; no shares issued and outstanding as of September 30, 2024 and December 31, 2023 ​ ​ — ​ ​ — Common stock, par value $ 0.0001 per share; 175,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 41,780,938 and 1,576,854 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively ​ ​ 4 ​ ​ — Additional paid-in capital ​ ​ 694,163 ​ ​ 4,645 Accumulated other comprehensive income ​ ​ 54 ​ ​ 37 Accumulated deficit ​ ​ ( 334,786 ) ​ ​ ( 230,403 ) Total stockholders’ equity (deficit) ​ ​ 359,435 ​ ​ ( 225,721 ) Total liabilities, convertible preferred stock and stockholders’ equity (deficit) ​ $ 403,432 ​ $ 68,180 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 7 Table of Contents Zenas BioPharma, Inc. Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited) (in thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2024 ​ 2023 ​ 2024 ​ 2023 Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collaboration revenue $ — $ 50,000 $ — $ 50,000 Total revenue ​ ​ — ​ ​ 50,000 ​ ​ — ​ ​ 50,000 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development (includes $ 1,375 , $ 612 , $ 3,247 and $ 2,704 from related parties, respectively) ​ ​ 33,530 ​ ​ 9,352 ​ ​ 89,982 ​ ​ 39,615 General and administrative (includes $ 0 , $ 3 , $ 0 and $ 71 from related parties, respectively) ​ ​ 7,454 ​ ​ 5,024 ​ ​ 18,283 ​ ​ 12,753 Acquired in-process research and development ​ ​ — ​ ​ — ​ ​ — ​ ​ 10,000 Total operating expenses ​ ​ 40,984 ​ ​ 14,376 ​ ​ 108,265 ​ ​ 62,368 (Loss) income from operations ​ ​ ( 40,984 ) ​ ​ 35,624 ​ ​ ( 108,265 ) ​ ​ ( 12,368 ) Other income (expense), net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value adjustments to convertible notes ​ ​ — ​ ​ — ​ ​ ( 846 ) ​ ​ — Other income (expense), net ​ ​ 2,378 ​ ​ ( 16 ) ​ ​ 4,727 ​ ​ ( 169 ) Total other income (expense), net ​ ​ 2,378 ​ ​ ( 16 ) ​ ​ 3,881 ​ ​ ( 169 ) Net (loss) income ​ $ ( 38,606 ) ​ $ 35,608 ​ $ ( 104,384 ) ​ $ ( 12,537 ) Net (loss) income per share attributable to common stockholders - basic ​ $ ( 5.02 ) ​ $ 2.42 ​ $ ( 28.83 ) ​ $ ( 8.21 ) Net (loss) income per share attributable to common stockholders - diluted ​ $ ( 5.02 ) ​ $ 1.96 ​ $ ( 28.83 ) ​ $ ( 8.21 ) Weighted-average common stock outstanding - basic ​ ​ 7,697,695 ​ ​ 1,537,918 ​ ​ 3,621,276 ​ ​ 1,527,730 Weighted-average common stock outstanding - diluted ​ ​ 7,697,695 ​ ​ 1,898,391 ​ ​ 3,621,276 ​ ​ 1,527,730 Comprehensive loss: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income ​ ​ ( 38,606 ) ​ ​ 35,608 ​ ​ ( 104,384 ) ​ ​ ( 12,537 ) Other comprehensive income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign currency translation adjustment ​ ​ ( 50 ) ​ ​ 9 ​ ​ 16 ​ ​ 165 Comprehensive (loss) income ​ $ ( 38,656 ) ​ $ 35,617 ​ $ ( 104,368 ) ​ $ ( 12,372 ) ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 8 Table of Contents Zenas BioPharma, Inc. Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited) (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ Convertible Preferred Stock ​ Additional ​ Other ​ ​ ​ Total ​ ​ Series Seed ​ Series A ​ Series B ​ ​ Common Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Stockholders' ​ Shares Amount Shares Amount Shares Amount Shares Amount Capital Income (Loss) Deficit Deficit Balance at December 31, 2022 ​ 1,785,714 ​ $ 956 ​ 17,589,380 ​ $ 55,840 ​ 77,052,632 ​ $ 183,290 ​ ​ 1,549,275 ​ $ — ​ $ 1,034 ​ $ ( 41 ) ​ $ ( 193,279 ) ​ $ ( 192,286 ) Exercises of common stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 15,835 ​ ​ — ​ ​ 55 ​ ​ — ​ ​ — ​ ​ 55 Stock-based compensation expense ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 687 ​ ​ — ​ ​ — ​ ​ 687 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 19,098 ) ​ ​ ( 19,098 ) Foreign currency translation adjustment ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 4 ) ​ ​ — ​ ​ ( 4 ) Balance at March 31, 2023 ​ 1,785,714 ​ $ 956 ​ 17,589,380 ​ $ 55,840 ​ 77,052,632 ​ $ 183,290 ​ ​ 1,565,110 ​ $ — ​ $ 1,776 ​ $ ( 45 ) ​ $ ( 212,377 ) ​ $ ( 210,646 ) Issuance of Series B convertible preferred stock as payment of Xencor milestone ​ — ​ ​ — ​ — ​ ​ — ​ 4,189,955 ​ ​ 10,000 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Exercises of common stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 3,108 ​ ​ — ​ ​ 11 ​ ​ — ​ ​ — ​ ​ 11 Stock-based compensation expense ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 669 ​ ​ — ​ ​ — ​ ​ 669 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 29,047 ) ​ ​ ( 29,047 ) Foreign currency translation adjustment ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 160 ​ ​ — ​ ​ 160 Balance at June 30, 2023 ​ 1,785,714 ​ $ 956 ​ 17,589,380 ​ $ 55,840 ​ 81,242,587 ​ $ 193,290 ​ ​ 1,568,218 ​ $ — ​ $ 2,456 ​ $ 115 ​ $ ( 241,424 ) ​ $ ( 238,853 ) Exercises of common stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation expense ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,004 ​ ​ — ​ ​ — ​ ​ 1,004 Net income ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 35,608 ​ ​ 35,608 Foreign currency translation adjustment ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 9 ​ ​ — ​ ​ 9 Balance at September 30, 2023 ​ 1,785,714 ​ $ 956 ​ 17,589,380 ​ $ 55,840 ​ 81,242,587 ​ $ 193,290 ​ ​ 1,568,218 ​ $ — ​ $ 3,460 ​ $ 124 ​ $ ( 205,816 ) ​ $ ( 202,232 ) ​ ​ ​ 9 Table of Contents Zenas BioPharma, Inc. Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited) (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ Total ​ ​ Convertible Preferred Stock ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Stockholders' ​ ​ Series Seed ​ Series A ​ Series B ​ Series C ​ ​ Common Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Equity ​ Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Income Deficit (Deficit) Balance at December 31, 2023 ​ 1,785,714 ​ $ 956 ​ 17,589,380 ​ $ 55,840 ​ 81,242,587 ​ $ 193,290 ​ $ — ​ $ — ​ ​ 1,576,854 ​ $ — ​ $ 4,645 ​ $ 37 ​ $ ( 230,403 ) ​ $ ( 225,721 ) Repurchase of unvested restricted stock awards ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 21,172 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Exercises of common stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 7,035 ​ ​ — ​ ​ 42 ​ ​ — ​ ​ — ​ ​ 42 Stock-based compensation expense ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 947 ​ ​ — ​ ​ — ​ ​ 947 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 27,800 ) ​ ​ ( 27,800 ) Foreign currency translation adjustment ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 37 ​ ​ — ​ ​ 37 Balance at March 31, 2024 ​ 1,785,714 ​ $ 956 ​ 17,589,380 ​ $ 55,840 ​ 81,242,587 ​ $ 193,290 ​ ​ — ​ $ — ​ ​ 1,562,717 ​ $ — ​ $ 5,634 ​ $ 74 ​ $ ( 258,203 ) ​ $ ( 252,495 ) Issuance of Series C convertible preferred stock, net of $ 619 issuance costs ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 116,275,239 ​ ​ 199,526 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation expense ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,536 ​ ​ — ​ ​ — ​ ​ 1,536 Exercises of common stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 15,655 ​ ​ — ​ ​ 124 ​ ​ — ​ ​ — ​ ​ 124 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 37,977 ) ​ ​ ( 37,977 ) Foreign currency translation adjustment ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 30 ​ ​ — ​ ​ 30 Balance at June 30, 2024 ​ 1,785,714 ​ $ 956 ​ 17,589,380 ​ $ 55,840 ​ 81,242,587 ​ $ 193,290 ​ ​ 116,275,239 ​ $ 199,526 ​ ​ 1,578,372 ​ $ — ​ $ 7,294 ​ $ 104 ​ $ ( 296,180 ) ​ $ ( 288,782 ) Conversion of convertible preferred stock to common stock upon closing of initial public offering ​ ( 1,785,714 ) ​ ​ ( 956 ) ​ ( 17,589,380 ) ​ ​ ( 55,840 ) ​ ( 81,242,587 ) ​ ​ ( 193,290 ) ​ ​ ( 116,275,239 ) ​ ​ ( 199,526 ) ​ ​ 24,978,715 ​ ​ 2 ​ ​ 449,610 ​ ​ — ​ ​ — ​ ​ 449,612 Issuance of common stock from initial public offering, net of $ 6,250 of issuance costs ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 15,220,588 ​ ​ 2 ​ ​ 234,384 ​ ​ — ​ ​ — ​ ​ 234,386 Stock-based compensation expense ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,843 ​ ​ — ​ ​ — ​ ​ 2,843 Exercises of common stock options ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,263 ​ ​ — ​ ​ 32 ​ ​ — ​ ​ — ​ ​ 32 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 38,606 ) ​ ​ ( 38,606 ) Foreign currency translation adjustment ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 50 ) ​ ​ — ​ ​ ( 50 ) Balance at September 30, 2024 ​ — ​ $ — ​ — ​ $ — ​ — ​ $ — ​ ​ — ​ $ — ​ ​ 41,780,938 ​ $ 4 ​ $ 694,163 ​ $ 54 ​ $ ( 334,786 ) ​ $ 359,435 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 10 Table of Contents Zenas BioPharma, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ 2024 2023 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 104,384 ) ​ $ ( 12,537 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ ​ ​ Acquired in-process research and development ​ ​ — ​ ​ 10,000 Depreciation expense ​ ​ 104 ​ ​ 83 Stock-based compensation expense ​ ​ 5,326 ​ ​ 2,360 Change in fair value of convertible notes ​ ​ 846 ​ ​ — Non-cash lease expense ​ ​ 423 ​ ​ 571 Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Prepaid expenses and other assets ​ ​ 475 ​ ​ ( 4,714 ) Accounts payable ​ ​ 6,319 ​ ​ ( 3,538 ) Accrued expenses ​ ​ 10,200 ​ ​ ( 6,791 ) Operating lease liabilities ​ ​ ( 429 ) ​ ​ ( 563 ) Net cash used in operating activities ​ ​ ( 81,120 ) ​ ​ ( 15,129 ) Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Purchases of property and equipment ​ ​ ( 57 ) ​ ​ — Purchases of investments ​ ​ ( 26,760 ) ​ ​ — Net cash used in investing activities ​ ​ ( 26,817 ) ​ ​ — Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Proceeds from issuance of Series C convertible preferred stock, net of issuance costs ​ ​ 178,381 ​ ​ — Payment of initial public offering costs ​ ​ ( 1,861 ) ​ ​ — Proceeds from sale of convertible notes ​ ​ — ​ ​ 20,000 Proceeds from exercise of stock options ​ ​ 198 ​ ​ 66 Proceeds from initial public offering, net of underwriting discount ​ ​ 234,387 ​ ​ — Net cash provided by financing activities ​ ​ 411,105 ​ ​ 20,066 Effect of exchange rate changes on cash, cash equivalents and restricted cash ​ ​ 16 ​ ​ 165 Net increase in cash, cash equivalents and restricted cash ​ ​ 303,184 ​ ​ 5,102 Cash, cash equivalents and restricted cash at beginning of period ​ ​ 56,943 ​ ​ 67,295 Cash, cash equivalents and restricted cash at end of period ​ $ 360,127 ​ $ 72,397 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Fair value of BMS Note recognized as Series C convertible preferred stock upon conversion ​ $ 21,146 ​ $ — Deferred offering costs in accounts payable and accrued expenses ​ $ 4,389 ​ $ — Deferred offering costs in accrued expenses ​ $ — ​ $ 51 Conversion of convertible preferred stock to common stock upon closing of initial public offering ​ $ 449,613 ​ $ — Reconciliation of cash, cash equivalents and restricted cash: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 360,038 ​ $ 72,311 Restricted cash ​ ​ 89 ​ ​ 86 Total cash, cash equivalents and restricted cash ​ $ 360,127 ​ $ 72,397 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 11 Table of Contents Zenas BioPharma, Inc. Notes to Condensed Consolidated Financial Statements ​ 1. Nature of Business Organization Zenas BioPharma, Inc. (“Zenas” or the “Company”) was incorporated in November 2019 as Zenas BioPharma (Cayman) Limited, an exempted company incorporated in the Cayman Islands with limited liability, and commenced operations in 2020. On August 2, 2023, the Company (then known as Zenas BioPharma (Cayman) Limited (“Zenas Cayman”)) de-registered from the Cayman Islands and registered by way of continuation in the State of Delaware (the “Redomicile”). Zenas is a clinical-stage global biopharmaceutical company committed to being a leader in the development and commercialization of transformative immunology-based therapies for patients in need. The Company’s goal is to build an immunology and inflammation (“I&I”) focused biopharmaceutical company. The Company has in-licensed and is developing several product candidates for the treatment of various auto-immune and rare diseases. The Company is headquartered in Waltham, Massachusetts and operates in one segment, which is the business of acquiring and developing immune-based therapies for potential commercialization. The Company’s condensed consolidated financial statements include the accounts of its wholly owned subsidiaries which include Zenas BioPharma (HK) Limited (“Zenas HK”), Zenas BioPharma (USA) LLC (“Zenas US”), Shanghai Zenas Biotechnology Co. Limited (“Zenas China”), Zenas BioPharma Securities Corp., and Zenas BioPharma GmbH. Liquidity and Capital Resources Since its inception, the Company has devoted its efforts principally to research and development and raising capital. The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, completing preclinical studies and clinical trials, obtaining regulatory approval for product candidates, market acceptance of products, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, reliance on third-party organizations, protection of proprietary technology, compliance with government regulations, and the ability to raise additional capital to fund operations. The Company’s revenues to date have been generated from payments received under the Company’s license agreement with Bristol-Myers Squibb Company (“BMS”) (see Note 8). The Company has not generated any revenue from product sales since inception, and its product candidates currently under development will require significant additional research and development efforts, including extensive clinical testing and regulatory approval prior to commercialization. On September 16, 2024, the Company completed its initial public offering (“IPO”), in which the Company issued and sold 15,220,588 shares of its common stock, including 1,985,294 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $ 17.00 per share, for aggregate gross proceeds of $ 258.7 million. The Company received approximately $ 234.4 million in net proceeds after deducting underwriting discounts and estimated offering expenses payable by the Company. In connection with the IPO, all outstanding shares of convertible preferred stock converted into 24,978,715 shares of the Company’s common stock. In connection with, and prior to, the Company’s IPO, the Company effected a 1-for- 8.6831 reverse stock split of the Company’s issued and outstanding common stock and adjusted the conversion ratio of all the Company’s outstanding convertible preferred stock. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split and the adjustment of the preferred stock conversion ratios. The Company has incurred operating losses and negative cash flows since its inception, including net losses of $ 104.4 million and $ 12.5 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and December 31, 2023, the Company had an accumulated deficit of $ 334.8 million and $ 230.4 million, respectively. Management expects operating losses and negative operating cash flows to continue for the foreseeable future. 12 Table of Contents The Company expects that its existing cash, cash equivalents and investments of $ 386.8 million as of September 30, 2024 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date these condensed consolidated financial statements were available to be issued. The Company will need additional financing to support its continuing operations and to pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of private or public equity financings, debt financings or other capital sources, including collaborations with other companies or other strategic transactions and licensing agreements. The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed could have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. ​ 2. Summary of Significant Accounting Policies The Company’s significant accounting policies are disclosed in Note 2, “Summary of Significant Accounting Policies,” in the audited consolidated financial statements for the years ended December 31, 2023 and 2022 and notes thereto, included in the Company’s final prospectus for its IPO filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”) on September 13, 2024 (the “IPO Prospectus”). Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies, except as noted below. Unaudited Interim Financial Information The accompanying condensed consolidated balance sheet as of September 30, 2024, and the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023, and the statements of changes in convertible preferred stock and stockholders’ equity (deficit) and statements of cash flows for the nine months ended September 30, 2024 and 2023 are unaudited. The condensed consolidated interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2024 and the results of its operations and its cash flows for the three and nine months ended September 30, 2024 and 2023. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2024 and 2023 are also unaudited. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, or for any other subsequent period. Deferred Offering Costs The Company capitalizes legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as other non-current assets until such financings are consummated. After consummation of the equity financing, these costs will be recorded in stockholders’ equity (deficit) as a reduction of additional paid-in-capital generated as a result of the offering. If the Company terminates its plan for an equity financing, any costs deferred will be expensed immediately. Upon closing the IPO in September 2024, the related deferred offering costs were recorded against the IPO proceeds. No deferred offering costs were recorded as of September 30, 2024. As of December 31, 2023, the Company had $ 1.4 million in deferred offering costs which were included in other assets. ​ 13 Table of Contents Investments The Company classifies all investments with a remaining maturity when purchased of greater than three months as “available-for-sale”. Available-for-sale securities with a remaining maturity of greater than one year are classified as non-current assets. Available-for-sale securities are carried at fair value based upon market prices at period end, with the unrealized gains and losses included in accumulated other comprehensive income (loss) as a component of stockholders’ equity (deficit) until realized. The amortized cost of investments in this category is adjusted for amortization of premiums and accretions of discounts over the life of the instrument. Realized gains and losses are determined using the specific identification method and are included in other income (expense). The Company reviews its portfolio of investments, using both quantitative and qualitative factors, to determine if declines in fair value below cost have resulted from a credit-related loss. If the decline in fair value is due to credit-related factors, a loss is recognized in other income (expense). Recently Issued Accounting Standards Not Yet Adopted From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the condensed consolidated financial statements and disclosures. ​ 3. Investments The following table summarizes the amortized cost and estimated fair value of the Company’s investments, which are considered to be available-for-sale investments and were included in short-term investments on the condensed consolidated balance sheets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ ​ Amortized Cost ​ ​ Gross Unrealized Gains ​ ​ Gross Unrealized Losses ​ ​ Fair Value Short-term investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper $ 3,570 ​ $ 9 ​ $ — ​ $ 3,579 Corporate debt securities ​ 8,007 ​ ​ 26 ​ ​ — ​ ​ 8,033 Government securities ​ 15,122 ​ ​ 27 ​ ​ — ​ ​ 15,149 Total $ 26,699 ​ $ 62 ​ $ — ​ $ 26,761 ​ Certain short-term debt securities with original maturities of less than 90 days are included in cash and cash equivalents on the condensed consolidated balance sheets and are not included in the table above. As of September 30, 2024, all short-term investments had contractual maturities within one year and there were no long-term investments held. The Company held no investments as of December 31, 2023. As the Company held no investments until the three months ended September 30, 2024, no available-for-sale securities were in a continuous unrealized loss position for greater than 12 months. There were no available-for-sale securities held by the Company in an unrealized loss position as of September 30, 2024. Therefore, the Company does not consider these investments to be impaired and there are no allowances for credit losses as of September 30, 2024. ​ 14 Table of Contents 4. Fair Value Measurement The following tables present information about the Company’s financial instruments measured at fair value on a recurring basis (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 Description Balance Sheet Classification Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ Current assets ​ $ 468 ​ $ — ​ $ — ​ $ 468 Government securities ​ Current assets ​ ​ 3,987 ​ ​ — ​ ​ — ​ ​ 3,987 Investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial paper ​ Current assets ​ ​ — ​ ​ 3,579 ​ ​ — ​ ​ 3,579 Corporate debt securities ​ Current assets ​ ​ — ​ ​ 8,033 ​ ​ — ​ ​ 8,033 Government securities ​ Current assets ​ ​ 15,149 ​ ​ — ​ ​ — ​ ​ 15,149 ​ ​ ​ ​ $ 19,604 ​ $ 11,612 ​ $ — ​ $ 31,216 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 Description Balance Sheet Classification Level 1 Level 2 Level 3 Total Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ BMS Note ​ Non-current liability ​ $ — ​ $ — ​ $ 20,300 ​ $ 20,300 ​ ​ ​ ​ $ — ​ $ — ​ $ 20,300 ​ $ 20,300 ​ The Company had cash equivalents of $ 4.5 million as of September 30, 2024 which consisted of money market funds and government securities. Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. The Company’s government securities are classified within Level 1 of the fair value hierarchy as the fair values are based on unadjusted quoted prices for identical assets in active markets. There were no cash equivalents held as of December 31, 2023. The Company measures its investments at fair value on a recurring basis and classifies those instruments within Level 2 of the fair value hierarchy. Investments are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. During the nine months ended September 30, 2024 and year ended December 31, 2023, there were no transfers between levels. The Company uses the carrying amounts of its prepaid expenses and other current assets, accounts payable and accrued expenses to approximate their fair value due to the short-term nature of these amounts. Convertible Notes In August 2023, the Company entered into a $ 20.0 million convertible promissory note agreement with BMS (the “BMS Note”) in connection with its strategic license and collaboration agreement with BMS (the “BMS Agreement”) (see Note 8). In the event that the Company issued and sold its convertible preferred stock to accredited investors with total gross proceeds equal to at least $ 70.0 million (a “BMS Qualified Financing”), the outstanding principal and accrued interest of the BMS Note were automatically convertible into equity securities sold in the BMS Qualified Financing at a conversion price equal (i) to the outstanding principal and accrued interest under the BMS Note divided by (ii) the lowest cash price paid per equity security. The Company elected the fair value option to account for the BMS Note. Changes in fair value at every reporting date are recorded as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The BMS Note is classified as a liability on the Company’s consolidated balance sheet as of December 31, 2023 and was initially recorded at fair value. The Company subsequently remeasured the fair value of the BMS Note at each applicable reporting period. 15 Table of Contents On May 3, 2024, the Company issued and sold Series C convertible preferred stock (“Series C Preferred Stock”), which was deemed to be a BMS Qualified Financing, as described above, and resulted in the outstanding BMS Note plus accrued interest being automatically converted into 12,284,686 shares of Series C Preferred Stock (see Note 10). Immediately prior to settlement, the BMS Note was remeasured to fair value utilizing the fair value of the shares of Series C Preferred Stock for which the BMS Note converted into. The BMS Note settling in shares of Series C Preferred Stock represents the redemption of stock-settled debt and was therefore accounted for as an extinguishment. Upon extinguishment, no gain or loss was recognized. The Company recorded a $ 0.8 million change in fair value of the BMS Note as a component of other income (expense), net in the Company’s condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2024. The change in fair value from issuance to September 30, 2023 was immaterial due to lack of changes in the significant estimates and assumptions utilized to value the BMS Note. The table below presents changes in the Company’s liabilities with significant unobservable inputs (Level 3 liabilities) during the nine months ended September 30, 2024 (in thousands): ​ ​ ​ ​ ​ Convertible notes Balance as of December 31, 2023 $ 20,300 Change in fair value of BMS Note ​ ​ 846 Issuance of Series C Preferred Stock in exchange for BMS Note ​ ​ ( 21,146 ) Balance as of September 30, 2024 ​ $ — ​ ​ ​ 5. Other Assets Other assets consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2024 2023 Prepaid clinical expenses ​ $ 8,920 ​ $ 5,788 Deferred offering costs ​ ​ — ​ ​ 1,388 Other ​ ​ 100 ​ ​ 100 Total other assets ​ $ 9,020 ​ $ 7,276 ​ ​ ​ 6. Accrued Expenses Accrued expenses consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2024 2023 Employee compensation and benefits ​ $ 6,188 ​ $ 5,122 External research, development and manufacturing expenses ​ ​ 20,049 ​ ​ 9,398 Professional and consultant fees ​ ​ 1,962 ​ ​ 2,379 Income taxes payable ​ ​ — ​ ​ 301 Other ​ ​ 332 ​ ​ 106 Total accrued expenses ​ $ 28,531 ​ $ 17,306 ​ ​ 7. Leases On September 8, 2021, Zenas US entered into a lease agreement for office space in Waltham, Massachusetts (the “Waltham Lease”), commencing on March 1, 2022. The Waltham Lease was classified as an operating lease, and has a lease term of 3.3 years with total fixed payments of approximately $ 1.8 million over that period. The Waltham Lease is terminable by the Company upon three months’ prior written notice. Zenas US has an irrevocable letter of credit agreement for the benefit of its landlord for the Waltham Lease in the amount of $ 0.1 million. 16 Table of Contents On June 28, 2022, Zenas China entered into a lease agreement for office space in Shanghai, China (the “Shanghai Lease”), commencing on September 10, 2022. The Shanghai Lease has a lease term of 3.0 years with total fixed payments of $ 0.8 million over that period, and an option to extend the lease term for an additional three years . The total lease cost for operating leases (recorded in general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive loss) was $ 0.2 million and $ 0.6 million for the three and nine months ended September 30, 2024, respectively, and $ 0.3 million and $ 0.7 million for the three and nine months ended September 30, 2023, respectively. Maturities of the operating lease liabilities as of September 30, 2024 are as follows (in thousands): ​ ​ ​ ​ Fiscal Year Amount 2024 (remaining three months) ​ $ 203 2025 ​ ​ 439 Total future minimum lease payments ​ ​ 642 Less: imputed interest ​ ​ ( 258 ) Total operating lease liabilities ​ $ 384 ​ ​ 8. Collaboration Revenue In August 2023, the Company entered into a license agreement with Bristol-Myers Squibb (the “BMS Agreement”), under which the Company granted BMS an exclusive license to (i) develop, manufacture (subject to the Company’s rights to be the exclusive manufacturer for BMS for a certain period of time), commercialize or otherwise exploit obexelimab and any biological product (irrespective of presentations, formulations or dosages) containing obexelimab but not any of the Company’s other proprietary active ingredient (the “BMS Product”) into Japan, South Korea, Taiwan, Singapore, Hong Kong and Australia (collectively, the “BMS Territory”) and (ii) develop and manufacture obexelimab and the BMS Product outside the BMS Territory provided that obexelimab and the BMS Product are solely used in the BMS Territory. The details of the BMS Agreement are further described in Note 8, “Collaboration Revenue,” in the audited consolidated financial statements for the years ended December 31, 2023 and 2022, included in the IPO Prospectus. Since the date of the audited consolidated financial statements for the years ended December 31, 2023 and 2022, there have been no changes to the BMS Agreement. Pursuant to the BMS Agreement, BMS paid the Company a one-time non-refundable upfront cash payment of $ 50.0 million, which was determined to be the transaction price. The Company is entitled to receive further separate development, regulatory, and sales milestone payments from BMS of up to approximately $ 149.5 million if certain milestones are successfully achieved. The Company is also eligible to receive tiered high single-digit to low double-digit royalties on net sales in the BMS Territory, subject to specified reductions. As of September 30, 2024, no milestones were achieved or deemed probable of achievement, and as such, all remaining milestones remained fully constrained and excluded from the transaction price. The Company and BMS collaborate on the performance of the ongoing Phase 3 clinical study of obexelimab in the IgG4-RD indication. BMS will fund their pro rata share of the total global study costs up to a specified percentage of the patients enrolled in the study from the BMS Territory. Should the percentage of patients from the BMS Territory fall below the specified percentage, BMS’s funding would proportionately decrease. The global development activities under the agreement do not represent a transaction where customer and reimbursement payments received by the Company for global development activities are accounted for as a reduction of the related research and development expenses. The Company recorded $ 1.8 million and $ 3.9 million, respectively, as a reduction to research and development expense during the three and nine months ended September 30, 2024, with a $ 1.8 million receivable included in prepaid expenses and other current assets, on the Company’s condensed consolidated balance sheet as of September 30, 2024. The Company recorded $ 3.4 million as a reduction to research and development expense during the three and nine months ended September 30, 2023. The Company satisfied the performance obligation through delivery of the license and initial technology transfer during the quarter ended September 30, 2023 and recognized the upfront payment of $ 50.0 million as revenue during the three 17 Table of Contents and nine months ended September 30, 2023. The Company recognized no revenue during each of the three and nine months ended September 30, 2024. ​ 9. License and Option Agreements Prior to 2024, the Company entered into license and option agreements with various companies in the biotechnology and life sciences industry to in-license certain technologies for the Company’s use. The Company’s agreements are disclosed in Note 9, “License and Option Agreements,” in the audited consolidated financial statements for the years ended December 31, 2023 and 2022, included in the IPO Prospectus. Since the date of those financial statements, there have been no changes to these agreements, except as noted below. Xencor, Inc. 2020 Xencor Agreement In September 2020, the Company entered into the 2020 Xencor Agreement, under which the Company is obligated to reimburse Xencor for third-party costs incurred for certain patent filings, prosecution and maintenance as further specified in the 2020 Xencor Agreement. During the three and nine months ended September 30, 2024 and 2023, the Company incurred no such reimbursable costs. 2021 Xencor Agreement In May 2021, the Company entered into the 2021 Xencor Agreement, through which it obtained an exclusive, royalty-bearing, sublicensable worldwide license to research, develop, manufacture, market and sell obexelimab. In April 2023, the Company incurred a $ 10.0 million development milestone pursuant to the 2021 Xencor Agreement, which Xencor elected to receive in the form of the Company’s Series B convertible preferred stock (“Series B Preferred Stock). See Note 10, “Convertible Preferred Stock,” for details. The milestone was recorded as acquired in-process research and development expense in the Company’s condensed consolidated statements of operations and comprehensive loss during the nine months ended September 30, 2023. Dianthus Therapeutics Inc. In September 2020, the Company entered into the Dianthus Option Agreement, under which the Company obtained an exclusive option to negotiate and enter into exclusive license agreements for the rights to research, develop, manufacture, market and sell products related to either or both of two antibody product candidates based on Dianthus’ proprietary technology. Dianthus will notify the Company when it has identified each of two antibody product candidates, and the Company will then have sixty ( 60 ) days to notify Dianthus if the Company intends to exercise each of the options. In October 2021, the Company notified Dianthus of its intention to exercise its option to ZB005 (also known as DNTH103) and in June 2022, the Company and Dianthus executed a license agreement for ZB005 (the “Dianthus License Agreement”). As of September 30, 2024, Dianthus had not notified the Company of its identification of the second antibody product candidate. In October 2024, the Company entered into a Novation Agreement (the “Novation Agreement”) with Tenacia Biotechnology (Hong Kong) Co., Limited (“Tenacia”), under which the Company transferred all of its rights and obligations under the Dianthus Option Agreement and the Dianthus License Agreement to Tenacia (see Note 17). During the three months ended September 30, 2024, and 2023, the Company incurred $ 1.9 million and $ 0.6 million of reimbursable expenses, respectively, and $ 4.7 million and $ 2.7 million for the nine months ended September 30, 2024 and 2023, respectively, which are recorded within research and development expenses in the condensed consolidated statements of operations and comprehensive loss. Of these amounts, $ 0.6 million and $ 1.9 million were recorded in accounts payable and accrued expenses, respectively, on the Company’s condensed consolidated balance sheet as of September 30, 2024. As of December 31, 2023, less than $ 0.1 million and $ 0.4 million were recorded in accounts payable and accrued expenses, respectively, on the Company’s consolidated balance sheet. 18 Table of Contents Viridian Therapeutics, Inc. In October 2020, the Company entered into the Viridian Agreement to obtain an exclusive, royalty-bearing, sublicensable license to research, develop, manufacture, market and sell certain antibody product candidates based on Viridian’s proprietary technology. The Company’s license rights are limited to non-oncology indications and are limited to China, Hong Kong, Macau and Taiwan (the “Zenas Territories”). Viridian retains its rights to develop and commercialize such product candidates outside of the Zenas Territories. The Company is obligated to make development milestone payments to Viridian, totaling up to $ 12.0 million, based on achievement of each of the specified milestone events. During each of the nine months ended September 30, 2024, and 2023, the Company incurred and paid no milestones to Viridian. As of September 30, 2024, Viridian had not notified the Company of any additional antibody product candidate. During each of the three months ended September 30, 2024 and 2023, the Company recognized no expense related to Viridian. The Company recognized $ 0.1 million for each of the nine months ended September 30, 2024 and 2023, respectively, related to amounts reimbursed to Viridian for manufacturing activities, which were recorded in research and development expenses in the condensed consolidated statement of operations. No related amounts were recorded in accrued expenses or in accounts payable on the Company’s condensed consolidated balance sheet as of September 30, 2024. As of December 31, 2023, less than $ 0.1 million was included in accrued expenses and no amount was included in accounts payable on the Company’s consolidated balance sheet. In addition, Viridian has agreed to reimburse the Company for certain services it performs on Viridian’s behalf, with reimbursements being recorded as a reduction of research and development expense. Such amounts have been and are expected to be immaterial. ​ 10. Convertible Preferred Stock In September 2020, the Company issued and sold 1,785,714 shares of Series Seed convertible preferred stock (“Series Seed Preferred Stock”) in a private financing transaction, at a purchase price of $ 0.56 per share, for total net cash proceeds of $ 1.0 million. In November 2020, the Company issued 5,041,542 shares of Series A convertible preferred stock (“Series A Preferred Stock”) to Xencor as initial consideration for the 2020 Xencor Agreement. Also in November 2020, the Company issued and sold 12,547,838 shares of Series A Preferred Stock in a private financing transaction, at a purchase price of $ 3.1878 per share, for total net cash proceeds of $ 39.9 million. In November 2022, the Company issued and sold 25,139,732 shares of Series B Preferred Stock in a private financing transaction, at a purchase price of $ 2.38666 per share, for total net cash proceeds of $ 59.4 million. Concurrent with the issuance and sale of the Series B Preferred Stock, which was deemed to be a qualified financing as defined in the convertible note agreement and resulted in the principal plus accrued interest being automatically converted into Series B Preferred Stock, the outstanding convertible notes were exchanged for 37,471,107 shares of Series B Preferred Stock. At the same time, the Xencor Warrant, which was issued as initial consideration for the 2021 Xencor Agreement, was deemed exercised for 14,441,793 shares of Series B Preferred Stock. In April 2023, the Company incurred a $ 10.0 million development milestone pursuant to the 2021 Xencor Agreement. Xencor elected to receive payment in the form of the Company’s Series B Preferred Stock and the Company issued 4,189,955 shares of Series B Preferred Stock as payment for the development milestone in June 2023. In May 2023, the Company issued and sold 103,990,553 shares of Series C convertible preferred stock (“Series C Preferred Stock”) in a private financing transaction, at a purchase price of $ 1.72131 per share, for total net cash proceeds of $ 178.4 million. Concurrent with the issuance and sale of the Series C Preferred Stock, which was deemed to be a BMS Qualified Financing as defined above in Note 4, “Fair Value Measurements,” the principal plus accrued interest of the BMS Note was automatically converted into 12,284,686 shares of Series C Preferred Stock, thereby making the total Series C issuance equal to 116,275,239 shares. In September 2024, the Company completed its IPO, pursuant to which the Company issued and sold 15,220,588 shares of its common stock, including 1,985,294 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $ 17.00 per share, for aggregate gross proceeds of $ 258.7 million. The 19 Table of Contents Company received approximately $ 234.4 million in net proceeds, after deducting underwriting discounts and estimated offering expenses payable by the Company. Upon the closing of the IPO, all outstanding shares of the Company’s Series Seed, Series A, Series B and Series C Preferred Stock (collectively, “Preferred Stock”) automatically converted into an aggregate of 24,978,715 shares of the Company’s common stock. Upon the issuance of Series Seed, Series A, Series B, and Series C Preferred Stock, the Company assessed the embedded conversion and liquidation features of the shares and determined that such features did not require the Company to separately account for these features. Preferred Stock consisted of the following (in thousands, except share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ Preferred Stock ​ ​ ​ ​ ​ ​ ​ Common Stock ​ ​ Preferred Stock ​ Issued and ​ ​ ​ ​ ​ ​ ​ Issuable Upon ​ ​ Authorized ​ Outstanding ​ Carrying Value ​ Liquidation Value ​ Conversion Series Seed Preferred Stock 1,785,714 1,785,714 $ 956 $ 1,000 205,653 Series A Preferred Stock ​ 17,589,380 ​ 17,589,380 ​ ​ 55,840 ​ ​ 56,071 ​ 2,025,699 Series B Preferred Stock ​ 81,242,587 ​ 81,242,587 ​ ​ 193,290 ​ ​ 193,898 ​ 9,356,392 Total ​ 100,617,681 ​ 100,617,681 ​ $ 250,086 ​ $ 250,969 ​ 11,587,744 ​ The holders of preferred stock had the following rights, preferences and privileges prior to conversion into common stock upon the closing of the IPO: Voting The holder of each share of Preferred Stock was entitled to one vote for each share of common stock into which it would convert and to vote with the common stock on all matters. Conversion Each share of convertible preferred stock was automatically convertible into a share of common stock, upon affirmative vote of majority of the holders of each series or upon the closing of an initial public offering of the Company’s common stock which resulted in a specified minimum amount of gross cash proceeds. The conversion ratio was initially one share of common stock for each share of convertible preferred stock and was adjustable adjusted in the event of a split or reverse split of the Company’s common stock, an issuance or declaration of dividends to holders of the Company’s common stock, a reorganization or merger transaction, or certain issuances of shares of common stock which were dilutive to holders of the Company’s preferred stock. Holders of preferred stock had the right to one vote for each share of the Company’s common stock into which such holder’s shares of preferred stock could then convert. Dividends Holders of Series C Preferred Stock were entitled to receive dividends, only when, as and if declared by the Board, at the annual rate of 6 % of the Series C Preferred Stock issue price, payable in preference to and satisfied before any dividend or distribution on any other class or series of the Company’s shares (except for certain exempted distributions). If any assets or funds remain after dividends had been distributed to holders of Series C Preferred Stock, holders of Series B Preferred Stock would have been entitled to receive dividends, only when, as and if declared by the Board, at the annual rate of 6 % of the Series B Preferred Stock issue price, payable in preference to and satisfied before any dividend or distribution on any other class or series of the Company’s shares (except for certain exempted distributions). If any assets or funds remain after dividends had been distributed to holders of Series B Preferred Stock, holders of Series A Preferred Stock would have been entitled to receive dividends, only when, as and if declared by the Board, at the annual rate of 6 % of the Series A issue price, payable in preference to and satisfied before any dividend or distribution on any other class or series of the Company’s shares (except for certain exempted distributions). If any assets or funds remain after dividends 20 Table of Contents had been distributed to holders of Series A Preferred Stock, holders of Series Seed Preferred Stock would have been entitled to receive dividends, only when, as and if declared by the Board, at the annual rate of 6 % of the Series Seed issue price, payable in preference to and satisfied before any dividend or distribution on any other class or series of the Company’s shares (except for certain exempted distributions). The right to receive dividends on shares of all series of preferred stock was not cumulative, and no such right accrued to holders of such shares. There were no dividends declared or paid as of September 30, 2024 . Liquidation Preference In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Company or a deemed liquidation event, holders of Series C Preferred Stock prior and in preference to any distribution to holders of Series B Preferred Stock, Series A Preferred Stock, Series Seed Preferred Stock and common shares, would have been entitled to be paid the issue price they originally paid to acquire their shares, plus any declared but unpaid dividends. After full payment to holders of Series C Preferred Stock, holders of Series B Preferred Stock prior and in preference to any distribution to holders of Series A Preferred Stock, Series Seed Preferred Stock and common shares, would have been entitled to be paid the issue price they originally paid to acquire their shares, plus any declared and unpaid dividends. After full payment to holders of Series B Preferred Stock, holders of Series A Preferred Stock prior and in preference to any distribution to holders of Series Seed Preferred Stock and common shares, would have been entitled to be paid the issue price they originally paid to acquire their shares, plus any declared and unpaid dividends. After full payment to holders of Series C Preferred Stock, Series B Preferred Stock, and Series A Preferred Stock, holders of Series Seed Preferred Stock prior and in preference to any distribution to holders of common shares, would have been entitled to be paid the issue price they originally paid to acquire their shares, plus any declared and unpaid dividends. Any remaining amounts after payment to holders of preferred stock, would have been paid to holders of common shares. A deemed liquidation event was defined as any consolidation, amalgamation, scheme of arrangement or merger of the Company (and any of its subsidiaries) or other reorganization resulting in loss of more than 50% voting power; the sale, transfer, lease or other disposition of all or substantially all of the Company’s assets; or the exclusive licensing of all or substantially all of the Company’s intellectual property. Redemption The Preferred Stock did not have redemption rights, except for the contingent redemption upon the occurrence of a Liquidation Event. ​ 11. Common Stock In August 2023, all outstanding shares of ordinary stock of Zenas Cayman automatically converted into shares of common stock of the Company upon the Redomicile and incorporation of the Company in the State of Delaware as Zenas BioPharma, Inc. In May 2024, the Company amended and restated its certificate of incorporation, whereby the Company increased the shares of common stock it was authorized to issue to 294,784,925 shares. Upon consummation of the IPO, the Company restated its certificate of incorporation, and as of September 30, 2024, the Company was authorized to issue 175,000,000 shares of $ 0.0001 par value common stock. The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preference of the holders of any preferred stock then issued and outstanding. The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders (and written actions in lieu of meetings), and there are not any cumulative voting rights. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of the holders of shares of capital stock of the Company; however, the issuance of common stock may be subject to the vote of the holders of one or more series of convertible preferred stock. 21 Table of Contents The Company had reserved the following shares of common stock for the potential conversion of outstanding convertible preferred stock and exercise of stock options: ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2024 2023 Conversion of outstanding shares of convertible preferred stock ​ — ​ 11,587,760 Options to purchase common stock ​ 8,630,075 ​ 2,382,933 Remaining shares reserved for future issuance ​ 447,981 ​ 60,793 Total ​ 9,078,056 ​ 14,031,486 ​ ​ 12. Stock-Based Compensation 2020 Plan On August 21, 2020, the Company’s sole director and member approved the Zenas BioPharma (Cayman) Limited 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan allowed the Company to grant stock options, restricted stock awards (“RSAs”), restricted stock units, and other stock-based awards to employees, officers, directors and consultants of the Company and its subsidiaries. Since inception of the 2020 Plan, the Company has granted RSAs and stock options. RSAs and stock options granted by the Company generally vest over four years , with 25 % of the total shares granted vesting on the anniversary of the vesting commencement date and the remaining 75 % vesting in equal monthly installments over the subsequent thirty-six ( 36 ) months. In August 2023, as part of the Redomicile, the 2020 Plan was transferred from Zenas BioPharma Cayman Limited to Zenas BioPharma, Inc and was renamed the Zenas BioPharma, Inc. 2020 Equity Incentive Plan. Upon the transfer, there was no legal modification to the outstanding RSAs and stock options, and no changes to any existing terms of the outstanding awards (exercise price, term, vesting, etc.). Upon effectiveness of the 2024 Plan (as defined below), the Company ceased granting additional awards under the 2020 Plan. 2024 Plan On September 3, 2024, the Board adopted the 2024 Equity Incentive Plan (the “2024 Plan”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s IPO. The 2024 Plan provides for the award of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, unrestricted stock, restricted stock units and other stock-based awards. Upon the effectiveness of the 2024 Plan, the number of shares of common stock initially reserved for issuance was 4,775,477 shares of common stock which is equal to 12 % of the number of shares of common stock issued and outstanding immediately following the consummation of the Company’s IPO. The number of shares reserved for issuance under the 2024 Plan will increase automatically on the first day of each fiscal year commencing on January 1, 2025 through January 1, 2034 by the number of shares equal to the lesser of (a) five percent of the aggregate number of shares of common stock outstanding as of such date, and (b) a number of shares as may be determined by the Board on or prior to such date. As of September 30, 2024, 447,981 shares of common stock remain available for future issuance under the 2024 Plan. 2024 ESPP On September 3, 2024, the Board adopted the 2024 Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the effectiveness of the registration statement for the Company’s IPO. The Company initially reserved 397,956 shares for issuance under the ESPP which is equal to 1 % of the number of shares of common stock issued and outstanding immediately following the consummation of the Company’s IPO. The number of shares reserved for sale under the ESPP will increase automatically on the first day of each fiscal year commencing on January 1, 2025 through January 1, 2034, by the number of shares equal to the lesser of (a) one percent of the aggregate number of shares of common stock outstanding as of such date, and (b) a number of shares as may be determined by the Board on or prior to such date, up to a maximum of 1,000,000 shares in the aggregate per year. As of September 30, 2024, no shares of common stock have been issued and no stock-based compensation has been recognized related to the ESPP. 22 Table of Contents Restricted Stock Awards The following table presents a summary of the Company’s RSA activity and related information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ Number of ​ Average Grant-Date ​ Shares Fair Value Unvested as of December 31, 2023 ​ ​ 27,199 ​ $ 2.71 Vested ​ ​ ( 6,027 ) ​ ​ 0.01 Repurchased ​ ​ ( 21,172 ) ​ ​ 3.48 Unvested as of September 30, 2024 ​ ​ — ​ $ — ​ There were no RSAs granted during the nine months ended September 30, 2024. As of September 30, 2024, all RSAs were fully vested. Stock Options The Company has granted stock options with service-based vesting conditions. Stock options typically vest over four years and have a maximum term of ten years . The Company typically grants stock options to employees and non-employees at exercise prices deemed by the Board to be equal to the fair value of the common stock at the time of grant. The following table presents a summary of the Company’s stock option activity and related information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ Aggregate ​ ​ Number of ​ Weighted-Average ​ Remaining ​ Intrinsic ​ Shares Exercise Price Contractual Term Value ​ ​ ​ ​ ​ ​ ​ ​ ​ (in years) ​ ​ (in thousands) Balance as of December 31, 2023 ​ ​ 2,382,933 ​ $ 8.51 ​ ​ ​ ​ $ 8,084 Granted ​ ​ 6,363,022 ​ ​ 14.86 ​ ​ ​ ​ ​ ​ Exercised ​ ​ ( 25,953 ) ​ ​ 7.56 ​ ​ ​ ​ ​ 78 Forfeited or cancelled ​ ​ ( 89,927 ) ​ ​ 9.21 ​ ​ ​ ​ ​ ​ Balance outstanding as of September 30, 2024 ​ ​ 8,630,075 ​ $ 13.19 ​ ​ 9.42 ​ $ 32,545 Options vested and exercisable as of September 30, 2024 ​ ​ 1,017,323 ​ $ 7.00 ​ ​ 7.71 ​ $ 10,093 Options vested and expected to vest as of September 30, 2024 ​ ​ 8,630,075 ​ $ 13.19 ​ ​ 9.42 ​ $ 32,545 ​ The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock for those stock options that had an exercise price lower than the fair value of the Company’s common stock as of the measurement date of September 30, 2024. The aggregate intrinsic value of options exercised during each of the nine months ended September 30, 2024 and 2023 was $ 0.1 million. As of September 30, 2024, unrecognized compensation cost related to unvested stock options was $ 79.2 million, which is expected to be recognized over a weighted average period of 3.3 years. Stock-Based Compensation Expense The following table presents stock-based compensation expense as reflected in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2024 2023 2024 2023 Research and development ​ $ 1,257 ​ $ 510 ​ $ 2,378 ​ $ 1,040 General and administrative ​ ​ 1,586 ​ ​ 493 ​ ​ 2,948 ​ ​ 1,320 Total stock-based compensation expense ​ $ 2,843 ​ $ 1,003 ​ $ 5,326 ​ $ 2,360 ​ 23 Table of Contents ​ 13. Net (Loss) Income Per Share In periods when participating securities are outstanding and the Company has income, net income (loss) per share information is determined using the two-class method, which includes the weighted-average number of shares of common stock outstanding during the period and other securities that participate in dividends (a participating security). The Company considers the convertible preferred stock to be participating securities because they include rights to participate in dividends with the common stock. Under the two-class method, basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share attributable to common stockholders is computed using the more dilutive of (1) the two-class method or (2) the if-converted method. The Company allocates net income first to preferred stockholders based on dividend rights under the Company's certificate of incorporation and then to preferred and common stockholders based on ownership interests. Net losses are not allocated to preferred stockholders as they do not have an obligation to share in the Company's net losses. Diluted net income (loss) per share gives effect to all potentially dilutive securities. Potential dilutive securities consist of shares of common stock issuable upon the exercise of stock options, and shares of common stock issuable upon the conversion of the outstanding convertible preferred stock and convertible debt. The dilutive effect of these common stock equivalents is reflected in diluted earnings per share by application of the treasury stock method. In periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share since dilutive common shares are not assumed to have been issued if their effect is antidilutive. Basic and diluted net (loss) income per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2024 2023 2024 2023 Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income ​ $ ( 38,606 ) ​ $ 35,608 ​ $ ( 104,384 ) ​ $ ( 12,537 ) Less: Noncumulative undeclared convertible preferred stock dividends ​ ​ — ​ ​ ( 3,766 ) ​ ​ — ​ ​ — Less: Earnings attributable to participating securities ​ ​ — ​ ​ ( 28,119 ) ​ ​ — ​ ​ — Net (loss) income attributable to common stockholders - basic and diluted ​ $ ( 38,606 ) ​ $ 3,723 ​ $ ( 104,384 ) ​ $ ( 12,537 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common stock outstanding - basic ​ ​ 7,697,695 ​ ​ 1,537,918 ​ ​ 3,621,276 ​ ​ 1,527,730 Dilutive effect of options to purchase common stock ​ ​ — ​ ​ 360,473 ​ ​ — ​ ​ — Weighted-average common stock outstanding - diluted ​ ​ 7,697,695 ​ ​ 1,898,391 ​ ​ 3,621,276 ​ ​ 1,527,730 Net (loss) income per share attributable to common stockholders - basic ​ $ ( 5.02 ) ​ $ 2.42 ​ $ ( 28.83 ) ​ $ ( 8.21 ) Net (loss) income per share attributable to common stockholders - diluted ​ $ ( 5.02 ) ​ $ 1.96 ​ $ ( 28.83 ) ​ $ ( 8.21 ) ​ 24 Table of Contents The Company excluded the following shares from the computation of diluted net (loss) income per share attributable to common stockholders as of September 30, 2024 and 2023 because including them would have had an anti-dilutive effect: ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2024 2023 Convertible preferred stock ​ — ​ 11,587,744 Unvested restricted stock ​ — ​ 29,459 Options to purchase common stock ​ 8,630,075 ​ 1,945,373 ​ ​ The BMS Note was also outstanding as of September 30, 2023, which could have obligated the Company to issue preferred shares or common shares upon the occurrence of various events at prices and in amounts that were not determinable as of September 30, 2023. As such, Company excluded the BMS Note from the table above and the calculation of diluted net loss per share. 14. Commitments and Contingencies Operating Leases The Company has entered into arrangements for leases of office space; see Note 7, “Leases,” for details. License and Option Agreements The Company entered into licenses agreements under which it is obligated to make fixed and contingent payments; see Note 9 “License and Option Agreements,” for details. Other Contracts The Company has entered into agreements with certain vendors for the provision of services that the Company is not contractually able to terminate for convenience and thereby avoid any and all future obligations to the vendors. Under such agreements, the Company is contractually obligated to make certain minimum payments to the vendors, with the exact amounts in the event of termination to be based on the timing of the termination and the exact terms of the agreement. Indemnification Agreements In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or services as directors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not currently aware of any indemnification claims and had not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of September 30, 2024. Litigation and Other Proceedings The Company may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities, including claims or disputes related to patents that have been issued or that are pending in the field of research on which the Company is focused. As of September 30, 2024, the Company was not subject to any material legal proceedings which would reasonably be expected to have a material adverse effect on the Company’s financial results. ​ 25 Table of Contents 15. Employee Benefit Plans Effective June 2020, the Company adopted the Zenas BioPharma 401(k) Plan (the “401(k) Plan”) for its employees, which is designed to be qualified under Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits. Since inception of the 401(k) Plan and through September 30, 2024, the Company has not made any contributions to the 401(k) Plan. ​ 16. Related Party Transactions As further described above in Note 9, “License and Option Agreements,” the Company has obtained exclusive, worldwide licenses from Xencor to research, develop, manufacture, market and sell four antibody product candidates pursuant to two license agreements. The Company has concluded that Xencor is a related party, because as initial consideration for the 2020 Xencor Agreement, the Company issued 5,041,542 shares of its Series A Preferred Stock to Xencor during the year ended December 31, 2020. In April 2023, Xencor elected to receive payment for a development milestone in the form of the Company’s Series B Preferred Stock and the Company issued 4,189,955 shares of Series B Preferred Stock as payment for the development milestone in June 2023. Following the IPO and as of September 30, 2024, Xencor held 7.4 % of shares of the Company’s outstanding common stock. The Company recorded no reimbursable costs and less than $ 0.1 million in reimbursable patent-related costs to general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss during the nine months ended September 30, 2024 and 2023, respectively. As further described above in Note 9, “License and Option Agreements,” the Company has obtained a license from Viridian to research, develop, manufacture, market and sell an antibody product candidate in China. The Company has concluded that Viridian is a related party because although Fairmount Funds Management LLC owns less than 5 % of shares of the Company’s outstanding common stock, they have a seat on the Board and are also a 10% or greater stockholder of Viridian and have two seats on Viridian’s board of directors. As initial consideration for this license, the Company issued 38,707 shares of its common stock to Viridian during the year ended December 31, 2020. Following the IPO and as of September 30, 2024, Viridian held less than 5 % of shares of the Company’s outstanding common stock. As further described above in Note 9, “License and Option Agreements”, the Company obtained an exclusive option to negotiate and enter into exclusive license agreements with Dianthus for the rights (in the Zenas Territories only) to either or both of two antibody product candidates. In June 2022, the Company and Dianthus entered into the Dianthus License Agreement. In October 2024, the Dianthus Option Agreement and Dianthus License Agreement and all of their related rights and obligations were transferred to Tenacia (Note 17). The Company has concluded that Dianthus is a related party because the Company’s Chair of the Board is a member of the board of directors of Dianthus. As initial consideration for this license, the Company issued 18,063 shares of its common stock to Dianthus during the year ended December 31, 2020. Following the IPO and as of September 30, 2024, Dianthus held less than 5 % of shares of the Company’s outstanding common stock. ​ 17. Subsequent Events Waltham Sublease ​ On October 10, 2024, the Company entered into an operating sublease agreement (the “Waltham Sublease”) for an office space located in Waltham, Massachusetts. This lease is expected to commence prior to December 31, 2024 and has an initial term of 18 months , with no options to extend the term for additional years. The aggregate estimated undiscounted rental payments due over the term of this lease is $ 1.0 million. The Company will assess the impact on its right-of use asset in its financial statements for the year ended December 31, 2024. ​ Early Termination of Waltham Lease ​ On October 11, 2024, the Company sent a notice of its intent to early terminate the Waltham Lease effective January 10, 2025. The Waltham Lease had an initial expiration date of June 2025. In accordance with the lease terms, the Company paid an early termination fee of $ 0.1 million. The Company will assess the impact on its right-of use asset in its financial statements for the year ended December 31, 2024. 26 Table of Contents ​ Novation Agreement ​ On October 21, 2024, the Company entered into a Novation Agreement with Tenacia, under which the Company transferred its rights and obligations under the Dianthus Option Agreement and the Dianthus License Agreement to Tenacia. As partial consideration for the Novation Agreement, the Company will receive a non-creditable, non-refundable upfront fee of $ 5.0 million from Tenacia. In addition, the Company is eligible to receive up to $ 86.0 million upon the achievement of certain future regulatory and commercial milestones. ​ ​ 27 Table of Contents