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Item 7. Management’s Discussion and Analysis

2025-03-25 compared with 2024-03-28 · 232 added, 156 removed, 227 unchanged (63% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report.

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our audited consolidated financial statements and notes thereto as of December 31, 2024, included elsewhere in this Annual Report.

In addition to historical information, this discussion and analysis contains forward-looking statements.

These forward-looking statements are subject to risks and uncertainties, including those discussed in the section titled “Risk Factors” in this Annual Report, that could cause actual results to differ materially from historical results or anticipated results.

You should carefully read the information under “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report.

Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Zura,” “we,” “us,” and “our” refer to Zura Bio Limited, a Cayman Islands exempted company formerly known as JATT Acquisition Corp, and its consolidated subsidiaries.

References to JATT Acquisition Corp.

or “JATT” refer to the Company prior to the consummation of the Business Combination.

Zura Bio Limited, formerly known as JATT Acquisition Corp., is a multi-asset clinical-stage biotechnology company focused on developing novel medicines for immune and inflammatory disorders.

The experienced leadership team aims to become a leader in the autoimmune and inflammatory field.

References to JATT Acquisition Corp or “JATT” refers to us prior to the consummation of the Business Combination.

We are a clinical-stage, multi-asset immunology company dedicated to developing novel dual-pathway antibodies for a range of autoimmune and inflammatory diseases with unmet needs.

Leveraging the extensive experience of our team, we identify relevant diseases and develop our differentiated assets in those diseases.

Our strategic focus is to harness dual-pathway biology to provide broader and deeper clinical benefits to patients with autoimmune and inflammatory diseases.

We are currently developing one clinical-stage product candidate in ongoing Phase 2 trials while actively evaluating development opportunities for our pipeline of clinical-stage assets, focusing on indications with unmet needs and commercial potential.

We are currently developing tibulizumab (ZB-106), an immunoglobulin G (IgG)-single-chain variable fragment (scFv) bispecific dual-antagonist antibody engineered by the fusion of TALTZ® (ixekizumab) and tabalumab to neutralize interleukin-17A (IL-17A) and B-cell activating factor (BAFF).

These cytokines play pivotal roles in various inflammatory and autoimmune disorders.

By targeting IL-17A and BAFF, tibulizumab demonstrates potential in mitigating chronic inflammation while preserving the integrity of the immune system.

Three Phase 1/1b clinical studies have been completed for tibulizumab, including studies involving participants with rheumatoid arthritis and Sjögren’s syndrome.

In December 2024, we initiated TibuSURE, a global Phase 2 study evaluating tibulizumab in adults with systemic sclerosis (SSc).

TibuSURE is a randomized, double-blind, placebo-controlled study designed to assess the safety, tolerability, and efficacy of tibulizumab in approximately 80 participants with early diffuse cutaneous systemic sclerosis (dcSSc).

The study includes a 24-week efficacy period followed by a 28-week open-label extension (OLE).

The primary endpoint is the modified Rodnan Skin Score (mRSS).

Key efficacy endpoints include lung disease, assessed by quantitative high-resolution computed tomography (qHRCT) and forced vital capacity (FVC);

physical function, measured by the Health Assessment Questionnaire-Disability Index (HAQ-DI);

and the revised Combined Response Index in Systemic Sclerosis (rCRISS) .

Topline data are expected to be available in the fourth quarter of 2026.

In September 2024, we engaged a third-party Contract Research Organization (“CRO”) to oversee and conduct the Phase 2 clinical program evaluating tibulizumab in hidradenitis suppurativa (HS).

This study is expected to initiate in the second quarter of 2025.

Crebankitug (ZB-168) is a fully human, high affinity monoclonal antibody that binds and neutralizes the interleukin-7 receptor (IL-7R) alpha chain.

IL-7Rα sits at the nexus of two key immune pathways, IL-7 and thymic stromal lymphopoietin (TSLP), thus IL-7Rα has the potential to block activation through either of these pathways.

As a result, we believe crebankitug could be therapeutically relevant in a broad set of indications where the IL-7 or TSLP pathways may be involved.

Three Phase 1/1b clinical studies have been conducted to date.

We are actively assessing the competitive landscape and evaluating potential therapeutic indications for crebankitug.

Torudokimab (ZB-880) is a fully human, high affinity monoclonal antibody that neutralizes interleukin-33 (IL-33), preventing ST2-dependent and ST2-independent (e.g., RAGE) inflammation.

The IL-33/ST2 axis stands as a validated therapeutic target for conditions such as chronic obstructive pulmonary disease (“COPD”) and asthma.

Three Phase 1/2 clinical studies have been conducted to date.

We are continuing to monitor external Phase 2 and Phase 3 IL-33/ST2 data releases from other companies related to asthma and COPD and are actively assessing the competitive landscape and evaluating potential therapeutic indications to guide our future development efforts for torudokimab.

We were incorporated as a Cayman Islands exempted company on March 10, 2021.

Our wholly owned subsidiary, Zura Bio Limited (“Zura Bio UK”) was formed in the United Kingdom, or UK, on January 18, 2022.

Our wholly owned subsidiary, Zura Bio Limited (“Zura Bio UK”) was formed in the United Kingdom (“U.K.”), on January 18, 2022.

Prior to March 20, 2023, our operations were conducted through Zura Bio UK.

We have a limited operating history.

Since our inception, our operations have focused on organizing and staffing our company, business planning, raising capital and entering into collaboration agreements for conducting manufacturing, research and development activities.

Our lead product candidates are in the clinical testing stage;

however, we have not conducted any clinical tests ourselves, nor have any been conducted during the period since our inception.

however, prior to the initiation of TibuSURE in December 2024, we have not conducted any clinical tests ourselves, nor have any been conducted during the period since our inception.

We do not have any product candidates approved for sale and have not generated any revenue from product sales.

We have funded our operations through (i) the sale of equity, raising an aggregate of $10.0 million of gross proceeds from the sale of shares of convertible preferred stock of Zura Bio UK through March 31, 2023;

We have funded our operations through (i) the sale of equity, raising an aggregate of $10.0 million of gross proceeds from the sale of our convertible preferred shares of Zura Bio UK through March 31, 2023;

(ii) the issuance of a promissory note, receiving net proceeds of $7.6 million in December 2022;

(iii) proceeds from the Business Combination of $56.7 million in March 2023;

and (iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and Pre-Funded Warrants during the year ended December 31, 2023.

(iii) proceeds from the Business Combination of $56.7 million in March 2023 (iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and 2023 Pre-Funded Warrants (as defined below) during the year ended December 31, 2023;

(v) the April 2024 Private Placement, raising an aggregate of $112.5 million of gross proceeds from the sale of Class A Ordinary Shares and 2024 Pre-Funded Warrants (as defined below) in April 2024;

(vi) the sale of 1,500,000 Class A Ordinary Shares at a price of $3.80 per share under the ATM (as defined below) for net proceeds of $5.5 million, after placement agent commissions, in September 2024;

and (vii) the sale of 3,000,000 Class A Ordinary Shares at a price of $1.75 per share under the ATM for net proceeds of $5.1 million, after placement agent commissions, in the first quarter of 2025.

Since our inception, we have incurred significant operating losses.

Our net loss for the year ended December 31, 2023 and period ended December 31, 2022 were $60.4 million and $25.7 million, respectively.

Our net loss for the years ended December 31, 2024 and 2023 were $52.4 million and $60.4 million, respectively.

As of December 31, 2024, we had an accumulated deficit of $155.9 million.

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● continue to advance the preclinical and clinical development of our product candidates;

● conduct our planned preclinical studies and clinical trials for the ZB Assets, as well as initiate and complete additional trials of future potential product candidates;

● conduct our planned preclinical studies and clinical trials for our product candidates, as well as initiate and complete additional trials of future potential product candidates;

● scale up our clinical and regulatory capabilities;

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Business Combination

On March 20, 2023 (the “Closing Date”), we consummated the previously-announced transactions contemplated by the Business Combination Agreement, dated June 16, 2022, as amended on September 20, 2022, November 14, 2022, and January 13, 2023 by and among Zura Bio Limited, a limited company incorporated under the laws of England and Wales (“Zura Bio UK”), JATT Acquisition Corp, a Cayman Islands exempted company (“JATT”), JATT Merger Sub, a Cayman Islands exempted company and wholly owned subsidiary of JATT (“Merger Sub”), JATT Merger Sub 2, a Cayman Islands exempted company and wholly owned subsidiary of JATT (“Merger Sub 2”) and Zura Bio Holdings Ltd, a Cayman Islands exempted company (“Holdco”), following the approval at an extraordinary general meeting of JATT’s shareholders held on March 16, 2023.

JATT Acquisition Corp (“JATT”) was a Cayman Islands exempted company initially incorporated under the laws of the Cayman Islands on March 10, 2021.

On July 13, 2021, JATT completed its IPO.

On March 20, 2023 (the “Closing Date”), we consummated the previously-announced transactions contemplated by that certain Business Combination Agreement, dated June 16, 2022, as amended on September 20, 2022, November 14, 2022 and January 13, 2023 by and among Zura Bio Limited, a limited company incorporated under the laws of England and Wales (“Zura Bio UK”), JATT, JATT Merger Sub, a Cayman Islands exempted company and wholly owned subsidiary of JATT (“Merger Sub”), JATT Merger Sub 2, a Cayman Islands exempted company and wholly owned subsidiary of JATT (“Merger Sub 2”) and Zura Bio Holdings Ltd, a Cayman Islands exempted company (“Holdco”), following the approval at an extraordinary general meeting of JATT’s shareholders held on March 16, 2023.

Pursuant to the Business Combination Agreement, (a) before the closing of the Business Combination, Holdco was established as our new holding company and became a party to the Business Combination Agreement;

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(ii) immediately following the Merger, Holdco merged with and into Merger Sub 2, with Merger Sub 2 continuing as the surviving company and a wholly owned subsidiary of JATT (the “Subsequent Merger”);

and (iii) JATT changed its name to “Zura Bio Limited” (“Zura Bio”).

Subject to, and in accordance with, the terms and conditions of the Business Combination Agreement, at the Closing, (i) each JATT unit was (to the extent not already separated) automatically separated and the holder thereof was deemed to hold one JATT Class A Ordinary Share and one-half of a JATT warrant;

(ii) in consideration for the Merger, JATT issued to holders of Holdco’s issued and outstanding shares immediately prior to the Effective Time (as defined in the Business Combination Agreement) an aggregate of 14,558,067 JATT Class A Ordinary Shares (including 499,993 JATT Class A Ordinary Shares underlying restricted share units granted to Amit Munshi, the Company’s Non-Executive Chairman) plus 1,941,933 options to acquire JATT Class A Ordinary Shares for which outstanding options to acquire Holdco Class A Ordinary Shares were exchanged on Closing;

and (iii) pursuant to the terms and conditions of JATT’s existing amended and restated memorandum and articles of association, all then-outstanding Class B Ordinary Shares, par value $0.0001 per share, were automatically converted into JATT Class A Ordinary Shares on a one-for-one basis.

and (iii) JATT, as the registrant changed its name to “Zura Bio Limited”.

Subject to, and in accordance with, the terms and conditions of the Business Combination Agreement, at the Closing, (i) each JATT unit was (to the extent not previously separated) automatically separated and the holder thereof was deemed to hold one JATT Class A Ordinary Share and one-half of a JATT warrant;

(ii) in consideration for the Merger, JATT issued to holders of Holdco’s issued and outstanding shares immediately prior to the Effective Time (as defined in the Business Combination Agreement) an aggregate of 14,558,067 JATT Class A Ordinary Shares (including 499,993 JATT Class A Ordinary Shares underlying restricted share units granted to Amit Munshi, our Non-Executive Chairman) plus 1,941,933 options to acquire JATT Class A Ordinary Shares for which outstanding options to acquire Holdco Class A Ordinary Shares were exchanged on Closing;

and (iii) pursuant to the terms and conditions of JATT’s amended and restated memorandum and articles of association, all then-outstanding Class B Ordinary Shares, par value $0.0001 per share, were automatically converted into JATT Class A Ordinary Shares on a one-for-one basis.

On the Closing Date, Ewon Comfortech Co., Ltd.

(“Ewon”), an institutional accredited investor which is an indirect investor in Zura through its equity interest in Hana Immunotherapeutics LLC (“Hana”), purchased from JATT 2,000,000 JATT Class A Ordinary Shares and Eugene Investment & Securities Co., Ltd (“Eugene”), an unaffiliated institutional credited investor, purchased from JATT 9,950 JATT Class A Ordinary Shares (Ewon, together with Eugene, the “PIPE Investors”), for an aggregate of 2,009,950 JATT Class A Ordinary Shares (the “PIPE Shares”) at a price of $10.00 per share, for an aggregate purchase price of $20,099,500 (the “PIPE Financing”), pursuant to the subscription agreement entered into by JATT and the Ewon as of June 16, 2022, as amended on November 25, 2022 (the “Ewon PIPE Subscription Agreement”) and the subscription agreement entered into by JATT and Eugene as of March 13, 2023 (the “Eugene PIPE Subscription Agreement” and, together with the Ewon PIPE Subscription Agreement, the “PIPE Subscription Agreements”).

(“Ewon”), an institutional accredited investor which is an indirect investor in us through its equity interest in Hana Immunotherapeutics LLC (“Hana”), purchased from JATT 2,000,000 JATT Class A Ordinary Shares and Eugene Investment & Securities Co., Ltd (“Eugene”), an unaffiliated institutional credited investor, purchased from JATT 9,950 JATT Class A Ordinary Shares (Ewon, together with Eugene, the “PIPE Investors”), for an aggregate of 2,009,950 JATT Class A Ordinary Shares (the “PIPE Shares”) at a price of $10.00 per share, for an aggregate purchase price of $20,099,500 (the “PIPE Financing”), pursuant to the subscription agreement entered into by JATT and the Ewon as of June 16, 2022, as amended on November 25, 2022 (the “Ewon PIPE Subscription Agreement”) and the subscription agreement entered into by JATT and Eugene as of March 13, 2023 (the “Eugene PIPE Subscription Agreement” and, together with the Ewon PIPE Subscription Agreement, the “PIPE Subscription Agreements”).

At the Closing of the Business Combination, Athanor Master Fund, LP and Athanor International Master Fund, LP (collectively, the “FPA Investors”), each of which is an unaffiliated institutional investor, purchased (i) an aggregate of 3,000,000 JATT Class A Ordinary Shares at $10 per share for $30,000,000;

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The Business Combination, together with the PIPE financing, the Forward Purchase Agreement, and the Redemption Backstop, generated approximately $56.7 million in proceeds.

On March 21, 2023, the Company’s Class A Ordinary Shares and public warrants began trading on the Nasdaq under the symbols “ZURA” and “ZURAW,” respectively.

On March 21, 2023, our Class A Ordinary Shares and public warrants began trading on the Nasdaq under the symbols “ZURA” and “ZURAW,” respectively.

On August 27, 2024, the Public Warrants (as defined below) were no longer listed on the Nasdaq in connection with the completion of the Warrant Exchange (as defined below).

Shelf Registration and ATM Program

We have filed a shelf registration statement on Form S-3 (the “Shelf Registration Statement”), which was declared effective September 17, 2024.

Pursuant to the Shelf Registration Statement, we may offer and sell ordinary shares, preference shares, debt securities, warrants and or units having an aggregate public offering price of up to $300.0 million.

In connection with the filing of the Shelf Registration Statement, we also entered into a sales agreement (the “Sales Agreement”) with Leerink Partners LLC (“Leerink Partners”), relating to the sale of our Class A Ordinary Shares having an aggregate gross sales price of up to $125.0 million, from time to time through Leerink Partners, acting as sales agent (the “ATM”).

We incurred $0.6 million of offering expenses in connection with establishing the ATM that reduced additional paid-in capital as of December 31, 2024.

During the third quarter of 2024, we sold 1,500,000 Class A Ordinary Shares at a price of $3.80 per share under the ATM, for net proceeds of $5.5 million, after placement agent commissions.

In the first quarter of 2025, we sold 3,000,000 Class A Ordinary Shares at a price of $1.75 per share under the ATM, for net proceeds of $5.1 million, after placement agent commissions.

As of the date of this filing, we have $114.0 million of Class A Ordinary Shares remaining available for sale under the Sales Agreement.

Warrant Exchange

On July 12, 2024, we commenced an exchange offer (the “Exchange Offer”) and consent solicitation (the “Consent Solicitation”) relating to our outstanding warrants that we assumed in connection with the business combination, including (i) public warrants to purchase 5,910,000 Class A Ordinary Shares (the “Public Warrants”) that were held by JATT, and (ii) private placement warrants to purchase 6,899,996 Class A Ordinary Shares (the “Private Placement Warrants”) that were held by JATT shareholders (together with the Public Warrants, the “IPO warrants”).

We offered to all holders of the IPO warrants the opportunity to receive 0.30 Class A ordinary shares in exchange for each outstanding IPO warrant tendered by the holder and exchanged pursuant to the Exchange Offer.

Concurrently with the Exchange Offer, we also solicited consents from holders of the IPO warrants to amend that certain warrant agreement, dated as of July 16, 2021, by and between us and Continental Stock Transfer & Trust Company (“CST”), as warrant agent (the “Warrant Agreement”) to permit the us to require that each IPO warrant outstanding upon the closing of the Exchange Offer be exchanged for 0.27 Class A ordinary shares, which is a ratio 10% less than the exchange ratio applicable to the Exchange Offer.

Pursuant to the terms of the Warrant Agreement, all except certain specified modifications or amendments require the vote or written consent of holders of at least a majority of the outstanding public warrants and a majority of the outstanding private placement warrants.

On August 12, 2024, we completed the Exchange Offer and Consent Solicitation and issued 3,235,184 Class A ordinary shares in exchange for 10,784,008 IPO warrants and entered into an amendment to the Warrant Agreement (the “Warrant Amendment”).

Pursuant to the Warrant Amendment, we had the right to mandatorily exchange our remaining outstanding IPO warrants for Class A ordinary shares at an exchange ratio of 0.27 Class A ordinary shares for each IPO warrant.

On August 27, 2024, we issued 547,006 Class A Ordinary Shares in exchange for the remaining 196,568 outstanding Public Warrants and 1,829,420 outstanding Private Placement Warrants.

As a result, there were no outstanding IPO warrants as of December 31, 2024.

April 2024 Private Placement

On April 26, 2023, the Company entered into its second PIPE subscription agreement (the “April 2023 Private Placement”) with certain accredited investors (the “Subscribers”), whereby the Company issued 15,041,530 Class A Ordinary Shares, par value $0.0001 per share and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 3,782,000 Class A Ordinary Shares.

On April 18, 2024, we entered into subscription agreements (the “April 2024 Investor Agreements”) with certain institutional and other accredited investors (the “Investors”), whereby we issued 18,732,301 Class A Ordinary Shares, par value $0.0001 per share and pre-funded warrants (the “2024 Pre-Funded Warrants”) to purchase up to 16,102,348 Class A Ordinary Shares.

Each Class A Ordinary Share was sold at a price of $3.108 per Class A Ordinary Share and each 2024 Pre-Funded Warrant was sold at a price of $3.107 per 2024 Pre-Funded Warrant for an aggregate purchase price of $108.3 million.

Concurrently with the April 2023 Private Placement, the Company agreed to, within six months of April 24, 2023, exercise its call option on 50% of the Z33 Series Seed Preferred Shares previously issued to Stone Peach.

The Company agreed to settle its call option by issuing 2,000,000 Class A Ordinary Shares.

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

The April 2024 Private Placement closed on April 22, 2024, from which we received gross proceeds of approximately $112.5 million.

April 2023 Private Placement

On April 26, 2023, we entered into its second PIPE subscription agreement (the “April 2023 Private Placement”) with certain accredited investors (the “Subscribers”), whereby we issued 15,041,530 Class A Ordinary Shares, par value $0.0001 per share and pre-funded warrants (the “2023 Pre-Funded Warrants” and, together with the 2024 Pre-Funded Warrants, the “Pre-Funded Warrants”) to purchase up to 3,782,000 Class A Ordinary Shares.

Each Class A Ordinary Share was sold at a price of $4.25 per Class A Ordinary Share and each 2023 Pre-Funded Warrant was sold at a price of $4.249 per 2023 Pre-Funded Warrant for an aggregate purchase price of $80.0 million.

We received net proceeds of approximately $75.8 million from the April 2023 Private Placement.

Concurrently with the April 2023 Private Placement, we agreed to, within six months of April 24, 2023, exercise its call option on 50% of the Z33 Series Seed Preferred Shares previously issued to Stone Peach.

We agreed to settle its call option by issuing 2,000,000 Class A Ordinary Shares.

The amended settlement terms represented an extinguishment and reissuance of the Z33 Series Seed Preferred Shares.

The $10.9 million difference between the estimated fair value of the new instrument issued and the carrying value of the Z33 Series Seed Preferred Shares was recorded as a deemed dividend to the redeemable noncontrolling interest.

The Company and Stone Peach subsequently renegotiated the settlement terms as discussed in the 2022 Lilly License section below.

We and Stone Peach subsequently renegotiated the settlement terms as discussed in the “— 2022 Lilly License” section below.

2023 Lilly License

On April 26, 2023, the Company’s newly-formed subsidiary ZB17 LLC (“ZB17”) entered into a license agreement (the “2023 Lilly License” and, together with the 2022 Lilly License, the “Lilly Licenses”) with Lilly, for an exclusive license to develop, manufacture and commercialize a certain bispecific antibody relating to IL-17 and BAFF (“ZB-106”) in exchange for an upfront payment consisting of $5.8 million as well as 1,000,000 Class A Ordinary Shares issued at a fair value of $7.84 per Class A Ordinary Share.

In addition, ZB17 will make a payment of $5.0 million upon the receipt of certain know-how, data, information and materials that Lilly is required to provide under the license agreement.

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, ZB17 granted to Stone Peach the right, but not the obligation, to purchase 4.99% of the fully diluted equity of ZB17 for $1.0 million (the “Stone Peach Call Right”).

The Stone Peach Call Right is not exercisable until after the last patient is dosed in any single next clinical trial with ZB-106 and expires one year from the date of first indication approval for ZB-106 by the FDA or the EMA.

As additional consideration, Stone Peach will receive annual payments first of $0.6 million, and increasing by 10% annually, so long as the Company maintains its license for ZB-106 and beginning on May 1, 2023.

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, the Company agreed to make a one-time milestone payment of $5.0 million to BAFFX17, Ltd (“BAFFX17”) upon the occurrence of either:

(i) a change of control transaction, (ii) the closing of an issuance of equity or equity-linked securities by the Company of at least $100.0 million (iii) the consummation of a sale of assets resulting in net proceeds in excess of $100.0 million, or (iv) the Company’s fully diluted shares outstanding exceed 52,500,000 shares (on a split adjusted basis).

In addition to the consideration transferred during the year ended December 31, 2023, the Company is obligated to make 4 development milestone payments to Lilly up to an aggregate of $155.0 million, and sales milestone payments up to an aggregate of $440 million based on respective thresholds of net sales of products developed from ZB-106.

The Company is also obligated to pay Lilly over a multi-year period (twelve years, or upon the later expiration of regulatory exclusivity of ZB-106 in a country) an annual earned royalty at a marginal royalty rate in the mid-single digits to low-double digits, with increasing rates depending on net sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of years.

The Company is obligated to pay BAFFX17 a fee equal to 3% of any milestone or royalty payments due to Lilly pursuant to the terms of either the 2022 Lilly License and the 2023 Lilly License with Lilly.

Upon receiving written approval from the FDA, EMA, or similar regulatory authority of the Investigational New Drug (“IND”) and the commencement of a clinical trial in the applicable jurisdiction for ZB-106, Stone Peach will also receive a one-time payment of $4.5 million.

Stone Peach will also receive a one-time milestone payment of $25 million upon either (i) certain equity-related transactions, or (ii) the receipt of regulatory approval from the applicable regulatory authority for any new indication in the applicable jurisdiction.

Furthermore, Stone Peach was granted a royalty of 2% of the aggregate net sales of any products developed from the Compound.

As of December 31, 2023, none of the contingent payments were due.

On April 26, 2023, our consolidated subsidiary ZB17 LLC (“ZB17”) entered into a license agreement (the “2023 Lilly License” and, together with the 2022 Lilly License (as defined below), the “Lilly Licenses”) with Lilly, for an exclusive license to develop, manufacture and commercialize a certain bispecific antibody relating to IL-17 and BAFF (“tibulizumab”) in exchange for an upfront payment consisting of $5.8 million as well as 1,000,000 Class A Ordinary Shares issued at a fair value of $7.84 per Class A Ordinary Share.

During 2024, ZB17 made an additional payment of $5.0 million to Lilly, in connection with the receipt of certain know-how, data, information and materials that Lilly is required to provide under the license agreement.

The acquisition was accounted for as an asset acquisition, as substantially all of the fair value of the assets acquired is concentrated in a group of similar identifiable IPR&D assets.

On the acquisition date, the compound licensed had not yet received regulatory approval and the in-process research and development did not have an alternative use.

Accordingly, we recorded the entire cost of the 2023 Lilly License as a component of research and development in the consolidated statement of operations during the year ended December 31, 2023.

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, ZB17 granted Stone Peach the right, but not the obligation, to purchase 4.99% of the fully diluted equity of ZB17 for $1.0 million (the “Stone Peach Call Right”).

The Stone Peach Call Right is not exercisable until after the last patient is dosed in any single next clinical trial with tibulizumab and expires one year from the date of first indication approval for tibulizumab by the United States Food and Drug Administration (“FDA”) or the European Medicines Agency (“EMA”).

We recognized the Stone Peach Call Right at a grant-date fair value of $1.5 million as a component of research and development in the consolidated statement of operations during the year ended December 31, 2023.

The Stone Peach Call Right represents noncontrolling interest in our consolidated subsidiary, ZB17.

As of December 31, 2024 and 2023, the noncontrolling interest balance was $1.5 million in the consolidated balance sheets.

As additional consideration, beginning on May 1, 2023, Stone Peach receives an annual payment of $0.6 million initially, and increasing by 10% annually, so long as we maintain our license for tibulizumab, to be paid on May 1 st of each year.

For the years ended December 31, 2024 and 2023, we recorded $0.7 million and $0.6 million, respectively, in research and development in the consolidated statement of operations for the annual payments.

We recorded a one-time payment of $4.5 million for additional consideration due to Stone Peach upon approval from the FDA for our Investigational New Drug (“IND”) and commencement of our clinical trial for tibulizumab in research and development in the consolidated statement of operations for the years ended December 31, 2024 and in accounts payable and accrued expenses as of December 31, 2024.

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, we agreed to make a one-time milestone payment of $5.0 million to BAFFX17, Ltd (“BAFFX17”) upon the occurrence of either:

(i) a change of control transaction, (ii) the closing of an issuance of equity or equity-linked securities by us of at least $100.0 million (iii) the consummation of a sale of assets resulting in net proceeds in excess of $100.0 million, or (iv) our fully diluted shares outstanding exceed 52,500,000 shares (on a split adjusted basis), as measured on April 24 th of each year.

As our fully diluted shares outstanding exceeded 52,500,000 shares prior to December 31, 2023, the $5.0 million fee was recorded in research and development in the consolidated statement of operations for the year ended December 31, 2023, and is included in accounts payable and accrued expenses in the consolidated balance sheets as of December 31, 2024 and 2023.

In addition to the consideration paid and/or earned in 2024 and 2023, we are also obligated to make payments (a) to Lilly for four (4) development milestone payments up to an aggregate of $155.0 million, and sales milestone payments up to an aggregate of $440.0 million based on respective thresholds of net sales of products developed from tibulizumab;

(b) to Lilly over a multi-year period (twelve years, or upon the later expiration of regulatory exclusivity of tibulizumab in a country) for an annual earned royalty at a marginal royalty rate in the mid-single digits to low-double digits, with increasing rates depending on net sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of years;

(c) to BAFFX17 for a fee equal to 3% of any milestone or royalty payments due to Lilly pursuant to the terms of either the 2022 Lilly License or the 2023 Lilly License;

(d) to Stone Peach for a one-time milestone payment of $25 million upon either (i) certain equity-related transactions, or (ii) the receipt of regulatory approval from the applicable regulatory authority for any new indication in the applicable jurisdiction;

and (e) to Stone Peach for a royalty of 2% of the aggregate net sales of any products developed from the Compound (collectively, the “2023 Lilly Contingent Payments”).

As of December 31, 2024, none of the 2023 Lilly Contingent Payments are due and accordingly will not be recorded in our financial statements until they are due.

2022 Lilly License

On December 8, 2022, the Company’s consolidated subsidiary, Z33 Bio Inc.

On December 8, 2022, our consolidated subsidiary, Z33 Bio Inc.

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

As consideration, the Company paid Lilly an upfront fee of $7.0 million.

As consideration for the 2022 Lilly License, Lilly agreed to receive either 550,000 Class A Ordinary Shares upon the closing of the Business Combination (subject to certain lock-up provisions) or 4,702,867 shares of Z33 Series Seed Preferred Shares (the subsidiary redeemable preferred shares) if the Business Combination was not consummated.

Upon the Closing Date of the Business Combination, the Company issued Lilly 550,000 Class A Ordinary Shares at an aggregate fair value of $4.5 million.

As a finder’s fee in connection with arranging the acquisition, Z33 issued to Stone Peach Properties, LLC (“Stone Peach”) 4,900,222 shares of Z33 Series Seed Preferred Shares, which is included in the measurement of the cost of the acquired asset.

Zura has the right, but not the obligation to purchase up to 50% of the Series Seed Preferred Shares issued to Stone Peach at a price per share of $2.448869 for a period of two years from the date of the agreement (the “Call Option”).

Stone Peach has the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to Zura for a price per share of $2.040724 (the “Put Option”).

Stone Peach may exercise its option at any time between the first anniversary and the second anniversary of the transaction.

In April 2023, the Company agreed to, within six months of April 24, 2023, exercise its Call Option on 50% of the Z33 Series Seed Preferred Shares previously issued to Stone Peach.

The Company agreed to settle its Call Option by issuing 2,000,000 Class A Ordinary Shares.

In November 2023, the Company and Stone Peach amended the terms of the agreement, voiding the Company’s obligation to exercise its Call Option, and instead reverting the Company’s rights and obligations under the Call Option back to that of the original agreement.

Stone Peach, in addition to the existing Put Option, was granted the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to Zura in exchange for 2,000,000 Class A Ordinary Shares (the “Put Right”).

As consideration, we paid Lilly an upfront fee of $7.0 million during 2022 and issued Lilly 550,000 Class A Ordinary Shares at an aggregate fair value of $4.5 million upon the Closing Date of the Business Combination during the year ended December 31, 2023.

As a finder’s fee in connection with arranging the acquisition, Z33 issued to Stone Peach Properties, LLC (“Stone Peach”) 4,900,222 shares of Z33 Series Seed Preferred Shares, which was included in the measurement of the cost of the acquired asset.

We have the right, but not the obligation to purchase up to 50% of the Series Seed Preferred Shares issued to Stone Peach at a price per share of $2.448869 for a period of two years from the date of the agreement (the “Call Option”).

Stone Peach has the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to us for a price per share of $2.040724 (the “Put Option”).

In April 2023, we agreed to exercise our Call Option and we amended the settlement terms to settle the Call Option by issuing 2,000,000 Class A Ordinary Shares (the “Amended Terms”).

In November 2023, the Amended Terms were voided and our rights and obligations under the Call Option reverted to those in the original agreement (the “Second Amended Terms”).

In connection with the Second Amended Terms, we also provided Stone Peach with the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to Zura in exchange for 2,000,000 Class A Ordinary Shares (the “Put Right”).

Stone Peach may exercise its Put Option and Put Right at any time between April 24, 2024 and April 24, 2028 under the new agreement.

In addition to the consideration transferred on December 8, 2022, the Company is obligated to pay $3.0 million to Lilly upon the completion of a financing by the Company with gross proceeds exceeding $100 million.

The Company is further obligated to make 10 commercial, development and regulatory milestone payments up to an aggregate of $155.0 million and sales milestone payments up to an aggregate of $440.0 million based on respective thresholds of net sales of products developed from the licensed compound.

The Company will also pay an annual earned royalty to Lilly at a marginal royalty rate between in the mid-single to low-double digits (less than 20%), with increasing rates based on Net Sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of the year.

The Company will account for these contingent payments when they become due.

As of December 31, 2023, none of the contingent payments were due.

Each of the Amended Terms and the Second Amended Terms were considered an extinguishment and reissuance of the Z33 Series Seed Preferred Shares, and the Z33 Series Seed Preferred Shares are remeasured to the greater of the redemption value or the initial fair value, less noncontrolling shareholder’s interest in net loss of Z33, at each subsequent reporting period.

The Z33 Series Seed Preferred Shares represent redeemable noncontrolling interest in our consolidated subsidiary, Z33.

In addition to the consideration paid in 2022 and shares issued in 2023, we are also obligated to make payments to Lilly for (a) $3.0 million upon the completion of a financing by Z33 with gross proceeds exceeding $100.0 million;

(b) 10 commercial, development and regulatory milestone payments up to an aggregate of $155.0 million and sales milestone payments up to an aggregate of $440.0 million based on respective thresholds of net sales of products developed from the licensed compound;

and (c) an annual earned royalty at a marginal royalty rate between in the mid-single to low-double digits (less than 20%), with increasing rates based on Net Sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of the year (collectively, “the “2022 Lilly Contingent Payments”).

As of December 31, 2024, none of the 2022 Lilly Contingent Payments are due and accordingly will not be recorded in our financial statements until they are due.

Pfizer Agreement

On March 22, 2022, the Company entered into a license agreement and a Series A-1 Subscription and Shareholder’s Agreement (collectively, the “Pfizer Agreement”) with Pfizer.

Under the Pfizer Agreement, the Company acquired a license for a compound initially developed by Pfizer, in exchange for $5.0 million in cash and 2,702,083 shares (as adjusted by the exchange ratio established in the Business Combination Agreement) of the Company’s Series A-1 convertible preferred shares, representing a 20% interest in the Company.

In addition to the consideration transferred on March 22, 2022, the Company is obligated to make 12 development and regulatory milestone payments aggregating up to $70.0 million and sales milestone payments up to an aggregate of $525.0 million based on respective thresholds of net sales of products (developed from the licensed compound) (the “Products”).

In further consideration for the license, the Company will also pay an annual earned royalty at a marginal royalty rate in the mid-single digits to low double digits (less than 20%), based on thresholds of nets sales of Products.

Royalties are payable on a country-by-country basis for a certain period of years or upon the later expiration of regulatory exclusivity of the Company’s Products in a country.

The Company is also subject to a potential multi-million dollar transaction payment if, within a certain period the Company has (a) certain changes in control, excluding an initial public offering or any business combination where the securities of the Company are listed on a stock exchange (e.g., a transaction with a special purpose acquisition company), or (b) the Company sublicenses or divests of its rights to the Products.

The Pfizer Agreement also has an anti-dilution provision to allow Pfizer to maintain an 18% interest in the Company.

Immediately prior to the Closing Date of the Business Combination, additional share options and restricted share units were issued to certain employees, executives, and directors that would result in the dilution of Pfizer’s ownership in the Company.

On March 22, 2022, we entered into a license agreement and a Series A-1 Subscription and Shareholder’s Agreement (collectively, the “Pfizer Agreement”) with Pfizer.

Under the Pfizer Agreement, we acquired a license for a compound initially developed by Pfizer, in exchange for $5.0 million in cash and 2,702,083 shares (as adjusted by the exchange ratio established in the Business Combination Agreement) of our Series A-1 convertible preferred shares, representing a 20% interest in us.

In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations , the Pfizer Agreement is accounted for as an asset acquisition, as substantially all of the $7.5 million value transferred to us was allocated to in-process research and development.

On the acquisition date, the compound licensed had not yet received regulatory approval and the in-process research and development did not have an alternative use.

In addition to the consideration transferred during 2022, we are obligated to make payments to Pfizer for (a) twelve (12) development and regulatory milestone payments aggregating up to $70.0 million and sales milestone payments up to an aggregate of $525.0 million based on respective thresholds of net sales of products (developed from the licensed compound) (the “Products”);

and (b) an annual earned royalty at a marginal royalty rate in the mid-single digits to low double digits (less than 20%), based on thresholds of nets sales of Products (collectively, the “Pfizer Contingent Payments”).

Royalties are payable on a country-by-country basis for a certain period of years or upon the later expiration of regulatory exclusivity of our Products in a country.

We recorded the first $1.0 million development milestone, included in the Pfizer Contingent Payments, as a component of research and development in the consolidated statement of operations during the year ended December 31, 2023.

This amount was fully paid to Pfizer during the year ended December 31, 2024.

As of December 31, 2024, no additional Pfizer Contingent Payments are due and accordingly no additional Pfizer Contingent Payments will be recorded in our financial statements until they are due.

The Pfizer Agreement also had an anti-dilution provision to allow Pfizer to maintain an 18% interest in us.

In accordance with the anti-dilution provision of the Pfizer Agreement, Pfizer was issued additional Series A-1 convertible preferred shares upon the closing of the Business Combination that were immediately converted to 267,939 Class A Ordinary Shares.

The first $1.0 million development milestone became due during the year ended December 31, 2023.

The Company does not owe any other amounts under the Pfizer Agreement.

Appointment of Directors

On May 31, 2023, the Board of Directors (the "Board") of the Company increased the size of the Board from seven directors to nine directors.

On June 22, 2023, the Board appointed Parvinder Thiara to fill the vacancy on and serve as a member of the Board, to serve until the next annual meeting of stockholders and until his successor is duly elected and qualified or until his earlier death, resignation or removal.

Thiara has no family relationships with any of the executive officers or directors of the Company.

On November 9, 2023, the Board appointed Arnout Ploos van Amstel to serve as a member of the Board.

Ploos van Amstel replaced Dr.

Garry Neil who left the Board on the same date and would continue to support the Company as an advisor on R&D matters.

Ploos van Amstel has no family relationships with any of the executive officers or directors of the Company.

Following the Business Combination, the anti-dilution provision is no longer in effect.

Impact of Global Economic Trends

Macroeconomic conditions, including uncertainties associated with the changes to and by the U.S.

federal government administration, the Israel-Hamas war, the ongoing conflict between Ukraine and Russia, international tariffs, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition.

We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows.

The extent of the impact of these factors on our operational performance and financial condition, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted;

however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Components of Operating Results

Operating Expenses

General and Administrative Expenses

General and administrative expenses primarily consist of professional fees for legal, accounting, and consulting costs relating to corporate matters, as well as salaries and related costs for personnel in executive and administrative functions, including share-based compensation.

We anticipate that our general and administrative expenses will increase in the future as we continue to support research and development activities and incur increased costs of operating as a public company.

These costs include increased headcount to support expanded operations and infrastructure.

Additionally, we anticipate increased costs associated with maintaining compliance with Nasdaq rules and SEC requirements such as accounting, audit, legal and consulting services, as well as director and officer liability insurance, investor and public relations activities.

Research and Development Expenses

Research and development (“R&D”) expenses consist of all direct and indirect operating expenses supporting the processes in development, including consulting fees for medical and manufacturing advisory services, costs related to manufacturing material for clinical studies, payroll and benefits, which includes share-based compensation, for research and development employees, licensing fees, and study acquisition costs.

Research and development (“R&D”) expenses consist of all direct and indirect operating expenses supporting the processes and manufacturing in development, including consulting fees for clinical and manufacturing advisory services, CRO costs, costs related to manufacturing material for preclinical studies, payroll and benefits, which includes share-based compensation for research and development employees, licensing fees, and data and study acquisition costs.

Expenses are recognized as the related goods are delivered or the services are performed.

R&D expenses include the cost of in-process research and development (“IPR&D”) assets purchased in an asset acquisition transaction.

IPR&D assets are expensed unless the assets acquired are deemed to have an alternative future use, provided that the acquired asset did not also include processes or activities that would constitute a “business” as defined under U.S.

IPR&D assets are expensed provided that the acquired asset did not also include processes or activities that would constitute a “business” as defined under United States Generally Accepted Accounting Principles (“U.S.

GAAP”), the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use.

Acquired IPR&D payments are immediately expensed in the period in which they are incurred and include upfront payments, as well as transaction fees and subsequent pre-commercial milestone payments.

Acquired IPR&D payments, including upfront payments, transaction fees and subsequent pre-commercial milestone payments, are immediately expensed in the period in which they are incurred.

Research and development costs incurred after the acquisition are expensed as incurred.

R&D expenses also include the remeasurement of the research and development license consideration liability.

The research and development license consideration liability represented an obligation to issue either preferred shares of the Company’s subsidiary or Class A Ordinary Shares to Lilly as consideration for the 2022 Lilly License, which was ultimately settled through the issuance of Class A Ordinary Shares upon the closing of the Business Combination.

The research and development license consideration liability represented an obligation to issue either preferred shares of our subsidiary or Class A Ordinary Shares to Lilly as consideration for the 2022 Lilly License, which was ultimately settled through the issuance of Class A Ordinary Shares upon the closing of the Business Combination.

Research and development expenses could include:

● employee-related expenses, including salaries, bonuses, benefits, share-based compensation and other related costs for those employees involved in research and development efforts;

● external research and development expenses incurred under agreements with clinical research organizations, investigative sites and consultants to conduct our studies;

● external research and development expenses incurred under agreements with CROs, investigative sites and consultants to conduct our studies;

● costs related to manufacturing material for preclinical studies and clinical trials, including fees paid to contract manufacturing organizations;

● milestone payments under our licensing agreements;

● laboratory supplies and research materials;

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● the efficacy and safety profile of our product candidates.

General and Administrative Expenses

General and administrative (“G&A”) expenses primarily consist of professional fees for legal, accounting, and consulting costs relating to corporate matters, as well as salaries and related costs for personnel in executive and administrative functions, including share-based compensation.

These costs include increased headcount to support expanded operations and infrastructure.

Results of Operations

Comparison of the Year Ended December 31, 2023 and the Period from January 18, 2022 (date of inception) to December 31, 2022.

The following table summarize our results of operations for the periods presented (in thousands):

For the Period from January

18, 2022 (date of inception) to

Comparison of the Years Ended December 31, 2024 and 2023

The following table summarize our results of operations for the years ended December 31, 2024 and 2023 (in thousands):

For the Year Ended

Operating expenses:

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Loss from operations

Other expense/(income), net:

Other expense, net

Other (income)/expense, net:

Interest income

Dividend income

Change in fair value of private placement warrants

Change in fair value of note payable

Total other expense/(income), net

Dividend income

Other income, net

Total other income, net

Loss before income taxes

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Net loss attributable to redeemable noncontrolling interest

Adjustment of redeemable noncontrolling interest from redemption value to carrying value

Accretion of redeemable noncontrolling interest to redemption value

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Deemed dividend to redeemable noncontrolling interest

Net loss attributable to Ordinary Shareholders of Zura

Net loss attributable to Class A Ordinary Shareholders of Zura

*Percentage change not meaningful

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Research and Development Expenses

Research and development expenses increased by $20.3 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

This was primarily due to an increase of $5.3 million of costs incurred to acquire licenses, as we recognized $21.9 million of expense related to the acquisitions of an in-process research and development (“IPR&D”) license from Pfizer and Lilly during the period ended December 31, 2022 and $27.2 million related to the acquisition of an IPR&D license from Lilly during the year ended December 31, 2023.

The increase was also due to the issuance of additional shares to Pfizer under an anti-dilution provision of $2.2 million recognized during the year ended December 31, 2023, an increase of $1.5 million in expenses related to compensation for personnel in research and development functions including share-based compensation, an increase of $1.7 million related to the change in fair value of our research and development license consideration liability, an increase of $9.1 million related to manufacturing of our product candidates, and an increase of $0.5 million of costs incurred for consulting and advisory services for clinical development strategy.

Research and development expenses decreased by $19.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This was primarily due to $27.2 million related to the acquisition of an IPR&D license from Lilly during the year ended December 31, 2023, and decreases of $1.9 million related to the change in fair value of the research and development license consideration liability and $0.8 million related to share-based compensation, primarily due to award forfeitures, for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

This decrease was partially offset by a $4.5 million milestone payment related to the 2023 Lilly License incurred during the year ended December 31, 2024, and increases of $2.9 million in expenses related to personnel compensation for research and development functions excluding share-based compensation and $2.0 million of costs incurred for consulting services for our product candidates for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

General and Administrative Expenses

General and administrative expenses increased by $15.2 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

The increase was primarily due to increases of $11.4 million in expenses related compensation for personnel in executive and administrative functions including share-based compensation, as well as an increase of $2.9 million in professional fees for legal and accounting costs incurred related to our ongoing operations as a public company, an increase of $0.8 million of travel, office, and other general and administrative expenses.

General and administrative expenses increased by $12.1 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The increase was primarily due to a $5.9 million non-cash share-based compensation expense charge for the modification of awards for the former CEO, an increase of $2.9 million in professional fees for legal and accounting costs, including $1.6 million related to the Warrant Exchange and $1.3 million related to our ongoing operations as a public company and an increase of $2.4 million in expenses related to compensation for personnel in executive and administrative functions including share-based compensation.

Other Expense (Income)

Other expense, net

Other expense decreased by an immaterial amount for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

This decrease was primarily due to a foreign exchange transaction gain for the year ended December 31, 2023 as compared to a foreign exchange transaction loss for the period ended December 31, 2022.

Interest income

Interest income increased by $2.2 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

This increase is due to an increase in our cash and cash equivalents balance during year ended December 31, 2023 as compared to the period ended December 31, 2022.

Dividend income

Dividend income increased by $1.4 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

The Company held no dividend-generating cash equivalents during the period ended December 31, 2022.

Interest income increased by $5.8 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

This is primarily due to an increase in our cash and cash equivalents balance during year ended December 31, 2024 as compared to the year ended December 31, 2023.

Change in fair value of private placement warrants

Revaluation gain on the liability-classified private placement warrants assumed in the Business Combination was $0.7 million for the year ended December 31, 2023.

No warrants were outstanding during the period ended December 31, 2022.

Revaluation loss on the liability-classified Private Placement Warrants assumed in the Business Combination was $5.2 million during the year ended December 31, 2024 compared to a revaluation gain of $0.7 million for the year ended December 31, 2023.

During the year ended December 31, 2024, the Private Placement Warrants were recorded at their settlement value upon completion of the Warrant Exchange, which was the fair value of the Class A Ordinary Shares exchanged for the Private Placement Warrants.

Change in fair value of note payable

Revaluation loss on the note payable increased by $2.1 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022, as a result of remeasurement to its settlement value.

Revaluation loss on the note payable was $2.2 million for the year ended December 31, 2023, as the note was remeasured to its settlement value and settled at the closing of the Business Combination.

Dividend income

Dividend income decreased by $1.4 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

We held no dividend-generating cash equivalents during the year ended December 31, 2024.

Other income, net

Other income, net remained relatively consistent for the year ended December 31, 2024 and compared to the year ended December 31, 2023.

Net loss attributable to redeemable noncontrolling interest

Net loss attributable to redeemable noncontrolling interest, representing the noncontrolling shareholder’s interest in the net loss of our consolidated subsidiary, Z33, decreased by $1.4 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022 due to a decrease in operating expenses for Z33 during the year ended December 31, 2023 as compared to the period ended December 31, 2022.

Net loss attributable to redeemable noncontrolling interest was $0.2 million for the year ended December 31, 2023, representing the noncontrolling shareholder’s interest in the net loss of our consolidated subsidiary, Z33.

Z33 had an immaterial amount of net loss for the year ended December 31, 2024.

Adjustment of Redeemable Noncontrolling Interest from Redemption Value to Carrying Value

After the modification of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach (see “—2022 Lilly License” above), the Z33 Series Seed Preferred Shares are recorded at the greater of the redemption value or the initial fair value, less noncontrolling shareholder’s interest in net loss of Z33.

For the year ended December 31, 2024, the adjustment of redeemable noncontrolling interest from redemption value to carrying value of $7.0 million resulted from a decrease in the redemption value of the Z33 Series Seed Preferred Shares below its initial fair value, less the noncontrolling shareholder’s interest in net loss of Z33, as of March 31, 2024.

As of December 31, 2024, the redemption value was again below the initial fair value, less noncontrolling shareholder’s interest in net loss of Z33, resulting in no additional adjustment of redeemable noncontrolling interest and no an accretion of the redeemable noncontrolling interest when remeasuring the Z33 Series Seed Preferred Shares to its redemption value (see below).

Accretion of redeemable noncontrolling interest to redemption value

Accretion of redeemable noncontrolling interest to redemption value increased by $0.6 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

This increase is due to modifications of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach during the year ended December 31, 2023 and the resulting adjustments to redemption value.

Deemed Dividend to Redeemable Noncontrolling Interest

Deemed dividend to the redeemable noncontrolling interest was $10.9 million for the year ended December 31, 2023, due to the modification of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach in April 2023.

There were no deemed dividends to the redeemable noncontrolling interest during the period ended December 31, 2022.

Accretion of redeemable noncontrolling interest to redemption value was $7.2 million for the year ended December 31, 2023 resulting from the remeasurement of the Z33 Series Seed Preferred Shares to redemption value.

After the modification of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach (see “— 2022 Lilly License ” above), the Z33 Series Seed Preferred Shares are recorded at the greater of the redemption value or the initial fair value, less noncontrolling shareholder’s interest in net loss of Z33.

As of December 31, 2024, the redemption value was below the initial fair value, less noncontrolling shareholder’s interest in net loss of Z33, resulting in no accretion of the redeemable noncontrolling interest when remeasuring the Z33 Series Seed Preferred Shares to its redemption value.

Deemed Contribution from Redeemable Noncontrolling Interest

Deemed contribution from the redeemable noncontrolling interest was $9.2 million for the year ended December 31, 2023, due to the modification of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach in November 2023.

There were no deemed contributions from the redeemable noncontrolling interest during the period ended December 31, 2022.

There were no deemed contributions from the redeemable noncontrolling interest during the year ended December 31, 2024

Deemed Dividend to Redeemable Noncontrolling Interest

There were no deemed dividends to the redeemable noncontrolling interest during the year ended December 31, 2024.

Liquidity and Capital Resources

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As of December 31, 2024, we had cash and cash equivalents of $176.5 million.

As of December 31, 2023, we have funded our operations through (i) the sale of equity, raising an aggregate of $10.0 million of gross proceeds from the sale of our convertible preferred shares;

(ii) the issuance of a promissory note, receiving net proceeds of $7.6 million;

(ii) the issuance of a promissory note, receiving net proceeds of $7.6 million in December 2022;

(iii) proceeds from the Business Combination of $56.7 million in March 2023;

and (iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and Pre-Funded Warrants in May and June 2023.

(iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and 2023 Pre-Funded Warrants during the year ended December 31, 2023;

(v) the April 2024 Private Placement, raising an aggregate of $112.5 million of gross proceeds from the sale of Class A Ordinary Shares and 2024 Pre-Funded Warrants in April 2024;

(vi) the sale of 1,500,000 Class A Ordinary Shares at a price of $3.80 per share under the ATM for net proceeds of $5.5 million, after placement agent commissions, in September 2024;

and (vii) the sale of 3,000,000 Class A Ordinary Shares at a price of $1.75 per share under the ATM for net proceeds of $5.1 million, after placement agent commissions, in the first quarter of 2025.

We have experienced operating losses and cash outflows from operations since inception and will require ongoing financing in order to continue our research and development activities.

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Furthermore, we expect to incur additional costs associated with operating as a public company.

We will also be responsible to Pfizer and Lilly for significant future contingent payments under the Pfizer Agreement, the 2022 Lilly License, and the 2023 Lilly License (collectively with the 2022 Lilly License, the “Lilly Licenses”) upon the achievement of certain development, regulatory, and sales milestones, as well as ongoing royalties on net commercial sales.

We will also be responsible to Pfizer and Lilly for significant future contingent payments under the Pfizer Agreement and the Lilly Licenses upon the achievement of certain development, regulatory, and sales milestones, as well as ongoing royalties on net commercial sales.

The size and timing of these milestone payments will vary greatly depending upon a number of factors, and it is therefore difficult to estimate the total payments that could become payable to Pfizer and Lilly and when those payments would be due.

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We will be required to pay certain of these milestone payments prior to the time at which we are able to generate sufficient revenue, if any, from commercial sales of any of our product candidates.

We intend to fund these milestone payments using a portion of the proceeds from the Business Combination and the April 2023 Private Placement.

We intend to fund these milestone payments using a portion of the proceeds from the Business Combination, the April 2023 Private Placement, the April 2024 Private Placement and sales under the ATM.

In addition to milestone payments, we are also required to pay Pfizer and Lilly under the Pfizer Agreement and Lilly Licenses, respectively, ongoing royalties in the mid-single digits to low double-digits (less than 20%) percentage range based upon thresholds of net sales of products.

We anticipate that we will need substantial additional funding in connection with our continuing operations.

We intend to devote most of the net proceeds from the Business Combination and the April 2023 Private Placement to the preclinical and clinical development of our product candidates, our public company compliance costs and certain milestone payments under the Pfizer Agreement and Lilly Licenses.

Based on our current business plans, we believe that the net proceeds from the Business Combination and the Private Placement (as defined below) will enable us to fund our operating expenses and capital requirements through at least the next twelve months.

Our estimate as to how long we expect the net proceeds from the Business Combination and the Private Placement to be able to fund our operating expenses and capital requirements is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

We intend to devote most of the net proceeds from the Business Combination, the April 2023 Private Placement, the April 2024 Private Placement and sales under the ATM to the preclinical and clinical development of our product candidates, our public company compliance costs and certain milestone payments.

Based on our current business plans, we believe that our existing cash, cash equivalents and investments should be sufficient to fund our operating expenses and capital requirements through 2027.

Our estimate as to how long we expect our existing cash and cash equivalents to be able to fund our operating expenses and capital requirements is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

Changing circumstances, some of which may be beyond our control, could result in less cash available to us or cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

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In addition, our product candidates, if approved, may not achieve commercial success.

Our commercial revenues, if any, will be derived from sales of our product candidates that we do not expect to be commercially available in the near term, if at all.

Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

Our commercial revenues, if any, will be derived from sales of our product candidates that we do not expect to be commercially available in the near term, if at all and are subject to successful clinical development and regulatory approval.

Accordingly, we may need to continue to rely on additional financing to achieve our business objectives.

Adequate additional financing may not be available to us on acceptable terms, or at all.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict our ability to operate.

Any future debt financing and equity financing, if available, may involve covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends.

To the extent that we raise additional capital through securities or debt financing, the terms of these securities or this debt may restrict our ability to operate.

Any financing, if available, may involve covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

2022 (date of

inception) to

For the Years Ended December 31,

Net cash used in operating activities

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Cash flows from operating activities

Cash used in operating activities for the year ended December 31, 2023 was $15.1 million, which consisted of a net loss before redeemable noncontrolling interest of $60.6 million, partially offset by $40.4 million in non-cash charges and a net change of $5.1 million in our net operating assets and liabilities.

The non-cash charges consisted of expense incurred in connection with the 2023 Lilly License of $27.4 million, a change in fair value of our promissory note of $2.2 million, a change in fair value of our research and development license consideration liability of $1.9 million, share-based payment expense of $2.2 million related to the anti-dilution shares issued to Pfizer, additional share-based payments of $7.5 million, and a change in fair value on the private placement warrants of $0.7 million.

Cash used in operating activities for the period ended December 31, 2022 was $1.2 million, which consisted of a net loss before redeemable noncontrolling interest of $27.3 million, partially offset by non-cash charges of $22.6 million and a net change of $3.5 million in our net operating assets and liabilities.

The non-cash charges consisted of the $21.9 million cost of the acquisitions of the licenses under the Pfizer Agreement and 2022 Lilly License, which were expensed to research and development, a change in fair value of our promissory note of $0.2 million, a change in fair value of our research and development license consideration liability of $0.2 million, and share-based payment expense of $0.3 million.

Net cash used in operating activities increased by $13.0 million to $28.1 million for the year ended December 31, 2024 from $15.1 million for the year ended December 31, 2023.

The increase is primarily due to an increase in our cash net loss of $10.2 million, comprised of our $8.2 million decrease in net loss before redeemable noncontrolling interest, as adjusted for the decrease in non-cash charges of $18.4 million for the year ended December 31, 2024.

The decrease of $18.4 in non-cash charges was due to an expense incurred in connection with the 2023 Lilly License of $27.4 million, a change in fair value of our promissory note of $2.2 million, a share-based payment expense of $2.2 million related to the anti-dilution shares issued to Pfizer, and a change in fair value of our research and development license consideration liability of $1.9 million for the year ended December 31, 2023, partially offset by an increase in share-based compensation expense of $9.3 million, of which $5.9 million related to the modification of our former CEOs awards, and an increase in the change in fair value on the Private Placement Warrants of $6.0 million for the year ended December 31, 2024.

Working capital changes increase cash used in operations by $2.8 million of cash for operating activities, resulting from higher prepaid expenses and other current assets and other assets and a decrease in cash used in paying accounts payable and accrued expenses for the year ended December 31, 2024.

Cash flows from investing activities

Cash used in investing activities for the year ended December 31, 2024 was $5.1 million, which was related to the $5.0 million cash consideration paid to acquire the 2023 Lilly License and $0.1 million of equipment purchased during the period.

Cash used in investing activities for the year ended December 31, 2023 was $8.0 million, which was entirely related to the cash consideration paid to acquire the 2023 Lilly License.

Cash used in investing activities for the period ended December 31, 2022 was $12.0 million, which was entirely related to the cash consideration paid to acquire the license under the Pfizer Agreement and the license under the 2022 Lilly License.

Cash flows from financing activities

Cash provided by financing activities for the year ended December 31, 2024 was $109.8 million, which consisted of $62.5 million of proceeds from the issuance of Class A Ordinary Shares in connection with the April 2024 Private Placement, $50.0 million of proceeds from the issuance of 2024 Pre-Funded Warrants in connection with the April 2024 Private Placement and net proceeds of

$5.5 million, after commissions, for the sale of Class A Ordinary Shares under our ATM, partially offset by transaction costs incurred in connection with the 2024 Private Placement and establishing the ATM of $7.2 million and $0.6 million, respectively.

Cash provided by financing activities for the year ended December 31, 2023 was $121.3 million, which consisted of $56.7 million of net proceeds from the issuance of shares upon the closing of the Business Combination and $59.7 million of proceeds, net of transaction costs, from the issuance of Class A Ordinary Shares in connection with the April 2023 Private Placement, and $16.1 million of proceeds from the issuance of 2023 Pre-Funded Warrants in connection with the April 2023 Private Placement, partially offset by a $10.0 million repayment of our promissory note and the payment of $1.2 million of deferred transaction costs.

Cash provided by financing activities for the period ended December 31, 2022 was $14.8 million, which consisted of $10.0 million from the issuance of Series A-1 convertible preferred shares of Legacy Zura in March 2022 and $7.6 million in net proceeds from the issuance of the Note to Hydra, partially offset by the payment of $2.8 million of deferred transaction costs.

Contractual Obligations and Other Commitments

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Some third party CMOs have intellectual property, such as patents and/or know-how with an annual fee and royalty bearing license to its customers that forms part of the manufacturing agreement.

We have entered into the Lonza License for a worldwide non-exclusive license for Lonza’s gene expression system in exchange for varying considerations depending on a number of factors such as whether the Company enters further into manufacturing agreements with Lonza or with a third party, and whether the Company enters into sublicense agreements with third parties (including up to middle six-figure annual payments per sublicense upon commencement of a sublicense, as well as royalties of up to low-single digit percentages of net sales of certain products over a commercially standard double-digit multi-year term).

Lonza License

In July 2022, we entered into a license agreement (the “Lonza License”) with Lonza Sales AG (“Lonza”) for a worldwide nonexclusive license for Lonza’s gene expression system in exchange for varying considerations depending on a number of factors such as whether we enter further into manufacturing agreements with Lonza or with a third party, and whether we enter into sublicense agreements with third parties (including up to middle six-figure annual payments per sublicense upon commencement of a sublicense, as well as royalties of up to low-single digit percentages of net sales of certain products over a commercially standard double-digit multi-year term).

The Lonza License will remain in effect until terminated.

The Company is free to terminate the Lonza License at any time upon 60 days’ notice, with or without cause.

Lonza may terminate the Lonza License for cause upon a breach by the Company or for other commercially standard reasons.

During October 2023, the Company began drug substance manufacturing with a third-party.

As a result of manufacturing with a third-party other than Lonza, under the terms of the Lonza License the first annual milestone payment of $0.4 million became due and payable.

WuXi Biologics

We are free to terminate the Lonza License at any time upon 60 days’ notice, with or without cause.

Lonza may terminate the Lonza License for cause upon a breach by us or for other commercially standard reasons.

During October 2023, we began manufacturing drug substance with another third party.

As a result of manufacturing with another third party other than Lonza, under the terms of the Lonza License we had a license fee of $0.4 million due to Lonza in the fourth quarter of 2023 and annually thereafter.

The fees of $0.4 million have been recorded as research and development expense in each of the years ended December 31, 2024 and 2023.

We paid the 2023 fee as of December 31, 2024 and will pay the 2024 fee in the year ended December 31, 2025.

WuXi Biologics License

In July 2023, we entered into a biologics master services agreement (the “WuXi Biologics MSA”) with WuXi Biologics.

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In July 2023, we entered into a cell line license agreement (the “Cell Line License Agreement”) with WuXi Biologics.

The Cell Line License Agreement provides the Company with a non-exclusive, worldwide, sublicensable license to certain of WuXi Biologics’s know-how, cell line, and biological materials (the “WuXi Biologics Licensed Technology”) to manufacture, have manufactured, use, sell and import certain products produced through the use of the cell line licensed by WuXi Biologics under the Cell Line License Agreement (the “WuXi Biologics Licensed Products”).

The Cell Line License Agreement provides us with a non-exclusive, worldwide, sublicensable license to certain of WuXi Biologics’s know-how, cell line, and biological materials (the “WuXi Biologics Licensed Technology”) to manufacture, have manufactured, use, sell and import certain products produced through the use of the cell line licensed by WuXi Biologics under the Cell Line License Agreement (the “WuXi Biologics Licensed Products”).

In consideration for the license, we agreed to pay WuXi Biologics a non-refundable license fee of $150,000.

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Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

Generally Accepted Accounting Principles.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods.

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Share-Based Compensation

When share-based awards are granted to executives, directors, employees, and consultants, the fair value of the equity instruments at the date of grant is charged to the consolidated statements of operations over the vesting period.

We recognized share-based compensation expense for all share-based awards.

The fair value of the equity instruments at the date of grant, net of actual forfeitures when they occur, is recognized to share-based compensation expense on a straight-line basis over the requisite service period.

When the terms and conditions are modified before they vest, any increase in the fair value of the shares, measured immediately before and after the modification, is also charged to the consolidated statements of operations.

We recognize share-based compensation expense for share options on a straight-line basis over the requisite service period and account for forfeitures as they occur.

Our share-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes option pricing model.

The grant date fair value of our restricted shares, restricted share units and share options with a nominal exercise price is determined based on the share price of our Class A Ordinary Shares.

The grant date fair value of our share options is estimated using the Black-Scholes option pricing model.

This model utilizes inputs which are highly subjective assumptions and generally require significant judgment.

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The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the share-based awards.

We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

Expected term —The expected term represents the period that the stock-based awards are expected to be outstanding.

We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own share price becomes available.

Expected term —The expected term represents the period that the share-based awards are expected to be outstanding.

We have opted to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option, which is generally between 5 to 10 years.

Risk-Free Interest Rate —The risk-free rate assu mption is based on the United States Treasury yield in effect at the time of the grant with maturities consistent with the expected term of our options.

Dividend Yield —We have never paid dividends on our ordinary shares and have no plans to pay dividends on our ordinary shares.

2 unchanged sentences

Our consolidated subsidiary Z33 issued its Series Seed Preferred Shares to Stone Peach as a finder’s fee for the 2022 Lilly License.

As the agreement to issue the Z33 preferred shares included embedded put and call features, the shares issued to Stone Peach represent redeemable noncontrolling interest that we were required to initially measure at fair value at issuance.

As the agreement to issue the Z33 Series Seed Preferred Shares included embedded put and call features, the shares issued to Stone Peach represent redeemable noncontrolling interest that we were required to initially measure at fair value at issuance.

The agreement between Z33 and Stone Peach was amended in both April 2023 and November 2023.

The amendments were accounted for as extinguishments and reissuances of the Z33 Series Seed Preferred Shares which triggered the Company to remeasure the fair value of the Z33 Series Seed Preferred Shares at those points in time.

The amendments were accounted for as extinguishments and reissuances of the Z33 Series Seed Preferred Shares which triggered us to remeasure the fair value of the Z33 Series Seed Preferred Shares at those points in time.

Subsequent to the amendments, the Series Seed Preferred Shares are remeasured at the end of each reporting period to the greater of the redemption value or the initial carrying value, decreased for the noncontrolling interest’s share of Z33’s net loss.

The fair value of the shares without the embedded features was first determined using an option pricing model which utilizes inputs which are highly subjective assumptions and generally require significant judgement.

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See Note 2 to our consolidated financial statements located in “Part I – Financial Information, Item 1.

Financial Statements” in this Annual Report for a description of recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition of results of operations.

Emerging Growth Company and Smaller Reporting Company Status

2 unchanged sentences

Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

Upon closing of the Business Combination, remained an emerging growth company and may elect to extend the transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.

Upon the Closing Date, we remained an emerging growth company and may elect to extend the transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.

In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies.

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We may choose to take advantage of some but not all of these reduced reporting burdens.

We have taken advantage of certain reduced reporting requirements in this Quarterly report on Form 10-Q.

We have taken advantage of certain reduced reporting requirements in this Annual Report.

Accordingly, the information contained herein may be different than you might obtain from other public companies in which you hold equity interests.

4 unchanged sentences

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company”, we are not required to provide the information otherwise required by this Item 3.

As a “smaller reporting company”, we are not required to provide the information otherwise required by this Item 7A.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements, together with the report of our independent registered public accounting firm, required by this item are set forth beginning on page F-1 of this Annual Report.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis