Zenas BioPharma reports $108.92 million net loss

Cover page 2 changes

4 unchanged paragraphs

For the quarterly period ended June September 30, 2026

25 unchanged paragraphs

As of July 31, October 30, 2026, there were 65,176,723 67,817,793 shares of the registrant's common stock, par value $0.0001 per share, outstanding.

1 unchanged paragraph

Financial Statements (Unaudited) 4 changes

Condensed Consolidated Balance Sheets as of June September 30, 2026 and December 31, 2025

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six nine months ended June September 30, 2026 and 2025

Condensed Consolidated Statements of Stockholders' Equity for the three and six nine months ended June September 30, 2026 and 2025

Condensed Consolidated Statements of Cash Flows for the six nine months ended June September 30, 2026 and 2025

Forward-looking statements 2 changes

5 unchanged paragraphs

● the success, cost and timing of our clinical development of our product candidates, including the extent to which interim, topline or preliminary data may be predictive of final results or of the results of future clinical trials;

9 unchanged paragraphs

● our ability to obtain and maintain regulatory approval of our product candidates, including our plans with respect to regulatory submissions and the timing and outcome with respect to such regulatory submissions and reviews by the U.S. Food and Drug Administration (the "FDA") or comparable foreign regulatory authorities and with respect to any regulatory approvals we may receive, any related restrictions, limitations or warnings in the label of any of our product candidates, if approved;

23 unchanged paragraphs

Financial statements 32 changes

22 unchanged paragraphs

Preferred stock, par value $ 0.0001 per share; 25,000,000 shares authorized and no shares issued and outstanding as of June September 30, 2026 and December 31, 2025

Common stock, par value $ 0.0001 per share; 175,000,000 shares authorized at June September 30, 2026 and December 31, 2025, respectively; 63,330,747 67,795,055 and 54,485,518 shares issued and outstanding as of June September 30, 2026 and December 31, 2025, respectively

9 unchanged paragraphs

For the six nine months ended

10 unchanged paragraphs

Other income (expense), net

Other (expense) income, net

30 unchanged paragraphs

Exercises of common stock options

Vesting of restricted stock units

Stock-based compensation expense

Purchases of common stock under the Employee Stock Purchase Plan

Issuance of common stock from ATM offering, net of underwriting commissions and other offering costs

Issuance of common stock as payment of milestone pursuant to InnoCare License Agreement

Unrealized loss on investments

Foreign currency translation adjustment

Balance as of September 30, 2026

17 unchanged paragraphs

Exercises of common stock options

Stock-based compensation expense

Purchase of common stock under the Employee Stock Purchase Plan

Unrealized gain on investments

Foreign currency translation adjustment

Balance as of September 30, 2025

3 unchanged paragraphs

Six Months Ended June 30,

Nine Months Ended September 30,

5 unchanged paragraphs

Net amortization of premiums and accretion of discounts on investments ( 1,397 2,982 )

13 unchanged paragraphs

Payments of milestones achieved pursuant to license agreements ( 30,000 57,500 )

Product candidate license acquisitions

2 unchanged paragraphs

Payments of other offering costs for the ATM offering and equity offering ( 527 548 )

Payments of debt issuance costs for the senior secured term loan and convertible senior notes ( 1,934 1,952 )

Payments of deferred offering costs for royalty obligation

3 unchanged paragraphs

Proceeds from issuance of common stock in connection with an equity offering, inclusive of underwriters' exercise of the overallotment option in full, net of underwriting discounts and commissions

1 unchanged paragraph

Proceeds from the issuance of convertible senior notes, inclusive of underwriters' exercise of the overallotment option in full, net of commissions

Proceeds from royalty obligation

1 unchanged paragraph

Effect of exchange rate changes on cash and cash equivalents ( 1,074 263 )

8 unchanged paragraphs

Note 1: Nature of Business 2 changes

6 unchanged paragraphs

The Company has incurred operating losses and negative cash flows since its inception, including net losses of $ 111.5 108.9 million and $ 52.2 51.5 million for the three months ended June September 30, 2026 and 2025, respectively, and $ 192.4 301.4 million and $ 85.8 137.3 million for the six nine months ended June September 30, 2026 and 2025, respectively. As of June September 30, 2026, the Company had an accumulated deficit of $ 957.6 million. 1.1 billion. Management expects operating losses and negative operating cash flows to continue for the foreseeable future.

The Company expects that its existing cash, cash equivalents and investments of $ 673.9 647.1 million as of June September 30, 2026, will be sufficient to fund its operating and capital expenditures for at least twelve months from the date of the issuance of these unaudited condensed consolidated financial statements.

Note 2: Summary of Significant Accounting Policies 8 changes

The Company's significant accounting policies are disclosed in Note 2, Summary of Significant Accounting Policies, in the audited consolidated financial statements for the year ended December 31, 2025, and notes thereto, included in the Company's Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (the "SEC") on March 16, 2026. Since the date of those financial statements, other than disclosed herein, there have been no material changes to the Company's significant accounting policies.

1 unchanged paragraph

The accompanying condensed consolidated financial statements include the operations of the Company and its wholly-owned subsidiaries. All intercompany accounts, transactions, and balances have been eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. 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").

1 unchanged paragraph

The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company's financial position as of June September 30, 2026, and the results of operations and its cash flows for the three and six nine months ended June September 30, 2026 and 2025. The financial data and other information disclosed in these notes related to the three and six nine months ended June September 30, 2026 and 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2026, any other interim periods, or any future year or period. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2025, and the notes thereto, which are included in the Company's Annual Report on Form 10-K as filed with the SEC, on March 16, 2026.

3 unchanged paragraphs

The Company evaluates its financial instruments, including its convertible senior notes and senior secured term loan to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815 "Derivatives and Hedging." ASC 815 generally provides three criteria that, if met, require companies to bifurcate embedded features from their host instruments and account for them as free-standing derivative financial instruments. The three criteria include circumstances in which (a) (i) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) (iii) a separate instrument with the same terms as the embedded derivative would be considered a derivative instrument.

If liability accounting is required, the Company's derivative instruments are recorded at fair value with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the statement of operations. The debt discount is amortized through interest expense over the life of the debt using the straight-line effective interest method.

1 unchanged paragraph

When the Company issues debt with a conversion feature, in accordance with ASC 815, "Derivatives and Hedging" it must first assess whether the conversion feature meets the requirements to be treated as a derivative. An embedded equity-linked component that meets the definition of a derivative does not have to be separated from the host instrument if the component qualifies for the scope exception for certain contracts involving an issuer's own equity. The scope exception applies if the contract is both (a) (i) indexed to its own stock; and (b) (ii) classified in stockholders' equity in its balance sheet.

3 unchanged paragraphs

In September of 2025, the FASB issued ASU 2025-07: Derivates Derivatives and Hedging (ASC 815) and Revenue from Contracts with Customers (ASC 606). This ASU expands the scope exceptions in the derivative guidance to exclude certain non-exchange-trade non-exchange-traded contracts with underlyings based on the operations or activities of one of the parties to the contract, including the occurrence or nonoccurrence of an event specific to those operations or activities. The ASU also clarifies that share-based noncash consideration received from a customer in exchange for goods or services should be accounted for as noncash consideration under ASC 606 unless and until the entity's rights to receive or retain such consideration becomes become unconditional. The Company early adopted the ASU at the beginning of fiscal year 2026, using the prospective method. The adoption of this new accounting standard was applied to the evaluation of the senior secured term loan that was executed during the first quarter.

1 unchanged paragraph

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03") , which requires entities to disclose additional information about specific expense categories in the notes to the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 may be applied retrospectively or prospectively to the financial statements. The Company is currently evaluating the impact of ASU 2024-03 on its unaudited condensed consolidated financial statements and related disclosures.

1 unchanged paragraph

Note 3: Fair Value Measurements 12 changes

The following table presents information about the Company's financial assets that are regularly measured and carried at fair value and indicate indicates the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value (in thousands):

As of September 30, 2026

3 unchanged paragraphs

Significant Other Observable Inputs

Significant Unobservable Inputs

Cash and cash equivalents

10 unchanged paragraphs

Significant Other Observable Inputs

Significant Unobservable Inputs

Cash and cash equivalents

7 unchanged paragraphs

There have been no material impairments of the Company's assets measured and carried at fair value as of June September 30, 2026 and December 31, 2025. In addition, there have been no changes in valuation techniques as of June September 30, 2026 and December 31, 2025. The fair value of Level 1 instruments classified as money market funds and government securities are valued using quoted market prices in active markets. The fair value of Level 2 instruments classified as short-term investments was determined using other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and fair value is determined using models or other valuation methodologies. During the six nine months ended June September 30, 2026 and year ended December 31, 2025, there were no transfers between levels.

The short and long-term investments are classified as available-for-sale securities. As of June September 30, 2026, the remaining contractual maturities of the available-for-sale securities were 1 to 16 months , and the balance in the Company's accumulated other comprehensive income loss was comprised of activity related to the Company's available-for-sale securities. There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities during the three and six nine months ended June September 30, 2026 and 2025. As a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the same period. The Company had a limited number of available-for-sale securities in insignificant loss positions as of June September 30, 2026, which the Company does not intend to sell and has concluded it will not be required to sell before recovery of amortized cost for the investment maturity.

1 unchanged paragraph

As of September 30, 2026

9 unchanged paragraphs

Certain short-term debt securities investments 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.

Note 6: Long – Term Obligations 20 changes

1 unchanged paragraph

In March 2026, the Company entered into the Loan Agreement with the Collateral Agent, BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP, which are funds managed by Pharmakon and the guarantors party thereto. The Loan Agreement provides for a five-year senior secured term loan, which matures on March 27, 2031 (the "Term Loan Maturity Date"), for up to $ 250.0 million and consists of five tranches (collectively, the "Term Loans"). Two of the tranches are committed tranches: (i) Tranche A in an aggregate of $ 75.0 million, which was funded on the date the Loan Agreement was executed; and (ii) Tranche B in an aggregate of $ 50.0 million (and up to an additional $ 25.0 million that the Company may elect to draw), which is available until November 1, 2027, subject to the occurrence of certain approval conditions (the "Tranche B/C Approval Condition").

Three of the tranches may be drawn upon at the discretion of the Company: (i) Tranche C in an aggregate of $ 25.0 million (less any amounts elected to be (and actually) drawn under Tranche B in excess of $ 50.0 million), which is available until April 28, 2028; (ii) Tranche D in an aggregate of $ 50.0 million, which is available until October 30, 2028; and (iii) Tranche E in an aggregate of $ 50.0 million, which is available until April 30, 2029. Tranche Tranches C through E are subject to the occurrence of certain approval conditions and, achievements in the case of Tranches D through E, achievement of certain milestones in respect of certain net sales levels.

3 unchanged paragraphs

The Company's obligations under the Loan Agreement are secured by substantially all of its assets, including its intellectual property, and are guaranteed by certain of its subsidiaries, each of which has pledged substantially all of their assets, including intellectual property, to secure such guarantee. The Company is also obligated to maintain a liquidity of not less than $ 50.0 million, immediately following the Tranche A closing date and until the satisfaction of the Tranche B/C Approval Condition.

1 unchanged paragraph

Total net proceeds were $ 72.0 million after deducting discounts and debt issuance costs as of June September 30, 2026. As of June September 30, 2026, the Company elected to pay interest on the Term Loan as PIK Interest, which was added to the outstanding principal balance of the term loan. No repayment of principal was made during the three and six nine months ended June September 30, 2026.

The following table reflects the Company's senior secured term loan as of June September 30, 2026 (in thousands):

4 unchanged paragraphs

The Company incurred $ 3.0 million of debt discounts and issuance costs, which were capitalized and deferred when incurred and subsequently amortized over the term of the Loan Agreement. The effective interest rate of the Loan Agreement, including the amortization of the debt issuance costs was 10.99% 11.00% for the three months ended June September 30, 2026.

2 unchanged paragraphs

For the six nine months ended

3 unchanged paragraphs

Pursuant to the Loan Agreement, each tranche may be voluntarily prepaid at any time, in whole or subject to certain conditions, in part, prior to the Term Loan Maturity Date. Prepayments are subject to an amount equal to the sum of all interest that would have been accrued and payable from such date of prepayment through the second year anniversary of each respective tranche's closing date on the amount of principal prepaid, using an interest rate in effect on such date.

Pursuant to the Loan Agreement, each tranche has a required prepayment premium, in an amount equal to the product of the amount of any prepaid principal, multiplied by: (i) if prepayment occurs prior to the third year anniversary of each respective tranche's closing date, 3 %; (ii) if prepayment occurs on or after the third year anniversary of each respective tranche's closing date but prior to the fourth year anniversary of each respective tranche's closing date, 2 %; and (iii) if prepayment occurs on or after the four year fourth anniversary of each respective tranche's closing date but prior to the Term Loan Maturity Date, 1 %.

2 unchanged paragraphs

As of June September 30, 2026, the Company was in compliance with its debt covenants under the Loan Agreement.

1 unchanged paragraph

In March 2026, the Company issued an aggregate principal amount of $ 200.0 million of 2.50 % convertible senior notes due 2032 (the "Convertible Notes") with to multiple individual investors (the "Holders") in an underwritten public offering. In April 2026, the underwriters of the Company's offering of the Convertible Notes exercised their overallotment option in full, pursuant to which the Company issued an additional principal amount of $ 30.0 million of Convertible Notes, before deducting commissions commission costs of $ 0.9 million. The Convertible Notes were issued pursuant to, and are governed by, an indenture (the "Base Indenture"), dated March 31, 2026, between the Company and U.S. Bank Trust Company, National Association, as trustee (the "Trustee"), as supplemented by a first supplemental indenture (the "Supplemental Indenture," and the Base Indenture, as supplemented by the Supplemental Indenture, the "Indenture"), dated as of March 31, 2026, between the Company and the Trustee.

3 unchanged paragraphs

The initial conversion rate is 37.7358 shares of common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $ 26.50 per share, and is subject to adjustment as described in the Indenture. However, if a fundamental change occurs, generally a change of control, merger, consolidation, asset sale or similar transaction, takes place prior to April 1, 2030, and it results in the Convertible Notes immediately being due, the noteholders may be entitled to an increase in the conversion rate ("Make-Whole Rate"). The amount of the increase is determined pursuant to the contractual make-whole table based on the effective date of the transaction. No increase in the conversion rate will be provided if the stock price used to determine the adjustment is greater than $ 160.00 per share or less than $ 20.00 per share of common stock and the conversion rate as increased pursuant to the make-whole provision will not exceed 50.00 shares of common stock per $1,000 principal amount of the Convertible Notes.

1 unchanged paragraph

The Convertible Notes were accounted for in accordance with ASC Subtopic 470-20, Debt with Conversion and Other Options ("ASC 470-20") and ASC Subtopic 815-40, Contracts in Entity's Own Equity ("ASC 815-40"). Under ASC 81-40, 815-40, to qualify for equity classification (or non-bifurcation, if embedded), the instrument (or embedded feature) must be both (i) indexed to the issuer's stock and (ii) meet the requirements of the equity classification guidance. Based upon our the Company's analysis, it was determined that the Convertible Notes do contain embedded features indexed to our the Company's common stock, but that do not meet the requirements for require bifurcation and therefore do not need to be separately accounted for as an equity component. Since the embedded conversion feature meets the equity scope exception from derivative accounting, and, also since the embedded conversion option does not need to be separately accounted for as an equity component under ASC 470-20, the proceeds from the issuance of the Convertible Notes were recorded as a liability.

The Company incurred issuance costs related to the Convertible Notes of $ 7.3 million, which were recorded as debt issuance costs and were included as a reduction to the Convertible Notes on the unaudited condensed consolidated balance sheet. The debt issuance costs are amortized to interest expense using the effective interest rate method over the term of the Convertible Notes, resulting in an effective interest rate of 3.07 3.08 %.

The outstanding balance of the Convertible Notes consisted of the following as of June September 30, 2026 (in thousands):

2 unchanged paragraphs

None of the Convertible Notes were converted, no r did the Company redeem any of the Convertible Notes as of June 30, 2026.

The fair value of the Convertible Notes is influenced by the Company's common stock price and has been classified as Level 1 within the fair value hierarchy as it uses quoted prices in active markets. The estimated fair value of the Convertible Notes as of June September 30, 2026, was approximately $ 275.5 301.1 million. None of the Convertible Notes were converted, no r did the Company redeem any of the Convertible Notes as of September 30, 2026.

1 unchanged paragraph

For the three and six months ended

For the nine months ended

4 unchanged paragraphs

As of June September 30, 2026, the Company was in compliance with its covenants under the Indenture.

Note 7: License and Collaboration Revenue 11 changes

1 unchanged paragraph

As of June 30, 2026 and 2025, the Company recorded $ 0.8 million and $ 1.3 million, respectively, as a receivable included in prepaid expenses and other current assets. The Company recorded $ 0.8 million and $ 1.3 million for the three months ended June 30, 2026 and 2025, respectively, and $ 1.9 million and $ 3.0 million for the six months ended June 30, 2026 and 2025, respectively, as a reduction to research and development expense for global development costs to be reimbursed by BMS. The Company did no t recognize revenue related to the BMS Agreement during the three and six months ended June 30, 2026 and 2025.

In August 2023, the Company entered into a license and collaboration agreement (the "BMS Agreement") with Bristol-Myers Squibb ("BMS"), 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 ingredients (the "BMS Product") into in 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.

Pursuant to the BMS Agreement, BMS paid the Company a one-time non-refundable upfront cash payment of $ 50.0 million. In September 2026, the Company received a development and regulatory milestone payment of $ 10.0 million for the first regulatory approval application filing in Japan. The Company is entitled to receive further separate development and regulatory milestone payments from BMS of up to approximately $ 79.5 69.5 million. The Company is also entitled to receive one-time sales milestone payments up to $ 70.0 million upon BMS achieving certain net sales milestones in a given year in the BMS Territory. 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.

Additionally, pursuant to the BMS Agreement, the Company will supply BMS finished products for use in the BMS Territory, per BMS orders, at the Company's cost of goods plus an applicable mark-up. The Company will recognize revenue in the period the finished products are shipped to BMS.

The Company will continue to perform and oversee the ongoing Phase 3 trial open label extension of obexelimab in the immunoglobulin G4-related disease ("IgG4-RD") indication and BMS will participate in the performance of the study. BMS will fund their its 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. The global development activities under the agreement do not represent a transaction with a 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 $ 0.9 million and $ 1.3 million for the three months ended September 30, 2026 and 2025, respectively, and $ 2.8 million and $ 4.2 million for the nine months ended September 30, 2026 and 2025, respectively, as a reduction to research and development expense for global development costs reimbursed or to be reimbursed by BMS.

The Company recognized $ 10.0 million in revenue, related to the achievement of the development milestone, during the three and nine months ended September 30, 2026. Additionally, the Company recorded deferred revenue of $ 2.0 million, related to a BMS drug substance supply order, as of September 30, 2026. During the three and nine months ended September 30, 2025, the Company did no t recognize revenue or record deferred revenue related to the BMS Agreement.

1 unchanged paragraph

In October 2024, the Company entered into a novation agreement with Tenacia Biotechnology (Hong Kong) Co., Limited ("Tenacia"), under which the Company transferred its rights and obligations under the agreements with Dianthus Therapeutics, Inc ("Dianthus") to Tenacia (the "Tenacia Agreement"). Pursuant to the Tenacia Agreement, Tenacia paid the Company a one-time non-refundable upfront cash payment of $ 5.0 million, which was recognized as revenue in the fourth quarter of 2024.

The Company did no t recognize revenue during the three and six months ended June September 30, 2026. During the nine months ended September 30, 2026, the Company recognized revenue of $ 1.0 million, related to the achievement of a certain development milestone. The Company did no t recognize revenue related to the Tenacia Agreement during the three and six nine months ended June September 30, 2025. The Company is entitled to receive remaining development, regulatory, and sales milestones from Tenacia of up to approximately $ 85.0 million if certain milestones are achieved.

1 unchanged paragraph

In January 2025, the Company entered into a license agreement (the "Zai License Agreement") with Zai Lab (Hong Kong) Limited ("Zai"), under which the Company granted Zai an exclusive sublicense to develop, manufacture and commercialize ZB001 (also known as VRDN-001), an insulin-like growth factor-1 receptor monoclonal antibody and related programs in greater China. Under the Zai License Agreement, Zai will be responsible for conducting all research and development activities, manufacturing, regulatory and commercialization in greater China.

1 unchanged paragraph

The Company evaluated the terms of the Zai License Agreement and determined it is within the scope of ASC 606. The Company identified the following promises in the Zai License Agreement that were evaluated under the scope of ASC 606: (i) transfer of the license for ZB001, (ii) licensed technology transfer, (iii) licensed material transfer and (iv) continued licensed technology transfer. The Company also evaluated whether certain options outlined in the Zai License Agreement represented material rights that would give rise to a performance obligation and concluded that none of the options conveyed a material right to Zai or were immaterial and, therefore, are not considered separate performance obligations within the Zai License Agreement.

2 unchanged paragraphs

As of June September 30, 2026 and 2025, no milestones were achieved or deemed probable of achievement.

Note 8: License Agreements 9 changes

4 unchanged paragraphs

In May 2021, the Company entered into a license agreement with Xencor (the "2021 Xencor Agreement"), under which the Company obtained an exclusive, royalty-bearing, sublicensable worldwide license to research, develop, manufacture, market and sell obexelimab. In May 2026, the Company made a payment of $ 10.0 million to Xencor for the achievement of a regulatory milestone for submission of the marketing authorization application to the FDA. In July 2026, the Company made a regulatory milestone payment of $ 2.5 million to Xencor for achievement of a regulatory milestone for submission of the marketing authorization application to Japan. The Company is obligated to make additional regulatory milestone payments up to $ 75.0 62.5 million, including $ 10.0 20.0 million for FDA marketing authorization submission which was achieved during the three months ended June 30, 2026 and $ 20.0 15.0 million for payable upon marketing approval by the FDA and the European Medicines Agency, respectively, and one-time sales milestone payments up to $ 385.0 million upon achieving milestone events of net sales in a given calendar year in the territory equal to certain threshold amounts. In addition, the Company is required to pay Xencor tiered royalties on annual net sales of successfully commercialized products utilizing obexelimab, with the royalty percentages varying based on regions and ranging from the mid-single digits to the mid-teens.

During the three and nine months ended June September 30, 2026, the Company completed the FDA marketing authorization submission recorded $ 2.5 million and made a $ 10.0 12.5 million milestone related to the achievement and payment which was recorded of regulatory milestones as acquired in-process research and development expense. During three and six nine months ended June September 30, 2026 and 2025, the Company did not no t record any reimbursable patent-related costs.

2 unchanged paragraphs

In January 2025, the Company entered into the Zai License Agreement under which the Company granted Zai an exclusive sublicense to develop, manufacture and commercialize ZB001 and related programs in greater China. In connection with the Zai License Agreement, the Company assigned the Viridian Supply Agreement to Zai. For additional information on the Zai License Agreement, please see License Agreement with Zai Lab (Hong Kong) Limited in Note 7, – License and Collaboration Revenue to these unaudited condensed consolidated financial statements.

During the three and six nine months ended June September 30, 2026 and 2025, the Company did no t incur expenses related to Viridian contract manufacturing organization ("CMO") costs. Viridian has agreed to reimburse the Company for certain services the Company performs on Viridian's behalf, with reimbursements being recorded as a reduction in research and development expenses. During the three and six nine months ended June September 30, 2026, the Company did not no t incur any reimbursable expenses. During the three and six nine months ended June September 30, 2025, the Company recorded an immaterial amount and $ 0.2 million in reimbursable expenses, respectively. Additionally, during the six nine months ended June September 30, 2026 and 2025, the Company did not achieve any milestones.

2 unchanged paragraphs

Pursuant to the InnoCare License Agreement, the Company made one-time non-refundable upfront cash payments totaling $ 35.0 million and issued 5,000,000 shares of common stock to InnoCare ("InnoCare Shares") in exchange for these rights in October 2025. Further, in August 2026, the Company achieved a development milestone (the "Near-Term Milestone") and became obligated to make an additional one-time non-refundable cash payment of $ 25.0 million and issue an additional 2,000,000 shares of common stock to InnoCare.

The Company is also required to make an additional one-time, non-refundable cash payment of $ 25.0 million and issue an additional 2,000,000 shares of common stock to InnoCare upon the achievement of a specified development milestone related to Zenas' Phase 3 clinical trial for orelabrutinib in any indication other than primary progressive MS, or by March 31, 2026, upon the occurrence of certain specified events, whichever comes first (the "Near-term Milestone"). In addition, the Company has agreed to make one-time, potential near-term milestone payments of $ 20.0 million each, upon the achievement of certain regulatory milestones for ZB021 and ZB022 (the "Regulatory Milestones"). During the three months ended June 30, In May 2026, the Company achieved the ZB021 Regulatory Milestone and made a payment of $ 20.0 million. which was recorded as acquired in-process research and development expense.

During the three months ended September 30, 2026, the Company recorded $ 25.0 million related to achievement and payment of the Near-Term Milestone and during the nine months ended September 30, 2026, the Company recorded $ 45.0 million related to the achievement and payment of Near-Term Milestone and the Regulatory Milestone for ZB021, both were recorded as acquired in-process research and development expense.

The Company is further obligated to pay future regulatory and commercial milestones of up to $ 723.0 million related to orelabrutinib, and future development, regulatory and commercial milestones of up to $ 636.0 million for ZB021, and $656.0 $ 656.0 million for ZB022, inclusive of the $ 20.0 $20.0 million Regulatory Milestone, for ZB022 specified above, if certain milestones are successfully achieved. In addition, the Company is obligated to pay royalties on net sales at rates ranging from high-single digits to high-teens for orelabrutinib, and mid-single digits to mid-teens for the preclinical compounds.

Under the InnoCare License Agreement, the Company is obligated to reimburse InnoCare for certain clinical trial startup costs and Investigational New Drug ("IND") enabling activities which were incurred prior to and after the effective date of the agreement. During the three and six nine months ended June September 30, 2026, the Company incurred $ 0.7 3.1 million and $ 1.9 5.0 million of expense, respectively. During the three and six nine months ended June September 30, 2026, the Company made payments of $ 1.4 0.7 million and $ 2.2 2.9 million to InnoCare related to the acquired programs, respectively.

Note 9: Royalty Obligation 2 changes

1 unchanged paragraph

The Royalty Purchase Agreement provides for an additional $ 225.0 million of payments to be paid to the Company by Royalty Pharma upon the occurrence of certain triggering events which includes (1) (i) $ 75.0 million payable upon the achievement of certain milestones with respect to Zenas' INDIGO Phase 3 Trial, noting the Company is not currently eligible for this milestone, (2) (ii) $ 75.0 million payable following receipt of marketing approval for obexelimab from the U.S. Food and Drug Administration (the "FDA") for the treatment of IgG4-Related Disease on or before a specified date and (3) (iii) $ 75.0 million payable following receipt of marketing approval for obexelimab from the FDA for the treatment of systemic lupus erythematosus on or before a specified date.

4 unchanged paragraphs

Royalty obligation as of June September 30, 2026

2 unchanged paragraphs

Note 10: Common Stock 2 changes

1 unchanged paragraph

In October 2025, the Company entered into a sales agreement with Jefferies LLC ("Jefferies") under which the Company could, from time to time, issue and sell shares of its common stock having aggregate sales proceeds of up to $ 200.0 million, in a series of one or more at-the-market equity offerings ("2025 ATM Program"). The Company's common stock will be sold at prevailing market prices at the time of the sale; and as a result, prices may vary. For the three and nine months ended June September 30, 2026, the Company did not sell any sold 1,818,181 and 4,645,904 shares of common stock, respectively, under the 2025 ATM Program. As of June September 30, 2026, $ 96.8 46.8 million remained available under the 2025 ATM Program.

In October 2025, the Company entered into a securities purchase agreement for a private placement investment in public entity equity ("PIPE") (the "PIPE Purchase Agreement"), pursuant to which the Company sold (i) 6,262,112 shares of common stock to certain institutional and accredited investors at a price of $ 19.00 per share and (ii) 48,918 shares of common stock to certain directors and officers of the Company at a price of $ 20.85 per share. The net proceeds from the PIPE offering, after deducting placement agent fees and other offering costs were $ 111.8 million.

9 unchanged paragraphs

Note 11: Stock-Based Compensation 17 changes

In August 2020, the Company's sole director adopted the 2020 Equity Incentive Plan (the "2020 Plan"). Upon effectiveness of the 2024 Plan (as defined below), the Company ceased granting additional awards under the 2020 Plan and the remaining available shares for future grants were transferred to the 2024 Plan. The 2020 Plan allowed the Company to grant stock options, restricted stock awards, restricted stock units ("RSUs") and other stock-based awards to employees, officers, directors and consultants of the Company and its subsidiaries. As of June September 30, 2026, 3,092,255 2,810,159 shares of stock options were issued and outstanding under the 2020 Plan.

1 unchanged paragraph

The number of shares reserved and available for issuance under the 2024 Plan will automatically increase each January 1, beginning on January 1, 2025 through January 1, 2034, by the number of shares equal to the lesser of (i) five percent of the aggregate number of shares of common stock outstanding as of such date, and (ii) a number of shares as may be determined by the Board on or prior to such date. On January 1, 2026, the number of shares of common stock available for issuance under the Company's 2024 Plan increased to 3,156,138 . As of June September 30, 2026, 1,028,297 1,583,621 shares of common stock were available for issuance under the 2024 Plan.

1 unchanged paragraph

In December 2025, the Company's Board adopted the 2026 Inducement Plan (the "2026 Inducement Plan"), which became effective December 10, 2025. The 2026 Inducement Plan provides for awards of non-qualified stock options and other awards under the 2026 Inducement Plan to persons not previously an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering the employment of the Company. The grants constitute "employment inducement grants" in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules and are issued outside of the 2024 Plan. The inducement grants include non-statutory options to purchase shares of the Company's common stock and RSUs. The inducement grants have terms and conditions consistent with those set forth in the 2024 Plan and vest under the same respective vesting schedules as stock options and RSUs granted under the 2024 Plan. The Company initially reserved 1,000,000 shares of common stock for the issuance of awards under the Company's 2026 Inducement Plan. In August 2026, the 2026 Inducement Plan was amended to increase the shares of common stock for issuance by 600,000 shares. As of June September 30, 2026, 270,900 592,500 shares of common stock were available for issuance under the 2026 Inducement Plan.

1 unchanged paragraph

From time to time, the Company grants equity awards to newly hired employees as an inducement to enter into employment with the Company. The grants constitute "employment inducement grants" in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules and are issued outside of the 2024 Plan and 2026 Plans Inducement Plan (the "Individual Inducement Grants"). The Individual Inducement Grants include non-statutory stock options to purchase shares of the Company's common stock and RSUs. The Individual Inducement Grants are granted under individual inducement agreements and have terms and conditions consistent with those set forth under the 2024 Plan and vest under the same respective vesting schedules as stock option awards granted under the 2024 Plan. The Individual Inducement Grants are included in the stock option award tables below. As of June September 30, 2026, the Company granted 1,062,000 non-statutory stock options as Individual Inducement Grants, which were awarded during the year ended December 31, 2025. The Company did not grant any stock options or RSUs as Individual Inducement Grants during the three or six nine months ended June September 30, 2026.

6 unchanged paragraphs

Outstanding - June 30, 2026

Outstanding - September 30, 2026

Options vested and exercisable as of June September 30, 2026

Options vested and expected to vest as of June September 30, 2026

The aggregate intrinsic value of the stock options outstanding 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 June September 30, 2026.

4 unchanged paragraphs

Unvested as of June September 30, 2026

The fair value of RSUs vested during the three and six nine months ended June September 30, 2026 was $ 2.2 2.4 million.

As of June September 30, 2026, unrecognized stock-based compensation expense was $ 109.6 95.6 million, which is expected to be recognized over a weighted-average period of 3.0 2.8 years.

1 unchanged paragraph

Six Months Ended June 30,

Three Months Ended June September 30,

Nine Months Ended September 30,

3 unchanged paragraphs

In connection with the transition and separation of certain employees in 2026, the Company accelerated the vesting and extended the exercise date of certain equity awards to these employees. The Company accounted for the stock modification of these awards under ASC Subtopic 718, Compensation – Stock Compensation ("ASC 718"). As a result of the modifications, the Company recognized approximately $ 7.3 million and $ 8.9 million of incremental stock-based compensation expense during the three and nine months ended September 30, 2026, respectively.

1 unchanged paragraph

In September 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 number of shares of common stock available under the ESPP will automatically increase on January 1st of each year, beginning on January 1, 2025 through January 1, 2034, by the number of shares equal to the lesser of (i) one percent of the aggregate number of shares of common stock outstanding as of such date, and (ii) 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. On January 1, 2026, the number of shares of common stock authorized for issuance under the ESPP increased to 1,317,977 . As of June September 30, 2026, 1,273,608 1,241,412 shares were available for future issuance under the ESPP. During the three months ended June 30, 2026, there were no issuances under the ESPP. During the six and nine months ended June September 30, 2026, there were 44,369 32,196 shares and 76,565 shares issued, respectively, under the ESPP.

Note 12: Net Loss Per Share 3 changes

The Company's potentially dilutive securities, which include stock options, RSUs, and convertible senior notes, and the 2,000,000 shares of common stock to be issued to InnoCare, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following shares from the computation of diluted net loss per share as of June September 30, 2026 and 2025 because including them would have had an anti-dilutive effect:

1 unchanged paragraph

Common stock to be issued to InnoCare

1 unchanged paragraph

1 Represents conversion rate, as of June September 30, 2026, of 37.7358 shares of common stock per $1,000 principal amount of notes.

Note 13: Commitments and Contingencies 3 changes

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. As of June September 30, 2026, our the Company's total non-cancellable clinical manufacturing contract payment obligations are $ 15.8 10.1 million of which the full obligation is payable within 12 months.

1 unchanged paragraph

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 and certain officers 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 unaudited condensed consolidated financial statements as of June September 30, 2026.

1 unchanged paragraph

The Company may periodically become subject to legal proceedings and claims arising in the ordinary course of business. As of June September 30, 2026, 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.

Note 14: Related Party Transactions 2 changes

The Company has obtained exclusive, worldwide licenses from Xencor to research, develop, manufacture, market and sell three antibody product candidates pursuant to two license agreements. The Company has concluded that Xencor is a related party, due to the issuance of convertible preferred stock in December 2020 and April 2023. In connection with the completion of the IPO, in September 2024, all outstanding shares of preferred stock converted into shares of common stock. As of June September 30, 2026, Xencor held less than 10 % of the shares of the Company's outstanding common stock.

5 unchanged paragraphs

The Company has obtained the exclusive rights from InnoCare to develop, manufacture and commercialize three product candidates pursuant to the InnoCare License Agreement. Though InnoCare does not hold any direct controlling interest in the Company, the Company has concluded that InnoCare is a related party, due to the 5,000,000 shares of common stock issued and the 2,000,000 7,000,000 shares of common stock to be issued pursuant to the InnoCare License Agreement. As of June September 30, 2026, InnoCare held less than 10 10.33 % of the shares of the Company's outstanding common stock.

1 unchanged paragraph

Note 15: Segment Information 6 changes

The Company manages its operations on a consolidated basis as a single reportable segment focused on the research and development of immunology-based therapies. The accounting policies of the single reportable segment are identical to those described in Note 1, Nature 2, Summary of Business , Significant Account Policies to these unaudited condensed consolidated financial statements. When evaluating the Company's financial performance, the Company's chief operating decision-maker (the "CODM"), its Chief Executive Officer regularly reviews consolidated net loss, total expense and direct expenses by program and compared to budget. The CODM allocates resources based on the Company's available cash resources, and forecasted expenditures on a consolidated basis, as well as an assessment of the probability of success of its research and development activities on a program basis. Segment asset information regularly provided to the CODM is consistent with that reported on the consolidated balance sheets with particular emphasis on the Company's available liquidity, including its cash, cash equivalents and investment balances. Revenue is primarily attributed to individual countries based on the entity owning the license. During the three and six months ended June September 30, 2026, the Company recognized $ 1.0 10.0 million of revenue, which was attributed to Zenas BioPharma Inc. During the nine months ended September 30, 2026, the Company recognized $ 11.0 million of revenue, which $ 1.0 million was attributed to Zenas HK and $ 10.0 million was attributed to Zenas BioPharma Inc. During the three months ended June September 30, 2025, the Company did no t recognize any revenue and for the six nine months ended June September 30, 2025, the Company recognized $ 10.0 million of revenue which was attributed to Zenas HK.

The following table presents certain financial data for the Company's reportable segment for the three and six nine months ended June September 30, 2026 and 2025 (in thousands):

1 unchanged paragraph

For the six nine months ended

7 unchanged paragraphs

Other segment items 4 5

3 unchanged paragraphs

4 Acquired -in- process research and development expenses consist of milestones achieved pursuant to the Xencor and InnoCare license agreements, for additional details see Note 8, License Agreements to these condensed unaudited consolidated financial statements.

5 Other segment items consist of other (income) expense, net, and income tax (benefit) provision. Other (income) expense, net consists of interest income, interest expense related to the royalty obligation, the senior secured term loan and convertible senior note notes as well as realized and unrealized gains and losses on foreign currency transactions .

Note 16: Subsequent Events 8 changes

In July 2026, the Company completed the sale of 1,818,181 shares of common stock under the 2025 ATM Program, with an average gross sales price of $ 27.50 per share, resulting in proceeds of $ 48.7 million, net of commissions. As of the issuance date of these financial statements, $ 46.8 million remained available under the 2025 ATM Program.

In August 2026, BMS announced the achievement of a specified regulatory milestone under the BMS Agreement, which requires BMS to make a milestone payment of $ 10.0 million to the Company. Due to the achievement of the specified regulatory milestone by BMS, the Company is obligated to make a milestone payment of $ 2.5 million to Xencor pursuant to the 2021 Xencor Agreement.

Amendment to 2026 Inducement Plan

In August 2026, the 2026 Inducement Plan was amended to increase the number of equity awards available for grant by 600,000 .

Achievement of Near-term Milestone pursuant to the InnoCare Agreement

In August 2026, the Company achieved the Near-term Milestone and is obligated to make a milestone payment of $ 25.0 million and issue 2,000,000 shares of common stock to InnoCare.

Achievement of specified Regulatory Milestone pursuant to the BMS 2021 Xencor Agreement

In October 2026, the Company submitted its first marketing authorization application in Europe with respect to a licensed asset under the 2021 Xencor Agreement, which triggered an obligation to make a milestone payment of $ 7.5 million to Xencor under the 2021 Xencor Agreement. The milestone will be recognized as acquired-in-process research and development expense in the fourth quarter of 2026.

MD&A 89 changes

4 unchanged paragraphs

We are developing obexelimab as a potential I&I franchise for patients in several autoimmune diseases, representing substantial commercial opportunities individually and in the aggregate. We are conducting clinical trials in IgG4-RD through a registration-directed Phase 3 trial which reported topline data in January 2026, relapsing multiple sclerosis ("RMS") through an ongoing Phase 2, double-blind, randomized, placebo-controlled trial which reported topline data in October 2025 (the "MoonStone" trial) and systemic lupus erythematosus ("SLE") through an ongoing Phase 2, double-blind, randomized, placebo-controlled trial (the "SunStone" trial), for which we expect to report topline results, including biomarker data, in the fourth quarter of 2026.

In January 2026, we reported positive results from the Phase 3 trial of obexelimab in patients with IgG4-RD ("INDIGO"). Obexelimab met the primary endpoint, demonstrating a highly statistically significant and clinically meaningful 56% reduction in the risk of IgG4-RD flare compared to placebo (Hazard Ratio 0.44, p=0.0005) and also met and demonstrated highly statistically significant activity compared to placebo on all four key secondary endpoints. Obexelimab was well tolerated with a safety profile consistent with that observed in previously completed clinical trials. Based on these results, we submitted the obexelimab Biologics License Application ("BLA") to the U.S. Food and Drug Administration ("FDA") for the treatment of IgG4-RD in May 2026. In August 2026, the FDA accepted the Company's our BLA and assigned a Prescription Drug User Fee Act ("PDUFA") target date of May 27, 2027. We intend to submit a Marketing Authorization Application to In October 2026, the European Medicines Agency in ("EMA") validated the second half recently submitted Marketing Authorization Application ("European MAA") for the treatment of 2026. IgG4-RD.

In October 2026, we announced interim data from the ongoing INDIGO Open-Label Extension ("OLE"). INDIGO participants who completed the 52-week randomized, controlled period of the trial were eligible to enter the OLE and receive 250 mg of obexelimab subcutaneously once weekly. The OLE evaluates the longer-term flare protection and safety of continued obexelimab treatment in patients with IgG4-RD. The interim OLE data were based on a data cutoff of May

2026 and reported that the 12-month probability of remaining flare-free was 0.93 based upon investigator- and adjudication committee-confirmed flares requiring rescue therapy, and 0.87 based upon investigator-determined flares requiring rescue therapy; adjudication was pending for five patients as of the data cutoff. The median and mean cumulative glucocorticoid rescue doses were 0 mg and 105 mg, respectively. Adverse event rates were comparable to or lower than those observed during the randomized, controlled period.

We also reported initial results from the Influenza and COVID-19 Vaccine Sub-Study conducted during the OLE. The ongoing sub-study assessed the presence of pre-existing influenza and SARS-CoV-2 immunity following a preceding long-term period of obexelimab exposure, and also the immune responses to vaccination during a planned treatment-free window. Pre-existing markers of immunity were observed in 71% of participants for influenza and 50% for COVID-19 (n=7). Vaccination during the treatment-free window resulted in seroimmunity to influenza in 6 of 7 participants (86%) and seroimmunity to COVID-19 in 4 of 4 participants (100%). No disease flares were observed during the treatment-free vaccination window, which lasted an average of 34.6 days.

In addition, we reported a sub-analysis that evaluated glucocorticoid-associated toxicity in patients with IgG4-RD using the Glucocorticoid Toxicity Index ("GTI"). Patients treated with obexelimab had statistically significantly lower cumulative glucocorticoid toxicity than patients receiving placebo at week 52 (GTI Cumulative Worsening Score difference: -11.4; p=0.021). Fewer patients receiving obexelimab reached clinical thresholds for cumulative glucocorticoid toxicity than those receiving placebo.

In August 2026, we announced that bioequivalence was established between obexelimab delivered via prefilled syringe and single-dose prefilled pen. The single-dose prefilled pen has the potential to offer a more convenient delivery option for patients. We intend to submit a supplemental application to obexelimab's IgG4-RD BLA, if approved, and to include included the bioequivalence data to a in the European MAA submission. in the second half of 2026.

2 unchanged paragraphs

In October 2025, we entered into a License Agreement (the "InnoCare License Agreement") with InnoCare Pharma Inc. ("InnoCare"), pursuant to which we were granted exclusive rights to develop, manufacture, and commercialize orelabrutinib, a Bruton's Tyrosine Kinase inhibitor ("BTK") inhibitor, for multiple sclerosis ("MS") worldwide, and in all non-oncology indications worldwide excluding mainland China, Hong Kong, Macau and Taiwan ("greater China"), and Brunei, Burma, Cambodia, Timor-Leste, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam ("Southeast Asia"), as well as two early-development product candidates: ZB021, an IL-17AA/AF inhibitor, in all fields of use worldwide excluding greater China and Southeast Asia, and ZB022, a TYK2 inhibitor, in all fields of use worldwide.

Orelabrutinib is a highly selective and central nervous system ("CNS") penetrant, oral small molecule BTK inhibitor. Orelabrutinib is designed to bind irreversibly to BTK with minimal off-target effects, which may potentially reduce certain side effects. We believe Orelabrutinib is was designed to efficiently cross the blood-brain barrier, reaching which may allow it to reach therapeutic levels within the CNS to directly target inflammation in diseases like MS.

In September 2025, the Phase 3 PriMroSe trial of orelabrutinib in patients with primary progressive multiple sclerosis ("PPMS") was initiated. The PriMroSe trial is a global, multicenter, randomized, double-blind, placebo-controlled clinical trial evaluating the safety and efficacy of orelabrutinib dosed 80 mg once daily ("QD") compared to placebo in patients with PPMS, with a primary endpoint of time to onset of 12-week composite confirmed disability progression ("CDP"). In March of 2026, we initiated a second global, Phase 3, multicenter, randomized, double-blind, placebo-controlled clinical trial evaluating orelabrutinib dosed 80 mg QD compared to placebo in patients with non-active secondary progressive multiple sclerosis ("naSPMS"), with a primary endpoint of time to onset of 24-week CDP.

1 unchanged paragraph

ZB022 is an oral, brain-penetrant TYK2-JH2 inhibitor, currently in IND-enabling Investigational New Drug ("IND") enabling studies. Subject to the results of Investigational New Drug ("IND") enabling IND-enabling studies, we expect to initiate a Phase 1 clinical study in 2027.

2 unchanged paragraphs

In September 2024, we completed our initial public offering ("IPO") in which we issued and sold an aggregate of 15,220,588 shares of our common stock, including 1,985,294 shares of common stock sold 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. We received $234.3 million in net proceeds after deducting underwriting discounts, commissions and other offering costs.

In October 2024, we entered into the Novation Agreement with Tenacia Biotechnology (Hong Kong) Limited ("Tenacia"), under which we transferred our rights and obligations under our agreements with Dianthus Therapeutics, Inc. ("Dianthus") to Tenacia for ZB005. As partial consideration for the Tenacia Agreement, we received a non-creditable, non-refundable upfront fee of $5.0 million from Tenacia. In June 2026, we recorded collaboration and license and collaboration revenue of $1.0 million upon successful achievement of a development milestone. In addition, we are eligible to receive up to an additional $85.0 million upon the achievement of certain future development, regulatory and commercial milestones.

In January 2025, we entered into a license agreement (the "Zai License Agreement"), with Zai Lab (Hong Kong) Limited ("Zai"), under which we granted to Zai an exclusive sublicense to develop, manufacture and commercialize ZB001 and related programs in greater China. As partial consideration for the Zai License Agreement, we received an upfront fee of $10.0 million from Zai. In addition, we are eligible to receive up to $96.0 million, upon the achievement of certain future development and commercial milestones and royalty percentage rates from the low to mid-single digits, net of pass-through obligations due to Viridian Therapeutics, Inc. ("Viridian").

In September 2025, we entered into the Revenue Participation Right Purchase and Sales Sale Agreement (the "Royalty Purchase Agreement"), with Royalty Pharma Investments 2019 ICAV ("Royalty Pharma"), pursuant to which Royalty Pharma purchased the right to receive, for each calendar quarter, (i) 5.5% of net sales of obexelimab products sold by us and our affiliates worldwide, (ii) 5.5% of net sales of obexelimab products sold by licensees of us and our affiliates in the U.S., the United Kingdom and the European Union, (iii) 25% of royalty income payable to us or any of our affiliates on sales of obexelimab products in countries other than the U.S., the United Kingdom, and in the European Union by its licensees pursuant to out-licenses less royalty payments payable by us to Xencor Inc. and (iv) 25% of non-royalty income attributable to obexelimab products payable to us or any of our affiliates by its licensees (other than certain milestone payments payable by Bristol-Myers Squibb) pursuant to out-licenses and allocated to countries other than the U.S., the United Kingdom and in the European Union.

In October 2025, we entered into a License Agreement (the "InnoCare License Agreement") with InnoCare Pharma Inc. ("InnoCare"), under which InnoCare granted to us the exclusive rights to develop, manufacture, and commercialize: i) orelabrutinib, in the MS field worldwide, and in all non-oncology indications outside greater China and Southeast Asia, ii) ZB021 in all fields of use worldwide, excluding greater China and Southeast Asia and iii) ZB022 in all fields of use worldwide. We also obtained certain non-exclusive rights to perform development and manufacturing activities in greater China and Southeast Asia. As consideration for the InnoCare License Agreement, we made a non-refundable upfront payment of $35.0 million. We also issued 5,000,000 shares of common stock to InnoCare in a private placement. and In August 2026, upon achievement of a specified development milestone (the "Near-Term Milestone"), we may be required to issue made a milestone payment of $25.0 million and issued an additional 2,000,000 shares of common stock to InnoCare in a private placement. upon the achievement of a specified development milestone related to a Phase 3 clinical trial for orelabrutinib in any indication other than PPMS. We are further obligated to pay future regulatory and commercial milestones of up to $723.0 million related to orelabrutinib and future development, regulatory, and commercial milestones of up to $636.0 million for ZB021, and $656.0 million for ZB022. In addition, we may be obligated to pay royalties on net sales at rates ranging from high-single digits to high-teens for orelabrutinib, and mid-single digits to mid-teens for the preclinical compounds.

Since inception, our operations have focused on research and development activities with respect to our product candidates as described above, as well as raising capital, business planning, organizing and staffing our company, establishing our intellectual property portfolio, establishing arrangements with third parties for the manufacture of our product candidates and related raw materials, and providing general and administrative support for these operations. We have financed our operations to date primarily with the proceeds from the issuance of convertible preferred stock, convertible senior notes, from the sale of common stock in our IPO completed in September 2024, private and public equity offerings, as well as from payments received under our license, collaboration and royalty purchase agreements and the senior secured term loan with Pharmakon Advisors, LP ("Pharmakon"). In October 2025, we closed our private investment in public equity ("PIPE") of 6,311,030 shares of common stock for net proceeds of approximately $111.8 million, after deducting agent fees and other offering costs. Additionally, in October 2025, we entered into a sales agreement with Jefferies LLC ("Jefferies") under which we may, from time to time, issue and sell shares of our common stock having aggregate sales proceeds of up to $200.0 million, in a series of one or more at-the-market ("ATM") equity offerings ("2025 ATM Program"). During the six nine months ended June September 30, 2026, we sold 2,827,723 4,645,904 shares of common stock under the 2025 ATM Program, with proceeds of $71.5 $120.3 million, net of commissions. As of June September 30, 2026, $96.8 $46.8 million remained available under the 2025 ATM Program. Further in March 2026, we entered into the Loan Agreement with the Collateral Agent, BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP, which are funds managed by Pharmakon, providing for up to a $250.0 million term loan facility consisting of several tranches of loans that will become available upon the achievement of certain milestones.

We have incurred significant operating losses and negative cash flows since inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. Our net losses for the three and six nine months ended June September 30, 2026 were $111.5 $108.9 million and $192.4 $301.4 million, respectively, and we recorded net loss of $52.2 $51.5 million and $85.8 $137.3 million, for the three and six nine months ended June September 30, 2025. As of June September 30, 2026, we had an accumulated deficit of $957.6 million. $1.1 billion. We expect to continue to incur significant and increasing losses for the foreseeable future. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

19 unchanged paragraphs

As of June September 30, 2026, we had $673.9 $647.1 million in cash, cash equivalents and investments. We expect that our existing cash, cash equivalents and investments will be sufficient to fund our capital and operating expenditures for at least twelve months from the date of the issuance of these the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. We estimate that our existing cash, cash equivalents and investments will be sufficient to fund our projected operations and capital expenditure requirements into 2029. Assuming receipt of the potential $75 million milestone payment from Royalty Pharma combined with the potential $75 million from the senior secured term loan with Pharmakon associated with achieving FDA marketing approval of obexelimab for IgG4-RD, we expect our cash, cash equivalents and investments will fund our operating expenses and capital expenditure requirements at least through the second quarter of 2029. We have based this estimate on our current assumptions, which may prove to be wrong, and we may exhaust our available capital resources sooner than we expect. See section titled "Liquidity and Capital Resources."

1 unchanged paragraph

The current geopolitical, trade, regulatory and economic environment, including, but not limited to imposition of new tariffs or increases in tariff rates and other trade measures, may materially affect our business and operating results by increasing the costs of our clinical trial materials and supplies, which in turn increase our overhead costs. Additionally, the ongoing recession risk together with the foregoing, could result in further economic uncertainty and volatility in the capital markets in the near term and, as a result could negatively affect our operations. Furthermore, such economic conditions have produced downward pressure on share prices. Such economic conditions could increase our operating costs, including our labor costs and research and development costs. For example, we import drug products and other components from and into China for use in the manufacturing process and in our clinical studies, and such components and products are subject to tariffs, which we anticipate will result in increased costs. Our operating and labor costs and research and development costs may also be negatively impacted due to supply chain constraints, global geopolitical tensions, worsening macroeconomic conditions and employee availability and wage increases, which may result in additional stress on our working capital.

4 unchanged paragraphs

License and collaboration revenue may be generated from milestones achieved under our BMS Agreement, our Tenacia Agreement and our Zai License Agreement, as well as from the supply of drug substance ("DS") and drug product ("DP") batches to BMS under the BMS Agreement.

Pursuant to the BMS Agreement, we sublicensed the rights to develop and commercialize obexelimab in Japan, South Korea, Taiwan, Singapore, Hong Kong and Australia (the "BMS Territory"). We retain exclusive rights to commercialize the licensed products containing obexelimab outside of the BMS Territory. The revenue recognized to date pursuant to this arrangement relates to the license of obexelimab and the related technology transfer, which was recognized upon delivery of the license. This arrangement includes the participation by BMS in certain joint global studies of obexelimab. in accordance with the terms of the BMS Agreement, in which BMS will reimburse us for its share of the related study costs. Such reimbursements will be classified as a reduction to research and development expense in the period such costs are incurred. We will recognize development and regulatory milestones defined in the BMS Agreement when the achievement of the underlying milestone events is deemed probable, which is expected to be upon achievement. Sales milestones and royalties on future sales will be recognized in the period the related sales occur.

1 unchanged paragraph

Pursuant to the Zai License Agreement, we granted Zai an exclusive sublicense to develop and commercialize ZB001 and related programs in greater China. As partial consideration for the Zai License Agreement, we received an upfront fee of $10.0 million from Zai. In addition, we are eligible to receive up to $96.0 million upon the achievement of certain development and commercial milestones and royalty percentage rates from the low to mid-single digits, net of pass-through obligations due to Viridian.

Pursuant to the Zai License Agreement, we granted Zai an exclusive sublicense to develop and commercialize ZB001 and related programs in greater China. The revenue recognized to date pursuant to this arrangement relates to the upfront fee. We will recognize additional development and commercial milestones as defined in the Zai License Agreement when the achievement of the underlying milestone event is deemed probable, which is expected to be upon achievement. Royalites on future sales will be recognized in the period the related sales occur.

32 unchanged paragraphs

Any changes in the outcome of any of these variables with respect to the development of our current product candidates or any future product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the Food and Drug Administration FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently anticipate would be required for the completion of clinical development, or if we experience significant delays in enrollment in any clinical trials following the FDA's acceptance and clearance of an IND, we could be required to expend significant additional financial resources and time to complete clinical development than we currently expect. We may never obtain regulatory approval for any product candidates that we develop.

10 unchanged paragraphs

Comparison of the Three Months Ended June September 30, 2026 and 2025

1 unchanged paragraph

Three Months Ended June September 30,

10 unchanged paragraphs

Other income (expense), net

Other (expense) income , net

3 unchanged paragraphs

For the three months ended June September 30, 2026, we recognized license and collaboration revenue of $1.0 $10.0 million, related to the achievement of a development and regulatory milestone under the Tenacia BMS Agreement. For the three months ended June September 30, 2025, we did not recognize any license and collaboration revenue.

2 unchanged paragraphs

Three Months Ended June September 30,

6 unchanged paragraphs

Research and development expenses were $62.9 $58.5 million for the three months ended June September 30, 2026, compared to $43.0 $34.4 million for the three months ended June September 30, 2025. The increase of $19.9 $24.1 million was primarily attributable to the following:

● $0.5 a $1.8 million decrease increase in costs related to the development of obexelimab, our lead product candidate, driven by $0.8 a $6.4 million decrease increase in manufacturing costs for clinical trial materials, partially offset by a $0.3 $4.6 million increase decrease in clinical trial, development and regulatory costs;

● a $11.2 $12.9 million increase in costs related to the development of orelabrutinib, driven by clinical trial and regulatory costs; and

● a $6.2 $6.0 million increase in personnel costs, including a $4.3 $3.9 million increase in salary and benefit related expense, due to an increase in headcount, a $1.7 $1.9 million increase in stock-based compensation expense, and a $0.2 million increase in external contractor expenses and other personnel costs.

2 unchanged paragraphs

Three Months Ended June September 30,

4 unchanged paragraphs

General and administrative expenses were $15.7 $27.4 million for the three months ended June September 30, 2026, compared to $12.1 $13.2 million for the three months ended June September 30, 2025. The increase of $3.6 $14.3 million was primarily attributable to the following:

● a $2.3 an $11.6 million increase in personnel costs, including a $1.7 an $8.1 million increase in stock-based compensation expense, primarily due to modifications of equity awards related to the transition and separation of certain employees from the company, $3.0 million increase in salary and benefit related expense, primarily due to an increase in headcount to support pre-commercialization efforts, a $0.8 $0.3 million increase in stock-based compensation expense, offset by a $0.1 million decrease in external contractor expense and other personnel costs, and a $0.1 $0.2 million decrease increase in recruiting expense; and

● a $2.4 $3.6 million increase in legal and professional fees, including consulting, pre-commercialization efforts, audit and tax expenses, primarily attributable to company growth and continued operations as a public company.

1 unchanged paragraph

For the three months ended June 30, 2026, acquired IPR&D expenses were $30.0 million, which included $10.0 million, related to the achievement of a milestone under the Xencor Agreement and related to the completion of the FDA marketing authorization submission for obexelimab and $20.0 million, related to the achievement of a Regulatory Milestone under the InnoCare Agreement. The Company did not recognize any acquired IPR&D expenses for the three months ended June 30, 2025.

For the three months ended September 30, 2026, acquired IPR&D expenses were $27.5 million, which included $25.0 million related to the achievement of the Near-Term Milestone under the InnoCare License Agreement and $2.5 million, related to the achievement of a regulatory milestone under the 2021 Xencor Agreement. Acquired IPR&D expense was $5.0 million for the three months ended September 30, 2025, related to a deposit paid toward the $35.0 million upfront payment for the exclusive rights to develop and manufacture product candidates under the License Agreement with InnoCare.

1 unchanged paragraph

For the three months ended June September 30, 2026, total other income (expense), net was $3.7 $5.5 million of expense, compared to $3.0 $1.1 million of income for the three months ended June September 30, 2025. The change of $6.6 $6.5 million is primarily related to an increase in interest expense of $10.3 $9.5 million related to our royalty obligation, senior secured term loan and convertible senior notes, partially offset by an increase in interest income of $3.0 million related to higher cash, cash equivalents and investments balances.

Comparison of the Six Nine Months Ended June September 30, 2026 and 2025

1 unchanged paragraph

Six Months Ended June 30,

Nine Months Ended September 30,

14 unchanged paragraphs

For the six nine months ended June September 30, 2026, we recognized license and collaboration revenue of $11.0 million, including $10.0 million, related to the achievement of a development and regulatory milestone under the BMS Agreement and $1.0 million, related to the achievement of a development milestone under the Tenacia Agreement. For the six nine months ended June September 30, 2025, we recognized revenue of $10.0 million related to the one-time non-refundable upfront cash payment under the Zai License Agreement that was recognized upon delivery of the license and related technology transfer.

2 unchanged paragraphs

Six Months Ended June 30,

Nine Months Ended September 30,

6 unchanged paragraphs

Research and development expenses were $123.4 $181.8 million for the six nine months ended June September 30, 2026, compared to $78.0 $112.3 million for the six nine months ended June September 30, 2025. The increase of $45.4 $69.5 million was primarily attributable to the following:

● a $7.9 $9.7 million increase in costs related to the development of obexelimab, our lead product candidate, driven by a $4.2 $10.1 million increase in manufacturing costs for clinical trial development and regulatory costs and materials, offset by a $3.7 $0.4 million increase decrease in manufacturing costs for clinical trial, materials; development and regulatory costs;

● a $21.3 $34.2 million increase in costs related to the development of orelabrutinib, driven by clinical trial and regulatory costs; and

● a $12.0 $17.9 million increase in personnel costs, including a $8.2 $12.1 million increase in salary and benefit related expense, due to an increase in headcount, a $3.3 $5.1 million increase in stock-based compensation expense, and a $0.5 $0.7 million increase in external contractor expenses and other personnel costs.

2 unchanged paragraphs

Six Months Ended June 30,

Nine Months Ended September 30,

4 unchanged paragraphs

General and administrative expenses were $32.7 $60.1 million for the six nine months ended June September 30, 2026, compared to $24.6 $37.7 million for the six nine months ended June September 30, 2025. The increase of $8.1 $22.4 million was primarily attributable to the following:

● a $6.2 $17.8 million increase in personnel costs, including a $3.4 $11.2 million increase in stock-based compensation expense, primarily due to modifications of equity awards related to the transition and separation of certain employees from the company, a $6.4 million increase in salary and benefit related expense, primarily due to an increase in headcount to support pre-commercialization efforts, a $3.1 million increase in stock-based compensation expense, and a $0.1 $0.3 million increase in external contractor expenses and other personnel costs, offset by a $0.4 $0.2 million decrease in recruiting expense; and

● a $3.9 $7.5 million increase in legal and professional fees, including consulting, pre-commercialization efforts, audit and tax expenses, primarily attributable to company growth and continued operations as a public company.

1 unchanged paragraph

For the six months ended June 30, 2026, acquired IPR&D expenses were $30.0 million, which included $10.0 million, related to the achievement of a milestone under the Xencor Agreement and related to the completion of the FDA marketing authorization submission for obexelimab and $20.0 million, related to the achievement of a Regulatory Milestone under the InnoCare Agreement. The Company did not recognize any acquired IPR&D expenses for the six months ended June 30, 2025.

For the nine months ended September 30, 2026, acquired IPR&D expenses were $57.5 million, which included $12.5 million, related to the achievement of two regulatory milestones under the 2021 Xencor Agreement and $20.0 million related to the achievement of the Regulatory Milestone for ZB021 and $25.0 million related to the Near-Term Milestone under the InnoCare License Agreement. For the nine months ended September 30, 2025, acquired IPR&D expenses were $5.0 million, related to a deposit paid toward the $35.0 million upfront payment for the exclusive rights to develop and manufacture product candidates under the InnoCare License Agreement.

1 unchanged paragraph

For the six nine months ended June September 30, 2026, total other income (expense), net was $7.3 $12.8 million of expense, compared to $6.5 $7.6 million of income for the six nine months ended June September 30, 2025. The change of $13.8 $20.4 million is primarily related to an increase in interest expense of $16.9 $26.5 million related to our royalty obligation, senior secured term loan and convertible senior notes, partially offset by an increase in interest income of $6.5 million related to higher cash, cash equivalents and investments balances.

1 unchanged paragraph

We have incurred significant operating losses since inception. We have not yet commercialized any product candidates, and we do not expect to generate revenue from sales of any product candidates or from other sources until 2027 at the earliest, if at all. As of June September 30, 2026, we had $673.9 $647.1 million in cash, cash equivalents, and investments and we had an accumulated deficit of $957.6 million. $1.1 billion. Through June September 30, 2026, we have funded our operations primarily with gross proceeds of $358.0 million through the sale and issuance of preferred stock and convertible notes, net proceeds from the sale of common stock of $234.3 million after deducting underwriting discounts, commissions and other offering costs from our IPO, $111.8 million, after deducting placement fees and other offering costs from our PIPE offering, $100.1 $148.9 million, after deducting commissions and other offering costs from our 2025 ATM Program, $330.4 million, after deducting commissions and issuance costs from our current convertible notes and equity offering inclusive of the underwriters' exercise of the overallotment option in full, as well as $65.0 $76.0 million from our BMS Agreement, Tenacia Agreement and Zai License Agreement, collectively, $71.3 million after deducting issuance cost, from our Royalty Purchase Agreement, after deducting issuance costs and $72.0 million from the first tranche under our debt arrangement with Pharmakon after deducting discounts and issuance costs.

1 unchanged paragraph

We expect that our available cash, cash equivalents and investments, as of June September 30, 2026, will be sufficient to fund our capital and operating expenditures for at least the next twelve months from the date of the issuance of this Quarterly Report on Form 10-Q. We estimate that our existing cash, cash equivalents and investments will be sufficient to fund our projected operations and capital expenditure requirements into 2029. Assuming receipt of the potential $75 million milestone payment from Royalty Pharma combined with the potential $75 million from the senior secured term loan with Pharmakon associated with achieving FDA marketing approval of obexelimab for IgG4-RD, we expect that our cash, cash equivalents and investments will fund our operating expenses and capital expenditure requirements at least through the second quarter of 2029.

21 unchanged paragraphs

In March 2026, the Company entered into the Loan Agreement with the Collateral Agent, BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP, which are funds managed by Pharmakon and the guarantors party thereto. The Loan Agreement provides for up to a $250.0 million Term Loan that matures on March 27, 2031 and consists of five tranches including (1) (i) a Tranche A Loan of $75.0 million drawn March 27, 2026, (2) (ii) a Tranche B Loan of $50.0 million which will be required to be drawn (and up to an additional $25.0 million that the Company may elect to draw) by no later than November 1, 2027, subject to the occurrence of the Tranche B/C Approval Condition, (3) (iii) a Tranche C Loan of $25.0 million (less any amounts elected to be (and actually) drawn under the Tranche B Loan in excess of $50.0 million) which will be available at the Company's election, subject to the occurrence of the Tranche B/C Approval Condition, no later than April 28, 2028, (4) (iv) a Tranche D Loan of $50.0 million which will be available at the Company's election no later than October 30, 2028, subject to the occurrence of the Tranche B/C Approval Condition and achievement of certain milestones in respect of certain net sales levels and (5) (v) a Tranche E Loan of $50.0 million which will be available at the Company's election no later than April 30, 2029, subject to the occurrence of the Tranche B/C Approval Condition and achievement of certain milestones in respect of net sales levels. We received net proceeds of $73.0 million from the draw of the Tranche A Loan after deducting the 2.00% funding fee. As of June September 30, 2026, we are in compliance with all covenants under the Loan Agreement.

1 unchanged paragraph

The Company is required to pay a funding fee equal to (i) 2.00% of $50,000,000 of the funding amount of the Tranche B Loan on the funding date for such loan, (ii) 1.00% of any amounts in excess of $50,000,000 of the funding amount for the Tranche B Loan on the funding date for such loan, and (iii) 1.00% of each of the funding amount of the Tranche C Loan, Tranche D Loan, and Tranche E Loan on each respective funding date.

Tranche B Loan on the funding date for such loan, and (iii) 1.00% of each of the funding amount of the Tranche C Loan, Tranche D Loan, and Tranche E Loan on each respective funding date.

1 unchanged paragraph

The Loan Agreement contains customary affirmative and restrictive covenants, representations and warranties and events of default. We and our subsidiaries are bound by certain affirmative covenants setting forth actions that are required during the term of the Loan Agreement, including, without limitation, certain information delivery requirements (including that consolidated financial statements delivered for and after the fiscal year ending December 31, 2026 are not subject to any qualification as to "going concern" or "scope of audit"), obligations to maintain certain insurance, and certain notice requirements. The Loan Agreement contains customary financial covenants, including (i) at all times prior to the satisfaction of the Tranche B/C Approval Condition, a minimum liquidity requirement and (ii) subject to the outstanding aggregate principal amount of Term Loans advanced under the Loan Agreement being equal to or greater than $200.0 million, a minimum trailing twelve months consolidated net revenue covenant. Additionally, we and our subsidiaries are bound by certain restrictive covenants setting forth actions that are not permitted to be taken during the term of the Loan Agreement, including, without limitation, (i) selling or disposing of assets, (ii) amending, modifying or waiving our rights under material agreements, (iii) consummating change in control transactions unless all amounts becoming due under the Loan Agreement are paid in full immediately upon (and concurrent with) the consummation of any such change in control transaction, (iv) incurring additional indebtedness, (v) incurring non-permitted liens or encumbrances on our or our subsidiaries' assets, (vi) paying dividends or making any distribution or payment on or redeeming, retiring or purchasing any equity interests, (vii) making payments on subordinated indebtedness and (viii) making investments other than permitted acquisitions and permitted investments, in each case, subject to specified exceptions including, in the case of restrictions on incurrence of additional indebtedness, the ability to incur certain convertible indebtedness and enter into certain permitted royalty financing agreements. The Loan Agreement also contains certain events of default, including the following: (i) failure to pay principal, interest and other amounts when due, (ii) the breach of the covenants under the Loan Agreement, (iii) the occurrence of a material adverse change or a withdrawal event in respect of obexelimab or orelabrutinib, (iv) certain attachments of the credit parties assets and restraints on their business, (v) certain insolvency, liquidation, bankruptcy or similar events, (vi) certain cross-default of third-party indebtedness and royalty revenue contracts, (vii) the failure to pay certain judgements, judgments, (viii) material misrepresentations, (ix) the loan documents ceasing to create a valid security interest in a material portion of the collateral, (x) the occurrence of certain ERISA events and (xi) the occurrence of a default under any intercreditor agreement, in each case subject to the grace periods, cure period and thresholds as specified in the Loan Agreement. Upon the occurrence of an event of default, the Lenders may, among other things, accelerate our obligations under the Loan Agreement (including all obligations for principal, interest and any applicable make-whole and prepayment premiums); provided that upon an event of default relating to certain insolvency, liquidation, bankruptcy or similar events, all outstanding obligations will be automatically accelerated.

5 unchanged paragraphs

In October 2025, we entered into a sales agreement with Jefferies under which we could, from time to time, issue and sell shares of our common stock having aggregate sales proceeds of up to $200.0 million, under the 2025 ATM Program. Pursuant to the sales agreement, shares will be sold under the shelf registration statement on Form S-3 ASR (Registration No. 333-290777), which became automatically effective upon filing on October 8, 2025. Our common stock will be sold at prevailing market prices at the time of the sale; and as a result, prices may vary. For the three and nine months ended June September 30, 2026, we did not sell any shares of common stock under the 2025 ATM Program. Since June 30, 2026, we have Company sold an additional 1,818,181 and 4,645,904 shares of common stock, respectively, under the 2025 ATM Program. with proceeds of $48.7 million, net of commissions. As of the issuance date of this Quarterly Report on Form 10-Q, September 30, 2026, $46.8 million remained available under the 2025 ATM Program.

2 unchanged paragraphs

The Royalty Purchase Agreement provides for an additional $225.0 million of payments to be paid to the Company by Royalty Pharma upon the occurrence of certain triggering events which includes (1) (i) $75.0 million payable upon the achievement of certain milestones with respect to Zenas' INDIGO Phase 3 Trial, noting the Company is not currently eligible for this milestone, (2) (ii) $75.0 million payable following receipt of marketing approval for obexelimab from the FDA for the treatment of IgG4-Related Disease on or before a specified date and (3) (iii) $75.0 million payable following receipt of marketing approval for obexelimab from the FDA for the treatment of systemic lupus erythematosus on or before a specified date.

1 unchanged paragraph

Six Months Ended June 30,

Nine Months Ended September 30,

3 unchanged paragraphs

Effect of exchange rate changes on cash and cash equivalents (1,074) (263)

2 unchanged paragraphs

Net cash used in operating activities for the six nine months ended June September 30, 2026 was $132.4 $190.4 million, and was primarily due to our net loss of $192.4 $301.4 million, which included non-cash charges principally related to stock-based compensation and interest charges on our agreement with Royalty Pharma. Net changes in our working capital during the three nine months resulted in a $2.4 $4.7 million cash outflow.

Net cash used in operating activities for the six nine months ended June September 30, 2025 was $78.8 $119.9 million, and was primarily due to our net loss of $85.8 $137.3 million, which included non-cash charges principally related to stock-based compensation. Net changes in our working capital during the six nine months resulted in a $3.7 $7.4 million cash outflow.

1 unchanged paragraph

Net cash used in investing activities for the six months ended June 30, 2025 was $198.6 million and consisted primarily of purchases of investments of $225.7 million and proceeds from the sale and maturities of investments of $27.1 million.

Net cash used in investing activities for the six nine months ended June September 30, 2026 was $256.1 $275.3 million and consisted primarily of purchases of investments of $408.3 $545.8 million and $30.0 $57.5 million of milestone payments, which included $10.0 $12.5 million related to the achievement of a milestone two regulatory milestones under the 2021 Xencor Agreement and $20.0 $45.0 million related to the achievement of a the Regulatory Milestone for ZB021 and the Near-Term Milestone under the InnoCare License Agreement, partially offset by proceeds from sales and maturities of investments of $182.2 $328.0 million.

Net cash used in investing activities for the nine months ended September 30, 2025 was $158.5 million and consisted primarily of purchases of investments of $284.9 million and $5.0 million payment as a deposit toward the $35.0 million upfront payment under the License Agreement with InnoCare, partially offset by proceeds from sales and maturities of investments of $131.4 million.

1 unchanged paragraph

Net cash provided by financing activities for the six nine months ended June September 30, 2026 was $475.5 $532.7 million, resulting primarily from $223.1 million in net proceeds received in connection with the convertible senior notes offering inclusive of the underwriters' exercise of the overallotment option in full, $108.1 million and $71.5 $120.3 million received in net proceeds from the sale and issuance of common stock under a follow-on equity offering inclusive of the underwriters' exercise of the overallotment option in full and the 2025 ATM Program, net of commissions, respectively, and $73.5 million in net proceeds received in connection with the senior secured term loan, net of discounts, $9.1 million in net proceeds received from the exercise of stock options, offset by $2.5 million of payments related to deferred offering costs and debt issuance costs.

Net cash provided by financing activities for the six nine months ended June September 30, 2025 was $1.8 $74.4 million, resulting from $1.8 $75.0 million in gross proceeds received in connection with the royalty obligation and $2.5 million in net proceeds received from the exercise of stock options, offset by $3.3 million of payments related to deferred offering costs.

1 unchanged paragraph

During the three nine months ended June September 30, 2026, except as disclosed in Note 6 – Long-Term Obligations and Note 13 – Commitments and Contingencies , of these the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, there were no material changes to our contractual obligations and commitments from those described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Contractual Obligations and Commitments" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

2 unchanged paragraphs

Accounting Policies and Significant Judgments and Estimates" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, except for the following:

1 unchanged paragraph

3 unchanged paragraphs

and 9 more changes in the filing

Market risk 3 changes

We are exposed to interest rate risk in the ordinary course of our business. As of June September 30, 2026, we had cash, cash equivalents and investments of $673.9 $647.1 million.

We also have exposure to market risk on our Loan Agreement with Pharmakon. Our Loan Agreement accrues interest from its date of issuance at a variable interest rate equal to 3-month SOFR subject to a 3.25% floor, plus 5.75%. As of June September 30, 2026, $75.0 million was outstanding under the Loan Agreement. The effect of a 100 basis points adverse change in market interest rates on our loan payable, in excess of applicable minimum floors, on our interest expense would be approximately $0.8 million.

1 unchanged paragraph

Our reporting currency is the U.S. dollar ("USD"). Our functional currency for Zenas BioPharma (HK) Limited, our wholly owned subsidiary in Hong Kong, is the USD, and our functional currency for Shanghai Zenas Biotechnology Co. Limited, our wholly-owned subsidiary in China, is the Chinese Yuan. Our functional currency for Zenas BioPharma GmbH, our wholly-owned subsidiary in Switzerland, is the Swiss Franc. Our functional currency of our wholly-owned subsidiaries, Zenas BioPharma B.V., in the Netherlands and Zenas BioPharma GmbH (Germany), is the Euro. Our functional currency of our wholly-owned U.S. subsidiaries, Zenas BioPharma (USA) LLC and Zenas BioPharma Securities Corp., is the USD. Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the functional currency are included in other income (expense), net in the unaudited condensed consolidated statements of operations and comprehensive loss as incurred. Realized foreign currency transaction gains (losses) were immaterial for the three and six nine months ended June September 30, 2026.

3 unchanged paragraphs

Controls and procedures 3 changes

1 unchanged paragraph

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of June September 30, 2026. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June September 30, 2026, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

1 unchanged paragraph

There were no changes in our internal control over financial reporting for the quarter ended June September 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Risk factors 1 change

25 unchanged paragraphs

Unless we elect to deliver solely shares of our common stock to settle conversions of the Convertible Notes (other than paying cash in lieu of delivering any fractional share), we must settle at least a portion of our conversion obligation in cash, and therefore, conversions of the Convertible Notes could materially and adversely affect our financial position and liquidity. Before January 1, 2032, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after January 1, 2032, noteholders may convert their notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. See "Description of Notes - Conversion Rights." However, many of the conditions that permit the conversion of notes before January 1, 2032 are beyond our control. We could be required to expend a significant amount of cash to settle conversions, which could significantly harm our financial position and liquidity.

Other information 6 changes

Transition of Chief Financial Officer and Chief Business Officer to Strategic Advisor to the Chairman of the Board

Jennifer Fox will be transitioning from her role as the Company's Chief Financial Officer and Chief Business Officer effective as of September 30, 2026 after which she will be a Strategic Advisor to the Chairman of the Board, first as an employee and then, as of July 1, 2027, as a consultant pursuant to a consulting agreement. Ms. Fox's transition is not due to a dispute or disagreement with the Company or the Company's auditors.

In connection with Ms. Fox's transition from the Company, on August 12, 2026, the Company and Ms. Fox entered into a letter agreement (the "Letter Agreement"). Pursuant to the Letter Agreement, subject to certain conditions, Ms. Fox will continue in her current role as Chief Financial Officer and Chief Business Officer through close of business on September 30, 2026. On October 1, 2026 and through June 30, 2027, subject to certain conditions, Ms. Fox will transition to the role of Strategic Advisor to the Chairman of the Board and will continue to receive her current salary and benefits. Pursuant to a consulting agreement, dated August 12, 2026, between the Company and Ms. Fox (the "Consulting Agreement"), from July 1, 2027 to December 31, 2027, Ms. Fox will provide consulting services to the Company as a strategic advisor to the Chairman of the Board and will receive consideration of continued vesting and exercisability of previously-granted stock options in accordance with their terms; provided, however, the consulting period will automatically extend for one year to December 31, 2028 unless either party notifies the other within specified time periods that it wishes not to extend the term. The foregoing description of the Letter Agreement and the Consulting Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the agreements which will be filed as exhibits to the Company's Quarterly Report on Form 10-Q for the quarter ending September 30, 2026, to the extent required by applicable Securities Exchange Commission (the "SEC") rules.

Appointment of Principal Financial Officer and Principal Accounting Officer

Effective the close of business on September 30, 2026, the Board has appointed Joseph Farmer, the Company's President and Chief Operating Officer, to replace Ms. Fox as principal financial officer and principal accounting officer while the Company conducts a search for a Chief Financial Officer. Mr. Farmer's biographical information is set forth in the Company's Definitive Proxy Statement filed with the SEC on March 16, 2026, and such information is incorporated herein by reference. There are no arrangements or understandings between Mr. Farmer and any other persons pursuant to which Mr. Farmer was appointed as principal financial officer and principal accounting officer. In addition, there are no family relationships between Mr. Farmer and any director or executive officer of the Company, and there are no transactions involving Mr. Farmer requiring disclosure under Item 404(a) of Regulation S-K.

1 unchanged paragraph

During our fiscal quarter ended June September 30, 2026, no director or "officer" (as defined in Rule 16a-1(f) under the Exchange Act) of the Company entered into, modified or terminated contracts, instructions or written plans for the purchase or sale of our common stock that are intended to satisfy the affirmative defense conditions specified in Rule 10b5-1(c) under the Exchange Act.

Exhibits 11 changes

2 unchanged paragraphs

First Amendment to the Zenas BioPharma, Inc. 2024 Employee Stock Purchase Plan, dated May 18, 2026

First Amendment to Zenas BioPharma, Inc. 2026 Inducement Plan, dated August 5, 2026 (incorporated by reference to Exhibit 4.4 to the Form S-8 filed on September 11, 2026, File No. 333-298894)

Letter Agreement, dated August 12, 2026, by and between Zenas BioPharma (USA) LLC and Jennifer Fox

Consulting Agreement, dated August 12, 2026, by and between Zenas BioPharma (USA) LLC and Jennifer Fox

1 unchanged paragraph

Certification of Chief Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

1 unchanged paragraph

Certification of Chief Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

10 unchanged paragraphs

Date: August 13, 2026

Date: November 5, 2026

5 unchanged paragraphs

Chief Business Officer and Chief Financial Officer

/s/ Joseph L. Farmer

President and Chief Operating Officer

1 unchanged paragraph