UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~March 3031, ~~2024~~2025

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 001-~~37437~~37347

XBIOTECH INC.

(Exact name of registrant as specified in charter)

British Columbia, Canada		__
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

5217 Winnebago Ln, Austin, TX 78744

(Address of principal executive offices)(Zip Code)

Telephone Number (512) 386-2900

(Registrant’s telephone number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	XBIT	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes ☒ No ☐~~

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company•	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November~~May 1314, ~~2024~~2025, there were 30,~~483~~487,~~481~~ 731 shares of the Registrant's common stock issued and outstanding.

XBIOTECH INC.

THREE MONTHS ~~AND NINE MONTHS~~ ENDED ~~SEPTEMBER~~MARCH 3031, ~~2024~~2025

INDEX

PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	6
	Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023	6
	Condensed Consolidated Balance Sheets as of March 31, 2025 (unaudited) and December 31, 2024	6
	Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2024 (unaudited) and 2023 (unaudited)	7
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 (unaudited) and 2024 (unaudited)	7
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months and Nine Months Ended September 30, 2024 (unaudited) and 2023 (unaudited)	8
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2025 (unaudited) and 2024 (unaudited)	8
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months and Nine Months Ended September 30, 2024 (unaudited) and 2023 (unaudited)	9
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 (unaudited) and 2024 (unaudited)	9
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 (unaudited) and 2023 (unaudited)	11
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
	Notes to Condensed Consolidated Financial Statements (unaudited)	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	18
Item 4.	Controls and Procedures	25
PART II—OTHER INFORMATION
Item 1.	Risk Factors	2719
Item 2.	Unregistered ~~Sale~~Sales of Equity Securities and Use of Proceeds	2719
Item 3.	Defaults Upon Senior Securities	2719
Item 4.	Mine Safety Disclosures	2719
Item 5.	Other Information	2719
Item 6.	Exhibits	27

SIGNATURES

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “would,” “could,” “expects,” “plans,” “contemplate,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “intend” or “continue” or the negative of such terms or other comparable terminology, although not all forward-looking statements contain these identifying words. Forward-looking statements are subject to inherent risks and uncertainties in predicting future results and conditions that could cause the actual results to differ materially from those projected in these forward-looking statements. These forward-looking statements include, but are not limited to statements about:

●

our ability to obtain regulatory approval to market and sell our product candidates in the United States, Europe and elsewhere;

●

the initiation, timing, cost, progress and success of our research and development programs, preclinical studies and clinical trials for our product candidates;

●

our ability to advance product candidates into, and successfully complete, clinical trials;

●

our ability to successfully commercialize the sale of our product candidates in the United States, Europe and elsewhere;

●

our ability to recruit sufficient numbers of patients for our future clinical trials for our pharmaceutical products;

●

our ability to achieve profitability;

●

the implementation of our business model and strategic plans;

●

our ability to develop and commercialize product candidates for orphan and niche indications independently;

●

our commercialization, marketing and manufacturing capabilities and strategy;

●

our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;

●

our expectations regarding federal, state and foreign regulatory requirements;

●

the therapeutic benefits, effectiveness and safety of our product candidates;

●

the accuracy of our estimates of the size and characteristics of the markets that may be addressed by our products and product candidates;

4● the rate and degree of market acceptance and clinical utility of our future products, if any;

● ~~the rate and degree of market acceptance and clinical utility of~~ our ~~future products, if any; ● our~~ expectations regarding market risk, including interest rate changes, foreign currency fluctuations and regional or global economic impacts caused by public health threats, such as the outbreak of coronavirus or other infectious diseases;

●

our ability to engage and retain the employees required to grow our business;

●

our future financial performance and projected expenditures;

●

developments relating to our competitors and our industry, including the success of competing therapies that are or become available; and

●

estimates of our expenses, future revenue, capital requirements and our needs for additional financing.

All forward looking statements in this Quarterly Report on Form 10-Q involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those under the heading “Risk Factors” included in our annual report for the year ended December 31, 2023 filed with the SEC on March 15, 2024, and under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. 4

All forward looking statements in this Quarterly Report on Form 10-Q involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those under the heading “Risk Factors” included in our annual report for the year ended December 31, 2024 filed with the SEC on March 18, 2025, and under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain medical conditions, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

XBiotech Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

	September 30, 2024 (Unaudited)			December 31, 2023
	March 31, 2025 (Unaudited)			December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	~~183~~155,~~118~~897		$	~~200~~172,~~023~~677
Accrued interest receivable		~~730~~480			~~860~~700
Income tax receivable		~~141~~158			75158
Prepaid expenses and other current assets		1,~~045~~150			~~760~~1,032
Total current assets		~~185~~157,~~034~~685			~~201~~174,~~718~~567
Property and equipment, net		24,~~817~~179			24,~~897~~526
Total assets	$	~~209~~181,~~851~~864		$	~~226~~199,~~615~~093
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	1,~~506~~100		$	2,~~516~~223
Accrued expenses		4,~~486~~303			32,~~501~~632
Income tax payable		-7			83-
Convertible loan, related party		~~10,000~~-			-10,000
Total current liabilities		15,992			6,100
Convertible loan, third party		-			250
Total current liabilities		5,410			15,105
Long-term liabilities:
Income tax payable		1,~~744~~741			1,~~669~~720
Total liabilities		177,~~736~~151			716,~~769~~825
Shareholders’ equity:
Preferred stock, no par value, unlimited shares authorized, no shares outstanding		-			-
Common stock, no par value, unlimited shares authorized, 30,479,406 and 30,436,964 shares issued and outstanding at September 30, 2024 and December 31, 2023		272,444			271,152
Common stock, no par value, unlimited shares authorized, 30,487,731 shares issued and outstanding at March 31, 2025 and December 31, 2024		276,434			273,105
Accumulated deficit		(80101,~~329~~721	)		(5290,~~306~~837	)
Total shareholders’ equity		~~192~~174,~~115~~713			~~218~~182,~~846~~268
Total liabilities and shareholders’ equity	$	~~209~~181,~~851~~864		$	~~226~~199,~~615~~093

See accompanying notes to unaudited condensed consolidated ~~financial~~financials statements.

XBiotech Inc.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2024			2023			2024			2023
	2025			2024
	(unaudited)			(unaudited)			~~(unaudited)~~			~~(unaudited)~~
Operating expenses:
Research and development	$	711,~~127~~619		$	79,~~547~~825			~~29,936~~			~~25,044~~
General and administrative		~~777~~1,931			~~973~~1,028			~~3,787~~			~~3,879~~
Total operating expenses		713,~~904~~550			810,~~520~~853			~~33,723~~			~~28,923~~
Loss from operations		(713,~~904~~550	)		(810,~~520~~853	)		~~(33,723~~	)		~~(28,923~~	)
Other income:
Other income :
Interest income		21,~~369~~504			2,~~529~~658			~~7,716~~			~~7,818~~
Interest expense		(~~203~~88	)		-(200	)		~~(603~~	)		-
Other income		25995			-			25			~~880~~
Foreign exchange gain (loss)		~~707~~284			(1,~~065~~582	)		~~(1,429~~	)		~~646~~
Total other income		2,~~898~~695			~~1,464~~876			~~5,709~~			~~9,344~~
Loss before income taxes		(510,~~006~~855	)		(79,~~056~~977	)		~~(28,014~~	)		~~(19,579~~	)
Income tax expense		(929	)		(~~308~~25	)		(9	)		~~(343~~	)
Net loss	$	(510,~~015~~884	)	$	(710,~~364~~002	)	$	~~(28,023~~	)	$	~~(19,922~~	)
Net loss per share—basic and diluted	$	(0.1636	)	$	(0.2433	)	$	~~(0.92~~	)	$	~~(0.65~~	)
Shares used to compute basic and diluted net loss per share		30,~~472~~487,~~557~~731			30,~~436~~443,~~638~~973			~~30,459,178~~			~~30,437,044~~

See accompanying notes to unaudited condensed consolidated ~~financial~~financials statements.

XBiotech Inc.

Condensed Consolidated Statements of ~~Comprehensive~~Shareholders' ~~Loss~~Equity (unaudited)

(in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
		Number of Shares			Common Stock Amount			Accumulated Deficit		Total
	2024			2023			2024			2023
Balance at December 31, 2024		30,487		$	273,105		$	(90,837	)	$	182,268
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net loss		-			-			(10,884	)		(10,884	)
Net loss	$	(5,015	)	$	(7,364	)	$	(28,023	)	$	(19,922	)
Share-based compensation expense		-			3,329			-			3,329
Reclassification adjustment from dissolution of Germany subsidiary		-			-			-			(386	)
Balance at March 31, 2025		30,487		$	276,434		$	(101,721	)	$	174,713
Comprehensive loss	$	(5,015	)	$	(7,364	)	$	(28,023	)	$	(20,308	)

See accompanying notes to unaudited condensed consolidated financial statements.

	Number of Shares		Common Stock Amount		Accumulated Deficit		Total
Balance at December 31, 2023	30,437	$	271,152	$	(52,306	)	$	218,846
Net loss	-		-		(10,002	)		(10,002	)
Issuance of common stock under stock option plan	14		55		-			55
Share-based compensation expense	-		381		-			381
Balance at March 31, 2024	30,451	$	271,588	$	(62,308	)	$	209,280

XBiotech Inc.

Condensed Consolidated Statements of Shareholders' Equity (unaudited)

(in thousands)

	Number of Shares		Common Stock Amount		Accumulated Deficit			Total
Balance at June 30, 2024		30,463	$	272,015	$	(75,314	)	$	196,701
Net loss		-		-		(5,015	)		(5,015	)
Issuance of common stock under stock option plan		16		64		-			64
Share-based compensation expense		-		365		-			365
Balance at September 30, 2024		30,479	$	272,444	$	(80,329	)	$	192,115

	Number of Shares		Common Stock and Additional Paid in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Total
Balance at June 30, 2023		30,436	$	268,930	$	440	$	(40,307	)	$	229,063
Net loss		-		-		-		(7,364	)		(7,364	)
Issuance of common stock under stock option plan		1		5		-		-			5
Share-based compensation expense		-		955		-		-			955
Balance at September 30, 2023		30,437	$	269,890	$	440	$	(47,671	)	$	222,659

	Number of Shares		Common Stock Amount		Accumulated Deficit			Total
Balance at December 31, 2023		30,437	$	271,152	$	(52,306	)	$	218,846
Net loss		-		-		(28,023	)		(28,023	)
Issuance of common stock under stock option plan		42		167		-			167
Share-based compensation expense		-		1,125		-			1,125
Balance at September 30, 2024		30,479	$	272,444	$	(80,329	)	$	192,115

	Number of Shares			Common Stock and Additional Paid in Capital			Accumulated Other Comprehensive Income			Accumulated Deficit			Total
Balance at December 31, 2022		30,440		$	267,325		$	826		$	(27,749	)	$	240,402
Net loss		-			-			-			(19,922	)		(19,922	)
Tender offer		(4	)		(14	)		-			-			(14	)
Issuance of common stock under stock option plan		1			5			-			-			5
Reclassification adjustment from dissolution of German subsidiary		-			-			(386	)		-			(386	)
Share-based compensation expense		-			2,574			-			-			2,574
Balance at September 30, 2023		30,437		$	269,890		$	440		$	(47,671	)	$	222,659

See accompanying notes to unaudited condensed consolidated financial statements.

XBiotech Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2024			2023
	2025			2024
	(unaudited)			(unaudited)
Operating activities
Net loss	$	(2810,~~023~~884	)	$	(1910,~~922~~002	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		~~1,306~~442			~~1,310~~432
Foreign exchange loss (gain)		1,429			(646	)
Foreign exchange (gain) loss		(284	)		1,582
Share-based compensation expense		13,~~125~~329			~~2,574~~381
Changes in operating assets and liabilities:
Income tax receivable		(66	)		97
Accrued interest receivable		220			(10	)
Accrued interest receivable		130			335
Prepaid expenses and other current assets		(118	)		(312	)
Prepaid expenses and other current assets		(285	)		(278	)
Accounts payable		(1,125	)		8
Accounts payable		(1,017	)		(940	)
Accrued expenses		1,671			694
Accrued expenses		986			2,063
Income tax payable		29			25
Income tax payable		(8	)		174
Net cash used in operating activities		(6,720	)		(7,202	)
Deferred tax liability		-			(59	)
Net cash used in operating activities		(24,423	)		(15,292	)
Investing activities
Purchase of property and equipment		(~~1,220~~94	)		(~~247~~255	)
Proceeds from maturity of interest bearing time deposits		-			61,859
Net cash (used in) investing activities		(94	)		(255	)
Net cash (used in) provided by investing activities		(1,220	)		61,612
Financing activities
Proceeds from convertible loan, related party		10,000			-
(Payment on) proceeds from convertible loan, related party		(10,000	)		10,000
Issuance of common stock under stock option plan		167			5
Payment on convertible loan, third party		(250	)		-
Cash paid in tender offer		-			(14	)
Proceeds from issuance of common stock under stock option plan		-			55
Net cash provided by (used in) financing activities		10,167			(9	)
Net cash (used in) provided by financing activities		(10,250	)		10,055
Effect of foreign exchange rate on cash and cash equivalents		~~(1,429~~284	)		(1,~~426~~582	)
Net change in cash and cash equivalents		(16,~~905~~780	)		441,~~885~~016
Cash and cash equivalents, beginning of period		~~200~~172,~~023~~677			~~157~~200,~~306~~023
Cash and cash equivalents, end of period	$	~~183~~155,~~118~~897		$	~~202~~201,~~191~~039
Supplemental Information:
Supplemental information:
Accrued purchases of property and equipment	$	6-		$	-82
Cash paid for interest		486			400

See accompanying notes to unaudited condensed consolidated financial statements.

119

XBiotech Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.	Organization

XBiotech Inc. (“XBiotech” or the “Company”) was incorporated in Canada on March 22, 2005. The Company’s headquarters are located in Austin, Texas. XBiotech USA, Inc., a wholly-owned subsidiary of the Company, was incorporated in Delaware, United States in November 2007. ~~XBiotech Germany GmbH, a wholly-owned subsidiary of the Company, was incorporated in Germany in January 2014. XBiotech Germany GmbH was dissolved in February 2023.~~

Since its inception, XBiotech has focused on advancing technology to rapidly identify and clone antibodies from individuals that have resistance to disease. At the heart of the Company is a proprietary technical knowhow to translate natural human immunity into therapeutic product candidates. The Company has in its pipeline both anti-infective and anti-inflammatory candidate therapeutics derived from this technology.

An area of medical focus for XBiotech are therapies that block a potent substance naturally produced by body, known as interleukin-1 alpha (IL-1a), that mediates tissue breakdown, angiogenesis, the formation of blood clots and inflammation. IL-1a is a protein that is on or in cells of the body and is involved in the body’s response to injury or trauma. In almost all chronic and in some acute injury scenarios (such as stroke or heart attack), IL-1a may mediate harmful disease-related activity.

At the end of 2019, XBiotech sold a True Human™ antibody that blocked IL-1a activity for $750 million in cash and up to $600 million in potential milestone payments set to expire after twelve years in 2031 (the “Janssen Transaction”). The potential milestone payments are contingent upon achieving the required commercialization authorization for a product intended for use in any non-dermatological indication by Janssen within twelve years. As of March 31, 2025, none of the milestone payments have been earned. As part of the Janssen Transaction, XBiotech maintained the right to develop new antibodies that block IL-1a and develop these therapeutics in all areas of medicine except dermatology. Moreover, Janssen agreed that they would assert all patents they acquired relating to IL-1a for the benefit of XBiotech to protect our future IL-1a-related therapies in all non-dermatological indications. XBiotech is using its True Human™ antibody discovery technology to identify and develop new IL-1a targeting product candidates and has already brought one such candidate into clinical studies in oncology and rheumatology; and another unique anti-IL-1a antibody into a Phase I study in neurology.

The Company ~~continues~~is ~~to be~~ subject to a number of risks common to companies in ~~similar~~clinical ~~stages~~stage of development. Principal among these risks are the uncertainties of technological innovations, dependence on key individuals, development of the same or similar technological innovations by the Company’s competitors and protection of proprietary technology. The Company’s ability to fund its planned clinical operations, including completion of its planned trials, is expected to depend on the amount and timing of cash receipts from future collaboration or product sales and/or financing transactions. The Company believes that its cash and cash equivalents of $~~183~~155.19 million at ~~September~~March 3031, ~~2024~~2025, will enable the Company to achieve several major inflection points, including ~~potential~~completion ~~new~~of clinical studies with lead product candidates. The Company expects to have sufficient cash through at least 12 months from the date of this report.

2.	Significant Accounting Policies

Basis of Presentation

The condensed consolidated balance sheet as of ~~September~~March 3031, ~~2024~~2025, the condensed consolidated statements of operations and ~~comprehensive loss and~~ shareholders’ equity ~~for the three and nine months ended September 30~~, ~~2024~~ and ~~2023, and the condensed consolidated statement of~~ cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024 were prepared by management without audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, except as otherwise disclosed, necessary for the fair presentation of the financial position, results of operations, and changes in financial position for such periods, have been made.

12Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2024. The results of operations for the period ended March 31, 2025 are not necessarily indicative of the operating results that may be expected for a full year. The consolidated balance sheet as of December 31, 2024 contains financial information taken from the audited XBiotech Inc. consolidated financial statements as of that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2023. The results of operations for three and nine months periods ended September 30, 2024 are not necessarily indicative of the operating results that may be expected for a full year. The condensed consolidated balance sheet as of December 31, 2023 contains financial information taken from the audited XBiotech Inc. consolidated financial statements as of that date.

Basis of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned ~~subsidiaries~~subsidiary. All significant intercompany transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. ~~GAAP~~ requires management to make estimates and assumptions that affect the reported values of amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

Research and Development Costs

All research and development costs are charged to expense as incurred. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract clinical trial research services, the costs of laboratory consumables, equipment and facilities, license fees and other external costs. Costs incurred to acquire licenses for intellectual property to be used in research and development activities with no alternative future use are expensed as incurred as research and development costs.

Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

Clinical Trial Accruals

Expense accruals related to clinical trials are based on actual services received and efforts expended pursuant to contracts with third party service providers which conduct and manage clinical trials on the Company’s behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. The Company accrues costs based on the actual services rendered in the period over which services were performed and the level of effort expended in each period based upon patient enrollment, clinical site activations, or information provided to the Company by its vendors on their actual costs incurred. Any estimates of the level of services performed or the costs of these services could differ from actual results.

Income Taxes

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which enhances the transparency and decision usefulness of income tax disclosures. Adjustments to the annual disclosure of income taxes include: (1) A tabular rate reconciliation comprised of eight specific categories, (2) Incomes taxes paid, disaggregated between significant national, state, and foreign jurisdictions, (3) Eliminates requirements to disclose the nature and estimate of reasonably possible changes to unrecognized tax benefits in the next 12 months or that an estimated range cannot be made, and (4) Adds a requirement to disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) from continuing operations disaggregated between domestic and foreign. The ASU is effective for public business entities for fiscal years beginning on or after December 15, 2024 with early adoption permitted. The amendments in ASU 2023-09 should be applied on a prospective basis and retrospective application is permitted. The Company is in the process of evaluating the impact of adoption of ASU 2023-09 on the Company's consolidated financial statements and disclosures.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company measures deferred tax assets and liabilities using the enacted tax rates for the years and jurisdictions in which the temporary differences are expected to be recovered. A change to the tax rates used to measure the Company’s deferred taxes is recognized in income during the period in which the new rate(s) were enacted.

The Company recognizes deferred tax assets to the extent the Company’s assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including the future reversals of existing taxable temporary differences, projected future taxable income exclusive of reversing temporary differences and carryforwards, tax-planning strategies, taxable income in prior carryback years if permitted under tax law, and the results from prior years. If the Company determines it is more likely than not, that all or a portion of a deferred tax asset will not be realized a valuation allowance is recorded with a charge to income tax expense. Alternatively, if the Company determines that all or a portion of a deferred tax asset previously not meeting the more likely than not threshold will be realized, the Company reduces its valuation allowance and recognizes a benefit in income tax expense.

The Company recognizes and measures uncertain tax benefits in accordance with ASC 740 based on a two-step process in which (1) the Company determines whether it is more likely than not that the tax position will be sustained based on the technical merits of the position, and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than fifty percent likely to be realized upon ultimate settlement with the related tax authority. The Company's policy is to recognize interest and penalties, if any, in income tax expense.

Share-Based Compensation

The Company accounts for its share-based compensation awards in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statements of operations based on their grant date fair values. For stock options granted to employees and to members of the board of directors for their services on the board of directors, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates, and expected dividend yields of the common stock. To determine the fair value of its common stock, the Company uses the closing price of the Company’s common stock as reported by NASDAQ. For awards subject to service-based vesting conditions, the Company recognizes share-based compensation expense, equal to the grant date fair value of stock options, on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur rather than on an estimated basis.

Share-based compensation expense recognized for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024 was included in the following line items on the condensed consolidated statements of operations (in thousands).

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2024		2023		2024		2023
	2025		2024
Research and development	$	~~242~~2,661	$	~~824~~255	$	~~738~~	$	~~2,235~~
General and administrative		~~123~~668		~~131~~126		~~387~~		~~339~~
Total share-based compensation expense	$	~~365~~3,329	$	~~955~~381	$	~~1,125~~	$	~~2,574~~

1411

The fair value of each option is estimated on the date of grant using the Black-Scholes method with the following assumptions:

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2024			2023			2024			2023
	2025			2024
Dividend yield		-			-			-			-
Expected volatility		79%-80	%		80~~%-81~~	%		~~79%-80~~	%		~~80%-82~~	%
Risk-free interest rate		34.61%-4.15	%		3.98%-4.63	%		~~3.6%-4.4~~	%		~~3.3%-4.6~~	%
Expected life (in years)		6.25-10			5.38-6.25			~~5.38-6.25~~			~~5.38-6.25~~
Weighted-average grant date fair value per share	$	42.8293		$	3.6291			~~3.87~~			~~2.89~~

Cash and Cash Equivalents

The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consisted primarily of cash on deposit in U.S., ~~German~~ and Canadian banks. Cash and cash equivalents are stated at cost which approximates fair value.

Interest Bearing Time Deposit

During 2023 the Company held guaranteed investment certificates with a financial institution. The guaranteed investment certificates had a 12 month term at origination with interest receivable at maturity. The guaranteed investment certificates matured in July 2023. There has been no related activity in 2024.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents. The Company holds these investments in highly-rated financial institutions, and limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

Property and Equipment

Property and equipment, which consists of land, construction in process, furniture and fixtures, computers and office equipment, scientific equipment, vehicles, mobile facility and building are stated at cost and depreciated over the estimated useful lives of the assets, with the exception of land and construction in process which are not depreciated, using the straight line method. The useful lives are as follows:

•	Furniture and fixtures	7 years

•	Office equipment	5 years

•	Scientific equipment	5 years

•	Vehicles	5 years

•	Mobile facility	27.5 years

•	Building	39 years

Costs of major additions and betterments are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to expense as incurred. Upon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized.

Impairment of Long-Lived Assets

The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC Topic 360, Property, Plant and Equipment. Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. ~~Recoverability~~The recoverability of these assets is assessed based on undiscounted expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and economic projections, market trends and product development cycles. If impairments are identified, assets are written down to their estimated fair value. The Company has not recognized any impairment through ~~September~~March 3031, ~~2024~~2025.

Convertible Loan, Related Party

On January 3, 2024, the Company entered into a Convertible Loan Agreement (the “Loan”) with John Simard, the Company’s Founder, President, Chief Executive Officer and Chairman. The Loan provided $10 million in immediate funding for the construction of a new, state-of-the-art research and development facility at the Company’s property at 5217 Winnebago Lane in Austin, Texas. The Loan is secured by the real estate and cash holdings of the Company, with interest to accrue at a simple rate equal to eight percent per year and interest-only payments to be made at six-month intervals. At Mr. Simard’s election, the balance may be converted to XBiotech stock at any time the Loan balance is outstanding at a fixed conversion price equal to $4.048 per share. The conversion feature is subject to a 19.9% cap limiting the number of shares that could be converted under the Loan based on Mr. Simard’s total stock ownership in the Company at the time of conversion. The Loan includes an acceleration feature, allowing Mr. Simard to declare immediate cash repayment or conversion under specific acceleration events, including certain financial and non-financial measures, such as payment defaults, breaches of covenants, drop in stock price below $3.00 per share or drop in cash position below $65,000,000. The Loan also allows Mr. Simard to obtain immediate cash repayment of the Loan balance at his election one year after the loan is funded or upon certain other conditions set forth in the Loan. The Loan has a contractual maturity date of January 3, 2029. The Loan was negotiated, evaluated, and approved on behalf of the Company by a committee of independent and disinterested directors.

Foreign Currency Transactions

Certain transactions are denominated in a currency other than the Company’s functional currency of the U.S. dollar, and the Company generates assets and liabilities that are fixed in terms of the amount of foreign currency that will be received or paid. At each balance sheet date, the Company adjusts the assets and liabilities to reflect the current exchange rate, resulting in a translation gain or loss. AsThe ~~of September 30, 2024, the~~ only significant assets denominated in a foreign currency were certain cash accounts, which were remeasured into the functional currency (U.S. dollar) as of ~~September~~the ~~30,~~end ~~2024~~of the year, resulting in a foreign exchange gain of $~~707~~284 thousand for the three months ended byMarch ~~September 30~~31, ~~2024~~2025 and a foreign exchange loss of $1.46 million for the ~~nine~~three months ended byMarch ~~September 30~~31, 2024. ~~Transaction~~The transaction gains and losses are also realized upon a settlement of a foreign currency transaction in determining net loss for the period in which the transaction is settled.

~~Comprehensive Income (Loss)~~12

ASC Topic 220, Comprehensive Income, requires that all components of comprehensive income (loss), including net income (loss), be reported in the financial statements in the period in which they are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on investments and foreign currency translation adjustments.

Segment and Geographic Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision -making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company and the chief operating decision maker view the Company’s operations and manage its business as one operating segment. Substantially all of the Company’s operations are in the U.S. geographic segment.

Net Loss Per Share

Net income/loss per share (“EPS”) is computed by dividing net loss by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net income/loss by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The number of common share equivalents, which include stock options, is computed using the treasury stock method. The Company does not include the potential impact of dilutive securities in diluted net loss per share, as the impact of these items is anti-dilutive. For the three months ended ~~September~~March 3031, ~~2024,~~2025 ~~1,340,774~~and ~~stock~~March ~~options~~31, ~~and 1~~2024,~~921,828~~ ~~shares~~all ~~of common~~ stock ~~issuable~~options ~~upon conversion of a convertible loan,~~ were not included in the computation of diluted net loss per share~~. For the nine months ended September 30~~, ~~2024,~~as ~~1,340,774 stock options and 1,921,828 shares of common stock issuable upon conversion of a convertible loan, were not included in~~ the ~~computation~~impact of ~~diluted~~these ~~net~~items ~~loss~~was ~~per share~~anti-dilutive.

Subsequent Events

The Company considered events or transactions occurring after ~~the~~March ~~balance~~31, ~~sheet~~2025 ~~date~~ but prior to the date the condensed consolidated financial statements ~~were~~are available to be issued for potential recognition or disclosure in its condensed consolidated financial statements. We have evaluated subsequent events through the date of filing this Form 10-Q.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"), which enhances the transparency and decision usefulness of income tax disclosures. Adjustments to the annual disclosure of income taxes include: (1) A tabular rate reconciliation comprised of eight specific categories, (2) Incomes taxes paid, disaggregated between significant national, state, and foreign jurisdictions, (3) Eliminates requirements to disclose the nature and estimate of reasonably possible changes to unrecognized tax benefits in the next 12 months or that an estimated range cannot be made, and (4) Adds a requirement to disclose income (or loss) from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) from continuing operations disaggregated between domestic and foreign. The ASU is effective for public business entities for fiscal years beginning on or after December 15, 2024 with early adoption permitted. The amendments in ASU 2023-09 should be applied on a prospective basis and retrospective application is permitted. The Company is in process of evaluating the impact of adoption of ASU 2023-09 on the Company's condensed consolidated financial statements and disclosures.

3.	Property and Equipment

~~Net~~Property ~~property~~ and equipment, ~~after~~is ~~deducting~~presented net of accumulated depreciation. Property and equipment, net, consisted of the following as of ~~September~~March 3031, ~~2024~~2025 and December 31, ~~2023~~2024 (in thousands):

	September 30, 2024		December 31, 2023
	March 31, 2025		December 31, 2024
Manufacturing equipment	$	1,~~488~~114	$	21,~~104~~272
Winnebago building		21,~~257~~049		2021,~~643~~178
Other fixed assets		2,~~072~~016		2,~~150~~076
Total property and equipment	$	24,~~817~~179	$	24,~~897~~526

4. ~~Common~~ ~~Stock~~Convertible Loan, Related Party

~~Pursuant~~On toJanuary ~~its~~3, ~~Articles~~2024, the Company entered into a Convertible Loan Agreement (the “Loan”) with John Simard, the Company’s Founder, President, Chief Executive Officer and Chairman. The Loan provided $10 million in immediate funding for the construction of ~~Incorporation~~a new, state-of-the-art research and development facility at the Company’s ~~has~~property anat ~~unlimited~~5217 Winnebago Lane in Austin, Texas. The Loan was secured by the real estate and cash holdings of the Company, with interest to accrue at a simple rate equal to eight percent per year and interest-only payments to be made at six-month intervals. At Mr. Simard’s election, the balance could be converted to XBiotech stock at any time the Loan balance was outstanding at a fixed conversion price equal to $4.048 per share. The conversion feature was subject to a 19.9% cap limiting the number of shares ~~available~~that ~~for~~could ~~issuance~~be converted under the Loan based on Mr. Simard’s total stock ownership in the Company at the time of conversion. The Loan included an acceleration feature, allowing Mr. Simard to declare immediate cash repayment or conversion under specific acceleration events, including certain financial and non-financial measures, such as payment defaults, breaches of covenants, drop in stock price below $3.00 per share or drop in cash position below $65,000,000. The Loan also allowed Mr. Simard to obtain immediate cash repayment of the Loan balance at his election one year after the loan is funded or upon certain other conditions set forth in the Loan. The Loan had a contractual maturity date of January 3, 2029. The Loan was negotiated, evaluated, and approved on behalf of the Company by a committee of independent and disinterested directors. On January 31, 2025, the Loan was terminated upon full repayment by the Company. As a result, all conversion rights to XBiotech stock associated with nothe ~~par~~Loan ~~value~~were extinguished.

On May 17, 2023, XBiotech announced that it had commenced a “modified Dutch auction” tender offer to purchase up to $80.0 million of its common shares, or such lesser number of common shares as are properly tendered and not properly withdrawn, at a price not less than $3.80 nor greater than $4.00 per common share, to the seller in cash. The tender offer expired on June 15, 2023.13

~~On June 20, 2023, the Company announced the final results of its “modified Dutch Auction” tender offer~~5. ~~The~~Common Company accepted for purchase 3,561 shares of its common stock, at a price of $4.00 per share, for an aggregate cost of approximately $14 thousand, excluding fees and expenses related to the tender offer. These shares represented an immaterial percent of the shares outstanding. The repurchased shares were retired and have been classified to reduce common stock in the accompanying condensed consolidated balance sheets.Stock

17Pursuant to its Articles, the Company has an unlimited number of shares available for issuance with no par value.

During the ~~year~~three months ended ~~December~~March 31, ~~2023~~2024, 113,~~250~~917 shares of common stock were issued upon the exercise of stock options, at aprices ~~price~~ranging offrom $3.84 to $5.43 per share, for total proceeds of $~~4,800~~55 thousand.

~~During~~No ~~the nine months ended September 30, 2024, 42,442 shares of common~~ stock options were ~~issued~~exercised ~~upon~~during the ~~exercise~~three ofmonths ~~stock~~ended ~~options,~~March ~~at prices ranging from $3.38 to $5.62 per share~~31, ~~for total proceeds of $167 thousand~~2025.

56. Common Stock Options

On November 11, 2005, the Board of Directors of the Company adopted the XBiotech Inc. 2005 Incentive Stock Option Plan (the “2005 Plan”), and on March 24, 2015, the ~~board~~Board of ~~directors~~Directors of the Company adopted the XBiotech Inc. 2015 Equity Incentive Plan (the “2015 Plan” and, together with the 2005 Plan, the “Plans”) pursuant to which the Company may grant incentive stock and non-qualified stock options to directors, officers, employees or consultants of the Company or an affiliate or other persons as the Compensation Committee may approve.

All options under ~~both~~the Plans will be non-transferable and may be exercised only by the participant, or in the event of the death of the participant, a legal representative until the earlier of the options’ ~~expiry~~expiration date or the first anniversary of the participant’s death, or such other date as may be specified by the Compensation Committee.

The term of the options is at the discretion of the Compensation Committee, but may not exceed 10 years from the grant date. The options expire on the earlier of the expiration date or the date three months following the day on which the participant ceases to be an officer or employee of or consultant to the Company, or in the event of the termination of the participant with cause, the date of such termination. Options held by non-employee Directors have an exercise period coterminous with the term of the options.

The number of common shares reserved for issuance to any one person pursuant to the 2005 Plan shall not, in aggregate, exceed 5% of the total number of outstanding common shares. The exercise price per common share under each option will be the fair market value of such shares at the time of the grant. Upon stock option exercise, the Company issues new shares of common stock.

A summary of changes in common stock options issued under the ~~2005~~Plans ~~Plan and under the 2015 Plan~~ is as follows:

	Options			Exercise Price		Weighted-Average Exercise Price
Options outstanding at December 31, 2023		5,039,518		$2.71-$21.74		$	9.46
Options outstanding at December 31, 2024		4,331,585		$2.71-$21.74		$	8.89
Granted		~~208~~1,~~000~~066,096			43.0525-73.8589		53.6052
Exercised		~~(42,442~~-	)		~~3.38~~-~~5.62~~		~~3.92~~-
Forfeitures		(~~693~~15,~~333~~000	)		315.~~84-19.92~~00		1015.7800
Options outstanding at September 30, 2024		4,511,743		$2.71-$21.74		$	9.13
Options outstanding at March 31, 2025		5,382,681		$2.71-$21.74		$	7.81

	Options			~~Exercise Price~~	Exercise Price	Weighted-Average Exercise Price
Options outstanding at December 31, 2022		4,558,902		$2.71-$21.74		$	10.47
Options outstanding at December 31, 2023		5,039,518			$2.71-$21.74	$	9.46
Granted		~~809~~23,~~600~~000			3$4.3805-$6.0445		45.1259
Exercised		(113,~~250~~917	)		$3.8465-$5.43		3.8496
Forfeitures		(~~308~~614,~~109~~750	)		$3.84-$19.0922		10.7392
Options outstanding at September 30, 2023		5,059,143		$2.71-$21.74		$	9.44
Options outstanding at March 31, 2024		4,433,851			$2.71-$21.74	$	9.25

18As of March 31, 2025, there was approximately $211 thousand unrecognized compensation cost, related to stock options granted under the Plans which will be amortized to stock compensation expense over the next 1.0 years. Total exercisable stock options as of March 31, 2025 is 5.3 million. The weighted-average exercise price of options exercisable as of March 31, 2025 is $7.85 per share and the weighted-average remaining contractual term is 6.1 years.

As of September 30, 2024, there was approximately $895 thousand of unrecognized compensation cost, related to stock options granted under the Plans which will be amortized to stock compensation expense over the next 17.1 ~~years.~~Income Taxes

6The Company's effective tax rates for the three months ended March 31, 2025 and March 31, 2024 were -0. ~~Income~~3% ~~Taxes~~and -0.3%, respectively. The effective tax rate for the three month periods ended March 31, 2025 and March 31, 2024 varied from the Canadian statutory rate primarily due to non-deductible compensation and losses in jurisdictions for which a valuation allowance is recorded.

The Company's effective tax rates for the three months ended September 30, 2024 and September 30, 2023, were -0.2% and -4.4% respectively. The effective tax rate for the three months periods ended September 30, 2024 and September 30, 2023 varied from the Canadian statutory rate primarily due to non-deductible compensation and losses in jurisdictions for which a valuation allowance is recorded.14

The Company's effective tax rates for the nine months ended September 30, 2024 and September 30, 2023, were 0.0% and -1.8%, respectively. The effective tax rate for the nine months periods ended September 30, 2024 and September 30, 2023 varied from the Canadian statutory rate primarily due to non-deductible compensation and losses in jurisdictions for which a valuation allowance is recorded.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

XBiotech Inc. (“XBiotech” or the “Company”) is a pre-market biopharmaceutical company engaged in discovering and developing True Human™ monoclonal antibodies for treating a variety of diseases. True Human™ monoclonal antibodies are those which occur naturally in human beings—as opposed to being derived from animal immunization or otherwise engineered. We believe that naturally occurring monoclonal antibodies have the potential to be safer and more effective than their non-naturally occurring counterparts. XBiotech is focused on developing its True Human™ pipeline and manufacturing system.

Following the Janssen Transaction in December 2019, the tender offer in February 2020, and the dividends paid in July 2021, ~~the~~ accumulated deficit as of ~~September~~March 3031, ~~2024~~2025 was ($80101.37) million. We had net losses ~~before income tax~~ of $510.09 million and $2810.0 million for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2024,~~2025 ~~respectively, compared to $7.1 million~~ and ~~$19.6 million for the three months and nine months ended September 30~~2024, ~~2023,~~ respectively. ~~During~~We ~~the~~do ~~next~~not ~~year,~~expect weto ~~don’t~~generate ~~expect~~ any ~~revenues~~revenue in 2025. In addition, we expect to incur significant and increasing operating losses for the foreseeable future as we advance our drug candidates from discovery through preclinical testing and clinical. In addition to these increasing research and development expenses, we expect general and administrative costs to increase, particularly in consideration of current inflationary trends. We will need to generate significant revenues to achieve or sustain profitability, and we may never do so. As of ~~September~~March 3031, ~~2024~~2025, we had 9290 employees.

Research and Development Expenses

Research and development expense consists of expenses incurred in connection with identifying and developing our drug candidates. These expenses consist primarily of salaries and related expenses, stock-based compensation, the purchase of equipment, laboratory and manufacturing supplies, facility costs, costs for preclinical and clinical research, development of quality control systems, quality assurance programs and manufacturing processes. We charge all research and development expenses to ~~operations~~operating expenses as incurred.

The clinical development costs may further increase going forward with potentially more advanced studies in the future as we evaluate our clinical data and pipeline.

Clinical development timelines, likelihood of success and total costs vary widely. We do not currently track our internal research and development costs or our personnel and related costs on an individual drug candidate basis. We use our research and development resources, including employees and our drug discovery technology, across multiple drug development programs. As a result, we cannot state precisely the costs incurred for each of our research and development programs or our clinical and preclinical drug candidates. From inception through ~~September~~March 3031, ~~2024~~2025, we have recorded total research and development expenses, including share-based compensation, of $~~303~~361.73 million. Our total research and development expenses for the three months ~~and nine months~~ ended ~~September~~March 3031, 2025 and 2024 were $711.16 million and $~~29.~~9 ~~million, respectively, compared to $7~~.58 million ~~and $25.05 million for the three months and nine months ended September 30~~, ~~2023,~~ respectively. Share-based compensation ~~related to research and development~~ accounted for $0.2.7 million and $~~0.7~~255 ~~million~~thousand for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2024,~~2025 ~~respectively, compared to $0.8 million~~ and ~~$2.2 million for the three months and nine months ended September 30~~2024, ~~2023,~~ respectively.

Research and development expenses, as a percentage of total operating expenses for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2024~~2025 ~~were 90%~~ and ~~89%,~~2024 ~~respectively,~~were ~~compared to 89~~86% and 8791% ~~for the three months and nine months ended September 30~~, ~~2023,~~ respectively. The percentages ~~of research and development expenses compared to total operating expenses~~, excluding ~~share~~stock-based compensation, for the three months ~~and nine months~~ ended ~~September 30~~March 31, ~~2024~~2025 ~~were 91%~~ and ~~90%~~2024, ~~respectively,~~were ~~compared to 89~~88% and 8791% ~~for the three months and nine months ended September 30, 2023~~.

We will select drug candidates and research projects for further development on an ongoing basis in response to their preclinical and clinical success and commercial potential. For research and development candidates in early stages of development, it is premature to estimate when material net cash inflows from these projects might occur.

General and Administrative Expenses

General and administrative expense consists primarily of salaries and related expenses for personnel in administrative, finance, business development, and human resource functions, as well as the legal costs of pursuing patent protection of our intellectual property and patent filing, and maintenance expenses, ~~share~~stock–based compensation, and professional fees for legal services. Our total general and administration expenses for the three months ~~and nine months~~ ended ~~September 30~~March 31, 2025 and 2024 were $01.89 million and $~~3.8 million, respectively, compared to $~~1.0 million ~~and $3.9 million for the three months and nine months ended September 30~~, ~~2023,~~ respectively. Share-based compensation ~~related to general and administration~~ accounted for $~~0.1~~668 ~~million~~thousand and $~~0.7~~126 ~~million~~thousand for the three months ~~and nine months~~ ended ~~September 30~~March 31, ~~2024,~~2025 ~~respectively,~~ and ~~$0.1 million and $0.4 million for the three months and nine months ended September 30~~2024, ~~2023,~~ respectively.

General and administrative ~~expenses~~expense, as a percentage of total operating expenses for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2024~~2025 ~~were 10%~~ and ~~11%,~~2024 ~~respectively,~~were ~~compared to 11~~14% and 139% ~~for the three months and nine months ended September 30~~, ~~2023,~~ respectively. The percentages ~~of general and administrative expense compared to total operating expenses~~, excluding ~~share~~stock-based compensation, for the three months ~~and nine months~~ ended ~~September 30~~March 31, ~~2024~~2025 ~~were 9%~~ and ~~10%~~2024, ~~respectively,~~were ~~compared to 11~~12% and 139% ~~for the three months and nine months ended September 30, 2023~~.

Critical Accounting Policies

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States (US GAAP). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and expenses incurred during the reported periods.

We base estimates on our historical experience, known trends and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~Our significant accounting policies are more fully described in the notes to our financial statements appearing in this Quarterly Report on Form 10-Q.~~15

While our significant accounting policies are more fully described in the notes to our financial statements appearing in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are the most critical to understanding and evaluating our reported financial results.

Income Taxes

We account for income taxes under the asset and liability method. We record deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect of a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the enactment date. We assess the likelihood that deferred tax assets will be realized, and we recognize a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction. To date, with the exception of certain Canada deferred tax assets that will reverse in a period in which they may be carried back, we have provided a valuation allowance against our deferred tax assets as we believe the objective and verifiable evidence of our historical pretax net losses outweighs any positive evidence of our forecasted future results. Although we believe that our tax estimates are reasonable, the ultimate tax determination involves significant judgment. We will continue to monitor the positive and negative evidence and will adjust the valuation allowance as sufficient objective positive evidence becomes available.

We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more likely than not that the position will be sustained upon examination. We recognize potential accrued interest and penalties associated with unrecognized tax positions within our global operations in income tax expense.

Clinical Trial Accruals

Results of Operations

Expenses

Research and Development

Research and Development costs are summarized as follows (in thousands):

	Three Months Ended September 30,				Increase			% Increase
	Three Months Ended March 31,				Increase			% Increase
	2024		2023		(Decrease)			(Decrease)
	2025		2024		(Decrease)			(Decrease)
Salaries and related expenses	$	26,~~697~~373	$	24,~~429~~075	$	~~268~~2,298			1156	%
Laboratory and manufacturing supplies		~~1,104~~687		~~712~~1,233		~~392~~(546	)		55-44	%
Clinical trials and sponsored research		~~1,303~~349		12,~~595~~193		(~~292~~1,844	)		-1884	%
Share-based compensation		242		824		(582	)		-71	%
Stock-based compensation		2,662		254		2,408			948	%
Other		1,~~781~~548		12,~~987~~070		(~~206~~522	)		-1025	%
Total	$	711,~~127~~619	$	79,~~547~~825	$	~~(420~~1,794	)		-618	%

	Nine Months Ended September 30,				Increase			% Increase
	2024		2023		(Decrease)			(Decrease)
Salaries and related expenses	$	13,757	$	10,977	$	2,780			25	%
Laboratory and manufacturing supplies		3,394		2,818		576			20	%
Clinical trials and sponsored research		6,416		3,147		3,269			104	%
Share-based compensation		738		2,235		(1,497	)		-67	%
Other		5,631		5,867		(236	)		-4	%
Total	$	29,936	$	25,044	$	4,892			20	%

We do not currently track our internal research and development costs or our personnel and related costs on an individual drug candidate basis. We use our research and development resources, including employees and our drug discovery technology, across multiple drug development programs. As a result, we cannot state precisely the costs incurred for each of our research and development programs or our clinical and preclinical drug candidates.

22Research and development expenses increased $1.8 million to $11.6 million for the three months ended March 31, 2025, compared to $9.8 million for the three months ended March 31, 2024. The increase of salaries and related expenses was mainly due to the $4.0 million bonus to the Chief Executive Officer in March 2025 in which 85%, or $3.4 million was allocated to research and development expenses compared to the $1.5 million company-wide bonus distributed in January 2024. Stock-based compensation increased due to the issuance of stock options with immediate vesting and grant date fair value at $3.0 million to the Chief Executive Officer in March 2025, with 85% or $2.5 million of the expense allocated to research and development. In addition, there is a reduction in clinical trials and sponsored research expenses, as no trials were active during the first quarter of 2025.

Research and development expenses decreased $0.4 million to $7.1 million for the three months ended September 30, 2024, compared to $7.5 million for the three months ended September 30, 2023. The decrease of in share-based compensation, which was due to the decreased stock option expense per share of new grants compared to the expense of fully amortized grants. Clinical trials and sponsored research expense decreased because of one study fully completed in the second quarter of 2024.16

Research and development expenses increased $4.9 million to $29.9 million for the nine months ended September 30, 2024, compared to $25.0 million for the nine months ended September 30, 2023. The increase was primarily due to the rise in the clinical trial activities, related to the new study being initiated in the second quarter of 2023. The increase of salaries and related expenses was mainly due to a company-wide bonus distributed in January 2024 and the bonus to the Chief Executive Officer. In addition, there is a decrease in share-based compensation, which was due to the decreased stock option expense per share of new grants compared to the expense of fully amortized grants.

General and Administrative

General and administrative costs are summarized as follows (in thousands):

	Three Months Ended September 30,				Increase			% Increase
	Three Months Ended March 31,				Increase			% Increase
	2024		2023		(Decrease)			(Decrease)
	2025		2024		(Decrease)			(Decrease)
Salaries and related expenses	$	~~152~~627	$	~~138~~219	$	14408			10186	%
Patent filing expense		~~155~~180		~~127~~293		28(113	)		22-39	%
Share-based compensation		123		131		(8	)		-6	%
Stock-based compensation		668		126		542			430	%
Professional fees		~~205~~312		~~410~~268		~~(205~~44	)		~~-50~~16	%
Other		~~142~~144		~~167~~122		~~(25~~22	)		~~-15~~18	%
Total	$	~~777~~1,931	$	~~973~~1,028	$	~~(196~~903	)		~~-20~~88	%

	Nine Months Ended September 30,				Increase			% Increase
	2024		2023		(Decrease)			(Decrease)
Salaries and related expenses	$	1,298	$	1,136	$	162			14	%
Patent filing expense		640		524		116			22	%
Share-based compensation		387		339		48			14	%
Professional fees		742		1,171		(429	)		-37	%
Other		720		709		11			2	%
Total	$	3,787	$	3,879	$	(92	)		-2	%

General and administrative expenses increased $0.9 million to $1.9 million for the three months ended March 31, 2025, compared to $1.0 million for the three months ended March 31, 2024. The increase in salaries and related expenses was primarily due to the $4.0 million bonus to the Chief Executive Officer in March 2025, in which 15% or $0.6 million was allocated to general and administrative expenses. Stock-based compensation increased due to the issuance of $3.0 million in stock options to the Chief Executive Officer in March 2025, with 15% or $0.5 million of the expenses allocated to general and administrative department.

General and administrative expenses decreased $196 thousand to $0.8 million for the three months ended September 30, 2024 compared to $1.0 million for the three months ended September 30, 2023. General and administrative expenses decreased $92 thousand to $3.8 million for the nine months ended September 30, 2024 compared to $3.9 million for the nine months ended September 30, 2023.

The three months decrease was primarily due to the decrease of professional fees, related to the stock service and the tax service.

Compared to the nine months ended September 30, 2023, the decrease in the general and administrative expense in the nine months ended September 30, 2024 was also primarily caused by the service fees associated with the tender offer in June 2023 and tax service. The increase of salaries and related expenses was due to a company-wide bonus distributed in January 2024 and the bonus to the Chief Executive Officer. In addition, the patent filing expense increased mainly due to the transfer of patents from Janssen to XBiotech.

Other income (loss)

The following table summarizes other income (loss) (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2024			2023			2024			2023
	2025			2024
Interest income	$	21,~~369~~504		$	2,~~529~~658		$	~~7,716~~		$	~~7,818~~
Interest expense		(203	)		-			(603	)		-
Interest expenses		(88	)		(200	)
Other income		25995			-			25			~~880~~
Foreign exchange gain (loss)		~~707~~284			(1,~~065~~582	)		~~(1,429~~	)		~~646~~
Total	$	2,~~898~~695		$	~~1,464~~876		$	~~5,709~~		$	~~9,344~~

The interest income for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~March 31, 2024 was mainly from the interest generated from the Company’s Canadian bank ~~account and interest bearing time deposit~~accounts. The interest ~~expense~~expenses for the three months ~~and~~periods ~~nine~~ended ~~months~~March ~~ended~~31, ~~September~~2025 30and March 31, 2024, ~~was~~were the interest for the ~~related party~~ convertible ~~loan~~loans. InThe ~~June~~other ~~2023,~~income during the ~~Company~~three ~~received~~months aended ~~sum~~March of31, ~~$750~~2025 ~~thousand~~was ~~from~~the ~~American~~cancellation ~~Stock~~of ~~Transfer~~a &penalty ~~Trust~~by ~~Company,~~the ~~LLC~~Canada ~~which~~Revenue ~~was~~Agency ~~recorded~~for asthe ~~other~~2020 ~~income,~~tax inyear. In accordance with the ~~terms~~settlement ~~outlined~~agreement, ina portion of the ~~settlement~~cancelled ~~agreement~~amount was allocated to American Stock Transfer & Trust Company, LLC. Foreign exchange gain (loss) was ~~mainly~~ due to the fluctuation between the US dollar and the Canadian dollar in the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2024~~2025 ~~compared~~and toMarch ~~2023~~31, 2024.

Liquidity and Capital Resources

Our cash requirements could change materially as a result of the progress of our research and development and clinical programs, licensing activities, acquisitions, divestitures or other corporate developments.

Since our inception on March 22, 2005 through March 31, 2025, we have funded our operations principally through private placements and public offerings of equity securities, which have provided aggregate cash proceeds of approximately $~~118~~278.46 million, asexcluding ofthe ~~September~~February ~~30,~~2020 ~~2024~~tender offer cash payment. We received $675 million in cash proceeds from the Janssen Transaction in the year ended December 31, 2019. In June 2021, we received the remaining $75 million in cash from the escrow receivable from the same transaction. In July 2021, we paid $75 million in dividends to shareholders. At ~~September~~March 3031, ~~2024~~2025, we had cash and cash equivalents of $~~183~~155.19 million as compared to cash and cash equivalents of $~~202~~201.20 million at ~~September~~March 3031, ~~2023~~2024. The following table summarizes our sources and uses of cash (in thousands):

	Nine Months Ended September 30,
	Three Months Ended March 31,
Net cash (used in) provided by:	~~2024~~2025			~~2023~~2024
Operating activities	$	(246,~~423~~720	)	$	(157,~~292~~202	)
Investing activities		(~~1,220~~94	)		~~61,612~~(255	)
Financing activities		(10,~~167~~250	)		(910,055	)
Effect of foreign exchange rate on cash and cash equivalents		~~(1,429~~284	)		(1,~~426~~582	)
Net change in cash and cash equivalents	$	(16,~~905~~780	)	$	441,~~885~~016

During the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024, our operating activities used net cash of $246.47 million and $157.2 million, respectively. The use of net cash in each of these periods primarily resulted from our net losses. The ~~increase~~decrease in net ~~cash~~loss ~~used~~from in operations for the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025 inas ~~comparison~~compared to the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 was mainly due to the ~~increase~~decrease in ~~salaries and related expenses and~~ clinical trial expense.

2417

During the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024, our investing activities used net cash of $~~1.2~~94 ~~million~~thousand and ~~generated net cash of~~ $~~61.6~~255 ~~million~~thousand, respectively. InThe ~~July~~decrease ~~2022,~~was wedue ~~purchased~~to ~~interest~~greater ~~bearing~~costs ~~time~~incurred ~~deposits~~on inpreparation for the ~~amount~~construction of ~~$59.5~~a ~~million.~~new ~~Upon~~facility ~~maturity~~during ~~in July 2023, we obtained both~~ the ~~principal~~three ~~amount~~months ~~and~~ended ~~the~~March ~~accrued~~31, ~~interest~~2024.

During the ~~nine~~three months ended ~~September~~March 3031, 2025 and 2024, the net cash from our financing activities ~~provided~~was ~~net~~mainly ~~cash~~related ofto ~~$10.2~~the ~~million~~related party Convertible Loan. On January 3, 2024, we entered into a Convertible Loan Agreement (the “Loan”) with John Simard, the Company’s Founder, President, Chief Executive Officer and Chairman, which provided $10 million net cash for the construction of a new, state-of-the-art research and development facility at the Company's property at 5217 Winnebago Lane in Austin, Texas. ~~Additionally, during the nine months ended September 30, 2024, employees exercised stock options to purchase 42,442 shares of our common stock for approximately $167 thousand in net proceeds.~~ On ~~June~~January 2031, ~~2023~~2025, wethe ~~used~~Loan ~~approximately~~was ~~$14~~terminated ~~thousand~~upon tofull ~~purchase~~repayment ~~3,561 common shares at a price~~ of ~~$4.00~~the ~~per~~principal ~~share,~~and ~~relating to~~ the ~~tender~~interest ~~offer~~by ~~completed~~the ~~in June 2023~~Company. Additionally, ~~During~~during the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, employees exercised stock options to purchase 113,~~250~~917 shares of our common stock for approximately $555 thousand in net proceeds.

We expect to continue to incur operating losses in the future. ~~We do not expect to receive any additional revenue under the clinical manufacturing agreement with Janssen.~~ Further, we may not receive any product revenue until a drug candidate has been approved by the FDA, EMA or similar regulatory agencies in other countries and successfully commercialized. As of ~~September~~March 3031, ~~2024~~2025, our principal sources of liquidity were our cash and cash equivalents, which totaled approximately $~~183~~155.19 million.

Off-Balance Sheet Arrangements

Since inception, we have not engaged in any off-balance sheet activities, including the use of structured finance, special purpose entities or variable interest entities.

Item 3. Quantitative and Qualitative Disclosure ~~About~~of Market Risks

The Company is not currently exposed to material market risk arising from financial instruments, changes in interest rates or commodity prices, or fluctuations in foreign currencies. The Company has no need to hedge against any of the foregoing risks and therefore currently engages in no hedging activities.

Item 4.

Controls and Procedures

Management's Evaluation of our Disclosure Controls and Procedures

As of the end of the ~~period~~year covered by this ~~Quarterly~~Annual Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and ~~Director of Finance (~~Principal Financial Officer), of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ~~as amended~~. Based on such evaluation, the Chief Executive Officer and ~~Director of Finance (~~Principal Financial Officer) concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports the Company files or furnishes under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and are operating in an effective manner.

25Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company’s management, with the participation of the Chief Executive Officer and Principal Financial Officer, conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on our management’s assessment, we have concluded that our internal control over financial reporting was effective as of March 31, 2025, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended ~~September~~March 3031, ~~2024~~2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

2618

PART II - OTHER INFORMATION

Item 1.

Risk Factors

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the year ended December 31, ~~2023~~2024. Please carefully consider the information set forth in this Quarterly Report on Form 10-Q and the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2023~~2024, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K, as well as other risks and uncertainties, could materially and adversely affect our business, results of operations and financial condition, which in turn could materially and adversely affect the trading price of shares of our Common Stock. Additional risks not currently known or currently material to us may also harm our business.

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

Not Applicable.

Item 3. Defaults ~~Upon~~upon Senior Securities

Not Applicable.

Item 4.

Mine Safety Disclosures

Not Applicable.

Item 5.

Other Information.

Not Applicable.

Item 6.

Exhibits.

31.1	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.
101	The following financial statements from the XBiotech Inc. Quarterly Report on Form 10-Q for the quarter ended ~~September~~March 3031, ~~2024~~2025, formatted in Inline Extensive Business Reporting Language (XBRL): (i) condensed consolidated balance sheets at ~~September~~March 3031, ~~2024~~2025 and December 31, ~~2023~~2024, (ii) condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024, (iii) condensed consolidated statements of comprehensive loss for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024, (iv) )condensed consolidated statements of shareholders’ equity for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024; (v) condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2024~~2025 and ~~2023~~2024 and (vi) notes to condensed consolidated financial statements (detail tagged).
104	Cover Page Interactive Data File (embedded within the iXBRL document).

2719

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 13, 2024	XBIOTECH INC.
Date: May 14, 2025	XBIOTECH INC.
	By:	/S/ John Simard
		John Simard
		President, Chief Executive Officer and Director (Principal Executive Officer)
Date: November 13, 2024	By:	/S/ Angela Hu
Date: May 14, 2025	By:	/S/ Angela Hu
		Angela Hu
		Director of Finance (Principal Financial Officer)

2820

Filing Compare · XBiotech Inc.