Bempikibart (ADX-914) for Alopecia Areata (AA) - Bempikibart demonstrated proof of concept in alopecia areata with favorable safety profile and robust changes in Th2 clinical biomarkers[9] - SIGNAL-AA Phase 2a Part A showed continued benefit through Week 36, supporting potential for durable effect following dosing cessation[25] - In SIGNAL-AA Part A, patients with baseline SALT 50-100 showed a mean SALT score percentage change of 163% at Week 24 and 199% at Week 36[29] - In SIGNAL-AA Part A, patients with baseline SALT 50-95 showed a mean SALT score percentage change of 245% at Week 24 and 278% at Week 36[29] - The company anticipates Bempikibart SIGNAL-AA Phase 2a Part B topline results in the first half of 2026[10, 71] - The company has received FDA Fast Track designation for Bempikibart for the treatment of AA[11] Alopecia Areata Market and Unmet Need - There are approximately 700,000 AA patients in the US[9, 45, 49] - The expected market size for AA is $26 billion by 2030[9] - Approximately 300,000 US Alopecia Areata (AA) Patients have Severe (SALT > 50)[49] - Currently available therapies for AA lack the desired profile, and doctors and patients seek alternatives to currently approved agents including JAK inhibitors which carry significant safety risks[9, 45, 46] ADX-097 and Complement Platform - ADX-097 is Phase 2 ready and the company is evaluating strategic next steps for ADX-097 and the complement inhibitor platform[11] - ADX-097 Phase 1 study achieved primary goals, demonstrating dose-dependent PK/PD and a favorable safety profile[62] Financial Overview - The company's Q2 2025 cash balance was $548 million, providing expected cash runway into 2027[71]

PART I—FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements.) The unaudited statements show a clinical-stage company with no revenue, a net loss of $20.5 million, and the financial impact of a recent merger Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $54,832 | $77,965 | | Total assets | $66,117 | $92,332 | | Total liabilities | $78,352 | $86,657 | | Total stockholders' equity (deficit) | $(12,235) | $5,675 | Condensed Consolidated Statement of Operations Highlights (in thousands) | Account | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Research and development | $12,286 | $23,252 | | General and administrative | $9,114 | $9,510 | | Loss from operations | $(21,400) | $(32,762) | | Net loss | $(20,520) | $(15,949) | | Net loss per share—basic | $(1.68) | $(2.46) | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Account | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(23,133) | $(36,765) | | Net cash provided by investing activities | $0 | $9,985 | | Net cash provided by financing activities | $0 | $93,824 | | Net (decrease) increase in cash | $(23,133) | $67,044 | - The company completed a **reverse recapitalization merger** with Homology Medicines, Inc. on March 25, 2024, which included a **$42.0 million Pre-Closing Financing**[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - As of June 30, 2025, the company had **$54.8 million in cash** and cash equivalents and an accumulated deficit of **$255.3 million**, with management believing cash is sufficient for at least one year[39](index=39&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses its strategic focus on bempikibart, the financial impact of its recent merger, and its current liquidity position and future capital needs - The company is advancing **bempikibart for Alopecia Areata (AA)** after completing a Phase 2a trial, with topline data expected in H1 2026 and an FDA Fast Track designation[162](index=162&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - A strategic restructuring in February 2025 discontinued the ADX-097 trial to focus on bempikibart, resulting in severance-related charges of approximately **$0.9 million**[171](index=171&type=chunk) Comparison of Results of Operations (in thousands) | Period | Research & Development Expense | General & Administrative Expense | Net Loss | | :--- | :--- | :--- | :--- | | **Three Months Ended June 30, 2025** | $5,161 | $4,010 | $(9,489) | | **Three Months Ended June 30, 2024** | $13,411 | $4,508 | $(16,978) | | **Six Months Ended June 30, 2025** | $12,286 | $9,114 | $(20,520) | | **Six Months Ended June 30, 2024** | $23,252 | $9,510 | $(15,949) | - The decrease in R&D expenses was primarily due to **lower clinical and manufacturing costs** for the bempikibart program and the discontinuation of the ADX-097 trial[199](index=199&type=chunk)[205](index=205&type=chunk) - The company's **$54.8 million in cash** and cash equivalents is expected to fund operations into 2027, but **substantial additional capital** will be needed for future development[180](index=180&type=chunk)[213](index=213&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is not required to provide disclosures about market risk - As a **smaller reporting company**, Q32 Bio Inc. is not required to provide quantitative and qualitative disclosures about market risk[246](index=246&type=chunk) [Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Management evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they were **effective**[248](index=248&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended June 30, 2025[249](index=249&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - As of the report date, the company is **not involved in any material legal proceedings**[251](index=251&type=chunk) [Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including a history of losses, capital requirements, dependence on its lead product, and regulatory challenges - The company has a history of significant losses (**$20.5 million for H1 2025**), has no products for sale, and may **never achieve profitability**[253](index=253&type=chunk)[254](index=254&type=chunk) - **Substantial additional capital is required** to finance future operations beyond the current cash runway projected into 2027[258](index=258&type=chunk)[259](index=259&type=chunk) - The company is **substantially dependent on the success** of its most advanced product candidate, bempikibart, whose clinical trials may not be successful[272](index=272&type=chunk) - The company's ability to protect its patents is uncertain and it relies on **key licenses from third parties** like Bristol-Myers Squibb[298](index=298&type=chunk)[306](index=306&type=chunk) - The company relies on third parties for manufacturing and clinical trials, including foreign CDMOs like WuXi Biologics which could be impacted by the **BIOSECURE Act**[395](index=395&type=chunk)[406](index=406&type=chunk)[410](index=410&type=chunk) - The company received a **Nasdaq non-compliance notice** on May 19, 2025, for failing to meet the minimum stockholders' equity requirement, which could result in delisting[467](index=467&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=148&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities during the covered period - The company reports **no unregistered sales of equity securities** for the period covered by the report[483](index=483&type=chunk) [Defaults Upon Senior Securities](index=148&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities during the period - The company reports **no defaults upon senior securities**[484](index=484&type=chunk) [Mine Safety Disclosures](index=148&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable as the company is not engaged in mining operations - Mine safety disclosures are **not applicable** to the company's operations[485](index=485&type=chunk) [Other Information](index=148&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 trading plans were adopted, modified, or terminated by officers or directors during the quarter - No officers or directors adopted, modified, or terminated any **Rule 10b5-1 trading plans** during the quarter ended June 30, 2025[486](index=486&type=chunk) [Exhibits](index=149&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including merger agreements and officer certifications - The report includes a list of filed exhibits, such as the Merger Agreement, corporate governance documents, and **Sarbanes-Oxley Act certifications**[488](index=488&type=chunk)

[Corporate Update and Business Highlights](index=1&type=section&id=Corporate%20Update%20and%20Business%20Highlights) Q32 Bio advanced bempikibart development for alopecia areata with ongoing Phase 2a dosing, a new interim CMO, and FDA Fast Track designation [Clinical Program Updates](index=1&type=section&id=Clinical%20Program%20Updates) Bempikibart's SIGNAL-AA Phase 2a trial continues patient dosing in Part B and OLE, with Part B topline data expected in H1 2026 - Dosing of patients in Part B of the SIGNAL-AA Phase 2a clinical trial is ongoing, with topline data readout on track for the first half of 2026[1](index=1&type=chunk)[3](index=3&type=chunk) - The Part B trial will evaluate bempikibart in approximately **20 patients** with severe AA over a **36-week dosing period**, with efficacy measured by changes in SALT scores[3](index=3&type=chunk) - Patient dosing is also ongoing in the Part A open-label extension (OLE), initiated due to emerging data suggesting durable responses and strong patient demand for continued treatment[6](index=6&type=chunk) [Corporate Developments](index=1&type=section&id=Corporate%20Developments) Q32 Bio appointed Dr. Adrien Sipos as Interim CMO and secured FDA Fast Track designation for bempikibart in alopecia areata - Appointed Adrien Sipos, M.D., Ph.D., a seasoned Immunology and Inflammation (I&I) drug developer, as **Interim Chief Medical Officer**[1](index=1&type=chunk)[2](index=2&type=chunk)[6](index=6&type=chunk) - Bempikibart received **FDA Fast Track designation**, potentially allowing more frequent FDA interactions, rolling review, and eligibility for Accelerated Approval and Priority Review[6](index=6&type=chunk) [Financial Results](index=2&type=section&id=Financial%20Results) Q32 Bio reported a reduced net loss of **$9.5 million** in Q2 2025, driven by lower R&D, with **$54.8 million** cash extending its runway to 2027 [Financial Performance Summary](index=2&type=section&id=Financial%20Performance%20Summary) Q32 Bio's cash and equivalents totaled **$54.8 million**, funding operations into 2027, with reduced R&D and G&A expenses narrowing net loss to **$9.5 million** - Cash and cash equivalents were **$54.8 million** as of June 30, 2025, expected to fund operations into **2027** through key clinical milestones for bempikibart[1](index=1&type=chunk)[6](index=6&type=chunk) Expense Summary (in millions USD) | Expense Category | Q2 2025 (USD) | Q2 2024 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | R&D Expenses | $5.2M | $13.4M | -$8.2M | | G&A Expenses | $4.0M | $4.5M | -$0.5M | - The decrease in R&D expenses was primarily due to lower costs for bempikibart development and the discontinuation of the ADX-097 Phase 2 trial, while G&A decreased mainly due to lower personnel and legal costs following restructuring[6](index=6&type=chunk)[7](index=7&type=chunk) Net Loss Summary (in millions USD, except per share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Loss | $9.5M | $17.0M | | Net Loss Per Share (basic & diluted) | $0.78 | $1.42 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Total operating expenses decreased to **$9.2 million** in Q2 2025 from **$17.9 million** in Q2 2024, resulting in a reduced net loss of **$9.5 million** Condensed Consolidated Statements of Operations (in thousands USD, except per share amounts) | (in thousands, except per share amounts) | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | | :--- | :--- | :--- | | Research and development | $5,161 | $13,411 | | General and administrative | $4,010 | $4,508 | | **Total operating expenses** | **$9,171** | **$17,919** | | **Loss from operations** | **($9,171)** | **($17,919)** | | **Net loss** | **($9,489)** | **($16,978)** | | **Net loss per share—basic & diluted** | **($0.78)** | **($1.42)** | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were **$66.1 million**, down from **$92.3 million** in 2024, with total liabilities at **$78.4 million** and a stockholders' deficit of **$12.2 million** Condensed Consolidated Balance Sheets (in thousands USD) | (in thousands) | June 30, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $54,832 | $77,965 | | **Total assets** | **$66,117** | **$92,332** | | **Liabilities and Stockholders' Equity (Deficit)** | | | | Total Liabilities | $78,352 | $86,657 | | Stockholders' equity (deficit) | ($12,235) | $5,675 | | **Total liabilities and stockholders' equity (deficit)** | **$66,117** | **$92,332** |

Clinical Trial Results - The SIGNAL-AA Phase 2a trial studied bempikibart in patients with severe or very severe Alopecia Areata [1] - The study included patients with SALT scores between 50 and 100 [15] - At Week 24, patients with baseline SALT 50-100 showed a mean SALT score change of 163% with bempikibart treatment [20] - In patients with baseline SALT 50-95, the mean SALT score change at Week 24 was 245% with bempikibart [20] - Some patients experienced continued response even 7 months post last dose [23, 24] Safety and Tolerability - In the bempikibart group, 70% of participants experienced at least one treatment-emergent adverse event (TEAE) [27] - In the placebo group, 38% of participants experienced at least one TEAE [27] - No Grade 3 or higher related adverse events were reported in the bempikibart group [27] Study Design and Demographics - The study randomized patients in a 3:1 ratio to bempikibart (n=33) or placebo (n=81) [15] - The mean baseline SALT score in the bempikibart group was 749, while in the placebo group it was 819 [16]

Core Insights - Q32 Bio Inc. has appointed Dr. Adrien Sipos as Interim Chief Medical Officer, succeeding Dr. Jason Campagna, who is leaving the company [1][2] - Dr. Sipos brings over 25 years of experience in clinical development and medical affairs, particularly in Immunology and Inflammation [1][2] - The company is advancing its Phase 2a clinical trial for bempikibart, a treatment for alopecia areata, with topline results expected in the first half of next year [2][3] Company Overview - Q32 Bio is a clinical stage biotechnology company focused on developing therapies for alopecia areata and other autoimmune and inflammatory diseases [3] - Approximately 700,000 individuals in the U.S. are affected by alopecia areata, which significantly impacts their lives and has limited treatment options [3] - Bempikibart (ADX-914) is a fully human anti-IL-7Rα antibody that aims to re-regulate adaptive immune function and is currently in a Phase 2 program [3] Leadership Background - Dr. Sipos previously served as President and Chief Medical Officer at PRAXICO Inc., advising biopharmaceutical companies on clinical development [2] - She has held significant roles at Biogen, Sanofi Genzyme, and Eli Lilly, focusing on immunology and clinical development [2] - Dr. Sipos holds a Ph.D. in Clinical Immunology and an M.D. specializing in clinical immunology and endocrine care [2]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) The unaudited condensed consolidated financial statements for Q32 Bio Inc. as of March 31, 2025, reflect the company's financial position following its merger with Homology. The company reported a net loss of $11.0 million for the first quarter of 2025, a significant shift from a net income of $1.0 million in the same period of 2024, which was primarily due to a one-time gain from the change in fair value of convertible notes in 2024. Total assets decreased, driven by cash used in operations, resulting in a stockholders' deficit of $4.0 million [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, the company's total assets were $79.1 million, a decrease from $92.3 million at December 31, 2024, primarily due to a reduction in cash and cash equivalents from $78.0 million to $65.5 million. Total liabilities decreased slightly to $83.1 million from $86.7 million. The company shifted from a stockholders' equity of $5.7 million to a stockholders' deficit of $4.0 million, driven by the net loss during the quarter Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $65,483 | $77,965 | | Total current assets | $68,632 | $81,877 | | Total assets | $79,071 | $92,332 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $14,579 | $16,465 | | Total liabilities | $83,085 | $86,657 | | Total stockholders' equity (deficit) | $(4,014) | $5,675 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2025, the company reported a net loss of $11.0 million, or ($0.90) per share. This contrasts with a net income of $1.0 million, or $1.03 per basic share, for the same period in 2024. The 2024 income was primarily due to a $15.9 million non-cash gain from the change in fair value of convertible notes upon the merger. Operating expenses decreased to $12.2 million in Q1 2025 from $14.8 million in Q1 2024, mainly due to lower research and development costs Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Research and development | $7,124 | $9,841 | | General and administrative | $5,104 | $5,002 | | **Total operating expenses** | **$12,228** | **$14,843** | | Loss from operations | $(12,228) | $(14,843) | | Change in fair value of convertible notes | — | $15,890 | | **Net income (loss)** | **$(11,031)** | **$1,029** | | Net income (loss) per share—basic | $(0.90) | $1.03 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $12.5 million for the three months ended March 31, 2025, compared to $14.6 million in the prior-year period. There were no investing or financing activities in Q1 2025. In contrast, Q1 2024 saw significant financing inflows of $99.3 million, primarily from cash acquired in the reverse recapitalization ($53.2 million), proceeds from the pre-closing financing ($42.0 million), and new debt ($7.0 million). The company's total cash, cash equivalents, and restricted cash decreased from $78.6 million at the beginning of the period to $66.1 million at the end of Q1 2025 Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(12,482) | $(14,551) | | Net cash provided by investing activities | — | $97 | | Net cash provided by financing activities | — | $99,346 | | **Net (decrease) increase in cash** | **$(12,482)** | **$84,892** | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant events and accounting policies, including the March 2024 merger with Homology, which was accounted for as a reverse recapitalization. The company adopted a restructuring plan in February 2025, incurring $0.9 million in severance costs. The company has venture debt of $12.5 million outstanding and has various license agreements with potential future milestone and royalty payments. As of March 31, 2025, the company believes its cash and cash equivalents of $65.5 million are sufficient to fund operations for at least one year - The merger with Homology was completed on March 25, 2024, and accounted for as a reverse recapitalization, with Legacy Q32 as the accounting acquirer. This resulted in Homology's net assets being recorded at fair value on the combined company's financial statements[33](index=33&type=chunk)[35](index=35&type=chunk) - In February 2025, the company initiated a restructuring plan to focus on the bempikibart program, which included discontinuing the Phase 2 trial for ADX-097 and a reduction in workforce. This resulted in a restructuring charge of approximately **$0.9 million** in Q1 2025[99](index=99&type=chunk) - As of March 31, 2025, the company had **$12.5 million** in principal outstanding under its venture debt agreement with Silicon Valley Bank. The loan has an interest-only period until July 1, 2025[115](index=115&type=chunk) - The company believes its cash and cash equivalents of **$65.5 million** as of March 31, 2025, are sufficient to fund operating and capital expenditures for at least one year from the issuance date of the financial statements[40](index=40&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's focus on developing biologics for autoimmune diseases, with bempikibart as the lead candidate for alopecia areata (AA). A corporate restructuring in February 2025 prioritized bempikibart, discontinuing the ADX-097 trial. The analysis covers the financial impact of the March 2024 merger with Homology and a comparison of Q1 2025 and Q1 2024 results, highlighting a decrease in R&D expenses. The company's cash and cash equivalents of $65.5 million are expected to fund operations into the second half of 2026, though substantial additional capital will be needed for future development and commercialization [Overview](index=43&type=section&id=Overview) Q32 Bio is a clinical-stage biotech company focused on autoimmune and inflammatory diseases. Its lead candidate, bempikibart, is being advanced for alopecia areata (AA) following Phase 2a results, with topline data from the Part B expansion expected in the first half of 2026. In February 2025, the company restructured to prioritize bempikibart, discontinuing the Phase 2 trial of its other asset, ADX-097, and reducing its workforce - The company's most advanced product candidate, bempikibart, is being advanced for the treatment of alopecia areata (AA), with topline data from the SIGNAL-AA Part B trial expected in the **first half of 2026**[163](index=163&type=chunk)[167](index=167&type=chunk) - In February 2025, a corporate restructuring was initiated to focus resources on bempikibart. This included discontinuing the Phase 2 renal basket clinical trial of ADX-097 and a workforce reduction[172](index=172&type=chunk) - In April 2025, the FDA granted Fast Track designation to bempikibart for the treatment of AA, which is intended to facilitate development and expedite review[168](index=168&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) For Q1 2025, the company reported a net loss of $11.0 million, compared to a net income of $1.0 million in Q1 2024. The prior year's income was driven by a $15.9 million non-cash gain on the conversion of convertible notes during the merger. Research and development expenses decreased by $2.7 million to $7.1 million, primarily due to lower clinical trial costs for bempikibart and the discontinuation of the ADX-097 trial. General and administrative expenses remained stable at $5.1 million Comparison of Results of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Research and development | $7,124 | $9,841 | $(2,717) | | General and administrative | $5,104 | $5,002 | $102 | | **Total operating expenses** | **$12,228** | **$14,843** | **$(2,615)** | | Change in fair value of convertible notes | — | $15,890 | $(15,890) | | **Net income (loss)** | **$(11,031)** | **$1,029** | **$(12,060)** | - The decrease in R&D expenses was primarily due to a **$2.5 million** reduction in clinical spend for the bempikibart program and a **$0.5 million** decrease related to the discontinuation of the ADX-097 Phase 2 trial[200](index=200&type=chunk) - Other income (expense), net increased to **$1.2 million** in Q1 2025, mainly due to a **$1.0 million** gain on the change in fair value of the CVR liability, which was not present in the prior year[204](index=204&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the company had $65.5 million in cash and cash equivalents and an accumulated deficit of $245.8 million. Management expects the current cash position to be sufficient to fund operations into the second half of 2026. The company has primarily funded its operations through sales of preferred stock, convertible notes, venture debt, and proceeds from the Homology merger and pre-closing financing. Net cash used in operating activities was $12.5 million for Q1 2025. Substantial additional capital will be required to complete development and potential commercialization of its programs - The company had cash and cash equivalents of **$65.5 million** as of March 31, 2025[206](index=206&type=chunk)[208](index=208&type=chunk) - Management projects that current cash and cash equivalents will fund operations to the **second half of 2026**[208](index=208&type=chunk)[219](index=219&type=chunk) - Net cash used in operating activities for Q1 2025 was **$12.5 million**, primarily to fund operating expenses related to research and development activities for the bempikibart program[209](index=209&type=chunk)[211](index=211&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is a smaller reporting company and is not required to provide the information requested under this item - As a smaller reporting company, Q32 Bio Inc. is not required to provide quantitative and qualitative disclosures about market risk[237](index=237&type=chunk) [Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded that they were effective as of March 31, 2025. There were no changes in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report, March 31, 2025[239](index=239&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the first quarter of 2025[240](index=240&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[243](index=243&type=chunk) [Risk Factors](index=63&type=section&id=Item%201A.%20Risk%20Factors) The company outlines numerous risks that could materially affect its business. Key risks include a history of significant losses and the need for substantial additional capital; dependence on the success of its lead product candidate, bempikibart; competition from larger companies; uncertainties in clinical development and regulatory approval processes; reliance on third parties for manufacturing and clinical trials; and the ability to protect its intellectual property. Additional risks relate to operating as a public company post-merger, potential disruptions from its recent restructuring, and macroeconomic uncertainties [Risks Related to Our Limited Operating History, Financial Position and Need for Capital](index=63&type=section&id=Risks%20Related%20to%20Our%20Limited%20Operating%20History,%20Financial%20Position%20and%20Need%20for%20Capital) The company has a history of significant losses ($11.0 million in Q1 2025) and expects them to continue. It has no products approved for sale and may never become profitable. Substantial additional capital is required to fund operations, and failure to raise it on acceptable terms could force delays or elimination of clinical programs. The company's limited operating history makes it difficult to evaluate its future success - The company has incurred significant losses since inception and expects these to continue, with a net loss of **$11.0 million** for the three months ended March 31, 2025[245](index=245&type=chunk)[246](index=246&type=chunk) - Substantial additional capital is needed to finance future operations. An inability to raise funds may force the company to delay, reduce, or eliminate clinical trials and commercialization efforts[250](index=250&type=chunk) - The company has a limited operating history and no approved products, making it difficult for investors to evaluate its business and likelihood of success[255](index=255&type=chunk) [Risks Related to Discovery, Development and Commercialization](index=67&type=section&id=Risks%20Related%20to%20Discovery,%20Development%20and%20Commercialization) The company's success is substantially dependent on its lead candidate, bempikibart, which is in the early stages of development and faces significant competition. The development process is lengthy, expensive, and uncertain, with a high risk of failure. Early positive results may not be predictive of future outcomes. The company also faces risks related to patient enrollment, potential adverse events in clinical trials, and the unproven nature of its scientific approach - The company is substantially dependent on the success of its most advanced product candidate, bempikibart, which is still in clinical development and may not be successful[264](index=264&type=chunk) - The company faces intense competition from multinational biopharmaceutical companies with greater financial and technical resources[258](index=258&type=chunk) - Preclinical and clinical development is a long, expensive process with an uncertain outcome, and results from early trials may not predict success in later, larger trials[274](index=274&type=chunk) [Risks Related to our Intellectual Property](index=79&type=section&id=Risks%20Related%20to%20our%20Intellectual%20Property) The company's ability to protect its patents and proprietary rights is uncertain. It relies on a combination of patents, trade secrets, and licenses from third parties (like BMS and the University of Colorado). Failure to comply with license terms could result in the loss of critical rights. The patent landscape is complex and litigious, and the company may face challenges to the validity of its patents or infringement claims from others, which could be expensive and time-consuming to defend - The company's success depends on its ability to obtain and maintain patent protection for its product candidates, but pending applications may not issue as patents, and issued patents may be challenged or invalidated[290](index=290&type=chunk) - The company is dependent on licenses from third parties, such as Bristol Myers Squibb (BMS) for bempikibart. Failure to comply with license obligations could lead to the loss of essential rights[298](index=298&type=chunk)[299](index=299&type=chunk) - The company may be involved in expensive and time-consuming lawsuits to protect its intellectual property or defend against infringement claims from others[334](index=334&type=chunk)[336](index=336&type=chunk) [Risks Related to Government Regulation](index=99&type=section&id=Risks%20Related%20to%20Government%20Regulation) The company faces a lengthy, time-consuming, and unpredictable regulatory approval process with the FDA and other foreign authorities. There is no guarantee of obtaining approval for any product candidate. Even if approved, products will be subject to extensive ongoing regulation, and potential healthcare reforms could lead to unfavorable pricing and reimbursement policies. The company may seek expedited review pathways, but these do not guarantee faster approval or increase the likelihood of success - The regulatory approval process is lengthy, expensive, and unpredictable, and there is no guarantee that the company's product candidates will be approved[350](index=350&type=chunk) - Even if approved, products will be subject to extensive ongoing regulatory obligations, and failure to comply can result in significant penalties[366](index=366&type=chunk) - Healthcare legislative reform, price controls, and unfavorable reimbursement policies could adversely affect the commercial viability of any approved products[368](index=368&type=chunk)[374](index=374&type=chunk)[377](index=377&type=chunk) [Risks Related to Our Third Party Relationships](index=113&type=section&id=Risks%20Related%20to%20Our%20Third%20Party%20Relationships) The company relies heavily on third parties, including CROs for clinical trials and CDMOs for manufacturing. These third parties may not perform satisfactorily, leading to delays or failures in development. The company has less control over these activities but remains responsible for regulatory compliance. Finding and maintaining strategic collaborators for development and commercialization is also a key challenge - The company depends on third-party CROs to conduct clinical trials and may not have full control over their performance, which could delay development[386](index=386&type=chunk)[394](index=394&type=chunk) - The company relies on third-party CDMOs for the supply and manufacture of its product candidates, and any interruption or quality issue could harm its research and clinical activities[396](index=396&type=chunk) - The company may not be successful in establishing or maintaining strategic collaborations needed for the development and commercialization of its product candidates[388](index=388&type=chunk) [Risks Related to Our Business, Personnel and Operations](index=119&type=section&id=Risks%20Related%20to%20Our%20Business,%20Personnel%20and%20Operations) The February 2025 strategic refocus and workforce reduction may not yield anticipated cost savings and could disrupt business operations and morale. The company is highly dependent on attracting and retaining key management and scientific personnel. Cybersecurity risks, data privacy regulations, and managing growth also present significant challenges. The company's operations are also subject to environmental, health, and safety laws - The February 2025 restructuring and workforce reduction may not result in anticipated cost savings and could lead to disruptions, attrition, and reduced employee morale[406](index=406&type=chunk) - The company is highly dependent on its ability to attract and retain qualified key management and scientific personnel in a competitive market[417](index=417&type=chunk) - Internal computer systems are vulnerable to security incidents and data breaches, which could result in significant liabilities and disrupt operations[409](index=409&type=chunk) [Risks Related to Our Operations Following the Merger](index=135&type=section&id=Risks%20Related%20to%20Our%20Operations%20Following%20the%20Merger) The company faces risks related to its recent merger, including the potential inability to successfully integrate the businesses of Homology and Legacy Q32 and realize the anticipated benefits. It will continue to incur costs and demands on management associated with being a public company. Failure to maintain effective internal controls could impair the ability to produce accurate financial statements in a timely manner - The company may be unable to successfully integrate the businesses of Homology and Legacy Q32, which could prevent the realization of the merger's anticipated benefits[455](index=455&type=chunk) - The company will continue to incur significant costs and management demands related to public company compliance and reporting obligations[458](index=458&type=chunk) - Failure to maintain proper and effective internal controls could impair the company's ability to produce accurate and timely financial statements, potentially leading to a decline in stock price and regulatory sanctions[462](index=462&type=chunk)[464](index=464&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=138&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - The company reports no unregistered sales of equity securities for the period[465](index=465&type=chunk) [Defaults Upon Senior Securities](index=138&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - The company reports no defaults upon senior securities for the period[466](index=466&type=chunk) [Other Information](index=138&type=section&id=Item%205.%20Other%20Information) The company states that no Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by officers or directors during the quarter ended March 31, 2025 - No officers or directors adopted, modified, or terminated any Rule 10b5-1 trading plans during the first quarter of 2025[468](index=468&type=chunk) [Exhibits](index=139&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Merger Agreement, corporate governance documents, and officer certifications

[Corporate Update and Business Highlights](index=1&type=section&id=Corporate%20Update%20and%20Business%20Highlights) This section details Q32 Bio's progress with its lead candidate bempikibart, including clinical trial advancements and positive Phase 2a results [Bempikibart Program Advancements](index=1&type=section&id=Bempikibart%20Program%20Advancements) Q32 Bio advanced its bempikibart program for alopecia areata, dosing the first patient in Phase 2a Part B and receiving FDA Fast Track designation - The first patient has been dosed in Part B of the SIGNAL-AA Phase 2a clinical trial, with topline data expected in the first half of **2026**[1](index=1&type=chunk)[4](index=4&type=chunk) - Bempikibart received Fast Track designation (FTD) from the FDA for the treatment of alopecia areata, a status intended to facilitate development and expedite the review of drugs for serious conditions[1](index=1&type=chunk)[3](index=3&type=chunk) - The first patient was dosed in the open-label extension (OLE) for eligible patients who completed Part A of the SIGNAL-AA trial, allowing for longer-term follow-up[1](index=1&type=chunk)[4](index=4&type=chunk) [SIGNAL-AA Phase 2a Part A Trial Results](index=2&type=section&id=SIGNAL-AA%20Phase%202a%20Part%20A%20Trial%20Results) Part A of the SIGNAL-AA Phase 2a trial showed clinically meaningful activity and a deepening response post-treatment, with bempikibart demonstrating safety and tolerability - In the SIGNAL-AA Part A trial, bempikibart showed clinically meaningful activity at week 24, with responses continuing to improve after dosing ceased, through the week 36 follow-up period[4](index=4&type=chunk) - Among **12 patients** who responded during the trial, all maintained their response or showed further hair growth post-treatment, with **seven** showing additional hair growth by SALT assessment[4](index=4&type=chunk) - Across clinical trials, bempikibart was observed to be safe and well-tolerated, with no grade 3 or higher related adverse events or related viral infections reported[5](index=5&type=chunk) [Financial Results](index=3&type=section&id=Financial%20Results) This section provides an overview of Q32 Bio's first quarter 2025 financial performance, including net loss, cash position, and key financial statements [First Quarter 2025 Financial Summary](index=3&type=section&id=First%20Quarter%202025%20Financial%20Summary) Q32 Bio reported a net loss of $11.0 million for Q1 2025, with $65.5 million in cash expected to fund operations into the second half of 2026 - Cash and cash equivalents were **$65.5 million** as of March 31, 2025, which is expected to provide financial runway into the second half of **2026**[1](index=1&type=chunk)[8](index=8&type=chunk) Q1 2025 vs. Q1 2024 Financial Highlights (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Research and Development Expenses | $7.1 | $9.8 | | General and Administrative Expenses | $5.1 | $5.0 | | Net Income (Loss) | $(11.0) | $1.0 | | Net Income (Loss) Per Share (Basic) | $(0.90) | $1.03 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q32 Bio reported a net loss of $11.0 million for Q1 2025, a shift from a $1.0 million net income in Q1 2024, primarily due to a non-recurring gain in the prior year Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended March 31, | | :--- | :--- | :--- | | | **2025** | **2024** | | **Total operating expenses** | $12,228 | $14,843 | | Loss from operations | $(12,228) | $(14,843) | | Change in fair value of convertible notes | — | $15,890 | | **Net income (loss)** | **$(11,031)** | **$1,029** | | Net income (loss) per share—basic | $(0.90) | $1.03 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Q32 Bio's total assets decreased to $79.1 million, primarily due to reduced cash, resulting in a stockholders' deficit of $4.0 million Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $65,483 | $77,965 | | **Total assets** | **$79,071** | **$92,332** | | **Liabilities and stockholders' equity (deficit)** | | | | Total liabilities | $83,085 | $86,657 | | Stockholders' equity (deficit) | $(4,014) | $5,675 | | **Total liabilities and stockholders' equity (deficit)** | **$79,071** | **$92,332** | [Company Information and Forward-Looking Statements](index=3&type=section&id=Company%20Information%20and%20Forward-Looking%20Statements) This section provides an overview of Q32 Bio's focus on autoimmune and inflammatory diseases and outlines the forward-looking nature of the report's statements [About Q32 Bio](index=3&type=section&id=About%20Q32%20Bio) Q32 Bio is a clinical-stage biotechnology company developing therapies for autoimmune and inflammatory diseases, with bempikibart as its lead candidate for alopecia areata - Q32 Bio is a clinical-stage biotechnology company developing therapies for alopecia areata and other autoimmune and inflammatory diseases[7](index=7&type=chunk) - The company's lead candidate is bempikibart (ADX-914), an anti-IL-7Rα antibody being advanced for the treatment of alopecia areata[7](index=7&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This report includes forward-looking statements regarding bempikibart's clinical development and financial projections, which are subject to inherent risks and uncertainties - The report contains forward-looking statements regarding the plan and timing of the SIGNAL-AA Phase 2a clinical trial, the potential benefits of bempikibart, and the sufficiency of cash to fund operations into the second half of **2026**[10](index=10&type=chunk) - Key risks include the possibility that future data may not support current expectations, clinical studies may be delayed or not yield anticipated results, and capital may be used sooner than expected[11](index=11&type=chunk)

Core Insights - Q32 Bio has made significant progress in its clinical trials for bempikibart, receiving Fast Track designation and initiating dosing in both parts of the SIGNAL-AA Phase 2a clinical trial [2][3][4] - The company reported a net loss of $11.0 million for Q1 2025, compared to a net income of $1.0 million in Q1 2024, indicating a shift in financial performance [9][13] - Cash and cash equivalents stood at $65.5 million as of March 31, 2025, which is expected to fund operations into the second half of 2026 [9][12] Clinical Development - The first patient has been dosed in Part B of the SIGNAL-AA Phase 2a clinical trial, with topline data readout anticipated in the first half of 2026 [3][4] - Part B will evaluate bempikibart in approximately 20 patients with severe or very severe alopecia areata (AA) over a 36-week treatment period [3][4] - An open-label extension (OLE) for Part A has been initiated to allow for longer-term follow-up of patients who completed the initial trial [3][4] Fast Track Designation - Bempikibart has received Fast Track designation from the FDA, which aims to expedite the development and review of drugs for serious diseases [3][4] - This designation may allow for more frequent communication with the FDA and eligibility for Accelerated Approval and Priority Review [3] Financial Performance - Research and development expenses decreased to $7.1 million in Q1 2025 from $9.8 million in Q1 2024, reflecting a focus on clinical development [9][13] - General and administrative expenses remained stable at $5.1 million for Q1 2025, consistent with the previous year [9][13] - The company reported a basic and diluted net loss per share of $(0.90) for Q1 2025, compared to a net income per share of $1.03 in Q1 2024 [9][13] Market Context - Approximately 700,000 individuals in the United States are affected by alopecia areata, highlighting the significant unmet medical need in this area [6] - Q32 Bio is focused on developing therapies that target the adaptive immune system, particularly for autoimmune and inflammatory diseases [6]

Core Insights - Q32 Bio Inc. has initiated dosing for the first patients in both Part A open-label extension and Part B of the SIGNAL-AA Phase 2a clinical trial for bempikibart, targeting alopecia areata [1][2] - The company reports encouraging clinical activity from Part A, with significant improvements in SALT scores and sustained responses observed in patients up to 55 weeks post-treatment [2][3] - Part B of the trial will involve approximately 20 patients over 36 weeks, with topline data expected in the first half of 2026 [3] Company Overview - Q32 Bio is a clinical stage biotechnology company focused on innovative therapies for alopecia areata and other autoimmune diseases, with an estimated 700,000 individuals affected in the U.S. [4] - The company is advancing bempikibart, a fully human anti-IL-7Rα antibody, which aims to re-regulate adaptive immune function [4] Clinical Trial Details - Part A of the SIGNAL-AA trial was a randomized, double-blind, placebo-controlled study that demonstrated significant clinical activity in patients with severe alopecia areata [2][3] - Part B will evaluate the efficacy of bempikibart based on mean percentage change in SALT scores and the proportion of subjects achieving specific SALT improvements [3]

Core Viewpoint - Q32 Bio (QTTB) has received an upgrade to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, indicating a positive outlook for the company's stock price [1][3]. Earnings Estimates and Stock Price Movement - Changes in a company's future earnings potential, reflected in earnings estimate revisions, are strongly correlated with near-term stock price movements [4]. - Institutional investors utilize earnings estimates to calculate the fair value of a company's shares, leading to buying or selling actions that influence stock prices [4]. Company Performance and Investor Sentiment - The rising earnings estimates for Q32 Bio suggest an improvement in the company's underlying business, which is expected to drive the stock price higher as investors recognize this trend [5]. - Over the past three months, the Zacks Consensus Estimate for Q32 Bio has increased by 0.3%, with analysts projecting a loss of -$4.14 per share for the fiscal year ending December 2025, representing a year-over-year change of 37.1% [8]. Zacks Rank System - The Zacks Rank stock-rating system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade of Q32 Bio to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [10].