89bio(ETNB) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents 89bio's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (Unaudited) This section presents 89bio's unaudited condensed consolidated financial statements, covering balance sheets, operations, equity, cash flows, and notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | $129,076 | $126,060 | | Marketable securities | $432,088 | $313,895 | | Total current assets | $601,520 | $476,450 | | Total assets | $603,485 | $478,685 | | Liabilities | | | | Total current liabilities | $39,611 | $36,129 | | Warrant liability | $— | $516 | | Term loan, noncurrent, net | $36,156 | $35,732 | | Total liabilities | $81,752 | $77,896 | | Stockholders' Equity | | | | Total stockholders' equity | $521,733 | $400,789 | | Total liabilities and stockholders' equity | $603,485 | $478,685 | Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's financial performance, including revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations and Comprehensive Loss (In thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $103,902 | $44,865 | $168,296 | $92,293 | | General and administrative | $11,922 | $8,571 | $23,437 | $18,420 | | Total operating expenses | $115,824 | $53,436 | $191,733 | $110,713 | | Loss from operations | $(115,824) | $(53,436) | $(191,733) | $(110,713) | | Interest expense | $(1,137) | $(874) | $(2,404) | $(1,737) | | Interest income and other, net | $6,210 | $6,473 | $12,248 | $13,029 | | Net loss | $(111,504) | $(47,971) | $(182,779) | $(99,652) | | Comprehensive loss | $(111,767) | $(48,135) | $(183,220) | $(100,525) | | Net loss per share, basic and diluted | $(0.71) | $(0.48) | $(1.20) | $(1.02) | | Weighted-average shares (basic and diluted) | 157,880,203 | 99,831,111 | 152,154,469 | 97,838,926 | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, reflecting stock issuances, net losses, and stock-based compensation - Total stockholders' equity increased from $400,789 thousand as of December 31, 2024, to $521,733 thousand as of June 30, 2025, primarily driven by $269,903 thousand from a public offering and stock-based compensation of $7,216 thousand and $7,315 thousand, partially offset by net losses of $(71,275) thousand and $(111,504) thousand[16] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(172,162) | $(100,884) | | Net cash used in investing activities | $(114,455) | $(52,049) | | Net cash provided by financing activities | $289,633 | $48,990 | | Net change in cash and cash equivalents | $3,016 | $(103,943) | | Cash and cash equivalents at end of period | $129,076 | $212,218 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements 1. Organization and Liquidity 89bio, a clinical-stage biopharmaceutical company, has an accumulated deficit of $1,007.3 million but sufficient liquidity for at least one year - 89bio, Inc. is a clinical-stage biopharmaceutical company developing pegozafermin for MASH and SHTG[24] - The company has an accumulated deficit of $1,007.3 million as of June 30, 2025, and expects continued operating losses[26] - Existing cash, cash equivalents, and marketable securities ($561.2 million as of June 30, 2025) are projected to fund operations for at least one year[27] 2. Summary of Significant Accounting Policies This section outlines 89bio's accounting principles, including U.S. GAAP conformity, fair value measurements, and new FASB ASUs - Financial statements are prepared in conformity with U.S. GAAP and SEC rules for interim reporting, reflecting normal recurring adjustments[28][29] - The company manages its business as a single reportable segment, with the CEO as the Chief Operating Decision Maker (CODM)[43] - New FASB ASUs (2023-09 on Income Tax Disclosures and 2024-03 on Expense Disaggregation) are expected to result in expanded disclosures upon adoption in 2025 and 2027/2028, respectively[45][46][47][48] 3. Fair Value Measurements This section details fair value measurements for financial assets and liabilities, including cash equivalents, marketable securities, and warrant liability Fair Value of Cash Equivalents and Marketable Securities (In thousands) | Asset Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------- | :----------------------- | :------------------------- | | Money market funds (Level 1) | $5,535 | $22,645 | | Commercial paper (Level 2) | $101,633 | $51,991 | | U.S. government bonds (Level 2) | $212,381 | $170,270 | | Agency bonds (Level 2) | $56,724 | $63,859 | | Corporate debt securities (Level 2) | $9,103 | $6,166 | | U.S. Treasury securities (Level 2) | $111,149 | $44,509 | | Agency discount securities (Level 2) | $— | $18,942 | | Total | $496,525 | $378,382 | | Classified as: Cash equivalents | $64,437 | $64,487 | | Classified as: Marketable securities | $432,088 | $313,895 | - The warrant liability, previously $516 thousand as of December 31, 2024, was reduced to zero as of June 30, 2025, due to the expiration of Tranche 1 and the remote probability of exercise for Tranches 2 and 3 of the Term Loan Facility[53][54] 4. Balance Sheet Components This section breaks down prepaid and other current assets, and accrued expenses, reflecting increased clinical trial activity Prepaid and Other Current Assets (In thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Prepaid research and development | $37,802 | $32,550 | | Prepaid taxes | $52 | $368 | | Prepaid other | $2,502 | $3,577 | | Total | $40,356 | $36,495 | Accrued Expenses (In thousands) | Expense Category | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Accrued research and development expenses | $17,363 | $11,426 | | Accrued employee and related expenses | $5,016 | $6,872 | | Accrued professional and legal fees | $1,749 | $1,680 | | Accrued other expenses | $42 | $42 | | Total | $24,170 | $20,020 | 5. Commitments and Contingencies This section details commitments under the Teva agreement and BiBo collaboration, plus an Israeli Tax Authority assessment - Under the FGF21 Agreement with Teva, 89bio is obligated to make up to $65.0 million in commercial milestone payments and tiered royalties on net sales of pegozafermin[57] - The BiBo Collaboration Agreement for a commercial manufacturing facility was amended in June 2025, increasing the total contractual obligation to $175.0 million (exclusive of VAT), with an additional $40.0 million paid in June 2025 and a final $13.5 million milestone payment due upon facility completion[61][62] - The Israeli Tax Authority (ITA) issued a formal assessment seeking to recharacterize an intercompany IP transfer as a taxable sale, leading to a recorded liability of $5.3 million for unrecognized tax benefit, which 89bio is appealing[64][65][67] 6. Term Loan Facility This section describes the $150.0 million Term Loan Facility, its tranches, maturity, interest rate, and warrant reclassification - The Term Loan Facility provides for a maximum aggregate principal amount of $150.0 million, secured by substantially all assets excluding intellectual property[69] - Tranche 1's remaining $35.0 million commitment expired undrawn on June 30, 2025; Tranche 2's $30.0 million is not expected to be achieved by the December 31, 2025, milestone due to revised ENTRUST data reporting in Q1 2026; Tranche 3 is available at lenders' sole discretion[73] - The loan matures on October 1, 2028, with interest-only payments until January 1, 2027, and the stated interest rate was 9.25% as of June 30, 2025[70] 7. Stockholders' Equity This section details changes in stockholders' equity, including public offerings, ATM program activity, and warrant issuances Common Stock Reserved for Issuance (As of June 30, 2025) | Category | Shares Reserved | | :------------------------------------------ | :-------------- | | Stock options outstanding | 11,698,226 | | RSUs and PSUs outstanding | 2,508,289 | | Shares available for future grants | 1,996,052 | | Shares available for ESPP | 3,246,812 | | Warrants to purchase common stock outstanding | 397,123 | | Pre-funded warrants to purchase common stock outstanding | 11,231,081 | | Conversion feature related to outstanding term loan | 1,112,546 | | Total available for future issuance | 32,190,129 | - In January 2025, an underwritten public offering of common stock and pre-funded warrants generated approximately $269.9 million in net proceeds[76][128] - Under the 2023 ATM Facility, $21.0 million in net proceeds were raised from the sale of 2,160,484 shares during the six months ended June 30, 2025, with approximately $82.8 million remaining available under this facility[78][79][125][126] - As of June 30, 2025, 11,628,204 warrants were outstanding, including 11,231,081 pre-funded warrants with a nominal exercise price of $0.001 per share[82] 8. Stock-Based Compensation Stock-based compensation expense increased due to headcount growth, with significant unrecognized expense for options and RSUs/PSUs Stock-Based Compensation Expense (In thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $3,184 | $2,342 | $6,586 | $4,657 | | General and administrative | $4,131 | $2,827 | $7,945 | $5,510 | | Total | $7,315 | $5,169 | $14,531 | $10,167 | - Total unrecognized stock-based compensation expense for unvested stock options was $47.9 million as of June 30, 2025, to be recognized over a weighted-average period of 2.9 years[83] - Total unrecognized stock-based compensation expense for RSUs and PSUs was $18.0 million as of June 30, 2025, to be recognized over a weighted-average period of 1.8 years, with a reassessment of PSU performance conditions reducing unrecognized expense by $7.8 million[84] 9. Net Loss Per Share Basic and diluted net loss per share were $(0.71) and $(1.20), with increased weighted-average shares due to issuances Weighted-Average Shares Outstanding for Net Loss Per Share | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Common stock | 146,649,122 | 98,495,085 | 142,028,913 | 96,230,372 | | Pre-funded warrants | 11,231,081 | 1,336,026 | 10,125,556 | 1,608,554 | | Total | 157,880,203 | 99,831,111 | 152,154,469 | 97,838,926 | - Potentially dilutive common stock equivalents, including stock options, RSUs, PSUs, warrants, and term loan conversion features, were excluded from diluted net loss per share calculations due to their anti-dilutive effect during periods of net loss[86] 10. Segment Information 89bio operates as a single segment, with the CEO reviewing consolidated net loss and key expense categories for performance - 89bio operates as a single reportable segment, with the CEO serving as the Chief Operating Decision Maker (CODM)[87] Significant Expense Categories (In thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Contract manufacturing | $58,084 | $17,018 | $77,141 | $38,369 | | Clinical development | $35,299 | $18,949 | $69,094 | $36,873 | | Research and development personnel-related | $9,608 | $7,847 | $20,281 | $15,580 | | General and administrative | $11,922 | $8,571 | $23,437 | $18,420 | | Interest expense | $1,137 | $874 | $2,404 | $1,737 | | Interest income and other, net | $(6,210) | $(6,473) | $(12,248) | $(13,029) | | Income tax expense | $753 | $134 | $890 | $231 | | Net loss | $(111,504) | $(47,971) | $(182,779) | $(99,652) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on 89bio's financial condition, operational results, and future funding needs Overview 89bio is a clinical-stage biopharmaceutical company focused on developing innovative therapies for liver and cardio-metabolic diseases - 89bio is a clinical-stage biopharmaceutical company focused on developing innovative therapies for liver and cardio-metabolic diseases[92] - Pegozafermin, the lead product candidate, is being developed for metabolic dysfunction-associated steatohepatitis (MASH) and severe hypertriglyceridemia (SHTG)[92] Pegozafermin MASH Program Pegozafermin is in Phase 3 clinical development for MASH, with topline data anticipated in H1 2027 and 2028 - Pegozafermin is in Phase 3 clinical development for MASH, following positive Phase 1b/2a and Phase 2b ENLIVEN trial results[93] - The FDA granted Breakthrough Therapy Designation and the EMA granted Priority Medicines Designation (PRIME) for pegozafermin in MASH[94] - The Phase 3 ENLIGHTEN program includes two global trials: ENLIGHTEN-Fibrosis (F2-F3 MASH, topline data anticipated H1 2027) and ENLIGHTEN-Cirrhosis (compensated F4 MASH, topline data anticipated 2028)[94][96] Pegozafermin SHTG Program Pegozafermin is advancing for SHTG treatment, with Phase 3 ENTRUST trial topline data expected in Q1 2026 - Pegozafermin is also advancing for SHTG treatment, based on positive Phase 2 ENTRIGUE trial results[95] - Enrollment in the Phase 3 ENTRUST trial for SHTG was completed in December 2024 (369 patients), with topline data expected in Q1 2026 after study completion at Week 52[95][97] Manufacturing and Commercial Supply Preparedness A collaboration with BiBo Biopharma Engineering is in place for a Commercial Facility to produce pegozafermin's bulk active ingredient - A collaboration agreement with BiBo Biopharma Engineering Co., Ltd. is in place for the construction of a Commercial Facility in China to produce pegozafermin's bulk active ingredient[98] - The manufacturing platform is designed to provide sufficient capacity for projected commercial needs and is part of a broader global manufacturing strategy to enhance resilience and flexibility[98] Components of Results of Operations This section defines key components of operations, including R&D, G&A, interest expense, interest income, and income tax expense - Research and development expenses include costs for preclinical and clinical development, intellectual property, license agreements, contract research organizations, manufacturing, and personnel[99] - General and administrative expenses primarily consist of personnel costs, professional services (legal, HR, audit), consulting, and allocated facilities costs[103] - Interest expense includes cash interest, accretion of end of term loan fees, and amortization of deferred debt issuance costs, while interest income is mainly from marketable securities[105][106] Results of Operations (Three Months Ended June 30, 2025 and 2024) Net loss significantly increased to $(111.5) million, driven by higher R&D expenses, including a $40.0 million BiBo payment Summary of Results of Operations (Three Months Ended June 30, In thousands) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :----- | | Research and development | $103,902 | $44,865 | $59,037 | | General and administrative | $11,922 | $8,571 | $3,351 | | Total operating expenses | $115,824 | $53,436 | $62,388 | | Loss from operations | $(115,824) | $(53,436) | $(62,388) | | Interest expense | $(1,137) | $(874) | $(263) | | Interest income and other, net | $6,210 | $6,473 | $(263) | | Net loss before tax | $(110,751) | $(47,837) | $(62,914) | - Research and development expenses increased by $59.0 million, primarily due to a $40.0 million non-recurring payment to BiBo for the Commercial Facility and a $16.4 million increase in clinical development costs for Phase 3 trials[110][111] - General and administrative expenses increased by $3.4 million, mainly due to higher personnel-related expenses, including stock-based compensation, driven by increased headcount[112] Results of Operations (Six Months Ended June 30, 2025 and 2024) Net loss increased to $(182.8) million, primarily due to higher R&D expenses, including the $40.0 million BiBo payment Summary of Results of Operations (Six Months Ended June 30, In thousands) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :----- | | Research and development | $168,296 | $92,293 | $76,003 | | General and administrative | $23,437 | $18,420 | $5,017 | | Total operating expenses | $191,733 | $110,713 | $81,020 | | Loss from operations | $(191,733) | $(110,713) | $(81,020) | | Interest expense | $(2,404) | $(1,737) | $(667) | | Interest income and other, net | $12,248 | $13,029 | $(781) | | Net loss before tax | $(181,889) | $(99,421) | $(82,468) | - Research and development expenses increased by $76.0 million, primarily from a $38.8 million increase in contract manufacturing (including the $40.0 million BiBo payment) and a $32.2 million increase in clinical development costs for Phase 3 trials[117][118] - General and administrative expenses increased by $5.0 million, driven by higher personnel-related costs, including a $2.4 million increase in stock-based compensation and a $1.7 million increase in payroll and benefits[119] Liquidity and Capital Resources 89bio had $561.2 million in liquidity, sufficient for one year, but will require substantial additional capital for operations - As of June 30, 2025, the company had $561.2 million in cash, cash equivalents, and marketable securities, and an accumulated deficit of $1,007.3 million[123] - Existing financial resources are expected to fund operations for at least one year from the filing date of the 10-Q[134] - Key sources of liquidity include $269.9 million net proceeds from a January 2025 public offering and $21.0 million from the 2023 ATM Facility (with $82.8 million remaining)[125][126][128] - The Term Loan Facility's Tranche 1 expired undrawn, and Tranche 2 is not expected to be achieved by its milestone date, limiting future debt funding from these tranches[133] - Future funding requirements are substantial and depend on clinical trial progress, manufacturing costs, regulatory approvals, and potential in-licensing activities[135] Cash Flows Net cash used in operating activities increased, while financing activities provided $289.6 million, resulting in a $3.0 million net cash increase Summary of Cash Flows (Six Months Ended June 30, In thousands) | Cash Flow Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net cash used in operating activities | $(172,162) | $(100,884) | | Net cash used in investing activities | $(114,455) | $(52,049) | | Net cash provided by financing activities | $289,633 | $48,990 | | Net change in cash and cash equivalents | $3,016 | $(103,943) | - Net cash used in operating activities increased by $71.3 million, primarily due to a higher net loss and a $4.2 million increase in prepaid expenses and other assets[139] - Net cash provided by financing activities increased by $240.6 million, mainly from $269.9 million in net proceeds from the public offering and $21.0 million from the ATM program[143] Contractual Obligations and Commitments This section details debt obligations, Teva license commitments, BiBo facility payments, and the Israeli Tax Authority assessment - Outstanding principal of $35.0 million under the Loan Agreement matures on October 1, 2028, with interest-only payments until January 1, 2027[145] - Obligations under the Teva license agreement include up to $65.0 million in commercial milestones and tiered royalties on net sales of pegozafermin[146] - The BiBo collaboration for the commercial facility has a total contractual obligation of $175.0 million (excluding VAT), with $161.5 million paid as of June 30, 2025, and a remaining $13.5 million milestone payment due upon facility completion (estimated 2026)[148][149] - The Israeli Tax Authority issued a formal assessment for approximately $26.0 million in tax liability and $3.9 million in penalties, which the company is appealing, having recorded a $5.3 million liability for unrecognized tax benefit[150][152] Critical Accounting Estimates No significant changes in critical accounting estimates compared to the Annual Report on Form 10-K for December 31, 2024 - There have been no significant changes in critical accounting estimates compared to the Annual Report on Form 10-K for the year ended December 31, 2024[153] Recent Accounting Pronouncements Refer to Note 2, 'Summary of Significant Accounting Policies,' for information on recent accounting pronouncements - Refer to Note 2, 'Summary of Significant Accounting Policies,' for information on recent accounting pronouncements[154] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk from the information provided in the Annual Report on Form 10-K for December 31, 2024 - No material changes in market risk from the information provided in the Annual Report on Form 10-K for the year ended December 31, 2024[155] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate financial reporting[156] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[157] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings, though litigation could adversely impact operations - The company is not currently a party to any material legal proceedings[160] - Litigation, even if not material, can adversely impact the company through costs, diversion of resources, and reputational harm[160] Item 1A. Risk Factors This section outlines significant risks, including dependence on pegozafermin, funding needs, manufacturing reliance, and regulatory complexities - The company is a clinical-stage biopharmaceutical company with a limited operating history, no approved products, and expects significant and increasing operating losses, making its stock a highly speculative investment[162][163][166] - Business success is highly dependent on pegozafermin, its only product candidate under clinical development, which has not completed a pivotal trial, and clinical drug development is lengthy, expensive, and uncertain, with no guarantee of regulatory approval or commercialization[162][167][168] - The company will require substantial additional capital to finance operations, which may not be available on acceptable terms, potentially delaying or preventing the development and commercialization of pegozafermin[162][171][172] - Significant risks include reliance on third-party manufacturers (e.g., BiBo in China, subject to geopolitical risks like the BIOSECURE Act), potential undesirable side effects of pegozafermin, and the complex, evolving regulatory landscape for MASH and SHTG[162][178][179][185][187][188] - The biopharmaceutical industry is intensely competitive, with many companies developing competing products, some with greater resources, and unstable market and economic conditions, including inflation and geopolitical events, pose serious adverse consequences[195][198][199][200] - Success depends on obtaining and maintaining intellectual property protection, which is uncertain and subject to challenges, and reliance on licenses (e.g., from Teva) and potential limitations on net operating loss carryforwards (e.g., due to Israeli Tax Authority assessment) are also significant risks[165][240][245][249][274][275] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - None[278] Item 3. Default Upon Senior Securities There were no defaults upon senior securities to report during the period - None[279] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[280] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[281] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents and key agreements - The exhibits include various corporate documents such as the Second Amended and Restated Certificate of Incorporation, Third Amended and Restated Bylaws, and specimen common stock certificates[285] - Forms of warrants to purchase common stock for Silicon Valley Bank and K2 HealthVentures LLC, as well as pre-funded warrants, are included[285] - Key agreements include an Amendment to Executive Employment Offer Letter and an Amendment to Collaboration Agreement with BiBo Biopharma Engineering Co., Ltd[285] SIGNATURES The report is signed by Rohan Palekar, Chief Executive Officer, and Ryan Martins, Chief Financial Officer, on August 8, 2025 - The report is signed by Rohan Palekar, Chief Executive Officer, and Ryan Martins, Chief Financial Officer, on August 8, 2025[289]