Financial Report Summary and Analysis

Overview of the Company’s Financial Performance

The financial report provides an overview of XBiotech’s financial performance for the three and nine months ended September 30, 2024. The key highlights are:

• Total research and development expenses decreased by 6% to $7.1 million for the three months ended September 30, 2024, compared to $7.5 million for the same period in 2023. However, for the nine months ended September 30, 2024, research and development expenses increased by 20% to $29.9 million, compared to $25.0 million in the prior year period.
• General and administrative expenses decreased by 20% to $0.8 million for the three months ended September 30, 2024, and decreased by 2% to $3.8 million for the nine months ended September 30, 2024, compared to the same periods in 2023.
• Other income increased to $2.9 million for the three months ended September 30, 2024, compared to $1.5 million in the same period in 2023, primarily due to higher interest income and foreign exchange gains.
• The company’s cash and cash equivalents decreased from $202.2 million as of September 30, 2023, to $183.1 million as of September 30, 2024, mainly due to the increase in net cash used in operating activities.

Revenue and Profit Trends

The company did not generate any revenue during the reported periods, as it is still in the research and development stage and has not yet commercialized any products. The company’s focus has been on advancing its drug candidates and research projects, which has resulted in increasing research and development expenses over time.

While the company’s research and development expenses increased by 20% for the nine months ended September 30, 2024, compared to the same period in 2023, the general and administrative expenses decreased by 2% during the same period. This suggests that the company is effectively managing its administrative costs while prioritizing its research and development efforts.

The company’s other income, primarily from interest and foreign exchange gains, has helped offset some of the losses from its operating expenses, but the company has continued to report net losses as it invests in its pipeline.

Strengths and Weaknesses

Strengths:

• Strong cash position, with $183.1 million in cash and cash equivalents as of September 30, 2024, providing the company with the financial resources to continue its research and development activities.
• Effective management of general and administrative expenses, which have decreased over the reported periods.
• Diversified pipeline of drug candidates and research projects, which the company can selectively advance based on their preclinical and clinical success and commercial potential.

Weaknesses:

• Lack of revenue, as the company has not yet commercialized any products.
• Increasing research and development expenses, which have grown by 20% for the nine months ended September 30, 2024, compared to the same period in 2023, as the company continues to invest in its pipeline.
• Reliance on external funding, as the company has not yet achieved profitability and must rely on equity financing and other sources of capital to fund its operations.

Outlook for the Future

The company’s future outlook will depend on its ability to successfully advance its drug candidates and research projects through the various stages of development and, ultimately, to commercialization. The company’s strong cash position provides it with the financial resources to continue its research and development efforts, but it will need to carefully manage its expenses and prioritize its projects to ensure the most efficient use of its capital.

The company’s management has stated that it will select drug candidates and research projects for further development on an ongoing basis, based on their preclinical and clinical success and commercial potential. This suggests that the company will continue to be selective in its investments and focus on the most promising opportunities in its pipeline.

Overall, the company’s financial performance and outlook will depend on its ability to effectively manage its research and development expenses, continue to secure external funding, and successfully advance its drug candidates and research projects towards commercialization.