Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the accompanying notes included in Part I, Item 1 of this Form 10-Q. Some of the information contained in this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. As a result of many factors, including those factors set forth in the section titled "Risk Factors," our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled "Risk Factors." Please also refer to the section titled "Special Note Regarding Forward Looking Statements."

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Quarterly Report" or "Form 10-Q") includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Exchange Act of 1934, as amended (the "Exchange Act"), that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek" and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, relate to future events or future performance, but reflect management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. In addition, historic results, including but not limited to those related to IND enabling GLP safety/toxicology of SAB-142; and Phase 1 & Phase 2a results of SAB-176; do not guarantee that future research or trials will suggest the same conclusions, nor that historic results referred to herein will be interpreted in the same manner due to future preclinical and clinical trial results or otherwise. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the sections entitled "Risk Factors" in this Quarterly Report, our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, and other periodic reports filed with the Securities and Exchange Commission (the "SEC") and available at https://www.sec.gov/. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as expressly required by applicable law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

Company Overview

We are a clinical-stage biopharmaceutical company focused on developing multi-specific, high-potency, human immunoglobulin G (hIgG) to treat and prevent immune and autoimmune disorders. Our programs are based on mechanisms of action that have achieved proof-of-concept in clinical trials in indications with significant unmet medical needs. We are focused on developing product candidates for disease targets where a differentiated approach has the greatest potential to be either first-in-class against novel targets or best-in-class against complex targets to treat diseases, including type 1 diabetes (T1D) and other autoimmune disorders. The Company's lead candidate, SAB-142, targets autoimmune T1D with a disease-modifying therapeutic approach that aims to change the T1D treatment paradigm by delaying onset and potentially preventing disease progression of Stage 3 T1D patients.

Using advanced genetic engineering and antibody science, we developed a proprietary technology which holds the potential to generate additional novel therapeutic candidates utilizing the human immune response, without the need for human donors or convalescent plasma. We believe it is the only technology capable of producing disease-targeted, hIgG in large quantities without human plasma donors.

We have optimized genetic engineering in the development of transchromosomic cattle, or Tc-Bovine™, to produce hIgG. Our engineering of our production platform drives IgG1 production across our pipeline. In addition, this differentiated approach using polyclonal antibodies has no biosimilar pathway, which provides a significant barrier to competitive polyclonal approaches.

Our proprietary platform holds the potential to generate additional novel therapeutic candidates to expand our pipeline, utilizing the human immune response to generate the optimal repertoire of hIgG for drug targets of interest. Our drug development production system is able to generate a diverse repertoire of specifically targeted, high-potency, hIgGs that can bind to multiple sites on targeted immunogens, making them ideally suited to address the complexities associated with many immune-mediated disorders and address a wide range of serious unmet needs in human diseases.

SAB-142: Our Lead Product Candidate

Our wholly owned lead product candidate, SAB-142 is a potentially disease-modifying, redosable immunotherapy in clinical development for the treatment of autoimmune type 1 diabetes (T1D). SAB-142 is a multi-specific, fully human anti-thymocyte globulin (hATG) with a mechanism of action analogous to that of rabbit ATG (rATG). rATG has demonstrated in multiple clinical trials the ability to slow disease progression in patients with new- or recent-onset of Stage 3 T1D. SAB-142, like rATG, directly targets multiple immune cells involved in destroying pancreatic beta cells, including modulation of "bad acting" T-lymphocytes. By stopping immune cells from attacking beta cells, this treatment has the potential to preserve insulin-producing beta cells. The mechanism of action of SAB-142 has been clinically validated in numerous clinical trials with a rabbit anti-thymocyte globulin (rATG). In addition, data from more than 800 human subjects have been treated with antibodies produced by our platform, including in the Phase 1 study of SAB-142, and we have seen no serum sickness rate and no incidence of neutralizing anti-drug antibodies (ADA). We expect this finding to continue through the clinical development of SAB-142.

There is an established regulatory path for T1D indications using the SAB-142 modality. Our regulatory pathway has also been established with the United States Food and Drug Administration (FDA), the United Kingdom Medicines and Healthcare products Regulatory Agency (MHRA), and the Therapeutic Good Administration (TGA) in Australia. The FDA regulates polyclonal hIgG and mAbs differently, as mAbs are regulated through the Center for Drug Evaluation and Research (CDER) while pAbs are regulated by the Center for Biologics Evaluation and Research (CBER). CBER has approved more than 30 immunoglobulin products from both human- and animal-derived plasma. Further, CBER is very familiar with our production platform and pAb products. We have navigated three SAB drug products through seven clinical trials with one product having advanced to Phase 3, building our safety database as well as positive efficacy data. As our lead program SAB-142 advances, we intend to expand our pipeline in complementary indications through strategic utilization of our platform.

We received an Investigational New Drug (IND) clearance from the FDA in May 2024 and announced positive topline data from our Phase 1 clinical trial of SAB-142 in January 2025, and December 2025. We initiated our pivotal Phase 2b clinical trial, called the SAFEGUARD study, in Q3 2025 and dosed the first patient in December 2025 with enrollment ongoing across multiple clinical trial sites in U.S., Australia, New Zealand, U.K. and European Union. Further, we are planning an additional clinical study of SAB-142 in individuals with T1D beyond 100 days of diagnosis.

In March 2026, we announced additional Phase 1 data demonstrating early signals of C-peptide preservation in adult patients with established autoimmune T1D, consistent with SAB-142's anticipated mechanism of action. In April 2026, we presented additional clinical and mechanistic data from our Phase 1 clinical trial of SAB-142 in adult patients with established autoimmune T1D. The Phase 1 T1D cohort included six adult participants (n=6), with four receiving SAB-142 at 2.5 mg/kg (n=4) and two receiving placebo (n=2). Participants ranged in age from 19 to 40 years. All participants with established T1D (Stage 3 T1D diagnosis within 28-40 months at the time of randomization) had residual beta cell function (C-peptide >0.2 nmol/L) and at least one T1D autoantibody at baseline. Phase 1 exploratory efficacy endpoints were measured at the End of Study Day 120 post SAB-142 administration. One placebo participant (n=1) completed through Day 120 as the other placebo participant discontinued early due to personal reasons. The results for SAB-142 highlighted C-peptide preservation, correlated with evidence of T cell exhaustion. Of the four SAB-142-treated participants, three demonstrated a super responder profile with C-peptide levels at or above baseline at Day 120. SAB-142 treated participants showed improved glycemic control, with mean time in range increasing from 73% at baseline to 85% at Day 120, without an associated increase in exogenous insulin use.In May 2025, SAB confirmed its intent with the FDA to utilize the data from the SAFEGUARD study as supportive evidence for future regulatory approval. In April 2026, we received written correspondence from the FDA confirming that C-peptide area under the curve (AUC) may serve as a surrogate endpoint for accelerated approval.

In May 2025, we confirmed our intent with the FDA to utilize the data from the SAFEGUARD study as supportive evidence for future regulatory approval. In April 2026, we received written correspondence from the FDA confirming that C-peptide area under the curve (AUC) may serve as a surrogate endpoint for accelerated approval.

Other Immunology Indications

T- and B-cells are multifunctional lymphocytes whose dysregulation was shown to have a central role in the pathogenesis of more than 80 autoimmune diseases, including T1D, systemic lupus erythematosus (SLE), rheumatoid arthritis (RA), multiple sclerosis (MS) and celiac disease. The therapeutic success to date of lymphocyte-mediating therapies in a variety of autoimmune diseases and our in vivo and in vitro pre-clinical and Phase 1 work from SAB-142 in T1D support direct progression into Phase 2 in other autoimmune indications.

Since the commencement of our operations, we have devoted substantially all of our resources to research and development activities, organizing and staffing our company, business planning, raising capital, establishing and maintaining our intellectual property portfolio, conducting preclinical studies and clinical trials, and providing general and administrative support for these operations.

Components of Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies and materials for employees and contractors engaged in research and product development, licensing fees to use certain technology in our research and development projects, fees paid to consultants and various entities that perform certain research and testing on our behalf. Research and development expenses are tracked by target/project code. Indirect general and administrative costs are allocated based upon a percentage of direct costs. We expense all research and development costs in the period in which they are incurred.

Research and development activities consist of discovery research for our platform development and the indications we are working on. For SAB-142, Avance Clinical PTY, Ltd ("Avance"), acts as the contract research organization ("CRO") overseeing our Phase 1 safety study. This study started in December 2023 and the terms of that agreement are subject to confidentiality and the status of the agreement is that it is current. Pursuant to an agreement between the Company and Fortrea Holdings Inc. ("Fortrea"). Fortrea is acting as the CRO overseeing our Phase 2b efficacy and safety study for SAB-142. The study began enrolling patients in December 2025.

For the three months ended March 31, 2026 and 2025, we continued to incur costs to advance our progress towards commercialization of SAB-142. We expect to continue to incur substantial research and development expenses as we conduct discovery research to enhance our platform and work on our indications. We expect to hire additional employees and continue research and development and manufacturing activities. As a result, we expect that our research and development expenses will continue to increase in the future and vary from period to period.

Research and development expenses by component for the three months ended March 31, 2026 and 2025:

General and Administrative Expenses

General and administrative expenses primarily consist of salaries, benefits, and stock-based compensation costs for employees in our executive, accounting and finance, project management, corporate development, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses. General and administrative expenses also include rent and facilities expenses allocated based upon total direct costs. We anticipate that general and administrative expenses will increase as we expand our workforce and invest in the advancement of our lead therapeutic candidate in preparation for potential commercialization. Additionally, as our operations grow in complexity and we progress toward commercialization, we may incur higher costs related to accounting, audit, legal, regulatory compliance, director and officer insurance, and investor relations. We expect these expenses to vary from period to period in absolute terms and as a percentage of revenue.

Nonoperating Income (Expense)

Gain (loss) on change in fair value of warrant liabilities

Gain (loss) on change in fair value of warrant liabilities consists of the changes in the fair value of the warrant liabilities.

Other Income (expense)

Other income primarily consists of income associated with the refundable portion of Australian research and development tax credits and dividend income from non-interest bearing short-term investments.

Interest income

Interest income consists of interest earned on our investments in debt securities, cash, and cash equivalents.

Interest expense

Interest expense consists primarily of interest related to abated rent and insurance financing.

Results of Operations

The following tables set forth our results of operations for the three months ended March 31, 2026 and 2025:

Comparison of the three months ended March 31, 2026 and 2025

Research and Development

Research and development expenses increased by $5.7 million, or 75.0%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The year-over-year change includes an increase in salaries and benefits (year-over-year increase of $3.7 million, 114.7%) and clinical trial costs (year-over-year increase of $1.3 million, 65.9%), outside lab services (year-over-year increase of $0.1 million, 20.3%), overhead and facility expense (year-over-year increase of $0.2 million, 17.5%), animal care (year-over-year increase of $0.3 million, 441.2%), and laboratory supplies (year-over-year increase of $0.2 million, 75.0%), offset by a decrease in project consulting (year-over-year decrease of $0.1 million, 47.0%). We expect research and development expenses to increase in future years as we advance our lead therapeutic candidate through Phase 2 clinical trials and invest in the necessary foundation to support potential commercialization.

General and Administrative

General and administrative expenses increased by $3.5 million, or 111.9%, in the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to an increase in salaries and benefits (year-over-year increase of $2.8 million, 170.4%), project consulting (year-over-year increase of $0.2 million, 65.3%), and other immaterial administrative support fees relating to IT and human resources (year-over-year increase of $0.6 million, 53.7%), offset by a decrease in insurance costs (year-over-year decrease of $0.1 million, 10.3%). As our operations grow in complexity and we progress toward commercialization, we may incur higher costs related to accounting, audit, legal, regulatory compliance, director and officer insurance, and investor relations.

Non-operating Income (Expense)

Total other non-operating income, not including interest income and interest expense, decreased by $5.4 million, or (97.41)%, in the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This decrease was primarily driven by the change in fair value of warrant liabilities (year-over-year decrease of $5.5 million, (109.58)%). Total other income increased by $0.1 million, primarily driven by an increase in dividend income (year-over-year increase of $0.4 million, 361.0%), offset by a decrease in the Australian research and development tax credit (year-over-year decrease of $0.3 million, 76.4%).

Interest Expense

Interest expense in the three months ended March 31, 2026 was consistent with interest expense in the three months ended March 31, 2025.

Interest Income

Interest income increased by $1.0 million, or 1,575.57%, during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to interest earned on our investments in debt securities, and higher interest earning cash, and cash equivalent balances.

Future interest income will be largely dependent on our total liquid cash and investment balances, which are in turn influenced by our capital resources and future fundraising activities.

Liquidity and Capital Resources

As of March 31, 2026, we had an accumulated deficit of $129.8 million. We anticipate that we will continue to generate losses for the foreseeable future, and expect the losses to increase as we continue the development of, or seeks regulatory approvals for product candidates, and begin commercialization of products. As a result, we will require additional capital to fund operations in order to support long-term plans.

On July 21, 2025, we entered into the July 2025 Purchase Agreement with certain accredited investors, pursuant to which we agreed to issue and sell, in the Series B Offering, (i) 1,000,000 Series B Shares, convertible into 100,000,000 Series B Conversion Shares, (ii) the Release Date Warrants to purchase up to 500,000 the Release Date Warrant Shares, and (iii) the Enrollment Date Warrants to purchase up to 1,000,000 Enrollment Date Warrant Shares. We generated approximately $175 million in gross proceeds, before fees and expenses, from the Series B Offering. The Series B Preferred Stock is convertible into common stock, subject to stockholder approval.

On March 17, 2026, we entered into the March 2026 Public Offering with the underwriters, pursuant to which we agreed to issue and sell, in the March 2026 Public Offering, (i) 19,324,677 Firm Shares at a public offering price of $3.85 per share and (ii) Pre-Funded Warrants to purchase up to 2,753,246 shares of common stock at a public offering price of $3.8499 per Pre-Funded Warrant. We also granted the underwriters a 30-day option to purchase up to an additional 3,311,688 Optional Shares, which the underwriters partially exercised as of March 31, 2026 to purchase 2,000,000 Optional Shares. We generated aggregate net proceeds of approximately $86.4 million from the March 2026 Public Offering and an additional $7.2 million of net proceeds from the underwriters' purchase of additional shares, after deducting underwriting discounts and commissions and offering expenses. The net proceeds are intended to fund the Phase 2b SAFEGUARD study of SAB-142 and for general corporate purposes.

See Note 8, Stockholders' Equity, in our condensed consolidated financial statements for more information about the Series B Offering and March 2026 Public Offering.

Based on our current level of operating expenses, existing resources will be sufficient to cover operating cash needs through the twelve months following the date of this report. In the future, we may seek additional funding through a combination of equity or debt financings, or other third-party financing, collaborative or other funding arrangements.

Shelf Registration Statement

On December 29, 2025 we filed a Registration Statement on Form S-3 (Registration No. 333-292482) (the "Shelf Registration Statement"), declared effective on January 7, 2026 by the SEC, which includes a base prospectus that allows us to offer and sell, from time to time, in one or more offerings, common stock, preferred stock, debt securities, warrants, rights or units up to an aggregate public offering price of $300 million. The Shelf Registration Statement is intended to preserve our flexibility to raise capital from time to time, if and when needed.

Cash Flows

The following table summarizes our cash flows for the three months ended March 31, 2026 and 2025:

Operating Activities

Net cash used in operating activities increased by $6.5 million in the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This increase was primarily driven by a $3.3 million increase in net cash used before changes in operating assets and liabilities, reflecting a higher net loss due to increased research and development expenses, with higher non-cash adjustments, including stock-based compensation and changes in fair value of warrant liabilities. In addition, cash used in operating activities increased by $3.2 million due to changes in operating assets and liabilities. The year-over-year increase in cash used reflects working capital fluctuations as we continue to invest in the development of our lead product candidate, SAB-142.

Investing Activities

Net cash used by investing activities increased by $70.3 million in the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to increased purchases of short-term investments and increase in capital expenditures. We anticipate to increase capital expenditures in the near term as we continue to invest in the development of our lead therapeutic candidate through Phase 2 clinical trials.

Financing Activities

Net cash provided by financing activities increased by $90.1 million in the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to the March 2026 Public Offering.

Contractual Obligations and Commitments

We enter into contracts in the normal course of business with third parties, including contract research organizations ("CRO").

As of March 31, 2026, there were no material changes outside of the ordinary course of business to our commitments and contractual obligations.

Off-Balance Sheet Arrangements

We did not have, for the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

We have prepared our condensed consolidated financial statements in accordance with U.S. GAAP. Our preparation of these condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on 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 readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.

Our most critical accounting estimates and assumptions are included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 9, 2026. There have been no significant changes to our critical accounting policies during the three months ended March 31, 2026. See Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements for further details.

JOBS Act Accounting Election

The Jumpstart Our Business Startups ("JOBS") Act, enacted in April 2012, permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have and intend to continue to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards, for an emerging growth company under Section 107 of the JOBS Act.

We may use these provisions until the last day of our fiscal year in which the fifth anniversary of the completion of our initial public offering occurred. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenue exceeds $1.235 billion, or we issue more than $1.07 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

We have elected to take advantage of certain of the reduced disclosure obligations in this Form 10-Q and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than the information you receive from other public companies in which you hold stock.

The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, until those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which we will adopt the recently issued accounting standard.