INVESTOR ALERT: ZBIO Under Investigation by Pomerantz Law

Company Overview & Recent Developments

Zenas BioPharma, Inc. (NASDAQ: ZBIO) is a clinical-stage biopharmaceutical company focused on immunology-based therapies. The company went public in September 2024 via an upsized IPO at $17 per share, raising roughly $225 million in gross proceeds (investors.zenasbio.com). Zenas’ lead drug candidate is obexelimab, a bi-functional antibody targeting B-cells, which has been in a Phase 3 trial (INDIGO) for Immunoglobulin G4-Related Disease (IgG4-RD) (www.globenewswire.com) (www.globenewswire.com). The company has attracted notable partners and financing – for example, Bristol Myers Squibb (BMS) paid $50 million upfront (plus an equity investment and milestones) in 2023 for rights to obexelimab in select Asia-Pacific markets (investors.zenasbio.com). Zenas has also completed significant private financings (including a $120 million raise in October 2025) to fund its pipeline (www.biospace.com).

In January 2026, Zenas announced top-line results from the INDIGO Phase 3 trial in IgG4-RD, which it initially characterized as “positive.” The trial met its primary endpoint, showing a 56% reduction in the risk of disease flare versus placebo (hazard ratio 0.443, p<0.001) (www.otcmarkets.com), and all key secondary endpoints were also statistically significant. The drug was well-tolerated with no new safety signals (www.otcmarkets.com). Zenas touted these results and outlined plans to submit a Biologics License Application (BLA) to the FDA by Q2 2026 (www.otcmarkets.com). However, despite the statistically significant outcomes, analysts observed that obexelimab’s efficacy may not have reached the threshold needed for strong commercial viability (www.globenewswire.com). IgG4-RD currently has no approved therapies, but off-label treatments (e.g. corticosteroids or B-cell depleting agents like rituximab) set a high bar for meaningful benefit. Management itself acknowledged some disappointment – on a conference call discussing the data, Zenas’ CEO noted he was “disappointed that the hazard ratio [for flares] doesn’t hit a number that many people were hoping for” (www.globenewswire.com). Investors reacted sharply to the news: ZBIO’s stock plunged ~52% on January 5, 2026 (from the mid-$30s down to $16.61) (www.globenewswire.com), and fell another 8.5% the next day to $15.20 (www.globenewswire.com). This two-day collapse wiped out roughly half of Zenas’ market value, signaling severe market doubts about obexelimab’s commercial prospects.

Dividend Policy & Yield

Zenas BioPharma does not pay any dividends, nor has it historically paid dividends since its IPO. As an R&D-stage biotech with no product revenue, the company retains all capital to fund operations. Its forward dividend yield is 0% (finance.yahoo.com), and this is unlikely to change in the foreseeable future. Traditional cash flow metrics like Funds From Operations (FFO) or Adjusted FFO are not applicable in Zenas’ case, as the company generates no operating profits and focuses on developing its drug pipeline. Management has explicitly stated that they intend to reinvest resources into clinical development rather than return cash to shareholders at this stage.

Leverage, Debt & Maturities

Leverage is low for Zenas, as the company has funded its growth primarily through equity and partnership capital rather than debt. The balance sheet shows no significant traditional debt obligations (no outstanding bank loans or bonds). Instead, Zenas leveraged non-dilutive financing in 2025 via a royalty funding deal with Royalty Pharma. Under that agreement, Royalty Pharma paid $75 million upfront for rights to a portion of future obexelimab revenues, with provisions for up to $225 million in additional milestone payments tied to success in the IgG4-RD trial and future FDA approvals (www.otcmarkets.com). This effectively monetized part of obexelimab’s future potential: it provided immediate cash but commits Zenas to share a slice of eventual product revenues. Importantly, one $75 million milestone was contingent on obexelimab achieving certain “INDIGO trial” success criteria by a set date (www.otcmarkets.com). With the Phase 3 results now viewed as falling short of the predefined benchmark, Zenas is not currently eligible for that milestone payout, and the company has entered discussions with Royalty Pharma regarding this issue (www.otcmarkets.com). In other words, a planned $75 million infusion is now in doubt, which could impact Zenas’ long-term funding plans. Aside from the Royalty Pharma obligation (recorded as a ~$73 million liability on the balance sheet) (www.biospace.com), Zenas’ liabilities mainly consist of normal course payables and lease obligations. There are no near-term debt maturities or interest-bearing loans that threaten liquidity.

Financial Position & Coverage

Zenas BioPharma’s financial health hinges on its cash reserves and ongoing expenses rather than earnings (since it has none). As of September 30, 2025, the company held $301.6 million in cash, equivalents and investments (www.biospace.com). Shortly after, Zenas bolstered its coffers with a $120 million private placement, bringing pro-forma cash to roughly $422 million (www.biospace.com). This substantial cash runway is critical given the company’s high burn rate – for Q3 2025 alone, R&D expenses were $34.4 million with an additional $13.2 million in G&A (www.biospace.com). Zenas projected that, excluding any unachieved milestones, its existing cash would fund operations into late 2026 (roughly the fourth quarter of 2026) (www.biospace.com). The lost $75 million Royalty Pharma milestone would have extended the runway into early 2027 (www.biospace.com), so missing that payment shortens the cushion by at least one quarter.

With essentially no debt on the books, traditional interest coverage ratios are not a concern at this time – the company isn’t burdened by interest payments that need coverage from earnings. However, coverage in a broader sense – i.e. the ability to cover ongoing cash burn – is a key focus. Zenas must continually “cover” its research and development spending using its cash reserves. The current cash on hand appears sufficient for perhaps 6–8 quarters of operations based on recent burn rates, but significant additional capital will be required beyond 2026 if the company is to commercialize obexelimab and advance its other programs. Investors should anticipate that Zenas will seek either new equity financing, partnerships, or even debt facilities in the future to bridge to profitability (investors.zenasbio.com) (investors.zenasbio.com) – especially if obexelimab’s approval or uptake is delayed or limited. In sum, liquidity is adequate for now, but not permanent: the clock is ticking on Zenas’s cash runway. Any unexpected setbacks or new trials could accelerate cash burn and financing needs.

Valuation & Outlook

Traditional valuation metrics are difficult to apply to Zenas BioPharma. The company has no earnings (EPS is negative excluding one-time items) and minimal revenue, so metrics like P/E or PEG ratios are not meaningful. Even price-to-book can be misleading for a biotech that derives its value from intangible drug assets. For context, after the January 2026 stock plunge, Zenas’ market capitalization was on the order of $800–900 million (at ~$15–$16 per share), which still significantly exceeds the company’s tangible book value of roughly $300 million (www.biospace.com). This premium reflects the market’s expectations for Zenas’ drug pipeline. In effect, investors at that price were valuing the future potential of obexelimab (and other pipeline candidates) at roughly half a billion dollars above cash – indicating that, despite the recent disappointment, the market still assigns substantial value to Zenas’ technology and assets. Notably, Zenas shares have been volatile: they debuted at $17, climbed into the $30s ahead of data, then crashed to the mid-teens on the trial news (www.globenewswire.com). Any partial recovery in share price (e.g. back into the $20s by mid-January) underscores the uncertainty – sentiment can swing rapidly as new information or interpretations emerge.

In terms of comparables, Zenas can be viewed alongside other early commercial-stage biotech companies with a single lead product. Its enterprise value (market cap minus cash) post-drop sits in the mid hundreds of millions, which might be compared to other immunology-focused biotechs in Phase 3 or pre-commercial stage. For example, companies targeting rare autoimmune diseases with late-stage candidates often trade at similar sub-$1 billion EVs if doubts exist about approvability or market size. A key factor for Zenas is that IgG4-RD is a rare disease with no approved therapies – a successful drug could enjoy de facto monopoly pricing power, but the market size is not fully clear (prevalence estimates vary, and diagnosis rates are improving). Some analysts’ initial price targets (before the INDIGO data) were in the high-$40s (finance.yahoo.com), implying a multi-billion valuation if all went well. Those targets will likely be revised given the efficacy questions. Valuation going forward will depend on: whether obexelimab secures FDA approval, how strong its label and real-world efficacy look, and the progress of Zenas’ other pipeline programs (e.g. a Phase 2 trial of obexelimab in lupus, a planned Phase 3 trial of in-licensed BTK inhibitor orelabrutinib in multiple sclerosis, and earlier-stage assets). We note that BMS’s involvement (with $50 million invested and regional rights (investors.zenasbio.com)) provides some validation of obexelimab’s potential; however, BMS’s deal was limited to Asia-Pacific markets, and it remains to be seen if they or another big pharma would seek broader rights pending the FDA outcome. If obexelimab’s prospects dim, Zenas’ valuation will hinge more on its cash and the rest of its pipeline – which could imply further downside. Conversely, any positive surprises (such as clearer efficacy in subgroup analyses, or a new partnership) could bolster the stock. In short, ZBIO’s valuation is in flux, tightly linked to clinical and regulatory events in the coming year.

Risks, Red Flags & Investor Cautions

- Securities Fraud Investigation: Pomerantz LLP has announced an investigation into whether Zenas and its officers misled investors or engaged in fraud related to the INDIGO trial disclosures (www.globenewswire.com). The fact that a respected securities class-action firm is involved is a red flag – it suggests that the wording of “positive” results versus the market’s reaction could become the basis of a shareholder lawsuit. Any such litigation could drain resources and distract management. Investors should monitor this situation, as formal class action proceedings (if filed) may yield new information about internal communications or trial data transparency. - Clinical Efficacy & Approval Risk: Although obexelimab met its endpoints, analysts doubt whether the efficacy is commercially adequate (www.globenewswire.com). There is a risk that regulators or key opinion leaders may also view the data as only marginally beneficial. The CEO’s own admission of disappointment in the hazard ratio (www.globenewswire.com) reinforces the concern. If the FDA requires additional trials or if the drug’s benefit-risk profile isn’t compelling, approval could be delayed or denied. Without obexelimab’s success, Zenas currently has no revenue-generating products to fall back on. - Market Adoption & Competition: Even if approved, obexelimab will face the challenge of driving adoption in IgG4-RD. Physicians today manage this condition with steroids and other off-label immunosuppressants; many also use rituximab (a B-cell depleting antibody) off-label with reported success. Obexelimab’s mechanism (B-cell inhibition without depletion) is novel, but if its efficacy in reducing flares is only moderate (~56% risk reduction), some doctors might prefer sticking with rituximab or waiting for more data. Additionally, other companies could develop treatments for IgG4-RD or related fibrotic diseases, increasing future competition. Commercial viability remains an open question – a subpar launch would hurt Zenas’s financial projections. - Financial & Dilution Risk: Zenas is not yet profitable and is burning cash at a high rate (over $40 million per quarter in operating expenses recently). The company forecasts that current funds last into late 2026 (www.biospace.com), but this assumes no major hiccups. Without the extra $75 million Royalty Pharma milestone (now unlikely (www.otcmarkets.com)), Zenas may have to raise capital sooner or cut spending. Any new equity raise at the current depressed share price would dilute existing shareholders. Alternatively, taking on debt or royalty financing could encumber future revenues. There is also risk that contingent payments (e.g. the remaining Royalty Pharma tranches or BMS milestones) never materialize if milestones aren’t met – leaving a funding gap. In short, the need for financing in the next 12–24 months is highly probable, posing risk to shareholders. - Management Credibility & Governance: The handling of the INDIGO results has raised credibility concerns. Management’s press release painted a very optimistic picture (www.globenewswire.com), yet the subsequent stock crash and CEO’s candid remarks suggest the results were less stellar than portrayed. This gap between messaging and reality can undermine investor trust. It also potentially exposes the company to the above-mentioned legal action. Going forward, investors will be watching how transparently Zenas communicates about its BLA submission, any FDA feedback, and other trial readouts. Any perception of overly rosy promises could be a red flag. Additionally, insiders’ actions bear watching – for example, significant insider selling (if it were to occur ahead of bad news) would be a major red flag. - Pipeline Concentration & Execution: Zenas does have other pipeline assets (such as the BTK inhibitor orelabrutinib for multiple sclerosis, and a TYK2 inhibitor in preclinical stage). However, obexelimab remains the flagship program and the furthest along. If obexelimab falters, the company’s outlook will hinge on these pipeline candidates, which are at least a couple of years behind. Developing multiple drugs in parallel is expensive and complex. Any delays, trial failures, or safety issues in these other programs would compound the company’s challenges. Essentially, Zenas is a one-product company in the near term – a classic high-risk/high-reward profile.

Open Questions & Uncertainties

- Will obexelimab secure FDA approval, and on what timeline? Zenas plans to submit a BLA by Q2 2026 (www.otcmarkets.com). Investors are waiting to see if the FDA will accept the INDIGO trial as sufficient for approval. Will regulators view the 56% reduction in risk as clinically meaningful enough, or will they request additional data? The approval timing and label (e.g. which patients, need for further confirmatory studies) remain uncertain. - What is the commercial path forward for obexelimab if approved? Given questions about its efficacy bar, how will Zenas price and market obexelimab? Will insurers cover it readily for IgG4-RD? Zenas might need to conduct post-marketing studies or pursue additional indications (like lupus or multiple sclerosis) to broaden the drug’s use. Additionally, will Zenas seek a larger commercial partner for Western markets to help launch the drug, since a partnership exists with BMS only for Asia-Pacific (investors.zenasbio.com) (www.globenewswire.com)? - Can the Royalty Pharma milestone be salvaged or restructured? Currently, Zenas did not hit the INDIGO trial milestone required for the next $75 million payment (www.otcmarkets.com). The company is in discussions with Royalty Pharma, but there’s no assurance of a favorable outcome. A key question is whether Royalty Pharma might agree to pay a portion of the milestone (e.g. if the results are borderline) or adjust the terms. If no deal is reached, Zenas will forfeit that funding – how will it plug that gap? - How will the Pomerantz investigation play out? It’s unclear yet if any formal lawsuit has been filed on behalf of investors. If one is filed, what specific allegations will be made? For instance, will it claim that Zenas overstated the trial results’ significance knowing the efficacy was borderline? How strong (or not) is the evidence of any intent to mislead? The outcome could range from the case being dropped, to a settlement, or to prolonged litigation. This remains an overhang on the stock – resolution (or lack thereof) will influence investor sentiment. - What is the trajectory for Zenas’ other pipeline programs? With attention on obexelimab, it’s easy to overlook the rest of the pipeline. The company is initiating a Phase 3 for orelabrutinib in secondary progressive MS (through an acquired program) and has a Phase 2 of obexelimab in lupus ongoing (www.globenewswire.com). Success in these areas could diversify Zenas’ opportunities. Key questions: When will we see data from these trials, and will positive results in, say, lupus or MS be enough to restore confidence if IgG4-RD falls short? Or conversely, can Zenas realistically fund and execute multiple big trials if obexelimab’s IgG4-RD path doesn’t generate revenue soon? The balance between advancing the pipeline and conserving cash is a critical strategic question ahead. - Will Zenas need to adjust its strategy or seek strategic alternatives? Given the recent challenges, investors are wondering if Zenas might change course. Possibilities include: seeking a commercialization partner or acquirer for obexelimab (to offload costs and risk); scaling back certain R&D programs to extend the cash runway; or even selling additional equity to a strategic investor (similar to BMS’s prior stake) to raise funds. Any such moves – or the lack thereof – will be telling. For instance, if the BLA filing approaches with no partner announced, it implies Zenas intends a solo launch, which is ambitious for a small company. On the other hand, management might wait for FDA approval as a value inflection point before striking a partnership or raising more capital. Investors should watch for strategic updates in the coming quarters (e.g. at investor conferences or in earnings calls) that could signal how Zenas plans to navigate these uncertainties.

Bottom Line: Zenas BioPharma faces a pivotal period ahead. The company’s fundamentals – a strong cash position, a novel drug candidate, and a broader immunology pipeline – are counterbalanced by significant risks – questionable trial results, legal scrutiny, and financing needs. The Pomerantz investigation serves as a stark reminder for investors to exercise caution and diligence. ZBIO is a high-volatility stock where new developments (clinical, regulatory, or legal) can rapidly change the outlook. Investors should stay alert for further disclosures from both the company and independent investigations, and be prepared for a wide range of outcomes as the obexelimab story unfolds. Appropriate position sizing and risk management are warranted given the binary nature of many of these upcoming events.

Sources: Zenas BioPharma press releases and SEC filings; Pomerantz LLP investor alert; Zenas Q3 2025 financial update; GlobeNewswire and BioSpace news (investors.zenasbio.com) (www.globenewswire.com) (www.globenewswire.com) (www.otcmarkets.com) (www.otcmarkets.com) (www.biospace.com) (investors.zenasbio.com) (www.globenewswire.com).