Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

As of May 11, 2020, there were 28,852,927 shares of the Registrant's common stock issued and outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “would,” “could,” “expects,” “plans,” “contemplate,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “intend” or “continue” or the negative of such terms or other comparable terminology, although not all forward-looking statements contain these identifying words. Forward-looking statements are subject to inherent risks and uncertainties in predicting future results and conditions that could cause the actual results to differ materially from those projected in these forward-looking statements. These forward-looking statements include, but are not limited to statements about:

All forward looking statements in this Quarterly Report on Form 10-Q involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those under the heading “Risk Factors” included in our annual report for the year ended December 31, 2019 filed with the SEC on March 16, 2020, and under the heading “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain medical conditions, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

Significant Accounting Policies

Basis of Presentation

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“US GAAP”). In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring items) considered necessary to present fairly the Company’s financial position at March 31, 2020 and December 31, 2019, the results of its operations and comprehensive loss for the three month periods ended March 31, 2020 and 2019, and the cash flows for the three month periods ended March 31, 2020 and 2019.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported values of amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue

Revenue from Janssen Agreements

The Company recognizes revenues from its Janssen Agreements as follows.

The Company entered into its clinical manufacturing and clinical trial services arrangements in connection with its sale of certain intellectual property on December 30, 2019. These contracts commenced January 1, 2020. While these agreements are not considered contracts with a customer based on the terms thereof, we are applying the revenue recognition guidance by analogy.

XBiotech is still in the research and development phase; however, the eventual output of the Company’s intended ordinary activities will be the licensing of intellectual property and/or sale of commercialized compounds for use in pharmaceutical treatment of disease, not the performance of manufacturing of development stage compounds or clinical trials for others. Although Janssen is not a customer, as these services are not the output of XBiotech’s ordinary activities, the Company evaluated the terms of the agreements and has analogized to Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“ASC 606”) for clinical manufacturing and clinical trial services revenue recognition.

Under ASC 606, an entity recognizes revenue when (or as) its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606 (or for those analogized to it), the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts (including by analogy) when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the counterparty. At contract inception, once the contract is determined to be within the scope of or analogized to ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Manufacturing Revenue

We have a Clinical Manufacturing Agreement that we account for by analogy to ASC 606, under which we agreed to manufacture bermekimab for use by Janssen in clinical trials, in exchange for payments of $4.5 million per quarter, paid in advance, for up to two years, though Janssen may terminate the contract for any reason with 60-days’ notice. Quantities are estimated for the two-year period, but are only binding on the Company and Janssen for the next four months of each period, other than by the 60-day notice termination. If, during any calendar quarter, the Company fails to deliver all of the Clinical Products ordered by Janssen, subject to our agreed upon capacity, the next quarter’s fee is reduced proportionately for the shortfall volume. Negative adjustments may also occur for delivered Clinical Products that do not meet quality specifications, though we expect to meet these standards.

We received payment of $4.5 million from Janssen based on billing schedules established in the contract on December 30, 2019 for manufacturing in the first quarter of 2020. Due to the coronavirus pandemic, the Company failed to fully complete the manufacture of drugs specified for the March purchase order due to supply disruptions for the syringes used to hold the manufactured compound. In addition, due to the pandemic, Janssen requested that we delay shipment of volumes for which we had completed manufacturing. We recognized revenue for those volumes held at Janssen’s request, as they are segregated for future delivery. $1.5 million has been recorded as deferred revenue to a future period for the volumes that were not completed due to the syringe shortage until they are completed and delivered. We received the syringe shipment in April, and currently anticipate fulfilling all production volumes and returning to normal manufacturing capabilities by the third quarter of 2020; however, due to the uncertainty associated with the pandemic and related mitigation efforts, it is possible this assessment could change in future periods.

Clinical Trial Service Revenue

On December 30, 2019, we entered into a Transition Services Agreement with Janssen. Pursuant to the Transition Services Agreement, the Company has agreed to continue operational management, on a fee-for-service basis, of two ongoing clinical trials related to bermekimab. The arrangement may continue as long as the clinical trials are ongoing; however, Janssen may terminate the contract at any time with thirty days’ notice.

We have determined that XBiotech is a principal with regard to the single performance obligation for the series of clinical trial services. In consideration for all of the services to be provided, for each calendar quarter during the term of the Transition Services Agreement, Janssen pays the Company for all third party costs incurred (such as for third party clinical trial site costs) plus a markup of 30%, which we recognize on a gross basis as the principal in the arrangement with Janssen. Those amounts relate directly to the Company’s efforts to provide clinical trial services in the respective month, and are allocated to that month’s services. As at March 31, 2020, the Company has recorded $7.5 million Pass-Through Costs and $9.7 million gross Clinical Trial Service Revenue.

Our clinical trial services were unaffected by the coronavirus pandemic during the first quarter of 2020. However, the timelines for future clinical trial services could be extended in the future as a result of the pandemic, which could delay or otherwise adversely affect our revenue. Because our fees are directly related to third party costs of our vendors, our clinical trial service revenues in future periods are likely to be affected by our vendors’ ability to operate and the activities of trial candidates due to the effects of the pandemic and mitigating activities. Our first quarter results may not be indicative of future revenues or costs associated with these clinical trials.

Research and Development Costs

All research and development costs are charged to expense as incurred. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract clinical trial research services, the costs of laboratory consumables, equipment and facilities, license fees and other external costs. Costs incurred to acquire licenses for intellectual property to be used in research and development activities with no alternative future use are expensed as incurred as research and development costs.

Share-Based Compensation

The Company accounts for its share-based compensation awards in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statements of operations based on their grant date fair values. For stock options granted to employees and to members of the board of directors for their services on the board of directors, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. To determine the fair value of its common stock, the Company uses the closing price of the Company’s common stock as reported by NASDAQ. For awards subject to service-based vesting conditions, the Company recognizes share-based compensation expense, equal to the grant date fair value of stock options on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur rather than on an estimated basis.

Share-based compensation expense recognized for the three months ended March 31, 2020 and 2019 was included in the following line items on the Consolidated Statements of Operations (in thousands).

	Three Months Ended
	March 31,
	2020		2019
Research and development	$	533	$	295
General and administrative		2,144		275
Total share-based compensation expense		779		-
Research and development	$	3,456	$	570

The fair value of each option is estimated on the date of grant using the Black-Scholes method with the following assumptions:

	Three Months Ended
	March 31,
	2020			2019
Dividend yield		-			-
Expected volatility	88%	-	91%	80%	-	82%
Risk-free interest rate	0.5%	-	1.87%	2.46%	-	2.64%
Expected life (in years)	6.25	-	10	5.75	-	10
Weighted-average grant date fair value per share		$12.08			$3.92

Cash and Cash Equivalents

The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consisted primarily of cash on deposit in U.S., German, Swiss, Japanese and Canadian banks. Cash and cash equivalents are stated at cost which approximates fair value.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents. The Company holds these investments in highly-rated financial institutions, and limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any significant credit risk on these funds. The Company has no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

Fair Value Measurements

The consolidated financial statements include financial instruments for which the fair market value of such instruments may differ from amounts reflected on a historical cost basis. Financial instruments of the Company consist of cash deposits, accounts and other receivables, accounts payable, and certain accrued liabilities. These financial instruments are held at cost, which generally approximates fair value due to their short-term nature.

The Company follows ASC Topic 820, Fair Value Measurements and Disclosures, which establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market date (observable inputs) and the Company’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

•

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities.

•

Level 2—Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

•

Level 3—Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

At March 31, 2020 and December 31, 2019, the Company did not have any assets or liabilities that are measured at fair value on a recurring basis. The carrying amounts reflected in the balance sheets for cash and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair values at March 31, 2020 and December 31, 2019, due to their short-term nature.

Property and Equipment

Property and equipment, which consists of land, construction in process, furniture and fixtures, computers and office equipment, scientific equipment, leasehold improvements, vehicles and building are stated at cost and depreciated over the estimated useful lives of the assets, with the exception of land and construction in process which are not depreciated, using the straight line method. The useful lives are as follows:


•   Furniture and fixtures	7 years

•   Office equipment	5 years

•   Leasehold improvements	Shorter of asset’s useful life or remaining lease term

•   Scientific equipment	5 years

•   Vehicles	5 years

•   Mobile facility	27.5 years

•   Building	39 years

Costs of major additions and betterments are capitalized; maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to expense as incurred. Upon retirement or sale, the cost of the disposed asset and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized.

Impairment of Long-Lived Assets

The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC Topic 360, Property, Plant and Equipment. Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Recoverability of these assets is assessed based on undiscounted expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and economic projections, market trends and product development cycles. If impairments are identified, assets are written down to their estimated fair value. The Company has not recognized any impairment through March 31, 2020.

Income Taxes

Income taxes are recorded in accordance with ASC 740, Accounting for Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company makes estimates and judgments in determining the need for a valuation allowance, including the estimation of its taxable income or loss for the quarter ended March 31, 2020. Realization of deferred tax assets is dependent upon future earnings. The Company is uncertain about the timing and amount of any future earnings. Accordingly, the Company offsets certain deferred tax assets with a valuation allowance. The Company may in the future determine that certain deferred tax assets are more-likely-than-not be realized, in which case the Company will reduce its valuation allowance in the period in which such determination is made. If the valuation allowance is reduced, the Company may recognize a benefit from income taxes in its statement of operations in that period.

ASC 740 clarifies the accounting for uncertainty in income taxes recognized in the financial statements and provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. This interpretation also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods and disclosure. The Company’s policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of tax expense.

Foreign Currency Transactions

Certain transactions are denominated in a currency other than the Company’s functional currency of the U.S. dollar, and the Company generates assets and liabilities that are fixed in terms of the amount of foreign currency that will be received or paid. At each balance sheet date, the Company adjusts the assets and liabilities to reflect the current exchange rate, resulting in a translation gain or loss. Transaction gains and losses are also realized upon a settlement of a foreign currency transaction in determining net loss for the period in which the transaction is settled.

Comprehensive Income (Loss)

ASC Topic 220, Comprehensive Income, requires that all components of comprehensive income (loss), including net income (loss), be reported in the financial statements in the period in which they are recognized. Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on investments and foreign currency translation adjustments.

Segment and Geographic Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company and the chief operating decision maker view the Company’s operations and manage its business as one operating segment. Substantially all of the Company’s operations are in the U.S. geographic segment.

Net Loss Per Share

Net income/loss per share (“EPS”) is computed by dividing net loss by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net income/loss by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The number of common share equivalents, which include stock options, is computed using the treasury stock method.

Subsequent Events

The Company considered events or transactions occurring after the balance sheet date but prior to the date the consolidated financial statements are available to be issued for potential recognition or disclosure in its consolidated financial statements. We have evaluated subsequent events through the date of filing this Form 10-Q.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, which supersedes ASC 840, Leases, and requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 201801, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 201811, Targeted Improvements. Topic 842, as amended (the "new lease standard") establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The effective date of the new guidance is for the Company’s first quarter of fiscal year 2019. The FASB has approved an optional, alternative method to adopt the lease standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the new standard effective January 1, 2019, using the alternative method. The Company did not have a cumulative adjustment impacting retained earnings. Adoption of the lease standard did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU requires instruments measured at amortized cost to be presented at the net amount expected to be collected. Entities are also required to record allowances for available-for-sale debt securities rather than reduce the carrying amount. On November 15, 2019, the FASB delayed the effective date of the standard for certain small public companies and other private companies. As amended, the effective date of ASC Topic 326 was delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities. The Company expects that the adoption will not have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The standard will become effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We early adopted ASU 2019-12 during the quarter ended March 31, 2020. The adoption of ASU 2019-12 resulted in no material impact to the Company's financial statements.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

XBiotech Inc. (“XBiotech” or the “Company) is a pre-market biopharmaceutical company engaged in discovering and developing True Human™ monoclonal antibodies for treating a variety of diseases. True Human™ monoclonal antibodies are those which occur naturally in human beings—as opposed to being derived from animal immunization or otherwise engineered. We believe that naturally occurring monoclonal antibodies have the potential to be safer and more effective than their non-naturally occurring counterparts. XBiotech is focused on developing its True Human™ pipeline and manufacturing system.

After the Janssen Transaction in December 2019, as of March 31, 2020, we had retained earnings of $243.6 million. We had net losses of $0.3 million and $5.9 million for the three months ended March 31, 2020 and 2019, respectively. During the next two years, we expect that the revenues from Janssen Transaction will generate enough cash for our research and development activities. However, we expect to incur significant and increasing operating losses for the foreseeable future as we advance our drug candidates from discovery through preclinical testing and clinical trials and seek regulatory approval and eventual commercialization. In addition to these increasing research and development expenses, we expect general and administrative costs to increase as we continue to operate as a public company, particularly following the end of the 2019 fiscal year when we lost our status as an emerging growth company and be required to comply with additional obligations from which we are currently exempt, including the auditor attestation requirement for internal controls. We will need to generate significant revenues to achieve or sustain profitability, and we may never do so. As of March 31, 2020, we had 63 employees.

During the first quarter of 2020, we were subject to challenging social and economic conditions created as a result of the novel strain of coronavirus, SARS-CoV-2 (“COVID-19”). The resulting impact of the COVID-19 outbreak has created various impacts to our operations as a result of taking necessary precautions for essential personnel to operate safely both in person as well as remotely, disruptions in our supply chain and delays requested by Janssen in shipping drug product under our clinical manufacturing agreement.

We are currently operating our facilities at less than normal levels. Our office-based employees have been working from home since early March 2020, while ensuring essential staffing levels in our operations remain in place, including maintaining key personnel in our laboratories and manufacturing facilities. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at March 31, 2020; however, this may not continue to be the case in future quarters . In addition to the delays we have already experienced in shipping drug product, it is possible that the COVID-19 pandemic and response efforts may adversely impact our future ability to manufacture clinical drugs for Janssen, which could have a material adverse impact on our results of operations or financial position during the remainder of 2020. In addition, having a significant number of employees working remotely could increase our cybersecurity risk, create data accessibility concerns, and make us more susceptible to communication disruptions.

While we are currently continuing the clinical trials under the transition services agreement with Janssen, we expect that COVID-19 precautions may directly or indirectly impact the timeline for some of the clinical trials, which could delay or otherwise adversely affect our revenue and adversely impact our financial position. To help mitigate the impact to our clinical trials, we are pursuing innovative approaches such as remote monitoring, remote patient visits and supporting home infusions.

We currently anticipate fulfilling all production volumes and returning to normal manufacturing capabilities under the clinical manufacturing agreement by the third quarter of 2020; however, due to the uncertainty associated with the pandemic and related mitigation efforts, it is possible this assessment could change in future periods as our manufacturing capabilities and Janssen’s purchase orders may continue to be negatively impacted.

On April 3, 2020, the Company announced the collaboration with BioBridge Global to participate in a U.S. Food and Drug Administration (FDA) investigational program for U.S. blood centers to begin collecting and distributing convalescent plasma from individuals who have recovered from COVID-19. The Company intends to use the blood samples to develop a candidate True Human™ antibody therapy for the disease.

Prior to receiving payments under the clinical manufacturing agreement entered into in connection with the Janssen Transaction, we had not generated any revenue. Under this clinical manufacturing agreement, we manufacture bermekimab for use by Janssen in clinical trials, in exchange for fixed payments, paid in quarterly installments through 2021. As of March 31, 2020, we have recorded $3 million as manufacturing revenue.

In addition, we entered into a transition services agreement under which we agreed to continue operational management, on a fee-for-service basis, of certain ongoing clinical trials related to bermekimab. In consideration for all of the services to be provided, for each calendar quarter during the term of the transition services agreement, Janssen shall pay the Company a fee for such quarter equal to all Pass-Through Costs incurred by the Company during such calendar quarter, plus a markup of 30%. As at March 31, 2020, the Company has recorded more than $7 million Pass-Through Costs and $9.7 million gross Clinical Trial Service Revenue.

Our ability to generate any additional revenue and/or to become profitable (or sustain any profitability) depends on our ability to successfully commercialize any product candidates we may advance in the future. On April 14, 2020, the Company announced that a novel antibody it has discovered that neutralizes interleukin-1 alpha (IL-1⍺) has now been advanced as a product candidate for clinical and commercial development. With the discovery, the Company is on schedule to reenter the clinic with a new anti-IL-1⍺ therapy in 2021. However, we are not able to estimate at this time the potential impact of the COVID-19 pandemic on our estimated timelines. It is possible that measures implemented to date or that may be implemented or re-implemented in the future by governmental authorities and/or our business partners in response to the pandemic may extend the timelines related to our development, clinical and commercial activities, which delays may be material and may adversely affect our revenues for future quarters , the current fiscal year or beyond.

Research and development expense consists of expenses incurred in connection with identifying and developing our drug candidates. These expenses consist primarily of salaries and related expenses, stock-based compensation, the purchase of equipment, laboratory and manufacturing supplies, facility costs, costs for preclinical and clinical research, development of quality control systems, quality assurance programs and manufacturing processes. We charge all research and development expenses to operations as incurred.

Clinical development timelines, likelihood of success and total costs vary widely. We do not currently track our internal research and development costs or our personnel and related costs on an individual drug candidate basis. We use our research and development resources, including employees and our drug discovery technology, across multiple drug development programs. As a result, we cannot state precisely the costs incurred for each of our research and development programs or our clinical and preclinical drug candidates. From inception through March 31, 2020, we have recorded total research and development expenses, including share-based compensation, of $211.0 million. Our total research and development expenses for the three months ended March 31, 2020 and 2019 were $1.2 million and $4.5 million, respectively. Share-based compensation accounted for $533 thousand and $295 thousand for the three months ended March 31, 2020 and 2019, respectively.

Research and development expenses, as a percentage of total operating expenses for the three months ended March 31, 2020 and 2019 were 22% and 78%, respectively. The percentages, excluding stock-based compensation, for the three months ended March 31, 2020 and 2019, were 25% and 81%, respectively.

The clinical development costs may further increase going forward with potentially more advanced studies in the future as we evaluate our clinical data and pipeline.

Based on the results of our preclinical studies, we anticipate that we will select drug candidates and research projects for further development on an ongoing basis in response to their preclinical and clinical success and commercial potential. For research and development candidates in early stages of development, it is premature to estimate when material net cash inflows from these projects might occur. In addition, our ability to conduct research and other laboratory activities, to engage in clinical studies and to pursue regulatory approvals may be delayed or otherwise adversely impacted by measures implemented by governmental authorities and/or our business partners in response to the COVID-19 pandemic.

General and administrative expense consists primarily of salaries and related expenses for personnel in administrative, finance, business development and human resource functions, as well as the legal costs of pursuing patent protection of our intellectual property and patent filing and maintenance expenses, stock–based compensation, and professional fees for legal services. Our total general and administration expenses for the three months ended March 31, 2020 and 2019 were $4.0 million and $1.3 million, respectively. Share-based compensation accounted for $2.1 million and $0.3 million for the three months ended March 31, 2020 and 2019, respectively.

General and administrative expense, as a percentage of total operating expenses for the three months ended March 31, 2020 and 2019 were 78% and 22%, respectively. The percentages, excluding stock-based compensation, for the three months ended March 31, 2020 and 2019, were 75% and 19%, respectively.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States (US GAAP). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and expenses incurred during the reported periods.

We base estimates on our historical experience, known trends and 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 apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are more fully described in the notes to our financial statements appearing in this Quarterly Report on Form 10-Q.

We account for income taxes under the asset and liability method. We record deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect of a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the enactment date. We assess the likelihood that deferred tax assets will be realized, and we recognize a valuation allowance if it is more likely than not that some portion of the deferred tax assets will not be realized. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction. To date, we have provided a valuation allowance against our deferred tax assets as we believe the objective and verifiable evidence of our historical pretax net losses outweighs any positive evidence of our forecasted future results. Although we believe that our tax estimates are reasonable, the ultimate tax determination involves significant judgment. We will continue to monitor the positive and negative evidence and will adjust the valuation allowance as sufficient objective positive evidence becomes available.

We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more likely than not that the position will be sustained upon examination. We recognize potential accrued interest and penalties associated with unrecognized tax positions within our global operations in income tax expense.

Revenue during the three months ended March 31, 2020 and 2019 are summarized as follows (in thousands):

We had not generated any revenue before the year 2020. Under the clinical manufacturing agreement with Janssen, as of March 31, 2020, we have recorded $3 million as manufacturing revenue for January and February, 2020. Clinical trial revenue is based on the transition services agreement under which we agreed to continue operational management, on a fee-for-service basis, of certain ongoing clinical trials related to bermekimab, which includes $7.5 million pass-through expense for two ongoing trials and $2.2 million mark-up revenue. Our first quarter results may not be indicative of future revenues or costs associated with our clinical manufacturing or clinical trial management agreements due to the ongoing impact of the COVID-19 pandemic.

Cost of goods sold during the three months ended March 31, 2020 and 2019 are summarized as follows (in thousands):

We had not incurred any cost of goods sold before the year 2020. The manufacturing cost was period expense for manufacture, quality assurance and quality control department for January and February, 2020 . Clinical trial cost was the pass-through expense for two ongoing trials and other clinical trial department expense for the three months ended March 31, 2020. Our first quarter results may not be indicative of future revenues or costs associated with our clinical manufacturing or clinical trial management agreements due to the ongoing impact of the COVID-19 pandemic.

We do not currently track our internal research and development costs or our personnel and related costs on an individual drug candidate basis. We use our research and development resources, including employees and our drug discovery technology, across multiple drug development programs. As a result, we cannot state precisely the costs incurred for each of our research and development programs or our clinical and preclinical drug candidates.

Research and development expenses decreased $3.4 million to $1.2 million for the three months ended March 31, 2020, compared to $4.5 million for the three months ended March 31, 2019. The decrease was mainly due to reclassification of expense. Manufacturing department expenses were reclassed to cost of goods sold as a result of the clinical manufacturing agreement we entered into as part of the Janssen Transaction. Also, we didn’t generate clinical trial expense for the three months ended March 31, 2020, because all such expenses incurred were pursuant to the transition services agreement entered into as part of the Janssen Transaction. As a result, clinical trial department expenses were reclassed to cost of goods sold. Our first quarter results may not be indicative of future revenues or costs associated with our clinical manufacturing or clinical trial management agreements due to the ongoing impact of the COVID-19 pandemic. The stock-based compensation increased due to the new grants to employees and Chief Executive Officer in the fourth quarter of 2019.

General and administrative expense increased $2.7 million to $4.0 million for the three months ended March 31, 2020, compared to $1.3 million for the three months ended March 31, 2019. The increase was primarily related to stock–based compensation expenses of $2.1 million, due to the new grants to employees and Chief Executive Officer in the fourth quarter of 2019. Also, professional fees increased $0.7 million mainly due to professional and legal fees related to the tender offer completed in February 2020.

The interest income for the three months ended March 31, 2020 and 2019 was mainly from the interest generated from the Company’s Canadian bank account. Foreign exchange gain and loss was mainly due to the fluctuation between the US dollar and the Euro in the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

Our cash requirements could change materially as a result of the progress of our research and development and clinical programs, licensing activities, acquisitions, divestitures or other corporate developments. In addition, the duration and extent of measures that have been or may in the future be adopted by XBiotech or our business partners, or imposed by governmental authorities, in response to the COVID-19 pandemic may require the use of additional cash resources and adversely impact our liquidity. We are currently unable to estimate the severity or duration of these potential impacts to our liquidity and capital resources.

Since our inception on March 22, 2005 through March, 2020, we have funded our operations principally through private placements and public offerings of equity securities, which have provided aggregate cash proceeds of approximately $307.4 million. We received $675 million in cash proceeds from the Janssen Transaction in the year ended December 31, 2019. We will receive $75 million cash from the same transaction in 2021. The following table summarizes our sources and uses of cash (in thousands):

During the three months ended March 31, 2020 and 2019, our operating activities used net cash of $60.7 million and $4.7 million, respectively. The use of net cash in each of these periods primarily resulted from our net losses. The increase in net loss from operations for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 was mainly due to the $51.1 million income tax payment for 2019.

During the three months ended March 31, 2020 and 2019, our investing activities used net cash of $389 thousand and $6 thousand, respectively. The use of cash was for the purchase of new research and development equipment.

During the three months ended March 31, 2020 and 2019, our financing activities used net cash of $412.1 million and provided net cash proceeds of $0.7 million, respectively. During the three months ended March 31, 2020, employees exercised stock options to purchase a total of 1.3 million shares of our common stock for approximately $7.9 million in net proceeds. On February 19, 2020, we used approximately $420 million to purchase 14,000,000 common shares at a price of $30.00 per share, relating to the tender offer completed in February 2020. During the three months ended March 31, 2019, employees exercised stock options to purchase a total of 190 thousand shares of our common stock for approximately $0.5 million in net proceeds. In this period, the Company also collected $0.2 million of its subscription receivable balance.

We expect to continue to incur operating losses in the future. Although we are currently receiving clinical manufacturing revenue and clinical trial service revenue from Janssen, we will not receive any product revenue until a drug candidate has been approved by the FDA, EMA or similar regulatory agencies in other countries and successfully commercialized. As of March 31, 2020, our principal sources of liquidity were our cash and cash equivalents, which totaled approximately $241.5 million. The ongoing impact of COVID-19 may delay or reduce our expected revenues from the Janssen Transaction. If we determine in the future that we require additional capital, we may face difficulties in conducting common stock offerings, as a result of market volatility caused by continued effects of COVID-19 affecting the global economy.

Since inception, we have not engaged in any off-balance sheet activities, including the use of structured finance, special purpose entities or variable interest entities.

The Company is not currently exposed to material market risk arising from financial instruments, changes in interest rates or commodity prices, or fluctuations in foreign currencies. The Company has no need to hedge against any of the foregoing risks and therefore currently engages in no hedging activities.

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and Principal Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based on such evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports the Company files or furnishes under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations, and are operating in an effective manner.

There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2019, except for the following:

Beginning in late 2019, the outbreak of COVID-19 has evolved into a global pandemic that is disrupting our business operations, which we expect to continue throughout the remainder of 2020 and possibly beyond. Depending upon the length and severity of the pandemic, which cannot be predicted, we may continue to experience disruptions that could materially and adversely impact our business including:

The COVID-19 pandemic continues to rapidly evolve. The ultimate impact of the pandemic on us is highly uncertain and subject to change and will depend on future developments, which cannot be accurately predicted. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, our clinical manufacturing or clinical trial management agreements, the healthcare system or the global economy. Given the uncertainties, we may be unable to maintain operations as planned prior to the COVID-19 pandemic.

Please carefully consider the information set forth in this Quarterly Report on Form 10-Q and the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, any of which risks and uncertainties may be further exacerbated by the COVID-19 pandemic and could materially affect our business, financial condition or future results. The risks described in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, as well as other risks and uncertainties, could materially and adversely affect our business, results of operations and financial condition, which in turn could materially and adversely affect the trading price of shares of our Common Stock. Additional risks not currently known or currently material to us may also harm our business.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of XBiotech Inc. on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Simard, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of XBiotech Inc.

In connection with the Quarterly Report of XBiotech Inc. on Form 10-Q for the period ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Queena Han, Vice President of Finance, Human Resources and Secretary of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of XBiotech Inc.

British Columbia, Canada		__
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	XBIT	NASDAQ Global Select Market

PART I—FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019	6
	Consolidated Statements of Operations for the Three Months Ended March 31, 2020 (unaudited) and 2019(unaudited)	7
	Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2020 (unaudited) and 2019 (unaudited)	8
	Consolidated Statements of Shareholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (unaudited)	9
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 (unaudited) and 2019 (unaudited)	10
	Notes to Consolidated Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II—OTHER INFORMATION
Item 1.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30

	March 31, 2020			December 31, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	241,540		$	714,594
Accounts receivable		9,681			-
Deferred cost of goods sold		1,703			-
Income tax receivable		3,793			-
Prepaid expenses and other current assets		1,179			1,669
Total current assets		257,896			716,263
Property and equipment, net		25,034			25,171
Escrow receivable		75,000			75,000
Deferred tax asset		443			443
Total assets	$	358,373		$	816,877

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	5,649		$	2,149
Accrued expenses		1,371			4,180
Contract Liabilities		-			4,500
Deferred revenue		1,500			-
Income taxes payable		1,715			49,361
Total current liabilities		10,235			60,190
Long-term liabilities:
Deferred rent		-			-
Income tax payable - non-current		1,056			1,056
Total liabilities		11,291			61,246

Shareholders’ equity:
Preferred stock, no par value, unlimited shares authorized, no shares outstanding		-			-
Common stock, no par value, unlimited shares authorized, 28,852,927 and 41,519,633 shares outstanding at March 31, 2020 and December 31, 2019, respectively		242,942			324,808
Accumulated other comprehensive loss		(16	)		(106	)
Retained earnings		104,156			430,929
Total shareholders’ equity		347,082			755,631

Total liabilities and shareholders’ equity	$	358,373		$	816,877

	Three Month Ended March 31,
	2020			2019
	(unaudited)			(unaudited)
Revenue
Manufacturing revenue	$	3,000		$	-
Clinical trial service revenue		9,681			-
Total revenue		12,681			-
Cost of goods sold
Manufacturing cost		2,166			-
Clinical trial cost		7,508			-
Total cost of goods sold		9,674			-
Gross margin		3,007			-

Operating expenses:
Research and development		1,155			4,527
General and administrative		4,023			1,278
Total operating expenses		5,178			5,805
Loss from operations		(2,171	)		(5,805	)

Other income (loss):
Interest income		1,898			78
Other income		-			9
Foreign exchange loss		(93	)		(146	)
Total other income (loss)		1,805			(59	)
Loss before income taxes		(366	)		(5,864	)
Provision for income taxes		(352	)		-
Net loss	$	(14	)	$	(5,864	)
Net loss per share—basic and diluted	$	(0.00	)	$	(0.16	)
Shares used to compute basic net loss per share		36,169,493			35,977,422

Large accelerated filer	¨	Accelerated filer	ý
Non-accelerated filer	¨	Smaller reporting company	ý
		Emerging growth company	¨

	Three Months Ended March 31,
	2020			2019
	(unaudited)			(unaudited)

Net loss	$	(14	)	$	(5,864	)
Foreign currency translation adjustment		90			138
Comprehensive loss	$	(76	)	$	(5,726	)

	Number of Shares			Common Stock Amount			Accumula-ted Other Compre-hensive Income (Loss)			Accumulated Deficit (Equity)			Total
Balance at December 31, 2019		41,519			324,808			(106	)		430,929		$	755,631
Net loss		-			-			-			(14	)		(14	)
Tender offer buyback		(14,000	)		(93,240	)		-			(326,760	)		(420,000	)
Foreign currency translation adjustment		-			-			90			-			90
Issuance of common stock under stock option plan		1,334			7,918			-			-			7,918
Share-based compensation expense		-			3,456			-			-			3,456
Balance at March 31, 2020		28,853		$	242,942		$	(16	)	$	104,155		$	347,082

	Number of Shares		Common Stock Amount			Accumula-ted Other Compre-hensive Income (Loss)			Accumulated Deficit			Total
Balance at December 31, 2018		35,900	$	279,353		$	(255	)	$	(237,700	)	$	41,398
Net loss		-		-			-			(5,864	)		(5,864	)
Foreign currency translation adjustment		-		-			138			-			138
Issuance of common stock under stock option plan		190		643			-			-			643
Stock subscription receivable		-		(102	)		-			-			(102	)
Collection of stock subscription receivable		-		200			-			-			200
Share-based compensation expense		-		570			-			-			570
Balance at March 31, 2019		36,090	$	280,664		$	(117	)	$	(243,564	)	$	36,983

	March 31, 2020		December 31, 2019
Manufacturing equipment	$	3,420	$	3,492
Winnebago building		19,275		19,406
Other fixed assets		2,339		2,273
Total property and equipment	$	25,034	$	25,171

	Options			Exercise Price			Weighted-Average Exercise Price
Options outstanding at December 31, 2019		6,965,730		$2.71	-	$21.99		6.09
Granted		50,500		8.89	-	21.8		15.40
Exercised		(1,333,294	)	2.94	-	19.09		5.94
Forfeitures		(12,167	)	4.95	-	10.36		8.13
Options outstanding at March 31, 2020		5,670,769		$2.71	-	$21.99		6.17

	Three Months Ended March 31,
	2020			2019
Net loss	$	(14	)	$	(5,864	)
Weighted-average number of common shares—basic and diluted		36,169,493			35,977,422
Net loss per share—basic and diluted	$	(0.00	)	$	(0.16	)

	Three Months Ended March 31,				Increase			% Increase
	2020		2019		(Decrease)			(Decrease)
Salaries and related expenses	$	321	$	1,166	$	(845	)		-72	%
Laboratory and manufacturing supplies		124		1,242		(1,118	)		-90	%
Clinical trials and sponsored research		-		256		(256	)		-100	%
Stock-based compensation		533		295		238			81	%
Other		177		1,568		(1,391	)		-89	%
Total	$	1,155	$	4,527	$	(3,372	)		-74	%

	Three Months Ended March 31,
Net cash (used in) provided by:	2020			2019
Operating activities	$	(60,673	)	$	(4,677	)
Investing activities		(389	)		(6	)
Financing activities		(412,082	)		741
Effect of foreign exchange rate on cash and cash equivalents		90			138
Net change in cash and cash equivalents	$	(473,054	)	$	(3,804	)

31.1		Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2		Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1		Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.

101		The following financial statements from the XBiotech Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Extensive Business Reporting Language (XBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations, (iii) condensed consolidated statements of comprehensive loss, (iv) ) condensed consolidated statements of shareholders’ equity; (v) condensed consolidated statements of cash flows and (vi) notes to condensed consolidated financial statements (detail tagged).

Date: May 11, 2020	XBIOTECH INC.

	By:	/S/ John Simard
		John Simard
		President, Chief Executive Officer and Director (Principal Executive Officer)

Date: May 11, 2020	By:	/S/ Queena Han
		Queena Han
		Vice President, Finance and Human Resources, and Secretary (Principal Financial Officer and Principal Accounting Officer)

	/S/ John Simard
	John Simard
	Chief Executive Officer and President
	(Principal Executive Officer)

	/S/JOHN SIMARD
	John Simard
	Chief Executive Officer and President
	(Principal Executive Officer)
	Date: May 11, 2020