On March 16, 2023, JATT’s board of directors approved the Zura Bio Limited 2023 Equity Incentive Plan (the “Equity Incentive Plan”) which became effective on the day immediately preceding the Closing Date of the Business Combination. The Equity Incentive Plan allows for the grant of share options, both incentive and nonqualified share options; stock appreciation rights (“SARs”), alone or in conjunction with other awards; restricted shares awards (“RSAs”) and restricted share units (“RSUs”); incentive bonuses, which may be paid in cash, shares, or a combination thereof; and other share-based awards to employees, officers, non-employee directors and other service providers. The Company has granted share options, RSUs and RSAs that generally vest over four years and expire after 10 years.

The Class A Ordinary Shares issuable under the Equity Incentive Plan are subject to an annual increase on January 1st of each calendar year beginning on January 1, 2024, and ending on and including January 1, 2029, equal to the lesser of (i) 5.0% of the aggregate number of Class A Ordinary Shares outstanding on the final day of the immediately preceding calendar year, (ii) 8,059,796 Class A Ordinary Shares or (iii) such smaller number of shares as is determined by the board.

On March 16, 2023, JATT’s board of directors approved the Zura Bio Limited 2023 Employee Stock Purchase Plan (the “ESPP”) which became effective on the day immediately preceding the Closing Date of the Business Combination. The maximum number of Class A Ordinary Shares that may be issued under the ESPP is 4,029,898, plus an aggregate number of Class A Ordinary shares that are automatically added under the Equity Incentive Plan on January 1st of each calendar year, beginning on January 1, 2024, and ending on and including January 1, 2029, as discussed above. The ESPP enables eligible employees of the Company and designated affiliates to purchase Class A Ordinary Shares at a discount of 15%. As of June 30, 2025, the Company has not activated its ESPP.

On January 1, 2025, the Class A Ordinary Shares reserved for future issuances under the Equity Incentive Plan and/or ESPP were increased by the annual automatic increase of 5% of outstanding Class A Ordinary Shares as of December 31, 2024, or 3,264,877 Class A Ordinary Shares. As of June 30, 2025, there were 18,944,302 Class A Ordinary Shares were authorized for issuance under the Equity Incentive Plan and ESPP, collectively, including 2,055,314 Class A Ordinary Shares authorized for issuance outside of the Equity Incentive Plan and the ESPP.

Equity Incentive Plan

Share Options

The fair value of Equity Incentive Plan share options are estimated on the date of grant using the Black-Scholes option pricing model. The Company lacks significant company-specific historical and implied volatility information. Therefore, it estimates its expected share volatility based on the historical volatility of a publicly traded set of peer companies. Due to the lack of historical exercise history, the expected term of the Company’s share options has been determined using the simplified method, averaging the vesting period and the contractual life of the share options granted. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following weighted-average assumptions were used to estimate the fair value of the Equity Incentive Plan share options issued during the six months ended June 30, 2025 and 2024:

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The following table summarizes the Company’s share option activity for the six months ended June 30, 2025:

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Included in options outstanding as of June 30, 2025 and December 31, 2024 in the table above are 2,055,314 and 2,165,369 options, respectively, to purchase Class A Ordinary Shares issued to certain directors, executives, and employees outside of the Equity Incentive Plan.

In May 2025, the Company granted 408,000 share options to purchase Class A Ordinary shares with non-market performance conditions (“PSOs”), included in the table above, that will vest upon the earlier of achieving a one-year service condition or upon the Company’s next Annual General Meeting (“AGM”).

In December 2024, the Company granted 1,053,000 PSOs (the “2024 PSOs”), included in the table above, that were to vest upon the earlier of achieving a one-year service condition or upon the Company’s AGM. In February 2025, the date of the AGM was set to May 21, 2025 (the “AGM Date”). Accordingly, management determined that the performance condition was met and recorded the remaining unrecognized compensation expense of $1.5 million ratably through the AGM Date. The 2024 PSOs vested on the AGM Date.

The weighted average grant date fair value of options granted during the six months ended June 30, 2025 and 2024 was $0.96 and $2.83, respectively.

Market-Based Share Options

As of June 30, 2025, there are 306,373 options outstanding to purchase Class A Ordinary Shares, with market-based performance conditions, (“Market-Based Share Options”) that were granted to a certain director of the board during 2023. These awards will vest only to the extent that the 20-day volume weighted average trading price (“VWAP”) of the Class A Ordinary Shares is over $30 per Class A Ordinary Share at any time prior to the fifth anniversary of the grant date. These awards have an exercise price of $8.16 and become exercisable when vested and the market condition is satisfied. These awards expire 10 years from the date of grant. The fair value of these Market-Based Share Options was estimated using a Monte Carlo valuation method on the grant date. No Market-Based Share Options were granted during the six months ended June 30, 2025 and the year ended December 31, 2024.

The expense recognized related to Market-Based Share Options was $0.1 million and $0.2 million, respectively, for the three months ended June 30, 2025 and 2024, and $0.3 million for each of the six months ended June 30, 2025 and 2024.

Restricted Share Units

The following table summarizes the Company’s RSU activity for the six months ended June 30, 2025:

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The expense recognized related to RSUs was $0.4 million and $0.5 million for the three months ended June 30, 2025 and 2024, respectively, and $0.8 million and $1.1 million for the six months ended June 30, 2025 and 2024, respectively.

Restricted Share Awards

The following table summarizes the Company’s RSA activity for the six months ended June 30, 2025:

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The expense recognized related to RSAs was $0.2 million and $0.3 million for the three months ended June 30, 2025 and 2024, respectively, and $0.5 million for each of the six months ended June 30, 2025 and 2024.

Equity Award Modification

During the three months ended June 30, 2025, the Company amended a member of the board of director’s option agreements, causing his unvested options to purchase 32,099 Class A Ordinary Shares to become fully vested and exercisable as of the AGM Date. Additionally, the board of directors extended the post-termination exercise period of his vested options to purchase an aggregate of 165,149 Class A Ordinary Shares to the applicable expiration date of each of the respective option awards, upon completion of his service as a member of the board of directors. During the three months ended June 30, 2025, the Company recognized $0.1 million of share-based compensation expense related to this modification within general and administrative expense in the condensed consolidated statement of operations.

On June 27, 2025, the Company and Verender Badial, the Company’s former Chief Financial Officer, entered into an agreement in connection with Mr. Badial’s resignation from the Company (the “Settlement Agreement”). The Settlement Agreement provides for accelerated vesting of the unvested portion of two outstanding options, previously granted to Mr. Badial, relating to an aggregate of 198,540 Class A Ordinary Shares, which became fully vested and exercisable on July 31, 2025. The Settlement Agreement also provides for an extension of the post-termination exercise period of all of Mr. Badial’s vested share options to the applicable expiration date of the applicable stock option, as of July 31, 2025, subject to certain conditions therein. All other remaining unvested options to purchase Class A Ordinary Shares were forfeited and cancelled on July 31, 2025. The Company recognized $0.1 million of share-based compensation expense related to this modification during the three months ended June 30, 2025, and expects to recognize $0.1 million of share-based compensation expense related to this modification in the third quarter of 2025, within general and administrative expense in the condensed consolidated statement of operations.

Share-based Compensation Expense

Share-based compensation expense for all equity arrangements for the three and six months ended June 30, 2025 and 2024 was as follows (in thousands):

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As of June 30, 2025, there was approximately $19.5 million of total unrecognized share-based compensation expense related to options granted to employees, executives, and directors that is expected to be recognized over a weighted average period of 3.1 years. As of June 30, 2025, there was approximately $3.3 million of total unrecognized share-based compensation expense related to RSUs granted to certain employees, executives, and directors under the Company’s Equity Incentive Plan that is expected to be recognized over a weighted average period of 1.9 years. As of June 30, 2025, there was approximately $1.7 million of total unrecognized share-based compensation expense related to RSAs granted to a certain director under the Company’s Equity Incentive Plan that is expected to be recognized over a weighted average period of 1.7 years.