Executive Summary / Key Takeaways

• Skye Bioscience is strategically focused on developing nimacimab, a peripherally restricted negative allosteric modulating antibody targeting the CB1 receptor, as a potentially differentiated treatment for obesity and related metabolic conditions.
• Nimacimab's core technological advantage lies in its minimal brain penetration, aiming to avoid the neuropsychiatric side effects that plagued previous small molecule CB1 inhibitors, while preclinical data supports its efficacy in driving weight loss and metabolic benefits.
• The Phase 2a CBeyond study in obesity has completed enrollment ahead of schedule (136 patients), with top-line 26-week data now expected in late Q3 or early Q4 2025, representing a critical near-term catalyst.
• An open-label extension to 52 weeks has been implemented for the CBeyond study, with data expected in Q2 2026, designed to provide valuable longer-term safety and efficacy insights, including potential for deeper weight loss and body composition analysis via DEXA scans.
• The company's balance sheet has been strengthened by recent financings and the recovery of restricted cash from a legal matter, providing a cash runway expected to fund operations through at least Q1 2027, covering key clinical milestones and manufacturing readiness for a potential Phase 2b study.

Setting the Scene: A New Angle in the Obesity Battle

The global obesity epidemic presents one of the most significant healthcare challenges and market opportunities of our time. While the landscape is increasingly dominated by highly effective incretin-based therapies, primarily GLP-1 receptor agonists, limitations persist regarding tolerability, lean mass preservation, and long-term sustainability for many patients. This has fueled a growing recognition within the pharmaceutical industry of the need for alternative mechanisms of action, evidenced by recent strategic deals in the non-incretin space.

One such alternative mechanism, targeting the cannabinoid receptor 1 (CB1), has a complex history. Early small molecule CB1 inhibitors demonstrated significant weight loss but were ultimately hampered by concerning neuropsychiatric side effects linked to their penetration of the central nervous system (CNS). Skye Bioscience (NASDAQ: SKYE) is positioning itself to potentially re-validate the CB1 pathway for obesity with a fundamentally different approach: nimacimab. Nimacimab is a first-in-class, peripherally restricted negative allosteric modulating antibody designed to harness the metabolic benefits of CB1 inhibition while minimizing CNS exposure and the associated safety liabilities. This strategy forms the core of Skye's investment thesis, aiming to offer a differentiated profile in a vast and evolving market.

Strategic Evolution and the Nimacimab Focus

Skye Bioscience, originally incorporated in 2011 and formerly known as Emerald Bioscience, has undergone a strategic transformation to arrive at its current focus. The pivotal moment came with the acquisition of the nimacimab asset, which was expensed for $21.2 million in 2023. This acquisition marked a decisive shift towards developing GPCR-targeting molecules for metabolic health. In 2024, the company solidified this focus by discontinuing its legacy SBI-100 program, reallocating resources entirely to the nimacimab opportunity. This history underscores a deliberate strategic pivot towards what management believes is the highest-value opportunity in their pipeline, concentrating capital and effort on advancing nimacimab through clinical development.

The Nimacimab Advantage: Technology Designed for Safety and Efficacy

Nimacimab's potential differentiation stems directly from its unique technological design as a peripherally restricted negative allosteric modulating antibody. The CB1 receptor is widely distributed throughout the body, including in peripheral metabolic tissues (adipose tissue, liver, pancreas, GI tract) and the CNS. While peripheral CB1 inhibition is believed to drive metabolic benefits and weight loss, CNS CB1 inhibition has been strongly linked to neuropsychiatric adverse events.

Skye's preclinical work and modeling support the hypothesis that peripheral CB1 inhibition is sufficient for meaningful weight loss and that CNS exposure is not required for efficacy but is the source of safety concerns. Nimacimab is engineered to be virtually undetectable in the CNS, demonstrating superior peripheral restriction compared to small molecule CB1 inhibitors like monlunabant and rimonabant, which exhibit increasing dose-dependent brain penetration. This is nimacimab's primary safety moat, aiming to avoid the depression, anxiety, irritability, and suicidal ideation seen with earlier compounds. As Dr. Puneet Arora, Skye's Chief Medical Officer, noted, "Based on those models, we do believe that this is very much a CNS effect and not driven by periphery," adding that blocking this physiological pathway in the CNS "is the risk that you engender."

Beyond peripheral restriction, nimacimab's allosteric binding mechanism offers another potential advantage. Unlike orthosteric small molecules that compete directly with natural endocannabinoid ligands (anandamide, 2-AG) for the same binding site, nimacimab binds to a different site on the receptor. In vitro data presented by Skye demonstrated that while monlunabant's potency was significantly impacted when challenged with elevated concentrations of a CB1 agonist, nimacimab's potency remained relatively stable. This suggests nimacimab may maintain effectiveness even in the presence of high endocannabinoid levels, which are associated with obesity, potentially offering a wider therapeutic window.

Preclinical studies in diet-induced obesity (DIO) murine models have provided early evidence supporting nimacimab's efficacy and mechanism. Skye reported that nimacimab alone demonstrated 23.5% weight loss in one DIO study, comparable to monlunabant and tirzepatide (a dual GLP-1/GIP agonist) alone in that same study. Crucially, when nimacimab was combined with tirzepatide, weight loss exceeded 30%, demonstrating an additive effect. Biomarker analyses in these studies showed nimacimab-driven weight loss was associated with beneficial changes in key hormones, glycemic control, and inflammatory markers, pointing towards a multimodal metabolic benefit and favorable impact on body composition, including potential lean mass preservation.

Skye is actively engaged in ongoing preclinical research to further elucidate nimacimab's differentiated mechanism, explore additional combinations, and investigate its potential in other metabolic indications where inflammation and fibrosis play a role. On the manufacturing front, the company has initiated GMP manufacturing runs and is implementing plans for optimization, scale-up, and commercial capabilities. A recent partnership with Arecor Therapeutics aims to develop a more concentrated formulation of nimacimab, potentially enabling less frequent dosing (e.g., monthly) for improved patient convenience and compliance, while also contributing to cost of goods sold reduction. These technological and operational efforts are foundational to translating preclinical promise into clinical and commercial success.

Translating to the Clinic: The CBeyond Study and Key Milestones

The central focus for Skye and its investors is the Phase 2a CBeyond clinical trial evaluating subcutaneous nimacimab in patients with obesity and overweight in the United States. This randomized, double-blinded, placebo-controlled study is designed as a proof-of-concept trial. The primary endpoint is an 8% difference in mean weight loss between nimacimab monotherapy and placebo at 26 weeks. Secondary and exploratory endpoints include assessing safety, tolerability, neuropsychiatric and cognitive outcomes, and changes in body composition via DEXA scans. The study also includes an exploratory arm evaluating nimacimab in combination with a GLP-1 receptor agonist (semaglutide).

Execution on the CBeyond trial has been a significant operational success for Skye. Enrollment was completed ahead of schedule by February 28, 2025, with 136 patients enrolled, exceeding the originally planned 120. This rapid enrollment allows the company to forgo the planned interim analysis and instead focus on reporting the full 26-week data set sooner. Top-line data from the 26-week treatment period is now anticipated in late Q3 or early Q4 2025, potentially three months earlier than prior guidance. This readout represents a critical inflection point, providing the first human clinical validation of nimacimab's efficacy and safety profile in obesity. The independent Data Safety Monitoring Committee (DSMB) has conducted three scheduled reviews and recommended the study continue as planned, offering an early positive signal on safety, though the study remains blinded.

Recognizing the value of longer-term data in the obesity space, Skye has implemented a protocol extension for the CBeyond trial. With IRB approval secured and protocol finalization with the FDA underway, patients in all four treatment arms will have the opportunity to continue therapy for an additional 26 weeks, extending the treatment period to 52 weeks. This extension is expected to yield substantially greater safety and efficacy data by Q2 2026. Management believes this longer duration could demonstrate deeper weight loss, consistent with observations from other weight loss mechanisms over time, and will provide a more comprehensive view of nimacimab's profile to support regulatory discussions and future development plans. The extension includes continued DEXA scans to track body composition changes over the full 52 weeks.

Looking ahead, Skye plans to engage with regulatory agencies (FDA and EMEA) based on the 26-week top-line data to align on the design of a larger Phase IIb dose-escalation study. Initiation of this Phase IIb trial is anticipated by the second quarter of 2026, following the availability of the 52-week data, which will further inform dose selection and trial design.

Financial Foundation and Resource Allocation

As a clinical-stage biotechnology company, Skye has not generated revenue to date, and its financial performance is characterized by operating losses driven by research and development expenditures. For the three months ended March 31, 2025, research and development expenses were $7.20 million, a significant increase from $1.95 million in the same period of 2024. This nearly 270% increase reflects the substantial investment in the ongoing Phase 2a CBeyond clinical trial, including increased site and patient costs, and contract manufacturing costs for drug substance and product needed for the extended Phase 2a study and future trials.

General and administrative expenses also increased, albeit more modestly, to $4.56 million in Q1 2025 from $4.21 million in Q1 2024, primarily due to consulting, investor relations, and marketing activities, partially offset by lower stock-based compensation. The net loss for Q1 2025 was $11.10 million, compared to $5.02 million in Q1 2024, reflecting the increased R&D spend and lower other income (due to the absence of a gain on asset sale present in Q1 2024, partially offset by reduced interest expense and higher interest income).

For the full year 2024, the net loss totaled $26.6 million, a decrease from $37.6 million in 2023. This improvement was largely attributable to the non-recurrence of a $21.2 million in-process research and development expense related to the nimacimab asset acquisition in 2023, as well as gains recognized in 2024 from the partial derecognition of a legal contingency ($4.2 million) and an insurance settlement ($2 million), plus interest income ($3 million) and a gain from real estate sale ($1.4 million).

Skye's liquidity position is critical for funding its development activities. As of March 31, 2025, the company held $46.42 million in cash and cash equivalents and $12.80 million in short-term investments, totaling $59.22 million. This compares to $68.42 million in cash and cash equivalents at December 31, 2024. Net cash used in operating activities was $9.19 million for the three months ended March 31, 2025, up from $4.71 million in the prior year period, reflecting the higher operating expenses. The operating cash burn averaged $6.3 million per quarter in 2024, increasing to $8.1 million in Q4 2024. Management expects to maintain at least this level of expenditure in 2025 as the CBeyond study progresses and manufacturing efforts increase.

The company significantly bolstered its balance sheet in early 2024 through two private placement equity transactions, raising combined net aggregate proceeds of $83.56 million. Furthermore, in Q4 2024, Skye recovered $9.08 million in restricted cash related to a legal appeal bond and collected $2 million from an insurance settlement following a favorable court ruling on a material litigation matter. While an estimated legal contingency of $1.91 million remains as of March 31, 2025, related to the remanded case, the recovery of funds has been reallocated to the clinical pipeline and extended the cash runway.

Based on its current operational requirements, Skye believes its existing cash and investments are sufficient to fund projected operations for at least 12 months from the May 8, 2025 filing date of the 10-Q. The company projects its cash runway will extend through at least the first quarter of 2027. This forecast includes the capital needed to complete the Phase 2a study, obtain both the 26-week and 52-week data readouts, and perform the necessary manufacturing work for a potential Phase 2b study. However, it explicitly excludes the costs associated with conducting Phase 2b and Phase 3 clinical trials. This financial position provides Skye with the necessary resources to reach critical value-inflection points over the next two years.

Competitive Positioning in a Dynamic Market

Skye operates within the highly competitive metabolic health landscape, specifically targeting the massive obesity market. The primary competitive forces come from established pharmaceutical companies with marketed incretin therapies (like GLP-1s) and other companies developing novel anti-obesity agents.

The GLP-1 receptor agonist class, led by companies like Novo Nordisk (NVO) and Eli Lilly (LLY), currently dominates the market due to demonstrated significant weight loss efficacy. However, these therapies are associated with gastrointestinal side effects, and there are ongoing questions regarding their impact on lean body mass and the long-term adherence required for weight maintenance. Skye views nimacimab as a potential complement or alternative, addressing some of these limitations with a different mechanism of action. Preclinical data showing additive weight loss when combined with tirzepatide supports the potential for combination therapy.

Within the CB1 inhibitor class itself, Skye differentiates nimacimab from small molecule predecessors like rimonabant and Novo Nordisk's monlunabant. While these small molecules demonstrated weight loss, their CNS penetration led to significant neuropsychiatric safety issues. Monlunabant's Phase 2a data, while showing weight loss, also reported dose-dependent increases in neuropsychiatric side effects, reinforcing the challenge for brain-penetrant compounds. Skye's core competitive advantage here is nimacimab's peripherally restricted nature, which preclinical data and Phase 1 clinical experience suggest avoids these CNS liabilities. This safety differentiation is paramount in a chronic treatment setting. Furthermore, nimacimab's allosteric binding offers a potential potency advantage over orthosteric small molecules, particularly in the context of elevated endocannabinoid levels in obesity.

Recent industry deals in the non-incretin obesity space highlight the strategic interest of larger pharmaceutical companies in diversifying beyond GLP-1s and acquiring novel mechanisms. Skye believes this trend validates the opportunity for alternative approaches like CB1 inhibition and positions nimacimab favorably as a differentiated candidate with a potentially superior safety profile compared to other CB1 inhibitors. Skye aims to fulfill unmet needs in the diverse obesity patient population rather than directly competing head-to-head with established GLP-1s for the same first-line positioning, although the potential for combination therapy remains a significant opportunity.

Key Risks and Challenges

Investing in a clinical-stage biotechnology company like Skye Bioscience involves significant risks. The primary risk is the successful outcome of ongoing and future clinical trials. While the Phase 2a CBeyond study has completed enrollment and DSMB reviews have been favorable, there is no guarantee that the top-line 26-week data or the 52-week extension data will demonstrate the desired level of efficacy (e.g., the 8% weight loss difference vs. placebo) or a favorable safety and tolerability profile sufficient to support further development or regulatory approval. Failure in clinical trials would severely impact the investment thesis.

Regulatory risk is also significant. Even with positive clinical data, there is no assurance that the FDA or other regulatory agencies will approve nimacimab for marketing. The history of the CB1 class and the prior withdrawal of rimonabant could lead to heightened scrutiny, particularly regarding safety.

Manufacturing risks exist, including the ability to successfully scale up GMP manufacturing to meet the needs of larger Phase 2b and Phase 3 trials and, eventually, commercial demand, while also managing costs. The success of efforts to reduce the cost of goods sold will be important for commercial viability.

Competition is intense, with well-funded large pharmaceutical companies dominating the obesity market and actively pursuing both incretin and non-incretin approaches. Skye will need to demonstrate clear differentiation and a compelling value proposition to compete effectively.

While Skye's cash runway is projected through at least Q1 2027, this does not cover the costs of Phase 2b and Phase 3 trials. The company will require substantial additional capital to complete development and potentially commercialize nimacimab. The ability to raise this capital will depend on clinical trial success, market conditions, and investor sentiment.

Finally, the ongoing legal matter, while the prior judgment was vacated, still requires a new trial, and the final amount of loss or recovery remains uncertain. While the immediate cash restriction was lifted, an unfavorable outcome in the new trial could impact financial resources. Macroeconomic factors, such as inflation and supply chain issues, could also impact operational costs and timelines.

Conclusion

Skye Bioscience is at a pivotal juncture, having successfully executed on the rapid enrollment of its Phase 2a CBeyond study for nimacimab in obesity. The company's strategic focus on this peripherally restricted CB1 antibody, underpinned by preclinical data suggesting a differentiated safety and efficacy profile compared to both incretins and previous small molecule CB1 inhibitors, positions it as a potentially significant player in the evolving metabolic health market.

The upcoming top-line 26-week data in late Q3 or early Q4 2025 is a critical near-term catalyst that will provide the first human proof-of-concept for nimacimab's mechanism in obesity. The planned 52-week extension will offer valuable longer-term insights into durability and safety. With a strengthened balance sheet providing runway through key clinical milestones and manufacturing readiness for future studies, Skye is poised to generate data that could validate its differentiated approach. While significant clinical, regulatory, and financial risks remain, the potential for nimacimab to offer a safer, effective alternative or complement in the vast obesity landscape makes Skye Bioscience a compelling story to watch as these key data readouts approach.