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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-40693

RALLYBIO CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware	85-1083789
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
234 Church Street, Suite 1020 New Haven, CT	06510
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (203) 859-3820

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

RLYB

The NASDAQ Global Select Market

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. Yes ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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 ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of September 8, 2021, the registrant had 32,129,970 shares of common stock, $0.0001 par value per share, outstanding.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements concerning:



the timing of our planned clinical trial application submission for RLYB116;



the initiation, timing, progress, results, and cost of our research and development programs, and our current and future preclinical and clinical studies, including statements regarding the timing of initiation and completion of our clinical trials for RLYB211, RLYB212, and RLYB116, and the natural history study for our FNAIT prevention program, and related preparatory work, and the period during which the results of the trials will become available;



the success, cost and timing of our clinical development of our product candidates, including RLYB212, RLYB116 and RLYB114;



the timing of our planned nomination of a compound for our ENPP1 program under our joint venture with Exscientia;



our ability to initiate, recruit and enroll patients in and conduct our clinical trials at the pace that we project;



our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations or warnings in the label of any of our product candidates, if approved;



our ability to compete with companies currently marketing or engaged in the development of treatments for diseases that our product candidates are designed to target, including PNH and gMG;



our reliance on third parties to conduct our clinical trials;



our reliance on third parties to manufacture drug substance for use in our clinical trials;



the size and growth potential of the markets for RLYB212, RLYB116, RLYB114 and any of our current product candidates or other product candidates we may identify and pursue, and our ability to serve those markets;



our ability to expand our pipeline through collaborations, partnerships and other transactions with third parties;



our ability to identify and advance through clinical development any additional product candidates;



the commercialization of our current product candidates and any other product candidates we may identify and pursue, if approved, including our ability to successfully build commercial infrastructure or enter into collaborations with third parties to market our current product candidates and any other product candidates we may identify and pursue;



our ability to retain and recruit key personnel;



our ability to obtain and maintain adequate intellectual property rights;



our expectations regarding government and third-party payor coverage and reimbursement;



our estimates of our expenses, ongoing losses, capital requirements and our needs for or ability to obtain additional financing;



our expected uses of the net proceeds from our initial public offering;



the potential benefits of strategic collaboration agreements, our ability to enter into strategic collaborations or arrangements, including potential business development opportunities and potential licensing partnerships, and our ability to attract collaborators with development, regulatory and commercialization expertise;



our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012;



our financial performance;



developments and projections relating to our competitors or our industry; and



other risks and uncertainties, including those listed under the section titled “Risk Factors.”

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as guarantees of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual future results, levels of activity, performance and events and circumstances could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risks and uncertainties may emerge from time to time, and it is not possible for management to predict all risks and uncertainties. Except as required by applicable law, we are not obligated to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Trademarks

We use Rallybio as a trademark in the United States and/or in other countries. This Quarterly Report on Form 10-Q contains references to our trademark and to those belonging to other entities, including Affibody®. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

Risk Factor Summary

Our business is subject to a number of risks that are discussed more fully in the “Risk Factors” section of this Quarterly Report on Form 10-Q. These risks include the following:



We have incurred significant losses since our inception and anticipate that we will continue to incur losses in the foreseeable future. We have not commercialized any products and have never generated revenue from the commercialization of any product. We are not currently profitable, and we may never achieve or sustain profitability;



We will require significant additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of RLYB212, RLYB116 or any additional product candidates we may develop;



Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates;



The ongoing COVID-19 pandemic in the United States and other countries has resulted in and may further result in disruptions to our preclinical studies, clinical trials, manufacturing and other business operations, which could adversely affect our business and the market price of our common stock;



We are heavily dependent on the success of RLYB212 and RLYB116, which are in preclinical IND-enabling activities. If we are not able to develop, obtain regulatory approval for, or successfully commercialize our product candidates, or if we experience significant delays in doing so, our business will be materially harmed;



We may not be successful in our efforts to identify additional product candidates. Due to our limited resources and access to capital, we must prioritize development of certain product candidates, the choice of which may prove to be wrong and adversely affect our business;



Preclinical studies and clinical trials are expensive, time consuming, and difficult to design and implement, and involve uncertain outcomes. Any product candidates that we advance into clinical trials may not achieve favorable results in later clinical trials, if any, or receive marketing approval. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates;



Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control, including our focus on rare diseases;



Results of preclinical studies, clinical trials, or analyses that we may announce or publish from time to time, may not be indicative of results obtained in later trials, and any interim results we may publish could be different than final results;



Any product candidates that we develop or the administration thereof, may cause serious adverse events or undesirable side effects, which may halt their clinical development, delay or prevent marketing approval, or, if approved, require them to be taken off the market, include safety warnings, or otherwise limit their sales;



The regulatory approval processes of the U.S. Food and Drug Administration (the "FDA"), the European Medicines Agency (the "EMA"), and comparable foreign regulatory authorities are lengthy, time- consuming, and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for RLYB212, RLYB116 or any of our other product candidates, our business will be substantially harmed;



Our product candidates target rare diseases and conditions, and the market opportunities for RLYB212 and RLYB116, if approved, may be smaller than we anticipate. As a result, our commercial opportunity may be limited and because the target populations of our product candidates are for rare diseases, we must be able to successfully identify patients and capture a significant market share to achieve profitability and growth;



The FDA, EMA or other comparable foreign regulatory authorities could require the clearance or approval of an in vitro diagnostic or companion diagnostic device as a condition of approval for any product candidate that requires or would commercially benefit from such tests. Failure to successfully validate, develop and obtain regulatory clearance or approval for companion diagnostics on a timely basis or at all could harm our drug development strategy and we may not realize the commercial potential of any such product candidate;



We face significant competition from biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively;



We intend to continue to acquire or in-license rights to additional product candidates or collaborate with third parties for the development and commercialization of our product candidates. We may not succeed in identifying and acquiring businesses or assets, in-licensing intellectual property rights or establishing and maintaining collaborations, which may significantly limit our ability to successfully develop and commercialize our other product candidates, if at all, and these transactions could disrupt our business, cause dilution to our stockholders or reduce our financial resources; and



If we are unable to obtain, maintain and enforce patent protection for our technology and product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.

The foregoing is only a summary of some of our risks. For a more detailed discussion of these and other risks you should consider before making an investment in our common stock, see “Risk Factors.”

iii

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Unaudited Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Units and Members’ Deficit	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II.	OTHER INFORMATION	25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 6.	Exhibits	74
Signatures		75

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

RALLYBIO HOLDINGS, LLC AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except unit and per unit amounts)	JUNE 30, 2021			DECEMBER 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	112,729		$	140,233
Prepaid expenses and other assets		5,702			1,028
Total current assets		118,431			141,261
Property and equipment, net		306			287
Investment in joint venture		1,360			310
Total assets	$	120,097		$	141,858
Liabilities and members’ deficit
Current liabilities:
Accounts payable	$	2,622		$	1,579
Accrued expenses		4,786			4,264
Total current liabilities		7,408			5,843
Accrued expenses long-term		27			12
Total liabilities		7,435			5,855
Commitments and contingencies (Note 7)
Redeemable convertible preferred units:
Series A preferred units, no par value, 33,478,255 units authorized, issued and outstanding as of June 30, 2021 and December 31, 2020; liquidation preference of $37,600 as of June 30, 2021 and December 31, 2020		37,141			37,141
Series B preferred units, no par value, 104,442,965 units authorized, issued and outstanding as of June 30, 2021 and December 31, 2020; liquidation preference of $145,204 as of June 30, 2021 and December 31, 2020		144,886			144,886
Members’ deficit:
Common units, no par value, 5,700,000 issued and outstanding as of June 30, 2021 and December 31, 2020		536			452
Incentive units, 20,869,704 and 6,865,704 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		1,515			538
Accumulated deficit		(71,416	)		(47,014	)
Total members’ deficit		(69,365	)		(46,024	)
Total liabilities, redeemable convertible preferred units, and members’ deficit	$	120,097		$	141,858

See accompanying notes of the condensed consolidated financial statements

RALLYBIO HOLDINGS, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)


	THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
(in thousands, except units and per unit amounts)	2021			2020			2021			2020
Operating Expenses:
Research and development	$	6,818		$	3,092		$	15,855		$	5,005
General and administrative		3,712			1,570			7,499			3,501
Total operating expenses		10,530			4,662			23,354			8,506
Loss from operations		(10,530	)		(4,662	)		(23,354	)		(8,506	)
Other income (expenses):
Interest income		13			47			30			102
Interest expense		—			(12	)		(10	)		(24	)
Other (expense) income		(142	)		69			(118	)		121
Total other (expense) income, net		(129	)		104			(98	)		199
Loss before income taxes		(10,659	)		(4,558	)		(23,452	)		(8,307	)
Income tax benefit		—			—			—			(16	)
Loss on investment in joint venture		468			335			950			483
Net loss and comprehensive loss	$	(11,127	)	$	(4,893	)	$	(24,402	)	$	(8,774	)
Net loss attributable to common units	$	(11,127	)	$	(4,893	)	$	(24,402	)	$	(8,774	)
Net loss per common unit, basic and diluted	$	(2.80	)	$	(1.85	)	$	(6.77	)	$	(3.81	)
Weighted average common units outstanding, basic and diluted		3,978,054			2,643,750			3,603,193			2,304,385

See accompanying notes of the condensed consolidated financial statements

RALLYBIO HOLDINGS, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Units and Members’ Deficit

(Unaudited)


For the Three Months Ended June 30, 2020 and 2021	SERIES A REDEEMABLE CONVERTIBLE PREFERRED UNITS				SERIES B REDEEMABLE CONVERTIBLE PREFERRED UNITS				COMMON UNITS				INCENTIVE UNITS				ACCUMULATED			TOTAL MEMBERS’
(in thousands, except unit amounts)	UNITS		AMOUNT		UNITS		AMOUNT		UNITS		AMOUNT		UNITS		AMOUNT		DEFICIT			DEFICIT
March 31, 2020		33,478,255	$	37,141		61,457,763	$	90,857		5,700,000	$	300		1,633,000	$	91	$	(24,448	)	$	(24,057	)
Issuance of Series B Redeemable Convertible Preferred Units, net of issuance costs of $71		—		—		42,985,202		54,029		—		—		—		—		—			—
Incentive unit-based compensation		—		—		—		—		—		—		225,000		39		—			39
Common unit-based compensation		—		—		—		—		—		55		—		—		—			55
Net loss and comprehensive loss		—		—		—		—		—		—		—		—		(4,893	)		(4,893	)
Balance, June 30, 2020		33,478,255	$	37,141		104,442,965	$	144,886		5,700,000	$	355		1,858,000	$	130	$	(29,341	)	$	(28,856	)

March 31, 2021		33,478,255	$	37,141		104,442,965	$	144,886		5,700,000	$	494		19,934,704	$	1,018	$	(60,289	)	$	(58,777	)
Incentive unit-based compensation		—		—		—		—		—		—		935,000		497		—			497
Common unit-based compensation		—		—		—		—		—		42		—		—		—			42
Net loss and comprehensive loss		—		—		—		—		—		—		—		—		(11,127	)		(11,127	)
Balance, June 30, 2021		33,478,255	$	37,141		104,442,965	$	144,886		5,700,000	$	536		20,869,704	$	1,515	$	(71,416	)	$	(69,365	)


For the Six Months Ended June 30, 2020 and 2021	SERIES A REDEEMABLE CONVERTIBLE PREFERRED UNITS				SERIES B REDEEMABLE CONVERTIBLE PREFERRED UNITS				COMMON UNITS				INCENTIVE UNITS				ACCUMULATED			TOTAL MEMBERS’
(in thousands, except unit amounts)	UNITS		AMOUNT		UNITS		AMOUNT		UNITS		AMOUNT		UNITS		AMOUNT		DEFICIT			DEFICIT
December 31, 2019		33,478,255	$	37,141		—	$	—		5,700,000	$	230		1,633,000	$	56	$	(20,567	)	$	(20,281	)
Issuance of Series B Redeemable Convertible Preferred Units, net of issuance costs of $319		—		—		104,442,965		144,886		—		—		—		—		—			—
Incentive unit-based compensation		—		—		—		—		—		—		225,000		74		—			74
Common unit-based compensation		—		—		—		—		—		125		—		—		—			125
Net loss and comprehensive loss		—		—		—		—		—		—		—		—		(8,774	)		(8,774	)
Balance, June 30, 2020		33,478,255	$	37,141		104,442,965	$	144,886		5,700,000	$	355		1,858,000	$	130	$	(29,341	)	$	(28,856	)

December 31, 2020		33,478,255	$	37,141		104,442,965	$	144,886		5,700,000	$	452		6,865,704	$	538	$	(47,014	)	$	(46,024	)
Incentive unit-based compensation		—		—		—		—		—		—		14,004,000		977		—			977
Common unit-based compensation		—		—		—		—		—		84		—		—		—			84
Net loss and comprehensive loss		—		—		—		—		—		—		—		—		(24,402	)		(24,402	)
Balance, June 30, 2021		33,478,255	$	37,141		104,442,965	$	144,886		5,700,000	$	536		20,869,704	$	1,515	$	(71,416	)	$	(69,365	)

See accompanying notes of the condensed consolidated financial statements

RALLYBIO HOLDINGS, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	SIX MONTHS ENDED JUNE 30,
(in thousands)	2021			2020
Cash Flows from Operating Activities
Net loss	$	(24,402	)	$	(8,774	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		48			27
Equity based compensation		1,061			199
Loss on investment in joint venture		950			483
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(2,249	)		(679	)
Accounts payable		787			(449	)
Accrued expenses		(970	)		38
Net cash used in operating activities		(24,775	)		(9,155	)
Cash Flows used in Investing Activities:
Purchase of property and equipment		(66	)		(8	)
Investment in joint venture		(2,000	)		(1,585	)
Net cash used in investing activities		(2,066	)		(1,593	)
Cash Flows from Financing Activities:
Issuance of Series B preferred units		—			145,205
Preferred unit issuance costs		—			(307	)
Payments of deferred offering costs		(663	)		—
Net cash (used in) provided by financing activities		(663	)		144,898
Net (decrease) increase in cash and cash equivalents		(27,504	)		134,150
Cash and cash equivalents—beginning of period		140,233			19,458
Cash and cash equivalents—end of period	$	112,729		$	153,608
Supplemental Disclosures of Noncash Investing and Financing Activities:
Deferred offering costs in accounts payable and accrued expenses	$	1,762		$	—
Property and equipment in accounts payable and accrued expenses	$	15		$	6
Series B preferred unit issuance costs in accounts payable and accrued expenses	$	—		$	12

See accompanying notes of the condensed consolidated financial statements

RALLYBIO HOLDINGS, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

1. BUSINESS AND LIQUIDITY

As of June 30, 2021, Rallybio Holdings LLC (“Rallybio Holdings”) held 100% of the outstanding common stock of Rallybio Corporation. Rallybio Holdings had no activities other than its ownership in Rallybio Corporation. Rallybio Corporation held 100% of the outstanding membership units in four wholly-owned subsidiaries—Rallybio, LLC, Rallybio IPA, LLC, Rallybio IPB, LLC, and IPC Research, LLC (collectively, the “Company”). The Company is a clinical-stage biotechnology company built around a team of seasoned industry experts with a shared purpose and a track record of success in discovering, developing, manufacturing, and delivering therapies to meaningfully improve the lives of patients suffering from severe and rare diseases.

In August 2021, the Company completed its initial public offering (“IPO”), pursuant to which it issued and sold 7,130,000 shares of the Company’s common stock, inclusive of 930,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $13.00 per share. The gross proceeds from the IPO, including the exercise of the underwriter's option to purchase additional shares were $