10-Q
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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

OR

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

 

https://cdn.kscope.io/9dc0090576336559ddfe630f5fe7f0bc-img113854762_0.jpg 

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

i


 

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;

ii


 

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

 

iv


 

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

1


 

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

2


 

 

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

3


 

 

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

 

4


 

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 $92.7 million and the net proceeds were approximately $83.2 million, after deducting underwriting discounts and commissions and other offering expenses.

 

Prior to the IPO, the Company operated as Rallybio Holdings, a Delaware limited liability company which was incorporated in Delaware on March 22, 2018 and held 100% of the outstanding membership units in five wholly-owned subsidiaries; Rallybio, LLC, Rallybio IPA, LLC, Rallybio IPB, LLC, Rallybio, IPD, LLC, and IPC Research, LLC prior to the IPO and it's liquidation. On June 30, 2021, the Company completed a series of transactions pursuant to which (i) Rallybio IPD, LLC, a direct subsidiary of Rallybio Holdings that was formed in Delaware in May 2020, was converted from a Delaware limited liability company to a Delaware corporation and changed its name to Rallybio Corporation (the "Corporation"), and (ii) four direct subsidiaries of the Corporation, each a Delaware limited liability company, or collectively the Merger Subs, each consummated a separate merger with one of Rallybio Holdings direct subsidiaries, other than Rallybio IPD, LLC, or collectively the Asset Subsidiaries, with the Asset Subsidiaries surviving the mergers and Rallybio Holdings receiving common stock of the Corporation in exchange for its interest in each Asset Subsidiary, which resulted in the Asset Subsidiaries becoming subsidiaries of the Corporation and the Corporation becoming the only direct subsidiary of Rallybio Holdings. On July 28, 2021, immediately prior to the completion of the IPO, Rallybio Holdings liquidated and distributed 100% of the capital stock of the Corporation, consisting solely of common stock, to the unitholders of Rallybio Holdings. The liquidation of Rallybio Holdings and distribution of the capital stock of the Corporation to the unitholders of Rallybio Holdings is referred to as the “Liquidation” and to the Liquidation and these other transactions collectively referred to as the “Reorganization.” As a result of the Reorganization, the unitholders of Rallybio Holdings became the holders of common stock of the Corporation, and the Company's condensed consolidated financial statements are subsequently reported from the Corporation.

 

Except as disclosed in this Quarterly Report on Form 10-Q, the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2021 and 2020 and the notes thereto, and other financial information included in this Quarterly Report on Form 10-Q are those of Rallybio Holdings and do not give effect to the Reorganization.

 

Rallybio Holdings had cash and cash equivalents of $112.7 million at June 30, 2021. Rallybio Holdings currently expects that its cash and cash equivalents will be sufficient to fund its operating expenses and capital requirements for more than 12 months from the date the condensed consolidated financial statements are issued. However, we do not anticipate that the current cash and cash equivalents as of June 30, 2021 combined with our net proceeds from our IPO in August of 2021, will be sufficient for us to fund any of our product candidates through regulatory approval, and we will need to raise substantial additional capital to complete the development and commercialization of our product candidates, if approved. We may satisfy our future cash needs through the sale of equity securities, debt financings, working capital lines of credit, corporate collaborations or license agreements, grant funding, interest income earned on invested cash balances or a combination of one or more of these sources.

In March 2020, the World Health Organization characterized the novel coronavirus as a global pandemic. Although there is significant uncertainty as to the likely effects this disease may have in the future, to date there has not yet been a significant impact to the Company’s operations or financial statements.

5


 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

Unaudited Financial Information— The unaudited condensed consolidated financial statements of Rallybio Holdings have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). In the opinion of Rallybio Holdings, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the financial position and results of operations for the reported interim periods. Rallybio Holdings considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

Rallybio Holdings reviews new accounting standards as issued. As of June 30, 2021 Rallybio Holdings has not identified any new standards that it believes will have a significant impact on the financial statements of Rallybio Holdings. However, Rallybio Holdings is still evaluating the impact of adopting ASU 2016-02, Leases on its condensed consolidated financial statements.

There were no changes to significant accounting policies of Rallybio Holdings during the six months ended June 30, 2021 other than noted below.

 

These accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 and notes thereto contained in the Company’s final prospectus for its IPO filed with the SEC on July 30, 2021 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “IPO Prospectus”).

Deferred Offering Costs—Rallybio Holdings capitalizes incremental legal, professional accounting and other third-party fees that are directly associated with the IPO as other current assets until the IPO is consummated. After consummation of the IPO, these costs will be recorded as a reduction of additional paid-in-capital generated as a result of the offering. As of June 30, 2021, there were deferred offering costs of approximately $2.4 million included in prepaid expenses and other assets. The IPO was completed in August of 2021 and all deferred offering costs were subsequently recorded within stockholder's equity of the Corporation as a reduction of additional paid-in-capital generated from the offering. 

3. ACCRUED EXPENSES

Accrued expenses consisted of the following as of June 30, 2021 and December 31, 2020: