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 March 31, 2023

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/33146ac1f837af78aa1a12df68f4f926-img115698922_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 May 4, 2023, the registrant had 37,747,433 shares of common stock, $0.0001 par value per share, outstanding.

 

 


Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

6

 

Unaudited Condensed Consolidated Balance Sheets

6

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

7

 

Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity

8

 

Unaudited Condensed Consolidated Statements of Cash Flows

9

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

75

Item 6.

Exhibits

76

Signatures

 

77

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

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 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 RLYB212, RLYB116 and RLYB331, and the natural history study for our fetal and neonatal alloimmune thrombocytopenia 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, RLYB114 and RLYB331;
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 paroxysmal nocturnal hemoglobinuria and generalized myasthenia gravis;
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, RLYB331 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 enter into 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 and any subsequent offerings;
the potential benefits of strategic collaboration agreements and arrangements, including our agreements with Exscientia Limited and AbCellera Biologics Inc. and our research and collaboration with EyePoint Pharmaceuticals, Inc., 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;

3


 

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 ("U.S.") 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;
We are heavily dependent on the success of RLYB212 and RLYB116, which are in early-stage clinical development. 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;

4


 

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, including the Medicines and Healthcare products Regulatory Agency in the United Kingdom (the “MHRA”), 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, RLYB116 or any of our other product candidates, 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, including the MHRA, 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, including RLYB212. 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 pursue business development transactions focused on the in-license of additional product candidates or the out-license of rights to product candidates in our pipeline and 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.”

 

5


 

 


PART I—FIN
ANCIAL INFORMATION

Item 1. Financial Statements.

RALLYBIO CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except share and per share amounts)

 

MARCH 31,
2023

 

 

DECEMBER 31,
2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

39,519

 

 

$

56,958

 

Marketable securities

 

 

110,870

 

 

 

112,036

 

Prepaid expenses and other assets

 

 

10,887

 

 

 

10,502

 

Total current assets

 

 

161,276

 

 

 

179,496

 

Property and equipment, net

 

 

346

 

 

 

385

 

Operating lease right-of-use assets

 

 

479

 

 

 

524

 

Investment in joint venture

 

 

217

 

 

 

30

 

Total assets

 

$

162,318

 

 

$

180,435

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

782

 

 

$

1,114

 

Accrued expenses

 

 

5,821

 

 

 

9,449

 

Operating lease liabilities

 

 

197

 

 

 

181

 

Total current liabilities

 

 

6,800

 

 

 

10,744

 

Operating lease liabilities, noncurrent

 

 

321

 

 

 

374

 

Total liabilities

 

 

7,121

 

 

 

11,118

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common stock, $0.0001 par value per share; 200,000,000 shares
   authorized as of March 31, 2023 and December 31, 2022,
   respectively; and
37,746,214 and 37,837,369 shares issued
   and outstanding as of March 31, 2023 and December 31, 2022,
   respectively

 

 

4

 

 

 

4

 

Preferred stock, $0.0001 par value per share; 50,000,000 shares
   authorized as of March 31, 2023 and December 31, 2022,
   respectively;
no shares issued or outstanding as of March 31, 2023
   and December 31, 2022, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

333,253

 

 

 

330,208

 

Accumulated other comprehensive loss

 

 

(61

)

 

 

(214

)

Accumulated deficit

 

 

(177,999

)

 

 

(160,681

)

Total stockholders' equity

 

 

155,197

 

 

 

169,317

 

Total liabilities and stockholders' equity

 

$

162,318

 

 

$

180,435

 

 

See accompanying notes of the condensed consolidated financial statements

6


 

RALLYBIO CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

 

 

FOR THE THREE MONTHS ENDED
MARCH 31,

 

(in thousands, except share and per share amounts)

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

11,202

 

 

$

7,648

 

General and administrative

 

 

7,172

 

 

 

6,670

 

Total operating expenses

 

 

18,374

 

 

 

14,318

 

Loss from operations

 

 

(18,374

)

 

 

(14,318

)

Other income (expenses):

 

 

 

 

 

 

Interest income

 

 

1,546

 

 

 

97

 

Other income

 

 

73

 

 

 

113

 

Total other income, net

 

 

1,619

 

 

 

210

 

Loss from continuing operations

 

 

(16,755

)

 

 

(14,108

)

Loss on investment in joint venture

 

 

563

 

 

 

390

 

Net loss

 

$

(17,318

)

 

$

(14,498

)

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

 

$

(0.43

)

 

$

(0.48

)

Weighted-average common shares outstanding, basic and diluted

 

 

40,248,893

 

 

 

30,318,405

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

Net unrealized income (loss) on marketable securities

 

 

153

 

 

 

(122

)

Other comprehensive income (loss)

 

 

153

 

 

 

(122

)

Comprehensive loss

 

$

(17,165

)

 

$

(14,620

)

 

See accompanying notes of the condensed consolidated financial statements

7


 

RALLYBIO CORPORATION

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

 

 

 

COMMON

 

 

ADDITIONAL
PAID-IN

 

 

ACCUMULATED

 

 

ACCUMULATED OTHER COMPREHENSIVE

 

 

STOCKHOLDERS'

 

(in thousands, except share amounts)

 

SHARES

 

 

AMOUNT

 

 

CAPITAL

 

 

DEFICIT

 

 

LOSS

 

 

EQUITY

 

December 31, 2021

 

 

32,129,970

 

 

$

3

 

 

$

269,626

 

 

$

(94,027

)

 

$

 

 

$

175,602

 

Share-based compensation expense

 

 

 

 

 

 

 

 

2,054

 

 

 

 

 

 

 

 

 

2,054

 

Issuance of common stock under the stock award plan

 

 

1,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,498

)

 

 

 

 

 

(14,498

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(122

)

 

 

(122

)

Balance, March 31, 2022

 

 

32,130,970

 

 

$

3

 

 

$

271,680

 

 

$

(108,525

)

 

$

(122

)

 

$

163,036

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

37,837,369

 

 

$

4

 

 

$

330,208

 

 

$

(160,681

)

 

$

(214

)

 

$

169,317

 

Share-based compensation expense

 

 

 

 

 

 

 

 

3,045

 

 

 

 

 

 

 

 

 

3,045

 

Forfeiture of restricted common stock

 

 

(91,155

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,318

)

 

 

 

 

 

(17,318

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

153

 

 

 

153

 

Balance, March 31, 2023

 

 

37,746,214

 

 

$

4

 

 

$

333,253

 

 

$

(177,999

)

 

$

(61

)

 

$

155,197

 

 

 

See accompanying notes of the condensed consolidated financial statements

8


RALLYBIO CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

FOR THE THREE MONTHS ENDED
   MARCH 31,

 

(in thousands)

 

2023

 

 

2022

 

Cash Flows used in Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(17,318

)

 

$

(14,498

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

39

 

 

 

42

 

Net accretion of discounts/premiums on debt securities

 

 

(895

)

 

 

36

 

Stock-based compensation

 

 

3,045

 

 

 

2,054

 

Loss on investment in joint venture

 

 

563

 

 

 

390

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses, right-of-use assets and other assets

 

 

(340

)

 

 

(794

)

Accounts payable

 

 

(295

)

 

 

447

 

Accrued expenses and operating lease liabilities

 

 

(3,564

)

 

 

(1,408

)

Net cash used in operating activities

 

$

(18,765

)

 

$

(13,731

)

Cash Flows Provided By (Used In) Investing Activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(29,285

)

 

 

(80,142

)

Proceeds from maturities of marketable securities

 

 

31,500

 

 

 

 

Purchase of property and equipment

 

 

 

 

 

(36

)

Investment in joint venture

 

 

(750

)

 

 

 

Net cash provided by (used in) investing activities

 

$

1,465

 

 

$

(80,178

)

Cash Flows Used In Financing Activities:

 

 

 

 

 

 

Payments of offering costs

 

 

(139

)

 

 

 

Net cash used in financing activities

 

$

(139

)

 

$

 

Net decrease in cash and cash equivalents

 

 

(17,439

)

 

 

(93,909

)

Cash and cash equivalents—beginning of period

 

 

56,958

 

 

 

175,334

 

Cash and cash equivalents—end of period

 

$

39,519

 

 

$

81,425

 

 

 

 

 

 

 

 

Supplemental Disclosures of Noncash Investing and Financing Activities:

 

 

 

 

 

 

Property and equipment in accounts payable and accrued expenses

 

$

 

 

$

8

 

 

See accompanying notes of the condensed consolidated financial statements

 

9


RALLYBIO CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

1. BUSINESS AND LIQUIDITY

Rallybio Corporation and subsidiaries ("Rallybio", the "Company", "we", "our", or "us") is a clinical-stage biotechnology company with a mission to develop and commercialize life-transforming therapies for patients with severe and rare diseases. Rallybio has built a broad pipeline of promising product candidates aimed at addressing diseases with unmet medical need in areas of maternal fetal health, complement dysregulation, hematology, and metabolic disorders. The Company has two clinical stage programs: RLYB212, an anti-HPA-1a antibody for the prevention of fetal and neonatal alloimmune thrombocytopenia ("FNAIT") and RLYB116, a complement factor 5 ("C5") complement inhibitor with the potential to treat several diseases of complement dysregulation, as well as additional programs in preclinical development.

 

The Company had cash, cash equivalents and marketable securities of $150.4 million as of March 31, 2023. The Company currently expects that its cash, cash equivalents and marketable securities 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, cash equivalents and marketable securities as of March 31, 2023 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, corporate collaborations or license agreements, working capital lines of credit, grant funding, interest income earned on invested cash balances or a combination of one or more of these sources.

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


Unaudited Financial Information — The unaudited condensed consolidated financial statements of the Company 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 the Company, 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. The Company 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.

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Rallybio Corporation and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

 

These accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 (our "Annual Report"). Our significant accounting policies are described in Note 2 of the Notes to the Consolidated Financial Statements included in our Annual Report. There have been no new accounting policies, including the adoption of new accounting standards during the three months ended March 31, 2023, which could be expected to materially impact the Company's unaudited condensed consolidated financial statements.

 

3. MARKETABLE SECURITIES

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of our marketable securities by type of security as of March 31, 2023 and December 31, 2022 was as follows:
 

10


 

 

 

 

MARCH 31, 2023

 

(in thousands)

 

Fair Value Hierarchy Level

 

Amortized Cost

 

 

Gross Unrealized Holding Gains

 

 

Gross Unrealized Holding Losses

 

 

Fair Value

 

Money market funds

 

Level 1

 

$

19,187

 

 

$

 

 

$

 

 

$

19,187

 

U.S. treasury securities

 

Level 1

 

 

14,195

 

 

 

1

 

 

 

(26

)

 

 

14,170

 

U.S. government agency securities

 

Level 2

 

 

96,736

 

 

 

27

 

 

 

(63

)

 

 

96,700

 

 

 

 

 

$

130,118

 

 

$

28

 

 

$

(89

)

 

$

130,057

 

 

 

 

 

 

DECEMBER 31, 2022

 

(in thousands)

 

Fair Value Hierarchy Level

 

Amortized Cost

 

 

Gross Unrealized Holding Gains

 

 

Gross Unrealized Holding Losses

 

 

Fair Value

 

Money market funds

 

Level 1

 

$

12,647

 

 

$

 

 

$

 

 

$

12,647

 

U.S. treasury securities

 

Level 1

 

 

39,372

 

 

 

 

 

 

(169

)

 

 

39,203

 

U.S. government agency securities

 

Level 2

 

 

76,860

 

 

 

37

 

 

 

(82

)

 

 

76,815

 

 

 

 

 

$

128,879

 

 

$

37

 

 

$

(251

)

 

$

128,665

 

The fair values of marketable securities by classification in the condensed consolidated balance sheets was as follows as of March 31, 2023 and December 31, 2022:
 

(in thousands)

 

MARCH 31, 2023

 

 

DECEMBER 31, 2022

 

Cash and cash equivalents

 

$

19,187

 

 

$

16,629

 

Marketable securities

 

 

110,870

 

 

 

112,036

 

 

$

130,057

 

 

$

128,665

 

 

The fair values of available-for-sale debt securities as of March 31, 2023 and December 31, 2022, by contractual maturity, are summarized as follows:
 

(in thousands)

 

MARCH 31, 2023

 

 

DECEMBER 31, 2022

 

Due in one year or less

 

$

125,526

 

 

$

127,667

 

Due after one year through two years

 

 

4,531

 

 

 

998

 

 

$

130,057

 

 

$

128,665

 

 

The aggregate fair value of available-for-sale debt securities in an unrealized loss position as of March 31, 2023 and December 31, 2022 was $50.9 million and $70.0 million, respectively. As of March 31, 2023, we believe that the cost basis of our available-for-sale debt securities is recoverable. No allowance for credit losses was recorded as of March 31, 2023.

4. BALANCE SHEET COMPONENTS

Prepaid expenses and other assets—

Prepaid expenses and other assets consisted of the following as of March 31, 2023 and December 31, 2022:

 

(in thousands)

 

MARCH 31,
2023

 

 

DECEMBER 31,
2022

 

Research and development

 

$

8,653

 

 

$

7,904

 

Insurance

 

 

539

 

 

 

933

 

Other prepaids

 

 

633

 

 

 

615

 

Other assets

 

 

1,062

 

 

 

1,050

 

 

$

10,887

 

 

$

10,502

 

Accrued Expenses—

11


Accrued expenses consisted of the following as of March 31, 2023 and December 31, 2022:

 

(in thousands)

 

MARCH 31,
2023

 

 

DECEMBER 31,
2022

 

Research and development

 

$

3,255

 

 

$

3,582

 

Compensation and related expenses

 

 

1,411

 

 

 

4,703

 

Professional fees

 

 

506

 

 

 

510

 

Other

 

 

649

 

 

 

654

 

 

$

5,821

 

 

$

9,449

 

 

5. STOCKHOLDERS' EQUITY

Common Stock

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 underwriters' option to purchase additional shares were $92.7 million and the net proceeds were approximately $83.0 million, after deducting underwriting discounts and commissions and other offering costs.

 

In November 2022, the Company completed a follow-on offering in which we raised gross proceeds of $54.8 million from the sale of 5,803,655 shares of common stock, inclusive of 803,654 shares of common stock sold pursuant to the partial exercise of the underwriters' option to purchase additional shares at the price of $6.00 per share and to certain investors in lieu of common stock, pre-funded warrants to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price for the shares less the $0.0001 per share exercise price for each pre-funded warrant. The net proceeds from the November 2022 follow-on offering were approximately $50.8 million, after deducting underwriting discounts and commissions and other offering costs.

 

The Company had 200,000,000 shares of common stock authorized as of March 31, 2023 and December 31, 2022, respectively, of which 37,746,214 and 37,837,369 shares were issued and outstanding as of March 31, 2023 and December 31, 2022.


Preferred Stock

The Company had 50,000,000 shares of preferred stock authorized as of March 31, 2023 and December 31, 2022, respectively, of which no shares were outstanding as of March 31, 2023 and December 31, 2022.

 

Pre-Funded Warrants
In connection with the follow-on offering entered into in November 2022, the Company entered into an agreement with certain investors for pre-funded warrants in lieu of common stock to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price at the November 2022 follow-on offering for common stock less a $0.0001 per share exercise price for each pre-funded warrant.

 

The Company may not effect the exercise of any pre-funded warrant, and a holder will not be entitled to exercise any portion of any pre-funded warrant if, upon giving effect to such exercise, the aggregate number of shares of common stock beneficially owned by the holder (together with its affiliates) would exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s election upon 61 days’ notice to the Company subject to the terms of such pre-funded warrants, provided that such percentage may in no event exceed 19.99%.

 

The Company has assessed the pre-funded warrant for appropriate equity or liability classification. During this assessment, the Company determined the pre-funded warrant is a freestanding instrument that does not meet the definition of a liability pursuant to ASC 480 and does not meet the definition of a derivative pursuant to ASC 815. The pre-funded warrant is indexed to the Company’s common stock and meets all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, the pre-funded warrant classified as equity and accounted for as a component of additional paid-in capital at the time of issuance. All of the pre-funded warrants related to our November 2022 follow-on offering remain outstanding and unexercised as of March 31, 2023.

 

12


Share-based Compensation

Share-based compensation comprised of stock options, restricted stock awards, restricted stock units and the employee stock purchase plan is classified in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023 and 2022 as follows:
 

 

 

FOR THE THREE MONTHS ENDED
MARCH 31,

 

(in thousands)

 

2023

 

 

2022

 

Research and development

 

$

1,063

 

 

$

725

 

General and administrative

 

 

1,982

 

 

 

1,329

 

 

$

3,045

 

 

$

2,054

 

 

2021 Equity Incentive Plan

In 2021, the board of directors adopted the Rallybio Corporation 2021 Equity Incentive Plan (the "2021 Plan"). The 2021 Plan reserves 5,440,344 for shares of the Company's common stock that have been issued in respect of outstanding equity awards granted prior to the registrant’s IPO and for future issuances of shares to employees, directors and consultants in the form of stock options, SARs, restricted and unrestricted stock and stock units, performance awards and other awards that are convertible into or otherwise based on the Company's common stock. Dividend equivalents may also be provided in connection with awards under the 2021 Plan. The share pool will automatically increase on January 1st of each year from 2022 to 2031 by the lesser of (i) five percent of the number of shares of the Company's common stock outstanding as of such date and (ii) the number of shares of the Company's common stock determined by the board of directors on or prior to such date. On January 1, 2023 and January 1, 2022, the 2021 Plan share pool was automatically increased by 1,891,868 shares and 1,606,549 shares, respectively. As of March 31, 2023, the total number of shares of common stock that were issuable under the 2021 Plan was 6,779,094 shares, of which 2,346,595 shares remained available for future issuance.


The following table summarizes stock option activity for the three months ended March 31, 2023:
 

Stock Options

 

Number of Option Shares

 

 

Weighted-Average Exercise Price

 

 

Weighted-Average Contractual Term
   (in years)

 

 

Aggregate Intrinsic Value
   (in thousands)

 

Outstanding at December 31, 2022

 

 

2,609,314

 

 

$

13.01

 

 

8.8

 

 

$

 

Granted

 

 

1,864,150

 

 

$

6.58

 

 

 

 

 

 

 

Forfeited

 

 

(146,500

)

 

$

13.65

 

 

 

 

 

 

 

Expired

 

 

(32,490

)

 

$

14.07

 

 

 

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

 

 

 

Outstanding at March 31, 2023

 

 

4,294,474

 

 

$

10.19