Rallybio Corporation — Q1 2022 Form 10-Q Summary
Business context and reporting period
Rallybio is a clinical-stage biotechnology company developing therapies for severe and rare diseases. The filing covers the three months ended March 31, 2022 and was filed May 10, 2022. The company had no approved products and no product revenue.
- Lead programs included RLYB212 and RLYB211 for prevention of fetal and neonatal alloimmune thrombocytopenia, and RLYB116 for complement-mediated diseases including PNH and generalized myasthenia gravis.
- RLYB212 was in a Phase 1 trial, with a Phase 1b proof-of-concept study initiated in Q2 2022; initial data were expected in Q3 2022.
- RLYB116 entered a Phase 1 trial in Australia in Q1 2022, with initial data expected in the second half of 2022.
- RLYB114 was in preclinical development, and the Exscientia collaboration included discovery-stage rare-metabolic-disease programs.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue |
| Research and development expense | $7.6 million | $9.0 million | Down $1.4 million |
| General and administrative expense | $6.7 million | $3.8 million | Up $2.9 million |
| Total operating expenses | $14.3 million | $12.8 million | Up $1.5 million |
| Net loss | $14.5 million | $13.3 million | Loss increased $1.2 million |
| Net loss per share | $0.48 | $0.60 | Per-share loss improved |
| Net cash used in operating activities | $13.7 million | $11.9 million | Use increased $1.8 million |
Cash, cash equivalents and marketable securities totaled $161.4 million at March 31, 2022, comprising $81.4 million of cash and cash equivalents and $80.0 million of marketable securities on the balance sheet. The company reported total assets of $169.4 million, total liabilities of $6.3 million and stockholders’ equity of $163.0 million. It had no debt or credit facility and no material ongoing financing commitments.
Cash used in investing activities was $80.2 million, primarily reflecting purchases of highly rated U.S. Treasury securities. Cash and cash equivalents declined from $175.3 million at year-end 2021 to $81.4 million at March 31, 2022, while marketable securities increased from zero to $80.0 million. Interest and other income was $0.2 million. The loss on the Exscientia joint venture was $0.4 million.
Share-based compensation expense was $2.1 million, compared with $0.5 million in Q1 2021. The company had $28.3 million of unrecognized compensation expense related to unvested options, restricted stock awards and restricted stock units, expected to be recognized over approximately 2.8 to 3.5 years.
Material changes versus the prior comparable period
- R&D expense decreased 15%, primarily because of lower RLYB116, RLYB212 and RLYB211 development and clinical manufacturing costs, partly offset by higher RLYB114 costs and increased R&D personnel expense.
- G&A expense increased 76%, driven by higher headcount, share-based compensation, professional fees, public-company costs and business-development expenses.
- Net loss increased 9%, despite lower R&D spending, due primarily to the higher G&A expense.
- Operating cash use increased 15%; investing cash use increased substantially because the company invested excess cash in marketable securities.
- The company adopted the new lease standard on January 1, 2022, recognizing approximately $0.7 million of right-of-use assets and corresponding lease liabilities.
- Accumulated deficit increased to $108.5 million from $94.0 million at December 31, 2021.
Guidance, outlook, risks and unusual items
- Management stated that cash, cash equivalents and marketable securities were expected to fund operating expenses and capital requirements for at least the next 16 months from the filing date, while the notes state more than 12 months from issuance of the financial statements.
- Existing capital is not expected to fund any product candidate through regulatory approval and commercialization. Substantial additional financing will be required.
- Management expects operating losses and research and development expenses to increase as clinical programs advance, new programs are initiated and public-company infrastructure expands.
- In May 2022, after the reporting date, Rallybio obtained worldwide exclusive rights to Sanofi’s KY1066, renamed RLYB331. The agreement included a $3.0 million upfront payment, potential development and regulatory milestones of up to $43.0 million, commercial milestones of up to $150.0 million for the first indication, additional milestone percentages for later indications and tiered royalties on net sales.
- Key risks include early-stage clinical development, uncertain safety and efficacy, regulatory delays or failure, patient enrollment and retention challenges, reliance on contract research and manufacturing organizations, supply-chain disruption, intellectual-property risks, competition, COVID-19 effects and the need for additional capital.
- The company reported no material litigation, no off-balance-sheet arrangements and no material change in internal control over financial reporting during the quarter. Disclosure controls and procedures were considered effective at a reasonable-assurance level.
Most important facts for investors to verify
- Whether cash burn and clinical-development spending remain consistent with the stated funding runway, particularly after adding RLYB331-related costs.
- Timing, enrollment, safety findings and initial data from the RLYB212 Phase 1b and RLYB116 Phase 1 programs.
- Whether the company can raise additional capital without substantial dilution, restrictive terms or loss of strategic rights.
- Terms, milestone obligations, royalties and development costs associated with the RLYB331 license and other existing licenses.
- Progress toward regulatory and diagnostic requirements for the FNAIT program, including the natural-history study and any companion diagnostic.
- Exposure to clinical manufacturing, contract research, supply-chain and COVID-19-related delays.