SAB Biotherapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. SAB is a clinical-stage biopharmaceutical company developing fully human polyclonal antibody therapies using its DiversitAb platform. It had no commercially approved products; revenue was entirely grant-based.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0.58 million | $11.80 million |
| Research and development expense | $4.54 million | $13.32 million |
| General and administrative expense | $3.45 million | $5.19 million |
| Operating loss | $7.40 million | $6.71 million |
| Net income (loss) | $(7.35) million | $0.99 million |
| Operating cash flow | $(1.61) million | $(9.54) million |
- Revenue was down 95.1% year over year, principally because the Department of Defense’s JPEO Rapid Response contract was terminated in 2022. The prior-year comparison also included a $7.85 million gain from changes in warrant fair value; the Q1 2023 gain was $0.08 million.
- Cash and cash equivalents were $13.06 million at March 31, down from $15.05 million at December 31, 2022. Total assets were $42.67 million, current assets $15.03 million, and current liabilities $13.67 million.
- Total liabilities were $18.27 million. Debt included $0.44 million of current insurance-premium financing and a $0.54 million convertible note; finance lease liabilities totaled $3.73 million. The filing also reports $8.06 million of contractual payments, including undiscounted lease commitments.
- Accumulated deficit was $55.22 million. Basic and diluted loss per share was $0.15. The company reported no income tax expense in Q1 2023 and maintained a full valuation allowance on deferred tax assets.
Material changes and outlook
- Lower R&D spending reflected cost reductions, paused unfunded SAB-185 research, and prioritization of earlier-stage programs. G&A also declined with discretionary cost reductions. Management expects continued losses and says expenses may increase as development advances.
- The company received final payment from the DoD in January 2023 following the JPEO contract settlement. It recorded $2.94 million of deferred grant income at quarter-end, potentially payable to the DoD depending on subsequent vendor negotiations. Management stated it believes there is a reasonable, good-faith basis that no present or future obligations exist, apart from those deferred obligations.
- Management stated existing cash would not cover operating cash needs for the 12 months following issuance of the financial statements. The filing concludes that substantial doubt exists about the company’s ability to continue as a going concern. SAB plans to seek capital through equity or debt, collaborations, or other financing; it warns financing may not be available on acceptable terms, or at all.
- On April 13 and 18, 2023, after quarter-end, the FDA granted Fast Track and Breakthrough Therapy designations for SAB-176 for influenza in high-risk patients. The company also reported FDA alignment on a planned Phase 2b study; designations do not assure approval.
- A March 2023 Ladenburg settlement included a $0.5 million cash payment, a warrant for 300,000 shares at $0.5424, and further payments of $1.5 million by June 30 and $1.1 million by December 31, 2023, payable in cash or shares at SAB’s option. These cash obligations were included in accrued liabilities.
- A May 2023 shelf registration statement proposed up to $50 million of securities, but had not been declared effective as of the filing’s discussion. The filing also disclosed a material weakness in review controls for technical accounting and significant or unusual transactions; remediation efforts were underway.
Important facts for investors to verify
- Available cash, operating burn, and financing plans in subsequent filings, given the going-concern warning.
- Status and terms of any financing under the proposed shelf registration, including resulting dilution.
- Remaining DoD settlement obligations and the $2.94 million deferred grant income, including any payments due.
- Progress, trial timing, funding, and regulatory requirements for SAB-176 and other pipeline programs.
- Completion and effectiveness of material-weakness remediation, and payment or share settlement of the Ladenburg obligations.
- Potential dilution from outstanding options, warrants, convertible debt, and earnout shares.