Rallybio Corporation 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 quarter and six months ended June 30, 2022. The company has no approved products and has not generated product revenue.
- Lead programs include 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 Phase 1 and Phase 1b studies; RLYB116 was in a Phase 1 study; RLYB331, acquired from Sanofi in May 2022, was in preclinical development.
- The company had 45 full-time employees as of June 30, 2022 and 32.1 million common shares outstanding as of August 1, 2022.
Financial position and key metrics
| Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $10.1 million | $6.8 million | $17.8 million | $15.9 million |
| General and administrative expense | $7.5 million | $3.7 million | $14.1 million | $7.5 million |
| Total operating expenses | $17.6 million | $10.5 million | $31.9 million | $23.4 million |
| Net loss | $17.6 million | $11.1 million | $32.1 million | $24.4 million |
| Net loss per share | $0.57 | $0.49 | $1.05 | $1.09 |
| Net cash used in operating activities | Not separately provided | Not separately provided | $27.3 million | $24.8 million |
- Cash and cash equivalents were $60.8 million and marketable securities were $86.6 million at June 30, 2022, for total cash, cash equivalents and marketable securities of approximately $147.4 million.
- Total assets were $155.6 million and stockholders’ equity was $147.9 million. Total liabilities were $7.8 million.
- The filing reports no credit facility, material debt financing, or ongoing material financing commitments. Operating lease liabilities totaled $0.6 million.
- Accumulated deficit was $126.1 million at June 30, 2022.
- Operating cash use was $27.3 million for the first six months. Investing cash use was $87.3 million, primarily reflecting purchases of marketable securities; this was largely a reallocation of cash into short-term U.S. Treasury securities rather than a comparable level of operating investment.
- There is no meaningful revenue-based margin because the company has no revenue; operating expenses equaled the operating loss.
Material changes versus the prior comparable period
- Second-quarter net loss increased by $6.5 million, or approximately 58%, to $17.6 million. First-half net loss increased by $7.7 million, or approximately 31%, to $32.1 million.
- Second-quarter research and development expense increased $3.3 million, primarily due to a $3.1 million in-process research and development charge for the RLYB331 license and higher personnel costs, including share-based compensation. These increases were partly offset by lower RLYB212, RLYB116 and RLYB211 development costs.
- First-half research and development expense increased $1.9 million. Increases from RLYB331, RLYB114 development and personnel costs were partly offset by lower RLYB212, RLYB116 and RLYB211 costs.
- General and administrative expense increased $3.8 million in the quarter and $6.6 million in the first half, driven by higher headcount, public-company costs, professional fees, business-development activities and share-based compensation.
- Interest income increased to $0.3 million in the quarter and $0.4 million in the first half, primarily because of investments in marketable securities.
- Weighted-average shares increased to 30.6 million in the quarter and 30.5 million in the first half, compared with 22.6 million and 22.3 million, respectively, in the prior-year periods, reflecting the 2021 IPO and related share issuances.
Guidance, outlook, commentary and unusual items
- Management expects existing cash, cash equivalents and marketable securities to fund operating expenses and capital requirements into the first quarter of 2024, subject to assumptions regarding development costs, trial timing and execution.
- The company expects significant additional operating losses and research and development spending as it advances RLYB212, RLYB116, RLYB331 and other programs. Substantial additional capital will be required to complete development and commercialization.
- Management implemented cash-preservation initiatives, including reviewing discretionary expenses and managing the timing of selected preclinical activities, while stating that these initiatives do not affect planned clinical development of RLYB212 or RLYB116.
- RLYB331 was licensed from Sanofi for an upfront payment of $3.0 million. The agreement includes up to $43.0 million in development and regulatory milestones, up to $150.0 million in commercial milestones for a first indication, additional potential milestone amounts for other indications, and mid-to-high single-digit royalties on net sales. The upfront payment and transaction costs resulted in a $3.1 million R&D charge.
- The company expects initial RLYB116 data for the 30 mg dose in the fourth quarter of 2022. It expected preliminary RLYB212 platelet-elimination data by the end of the third quarter of 2022 and proof-of-concept data in the first quarter of 2023.
- COVID-19, clinical-trial enrollment, third-party manufacturing and supply-chain disruptions could delay development activities and increase costs.
- The CFO announced plans to retire, and the company had begun an external search for a successor. No material litigation was reported.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2022. The filing did not include management or auditor attestation reports on internal control over financial reporting because of applicable transition exemptions for newly public companies.
Most important facts for investors to verify
- Whether the projected cash runway through the first quarter of 2024 remains valid after updated trial plans, RLYB331 development, inflation and potential clinical or manufacturing delays.
- Progress, safety, enrollment and data quality for the RLYB212, RLYB116 and RLYB211 clinical programs, including whether stated 2022 and 2023 milestones were achieved.
- The need, timing, terms and potential dilution of future equity or debt financing, since the company has no committed external source of capital.
- The economic and termination terms of the Sanofi, Prophylix, Sobi, Affibody and Exscientia arrangements, including milestone, royalty and collaboration obligations.
- RLYB331’s preclinical validation and whether the program warrants continued investment.
- Clinical-trial enrollment risks, companion-diagnostic requirements, regulatory feedback, third-party manufacturing capacity and intellectual-property protection.
- The effect of substantially higher share-based compensation and the approximately $27.9 million of unrecognized compensation expense related to unvested options, restricted stock awards and restricted stock units.