Rallybio Corporation — Q2 2021 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 and six months ended June 30, 2021, with comparative periods ended June 30, 2020. The financial statements primarily reflect Rallybio Holdings, LLC before the June–July 2021 reorganization and August 2021 initial public offering.
- Lead programs include RLYB211 and RLYB212 for prevention of fetal and neonatal alloimmune thrombocytopenia, RLYB116 for complement-mediated diseases including PNH and generalized myasthenia gravis, and RLYB114 for ophthalmic diseases.
- The company has no approved products and has never generated product revenue.
- At June 30, 2021, the company had 28 full-time employees.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Research and development expense | $6.8 million, versus $3.1 million | $15.9 million, versus $5.0 million |
| General and administrative expense | $3.7 million, versus $1.6 million | $7.5 million, versus $3.5 million |
| Total operating expenses | $10.5 million, versus $4.7 million | $23.4 million, versus $8.5 million |
| Net loss | $11.1 million, versus $4.9 million | $24.4 million, versus $8.8 million |
| Net loss per common unit | $2.80 loss, versus $1.85 loss | $6.77 loss, versus $3.81 loss |
| Net cash used in operating activities | Not separately presented | $24.8 million, versus $9.2 million |
- Cash and cash equivalents were $112.7 million at June 30, 2021, down from $140.2 million at December 31, 2020.
- Total assets were $120.1 million; total liabilities were $7.4 million. The filing does not report conventional debt or a credit facility.
- Accumulated deficit was $71.4 million.
- Investing cash uses were $2.1 million for the first six months, primarily reflecting a $2.0 million investment in the joint venture with Exscientia and $0.1 million of property and equipment purchases.
- Net cash used in financing activities was $0.7 million, consisting primarily of IPO-related offering costs paid before the offering closed.
- Revenue, gross margin, operating margin and net margin are not meaningful because the company has no product sales or operating revenue.
Material changes versus the prior comparable period
- First-half research and development expense increased by $10.9 million, driven principally by higher spending on RLYB212, up $6.2 million, and RLYB116, up $2.8 million. RLYB211 spending declined by $0.3 million.
- General and administrative expense increased by $4.0 million, reflecting higher personnel costs, equity-based compensation, professional fees and preparation for becoming a public company.
- First-half net loss increased by $15.6 million, and operating cash burn increased by $15.6 million.
- Equity-based compensation increased to $1.1 million from $0.2 million for the first six months. The company granted 14.0 million incentive units during the period.
- Loss recognized from the 50% joint venture increased to $1.0 million from $0.5 million.
- On August 2, 2021, after the quarter ended, Rallybio completed its IPO of 7.13 million shares at $13.00 per share. Gross proceeds were $92.7 million and reported net proceeds were approximately $83.2 million after underwriting discounts and offering expenses.
- The reorganization converted the company from a limited liability company structure to a corporation and resulted in the preferred units being exchanged for common stock.
Guidance, outlook, management commentary and risks
- Management expects significant additional operating losses as programs advance through preclinical and clinical development. The company does not expect to become profitable in the foreseeable future.
- Management stated that June 30 cash, together with IPO proceeds, was expected to fund operating expenses and capital requirements for more than 24 months from the filing date, although the filing also states that substantial additional capital will be required to fund candidates through regulatory approval and commercialization.
- RLYB212: a clinical trial application was submitted in Germany in July 2021; management expected a Phase 1 trial to begin in the first quarter of 2022, subject to regulatory acceptance.
- RLYB116: management expected to submit a clinical trial application in the fourth quarter of 2021.
- RLYB114: management expected to submit a clinical trial application in the first half of 2023.
- RLYB211 Phase 1/2 proof-of-concept data presented in July 2021 showed rapid platelet clearance and no serious adverse events in the reported participants; the filing cautions that early results may not predict later clinical outcomes.
- Key risks include clinical and regulatory failure, patient enrollment limitations associated with rare diseases, dependence on contract research and manufacturing organizations, supply-chain disruptions, potential companion-diagnostic requirements, intellectual-property challenges, competition, and the need for additional financing.
- COVID-19 had not materially affected operations or financial statements as of the filing, but management continued to identify potential disruptions to trials, manufacturing, supply chains, regulatory activities and financing.
- The company had no material litigation considered probable to have a material adverse effect and reported no off-balance-sheet arrangements.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Reconcile the filing’s different liquidity statements: more than 12 months of funding based on June 30 cash alone versus more than 24 months including IPO proceeds.
- Verify actual cash runway against the accelerating research and development spend and planned clinical-trial milestones.
- Confirm regulatory acceptance and timing of the RLYB212 and RLYB116 clinical trial applications.
- Assess whether RLYB211 proof-of-concept results translate into efficacy and safety for RLYB212 and later-stage trials.
- Review dilution from the IPO, conversion of preferred units, incentive units, restricted shares and future equity financing needs.
- Evaluate contractual milestone and royalty obligations under the company’s licensing arrangements.
- Monitor reliance on third-party manufacturers, clinical research organizations and potential companion-diagnostic providers.