SAB Biotherapeutics, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. 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 from grants.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Grant revenue | $6.35M | $18.21M | $18.15M | $35.14M |
| Research and development | $8.58M | $18.68M | $21.95M | $31.47M |
| General and administrative | $4.31M | $2.40M | $9.46M | $5.73M |
| Operating loss | $6.54M | $2.87M | $13.25M | $2.06M |
| Net loss | $4.78M | $2.94M | $3.79M | $1.53M |
| Operating cash flow | Not separately provided for the quarter | Not separately provided for the quarter | $(15.50)M | $3.07M |
Revenue fell 65% in Q2 and 48% for the six-month period, primarily because less work was performed under the DoD JPEO Rapid Response contract. R&D expense also declined as contract-related activity slowed. G&A increased, reflecting higher compensation, public-company insurance, consulting, and compliance costs. Q2 operating loss exceeded grant revenue; the filing does not present a gross margin measure.
Six-month net loss included a $9.58M non-cash gain from the decline in fair value of warrant liabilities, which reduced the reported loss relative to the operating loss. Basic and diluted loss per share was $0.11 for Q2 and $0.09 for the first half of 2022.
Financial position and liquidity
- Cash and cash equivalents were $16.62M at June 30, 2022, down from $33.21M at December 31, 2021. The prior-year-end balance also included $6.34M of restricted cash, used in Q1 2022 to settle the forward share purchase agreement; $5.52M funded repurchase of 546,658 shares.
- Current assets were $27.75M and current liabilities $16.14M. Total assets were $59.15M; total liabilities were $22.03M.
- Six-month cash use was $15.50M in operations, $1.89M in investing, and $5.53M in financing, for a $22.93M decrease in cash, cash equivalents, and restricted cash.
- Interest-bearing notes payable were $25,013, due in Q4 2022. Lease liabilities totaled approximately $6.07M; finance lease liabilities were about $3.84M and operating lease liabilities about $2.23M.
Outlook, risks, and unusual items
- Material subsequent event: On August 3, 2022, the company received DoD notice terminating the JPEO Rapid Response contract, which had accounted for the substantial majority of revenue. No termination penalty is expected; SAB anticipated a settlement for eligible wind-down costs. The filing said approximately $71.3M of contract funding remained at June 30, but that amount was eliminated by the termination.
- Management expects lower future revenue and reduced R&D costs related to SAB-185, while focusing on Clostridioides difficile infection, influenza, and immune-system disorders and pursuing partnerships, co-development, or licensing. It provided no numeric revenue or earnings guidance.
- Management stated that existing cash and anticipated operating cash flows were expected to fund working capital and capital expenditures for at least 12 months, assuming no significant unforeseen expenses. It also said additional capital would be needed for long-term plans, particularly after the contract termination, and financing may not be available on acceptable terms.
- Two NIH grant extensions were pending, with approximately $1.6M of potential remaining funding if approved. The company noted that grant funding is not guaranteed and government grants accounted for all revenue.
- Key risks include clinical and regulatory uncertainty, dependence on grant and government funding, need for future financing, and potential cash-flow effects of the tax-law requirement to amortize R&D costs. The company reported no material litigation and no material COVID-19 impact to date.
- The warrant-liability fair-value gain is non-cash and may make earnings volatile. At June 30, 2022, cash was $16.62M and warrant liabilities were $1.14M.
Important facts for investors to verify
- Terms, timing, and amount of any DoD termination settlement, and whether reimbursements cover wind-down costs.
- Cash runway and planned operating spending after loss of the JPEO contract; whether management’s 12-month liquidity expectation remains valid.
- Status of the two pending grant extensions and any replacement funding, partnerships, or licensing arrangements.
- Clinical-program timelines, spending needs, and progress for SAB-176 and other pipeline candidates.