SAB Biotherapeutics, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 29, 2022. This is an annual report, not a standalone fourth-quarter report. SAB is a clinical-stage biopharmaceutical company developing fully human polyclonal antibodies using its DiversitAb platform and genetically engineered cattle. It has no products approved for sale; substantially all revenue came from government grants.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue, primarily grants | $60.9 million | $55.2 million |
| Research and development expense | $57.2 million | $27.9 million |
| General and administrative expense | $17.1 million | $6.8 million |
| Operating income (loss) | $(13.4) million | $20.6 million |
| Net income (loss) | $(17.1) million | $20.1 million |
| Basic and diluted EPS | $(0.63) | $0.79 basic; $0.74 diluted |
| Cash from operating activities | $3.8 million | $10.0 million |
| Cash used in investing activities | $(10.9) million | $(12.7) million |
| Cash from financing activities | $34.1 million | $9.0 million |
- Revenue increased 10.2%, chiefly from expanded work under the Department of Defense JPEO government award. Government grants represented 100% of 2021 revenue.
- Operating expenses rose 114%, outpacing revenue growth. R&D more than doubled, reflecting increased staffing, manufacturing, clinical activity and capacity investment. G&A rose 152%, including public-company, consulting, insurance and personnel costs.
- 2020 profitability is not a straightforward comparison: revenue included approximately $12 million for capacity-building assets, with no corresponding R&D expense, and 2021 included a $4.2 million noncash warrant fair-value loss. 2021 also recognized a $0.7 million gain from forgiveness of the PPP loan.
- At year-end, cash and cash equivalents were $33.2 million, plus $6.3 million of restricted cash; accounts receivable were $8.0 million. Current assets were $48.4 million and current liabilities $24.7 million. The restricted cash related to the forward share purchase arrangement and was substantially used in its January 2022 settlement.
- Total liabilities were $40.8 million, including $10.7 million of warrant liabilities and lease liabilities of approximately $6.7 million. Notes payable were $25,000. Year-end equity was $38.5 million; accumulated deficit was $29.1 million.
- Operating cash flow was positive despite the net loss, including a $12.6 million reduction in accounts receivable. Capital expenditures were substantial. The Business Combination provided $34.3 million net of transaction costs.
- Management stated that existing cash, Business Combination proceeds and anticipated operating cash flows were expected to fund working capital and capital expenditure needs for at least the next 12 months, subject to execution of its business plan and expected funding.
Programs, developments and outlook
- SAB-185, COVID-19: Phase 2 interim analysis met predefined criteria to advance to Phase 3, and the candidate showed in-vitro neutralization of Omicron, with a mild-to-moderate potency reduction versus wild type. On February 28, 2022, NIH discontinued the ACTIV-2 study because declining hospitalizations made the trial operationally futile under its existing design. SAB said it was evaluating further development options, including specialized populations such as immunocompromised patients and alternative administration routes. Full Phase 2 data were expected mid-2022.
- SAB-176, influenza: In a 60-person Phase 2a challenge study, topline results reported that the primary viral-load endpoint was met (one-sided p=0.026) and a symptomatic-patient secondary endpoint was significant at Day 4 (one-sided p=0.013). The company reported no SAB-176-related serious adverse events and expected a full data readout in the first half of 2022. These were topline results, not a final clinical readout.
- SAB-142: In development for transplant and type 1 diabetes applications. The company reported favorable comparative in-vitro findings but had not established clinical benefit. Further IND-enabling work was planned, subject to availability of appropriate models.
- Platform and manufacturing: A 200L purification facility completed in 2021 was undergoing validation, with product expected in 2022. SAB also reported expansion of laboratory and production capabilities. Commercial-scale manufacturing arrangements had not yet been secured.
- Government funding: The JPEO award, including modifications, totaled approximately $203.6 million; approximately $89.2 million remained at December 31, 2021. Management reported approximately $90 million of funding remaining across current government grants, plus $1.7 million subject to extension approvals. The principal government agreement is cost-reimbursement based and may be revised, discontinued or rescoped by the government.
- Regulatory path: The company expected to complete the transchromosomic-cattle New Animal Drug Application process in the fourth quarter of 2022. Commercialization also requires product-specific biologic approval. Timing and approval are uncertain.
- Other items: The October 2021 Business Combination was accounted for as a reverse recapitalization. SAB reported no material litigation. The auditor issued an unqualified opinion on the financial statements, but did not audit internal control over financial reporting; management said it was unable to complete an assessment due to the recent business combination. Disclosure controls were assessed as effective.
Key investor risks and facts to verify
- Review final clinical data for SAB-185 and SAB-176, including complete efficacy, safety and statistical results; distinguish interim or topline findings from final results.
- Track SAB-185’s post-ACTIV-2 development plan, funding source and whether any new trial can demonstrate clinical benefit.
- Verify progress and timing of cattle-related NADA review, product BLAs, manufacturing validation and commercial supply agreements.
- Assess the sustainability and terms of government awards, remaining fundable work, pending extensions and the company’s dependence on government grants for all 2021 revenue.
- Monitor cash burn, grant collections and financing needs against management’s stated 12-month liquidity expectation. Additional equity financing could dilute shareholders.
- Review warrant liabilities and potential dilution: 5,958,600 warrants were outstanding and exercisable in January 2022 at $11.50 per share; the company records warrant fair-value changes through earnings. Also assess equity awards and contingent earnout shares.
- Confirm the January 2022 forward-share purchase settlement: the company repurchased 546,658 shares for approximately $5.5 million from restricted cash and released the remaining approximately $0.8 million.
- Consider operating scale-up, cattle-health, regulatory, competition, reimbursement and intellectual-property risks. The company had no approved products and reported an accumulated deficit.