SAB Biotherapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. SAB is a clinical-stage biopharmaceutical company developing fully human polyclonal antibodies using its DiversitAb platform. It has no commercially approved products; reported revenue is grant revenue.
Financial performance and liquidity
| Metric | Q2 2023 | Six months 2023 | Comparable 2022 period |
|---|---|---|---|
| Grant revenue | $0.09 million | $0.67 million | $6.35 million Q2; $18.15 million six months |
| Research and development | $3.66 million | $8.20 million | $8.58 million Q2; $21.95 million six months |
| General and administrative | $2.90 million | $6.35 million | $4.31 million Q2; $9.46 million six months |
| Net loss | $6.88 million | $14.23 million | $4.78 million Q2; $3.79 million six months |
| Basic and diluted loss per share | $0.14 | $0.28 | $0.11 Q2; $0.09 six months |
| Operating cash used | Not stated by quarter | $6.50 million | $13.99 million six months |
- At June 30, cash and cash equivalents were $7.77 million, down from $15.05 million at year-end 2022. Total assets were $35.44 million and total liabilities $15.73 million.
- Current assets of $9.01 million were below current liabilities of $11.01 million. Stockholders’ equity was $19.72 million; accumulated deficit was $62.10 million.
- Debt included $0.65 million of notes payable, including a $0.54 million 8% convertible note, and $3.61 million of finance lease liabilities. The balance sheet also reported $0.64 million of operating lease liabilities and $0.60 million of warrant liabilities.
- Six-month investing cash use was $0.04 million and financing cash use was $0.72 million; cash declined by $7.27 million overall. The filing says existing cash is not expected to cover operating needs through the next 12 months.
- Revenue and gross-margin comparisons are not representative of a commercial business: revenue is entirely grant-based, and the filing does not present a meaningful product gross margin.
Material changes versus 2022
- Revenue fell 98.7% in Q2 and 96.3% for the first half, primarily because the Department of Defense’s JPEO Rapid Response contract was terminated in 2022. The former contract represented substantial grant-funded work, including development of SAB-185.
- R&D expense declined 57.3% in Q2 and 62.6% for the first half, reflecting cost reductions, paused unfunded SAB-185 work, and lower manufacturing, laboratory, and personnel costs. Management said it is prioritizing earlier-stage candidates, including programs in Type 1 diabetes, respiratory, and gastrointestinal diseases.
- G&A expense declined about 33% in both comparison periods, mainly due to discretionary cost reductions and lower insurance and personnel costs.
- Six-month net loss increased substantially from 2022, despite lower operating expenses. The 2022 comparison included a $9.58 million noncash gain from changes in warrant fair value; 2023 recorded a $0.27 million loss on that item.
- On June 30, the company issued 1,916,894 shares valued at $1.55 million to settle part of its Ladenburg settlement obligations. The filing reports $1.1 million of consideration remaining.
Outlook, risks, and unusual items
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern for the year following issuance of the financial statements. It expects continuing losses and needs additional capital. If financing is unavailable on acceptable terms, it may need to reduce or discontinue programs, cut headcount, sell assets, reorganize, or cease operations.
- Funding and outlook: SAB plans to seek equity or debt financing and collaborative or other funding. It expects lower future revenue following the JPEO contract termination and anticipates continued significant R&D spending; no specific financial guidance was provided. A shelf registration allowing up to $50 million of securities had been filed but was not yet effective as of the filing.
- Pipeline and execution: The filing describes two clinical programs, three preclinical indications, and two research collaborations. Clinical and regulatory outcomes, commercialization, and future collaboration or grant funding remain uncertain.
- Contract contingency: The company says it has a reasonable, good-faith basis to believe no present or future JPEO obligations remain, except possible deferred obligations tied to later negotiations with third-party vendors. Deferred grant income was $2.89 million at June 30.
- Potential dilution: At June 30, 52.31 million common shares were outstanding. The filing also lists substantial potential shares from warrants, options, convertible debt, and earnouts; these were excluded from diluted loss per share as anti-dilutive. The exact future dilution depends on exercise, conversion, and earnout conditions.
- Controls: Management concluded disclosure controls were ineffective at June 30 because of a material weakness in review controls for technical accounting and significant or unusual transactions. Remediation includes external support, hiring technical accounting expertise, and implementing a contract-management platform; management gave no assurance these steps will fully resolve the weakness.
- The company reported no material litigation and no material subsequent events requiring disclosure.
Most important facts for investors to verify
- Cash runway, near-term funding requirements, and progress toward financing or partnership arrangements.
- Whether the JPEO termination closeout is fully settled and whether the $2.89 million deferred grant balance could become payable.
- Clinical, preclinical, and collaboration milestones, particularly for SAB-176 and the prioritized early-stage programs.
- Progress and effectiveness of remediation for the material weakness in financial reporting controls.
- Potential dilution from outstanding warrants, options, convertible debt, earnout shares, and any future securities issuance.