BIOATLA, INC. You should read the following discussion and analysis together with our
unaudited financial statements and notes thereto included in "Item 1. Financial
Statements" of this Quarterly Report on Form 10-Q and the audited financial
statements and notes thereto as of and for the year ended
Overview
We are a clinical-stage biopharmaceutical company developing our novel class of highly specific and selective antibody-based therapeutics for the treatment of solid tumor cancer. Our CABs capitalize on our proprietary discoveries with respect to tumor biology, enabling us to target known and widely validated tumor antigens that have previously been difficult or impossible to target. Our novel CAB therapeutic candidates exploit characteristic pH differences between the tumor microenvironment and healthy tissue. Unlike healthy tissue, the tumor microenvironment is acidic, and we have designed our antibodies to selectively bind to their targets on tumor cells under acidic pH conditions but not on targets in normal tissues. Our approach is to identify the necessary targeting and potency required for cancer cell destruction, while aiming to eliminate or greatly reduce on-target, off-tumor toxicity-one of the fundamental challenges of existing cancer therapies.
We are a
We have incurred significant losses to date. Our ability to generate product
revenue sufficient to achieve profitability will depend on the successful
development and eventual commercialization of one or more of our current and
future product candidates. Our net losses were
We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities as we:
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advance the clinical development of mecbotamab vedotin;
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advance the clinical development of ozuriftamab vedotin;
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advance the clinical development of BA3071;
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expand our pipeline of bispecific and other CAB antibody-based product candidates;
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continue to invest in our CAB technology platform;
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maintain, protect and expand our intellectual property portfolio, including patents, trade secrets and know-how;
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seek marketing approvals for any product candidates that successfully complete clinical trials;
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establish additional product collaborations and commercial manufacturing relationships with third parties;
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build sales, marketing and distribution infrastructure and relationships with third parties to commercialize product candidates for which we may obtain marketing approval;
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continue to expand our operational, financial and management information systems; and
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attract, hire and retain additional clinical, scientific, management, administrative and commercial personnel.
Furthermore, we expect to incur additional costs associated with operating as a public company.
As a result, we will require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings, debt financings, collaborations and other similar arrangements. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Because of the numerous risks and uncertainties associated with product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to raise capital, maintain our research and development efforts, expand our business or continue our operations at planned levels, and as a result we may be forced to substantially reduce or terminate our operations.
As of
Impact of COVID-19 on Our Business
The worldwide COVID-19 pandemic may affect our ability to complete our current
preclinical studies and clinical trials, initiate and complete our planned
preclinical studies and clinical trials, disrupt regulatory activities or have
other adverse effects on our business, results of operations, financial
condition and prospects. In addition, the pandemic has caused substantial
disruption in the financial markets and may adversely impact economies
worldwide, both of which could adversely affect our business, operations and
ability to raise funds to support our operations. To date, we have experienced
modest business disruptions, including with respect to clinical trials we are
conducting, and non-material impairments as a result of the pandemic. Our
mecbotamab vedotin Phase 2 sarcoma trial remains on schedule and the Phase 2
interim analysis for mecbotamab vedotin NSCLC and ozuriftamab vedotin studies
have experienced some modest delays. We are following, and plan to continue to
follow, recommendations from federal, state and local governments regarding
workplace policies, practices and procedures. In
Financial Operations Overview
Revenue
To date, we have not generated any revenue from the sale of products and do not expect to generate meaningful revenue in the near future.
In 2019 we entered into a collaboration agreement with BeiGene, Ltd. The
agreement was amended several times and was terminated in
Prior to developing our own programs, we received revenue from services performed under fixed price service contracts that, in some cases, provided for potential milestone and royalty payments to us. We did not recognize any revenue from our legacy service
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contracts for the three and six months ended
Operating Expenses
Research and Development
Research and development expenses consist primarily of costs incurred in the discovery and development of our product candidates.
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External expenses consist of:
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Fees paid to third parties such as contractors, clinical research organizations (CROs) and consultants, and other costs related to preclinical and clinical trials;
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Fees paid to third parties such as contract manufacturing organizations (CMOs) and other vendors for manufacturing research and clinical trial materials; and
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Expenses related to laboratory supplies and services.
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Unallocated expenses consist of:
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Personnel-related expenses, including salaries, benefits and equity-based compensation expenses, for personnel in our research and development functions; and
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Related equipment and facilities depreciation expense.
We expense research and development costs in the periods in which they are incurred. Nonrefundable advance payments for goods or services to be received in future periods for use in research and development activities are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered and services are performed.
We expect our research and development expenses to generally increase for the foreseeable future as we continue to invest in research and development activities to advance our product candidates and our clinical programs and expand our product candidate pipeline. The process of conducting the necessary preclinical and clinical research to obtain regulatory approval is costly and time-consuming. Successful product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, to the extent that our product candidates continue to advance into clinical trials, including larger and later-stage clinical trials, our expenses will increase substantially and may become more variable. The actual probability of success for our product candidates may be affected by a variety of factors, including the safety and efficacy of our product candidates, the quality and consistency in their manufacture, investment in our clinical programs and competition with other products. As a result of these variables, we are unable to determine the duration and completion costs of our research and development projects and programs or when and to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in achieving regulatory approval for any of our product candidates.
General and Administrative
Our general and administrative expenses include personnel-related expenses for personnel in our executive, finance, corporate and other administrative functions, intellectual property and patent costs, facilities and other allocated expenses, other expenses for outside professional services, including legal, human resources, investor relations, audit and accounting services and insurance costs. Personnel-related expenses consist of salaries, benefits and equity-based compensation. Our general and administrative expenses have increased as a result of operating as a public company and after losing our emerging growth status. We also expect our general and administrative expenses to increase in the future as we increase our personnel headcount to support our research and development activities to advance our product candidates and clinical stage programs.
Interest Income
Interest income consists primarily of interest earned on our cash and cash equivalent balances. Our interest income has not been significant to date and we do not expect any material changes.
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Results of Operations
Comparison of the Three Months Ended
Three Months Ended
June 30,
2022 2021 Change
(in thousands)
Collaboration and other revenue $ - $ 250 $ (250 )
Operating expenses:
Research and development 20,711 $ 14,850 $ 5,861
General and administrative 8,344 15,860 (7,516 )
Total operating expenses 29,055 30,710 (1,655 )
Loss from operations (29,055 ) (30,460 ) 1,405
Other income (expense):
Interest income 146 80 66
Interest expense - (1 ) 1
Other income 3 - 3
Total other income (expense) 149 79 70
Consolidated net loss and comprehensive loss
Research and Development Expense
The following table summarizes our research and development expenses allocated by CAB program for the periods indicated:
Three Months Ended
June 30,
2022 2021 Change
(in thousands)
External expenses:
BA3011 (AXL-ADC) $ 3,565 $ 5,231 $ (1,666 )
BA3021 (ROR2-ADC) 2,244 4,077 (1,833 )
Other CAB Programs 10,021 2,046 7,975
Total external expenses 15,830 11,354 4,476
Personnel and related 2,768 1,659 1,109
Equity-based compensation 1,398 1,154 244
Facilities and other 715 683 32
Total research and development expenses
Research and development expenses were
General and Administrative Expense
General and administrative expenses were
Interest Income
Interest income was
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Comparison of the Six Months Ended
Six Months Ended
June 30,
2022 2021 Change
(in thousands)
Collaboration revenue $ - $ 250 $ (250 )
Operating expenses:
Research and development 37,634 $ 25,273 $ 12,361
General and administrative 15,767 24,234 (8,467 )
Total operating expenses 53,401 49,507 3,894
Loss from operations (53,401 ) (49,257 ) (4,144 )
Other income (expense):
Interest income 231 178 53
Interest expense - (3 ) 3
Other income 10 - 10
Total other income 241 175 66
Consolidated net loss and comprehensive loss
Research and Development Expense
The following table summarizes our research and development expenses allocated by CAB program for the periods indicated:
Six Months Ended
June 30,
2022 2021 Change
(in thousands)
External expenses:
BA3011 (AXL-ADC) $ 8,279 $ 9,777 $ (1,498 )
BA3021 (ROR2-ADC) 4,032 5,378 (1,346 )
Other CAB Programs 15,956 3,820 12,136
Total external expenses 28,267 18,975 9,292
Personnel and related 5,204 2,893 2,311
Equity-based compensation 2,698 2,109 589
Facilities and other 1,465 1,296 169
Total research and development expenses
Research and development expenses were
General and Administrative Expense
General and administrative expenses were
Interest Income
Interest income was
Liquidity and Capital Resources
We have incurred aggregate net losses and negative cash flows from operations
since our inception and anticipate we will continue to incur net losses for the
foreseeable future. As of
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Debt
On
Future Funding Requirements
Our primary uses of cash are to fund operating expenses, which consist primarily of research and development expenses related to our programs and related personnel costs. The timing and amount of future funding requirements depends on many factors, including the following:
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the initiation, scope, rate of progress, results and costs of our preclinical studies, clinical trials and other related activities for our product candidates;
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the costs associated with manufacturing our product candidates and establishing commercial supplies and sales, marketing and distribution capabilities;
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the timing and costs of capital expenditures to support our research and development efforts;
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the number and characteristics of other product candidates that we pursue;
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our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make in connection with the licensing, filing, defense and enforcement of any patents or other intellectual property rights;
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the timing, receipt and amount of sales from our potential products;
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our need and ability to hire additional management, scientific and medical personnel;
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the effect of competing products that may limit market penetration of our product candidates;
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our need to implement additional internal systems and infrastructure, including financial and reporting systems;
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the economic and other terms, timing and success of any collaboration, licensing, or other arrangements into which we may enter in the future, including the timing of receipt of any milestone or royalty payments under these agreements;
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the compliance and administrative costs associated with being a public company; and
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the extent to which we acquire or invest in businesses, products or technologies, although we have no commitments or agreements relating to any of these types of transactions.
Based on our current operating plan, our current cash and cash equivalents are expected to be sufficient to fund our ongoing operations into the second half of 2024. However, we have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
In addition, we will require additional funding in order to complete development
of our product candidates and commercialize our products, if approved. We may
seek to raise any necessary additional capital through a combination of public
or private equity offerings, debt financings, collaborations, strategic
alliances, licensing arrangements and other marketing and distribution
arrangements. We cannot assure you that, in the event we require additional
financing, such financing will be available at acceptable terms to us, if at
all. Failure to generate sufficient cash flows from operations, raise additional
capital, and reduce discretionary spending should additional capital not become
available could have a material adverse effect on our ability to achieve our
intended business objectives. Because of the numerous risks and uncertainties
associated with the development and commercialization of our product candidates,
we are unable to estimate the amounts of increased capital outlays and operating
expenditures associated with our current and anticipated preclinical studies and
clinical trials. To the extent that we raise additional capital through
collaborations, strategic alliances or licensing arrangements with third
parties, we may have to relinquish valuable rights to our product candidates. We
may also have to forego future revenue streams of research programs at an
earlier stage of development or on less favorable terms than we would otherwise
choose, or have to grant licenses on terms that may not be favorable to us. Our
ability to raise additional funds will depend on financial, economic and other
factors, many of which are beyond our control. For example, market volatility
resulting from a variety of causes, including the COVID-19 pandemic, supply
chain disruptions, and geopolitical disruptions, including the recent conflict
between
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we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, acquiring other businesses, products or technology, or declaring dividends. If we are unable to obtain additional funding from these or other sources, it may be necessary to significantly reduce our rate of spending through reductions in staff and delay, scale back or stop certain research and development programs.
Cash flows
The following summarizes our cash flows for the periods indicated:
Six Months Ended
June 30,
2022 2021
(in thousands)
Net cash used in:
Operating activities $ (42,057 ) $ (28,539 )
Investing activities (176 ) (736 )
Financing activities (456 ) (1,721 )
Net decrease in cash and cash equivalents
Cash Used in Operating Activities
Net cash used in operating activities totaled
Net cash used in operating activities for the six months ended
Cash Used in Investing Activities
Cash used in investing activities was
Cash Used in Financing Activities
Net cash used in financing activities was
Net cash used in financing activities was
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with
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Our critical accounting policies are those accounting principles generally
accepted in
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements, as defined in the
rules and regulations of the
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