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
In
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 loss was
We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities as we:
?
advance the clinical development of BA3011;
?
advance the clinical development of BA3021;
15
--------------------------------------------------------------------------------
? expand our pipeline of bispecific and other CAB antibody-based product candidates; ? continue to invest in our CAB technology platform; ? maintain, protect and expand our intellectual property portfolio, including patents, trade secrets and know-how; ? seek marketing approvals for any product candidates that successfully complete clinical trials; ? establish additional product collaborations and commercial manufacturing relationships with third parties; ? build sales, marketing and distribution infrastructure and relationships with third parties to commercialize product candidates for which we may obtain marketing approval; ? continue to expand our operational, financial and management information systems; and ? 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, including significant legal, accounting, insurance, investor relations and other administrative and professional services expenses that we did not incur as a private 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.
Through the date of our initial public offering, or IPO, in
Impact of COVID-19 on Our Business
On
16
--------------------------------------------------------------------------------
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
We did not recognize any revenue for the three 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.
? External expenses consist of: ? Fees paid to third parties such as contractors, clinical research organizations (CROs) and consultants, including through our relationship withBioDuro , and other costs related to preclinical and clinical trials; ? Fees paid to third parties such as contract manufacturing organizations (CMOs) and other vendors for manufacturing research and clinical trial materials; and ? Expenses related to laboratory supplies and services. ? Unallocated expenses consist of: ? Personnel-related expenses, including salaries, benefits and equity-based compensation expenses, for personnel in our research and development functions; and ? Related equipment and facilities depreciation expenses.
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 increase substantially 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. 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.
17
--------------------------------------------------------------------------------
General and Administrative
Our general and administrative expenses consist primarily of 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, audit and accounting services and insurance
costs. Personnel-related expenses consist of salaries, benefits and equity-based
compensation. We expect our general and administrative expenses to increase as a
result of operating as a public company, including additional costs (i) to
comply with the rules and regulations of the
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, but we expect interest income to increase as we invest the net proceeds from our IPO.
Interest Expense
Interest expense consists primarily of interest incurred on our outstanding
convertible debt, including coupon interest and the amortization of debt
discounts, including those related to beneficial conversion features and
embedded derivatives. We expect our interest expense to decline subsequent to
the settlement of our outstanding convertible debt in
Change in Fair Value of Derivative Liability
The convertible promissory notes we issued during 2019 and 2020 contained
redemption features which we determined were embedded derivatives to be
recognized as liabilities and measured at fair value. At the end of each
reporting period, changes in the estimated fair value during the period were
recorded as a change in the fair value of derivative liability. The embedded
derivative liability was recorded at fair value utilizing an income approach
that identified the cash flows using a "with-and-without" valuation methodology.
The inputs used to determine the estimated fair value of the derivative
instrument were based primarily on the probability of an underlying event
triggering the embedded derivative occurring and the timing of such event. We
will no longer record changes in the fair value of the derivative liability
subsequent to the settlement of the derivative liability in connection with the
conversion of our outstanding convertible debt in
Results of Operations
Comparison of the Three Months Ended
Three Months Ended
March 31,
2021 2020 Change
(in thousands)
Collaboration revenue $ - $ 89 $ (89 )
Operating expenses:
Research and development 10,423 1,661 8,762
General and administrative 8,374 (463 ) 8,837
Total operating expenses 18,797 1,198 17,599
Loss from operations (18,797 ) (1,109 ) (17,688 )
Other income (expense):
Interest income 98 5 93
Interest expense (2 ) (547 ) 545
Change in fair value of derivative liability - 47 (47 )
Total other income (expense) 96 (495 ) 591
Consolidated net loss and comprehensive loss
Collaboration Revenue
Collaboration revenue for the three months ended
18
--------------------------------------------------------------------------------
Research and Development Expense
The following table summarizes our research and development expenses allocated by CAB program for the periods indicated:
Three Months Ended
March 31,
2021 2020 Change
(in thousands)
External expenses:
BA3011 (AXL-ADC) $ 4,573 $ 879 $ 3,694
BA3021 (ROR2-ADC) 1,328 924 404
Other CAB Programs 1,720 632 1,088
Total external expenses 7,621 2,435 5,186
Personnel and related 1,233 1,150 83
Equity-based compensation 954 (2,523 ) 3,477
Facilities and other 615 599 16
Total research and development expenses
Research and development expenses were
General and Administrative Expense
General and administrative expenses were
Interest Income
Interest income was
Interest Expense
Interest expense was
Change in Fair Value of Derivative Liability
Change in fair value of derivative liability 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
Convertible and Promissory Notes
As of
19
--------------------------------------------------------------------------------
On
The proceeds from the PPP Loan may only be used for payroll costs (including benefits), rent and utility obligations, and interest on certain of our other debt obligations.
All or a portion of the PPP Loan may be forgiven by the
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:
? the initiation, scope, rate of progress, results and costs of our preclinical studies, clinical trials and other related activities for our product candidates; ? the costs associated with manufacturing our product candidates and establishing commercial supplies and sales, marketing and distribution capabilities; ? the timing and costs of capital expenditures to support our research and development efforts; ? the number and characteristics of other product candidates that we pursue; ? 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; ? the timing, receipt and amount of sales from our potential products; ? our need and ability to hire additional management, scientific and medical personnel; ? the effect of competing products that may limit market penetration of our product candidates; ? our need to implement additional internal systems and infrastructure, including financial and reporting systems; ? 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; ? the compliance and administrative costs associated with being a public company; and ? 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 at least through the end of 2022. 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,
20
--------------------------------------------------------------------------------
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 the COVID-19 pandemic could adversely impact our ability to access capital as and when needed. We may choose to raise additional capital through the issuance of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to our investors and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. If 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:
Three Months Ended
March 31,
2021 2020
(in thousands)
Net cash provided by (used in):
Operating activities $ (14,994 ) $ (3,814 )
Investing activities (501 ) (20 )
Financing activities (1,911 ) 500
Net decrease in cash and cash equivalents
Cash Used in Operating Activities
Net cash used in operating activities for the three months ended
Net cash used in operating activities for the three months ended
Cash Used in Investing Activities
Cash used in investing activities was
Cash (Used in) Provided by Financing Activities
Net cash used in financing activities was
Net cash provided by financing activities was
21
--------------------------------------------------------------------------------
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
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
© Edgar Online, source
