Catabasis Pharmaceuticals : 2020 Annual Report

2020 ANNUAL REPORT

Dear Shareholders,

While the past year has been a period of change for Catabasis, our commitment to bringing hope with life- changing therapies to patients and families remains the same. We recently acquired Quellis Biosciences, including our lead program QLS-215, a potential best-in-class monoclonal antibody inhibitor of plasma kallikrein in preclinical development for the treatment of hereditary angioedema (HAE). We are excited about what the future holds for our company.

Last year, we completed the Phase 3 PolarisDMD trial of edasalonexent in Duchenne muscular dystrophy. Unfortunately, in October we announced that the trial did not meet its primary or secondary endpoints. Based on these results, we made the difficult decision to stop activities related to the development of edasalonexent. We are incredibly grateful for the Duchenne community and their support for edasalonexent through the years.

Following these disappointing results, we explored and evaluated strategic options with a financial advisor. As a result of our evaluation, in January 2021, we acquired Quellis Biosciences and announced a concurrent private placement, which closed on February 1, 2021, that resulted in gross proceeds of approximately $110.0 million, before deducting placement agent and other offering expenses. We believe that the acquisition represents an opportunity to create substantial value for our shareholders, while potentially providing benefit to a patient population with high disease burden.

HAE is a rare, debilitating and potentially life-threatening disease. While treatment options for HAE have improved, there remains unmet medical need, and the global market for HAE is strong and growing. Our vision for QLS-215, a monoclonal antibody inhibitor of plasma kallikrein, is that it will be a prophylactic treatment with infrequent dosing for patients affected by HAE. QLS-215 is currently in preclinical development and we expect to submit an Investigational New Drug Application in the first half of 2022 and plan to initiate a Phase 1a clinical trial with initial results anticipated by the end of 2022. Subsequently, assuming positive data from the Phase 1a clinical trial, we plan to initiate a Phase 1b/2 trial in patients with HAE in 2023 with initial results anticipated by the end of 2023. We believe that each of these clinical trials has the opportunity to demonstrate proof of concept for the differentiated profile of QLS-215.

Beyond QLS-215, we also acquired from Quellis a second undisclosed preclinical program, which we plan to evaluate and share more about later this year. As we look to the future, we intend to diversify and further build our pipeline and expand our commitment to improving the lives of patients and families.

Thank you for your support through this challenging year. We believe that the acquisition of Quellis and the private placement have put us in a strong position to accomplish our goals in 2021 and the coming years. We are excited about the new direction for Catabasis as we turn our focus to QLS-215 as a potential treatment for HAE as well as the long-term growth of our organization. We look forward to sharing more in the coming months, and we are appreciative of your confidence in Catabasis.

Sincerely,

Jill C. Milne, Ph.D.

Chief Executive Officer

April 20, 2021

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the fiscal year ended December 31, 2020

or

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the transition period from to

Commission File Number: 001-37467

Catabasis Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware	26-3687168
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
100 High Street
Floor 28	02110
Boston, Massachusetts
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code [phone]

Securities registered pursuant to Section 12(b) of the Act:

				Name of each exchange on which
Title of each class		Trading Symbol(s)		registered
Common Stock, $0.001 par value per share		CATB		Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the last sale price for such stock on June 30, 2020: $101,269,279

As of March 4, 2021, there were 23,417,006 shares of the registrant's common stock, par value $0.001 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement relating to its 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The registrant intends to file such proxy statement with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates.

	TABLE OF CONTENTS
PART I
Item 1.	Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Item 1A.	Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Item 1B.	Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
Item 2.	Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
Item 3.	Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71
Item 4.	Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	72
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
	Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73
Item 6.	Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	74
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of
	Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	75
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . .	84
Item 8.	Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	84
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial
	Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	84
Item 9A.	Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	84
Item 9B.	Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	85
PART III
Item 10.	Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . .	86
Item 11.	Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related
	Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
Item 13.	Certain Relationships and Related Transactions, and Director Independence . . . . . . . . .	86
Item 14.	Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
PART IV
Item 15.	Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	87
Item 16.	Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	90
SIGNATURES

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Summary of the Material Risks Associated with Our Business

Investing in our common stock involves a high degree of risk because our business is subject to numerous risks and uncertainties. The principal factors and uncertainties that make investing in our common stock risky include, among others:

• We are heavily dependent on the success of our product candidate, QLS-215 for the treatment of hereditary angioedema ("HAE"), which is in the pre-clinical stage of development, and has only produced results in pre-clinical and non-clinical settings. We cannot give any assurance that we will generate clinical or other data for QLS-215 or for any other future product candidates that is consistent with its pre-clinical data or sufficiently supportive to receive regulatory approval, which will be required before they can be commercialized.
• We will need substantial additional funding. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
• Raising additional capital may cause dilution to our stockholders, restrict our operations, or require us to relinquish rights.
• Our ability to continue as a going concern, if our stockholders do not approve the conversion of our Series X Preferred Stock into common stock.
• Our acquisition of Quellis Biosciences, Inc., or Quellis, involves numerous risks, including the inability to effectively integrate the QLS-215 program and other Quellis programs into our operations or realize the expected benefits from the acquisition, which could materially harm our operating results.
• We have never generated any revenue from product sales and may never be profitable.
• We have never obtained marketing approval for a product candidate and we may be unable to obtain, or may be delayed in obtaining, marketing approval for any future product candidate we may seek to develop.
• Clinical trials are costly, time consuming, difficult to enroll and inherently risky, and we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.
• QLS-215or any future product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial viability of an approved label, or result in significant negative consequences following marketing approval, if any.
• We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
• Product development involves a lengthy and expensive process with an uncertain outcome, and results of earlier preclinical studies and clinical trials may not be predictive of future clinical trial results.
• We will need to maintain a cell line for QLS-215 and any other future biologic candidate that generates sufficient material for pre-clinical,non-clinical and clinical studies, and also build and maintain sufficient pre-clinical, clinical and commercial manufacturing drug substance and drug product capacity, in each case, through third party manufacturers, for QLS-215 and any other future product candidate that advances into such stages, on the timetables and in a manner that, in each case, are consistent with our expected development timetables and financial projections, the failure of which could materially harm our operating results and require us to raise capital sooner than we expect.
• Our forecasts of cash usage and how long our existing cash, cash equivalents and short-term investments may fund operating expenses may not be accurate and we may therefore use our cash, cash equivalents and short-term investments more rapidly than we expect, which could force us to delay, reduce or eliminate our product development programs or commercialization efforts, if any, and therefore materially harm our operating results, and we could be required to raise capital sooner than we expect.

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