INVIVYD, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our final prospectus for our initial public offering filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, or the Securities Act, with theSEC , onAugust 6, 2021 (the "Prospectus"). Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "we," "us," and "our" refer toAdagio Therapeutics, Inc. together with its consolidated subsidiaries.
Forward-Looking Statements
The information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements and information within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements, including, without limitation, the risks set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q and in our other filings with theSEC . These forward-looking statements are applicable only as of the date on which they are made and we do not assume any obligation to update any forward-looking statements.
Overview
Adagio Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of antibody-based solutions for infectious diseases with pandemic potential, including COVID-19 and influenza. We are developing our lead product candidate, ADG20, for the prevention and treatment of coronavirus disease 2019, or COVID-19, the disease caused by the virus SARS-CoV-2 and its variants. COVID-19 has caused the current global pandemic that remains a significant global health crisis and has resulted in millions of deaths and lasting health problems in many survivors. We believe that COVID-19 will become an endemic disease requiring a variety of effective, safe and convenient prevention and treatment options for years to come. We aim to address COVID-19 and future potential viral outbreaks by building a portfolio of antibodies with broadly neutralizing activity against multiple members of the coronavirus family or additional viruses with pandemic potential. Our portfolio of antibodies was discovered byAdimab, LLC , orAdimab , an industry leader in translating target hypotheses into therapeutically relevant antibodies with their proprietary platform, which has resulted in more than 400 antibody discovery programs. ADG20 is designed to be a potent, long-acting and broadly neutralizing antibody for both the prevention and treatment of COVID-19 as either a single or combination agent. We believe several attributes differentiate ADG20. Unlike other antibody-based therapies specifically targeting SARS-CoV-2, ADG20 has demonstrated an ability in non-clinical studies to neutralize a diverse panel of circulating SARS-CoV-2 variants, including the newly emerged Lambda, Mu and Delta plus variants, as well as a broad range of SARS-like viruses with neutralization potency at IC50 (half maximal inhibitory concentrations) of approximately 0.01 mcg/mL or less in live-virus cellular assays. We believe this demonstrated in vitro neutralization activity will translate into a low-clinical dose which, in turn, may translate into the ability to conveniently deliver ADG20 as a single intramuscular, or IM, injection. Data from a six-month evaluation timepoint in our Phase 1 healthy volunteer study ADG20-1-001 confirmed the extended half-life of ADG20, which approached 100 days based on data from the 300 mg IM dose cohort and we believe may allow for protection of up to twelve months. As ofSeptember 4, 2021 , there were no study drug related adverse events, serious adverse events, injection-site reactions or hypersensitivity reactions reported through a minimum of three months follow-up across all cohorts. In addition, in an exploratory analysis, 50% serum virus neutralizing antibody titers against an authentic SARS-CoV-2 D614G variant measured six months after a single 300 mg IM dose of ADG20 were similar to observed peak titers with the RNA-1273 vaccine series and exceeded those achieved with the AZD1222 vaccine series. We are conducting two separate Phase 2/3 clinical trials: our EVADE trial to evaluate ADG20 for the prevention of COVID-19 and our STAMP trial to evaluate ADG20 for the treatment of COVID-19. Additionally, our portfolio includes multiple broadly neutralizing antibodies, including ADG10, for potential use with ADG20 as a combination therapy for the prevention and treatment of COVID-19 and future coronavirus outbreaks. We were formed inJune 2020 . InJuly 2020 , we entered into an assignment and license agreement, or the Adimab Assignment Agreement, withAdimab , pursuant to which we acquired certain rights toAdimab's antibodies relating to COVID-19 and severe acute respiratory syndrome, or SARS, as well as related provisional patent applications, know-how and data generated with respect to the associated antibodies. In addition,Adimab granted to us a non-exclusive, worldwide license to certain ofAdimab's platform patents and technology for use in research and development. In connection with the rights and license acquired, we issued 5,000,000 shares of our Series A preferred stock toAdimab . 22 -------------------------------------------------------------------------------- Since our inception, we have devoted substantially all of our resources to organizing and staffing, building an intellectual property portfolio, business planning, conducting research and development, establishing arrangements with third parties for the manufacture of our product candidates and raising capital. We rely heavily on external consultants and contract research organizations, or CROs, to conduct our non-clinical, preclinical and clinical activities. Additionally, we are currently dependent on WuXi Biologics (Hong Kong ) Limited, or WuXi, a contract development and manufacturing organization, or CDMO, for the manufacture of our product candidates for clinical and commercial use. We expect to continue to rely on third parties for clinical trials and the manufacture and testing of our product candidates. Since our inception, we have financed our operations with approximately$464.7 million of net proceeds from sales of our preferred stock, and most recently, with proceeds from our initial public offering, or IPO. InAugust 2021 , we completed our IPO pursuant to which we issued and sold 20,930,000 shares of our common stock, including 2,730,000 shares of common stock pursuant to the full exercise of the underwriters' option to purchase additional shares. We received aggregate net proceeds from our IPO of approximately$330.9 million , after deducting underwriting discounts and commissions, but before deducting offering expenses payable by the Company, which were$3.4 million . To date, we have not generated any revenue from any sources, including product sales. InFebruary 2021 , we advanced ADG20 into a Phase 1 clinical trial. In April andAugust 2021 , we advanced ADG20 into two Phase 2/3 clinical trials. We have not yet commenced significant development activities with respect to other product candidates. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates, if approved. Since our inception, we have incurred significant losses, including net losses of$65.3 million for the period fromJune 3, 2020 (inception) toDecember 31, 2020 and of$143.7 million for the nine months endedSeptember 30, 2021 . As ofSeptember 30, 2021 , we had an accumulated deficit of$209.1 million . We expect to continue to incur significant expenses and recognize substantial losses in the foreseeable future as we expand and progress our research and development activities as well as the associated manufacturing activities and commercialization efforts. In addition, our losses from operations may fluctuate significantly from period to period depending on the timing of our clinical trials and our expenditures on other research and development activities, including any associated manufacturing activities, and potential commercialization efforts. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we: ? continue to conduct our ongoing clinical trials of ADG20, including advancement through late-stage global clinical trials, as well as initiate and complete additional clinical trials of future product candidates or current product candidates in new indications or patient populations; ? continue to advance the preclinical development of our other product candidates and our preclinical and discovery programs; ? seek regulatory approval for any product candidates that successfully complete clinical trials; ? pursue marketing approvals or EUA and reimbursement for our product candidates; ? acquire or in-license other product candidates, intellectual property and/or technologies; ? develop, establish and validate our commercial-scale current good manufacturing practices, or cGMP, manufacturing process; ? manufacture material under cGMP, for potential EUA and commercial sales at our contracted manufacturing facilities; ? maintain, expand, enforce, defend and protect our intellectual property portfolio; ? comply with regulatory requirements established by the applicable regulatory authorities; ? establish a sales, marketing and distribution infrastructure and scale up manufacturing capabilities to commercialize any product candidates for which we may obtain regulatory approval or EUA; ? hire and retain additional personnel, including research, clinical, development, manufacturing, quality control, quality assurance, regulatory and scientific personnel; ? add operational, financial, corporate development, management information systems and administrative personnel, including personnel to support our product development and planned future commercialization efforts; and ? incur additional legal, accounting and other expenses in operating as a public company. We do not anticipate generating revenue from product sales, including government supply contracts, unless and until we successfully complete clinical development and obtain marketing approvals or EUA for one or more of our product candidates. We are currently establishing our commercial infrastructure to support the anticipated marketing and distribution of our product candidates. Subject to receiving marketing approval or EUA for prevention and/or treatment of COVID-19, we expect to enter into arrangements with third parties for the sale, marketing and distribution of our product candidates. Accordingly, if we obtain marketing approval or EUA for any of our product candidates, we will incur significant additional commercialization expenses related to product manufacturing, marketing, sales and distribution. 23 -------------------------------------------------------------------------------- As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, government or private-party grants, debt financings, collaborations with other companies and strategic alliances. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions. Because of the numerous risks and uncertainties associated with pharmaceutical 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 or maintain profitability. We may never obtain regulatory approval for any of our product candidates. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See "Liquidity and Capital Resources."
Impact of COVID-19 on Our Operations
InMarch 2020 , theWorld Health Organization declared the outbreak of COVID-19 a global pandemic. The evolving and constantly changing impact of the pandemic will directly affect the potential commercial prospects of ADG20 for the prevention and treatment of COVID-19. The severity of the COVID-19 pandemic and the continued emergence of variants of concern (such as the widespread Delta variant), the availability, administration and acceptance of vaccines, monoclonal antibodies, antiviral agents and other therapeutic modalities, the introduction of local, national and/or employer vaccine mandates, and the potential development of "herd immunity" by the global population will affect the design and enrollment of our clinical trials, the potential regulatory authorization or approval of our product candidates and the commercialization of our product candidates, if approved. In addition, our business and operations may be more broadly adversely affected by the COVID-19 pandemic. The COVID-19 outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred, supply chains have been disrupted, facilities and production have been suspended and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services has fallen. The global COVID-19 pandemic continues to evolve rapidly, and we will continue to monitor it closely. The ultimate extent of the impact of the COVID-19 pandemic on our business, financial condition, operations and product development timelines and plans remains highly uncertain and will depend on future developments, including the duration and spread of outbreaks and the continued emergence of variants, its impact on our clinical trial design and enrollment, trial sites, contract research organizations, contract manufacturing organizations and other third parties with which we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. To date, we have experienced some delays and disruptions in our development activities as a result of the COVID-19 pandemic. Some of our contract research organizations, contract manufacturing organizations and other service providers also continue to be impacted. We will continue to monitor developments as it addresses the disruptions, delays and uncertainties relating to the COVID-19 pandemic. These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, our results and operations may be materially adversely affected and may affect our ability to raise capital.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue from product sales, including government supply contracts, or any other sources. If our development efforts for our product candidates are successful and result in regulatory approval or collaboration or license agreements with third parties, we may generate revenue in the future from product sales or payments from collaboration or license agreements that we may enter into with third parties, or any combination thereof.
Research and Development Expenses
The nature of our business and primary focus of our activities generate a significant amount of research and development costs. Research and development expenses represent costs incurred by us for:
?
the non-clinical and preclinical development of our product candidates, including our discovery efforts;
24
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?
the procurement of our product candidates from third-party manufacturers; and
?
the global clinical development of our product candidates.
Such costs consist of:
? personnel-related expenses, including salaries, bonuses, benefits and other compensation-related costs, including stock-based compensation expense, for employees engaged in research and development functions; ? expenses incurred under agreements with third parties, such as consultants, contractors and CROs, that conduct the non-clinical and preclinical studies and clinical trials of our product candidates and research programs; ? costs of procuring manufactured product candidates for use in non-clinical studies, preclinical studies and clinical trials from third-party CDMOs; ? costs of outside consultants and advisors, including their fees and stock-based compensation; ? payments made under third-party licensing agreements; and ? other expenses incurred as a result of research and development activities. We expense research and development costs as incurred. Non-refundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed, or when it is no longer expected that the goods will be delivered or the services rendered. Our primary focus since inception has been the development of ADG20. Our research and development costs consist primarily of external costs, such as fees paid to CDMOs, CROs and consultants in connection with our non-clinical studies, preclinical studies and clinical trials. To date, external research and development costs for any individual product candidate have been tracked commencing upon product candidate nomination. We do not allocate employee-related costs, costs associated with our discovery efforts and other internal or indirect costs to specific research and development programs or product candidates because these resources are used and these costs are deployed across multiple programs under development and, as such, are not separately classified. Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher and more variable development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in the near term as we advance ADG20 through clinical development on a global basis, pursue regulatory approval of ADG20, continue to discover and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts, including the associated manufacturing activities. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of: ? the timing and progress of preclinical and clinical development activities; ? the number and scope of preclinical and clinical programs we decide to pursue; ? filing acceptable investigational new drug applications with theU.S. Food and Drug Administration or comparable foreign applications that allow commencement of our planned clinical trials or future clinical trials for our product candidates; ? sufficiency of our financial and other resources to complete the necessary preclinical studies and clinical trials, manufacture the product candidates and complete associated regulatory activities; ? our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and successfully develop, obtain regulatory approval or EUA for our product candidates; ? successful enrollment and timely completion of clinical trials, including our ability to generate positive data from any such clinical trials; ? the costs associated with the development of any additional development programs and product candidates we identify in-house or acquire through collaborations; ? the prevalence, nature and severity of adverse events experienced with ADG20 or any other product candidates; ? the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; 25 -------------------------------------------------------------------------------- ? our ability to obtain and maintain patent, trademark and trade secret protection and regulatory exclusivity for our product candidates, if and when approved, and otherwise protecting our rights in our intellectual property portfolio; ? receipt of timely marketing approvals from applicable regulatory authorities; ? our ability to maintain compliance with regulatory requirements, including good clinical practices, current good laboratory practices and cGMPs, and to comply effectively with other rules, regulations and procedures applicable to the development and sale of pharmaceutical products; ? potential significant and changing government regulation, regulatory guidance and requirements and evolving treatment guidelines; and ? the impact of any business interruptions to our operations or those of third parties with which we work, particularly in light of the current COVID-19 pandemic. A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. We may never succeed in obtaining regulatory approval or EUA for any of our product candidates. In addition, in the absence of a Public Health Emergency (or "PHE"), we may not be able to receive an EUA. The national PHE declaration is currently in effect throughJanuary 2022 and may or may not be renewed.
Acquired in-process research and development, or IPR&D, expenses consist primarily of the upfront costs we incurred inJuly 2020 , as well as any costs of contingent milestone payments we incurred in subsequent periods, to acquire rights toAdimab's antibodies relating to COVID-19 and SARS and related intellectual property and a license to certain ofAdimab's platform patents and technology, or the IPR&D assets, for use in the research and development of our product candidates. We expensed the cost of the IPR&D assets because they had no alternative future use as of the acquisition date. We will recognize additional acquired IPR&D expenses in the future if and when we become obligated to make contingent milestone payments toAdimab under the terms of the agreement by which we acquired the IPR&D assets.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, bonuses, benefits, third-party fees and other related costs, including stock-based compensation, for our personnel and external contractors involved in our executive, finance, legal, business development and other administrative functions as well as our commercial function. Selling, general and administrative expenses also include costs incurred for outside services associated with such functions, including legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and administrative consulting services; insurance costs; market research costs; and other selling, general and administrative expenses. These costs relate to the operation of the business, unrelated to the research and development function, or any individual program. We anticipate that our selling, general and administrative expenses will increase significantly in the future as our business expands and we increase our headcount to support the expected growth in our research and development activities and the potential commercialization of our product candidates. In particular, we expect to incur additional commercialization expenses prior to any regulatory approval or EUA of our product candidates as we continue to expand our commercial function to support potential future product launches. We also anticipate that we will incur increased expenses associated with operating as a public company, including increased costs of accounting, audit, legal, regulatory and tax-related services, director and officer insurance premiums, and investor and public relations costs. We also expect to incur additional intellectual property-related expenses as we file additional patent applications to protect innovations arising from our research and development activities. ThroughSeptember 30, 2021 , we have operated as a virtual company. Therefore, we do not incur material operating expenses for the rent, maintenance and insurance of facilities or for depreciation of fixed assets.
Interest Income
Interest income consists of interest earned from our cash, cash equivalents and marketable securities. We expect our interest income to modestly increase as we continue to invest the cash received from our sales of Series C preferred stock inApril 2021 and the net proceeds from our IPO inAugust 2021 . 26 --------------------------------------------------------------------------------
Income Taxes
For the three and nine months endedSeptember 30, 2021 , the three months endedSeptember 30, 2020 , and for the period fromJune 3, 2020 (inception) toSeptember 30, 2020 , the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each period, due to its uncertainty of realizing a benefit from those items. Results of Operations
Comparison of the three months ended
The following table summarizes our results of operations for the three months
ended
Three Months Three Months
Ended Ended
September 30, September 30,
(in thousands) 2021 2020 Change
Operating expenses:
Research and development $ 45,366 $ 7,251 $ 38,115
Acquired in-process research and development 4,000 39,915 (35,915 )
Selling, general and administrative 11,052 842 10,210
Total operating expenses 60,418 48,008 12,410
Loss from operations (60,418 ) (48,008 ) (12,410 )
Other income (expense):
Interest income 48 - 48
Other expense (5 ) - (5 )
Total other income (expense), net 43 - 43
Net loss and comprehensive loss $ (60,375 ) $
(48,008 )
The following discussion presents the components of our expenses for the periods presented:
Research and Development Expenses
Three Months Three Months
Ended Ended
September 30, September 30,
(in thousands) 2021 2020 Change
Direct, external research and development
expenses by program:
ADG20 $ 31,878 $ 6,294 $ 25,584
ADG10 4,440 - 4,440
Unallocated research and development
expenses:
Personnel-related costs 6,857 489 6,368
External discovery-related and other costs 2,191 468 1,723
Total research and development expenses $ 45,366 $
7,251
Research and development expenses were$45.4 million for the three months endedSeptember 30, 2021 , compared to$7.3 million for the three months endedSeptember 30, 2020 . The increase of$25.6 million in direct costs related to our ADG20 program was primarily due to overall increases in our clinical study costs and manufacturing expenses. The increase of$4.4 million in direct costs related to our ADG10 program was driven by manufacturing expenses, for which there were no costs incurred during the three months endedSeptember 30, 2020 . Personnel-related costs, including salaries, bonuses, benefits and other compensation-related costs were$4.7 million and stock-based compensation expense was$2.2 million for the three months endedSeptember 30, 2021 , compared to personnel-related costs of$0.5 million and stock-based compensation expense of less than$0.1 million for the three months endedSeptember 30, 2020 . The overall increase in personnel-related costs is attributable to the hiring of individuals to support the development of our product candidates. The increase in external discovery related costs and other of$1.7 million was primarily driven by the$1.3 million quarterly fee under the Adimab Collaboration Agreement,$0.5 million in professional services and consulting costs, offset by$0.1 million of other research and development related costs.
Acquired IPR&D expenses of$4.0 million for three months endedSeptember 30, 2021 consisted of the cost we incurred in the period under the Adimab Assignment Agreement for a milestone payment that became due toAdimab inAugust 2021 upon the dosing of the first patient in a Phase 3 global clinical trial evaluating ADG20 for the prevention of COVID-19. The amount of this contingent payment was recognized as an IPR&D expense based on the nature of the associated assets acquired fromAdimab on the date of the milestone achievement. Acquired IPR&D expense of$39.9 million for the three months endedSeptember 30, 2020 consisted of the costs we incurred in the period under the Adimab Assignment Agreement to acquire rights toAdimab's antibodies relating 27 -------------------------------------------------------------------------------- to COVID-19 and SARS and related intellectual property and a license to certain ofAdimab's platform patents and technology for use in the research and development of our product candidates. We expensed the cost of the IPR&D assets because they had no alternative future use as of the acquisition date.
Selling, General and Administrative Expenses
Three Months Three Months
Ended Ended
September 30, September 30,
(in thousands) 2021 2020 Change
Personnel-related costs $ 6,432 $ 204 $ 6,228
Professional and consultant fees 4,108 558 3,550
Other 512 80 432
Total selling, general and administrative expenses
842
Selling, general and administrative expenses for the three months endedSeptember 30, 2021 were$11.1 million , compared to$0.8 million for the three months endedSeptember 30, 2020 . Personnel-related costs increased by$6.2 million due to increased hiring to support general and administrative functions. Personnel-related costs, including salaries, bonuses, benefits and other compensation-related costs were$2.6 million and stock-based compensation expense was$3.8 million for the three months endedSeptember 30, 2021 , compared to personnel-related costs of$0.2 million and stock-based compensation expense of less than$0.1 million for the three months endedSeptember 30, 2020 . The increase of$3.6 million in professional services and consultant fees and the increase of$0.4 million in other expenses was attributable to costs incurred as we began operating as a public company, including insurance premiums and other fees. Other Income Other income was less than$0.1 million for the three months endedSeptember 30, 2021 and$0 for the three months endedSeptember 30, 2020 , consisting primarily of interest earned on invested cash balances.
Comparison of the nine months ended
The following table summarizes our results of operations for the nine months endedSeptember 30, 2021 and for the period fromJune 3, 2020 (inception) toSeptember 30, 2020 : Period from Nine Months June 3, 2020 Ended (Inception) to September 30, September 30, (in thousands) 2021 2020 Change Operating expenses: Research and development$ 114,465 $ 7,299$ 107,166 Acquired in-process research and development 7,500 39,915 (32,415 ) Selling, general and administrative 21,853 892 20,961 Total operating expenses 143,818 48,106 95,712 Loss from operations (143,818 ) (48,106 ) (95,712 ) Other income (expense): Interest income 80 - 80 Other expense (10 ) - (10 ) Total other income (expense), net 70 - 70 Net loss and comprehensive loss$ (143,748 ) $
(48,106 )
Research and Development Expenses
Period from
Nine Months June 3, 2020
Ended (Inception) to
September 30, September 30,
(in thousands) 2021 2020 Change
Direct, external research and development
expenses by program:
ADG20 $ 90,561 6,294 $ 84,267
ADG10 4,440 - 4,440
Unallocated research and development
expenses:
Personnel-related costs 14,457 537 13,920
External discovery-related and other costs 5,007 468 4,539
Total research and development expenses $ 114,465 $ 7,299 $ 107,166
28
-------------------------------------------------------------------------------- Research and development expenses were$114.5 million for the nine months endedSeptember 30, 2021 , compared to$7.3 million for the period fromJune 3, 2020 (inception) toSeptember 30, 2020 . The increase of$84.3 million in direct costs related to our ADG20 program was primarily due to overall increases in our clinical study costs and manufacturing expenses. The increase of$4.4 million in direct costs related to our ADG10 program was primarily due to manufacturing expenses, for which there were no costs incurred for the period fromJune 3, 2020 (inception) toSeptember 30, 2020 . Personnel-related costs, including salaries, bonuses, benefits and other compensation-related costs, were$10.9 million and stock-based compensation expense was$3.6 million for the nine months endedSeptember 30, 2021 , compared to personnel-related costs of$0.5 million and stock-based compensation expense of less than$0.1 million for the period fromJune 3, 2020 (inception) toSeptember 30, 2020 . The overall increase in personnel-related costs is attributable to the hiring of more individuals to support the development of ADG20 and ADG10. The increase in external discovery-related and other costs and other of$4.5 million was primarily driven by$1.3 million quarterly fee under the Adimab Collaboration Agreement,$1.5 million related to theTSRI Research Agreement and an increase in professional services and consultant fees.
Acquired IPR&D expenses of$7.5 million for the nine months endedSeptember 30, 2021 consisted of the costs we incurred in the period under theAdimab Assignment Agreement for a$1.0 million milestone payment that became due toAdimab inFebruary 2021 upon the dosing of the first patient in a Phase 1 global clinical trial evaluating ADG20, a$2.5 million milestone payment that became due toAdimab inApril 2021 upon the dosing of the first patient in the first Phase 2 global clinical trial of a product licensed under the agreement, and a$4.0 million milestone payment that became due toAdimab inAugust 2021 upon dosing of the first patient in a Phase 3 global clinical trial evaluating ADG20 for the prevention of COVID-19. The amounts of these contingent payments were recognized as an IPR&D expense based on the nature of the associated assets acquired fromAdimab on the date of the milestone achievement. Acquired IPR&D expense of$39.9 million for the three months endedSeptember 30, 2020 consisted of the costs we incurred in the period under the Adimab Assignment Agreement to acquire rights toAdimab's antibodies relating to COVID-19 and SARS and related intellectual property and a license to certain ofAdimab's platform patents and technology for use in the research and development of our product candidates. We expensed the cost of the IPR&D assets because they had no alternative future use as of the acquisition date.
Selling, General and Administrative Expenses
Period from
Nine Months June 3, 2020
Ended (Inception) to
September 30, September 30,
(in thousands) 2021 2020 Change
Personnel-related costs $ 11,980 $ 252 $ 11,728
Professional and consultant fees 9,026 560 8,466
Other 847 80 767
Total selling, general and administrative expenses
892
Selling, general and administrative expenses for the nine months endedSeptember 30, 2021 were$21.9 million , compared to$0.9 million for the period fromJune 3, 2020 (inception) toSeptember 30, 2020 . Personnel-related costs increased by$11.7 million due to increased hiring to support general and administrative functions. Personnel-related costs, including salaries, bonuses, benefits and other compensation-related costs, were$5.7 million and stock-based compensation expense was$6.3 million for the nine months endedSeptember 30, 2021 , compared to personnel-related costs of$0.2 million and stock-based compensation expense of less than$0.1 million for the period fromJune 3, 2020 (inception) toSeptember 30, 2020 . The increase of$8.5 million in professional services and consultant fees and the increase of$0.8 million in other expenses is attributable to costs incurred as we began operating as a public company, including insurance premiums and other fees.
Other Income
Other income was less than$0.1 million for the nine months endedSeptember 30, 2021 and$0 for the period fromJune 3, 2020 (inception) toSeptember 30, 2020 , consisting of primarily of interest earned on invested cash balances.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception inJune 2020 , we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from operations. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates. To date, we have funded our operations with$467.7 million of net proceeds from sales of our preferred stock, and most recently, with$330.9 million of net proceeds from our IPO completed inAugust 2021 . As ofSeptember 30, 2021 , we had cash, cash equivalents and marketable securities of$666.3 million . 29 --------------------------------------------------------------------------------
In
Cash Flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Period from
Nine Months June 3, 2020
Ended (Inception) to
September 30, September 30,
(in thousands) 2021 2020
Net cash used in operating activities
(188,627 ) -
Net cash provided by financing activities 663,432
49,720
Net increase in cash and cash equivalents
Operating Activities During the nine months endedSeptember 30, 2021 , operating activities used$111.5 million of cash, primarily due to our net loss of$143.7 million , partially offset by non-cash stock-based compensation expense of$9.9 million and net cash provided by changes in our operating assets and liabilities of$21.7 million . Net cash provided by changes in our operating assets and liabilities consisted of a$8.9 million increase in accounts payable and a$30.1 million increase in accrued expenses, partially offset by a$11.3 million increase in prepaid expenses and other current assets and a$6.0 million increase in other non-current assets. The increases in accounts payable and accrued expenses were primarily due to amounts owed to vendors in connection with our research and development activities, including increased external costs associated with clinical trials and manufacturing, as well as increases in accrued employee bonuses. The increase in prepaid expenses and other current assets and other non-current assets was primarily due to prepayments for external research and development activities and prepayments for insurance premiums. During the period fromJune 3, 2020 (inception) toSeptember 30, 2020 , operating activities used$1.1 million of cash, primarily due to our net loss of$48.1 million , offset by non-cash acquired IPR&D of$39.9 million and net cash provided by changes in our operating assets and liabilities of$7.0 million . Net cash provided by changes in our operating assets and liabilities consisted of a$5.2 million increase in accounts payable and a$1.9 million increase in accrued expenses. The increases in accounts payable and accrued expenses were primarily due to amounts owed to vendors in connection with our research and development activities, including increased external costs associated with clinical trials and manufacturing, as well as increases in accrued employee bonuses.
Investing Activities
Net cash used in investing activities during the nine months ended
We had no cash used in or provided by investing activities for the period from
Financing Activities
Net cash provided by financing activities during the nine months endedSeptember 30, 2021 consisted of$328.3 million from sales of our common stock and$335.2 million of net proceeds from the issuance of our Series C Preferred Stock inApril 2021 .
Net cash provided by financing activities from
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing
activities, particularly as we advance the non-clinical and preclinical studies
and the current and future clinical trials of our product candidates. Our
funding requirements and timing and amount of our operating expenditures will
depend on many factors, including:
?
the rate of progress in the development of AGD20 and our other product
candidates;
?
the scope, progress, results and costs of non-clinical studies, preclinical
development, laboratory testing and clinical trials for ADG20 and future product
candidates and associated development programs;
?
the extent to which we develop, in-license or acquire other product candidates
and technologies in our pipeline;
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the scope, progress, results and costs as well as timing of process development
and manufacturing scale-up and validation activities associated with ADG20 and
our future product candidates and other programs as we advance them through
preclinical and clinical development;
?
the number and development requirements of product candidates that we may
pursue;
?
the costs, timing and outcome of regulatory review of our product candidates;
?
our headcount growth and associated costs as we expand our research and
development capabilities and establish a commercial infrastructure;
?
the timing and costs of securing sufficient capacity for commercial supply of
our product candidates, or the raw material components thereof;
?
the costs and timing of future commercialization activities, including product
manufacturing, marketing, sales and distribution, for any of our product
candidates for which we receive marketing approval or EUA;
?
the costs necessary to obtain regulatory approvals, if any, for products in the
United States and other jurisdictions, and the costs of post-marketing studies
that could be required by regulatory authorities in jurisdictions where approval
is obtained;
?
the costs and timing of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and defending any
intellectual property-related claims;
?
the continuation of our existing licensing and collaboration arrangements and
entry into new collaborations and licensing arrangements, if at all;
?
the need and ability to hire additional research, clinical, development,
scientific and manufacturing personnel;
?
the costs we incur in maintaining business operations;
?
the need to implement additional internal systems and infrastructure;
?
the effect of competing technological, product and market developments;
?
the revenue, if any, received from commercial sales of our product candidates
for which we receive marketing approval;
?
the costs of operating as a public company; and
?
the progression of the COVID-19 pandemic and emergence of potential outbreaks of
other coronaviruses, including the impact of any business interruptions to our
operations or to those of our contract manufacturers, suppliers or other vendors
resulting from the COVID-19 pandemic or other similar public health crises.
As of November 15, 2021 , we believe that our existing cash, cash equivalents and
marketable securities, including the net proceeds from our IPO, will enable us
to fund our operating expenses and capital expenditure requirements into the
first quarter of 2023. We have based this estimate on assumptions that may prove
to be wrong, and we could exhaust our available capital resources sooner than we
expect.
Until such time, if ever, as we can generate substantial product revenue, we
expect to finance our operations through a combination of equity offerings,
government or private-party grants, debt financings, collaborations, strategic
alliances and licensing arrangements. To the extent that we raise additional
capital through the sale of equity or convertible debt securities, ownership
interest will be diluted, and the terms of such securities may include
liquidation or other preferences and anti-dilution protections that adversely
affect as a common stockholders' rights. Additional debt financing and preferred
equity financing, if available, may involve agreements that include covenants
limiting or restricting our ability to take specific actions, such as incurring
debt, making acquisitions or capital expenditures or declaring dividends, which
could adversely constrain our ability to conduct our business, and may require
the issuance of warrants, which could potentially dilute your ownership
interest. If we raise additional funds through collaborations, strategic
alliances or licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies, future revenue streams, research
programs, or product candidates or grant licenses on terms that may not be
favorable to us. If we are unable to raise additional funds through equity or
debt financings or through other sources, when needed, we may be required to
delay, limit, reduce or terminate our product development programs or any future
commercialization efforts or grant rights to develop and market product
candidates to third parties that we would otherwise prefer to develop and market
ourselves.
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Contractual Obligations and Commitments
There have been no material changes to our contractual obligations from those described in the Prospectus. For additional information, see Note 8 to our condensed consolidated financial statements appearing in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Significant Judgments and Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles inthe United States . The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates" in our Prospectus. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. There have been no significant changes to our critical accounting policies from those described in the Prospectus.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of theSecurities and Exchange Commission .
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations and cash flows is disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Internal Control over Financial Reporting
We identified a material weakness in our internal control over financial reporting that existed as ofSeptember 30, 2021 . See Item 4, Controls and Procedures. If we are unable to remediate this material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012 permits an "emerging growth
company" such as us to take advantage of an extended transition period to comply
with new or revised accounting standards applicable to public companies until
those standards would otherwise apply to private companies. We have elected not
to "opt out" of such extended transition period, which means that when a
standard is issued or revised and it has different application dates for public
or private companies, we will adopt the new or revised standard at the time
private companies adopt the new or revised standard and will do so until such
time that we either (i) irrevocably elect to "opt out" of such extended
transition period or (ii) no longer qualify as an emerging growth company. We
may choose to early adopt any new or revised accounting standards whenever such
early adoption is permitted for private companies.
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