Unity Biotechnology(UBX) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Unity Biotechnology, Inc.'s unaudited condensed financial statements and management's discussion and analysis Item 1. Condensed Financial Statements This section presents Unity Biotechnology, Inc.'s unaudited condensed financial statements, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows for the periods ended March 31, 2021 and 2020. It also includes detailed notes explaining the company's organization, significant accounting policies, fair value measurements, marketable securities, license agreements, commitments, term loan facility, related party transactions, equity financing, corporate restructuring, stock-based compensation, and net loss per common share Condensed Balance Sheets This section provides a snapshot of the company's financial position at specific points in time Condensed Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $26,842 | $17,807 | | Short-term marketable securities | $73,617 | $79,892 | | Total current assets | $102,041 | $100,866 | | Total assets | $148,185 | $156,319 | | Total current liabilities | $10,269 | $14,463 | | Total liabilities | $68,232 | $73,439 | | Total stockholders' equity | $79,953 | $82,880 | Condensed Statements of Operations and Comprehensive Loss This section details the company's revenues, expenses, and net loss over specific periods Condensed Statements of Operations and Comprehensive Loss Highlights (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | Research and development | $8,717 | $19,265 | $(10,548) | | General and administrative | $6,226 | $5,953 | $273 | | Total operating expenses | $14,943 | $27,156 | $(12,213) | | Net loss | $(15,756) | $(28,038) | $12,282 | | Comprehensive loss | $(15,746) | $(27,755) | $12,009 | | Net loss per share, basic and diluted | $(0.29) | $(0.59) | $0.30 | - Research and development expenses decreased significantly by $10.5 million, while net loss improved by $12.3 million year-over-year[14] Condensed Statements of Stockholders' Equity This section outlines changes in the company's equity from various transactions and net loss Changes in Stockholders' Equity (in thousands) | Item | Three Months Ended March 31, 2021 | | :------------------------------------------------ | :-------------------------------- | | Balances at December 31, 2020 | $82,880 | | Issuance of common stock (ATM offering) | $8,892 | | Issuance of common stock (stock options exercise) | $1,183 | | Stock-based compensation | $2,744 | | Unrealized gain on marketable securities | $10 | | Net loss | $(15,756) | | Balances at March 31, 2021 | $79,953 | - Total stockholders' equity decreased from $82.88 million at December 31, 2020, to $79.95 million at March 31, 2021, primarily due to the net loss, partially offset by proceeds from equity offerings and stock-based compensation[17] Condensed Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | Net cash used in operating activities | $(15,091) | $(25,073) | $9,982 | | Net cash provided by investing activities | $14,062 | $3,666 | $10,396 | | Net cash provided by financing activities | $10,064 | $8,993 | $1,071 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $9,035 | $(12,414) | $21,449 | | Cash, cash equivalents and restricted cash at end of period | $28,288 | $26,505 | $1,783 | - The company significantly reduced cash used in operating activities and increased cash provided by investing activities year-over-year, leading to a net increase in cash, cash equivalents, and restricted cash in Q1 2021[20] Notes to Condensed Financial Statements This section provides detailed explanations and disclosures supporting the condensed financial statements Note 1. Organization This note describes the company's business, operational segment, and financial viability considerations - Unity Biotechnology, Inc. is a biotechnology company focused on research and development of therapeutics to slow, halt, or reverse diseases of aging, operating in one segment[22] - The company has incurred significant operating losses and an accumulated deficit of $355.1 million as of March 31, 2021, and expects continued losses, requiring additional capital[23] Liquidity Summary (in millions) | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | Accumulated deficit | $355.1 | $339.3 | | Net loss (three months ended) | $15.8 | $28.0 | | Net cash used in operating activities (three months ended) | $15.1 | $25.1 | | Cash, cash equivalents and marketable securities | $110.2 | N/A | Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - The condensed financial statements are prepared in accordance with GAAP and SEC rules for interim reporting, with certain information condensed or omitted compared to annual statements[25][26] - The company operates as a single segment, with the CEO managing operations on a consolidated basis[30] - Marketable securities are classified as available-for-sale debt securities, reported at fair value with unrealized gains/losses in stockholders' equity[34] - Research and development costs are expensed as incurred, unless there is an alternative future use, and accruals are estimated based on contract progress[42][43] - The company evaluates contingent consideration for license agreements as a derivative liability, measured at fair value, until equity classification criteria are met or milestones expire[46] - The FFCR Act, CARES Act, Trailer Bill, and CAA did not materially impact the company's financial statements as of March 31, 2021, but the company continues to assess their future impacts[56] - Basic and diluted net loss per share are the same due to the company being in a loss position, making potentially dilutive securities anti-dilutive[57] - The company is evaluating the impact of recently issued accounting pronouncements, ASU 2020-06 (convertible instruments) and ASU 2016-13 (credit losses), on its condensed financial statements[61][63] Note 3. Fair Value Measurements This note describes the valuation techniques and inputs used to measure financial assets and liabilities at fair value - The company categorizes fair value measurements into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (other significant observable inputs), and Level 3 (significant unobservable inputs)[64] Fair Value Measurements of Financial Assets (in thousands) | Asset Category | March 31, 2021 (Total) | Level 1 | Level 2 | Level 3 | | :------------------------------------ | :--------------------- | :------ | :------ | :------ | | Cash equivalents (Money market funds) | $23,040 | $23,040 | $— | $— | | Short-term marketable securities | $73,617 | $— | $73,617 | $— | | Long-term marketable securities | $9,790 | $— | $9,790 | $— | | Total assets | $106,447 | $23,040 | $83,407 | $— | | Asset Category | December 31, 2020 (Total) | Level 1 | Level 2 | Level 3 | | :------------------------------------ | :---------------------- | :------ | :------ | :------ | | Cash equivalents (Money market funds) | $13,686 | $13,686 | $— | $— | | Short-term marketable securities | $79,892 | $— | $79,892 | $— | | Long-term marketable securities | $17,871 | $— | $17,871 | $— | | Total assets | $111,449 | $13,686 | $97,763 | $— | - As of March 31, 2021, and December 31, 2020, there was no contingent consideration liability, which was previously a Level 3 measurement, due to settlements and changes in commercial agreements[68] Note 4. Marketable Securities This note provides details on the company's investment in marketable securities, including their classification and fair value Marketable Securities as of March 31, 2021 (in thousands) | Category | Amortized Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | | :-------------------------------- | :------------------- | :--------------- | :---------------- | :--------- | | Cash equivalents (Money market funds) | $23,040 | $— | $— | $23,040 | | Short-term marketable securities | $73,604 | $14 | $(1) | $73,617 | | Long-term marketable securities | $9,788 | $2 | $— | $9,790 | | Total | $106,432 | $16 | $(1) | $106,447 | Marketable Securities as of December 31, 2020 (in thousands) | Category | Amortized Cost Basis | Unrealized Gains | Unrealized Losses | Fair Value | | :-------------------------------- | :------------------- | :--------------- | :---------------- | :--------- | | Cash equivalents (Money market funds) | $13,686 | $— | $— | $13,686 | | Short-term marketable securities | $79,890 | $5 | $(3) | $79,892 | | Long-term marketable securities | $17,867 | $4 | $— | $17,871 | | Total | $111,443 | $9 | $(3) | $111,449 | - The remaining contractual maturities of available-for-sale securities were less than two years as of March 31, 2021, with no significant realized gains or losses[73] Note 5. License Agreements and Strategic Investment This note details the company's licensing arrangements and past strategic equity investments - The company has active license agreements with Ascentage Pharma, including a compound library and option agreement and a Bcl License Agreement, but terminated the APG1252 License Agreement in July 2020 to prioritize other compounds like UBX1325[75] - The agreements include potential cash payments up to $70.3 million and equity payments of up to 1,333,338 shares of common stock based on preclinical, clinical, and sales milestones[76] - As of March 31, 2021, 974,980 shares were issued to Ascentage Pharma and 186,667 shares to an academic institution, with no contingent consideration liability remaining after the APG1252 termination[77][78] - The company previously held an equity investment in Ascentage International, which was sold in 2020, resulting in a $1.4 million change in fair value recorded as other expense for the three months ended March 31, 2020[79] - An exclusive license agreement with UCSF in May 2019 involved issuing 120,000 common shares and includes potential milestone payments up to $13.6 million per product and low single-digit royalties, none of which have been recognized as of March 31, 2021[81] Note 6. Commitments and Contingencies This note describes the company's contractual obligations, lease liabilities, and potential legal exposures Lease Expense (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Operating lease cost | $1,096 | $1,300 | | Variable lease cost | $466 | $278 | | Sublease income | $(145) | $— | | Impairment of operating lease right-of-use asset | $— | $1,157 | | Total lease cost | $1,417 | $2,735 | Maturities of Lease Liabilities as of March 31, 2021 (in thousands) | Year | Amount | | :------------------------------------ | :----- | | 2021 (remaining 9 months) | $5,001 | | 2022 | $6,283 | | 2023 | $4,810 | | 2024 | $4,964 | | 2025 | $5,123 | | Thereafter | $22,179 | | Total future minimum lease payments | $48,360 | | Less: Amount representing interest | $(10,470) | | Present value of future minimum lease payments | $37,890 | | Less: Current portion of operating lease liability | $(4,626) | | Noncurrent portion of operating lease liability | $33,264 | - The company entered a new office and laboratory lease in South San Francisco in February 2019, with a ten-year term and a $10.7 million tenant improvement allowance[84] - In February 2020, the company recorded a $2.2 million impairment loss on its Brisbane, California facility's right-of-use asset and leasehold improvements due to relocation and market conditions, and subsequently subleased a portion of the facility in February 2021[88][89] - The company indemnifies its officers and directors, holding director and officer liability insurance, and believes the fair value of these obligations is minimal[90][91] Note 7. Term Loan Facility This note details the terms and conditions of the company's long-term debt agreement - In August 2020, the company entered a Loan and Security Agreement with Hercules Capital, Inc. for up to $80.0 million, with a first tranche of $25.0 million advanced[93] - The remaining tranches' milestones were not met as of March 31, 2021, due to the discontinuation of UBX0101 clinical development[93] - Interest accrues at the greater of Wall Street Journal prime rate plus 6.10% or 9.35% (9.35% at March 31, 2021), with an effective interest rate of 12.40%[95] - The company granted first priority liens on substantially all intellectual property as collateral and was in compliance with all covenants, including a $15.0 million liquidity covenant starting July 1, 2021[96] Future Principal Payments for Long-Term Debt as of March 31, 2021 (in thousands) | Year | Amount | | :------------------------------------ | :----- | | 2021 (remaining 9 months) | $— | | 2022 | $3,838 | | 2023 | $12,272 | | 2024 | $8,890 | | Total principal payments | $25,000 | | End of term fee due at maturity in 2024 | $1,562 | | Unamortized discount and debt issuance costs | $(1,863) | | Long-term debt, net | $24,699 | Note 8. Related Party Transactions This note discloses transactions between the company and its related parties - A full-recourse promissory note of $0.2 million to an executive for common stock purchase was reclassified from 'Related party promissory note' to 'Promissory notes for purchase of common stock' following the executive's employment termination in January 2021[101] Note 9. Equity Financing This note describes the company's equity financing activities, including at-the-market offerings - The company has ATM Offering Programs, including an Initial ATM Offering Program (up to $75.0 million) and an Additional ATM Offering Program (up to $50.0 million), through Cowen and Company, LLC[102][104] - For the three months ended March 31, 2021, the company sold 1,187,068 shares under the Initial ATM Offering Program and 33,561 shares under the Additional ATM Offering Program, generating approximately $8.9 million in net proceeds[105] Note 10. Corporate Restructuring This note details the company's recent restructuring efforts and associated costs - In September 2020, the company implemented a corporate restructuring, eliminating approximately 33 positions (32% of workforce) to focus resources on ophthalmology and neurology cellular senescence programs and extend operating capital[106] - A one-time employee benefits and severance charge of approximately $1.8 million was incurred in 2020, with most cash payments made in Q1 2021[106] Note 11. Stock-Based Compensation This note provides information on the company's stock option and restricted stock unit activity and related compensation expense Stock Option Activity (Three Months Ended March 31, 2021) | Metric | Number of Shares | Weighted Average Exercise Price | | :-------------------------- | :--------------- | :------------------------------ | | Balances at December 31, 2020 | 7,475,472 | $6.88 | | Granted | 1,044,000 | $6.59 | | Exercised | (259,019) | $4.57 | | Canceled | (854,834) | $9.29 | | Balances at March 31, 2021 | 7,405,619 | $6.64 | Restricted Stock Units (RSUs), Performance Stock Units (PSUs) and Restricted Stock Awards (RSAs) Activity (Three Months Ended March 31, 2021) | Metric | Number of Shares | Weighted Average Grant Date Fair Value | | :-------------------------- | :--------------- | :------------------------------------- | | Unvested at December 31, 2020 | 2,922,077 | $3.44 | | Granted | 250,000 | $5.98 | | Vested | (88,218) | $5.95 | | Canceled | (253,227) | $3.41 | | Unvested at March 31, 2021 | 2,830,632 | $3.59 | - The company uses the Black-Scholes model for service-based stock options and the Monte-Carlo model for PSU awards with market-based conditions[107][115] - In January 2021, the board modified PSUs and performance/market contingent stock options, lowering market conditions and resulting in incremental fair value amortized over new service periods[114][115][116][117] Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $1,081 | $1,535 | | General and administrative | $1,663 | $1,782 | | Total | $2,744 | $3,317 | Note 12. Net Loss per Common Share This note explains the calculation of basic and diluted net loss per common share - Basic and diluted net loss per share are identical because the company was in a net loss position, rendering all potentially dilutive securities anti-dilutive[119][122] Net Loss per Common Share Reconciliation (in thousands, except share and per share amounts) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(15,756) | $(28,038) | | Weighted-average number of shares outstanding—basic and diluted | 54,169,349 | 47,544,401 | | Net loss per share—basic and diluted | $(0.29) | $(0.59) | Anti-Dilutive Securities (Shares) | Security Type | March 31, 2021 | March 31, 2020 | | :------------------------------------ | :------------- | :------------- | | Options to purchase common stock | 7,405,619 | 9,520,760 | | Early exercised common stock subject to future vesting | 33,370 | 122,393 | | RSUs | 2,830,632 | 970,328 | | Shares subject to 2018 ESPP | 57,568 | 44,344 | | Total | 10,327,189 | 10,657,825 | Note 13. Defined Contribution Plan This note describes the company's 401(k) plan and employer matching contributions - The company sponsors a 401(k) Plan and matched $0.2 million in contributions during each of the three months ended March 31, 2021 and 2020[123] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting its focus on developing senolytic medicines for diseases of aging, particularly UBX1325 for ophthalmologic diseases. It details the financial performance, liquidity, capital resources, and the impact of the COVID-19 pandemic on operations and clinical trials Overview This section provides a high-level summary of the company's business, strategic focus, and financial position - Unity Biotechnology is a clinical-stage biotechnology company focused on developing senolytic medicines to treat diseases of aging, with an initial focus on ophthalmologic and neurologic diseases[125] - The company initiated a Phase 1 clinical study of UBX1325 for advanced diabetic macular edema (DME) and wet age-related macular degeneration (AMD) in October 2020, which was well tolerated, leading to a Phase 2a study in DME in May 2021 with topline data expected in H1 2022[126][127] Financial Overview (in millions) | Metric | March 31, 2021 | March 31, 2020 | | :---------------- | :------------- | :------------- | | Net losses | $15.8 | $28.0 | | Accumulated deficit | $355.1 | N/A | - The company has incurred significant net losses since inception and does not expect positive cash flows from operations in the foreseeable future, necessitating additional capital[128][132] - Funding sources include a $25.0 million term loan from Hercules Capital, Inc. (August 2020) and proceeds from ATM equity offering programs, with $49.7 million remaining available under the Additional ATM Offering Program as of March 31, 2021[129][131][158] COVID-19 Update This section discusses the impact of the COVID-19 pandemic on the company's operations and clinical development - The COVID-19 pandemic has strained healthcare services, potentially impacting clinical trials through limits on initiation, slowed enrollment, and restrictions on monitoring activities[134] - The company amended clinical study protocols for UBX1325 to enable remote data collection and source verification, and has not experienced supply chain disruptions for UBX1325[134][135] - An internal COVID-19 Response Team monitors the situation, implementing protocols like reduced onsite staff and remote working, but the full impact on financial condition and clinical studies remains uncertain[136] Components of Our Results of Operations This section breaks down the key elements contributing to the company's financial performance - Research and development expenses are expected to increase as drug candidates advance through preclinical and clinical trials, with costs including personnel, supplies, clinical trials, and third-party services[137][138] - General and administrative expenses primarily consist of personnel costs, facilities, and professional services, expected to increase due to public company operating costs[139] - Contingent consideration liability, related to license agreements, is measured at fair value as a derivative, with changes reflected in operating results[140] - Interest income is primarily from marketable securities, while interest expense relates to the Loan Agreement[141][143] - Other expense for Q1 2020 included changes in fair value of an equity investment in Ascentage International, which was sold in 2020[144] Results of Operations This section analyzes the company's financial performance for the reported periods, focusing on key expense categories and net loss Summary of Operations Data (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | | Research and development | $8,717 | $19,265 | $(10,548) | | General and administrative | $6,226 | $5,953 | $273 | | Change in fair value of contingent consideration | $— | $(221) | $221 | | Impairment of long-lived assets | $— | $2,159 | $(2,159) | | Total operating expenses | $14,943 | $27,156 | $(12,213) | | Loss from operations | $(14,943) | $(27,156) | $12,213 | | Interest income | $36 | $527 | $(491) | | Interest expense | $(775) | $— | $(775) | | Other expense | $(74) | $(1,409) | $1,335 | | Net loss | $(15,756) | $(28,038) | $12,282 | - Research and development expenses decreased by $10.6 million, primarily due to the termination of UBX0101, reduction in force, and lower laboratory and facilities costs[146] - General and administrative expenses increased by $0.3 million, driven by higher facilities and insurance costs, partially offset by reduced professional fees[148] - The absence of contingent consideration liability in Q1 2021 and a $2.2 million impairment charge in Q1 2020 (related to the Brisbane facility exit) significantly impacted operating expenses year-over-year[149][150] - Interest income decreased due to lower market yields, while interest expense of $0.8 million was incurred in Q1 2021 related to the Loan Agreement[151][152] Liquidity, Capital Resources and Capital Requirements This section analyzes the company's ability to meet its financial obligations and fund future operations - The company has an accumulated deficit of $355.1 million as of March 31, 2021, and expects continued significant losses and negative cash flows from operations, requiring substantial additional funding[154][159][161] - Current capital resources (cash, cash equivalents, marketable securities of $110.2 million as of March 31, 2021) are expected to fund operations through at least the next 12 months, into the second half of 2022[161][162] - Future funding requirements are dependent on factors such as the scope and cost of R&D, clinical trials, regulatory approvals, manufacturing, commercialization, and strategic collaborations[163][194] Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Cash used in operating activities | $(15,091) | $(25,073) | | Cash provided by investing activities | $14,062 | $3,666 | | Cash provided by financing activities | $10,064 | $8,993 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $9,035 | $(12,414) | - Operating cash outflow decreased by $9.98 million YoY, driven by lower net loss and non-cash charges, while investing cash inflow increased by $10.4 million due to marketable securities maturities[164][165][166] - Financing activities provided $10.1 million in Q1 2021, primarily from ATM offerings and stock option exercises[167] - Contractual obligations include the Term Loan Facility, operating leases, and non-cancelable purchase obligations under R&D agreements and license agreements with milestone and royalty payments[169][170] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate sensitivities related to its cash, cash equivalents, marketable securities, and term loan facility - The company's exposure to interest rate risk on its $110.2 million in cash, cash equivalents, and marketable securities (as of March 31, 2021) is not significant due to short-term investments[177] - The $25.0 million term loan is subject to variable interest rates (greater of WSJ prime + 6.10% or 9.35%), with an effective rate of 12.40% at March 31, 2021. A hypothetical 1% interest rate change would increase annual expense by approximately $0.2 million[178] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2021[179] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2021, that materially affected or are reasonably likely to materially affect internal control over financial reporting[180] PART II. OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, defaults, and other required disclosures Item 1. Legal Proceedings The company is not currently involved in any material litigation or other material legal proceedings - The company is not currently a party to any material litigation or other material legal proceedings[182] Item 1A. Risk Factors This section outlines the significant risks that could impact Unity Biotechnology, Inc.'s business, financial condition, and operating results. Key areas of risk include the company's limited operating history and substantial losses, the need for significant additional financing, the novel nature of its therapeutic approach to cellular senescence, dependence on successful drug candidate development and regulatory approval, potential impacts of the COVID-19 pandemic, reliance on third-party manufacturers and suppliers, intense competition, challenges in intellectual property protection, and compliance with extensive government regulations Risk Factor Summary This section provides a concise overview of the primary risks facing the company's operations and financial stability - Clinical-stage biopharmaceutical company with limited operating history and no approved products, incurring significant losses - Requires substantial additional financing; failure to obtain could delay or terminate product development - Novel therapeutic approach (senolytic molecules) exposes the company to unforeseen risks and unpredictable development costs/regulatory approval - Business dependent on successful development, regulatory approval, and commercialization of early-stage drug candidates with no definitive human efficacy - COVID-19 pandemic could adversely impact business, including clinical trials and financial condition - Approved drug candidates may fail to achieve broad physician and patient adoption - Relies on third-party suppliers for manufacturing; loss or failure of suppliers would materially affect business - Faces significant competition from companies with greater resources; failure to compete effectively may limit market penetration - Senolytic medicine platform could infringe third-party patent rights, leading to costly litigation and commercialization limits - Approved products remain subject to regulatory scrutiny Risks Related to Our Limited Operating History, Financial Condition, and Capital Requirements This section details risks stemming from the company's early stage, financial losses, and ongoing need for capital - The company is a clinical-stage biopharmaceutical company with a limited operating history, no approved products, and has incurred significant losses ($355.1 million accumulated deficit as of March 31, 2021), making future viability assessment difficult[187][188][190] - Substantial additional financing is required for preclinical and clinical development; failure to obtain it on acceptable terms could force delays or termination of product development and commercialization efforts[191][193] - The company must prioritize drug candidates and indications due to limited resources, risking investment in unsuccessful products or missing more profitable opportunities[196][197][199] - Interim, 'top-line,' and preliminary clinical trial data are subject to change and audit, and may differ from final results, potentially harming business prospects and stock price volatility[201][202][204] - Quarterly and annual operating results may fluctuate significantly due to factors like R&D investment, clinical study timing, manufacturing costs, regulatory approvals, and the COVID-19 pandemic, making future results difficult to predict[205][206][207] Risks Related to Our Business and Product Development This section covers risks inherent in the company's drug development process, from clinical trials to commercialization - The company's novel senolytic therapeutic approach, based on cellular senescence, is in early human testing, with most data from preclinical models, posing unforeseen risks and making regulatory approval difficult to predict[209][211][212] - Business success depends on the successful development, regulatory approval, and commercialization of early-stage drug candidates, none of which have shown definitive efficacy in humans, and UBX0101 development has ceased[213][215] - The COVID-19 pandemic could severely impact business and clinical trials through delays in patient enrollment, site initiation, and supply chain disruptions, despite mitigation efforts[219][224][225] - Failure to obtain regulatory approval for drug candidates, due to insufficient safety/efficacy data or regulatory disagreements, would delay commercialization and revenue generation[226][230][232] - Disruptions at the FDA and other government agencies, including those caused by funding shortages or global health concerns like COVID-19, could delay drug development and approval[233][236] - Clinical development is lengthy, expensive, and uncertain; early study results may not predict future success, and unforeseen events or side effects could delay or terminate trials[237][239][240][241][245] - Failure to create a pipeline of commercially successful drug candidates or identify novel senolytic mechanisms would limit commercial opportunities[247][248][249] - Developing systemic senolytic medicines for systemic diseases of aging is a long-term goal, with significant risks even for localized treatments[250] - Difficulties in patient enrollment for clinical studies, exacerbated by factors like eligibility criteria, competition, and safety concerns, could delay development and increase costs[251][252][253][254] - Undesirable side effects from drug candidates could delay or prevent regulatory approval, limit commercial profile, or lead to significant negative consequences post-approval, including product recalls or withdrawal[255][256][258] - Commercial success of approved drug candidates depends on broad physician and patient adoption, influenced by efficacy, safety, reimbursement, pricing, and competition[259][261][262] - Reliance on third-party suppliers for manufacturing preclinical and clinical supplies, and future commercial supplies, poses risks of disruption, quality control issues, and regulatory non-compliance[263][265][266][267][269] - Failure to attract and retain senior management and key scientific personnel, especially after recent corporate restructuring and executive changes, could hinder drug development and commercialization[270][271][272] - Dependence on third-party suppliers for raw materials exposes the company to risks of supply interruption, pricing issues, and quality control, potentially delaying drug candidate manufacture[273] - Reliance on third parties for preclinical and clinical studies means their failure to perform contractual duties or comply with regulations could delay or prevent regulatory approval[274][275][276] - Conducting preclinical trials and contracting with third-party manufacturers in foreign countries exposes the company to commercial, political, and financial risks, including potential disruptions from global events[278] - The company faces significant competition from larger pharmaceutical and biotechnology companies with greater resources, potentially limiting market penetration for its drug candidates[279][280][281][283] - Failure to obtain or maintain adequate coverage, reimbursement levels, and pricing policies from governmental authorities and health insurers could limit marketability and revenue generation for approved drug candidates[284][285][286][287][289][290][291] - Lack of an internal sales organization means the company must build or partner for marketing, sales, and distribution capabilities; failure to do so effectively would hinder commercialization and revenue[292] - The company needs to increase its organizational size and manage growth effectively, which requires managing clinical studies, recruiting personnel, and improving operational controls[293][294] - Product liability lawsuits, arising from clinical testing or commercialized products, could result in substantial liabilities, limit commercialization, and damage reputation, even with insurance coverage[296][297] - Existing and future collaboration arrangements may not be successful, depending heavily on collaborators' efforts and potentially leading to delays, termination, or disputes over intellectual property[298][299][300] - Unfavorable global economic or political conditions, including those exacerbated by the COVID-19 pandemic, could adversely affect demand, capital raising ability, and supply chains[301] Risks Related to Intellectual Property This section addresses risks concerning the company's ability to protect and utilize its intellectual property - The company's senolytic medicine platform and future products could infringe third-party patent rights, leading to costly litigation, substantial damages, and limitations on commercialization[302][304] - Failure to obtain, maintain, and enforce intellectual property protection for its platform and technologies could allow competitors to market similar products, adversely affecting market competitiveness[308][309][310][312] - Patent validity challenges, unenforceability assertions, and design-arounds by third parties could lead to loss of patent protection, materially impacting the business[314][315][316][317] - Uncertainties in patent law interpretation and legislative changes, such as the Leahy-Smith America Invents Act, could increase costs and uncertainties in patent prosecution and enforcement[318][319] - International intellectual property protection is challenging due to varying laws and enforcement, potentially hindering the company's ability to prevent infringement globally[320][321][322] - Reliance on confidentiality agreements to protect proprietary know-how is subject to risks of breach, independent discovery, and difficulty in enforcement[323][324] - Disagreements over contract interpretation in intellectual property agreements could narrow rights or increase financial obligations to licensors[328] - Inadequate protection of trademarks and trade names could hinder brand recognition and marketing efforts[330] Risks Related to Government Regulation This section details the regulatory and compliance risks impacting the company's drug development and commercialization - Approved products remain subject to ongoing regulatory scrutiny, including manufacturing, labeling, advertising, and post-marketing study requirements, with non-compliance leading to significant penalties or market withdrawal[333][334][335][336][337] - Changes in FDA policies or government regulations, potentially influenced by political shifts (e.g., U.S. Presidential Election), could prevent, limit, or delay regulatory approval of drug candidates[338][339] - If small molecule drug candidates receive regulatory approval, generic versions could enter the market via ANDAs or 505(b)(2) NDAs, potentially leading to rapid sales decline if patents are challenged[340][341][342] - Biologic drug candidates may face competition from biosimilar products sooner than anticipated, potentially eroding market share despite BPCIA exclusivity provisions[343][344][345] - While the company may seek orphan drug designation, obtaining and maintaining associated benefits like market exclusivity is uncertain and may not fully protect against competition[346][347][348] - Enacted and future healthcare legislation (e.g., Affordable Care Act, state pricing controls, EU cost-containment) may increase the difficulty and cost of obtaining marketing approval and commercializing drug candidates, affecting pricing and revenue[349][350][351][353][354][355] - Business operations are subject to healthcare regulatory laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), with non-compliance risking significant penalties, exclusion from government programs, and reputational harm[356][357][358] - U.S. tax legislation and future changes to tax laws could adversely affect the company's business, financial condition, and results of operations[360] Risks Related to Ownership of Our Common Stock This section addresses risks associated with investing in the company's common stock, including market volatility and dilution - The company's stock price may be highly volatile due to clinical trial results, regulatory announcements, competition, and general market conditions, potentially causing it to fall below investor expectations[361][362][363] - An active, liquid, and orderly market for common stock may not be sustained, impairing shareholders' ability to sell shares and the company's ability to raise capital or make acquisitions[364] - If securities or industry analysts issue adverse opinions or cease coverage, the stock price and trading volume could decline[365] - As an 'emerging growth company' under the JOBS Act, the company benefits from reduced disclosure and governance requirements, which may make its common stock less attractive to some investors and increase stock price volatility[366][367][368] - Future equity financings, including ATM offerings, could result in immediate dilution for existing stockholders and a decline in stock price[369] - Principal stockholders and management own approximately 46.6% of voting stock, allowing them to exert significant control over matters requiring stockholder approval, potentially discouraging takeovers[370] - Sales of a substantial number of common stock shares in the public market, including those from equity compensation plans, could cause the stock price to fall[371] - Operating as a public company incurs increased costs and management time for compliance, including Section 404 of Sarbanes-Oxley, with potential sanctions for non-compliance[373][374][375] - The ability to use net operating loss carryforwards (NOLs) and other tax attributes may be limited by 'ownership changes' under Sections 382 and 383 of the Internal Revenue Code[376] - Provisions in charter documents and Delaware law could discourage takeovers and entrench management[378] - Claims for indemnification by directors and officers may reduce available funds to satisfy third-party claims[379][380][381] - The company does not intend to pay dividends, meaning returns on investment will depend solely on stock price appreciation[382] General Risk Factors This section covers broad risks that could impact the company's overall business and operations - Natural disasters (e.g., earthquakes, wildfires) or unforeseen pandemics (e.g., COVID-19) could severely disrupt operations, supply chains, and have a material adverse effect on the business, with current disaster recovery plans being limited[383][384][386] - Significant disruptions of information technology systems or data security breaches, including cyberattacks, could materially adversely affect business, operations, and financial condition, risking loss of confidential information and litigation[387][388][389] - Misconduct or improper activities by employees and independent contractors, including noncompliance with regulatory standards or fraud, could lead to significant penalties, reputational harm, and adverse financial results[390][391] - The business involves hazardous materials, requiring compliance with environmental laws and regulations, which can be expensive and pose risks of contamination, injury, and liabilities[392][393][394] - Claims challenging the inventorship or ownership of patents and other intellectual property could lead to costly litigation and loss of valuable rights[396] - Protecting intellectual property rights globally is challenging and expensive, as foreign laws may offer less protection, potentially allowing competitors to use technologies in jurisdictions without patent protection[397][398][399] - Changes in and failures to comply with U.S. and foreign privacy and data protection laws (e.g., HIPAA, CCPA, GDPR) may adversely affect business, operations, and financial performance, leading to increased compliance costs and potential liabilities[400][401][403][404][405][406] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or repurchases of company equity securities during the three months ended March 31, 2021 - There were no sales of unregistered securities during the three months ended March 31, 2021[408] - There were no repurchases of shares or company equity securities during the three months ended March 31, 2021[408] Item 3. Default Upon Senior Securities The company reported no default upon senior securities - No default upon senior securities was reported[409] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[410] Item 5. Other Information No other information was reported under this item - No other information was reported[411] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, common stock certificates, investor rights agreements, employment agreements, and certifications from executive officers - Amended and Restated Certificate of Incorporation (Exhibit 3.1) - Amended and Restated Bylaws (Exhibit 3.2) - Form of Common Stock Certificate (Exhibit 4.2) - Amended and Restated Investors' Rights Agreement (Exhibit 4.3) - Description of Unity's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (Exhibit 4.4) - Employment Agreement with Alexander Nguyen (Exhibit 10.1) - Certifications of Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1) - Inline XBRL Instance Document and Taxonomy Extensions (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE) - Cover page formatted in Inline XBRL (Exhibit 104) Signatures The report is duly signed on behalf of Unity Biotechnology, Inc. by its Chief Executive Officer, Anirvan Ghosh, Ph.D., and Chief Financial Officer, Lynne Sullivan, on May 11, 2021 - The report was signed by Anirvan Ghosh, Ph.D., Chief Executive Officer, and Lynne Sullivan, Chief Financial Officer, on May 11, 2021[417]