BioAtla(US:BCAB)2021-11-14 16:00markdown [PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) BioAtla, Inc.'s unaudited condensed consolidated financial statements for Q3 2021 and FY2020, including balance sheets, operations, equity, cash flows, and accounting notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | September 30, 2021 (unaudited) | December 31, 2020 | | :--------------------------------- | :----------------------------- | :------------------ | | **Assets** | | | | Cash and cash equivalents | $269,925 | $238,605 | | Total current assets | $273,517 | $240,681 | | Total assets | $277,579 | $244,937 | | **Liabilities** | | | | Accounts payable and accrued expenses | $24,939 | $12,068 | | Current portion of deferred revenue | $19,806 | $19,806 | | Total current liabilities | $45,227 | $32,261 | | Total liabilities | $46,926 | $34,963 | | **Stockholders' Equity** | | | | Additional paid-in capital | $393,578 | $300,888 | | Accumulated deficit | $(162,929) | $(90,917) | | Total stockholders' equity | $230,653 | $209,974 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Collaboration and other revenue | $— | $150 | $250 | $429 | | Research and development expense | $16,553 | $4,864 | $41,826 | $9,448 | | General and administrative expense | $7,142 | $3,301 | $31,376 | $4,625 | | Total operating expenses | $23,695 | $8,165 | $73,202 | $14,073 | | Loss from operations | $(23,695) | $(8,015) | $(72,952) | $(13,644) | | Total other income (expense) | $765 | $(3,617) | $940 | $(5,814) | | Consolidated net loss and comprehensive loss | $(22,930) | $(11,632) | $(72,012) | $(19,458) | | Net loss per common share, basic and diluted | $(0.68) | $(0.13) | $(2.13) | $(0.13) | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) - Total stockholders' equity increased from **$209,974 thousand** at **December 31, 2020**, to **$230,653 thousand** at **September 30, 2021**, primarily driven by additional paid-in capital from stock issuances and stock-based compensation, partially offset by net losses[13](index=13&type=chunk) Key Changes in Stockholders' Equity (Nine Months Ended September 30, 2021, in thousands) | Item | Amount | | :------------------------------------------ | :------- | | Balance at December 31, 2020 | $209,974 | | Stock-based compensation expense | $21,307 | | Issuance of common stock, net of issuance costs | $71,053 | | Net loss | $(72,012)| | Balance at September 30, 2021 | $230,653 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Nine Months Ended September 30, in thousands) | Cash Flow Activity | 2021 | 2020 | | :------------------------- | :---------- | :---------- | | Operating activities | $(41,265) | $(22,328) | | Investing activities | $(835) | $(195) | | Financing activities | $73,420 | $75,576 | | Net increase in cash and cash equivalents | $31,320 | $53,053 | | Cash and cash equivalents, end of period | $269,925 | $56,757 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Organization and Summary of Significant Accounting Policies](index=7&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) - BioAtla, Inc. converted from BioAtla, LLC in July 2020 as part of a Corporate Reorganization, spinning off Himalaya Therapeutics SEZC and completing a Series D financing; post-reorganization, BioAtla, Inc. is a single legal entity[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - The Company has incurred cumulative operating losses and negative cash flows, with an accumulated deficit of **$162.9 million** as of September 30, 2021; management believes current cash and cash equivalents are sufficient to fund operations for at least one year[20](index=20&type=chunk)[22](index=22&type=chunk) - The Company expects to lose its Emerging Growth Company (EGC) status by **December 31, 2021**, making new accounting standards effective for its fiscal year beginning **January 1, 2021**[32](index=32&type=chunk)[33](index=33&type=chunk) [2. Balance Sheet Details](index=10&type=section&id=2.%20Balance%20Sheet%20Details) Prepaid Expenses and Other Current Assets (in thousands) | Item | September 30, 2021 | December 31, 2020 | | :---------------------------------- | :----------------- | :------------------ | | Prepaid research and development | $2,549 | $2,004 | | Prepaid insurance | $691 | $— | | Other prepaid expenses and current assets | $352 | $72 | | Total | $3,592 | $2,076 | Property and Equipment, Net (in thousands) | Item | September 30, 2021 | December 31, 2020 | | :----------------------------------- | :----------------- | :------------------ | | Total gross property and equipment | $7,851 | $7,172 | | Less accumulated depreciation and amortization | $(3,943) | $(3,070) | | Total | $3,908 | $4,102 | Accounts Payable and Accrued Expenses (in thousands) | Item | September 30, 2021 | December 31, 2020 | | :----------------------------------- | :----------------- | :------------------ | | Accounts payable | $1,550 | $2,456 | | Accrued compensation | $3,008 | $2,804 | | Accrued research and development | $15,883 | $4,852 | | Accrued equity issuance costs | $3,947 | $1,143 | | Other accrued expenses | $551 | $813 | | Total | $24,939 | $12,068 | [3. Fair Value Measurements](index=10&type=section&id=3.%20Fair%20Value%20Measurements) - The Company's current financial assets and liabilities have fair values representative of their carrying amounts due to their short-term nature; no financial assets or liabilities were measured at fair value on a recurring basis as of **September 30, 2021**, and **December 31, 2020**[38](index=38&type=chunk) [4. Convertible and Other Debt](index=10&type=section&id=4.%20Convertible%20and%20Other%20Debt) - The Company's **$0.7 million** Paycheck Protection Program (PPP) loan, borrowed in **April 2020**, was fully forgiven in **July 2021**, resulting in recognition of other income[42](index=42&type=chunk)[43](index=43&type=chunk) Interest Expense on Debt (in thousands) | Period | 2021 | 2020 | | :--------------------------------- | :--- | :--- | | Three months ended September 30 | $0 | $86 | | Nine months ended September 30 | $3 | $1,387 | [5. Commitments and Contingencies](index=12&type=section&id=5.%20Commitments%20and%20Contingencies) Expected Future Minimum Operating Lease Payments (in thousands) | Years ending December 31 | Operating Lease | | :------------------------- | :-------------- | | 2021 (3 months) | $370 | | 2022 | $1,555 | | 2023 | $1,636 | | 2024 | $1,685 | | Thereafter | $845 | - The Company is not currently a party to any legal proceedings expected to have a material adverse effect on its business, operating results, or financial condition[46](index=46&type=chunk) [6. Stockholders'/Members' Equity (Deficit)](index=13&type=section&id=6.%20Stockholders'%2FMembers'%20Equity%20%28Deficit%29) - In **December 2020**, the Company completed its IPO, selling **12,075,000 shares** of common stock at **$18.00 per share**, generating **$198.3 million** net proceeds; all outstanding convertible preferred stock converted into common and Class B common stock[52](index=52&type=chunk) - In **September 2021**, the Company completed a Private Placement, selling **2,678,600 shares** of common stock at **$28.00 per share**, raising **$71.0 million** net proceeds[53](index=53&type=chunk) Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :------------------------- | :------------------------------ | :----------------------------- | | Research and development | $1,267 | $3,376 | | General and administrative | $3,099 | $17,931 | | Total | $4,366 | $21,307 | - As of **September 30, 2021**, total unrecognized stock-based compensation expense for RSUs was **$19.9 million** (expected over **~2.4 years**) and for stock options was **$14.3 million** (expected over **~3.2 years**)[60](index=60&type=chunk)[62](index=62&type=chunk) Common Stock Reserved for Future Issuance (common equivalent shares) | Item | September 30, 2021 | December 31, 2020 | | :--------------------------------------------------- | :----------------- | :------------------ | | Warrants for the purchase of common stock | 717,674 | 717,674 | | Common stock options and restricted stock units issued and outstanding | 2,553,198 | 2,535,143 | | Awards available for future issuance under the 2020 Plan | 3,338,354 | 2,404,535 | | Awards available for future issuance under the ESPP | 828,713 | 464,829 | | Total common stock reserved for future issuance | 7,437,939 | 6,122,181 | [7. Profits Interest Incentive Plan](index=17&type=section&id=7.%20Profits%20Interest%20Incentive%20Plan) - Prior to the **July 2020** Corporate Reorganization, the Company maintained a Profits Interest Incentive Plan, with Class B units treated as liability awards measured at fair value; this plan was assumed by an affiliate during the reorganization[72](index=72&type=chunk)[73](index=73&type=chunk) Allocation of Equity-Based Compensation for Class B Units (in thousands) | Expense Category | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2020 | | :------------------------- | :------------------------------ | :----------------------------- | | Research and development | $5 | $(3,355) | | General and administrative | $(29) | $(4,270) | | Total | $(24) | $(7,625) | [8. Collaboration, License and Option Agreements](index=18&type=section&id=8.%20Collaboration%2C%20License%20and%20Option%20Agreements) - The Company has a Global Co-Development and Collaboration Agreement with BeiGene for the CAB-CTLA-4 antibody (BA3071); BeiGene is responsible for global development, manufacturing, and commercialization costs, with BioAtla eligible for tiered royalties and up to **$225.5 million** in milestone payments[76](index=76&type=chunk)[77](index=77&type=chunk)[82](index=82&type=chunk) - As of **September 30, 2021**, and **December 31, 2020**, the Company had **$19.8 million** in deferred revenue related to the BeiGene collaboration, expected to be earned upon transfer of know-how and master cell bank within the next twelve months[84](index=84&type=chunk) Collaboration Revenue (in thousands) | Period | 2021 | 2020 | | :--------------------------------- | :--- | :--- | | Three months ended September 30 | $0 | $150 | | Nine months ended September 30 | $250 | $429 | [9. Related Party Transactions](index=19&type=section&id=9.%20Related%20Party%20Transactions) - In **March 2021**, a Transition Agreement with co-founder Carolyn Anderson Short resulted in a lump sum payment, pro-rated bonus, and accelerated full vesting of **7,747** stock options and **138,461** restricted stock units, leading to a **$7.0 million** incremental fair value recognized[89](index=89&type=chunk) - As part of the **September 2021** Private Placement, the Company issued **625,000 shares** of common stock to certain related party stockholders for **$17.5 million**[90](index=90&type=chunk) [10. 401(k) Plan](index=20&type=section&id=10.%20401%28k%29%20Plan) - The Company maintains a 401(k) plan for eligible employees but had not made any matching contributions as of **September 30, 2021**, and **December 31, 2020**[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses BioAtla, Inc.'s financial condition and operational results, highlighting its clinical-stage status, significant losses, funding reliance, and cash flow activities [Overview](index=21&type=section&id=Overview) - BioAtla is a **phase 2 clinical-stage** biopharmaceutical company developing conditionally active biologics (CABs) for solid tumor cancer, designed to be active only in the acidic tumor microenvironment[93](index=93&type=chunk) - The Company has incurred significant losses, with net losses of **$22.9 million** and **$72.0 million** for the three and nine months ended **September 30, 2021**, respectively, and an accumulated deficit of **$162.9 million**[96](index=96&type=chunk) - Current cash and cash equivalents of **$269.9 million** are expected to fund operations into the **first half of 2024**, but substantial additional capital will be required for product development and commercialization[101](index=101&type=chunk) [Impact of COVID-19 on Our Business](index=22&type=section&id=Impact%20of%20COVID-19%20on%20Our%20Business) - The COVID-19 pandemic has caused non-material business disruptions, with the **Phase 2 sarcoma trial** remaining on schedule and modest delays in patient initiations for AXL NSCLC and ROR2 studies, but overall timelines for study completion are unchanged[102](index=102&type=chunk) - The Company's **$0.7 million** PPP loan was fully forgiven in **July 2021**, recognized as other income[102](index=102&type=chunk)[103](index=103&type=chunk) [Financial Operations Overview](index=23&type=section&id=Financial%20Operations%20Overview) - The Company has not generated revenue from product sales and does not expect to in the near future; collaboration revenue for the nine months ended **September 30, 2021**, was **$0.3 million** from legacy service contracts[104](index=104&type=chunk)[106](index=106&type=chunk) - Research and development expenses are expected to increase substantially as the Company advances clinical programs and expands its pipeline[108](index=108&type=chunk) - General and administrative expenses are expected to increase due to operating as a public company, including compliance, legal, and intellectual property costs[110](index=110&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Key Financial Changes (Three Months Ended September 30, 2021 vs. 2020, in thousands) | Metric | 2021 | 2020 | Change | | :--------------------------------- | :---------- | :---------- | :---------- | | Collaboration revenue | $— | $150 | $(150) | | Research and development | $16,553 | $4,864 | $11,689 | | General and administrative | $7,142 | $3,301 | $3,841 | | Loss from operations | $(23,695) | $(8,015) | $(15,680) | | Consolidated net loss | $(22,930) | $(11,632) | $(11,298) | Key Financial Changes (Nine Months Ended September 30, 2021 vs. 2020, in thousands) | Metric | 2021 | 2020 | Change | | :--------------------------------- | :---------- | :---------- | :---------- | | Collaboration revenue | $250 | $429 | $(179) | | Research and development | $41,826 | $9,448 | $32,378 | | General and administrative | $31,376 | $4,625 | $26,751 | | Loss from operations | $(72,952) | $(13,644) | $(59,308) | | Consolidated net loss | $(72,012) | $(19,458) | $(52,554) | - Research and development expenses increased significantly due to manufacturing and clinical development for **BA3011** and **BA3021**, preclinical development for bispecific programs, and increased stock-based compensation[118](index=118&type=chunk)[128](index=128&type=chunk) - General and administrative expenses rose primarily due to increased stock-based compensation, insurance, and personnel-related costs, including severance benefits[119](index=119&type=chunk)[129](index=129&type=chunk) - Interest expense decreased due to the settlement of convertible debt in **July 2020** and the forgiveness of the PPP loan in **July 2021**[122](index=122&type=chunk)[131](index=131&type=chunk) - A **$0.7 million** gain on extinguishment of debt was recognized in **Q3 2021** due to PPP loan forgiveness, contrasting with a **$2.7 million** loss in **Q3 2020** from convertible promissory note settlement[124](index=124&type=chunk)[133](index=133&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) - As of **September 30, 2021**, the Company had **$269.9 million** in cash and cash equivalents, expected to fund operations into the **first half of 2024**[135](index=135&type=chunk)[139](index=139&type=chunk) - The Company will require substantial additional funding for product development and commercialization, potentially through equity offerings, debt financings, or collaborations[139](index=139&type=chunk)[140](index=140&type=chunk) Cash Flow Summary (Nine Months Ended September 30, in thousands) | Cash Flow Activity | 2021 | 2020 | | :------------------------- | :---------- | :---------- | | Operating activities | $(41,265) | $(22,328) | | Investing activities | $(835) | $(195) | | Financing activities | $73,420 | $75,576 | | Net increase in cash and cash equivalents | $31,320 | $53,053 | - Net cash used in operating activities increased to **$41.3 million** in **2021** from **$22.3 million** in **2020**, driven by higher net loss and changes in operating assets and liabilities[142](index=142&type=chunk)[143](index=143&type=chunk) - Net cash provided by financing activities was **$73.4 million** in **2021**, primarily from a **$75.0 million** private placement of common stock, offset by IPO costs[145](index=145&type=chunk) [Critical Accounting Policies and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The Company's financial statements rely on estimates and assumptions, particularly for revenue recognition, R&D accruals, equity-based compensation, and fair value measurements; no material changes to critical accounting policies were reported during the nine months ended **September 30, 2021**[146](index=146&type=chunk)[147](index=147&type=chunk) [Off-Balance Sheet Arrangements](index=32&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company has not entered into any off-balance sheet arrangements[148](index=148&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Quantitative and qualitative disclosures about market risk are not applicable to BioAtla, Inc. as a smaller reporting company - Quantitative and qualitative disclosures about market risk are not applicable to BioAtla, Inc. as a smaller reporting company[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the Company's disclosure controls and procedures as effective as of September 30, 2021, with no material changes in internal control over financial reporting - As of **September 30, 2021**, the Company's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level[149](index=149&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended **September 30, 2021**[151](index=151&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - The Company is not currently a party to any legal proceedings that, if determined adversely, would individually or in aggregate have a material adverse effect on its business, operating results, or financial condition[152](index=152&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) Outlines significant risks of investing in BioAtla, Inc., covering financial position, product development, regulatory approvals, operational challenges, and intellectual property [Risk Factor Summary](index=33&type=section&id=Risk%20Factor%20Summary) - Key risks include the Company's limited operating history, significant losses, need for substantial additional capital, potential product development failures or delays, and dependence on its patented CAB technology platform[153](index=153&type=chunk)[154](index=154&type=chunk) - Other risks involve market acceptance of novel therapeutic modalities, unpredictability of clinical trial results, competition from other cancer treatments, and challenges in obtaining and maintaining regulatory approvals[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) [Risks related to our financial position and need for additional capital](index=34&type=section&id=Risks%20related%20to%20our%20financial%20position%20and%20need%20for%20additional%20capital) - BioAtla is a clinical-stage biopharmaceutical company with no approved products and a history of significant losses, including **$72.0 million** for the nine months ended **September 30, 2021**, and an accumulated deficit of **$162.9 million**[162](index=162&type=chunk)[163](index=163&type=chunk) - The Company will require substantial additional capital beyond its current **$269.9 million** cash and cash equivalents to fund operations into the **first half of 2024**, with future funding dependent on development progress and market conditions[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) [Risks related to the discovery, development and commercialization of our product candidates](index=36&type=section&id=Risks%20related%20to%20the%20discovery%2C%20development%20and%20commercialization%20of%20our%20product%20candidates) - Product candidates, including **BA3011** and **BA3021** in **Phase 2 trials**, may fail or be delayed in development due to issues like negative preclinical/clinical results, regulatory hurdles, patient recruitment challenges, or manufacturing problems[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) - The Company's future success is heavily dependent on its patented CAB technology platform; any setbacks could detrimentally impact all product candidates[174](index=174&type=chunk)[175](index=175&type=chunk) - Undesirable side effects, such as reversible myelosuppression and transient liver enzyme elevations observed in **BA3011** and **BA3021** trials, could halt clinical development or delay regulatory approval[196](index=196&type=chunk)[197](index=197&type=chunk) - Competition from other biopharmaceutical companies developing novel treatments for cancer, including immune-based cellular therapies and ADCs, poses a significant risk to the commercial viability of BioAtla's product candidates[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk) [Risks related to regulatory approval and other legal compliance matters](index=42&type=section&id=Risks%20related%20to%20regulatory%20approval%20and%20other%20legal%20compliance%20matters) - Obtaining U.S. or foreign regulatory approval is costly, lengthy, and uncertain, with no guarantee that any product candidates will receive approval[222](index=222&type=chunk)[223](index=223&type=chunk) - The Company intends to seek accelerated approval pathways for **BA3011** and **BA3021**, but success is not guaranteed, and confirmatory studies may be required post-approval[229](index=229&type=chunk)[230](index=230&type=chunk) - Post-approval, products are subject to ongoing regulatory obligations, including potential labeling restrictions, post-marketing studies, and market withdrawal, with non-compliance leading to significant penalties[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - Healthcare legislative reforms, such as the **ACA** and drug pricing scrutiny, could adversely impact the Company's business by affecting reimbursement policies and market access[254](index=254&type=chunk)[255](index=255&type=chunk)[258](index=258&type=chunk) [Risks related to employee matters, managing our growth and other risks related to our business](index=57&type=section&id=Risks%20related%20to%20employee%20matters%2C%20managing%20our%20growth%20and%20other%20risks%20related%20to%20our%20business) - The Company's success depends on attracting and retaining qualified senior management and scientific personnel, with intense competition in the biopharmaceutical field[278](index=278&type=chunk)[279](index=279&type=chunk) - Failure to establish effective sales, marketing, and distribution capabilities, either internally or through third parties, could hinder commercialization efforts and future product revenue[280](index=280&type=chunk)[281](index=281&type=chunk) - Growth management challenges include recruiting and integrating employees, managing internal development, and improving operational controls, especially with reliance on numerous external consultants[282](index=282&type=chunk)[284](index=284&type=chunk) - Cybersecurity attacks or data breaches could disrupt operations, lead to significant liabilities, and harm the Company's reputation[285](index=285&type=chunk)[286](index=286&type=chunk) - Operations in China through BioDuro expose the Company to risks from changes in Chinese laws, political unrest, and economic instability, potentially affecting research and development activities[288](index=288&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) - Concentration of operations in San Diego, California, and reliance on BioDuro in China exposes the Company to risks from natural disasters, potentially disrupting business continuity[291](index=291&type=chunk)[292](index=292&type=chunk) - The COVID-19 pandemic continues to pose risks to preclinical and clinical trial operations, potentially delaying patient enrollment, data readouts, and regulatory filings[295](index=295&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk) [Risks related to our dependence on third parties](index=62&type=section&id=Risks%20related%20to%20our%20dependence%20on%20third%20parties) - Reliance on third-party collaborators, like BeiGene for **BA3071**, means limited control over resource allocation and potential for delays or termination of development programs[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk) - Failure of third-party CROs to perform contractually, meet regulatory requirements, or adhere to deadlines could delay development programs[309](index=309&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk) - Dependence on third-party contract manufacturers for product candidates increases the risk of insufficient supply, quality issues, or delays, potentially impacting clinical trials and commercialization[312](index=312&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk) - Manufacturing biotechnology products is complex; difficulties in production, contamination, or raw material shortages could delay or stop development and commercialization[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk) [Risks related to intellectual property](index=68&type=section&id=Risks%20related%20to%20intellectual%20property) - The Company's success depends on obtaining, maintaining, and protecting patents and other IP rights for its product candidates and technologies, which is an expensive and time-consuming process[321](index=321&type=chunk)[322](index=322&type=chunk) - Patents may not be sufficiently broad, could be challenged, or found invalid/unenforceable, and competitors may design around them[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk) - Failure to protect trade secrets and confidential know-how could harm the Company's competitive position, as enforcement is difficult and costly[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk) - The limited lifespan of patents (generally **20 years**) means protection for product candidates might expire before or shortly after commercialization, leading to increased competition[333](index=333&type=chunk) - Changes in U.S. patent law (e.g., Leahy-Smith Act) and interpretations could increase uncertainties and costs in patent prosecution and enforcement[335](index=335&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk) - Third-party intellectual property rights could prevent or delay drug discovery and commercialization, potentially requiring costly litigation or licenses on unfavorable terms[344](index=344&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk) - Failure to comply with obligations under license or collaboration agreements could lead to damages or loss of essential intellectual property rights[362](index=362&type=chunk)[363](index=363&type=chunk) - Protecting intellectual property rights globally is challenging due to varying laws and enforcement difficulties in certain countries, potentially diminishing the value of these rights[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk) [Risks related to our common stock](index=79&type=section&id=Risks%20related%20to%20our%20common%20stock) - The Company's operating results are subject to significant fluctuations, and failure to meet investor or analyst expectations could cause stock price volatility[371](index=371&type=chunk)[372](index=372&type=chunk) - Future issuances of equity or convertible debt will dilute existing shareholders' ownership and may adversely affect the stock price[375](index=375&type=chunk) - The dual-class common stock structure (voting common, non-voting Class B convertible) may limit common stockholders' influence on corporate matters[376](index=376&type=chunk)[377](index=377&type=chunk) - Principal stockholders and management own a significant percentage (**46.8%** as of **Sep 30, 2021**) of outstanding common stock, allowing them to exert significant control over corporate actions[380](index=380&type=chunk)[381](index=381&type=chunk) - The Company will cease to be an 'emerging growth company' and 'smaller reporting company' as of **December 31, 2021**, leading to increased compliance costs and disclosure requirements[384](index=384&type=chunk)[385](index=385&type=chunk)[387](index=387&type=chunk) - Anti-takeover provisions in charter documents and Delaware law could make acquisitions more difficult and prevent changes in management[388](index=388&type=chunk)[389](index=389&type=chunk)[390](index=390&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=86&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity sales were reported; **$3.4 million** of **$198.3 million** IPO net proceeds used by September 30, 2021, with no material change in planned use - No unregistered sales of equity securities were reported[402](index=402&type=chunk) - As of **September 30, 2021**, **$3.4 million** of the **$198.3 million** net proceeds from the **December 2020 IPO** had been used, consistent with the planned use of proceeds[402](index=402&type=chunk)[403](index=403&type=chunk) [Item 3. Defaults Upon Senior Securities](index=86&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[404](index=404&type=chunk) [Item 4. Mine Safety Disclosures](index=86&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[404](index=404&type=chunk) [Item 5. Other Information](index=86&type=section&id=Item%205.%20Other%20Information) The Company reported no other information - No other information was reported[404](index=404&type=chunk) [Item 6. Exhibits](index=87&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL financial data - Exhibits include the Form of Stock Purchase Agreement, Non-Employee Director Stock Option Agreement, Employee Stock Option Agreement, CEO and CFO certifications (**302** and **906**), and Inline XBRL financial data[405](index=405&type=chunk)[406](index=406&type=chunk)