BioAtla(BCAB) - 2022 Q3 - Quarterly Report

Cover Page and Filing Information This section provides the initial filing details for the Form 10-Q quarterly report, including company identification and filing status Filing Details This document is a Form 10-Q quarterly report filed by BIOATLA, INC. for the period ended September 30, 2022, classified as a large accelerated filer - The filing is a Quarterly Report on Form 10-Q for the period ended September 30, 2022[2] - BIOATLA, INC. is a Delaware corporation with its principal executive offices in San Diego, California[3] - The registrant is classified as a large accelerated filer[4] Table of Contents This section provides an organized listing of all chapters and items included in the quarterly report for easy navigation PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including the Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows, along with their accompanying notes Condensed Consolidated Balance Sheets (in thousands) | Metric | September 30, 2022 (unaudited) | December 31, 2021 | |:---|:---|:---| | Total Assets | $189,112 | $254,422 | | Total Liabilities | $46,478 | $43,601 | | Total Stockholders' Equity | $142,634 | $210,821 | Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Collaboration and other revenue | $— | $— | $— | $250 | | Total operating expenses | $26,179 | $23,695 | $79,580 | $73,202 | | Consolidated net loss and comprehensive loss | $(25,779) | $(22,930) | $(78,939) | $(72,012) | | Net loss per common share, basic and diluted | $(0.69) | $(0.68) | $(2.11) | $(2.13) | Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|\ | Net cash used in operating activities | $(66,073) | $(41,265) | | Net cash used in investing activities | $(234) | $(835) | | Net cash provided by (used in) financing activities | $(552) | $73,420 | | Net increase (decrease) in cash and cash equivalents | $(66,859) | $31,320 | | Cash and cash equivalents, end of period | $178,120 | $269,925 | Note 1. Organization and Summary of Significant Accounting Policies This note describes BioAtla, Inc. as a clinical-stage biopharmaceutical company developing conditionally active biologics (CABs) for solid tumor cancer, and summarizes its significant accounting policies - BioAtla, Inc. is a clinical-stage biopharmaceutical company focused on developing conditionally active biologics (CABs) for solid tumor cancer, designed to be active only in diseased tissue[22] - The company has incurred cumulative operating losses and negative cash flows since inception, with an accumulated deficit of $265.3 million as of September 30, 2022[24] - Management believes current cash and cash equivalents are sufficient to fund operations for at least one year from the issuance date of the financial statements[25] Potentially Dilutive Securities (in common stock equivalents) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|\ | Common stock warrants | — | 717,674 | | Common stock options | 2,718,930 | 960,402 | | Restricted stock units | 629,007 | 1,592,796 | | ESPP shares | 115,783 | 4,109 | | Total | 3,463,720 | 3,274,981 | Note 2. Balance Sheet Details This note provides detailed breakdowns of specific balance sheet accounts, including prepaid expenses, property and equipment, and accounts payable and accrued expenses Prepaid Expenses and Other Current Assets (in thousands) | Metric | September 30, 2022 | December 31, 2021 | |:---|:---|:---|\ | Prepaid research and development | $3,978 | $1,811 | | Prepaid insurance | $692 | $— | | Other prepaid expenses and current assets | $519 | $502 | | Total | $5,189 | $2,313 | Property and Equipment, Net (in thousands) | Metric | September 30, 2022 | December 31, 2021 | |:---|:---|:---|\ | Total (gross) | $8,144 | $7,933 | | Less accumulated depreciation and amortization | $(5,142) | $(4,257) | | Total | $3,002 | $3,676 | Accounts Payable and Accrued Expenses (in thousands) | Metric | September 30, 2022 | December 31, 2021 | |:---|:---|:---|\ | Accounts payable | $3,696 | $1,179 | | Accrued compensation | $2,979 | $2,671 | | Accrued research and development | $14,713 | $13,501 | | Other accrued expenses | $939 | $1,073 | | Total | $22,327 | $18,424 | Note 3. Fair Value Measurements This note explains the company's approach to fair value measurements, noting that current financial assets and liabilities are representative of their fair values - The company's current financial assets and liabilities are considered to be representative of their fair values due to their short-term nature[40] - As of September 30, 2022, and December 31, 2021, the company had no financial assets or liabilities measured at fair value on a recurring basis[40] Note 4. Debt This note confirms the company had no outstanding debt as of September 30, 2022, and details the forgiveness of a prior PPP loan - The company had no outstanding debt as of September 30, 2022, or December 31, 2021[42] - A $0.7 million Paycheck Protection Program (PPP) loan borrowed in April 2020 was fully forgiven in July 2021, recognized as other income[42] Note 5. Leases This note outlines the company's operating lease for its corporate headquarters and laboratory space, including lease expenses and future minimum lease payments - The company has a single operating lease for its corporate headquarters and laboratory space in San Diego, California, expiring in July 2025[43] Lease Expense (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Operating lease expense | $261 | $261 | $782 | $782 | | Variable lease expense | $132 | $128 | $328 | $384 | | Total lease expense, net | $393 | $389 | $1,110 | $1,166 | Future Minimum Lease Payments (in thousands) | Period | Operating lease | |:---|:---|\ | Three months ending December 31, 2022 | $401 | | 2023 | $1,636 | | 2024 | $1,685 | | 2025 | $845 | | Total future lease payments | $4,567 | | Less: imputed interest | $(222) | | Total operating lease liabilities | $4,345 | Note 6. Commitments and Contingencies This note states that the company is not currently a party to any legal proceedings that would have a material adverse effect on its business or financial condition - The company is not currently a party to any legal proceedings that would have a material adverse effect on its business, operating results, or financial condition[50] Note 7. Stockholders' Equity This note details stock-based compensation expenses, unrecognized compensation costs, ESPP share issuances, and the expiration of common stock warrants Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | |:---|:---|:---|:---|:---|\ | Research and development | $1,427 | $1,267 | $4,125 | $3,376 | | General and administrative | $2,161 | $3,099 | $6,937 | $17,931 | | Total | $3,588 | $4,366 | $11,062 | $21,307 | - Total unrecognized stock-based compensation expense for RSUs was $11.3 million as of September 30, 2022, expected to be recognized over approximately 1.5 years[57] - Total unrecognized stock-based compensation cost for unvested common stock options was $16.4 million as of September 30, 2022, expected to be recognized over approximately 3.1 years[59] - The company issued 9,482 common shares under the ESPP during the nine months ended September 30, 2022, compared to 5,280 shares in the prior year[64] - All common stock warrants expired unexercised by March 2022, with no remaining warrants outstanding[65] Note 8. Collaboration, License and Option Agreements This note describes the termination of the BeiGene Collaboration, the company regaining rights to BA3071, and the new clinical trial collaboration with Bristol-Myers Squibb Company - The BeiGene Collaboration for BA3071 was terminated in November 2021, with BioAtla regaining global development and commercialization rights and agreeing to pay BeiGene mid-single digit royalties on future sales[67] - The company did not recognize any revenue from collaboration agreements or legacy service contracts for the three or nine months ended September 30, 2022[69][70] - In January 2022, BioAtla entered into a Master Clinical Trial Collaboration Agreement with Bristol-Myers Squibb Company (BMS) to investigate CAB-ADC candidates (mecbotamab vedotin and ozuriftamab vedotin) in combination with Opdivo[71] Note 9. Related Party Transactions This note discloses a Clinical Trial Agreement with Himalaya Therapeutics SEZC, a related party, for BA3011 clinical trials in China - In April 2022, the company entered into a Clinical Trial Agreement with Himalaya Therapeutics SEZC, a related party, for services related to BA3011 clinical trials in China, recognizing $0.1 million in R&D expense for the three and nine months ended September 30, 2022[74] Note 10. 401(k) Plan This note confirms the company maintains a 401(k) plan for eligible employees but has not made any matching contributions - The company maintains a 401(k) plan for eligible employees but had not made any matching contributions as of September 30, 2022, and December 31, 2021[75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the company's financial condition and results of operations, highlighting significant losses, increased R&D expenses, and liquidity - The company is a clinical-stage biopharmaceutical company developing novel conditionally active biologics (CABs) for solid tumor cancer, designed to selectively bind to targets in acidic tumor microenvironments[77] - Net losses were $25.8 million and $78.9 million for the three and nine months ended September 30, 2022, respectively, compared to $22.9 million and $72.0 million for the same periods in 2021[78] - As of September 30, 2022, cash and cash equivalents totaled approximately $178.1 million, expected to fund operations into the second half of 2024[82] Overview This section provides a strategic overview of the company's conditionally active biologics (CABs) development for solid tumor cancer and anticipated increases in expenses - The company's CABs are designed to be active only under acidic conditions found in diseased tissue, remaining inactive in normal tissue, aiming to reduce on-target, off-tumor toxicity[77] - Current clinical development includes two lead CAB antibody drug conjugates (ADCs) targeting AXL and ROR2 receptors, and a CAB immune-oncology antibody targeting CTLA-4[22][77] - The company expects expenses and capital requirements to increase substantially as it advances clinical development of mecbotamab vedotin, ozuriftamab vedotin, and BA3071, expands its pipeline, and invests in its CAB technology platform[79] Impact of COVID-19 on Our Business This section discusses the modest business disruptions caused by the COVID-19 pandemic, including some delays in Phase 2 interim analyses - The COVID-19 pandemic has caused modest business disruptions, including some delays in Phase 2 interim analyses for mecbotamab vedotin NSCLC and ozuriftamab vedotin studies[83] - The mecbotamab vedotin Phase 2 sarcoma trial remains on schedule[83] Financial Operations Overview This section outlines the company's financial operational expectations, including no product sales revenue to date and anticipated increases in R&D and G&A expenses - The company has not generated any revenue from product sales to date and does not expect to generate meaningful revenue in the near future[84] - Research and development expenses are expected to generally increase as the company invests in advancing product candidates and clinical programs[90] - General and administrative expenses are expected to increase in the future due to increased personnel headcount to support R&D activities[91] Results of Operations This section analyzes the company's financial performance, detailing changes in research and development expenses, general and administrative expenses, and interest income Research and Development Expenses by CAB Program (in thousands) | Program | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change | |:---|:---|:---|:---|\ | BA3011 (AXL-ADC) | $4,227 | $3,851 | $376 | | BA3021 (ROR2-ADC) | $2,807 | $2,982 | $(175) | | Other CAB Programs | $7,775 | $5,675 | $2,100 | | Total external expenses | $14,809 | $12,508 | $2,301 | | Personnel and related | $2,788 | $2,014 | $774 | | Equity-based compensation | $1,427 | $1,267 | $160 | | Facilities and other | $815 | $764 | $51 | | Total R&D expenses | $19,839 | $16,553 | $3,286 | - General and administrative expenses decreased by $0.8 million for the three months ended September 30, 2022, primarily due to a $0.9 million decrease in stock-based compensation[97] - Interest income increased by $294,000 for the three months ended September 30, 2022, due to higher yields[98] Research and Development Expenses by CAB Program (Nine Months, in thousands) | Program | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change | |:---|:---|:---|:---|\ | BA3011 (AXL-ADC) | $12,505 | $13,633 | $(1,128) | | BA3021 (ROR2-ADC) | $6,839 | $8,365 | $(1,526) | | Other CAB Programs | $23,732 | $9,485 | $14,247 | | Total external expenses | $43,076 | $31,483 | $11,593 | | Personnel and related | $7,992 | $4,907 | $3,085 | | Equity-based compensation | $4,125 | $3,376 | $749 | | Facilities and other | $2,280 | $2,060 | $220 | | Total R&D expenses | $57,473 | $41,826 | $15,647 | - General and administrative expenses decreased by $9.3 million for the nine months ended September 30, 2022, primarily due to an $11.0 million decrease in stock-based compensation[102] Liquidity and Capital Resources This section assesses the company's financial liquidity and capital resources, including cash and cash equivalents, future funding requirements, and cash flow activities - The company had $178.1 million in cash and cash equivalents as of September 30, 2022, which is expected to fund operations into the second half of 2024[104][107] - Future funding requirements are substantial and depend on the pace of preclinical studies, clinical trials, manufacturing costs, and regulatory approvals[106] - Net cash used in operating activities was $66.1 million for the nine months ended September 30, 2022, compared to $41.3 million in the prior year[111] - Net cash used in financing activities was $0.6 million for the nine months ended September 30, 2022, primarily for taxes related to equity awards, a significant decrease from $73.4 million provided in the prior year from common stock issuance[113] Critical Accounting Policies and Estimates This section highlights the significant estimates and assumptions required for financial statement preparation, particularly for revenue recognition, R&D accruals, and equity-based compensation - The preparation of financial statements requires significant estimates and assumptions, particularly for revenue recognition, R&D cost accruals, and equity-based compensation[114][115] - There have been no material changes to critical accounting policies during the nine months ended September 30, 2022[116] Off-Balance Sheet Arrangements This section confirms that the company has not entered into any off-balance sheet arrangements - The company has not entered into any off-balance sheet arrangements[117] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily interest rate risk and foreign currency exchange risk, which are deemed immaterial - The company is exposed to interest rate risk from its cash and cash equivalents, which include bank deposits and money market funds[118] - Historical fluctuations of interest income have not been significant, and the company does not use derivative financial instruments to manage interest rate exposure[118] - Foreign currency transaction gains and losses have not been material, and the company has not engaged in foreign currency hedging[119] Item 4. Controls and Procedures Management evaluated the effectiveness of the company's disclosure controls and procedures as of September 30, 2022, concluding they were effective with no material changes - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022[120] - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended September 30, 2022[121] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, defaults, and other disclosures pertinent to the company's operations and financial standing Item 1. Legal Proceedings The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business, operating results, or financial condition - The company is not a party to any legal proceedings whose outcome would individually or in the aggregate have a material adverse effect on its business, operating results, or financial condition[122] Item 1A. Risk Factors This section outlines significant risks associated with investing in the company's common stock, covering financial position, product development, regulatory approval, dependence on third parties, intellectual property, and common stock specific risks - The company is a clinical-stage biopharmaceutical company with a limited operating history and no approved products, expecting significant losses for the foreseeable future[125] - Substantial additional capital will be required to finance operations, and failure to raise it could delay or eliminate research and development programs[129] - Product candidates may fail in development or suffer delays, and the company is substantially dependent on the success of its patented CAB technology platform[123][136][137] Risk Factor Summary This section provides a concise overview of the high degree of risk involved in investing in the company's common stock, including financial, development, and operational challenges - Investing in the company's common stock involves a high degree of risk, requiring careful consideration of all information in the report[123] - Key risks include the company's limited operating history, significant losses, need for substantial additional capital, potential failure or delays in product development, and dependence on its CAB technology platform[123] Risks related to our financial position and need for additional capital This section details risks associated with the company's significant accumulated losses, substantial future funding requirements, and potential delays if capital is not secured - The company has incurred significant losses since inception, with an accumulated deficit of $265.3 million as of September 30, 2022, and expects to continue incurring losses[126] - Substantial additional funding will be required to continue operations, as existing cash and cash equivalents are expected to fund operations only into the second half of 2024[129][130] - Failure to obtain timely funding on acceptable terms could lead to delays, reductions, or termination of research and development programs[132] Risks related to the discovery, development and commercialization of our product candidates This section outlines risks concerning product candidate failure or delays at any development stage, dependence on the CAB technology platform, and intense competition - Product candidates may fail at any stage of development or suffer delays due to issues like negative preclinical/clinical results, product-related side effects, or regulatory hurdles[134][135] - The company's future success heavily depends on its patented CAB technology platform, and any setbacks could detrimentally impact all product candidates[137] - Undesirable side effects observed in clinical trials (e.g., myelosuppression, liver enzyme elevations, pyrexia, peripheral neuropathy for mecbotamab vedotin and ozuriftamab vedotin) could halt development or delay approval[154][155] - The company faces intense competition from biopharmaceutical companies developing novel treatments and technology platforms for cancer, many with greater resources[165][168] Risks related to regulatory approval and other legal compliance matters This section addresses challenges in obtaining U.S. or foreign regulatory approval, the need for companion diagnostics, impacts of healthcare reforms, and compliance with fraud and abuse laws - The company may be unable to obtain U.S. or foreign regulatory approval for its product candidates, which is a costly, lengthy, and uncertain process[174] - If companion diagnostic tests are essential for product use, their approval or clearance is generally required simultaneously with product approval, and delays could impair commercial potential[164] - The company intends to seek accelerated approval pathways, but there is no assurance of success, and confirmatory trials are required post-approval[180][181] - Healthcare legislative reforms, such as the Inflation Reduction Act (IRA), could negatively impact drug pricing, reimbursement, and market acceptance of products[201] - Relationships with healthcare professionals and third-party payors are subject to federal and state healthcare fraud and abuse laws, false claims laws, and privacy laws, non-compliance with which could lead to significant penalties[203][205][206] Risks related to employee matters, managing our growth and other risks related to our business This section covers risks related to attracting and retaining key personnel, building sales capabilities, managing growth, geographic concentration, and the ongoing impact of the COVID-19 pandemic - The company's success depends on attracting and retaining qualified senior management and key scientific personnel, with intense competition in the biopharmaceutical field[214][215] - The company lacks a sales organization and must build or partner for marketing, sales, and distribution capabilities, which is expensive and time-consuming[216] - Growth will require additional personnel and effective management of outsourced activities, posing challenges to operational, financial, and management controls[218][221] - The company's operations are concentrated in San Diego, California, and research activities in China, making it vulnerable to natural disasters, political unrest, and changes in international relations[229][230] - The COVID-19 pandemic continues to pose risks to preclinical and clinical trial operations, potentially causing delays in patient enrollment, data readouts, and regulatory filings[234] Risks related to our dependence on third parties This section highlights risks stemming from reliance on third-party collaborators, investigators, CROs, and manufacturers for development, clinical trials, and product supply - The company relies on third-party collaborators for development and commercialization, with limited control over their resource allocation and potential for delays or termination of programs[235][237] - Reliance on third-party investigators, CROs, and manufacturers for preclinical and clinical trials increases risks related to timing, quality, and regulatory compliance[243] - Dependence on third-party contract manufacturers for product supplies and raw materials increases the risk of insufficient quantities, unacceptable costs, or supply disruptions[244][245] Risks related to intellectual property This section details risks associated with obtaining and protecting patent and intellectual property rights, trade secret protection, patent lifespan, and potential third-party infringement claims - The company's success depends on obtaining, maintaining, and protecting patent and other intellectual property rights, which is expensive, time-consuming, and uncertain[252] - Failure to protect trade secrets and confidential know-how could harm the company's business and competitive position[258][259] - The limited lifespan of patents (generally 20 years) means protection may expire before or shortly after product commercialization, opening the door to competition[260] - Changes in U.S. patent law (e.g., Leahy-Smith Act) and interpretations of patent laws could diminish the value of patents and increase prosecution/defense costs[263][267] - Third-party intellectual property rights could prevent or delay drug discovery and commercialization, potentially requiring costly litigation or licenses[272] Risks related to our common stock This section discusses risks concerning stock price volatility, dilution from future equity issuances, significant control by principal stockholders, anti-takeover provisions, and public company compliance costs - Operating results are expected to fluctuate significantly, and falling below investor/analyst expectations could cause stock price decline[294][296] - The stock price may be volatile due to various factors, including clinical trial results, regulatory developments, competition, and market conditions[298][299][300] - Future issuance of equity or convertible debt securities will dilute existing share capital and could adversely affect the trading price[301] - Principal stockholders and management own a significant percentage (42.6% as of Sep 30, 2022) of common stock, allowing them to exert significant control over corporate matters[304][305] - Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult and prevent attempts to replace management[309][311] - The company incurs significant costs as a public company and must maintain effective internal controls; failure to do so could impair financial reporting and lead to sanctions[314][318] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities and details the use of proceeds from the company's IPO, consistent with the planned use - There were no unregistered sales of equity securities during the period[325] - The company received gross proceeds of $217.4 million from its IPO on December 18, 2020[326] - As of September 30, 2022, approximately $91.2 million of the IPO proceeds have been used, with no material change from the planned use[326] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[327] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[327] Item 5. Other Information The company reported no other information - No other information was reported[327] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including management plans, collaboration agreements, certifications, and XBRL documents - Exhibits include the Management Change of Control Severance Plan, Master Clinical Trial Collaboration Agreement with Bristol-Myers Squibb Company, and various certifications (CEO, CFO)[330][331][332][333][334] - The filing also includes Inline XBRL Instance Document and Cover Page Interactive Data File[335][336][337] SIGNATURES This section contains the official signatures of the company's Chief Executive Officer and Chief Financial Officer, certifying the report's contents Signatures The report is signed by Jay M. Short, Ph.D., Chief Executive Officer, and Richard A. Waldron, Chief Financial Officer, on November 4, 2022 - The report was signed by Jay M. Short, Ph.D., Chief Executive Officer, and Richard A. Waldron, Chief Financial Officer[341] - The signing date for the report was November 4, 2022[341]