Belite Bio(BLTE) - 2022 Q4 - Annual Report

PART I This section covers the company's key risks, business overview, financial performance, and corporate governance Item 3. Key Information This section outlines the principal risks associated with the company's business, financials, regulatory environment, intellectual property, and operations as a clinical-stage biopharmaceutical company Summary of Risk Factors The company's primary risks revolve around its high dependence on the success of its lead product candidate, Tinlarebant, a history of net cash outflow, and reliance on licensed intellectual property - The business is highly dependent on the success of its lead product candidate, Tinlarebant. Failure to develop, obtain approval for, or commercialize it would harm the business[24][67] - The company has a history of net cash outflow and will require additional financing to fund operations and complete the development and commercialization of its product candidates[24][158] - The company relies on intellectual property licensed from third parties, and failure to comply with license obligations could result in the loss of significant rights[26][677] - The company relies on third parties for conducting preclinical studies, clinical trials, and manufacturing; any failure by these third parties could substantially harm the business[48] Risks Related to the Discovery, Development and Commercialization of Our Product Candidates This section details the risks inherent in the drug development process, including lengthy and uncertain clinical trials, patient enrollment challenges, reliance on third-party manufacturing, and intense competition - The company's business is highly dependent on the success of its lead product candidate, Tinlarebant (LBS-008); failure to obtain marketing approval or successfully commercialize it would be detrimental[51][67] - Clinical development is a lengthy and expensive process with an uncertain outcome, with all product candidates still in development and no guarantee of success at any stage[57][74][128] - Difficulties in enrolling and retaining a sufficient number of eligible patients for clinical trials could lead to significant delays, increased costs, or trial abandonment[63][81] - The company is entirely dependent on third-party contractors for manufacturing its product candidates and lacks its own cGMP manufacturing capabilities, posing risks of delays and supply issues[108][129] - The company faces substantial competition from major pharmaceutical companies with greater resources, which may develop more effective or less costly products or achieve market penetration earlier[10][116][137] - Preliminary or "top-line" data from clinical trials may change as more data becomes available and is subject to audit and verification, which could result in material changes in the final data[11][143] Risks Related to Our Financial Position and Need for Additional Capital The company has a history of net losses and negative cash flow, requiring substantial additional funding for R&D and potential commercialization, with risks of dilution for existing shareholders - The company has incurred net losses since inception and expects to continue incurring significant losses, with net losses of US$5.8 million, US$9.7 million, and US$12.6 million for the years ended Dec 31, 2020, 2021, and 2022, respectively[549][590] Net Cash Used in Operating Activities | Year Ended Dec 31 | Net Cash Used (US$ millions) | | :--- | :--- | | 2020 | 4.4 | | 2021 | 7.5 | | 2022 | 11.5 | - The company will need to obtain substantial additional funding to continue operations, as existing cash is not sufficient to fund all planned efforts, and failure to raise capital could force delays or elimination of R&D programs[13][158][159] - The company's ability to use its net operating loss (NOL) carryforwards may be limited by tax rules regarding ownership changes, with U.S. NOL carryforwards of approximately US$6.7 million as of Dec 31, 2022[571][594] Risks Related to Regulatory Approval and Marketing of Our Product Candidates and Other Legal Compliance Matters This section highlights the significant risks associated with the heavily regulated pharmaceutical industry, including uncertain and costly approval processes, varying international requirements, and critical post-approval compliance - The regulatory approval processes of the FDA, TGA, NMPA, and EMA are time-consuming, may evolve, and are inherently uncertain, with failure to obtain approval substantially harming the business[574][597] - All aspects of pharmaceutical product research, development, manufacturing, and commercialization are heavily regulated, and failure to comply can result in administrative or judicial sanctions[578][579] - Obtaining regulatory approval in one jurisdiction does not guarantee approval in others, and clinical data from foreign trials may not be accepted by the FDA, potentially requiring additional costly trials[603][604][629] - Even if orphan drug designation is obtained, it may not effectively protect the product from competition, as different drugs can be approved for the same condition or a competitor's drug could be deemed clinically superior[583][585] - The company received Fast Track designation for Tinlarebant for STGD1, but this does not guarantee a faster development or review process, nor does it ensure marketing approval[607][632] Risks Related to Our Intellectual Property The company's success is highly dependent on its ability to obtain, maintain, and enforce its intellectual property rights, facing risks from patent uncertainty, reliance on licensed IP, and costly infringement litigation - The company's ability to protect its proprietary technology and product candidates via patents is uncertain and critical to its success, as failure could allow third parties to develop similar products and compete directly[620][644] - The company is heavily dependent on intellectual property licensed from Columbia University, and failure to comply with obligations under this license agreement could result in losing significant rights essential to the business[626][647][677] - Changes in U.S. patent law, such as the America Invents Act, have created uncertainty and could increase the costs and challenges of prosecuting patent applications and defending patents[163][660][690] - The company may face costly litigation or require substantial resources to resolve claims that its product candidates infringe on the intellectual property rights of third parties[168][699][729] - Intellectual property protection in China is weaker than in the U.S., with uncertainties around patent term extension and data exclusivity, increasing the risk of early generic competition[660][688] Risks Related to Our Industry, Business and Operations This section covers operational risks including internal control weaknesses, dependence on key personnel, business disruptions, cybersecurity threats, complex data privacy laws, and significant risks related to operations in China - A material weakness in internal control over financial reporting was identified for the year ended December 31, 2021, related to a lack of formal risk assessment policies and an internal control framework[170][708][736] - The company's future success is highly dependent on its ability to attract, retain, and motivate senior management and qualified scientific employees in a competitive environment[709][711][737] - Business disruptions, such as the COVID-19 pandemic, could harm future revenue, increase costs, and delay clinical trials by affecting patient recruitment and supply chains[758][759][760] - The company faces risks from changes in the political and economic policies of the Chinese government, which has significant oversight over business conduct and may intervene in operations[770][797][801] - Compliance with evolving and complex data privacy laws in the U.S. (HIPAA, CCPA), Europe (GDPR), and China (Cyber Security Law) is costly and poses risks of significant penalties for non-compliance[753][755][822] Risks Related to Our Reliance on Third Parties The company heavily relies on third-party CROs and CMOs for preclinical studies, clinical trials, and manufacturing, creating risks related to quality, timeliness, compliance, and potential delays or increased costs - The company relies on third-party CROs to conduct preclinical studies and clinical trials; failure to perform or meet deadlines could extend, delay, or terminate clinical trials[830][832] - The company and its CROs must comply with cGCP and cGLP regulations, as non-compliance could result in clinical data being deemed unreliable, requiring repeated trials and delaying approval[834][835] - The company relies on third-party suppliers for drug raw materials; any interruption in supply or significant cost increase could materially harm the business[160][810] - The company plans to seek strategic collaborations for development and commercialization but faces significant competition in finding suitable partners, which may force alteration of plans[161][224][861] Risks Related to Our ADSs This section details risks for investors in the company's American Depositary Shares (ADSs), including market price volatility, exemptions as a foreign private issuer, controlled company status, lack of dividends, and potential PFIC classification - The market price of the company's ADSs may be volatile due to factors such as clinical trial results, regulatory announcements, and general market fluctuations for biotechnology companies[176][849][850] - As a foreign private issuer, the company is exempt from certain SEC reporting and governance rules applicable to U.S. domestic companies, potentially resulting in less extensive and timely information for investors[191][218] - The company is a "controlled company" under Nasdaq rules because its principal shareholder holds over 50% of the voting power, exempting it from certain corporate governance requirements[194][921] - The company does not expect to pay cash dividends in the foreseeable future, so investors must rely on ADS price appreciation for a return on investment[197][922] - There is a risk the company could be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. investors[198][923] - The Holding Foreign Companies Accountable Act (HFCAA) could lead to delisting if the PCAOB is unable to inspect the company's auditor for consecutive years, though the PCAOB currently has access to inspect firms in China and Hong Kong[193][325][377] Item 4. Information On the Company This section provides a comprehensive overview of Belite Bio, including its history, corporate structure, business operations, lead product candidate Tinlarebant, and regulatory frameworks A. History and Development of the Company Belite Bio, Inc was incorporated in the Cayman Islands in March 2018 as part of a reorganization by its ultimate controlling shareholder, and listed its ADSs on Nasdaq in April 2022 - Belite Bio, Inc was incorporated in the Cayman Islands on March 27, 2018, as part of a reorganization by its ultimate controlling shareholder, Lin BioScience, Inc[905][928] - The company listed its American Depositary Shares (ADSs) on the Nasdaq Capital Market under the symbol "BLTE" in April 2022[932] B. Business Overview Belite Bio is a clinical-stage biopharmaceutical company focused on developing novel therapeutics for untreatable eye diseases, with its lead candidate Tinlarebant in Phase 3 trials for STGD1 and GA - The company's lead product candidate is Tinlarebant (LBS-008), an oral, once-a-day tablet for Stargardt disease (STGD1) and Geographic Atrophy (GA)[279][935] - A Phase 3 clinical trial named "DRAGON" for adolescent STGD1 patients is ongoing in multiple countries, including the U.S., U.K., Germany, China, and Australia[235][295][333] - A Phase 3 clinical trial named "PHOENIX" for GA has been initiated, with the first patient expected to be enrolled around mid-2023[273][302][938] - Tinlarebant has received Orphan Drug Designation in the U.S. and Europe, and Fast Track and Rare Pediatric Disease designations in the U.S. for the treatment of STGD1[237][258][939] - The pipeline includes LBS-009, a preclinical oral therapy targeting metabolic diseases such as NAFLD, NASH, and Type 2 Diabetes[232][305] Item 5. Operating And Financial Review and Prospects This section analyzes the company's financial condition and results of operations, highlighting its lack of revenue, significant net losses, and reliance on equity financing for increasing R&D expenses A. Operating Results The company has not generated any revenue and incurred significant net operating losses, primarily driven by increased research and development and general and administrative expenses in 2022 - The company has not generated any revenue to date and has financed operations primarily through equity offerings, including its IPO[1285][1299][1337] Consolidated Results of Operations (in thousands of US$) | | For the Year Ended December 31, | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | | 2021 | 2022 | ($) | (%) | | Research and development | 7,419 | 8,869 | 1,450 | 19.5 | | General and administrative | 2,378 | 3,952 | 1,574 | 66.2 | | Total operating expenses | 9,797 | 12,821 | 3,024 | 30.9 | | Loss from operations | (9,797) | (12,821) | (3,024) | 30.9 | | Net loss | (9,666) | (12,648) | (2,982) | 30.9 | - Research and development expenses increased by 19.5% to US$8.9 million in 2022, primarily due to an increase in wages, salaries, and share-based compensation from R&D team expansion[1342][1391] - General and administrative expenses increased by 66.2% to US$4.0 million in 2022, mainly due to higher professional service fees, D&O insurance expenses, and wages and salaries after becoming a public company[1343][1361] B. Liquidity and Capital Resources As of December 31, 2022, the company had cash of approximately US$42.1 million, primarily from its 2022 IPO, and anticipates needing substantial additional funding for ongoing clinical trials Cash Flow Summary (in thousands of US$) | | 2021 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | (7,474) | (11,458) | | Net cash used in investing activities | (56) | (394) | | Net cash (used in) provided by financing activities | (583) | 36,963 | | Cash at end of the year | 17,344 | 42,089 | - As of December 31, 2022, the company had cash of approximately US$42.1 million[1397] - Net cash provided by financing activities was US$37.0 million in 2022, primarily from the proceeds of its initial public offering[1408] - The company expects expenses to increase substantially and will require additional funding to continue its clinical development programs, with future financing potentially from equity offerings, debt, or collaborations[1399][1403] Item 6. Directors, Senior Management and Employees This section provides information on the company's leadership, including directors and senior management, their compensation, share incentive plans, employee count, and principal shareholder ownership - The Board of Directors consists of seven members, including three independent directors: John M. Longo, Ita Lu, and Gary C. Biddle[1465][1618] - For the fiscal year ended December 31, 2022, the company paid an aggregate of approximately US$1.3 million in cash to its executive officers and US$58,000 to its independent directors[1481] - The company has two main share incentive plans: the 2020 Share Incentive Plan and the 2022 Performance Incentive Plan, under which options have been granted to directors, officers, and employees[1487][1531][1540] - As of December 31, 2022, the company had 16 employees, with 9 (57%) in Research and Development[1084][1631] - As of the latest practicable date, the principal shareholder, Lin Bioscience International Ltd., beneficially owned approximately 65.94% of the company's outstanding ordinary shares[1088] Item 8. Financial Information This section confirms the inclusion of consolidated financial statements, absence of material legal proceedings, and the company's policy of not paying dividends in the foreseeable future - The company's consolidated financial statements are included as part of the annual report[971] - The company is not currently involved in any legal proceedings that could have a material adverse impact on its business[972] - The company has no plan to declare or pay any dividends in the near future and intends to retain all available funds for business operations and expansion[973] Item 11. Quantitative And Qualitative Disclosures About Market Risk The company is exposed to market risks, primarily interest rate, credit, and foreign currency exchange rate risks, with credit risk concentrated in cash deposits at financial institutions - The company's primary market risks are interest rate, credit, and foreign currency exchange rate risk[1195] - Credit risk is mainly from cash deposits; a substantial majority of cash was held at Silicon Valley Bank (SVB) as of December 31, 2022, but funds were subsequently transferred without loss after SVB's closure in March 2023[1242][1598] - Foreign currency exchange rate risk exists due to global contracts with CROs and CMOs, with transactions denominated in currencies other than the U.S. dollar[1243] PART II This section details the use of IPO proceeds, internal controls, and corporate governance practices Item 14. Material Modifications to The Rights of Security Holders and Use of Proceeds This section addresses the use of proceeds from the company's initial public offering completed in April 2022, totaling US$38.0 million, none of which had been used as of December 31, 2022 - The company completed its initial public offering in April 2022 and an over-allotment option exercise in May 2022, receiving total net proceeds of approximately US$38.0 million[1301] - As of December 31, 2022, none of the IPO proceeds have been used, and the company still intends to use the proceeds as disclosed in its registration statements[1265][1303] Item 15. Controls And Procedures Management concluded the company's disclosure controls were effective as of December 31, 2022, after remediating a prior material weakness in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[1266][1305] - A material weakness in internal control over financial reporting identified for the year ended Dec 31, 2021, related to a lack of formal risk assessment processes and internal control framework[1307] - In 2022, the company implemented remediation measures, including appointing independent directors, establishing an audit committee, and formulating new internal control policies to address the material weakness[1308][1310][1311] - As an emerging growth company, the annual report does not include an attestation report from the independent registered public accounting firm regarding internal control over financial reporting[1267][1306] Item 16. Reserved This section covers corporate governance matters, including the audit committee composition, adoption of a Code of Business Conduct and Ethics, and fees paid to the principal accountant - The audit committee is composed of three independent directors: John M. Longo (Chairman), Ita Lu, and Gary C. Biddle, with Longo and Biddle qualifying as financial experts[1313] Principal Accountant Fees (in US$) | | 2021 | 2022 | | :--- | :--- | :--- | | Audit fees | 110,000 | 140,000 | | All other fees | 12,500 | 30,000 | | Total | 122,500 | 170,000 | - The company's independent registered public accounting firm changed from Friedman LLP to Marcum Asia CPAs LLP effective September 1, 2022, due to a combination of the two firms[1322] PART III This section presents the company's audited consolidated financial statements and related notes Item 17 & 18. Financial Statements The company has elected to provide full financial statements as required under Item 18, which are included at the end of the annual report - The company has elected to provide financial statements pursuant to Item 18, which are included at the end of the annual report[1364][1365] Consolidated Financial Statements This section presents the audited consolidated financial statements for Belite Bio, Inc. and its subsidiaries for the years ended December 31, 2020, 2021, and 2022, prepared in accordance with U.S. GAAP Consolidated Balance Sheet Summary (in thousands of US$) | | As of Dec 31, 2021 | As of Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | 18,348 | 44,273 | | Cash | 17,344 | 42,089 | | Total Liabilities | 1,635 | 2,772 | | Total Shareholders' (Deficit) Equity | (15,093) | 41,501 | Consolidated Statement of Operations Summary (in thousands of US$) | | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | Research and development | 3,688 | 7,419 | 8,869 | | General and administrative | 2,055 | 2,378 | 3,952 | | Loss from operations | (5,743) | (9,797) | (12,821) | | Net loss | (5,753) | (9,666) | (12,648) | | Net loss per share (Basic & Diluted) | (0.65) | (1.01) | (0.63) | - The company adopted the new lease standard (ASC Topic 842) on January 1, 2022, recognizing operating lease right-of-use (ROU) assets and corresponding lease liabilities of US$941 thousand[1062] - The company has a license agreement with Columbia University requiring potential milestone payments up to US$20 million for development/regulatory achievements and up to US$25 million for a cumulative sales milestone[964][1410]