Revelation Biosciences(US:REVB)2023-03-30 20:51PART I Business Revelation Biosciences is a clinical-stage biopharmaceutical company developing therapeutics and diagnostics that modulate the innate immune system via TLR-4 stimulation Overview and Pipeline Revelation develops TLR-4 modulating therapeutics, with a pipeline focused on organ disease, infection prevention, vaccine adjuncts, and food allergies, while discontinuing prior programs - The company's therapeutic candidates are based on the active ingredient PHAD®, a synthetic version of MPLA, which stimulates TLR-4 to modulate the innate and adaptive immune response75 Development Pipeline Status | Therapeutic Candidate | Indication | Discovery | Preclinical | Phase 1 | Phase 2 | Next Milestone | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | REVTx-300 | Acute/chronic kidney disease | ✔ | ✔ | | | Initiate Phase 1a* study | | REVTx-100 | Prevention of post surgical infection | ✔ | ✔ | | | Initiate Phase 1a* study | | REVTx-200 | Adjunct to IM vaccine | ✔ | ✔ | | | Readout from PEITHO nonclinical study | | REVTx-99b | Food allergies | ✔ | ✔ | | | Initiate non-clinical study | - The company discontinued clinical development of REVTx-99a for respiratory viral infections in June 2022 after a Phase 2b study did not meet its primary endpoint95 - Development of REVTx-99b for chronic nasal congestion and allergic rhinitis was halted in July 2022 after a Phase 1b study met safety endpoints but not exploratory efficacy endpoints96 - Development of the REVDx-501 diagnostic has been suspended to focus resources on therapeutic candidates99176 Key Therapeutic Programs Key therapeutic programs leverage PHAD® for acute/chronic organ diseases, infection prevention, vaccine adjuncts, and food allergies, with Phase 1a studies for REVTx-300 and REVTx-100 planned for H2 2023 - In a nonclinical rat model for kidney disease, REVTx-300 demonstrated a statistically significant reduction in renal cortical fibrosis at doses of 0.3 mg/kg (44% reduction) and 0.9 mg/kg (58% reduction) compared to the vehicle-only group7788 - The company plans to initiate a combined Phase 1a clinical study in healthy volunteers for both REVTx-300 and REVTx-100 in the second half of 2023 to evaluate safety and investigate biomarkers8285146 - REVTx-100 is being developed under an exclusive worldwide license agreement with Vanderbilt University for treating or preventing infections, utilizing US patent 11,389,46583187 - REVTx-200 is being developed as an intranasal therapy to be administered with traditional IM vaccines to potentially provide a more complete immunization by stimulating a mucosal immune response86 Manufacturing, IP, and Competition Revelation relies on third-party manufacturing, faces single-source supplier risk for PHAD®, holds several patent applications, and operates in an intensely competitive biopharmaceutical industry - The company does not own or operate manufacturing facilities and relies on third-party CMOs for production of its product candidates184 - There is only one supplier for the active ingredient PHAD®, Avanti Polar Lipids, Inc., and the company does not have a long-term supply agreement in place, though it has purchased enough material for planned clinical studies184 - As of March 21, 2023, the company's patent portfolio includes three U.S. provisional patent applications (for REVTx-300, REVTx-99b, and a new drug program) and three international PCT patent applications (two for REVTx-99b and one for REVDx-501)197 - The company faces intense competition from multinational pharmaceutical companies and specialized biotechnology firms with greater financial, technical, and human resources177183 Government Regulation The company's products are subject to extensive FDA and international regulation, encompassing preclinical studies, clinical trials, manufacturing, marketing approval, and ongoing compliance with healthcare laws and reimbursement policies - Therapeutic product candidates must undergo a multi-phase approval process including preclinical studies, an Investigational New Drug (IND) application, and three phases of clinical trials to establish safety and efficacy before an NDA can be submitted to the FDA210213215 - The diagnostic candidate, REVDx-501, is regulated as a medical device and is expected to be subject to review under a de novo clearance pathway, which can be more rigorous than the 510(k) process228233 - The company's operations are subject to various U.S. healthcare laws, including the Anti-Kickback Statute, the False Claims Act, HIPAA for data privacy, and the Sunshine Act for transparency in payments to physicians244245248252257 - Commercial success depends on securing coverage and adequate reimbursement from third-party payors like Medicare, Medicaid, and private insurers, which is a complex and uncertain process260261262 Risk Factors The company faces substantial risks including limited operating history, net losses, going concern uncertainty, high development risks, reliance on third-party manufacturing, IP protection challenges, intense competition, commercialization hurdles, litigation, and regulatory changes - The company has a limited operating history, has incurred net losses since inception, and its financial statements raise substantial doubt about its ability to continue as a going concern without additional funding315316318 - The business is highly dependent on the success of its Program Products, which are in early stages of development and face a high risk of failure in clinical trials322332347 - Revelation relies on a single supplier, Avanti Polar Lipids, Inc., for PHAD®, the active pharmaceutical ingredient in its therapeutic candidates, and does not have a long-term supply agreement, posing a significant manufacturing risk367 - The company faces litigation risks, including a lawsuit from LifeSci Capital LLC seeking approximately $5.3 million in unpaid fees related to the business combination, which could materially harm its financial condition if unsuccessful203505 - The company has no experience in sales, marketing, or distribution and will need to build these capabilities or partner with third parties to commercialize any approved products, which is an expensive and uncertain process441450 Properties The company leases approximately 2,140 square feet of laboratory space in San Diego, California, with the lease expiring December 31, 2023, and maintains corporate headquarters access in the same city - The company leases laboratory space at 11011 Torreyana Rd., Suite 102, San Diego, California, which is approximately 2,140 square feet. The lease is set to expire on December 31, 2023507 Legal Proceedings Revelation Biosciences is involved in three legal actions, including lawsuits from LifeSci Capital LLC for $5.3 million, A-IR Clinical Research Ltd. for £1.6 million, and Marwood Advisory Group, LLC for $150,000, all of which the company is disputing - LifeSci Capital LLC filed a lawsuit seeking approximately $2.7 million in cash and $2.6 million in equity for unpaid fees related to the Business Combination. The company is disputing the claim508 - A-IR Clinical Research Ltd. filed a claim for £1.6 million in unpaid invoices for a viral challenge study, which the company is disputing due to alleged non-performance and misrepresentation510 - Marwood Advisory Group, LLC filed an action for $150,000 plus interest for a due diligence report related to a target considered by Petra prior to the Business Combination512 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock and warrants trade on Nasdaq, with 78 stockholders of record, no history of dividends, and a $7.65 million share repurchase in February 2022 - The company's common stock and warrants are traded on the Nasdaq Capital Market under the symbols "REVB" and "REVBW"515 - The company has never paid dividends and does not plan to in the foreseeable future517 Issuer Purchases of Equity Securities (FY 2022) | Period | Total number of shares purchased | Average price paid per share | | :--- | :--- | :--- | | February 2022 | 21,429 | $357.10 | | Total | 21,429 | $357.10 | Management's Discussion and Analysis of Financial Condition and Results of Operations For FY2022, the company reported a $10.8 million net loss, an accumulated deficit of $25.3 million, and $5.3 million in cash, with management expressing substantial doubt about its going concern ability due to insufficient funds Results of Operations For FY2022, net loss decreased to $10.8 million from $12.0 million in 2021, driven by a $1.5 million reduction in R&D expenses, partially offset by a $0.5 million increase in G&A expenses Consolidated Statements of Operations Summary (in millions) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $5.4 | $6.9 | ($1.5) | | General and administrative | $5.5 | $5.0 | $0.5 | | Total operating expenses | $10.9 | $12.0 | ($1.1) | | Net loss | ($10.8) | ($12.0) | $1.2 | - Research and development expenses decreased by $1.5 million year-over-year, primarily due to a $1.3 million decrease in diagnostic development expenses for REVDx-501 and a $0.5 million decrease in personnel expenses542 - General and administrative expenses increased by $0.5 million year-over-year, mainly due to a $1.4 million increase in other expenses (primarily D&O insurance), offset by a $0.7 million decrease in personnel expenses and a $0.3 million decrease in professional fees543 Liquidity, Capital Resources, and Going Concern As of December 31, 2022, the company had $5.3 million in cash and $25.3 million accumulated deficit, with management concluding substantial doubt about its going concern ability despite recent financing activities - The company had $5.3 million in cash and cash equivalents as of December 31, 2022546 - Management explicitly states that current cash is not sufficient to sustain operations for one year from the financial statement issuance date, which raises substantial doubt about the company's ability to continue as a going concern550551 Cash Flow Summary (in millions) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($11.2) | ($11.1) | | Net cash used in investing activities | $0.0 | ($0.1) | | Net cash provided by financing activities | $15.2 | $8.0 | - Net cash from financing activities in 2022 was $15.2 million, primarily from the Business Combination, a PIPE investment, and the July 2022 Public Offering558559 Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for FY2022 and FY2021, including the auditor's report from Baker Tilly US, LLP, which highlights a "Going Concern Uncertainty" Report of Independent Registered Public Accounting Firm Baker Tilly US, LLP issued an opinion on the fair presentation of financial statements, including a "Going Concern Uncertainty" paragraph due to recurring losses and lack of revenue - The auditor's report explicitly includes a "Going Concern Uncertainty" paragraph, citing recurring operating losses and lack of revenue as conditions that raise substantial doubt about the company's ability to continue as a going concern676 Consolidated Financial Statements As of December 31, 2022, the company reported $5.5 million in total assets, $4.5 million in total liabilities, $1.1 million in stockholders' equity, and a $10.8 million net loss for the year Consolidated Balance Sheet Data (in millions) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $5.3 | $1.3 | | Total Assets | $5.5 | $2.0 | | Total Liabilities | $4.5 | $2.1 | | Total Stockholders' Equity (Deficit) | $1.1 | ($0.1) | Consolidated Statement of Operations Data (in millions) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | Total operating expenses | $10.9 | $12.0 | | Net loss | ($10.8) | ($12.0) | | Net loss per share | ($20.09) | ($42.50) | Notes to Consolidated Financial Statements The notes detail accounting policies, the January 2022 reverse recapitalization, the February 2023 1-for-35 reverse stock split, going concern uncertainty, litigation, significant financing activities, and substantial net operating loss carryforwards - A 1-for-35 reverse stock split was effected on February 1, 2023, and the number of authorized shares of common stock was increased from 100 million to 500 million698776 - Subsequent to year-end, in February 2023, the company closed a public offering with gross proceeds of approximately $15.6 million, which allowed it to regain compliance with Nasdaq listing requirements827830 - As of December 31, 2022, the company had federal and state net operating loss carryforwards of $18.2 million and $24.5 million, respectively, which may be subject to limitation under IRC Section 382815 Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, based on the COSO 2013 framework - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022577 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2022581 PART III Directors, Executive Officers and Corporate Governance The company's leadership includes key executives and a classified Board of Directors with Audit, Compensation, and Nominating and Governance committees, operating under a Code of Ethics compliant with Nasdaq rules Key Executive Officers and Directors | Name | Position | | :--- | :--- | | George Tidmarsh, M.D., Ph.D. | Chairman and Director | | James Rolke | Director and Chief Executive Officer | | Chester S. Zygmont, III | Chief Financial Officer | - The Board of Directors is classified into three classes with staggered three-year terms, which may delay or prevent a change in control596600 - The board has three standing committees: Audit, Nominating and Governance, and Compensation, each with independent directors as required by Nasdaq rules606607609612 Executive Officer and Director Compensation In 2022, CEO James Rolke received $479,591 total compensation and CFO Chester S. Zygmont, III received $339,138, while non-employee directors received no cash or equity compensation 2022 Executive Compensation Summary | Name and Position | Year | Salary ($) | Option based awards ($) | Total compensation ($) | | :--- | :--- | :--- | :--- | :--- | | James Rolke, CEO | 2022 | 400,000 | 79,591 | 479,591 | | Chester S. Zygmont, III, CFO | 2022 | 320,000 | 19,138 | 339,138 | - CEO James Rolke has an annual base salary of $400,000 and a target bonus of 40%. CFO Chester S. Zygmont, III has an annual base salary of $320,000 and a target bonus of 35%618 - Non-employee directors did not receive any cash or equity compensation for their board service during the fiscal year ended December 31, 2022628 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 21, 2023, with 4,511,839 shares outstanding, directors and executive officers as a group beneficially owned approximately 2.3% of common stock, with Chairman George Tidmarsh holding 1.3% Beneficial Ownership of Directors and Officers (as of March 21, 2023) | Name | Shares Beneficially Owned | Percentage of Ownership | | :--- | :--- | :--- | | James Rolke (CEO) | 21,321 | * | | George Tidmarsh M.D., Ph.D. (Chairman) | 58,097 | 1.3% | | Chester S. Zygmont, III (CFO) | 20,048 | * | | All Directors and Officers as a Group (6 individuals) | 104,473 | 2.3% | Certain Relationships and Related Transactions, and Director Independence The company engaged in related party transactions including Backstop Agreements and a Series A Preferred Stock sale to CEO James Rolke for $5,000, and the board determined all directors except the CEO are independent under Nasdaq rules - In connection with the Business Combination, the company entered into Backstop Agreements with several investors, including Chairman Dr. George Tidmarsh, to purchase shares in the event of significant redemptions636 - In December 2022, the company sold one share of Series A Preferred Stock with 50,000,000 votes to CEO James Rolke for $5,000. This was done to secure approval for a reverse stock split and was automatically redeemed in January 2023 after the vote641642644 - The Board of Directors has determined that all directors are independent under Nasdaq listing rules, with the exception of CEO James Rolke650 Principal Accountant Fees and Services Baker Tilly US, LLP served as the independent auditor, with total fees of $290,502 in 2022 and $294,395 in 2021, and all services were pre-approved by the Board or Audit Committee Accountant Fees (Baker Tilly US, LLP) | Fee Category | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $144,730 | $147,567 | | Tax Fees | $19,756 | $38,869 | | Other Fees | $126,016 | $107,959 | | Total | $290,502 | $294,395 | PART IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Annual Report on Form 10-K, including corporate documents, merger agreements, financing agreements, and executive contracts - The exhibits include foundational corporate documents, agreements related to the Business Combination, securities purchase agreements from recent financings, and executive employment contracts655