Rapid Micro Biosystems(RPID) - 2023 Q4 - Annual Report

Part I Business Rapid Micro Biosystems automates microbial quality control for pharmaceutical manufacturing with its Growth Direct platform - The company's core business is its Growth Direct platform, which automates microbial quality control (MQC) testing for pharmaceutical manufacturing, reducing result times by 50% or more and eliminating up to 85% of manual steps[22][26][43] - The business model relies on initial system sales followed by recurring revenue from proprietary consumables and service contracts. As of the report date, 141 systems have been placed globally[29][68] - The company's customer base includes 70% of the top twenty largest pharmaceutical companies and manufacturers of 24% of globally approved cell and gene therapies[29] - A key growth strategy is to establish the Growth Direct platform as the industry standard, particularly in the rapidly growing bioprocessing market for biologics and cell and gene therapies[70] - The company is preparing for the commercial launch of a new rapid automated sterility test by mid-year 2024, which is expected to deliver final results in as little as one to three days, a significant improvement over the traditional 14-day method[54][56] Risk Factors The company faces significant financial, operational, and market risks, including ongoing losses and Nasdaq listing compliance challenges - The company has a history of significant losses, with a net loss of $52.5 million in 2023 and an accumulated deficit of $428.4 million as of December 31, 2023. It expects to incur future losses and may need to raise additional capital[106][122] - The business is highly dependent on the commercial success of its sole platform, Growth Direct. Its success hinges on market acceptance, competition, and the ability to expand with new and existing customers[109][125] - Manufacturing operations rely on third-party suppliers, including single-source suppliers for critical components, making the company vulnerable to supply shortages and price fluctuations[188][189] - The company received a notification from Nasdaq on February 2, 2024, for non-compliance with the minimum bid price requirement of $1.00 per share, posing a risk of delisting if not rectified[224] - The ability to use net operating loss (NOL) carryforwards of $229.3 million (federal) and $100.4 million (state) is subject to limitations due to past and potential future ownership changes under Section 382 of the Code[249][250] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[257] Properties The company's operations are based in a 67,663 sq ft leased facility in Lowell, MA, and a 33,339 sq ft subleased facility in Lexington, MA - The main facility is a 67,663 sq. ft. leased space in Lowell, MA, expiring in July 2029[265] - A back-up manufacturing and R&D facility of 33,339 sq. ft. is subleased in Lexington, MA, expiring in June 2029[265] Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently party to any material litigation[266] Mine Safety Disclosures This item is not applicable to the company - Not applicable[267] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A common stock trades on Nasdaq under 'RPID', with no history or plans for cash dividends - Class A common stock trades on the Nasdaq Global Select Market under the symbol "RPID"[270] - The company has never paid cash dividends and does not intend to in the foreseeable future, retaining earnings for business expansion[272] Management's Discussion and Analysis of Financial Condition and Results of Operations In FY2023, revenue increased to $22.5 million, with a net loss of $52.5 million, and $95.0 million in cash available for operations Key Business Metrics (2022 vs. 2023) | Metric | 2023 | 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Systems Placed in Period | 16 | 9 | 7 | 77.8% | | Cumulative Systems Placed | 141 | 125 | 16 | 12.8% | | Systems Validated in Period | 18 | 19 | (1) | (5.3%) | | Cumulative Systems Validated | 121 | 103 | 18 | 17.5% | | Total Product & Service Revenue | $22.5M | $17.1M | $5.4M | 31.4% | | Recurring Revenue | $13.5M | $11.0M | $2.6M | 23.3% | Results of Operations (in thousands) | Line Item | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total Revenue | $22,519 | $17,133 | | Cost of Revenue | $28,004 | $25,673 | | Gross Profit (Loss) | ($5,485) | ($8,540) | | Research and development | $12,820 | $12,866 | | Sales and marketing | $13,322 | $14,994 | | General and administrative | $24,936 | $26,819 | | Loss from operations | ($56,563) | ($63,219) | | Net loss | ($52,467) | ($60,806) | - As of December 31, 2023, the company had $95.0 million in cash, cash equivalents, and investments and believes these funds are sufficient to cover operating expenses and capital requirements for at least the next 12 months[122][283][340] - In December 2023, the company established an "at-the-market" (ATM) facility to sell up to $50 million of Class A common stock, though no shares were sold under this facility as of the report date[339] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its $95.0 million cash and investment portfolio - The company's main market risk is interest rate sensitivity on its $95.0 million in cash, cash equivalents, and investments[364] - Foreign currency exchange risk is not currently considered significant[365] - Inflation has impacted costs for materials, labor, and freight, but the company does not believe it has had a material effect on its overall financial condition or results of operations[366] Financial Statements and Supplementary Data This section refers to the full consolidated financial statements and supplementary data appended to the Form 10-K - The full financial statements required by this item are appended to the report, with an index on page F-1[367] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes or disagreements with its accountants on financial disclosure - None reported[368] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[370] - Management concluded that internal control over financial reporting was effective as of December 31, 2023, based on the COSO 2013 framework[374] Other Information The company reports no other required information or Rule 10b5-1 trading arrangement changes in Q4 2023 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement in Q4 2023[377] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[381] Executive Compensation Executive compensation information is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[382] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[383] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[384] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[385] Part IV Exhibits and Financial Statement Schedules This section lists the consolidated financial statements and exhibits filed as part of the Annual Report on Form 10-K - This item lists the financial statements and exhibits filed with the 10-K[387][389] Financial Statements Consolidated Financial Statements Consolidated financial statements show a net loss of $52.5 million in 2023, with assets at $143.5 million and equity at $118.0 million Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $120,415 | $138,576 | | Cash and cash equivalents | $24,285 | $27,064 | | Short-term investments | $67,768 | $81,584 | | Inventory | $19,961 | $21,187 | | Total Assets | $143,452 | $190,650 | | Total Current Liabilities | $18,986 | $19,050 | | Total Liabilities | $25,463 | $26,481 | | Total Stockholders' Equity | $117,989 | $164,169 | Consolidated Statement of Operations Data (in thousands) | Account | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total Revenue | $22,519 | $17,133 | | Total costs and operating expenses | $79,082 | $80,352 | | Loss from operations | ($56,563) | ($63,219) | | Net Loss | ($52,467) | ($60,806) | | Net loss per share | ($1.22) | ($1.43) | Consolidated Cash Flow Data (in thousands) | Account | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($45,081) | ($58,547) | | Net cash provided by (used in) investing activities | $42,153 | ($93,469) | | Net cash provided by financing activities | $149 | $693 | | Net decrease in cash | ($2,779) | ($151,323) | Notes to Consolidated Financial Statements Notes detail accounting policies, disaggregated revenue ($13.5 million recurring in 2023), deferred tax assets, and operating lease commitments Disaggregated Revenue (in thousands) | Revenue Type | 2023 | 2022 | | :--- | :--- | :--- | | Product and service revenue — recurring | $13,546 | $10,983 | | Product and service revenue — non-recurring | $8,973 | $6,150 | | Total revenue | $22,519 | $17,133 | - The company has a full valuation allowance of $71.1 million against its net deferred tax assets as of December 31, 2023, due to uncertainty about future profitability[519] - Total stock-based compensation expense was $4.8 million in 2023, up from $4.0 million in 2022[513] - As of December 31, 2023, the company has total future operating lease payments of $7.8 million[531]