ARS Pharmaceuticals(US:SPRY)2021-08-12 20:37markdown PART I FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Silverback Therapeutics, Inc.'s unaudited condensed financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, for periods ending June 30, 2021 [Condensed Balance Sheets](index=6&type=section&id=Condensed%20Balance%20Sheets) The company's balance sheet reflects a decrease in **total assets** and **stockholders' equity**, alongside an increase in **total liabilities** Condensed Balance Sheet Data (in thousands) | Financial Metric | June 30, **2021** (in thousands) | December 31, **2020** (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | **$359,689** | **$386,569** | | Total current assets | **$363,027** | **$390,656** | | **Total assets** | **$366,976** | **$394,804** | | **Liabilities & Equity** | | | | Total current liabilities | **$15,548** | **$9,601** | | **Total liabilities** | **$17,326** | **$11,927** | | **Total stockholders' equity** | **$349,650** | **$382,877** | [Condensed Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported **significantly increased net losses** for both the three and six-month periods ending June 30, **2021**, driven by substantial growth in **operating expenses** Quarterly Operating Expense and Net Loss Comparison (in thousands) | Metric (in thousands) | Q2 **2021** | Q2 **2020** | % Change | | :--- | :--- | :--- | :--- | | Research and development | **$17,749** | **$5,126** | **246%** | | General and administrative | **$6,762** | **$1,337** | **406%** | | **Total operating expenses** | **$24,511** | **$6,463** | **279%** | | **Net loss** | **($24,496)** | **($6,467)** | | | Net loss per share | **($0.70)** | **($9.65)** | | Six-Month Operating Expense and Net Loss Comparison (in thousands) | Metric (in thousands) | Six Months **2021** | Six Months **2020** | % Change | | :--- | :--- | :--- | :--- | | Research and development | **$29,988** | **$9,540** | **214%** | | General and administrative | **$13,408** | **$2,165** | **519%** | | **Total operating expenses** | **$43,396** | **$11,705** | **271%** | | **Net loss** | **($43,363)** | **($11,746)** | | | Net loss per share | **($1.25)** | **($17.54)** | | [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) **Net cash used in operating activities increased significantly** for the six months ended June 30, **2021**, leading to a net decrease in cash, contrasting with the prior year's financing-boosted cash inflow Condensed Cash Flow Summary (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, **2021** | Six Months Ended June 30, **2020** | | :--- | :--- | :--- | | **Net cash used in operating activities** | **($26,336)** | **($13,071)** | | Net cash used in investing activities | **($735)** | **($38)** | | **Net cash provided by financing activities** | **$191** | **$33,248** | | **Change in cash, cash equivalents, and restricted cash** | **($26,880)** | **$20,139** | [Notes to Unaudited Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) The notes provide detailed explanations of accounting policies, business nature, **IPO** completion, and management's assessment of cash **sufficiency** for future operations - **Silverback** is a **clinical-stage biopharmaceutical company** focused on its proprietary **ImmunoTAC technology platform** to develop therapeutics for cancer, chronic viral infections, and other serious diseases[23](index=23&type=chunk) - The company completed its **IPO** on December **8**, **2020**, raising **net proceeds** of **$255.3 million**[24](index=24&type=chunk) - As of June **30**, **2021**, the company had an **accumulated deficit** of **$140.1 million** but held **$360.0 million** in **cash, cash equivalents, and restricted cash**, which is considered **sufficient** to fund operations for at least the next **12 months**[27](index=27&type=chunk) - **Accrued research and development expenses increased significantly** from **$2.1 million** at year-end **2020** to **$9.7 million** as of June **30**, **2021**[50](index=50&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations, detailing **increased operating expenses** and confirming strong liquidity post-**IPO** [Overview](index=19&type=section&id=Overview) **Silverback** is a **clinical-stage biopharmaceutical company** developing tissue-targeted therapeutics, with its lead candidate **SBT6050** in **Phase 1/1b trials** and a history of **significant operating losses** - Lead product candidate **SBT6050** is in a **Phase 1/1b clinical trial** for HER2-expressing solid tumors, with an interim update anticipated at the ESMO **2021** Annual Meeting[80](index=80&type=chunk) - The company plans to submit an **investigational new drug (IND) application** for its second product candidate, **SBT6290**, in the fourth quarter of **2021**[80](index=80&type=chunk) - The company has incurred **significant operating losses** since inception, with an **accumulated deficit** of **$140.1 million** as of June **30**, **2021**[82](index=82&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) **Operating expenses increased significantly** in **2021** compared to **2020**, driven by advancing **clinical** and preclinical programs (**SBT6050**, **SBT6290**, **SBT8230**), increased headcount, and public company costs Quarterly Operating Expense and Net Loss Comparison (in thousands) | Expense Comparison (in thousands) | Q2 **2021** | Q2 **2020** | % Change | | :--- | :--- | :--- | :--- | | Research and development | **$17,749** | **$5,126** | **246%** | | General and administrative | **$6,762** | **$1,337** | **406%** | | **Total operating expenses** | **$24,511** | **$6,463** | **279%** | Six-Month Operating Expense and Net Loss Comparison (in thousands) | Expense Comparison (in thousands) | Six Months **2021** | Six Months **2020** | % Change | | :--- | :--- | :--- | :--- | | Research and development | **$29,988** | **$9,540** | **214%** | | General and administrative | **$13,408** | **$2,165** | **519%** | | **Total operating expenses** | **$43,396** | **$11,705** | **271%** | [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position is strong, with current cash reserves deemed **sufficient** to fund operations for at least the next **24 months**, though future funding will be required - The company had **$360.0 million** in **cash, cash equivalents, and restricted cash** as of June **30**, **2021**[103](index=103&type=chunk) - Management believes current cash reserves will be **sufficient** to fund operations and capital expenditures through at least the next **24 months**[109](index=109&type=chunk) - **Net cash used in operating activities** for the first six months of **2021** was **$26.3 million**, primarily due to a **net loss** of **$43.4 million**, offset by non-cash charges like stock-based compensation[103](index=103&type=chunk)[104](index=104&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is **not applicable** as the company qualifies as a "**smaller reporting company**" under SEC regulations - The company is a "**smaller reporting company**" as defined under Item **10(f)(1)** of Regulation S-K, and therefore this disclosure is **not applicable**[120](index=120&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's **disclosure controls and procedures** were effective as of June **30**, **2021**, with **no material changes** to **internal control over financial reporting** - Based on an evaluation as of June **30**, **2021**, the CEO and CFO concluded that the company's **disclosure controls and procedures** were effective[121](index=121&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter ended June **30**, **2021**, that materially affected, or are reasonably likely to materially affect, **internal controls**[122](index=122&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is **not currently a party to any material legal proceedings**, though it may become involved in claims arising in the ordinary course of business - The company is **not currently a party to any material legal proceedings**[124](index=124&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) This section outlines numerous risks related to the company's business, product development, manufacturing, intellectual property, and common stock ownership [Risks Related to Business and Industry](index=28&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) The company faces **significant business risks** including a **limited operating history**, expected continued **net losses**, **substantial capital** requirements, and potential impacts from the **COVID-19 pandemic** - The company has a **limited operating history**, has incurred **net losses** since inception, and expects to incur **significant losses** for the foreseeable future[126](index=126&type=chunk) - The company will need to raise **substantial additional capital** to complete the development and commercialization of its product candidates, as current cash is **not sufficient** to fund any product through regulatory approval[131](index=131&type=chunk)[132](index=132&type=chunk) - The **COVID-19 pandemic** could continue to **adversely impact** business, including delays in **clinical trials**, **supply chain disruptions**, and limitations on employee resources[137](index=137&type=chunk)[138](index=138&type=chunk) [Risks Related to Discovery, Development and Regulatory Approval](index=32&type=section&id=Risks%20Related%20to%20the%20Discovery%2C%20Development%20and%20Regulatory%20Approval%20of%20Our%20Product%20Candidates) The company's early-stage development efforts involve lengthy, expensive, and uncertain processes with **high failure rates**, compounded by novel technology and potential **adverse events** - The company is in early-stage development with only one product candidate, **SBT6050**, in **clinical trials**, and a **limited history** of conducting human trials[143](index=143&type=chunk) - Product candidates are based on **novel technologies** (**ImmunoTAC**), making it difficult to predict the timing, results, and cost of development and the likelihood of regulatory approval[152](index=152&type=chunk) - **Serious adverse events** or **undesirable side effects** could lead to the **discontinuation** of **clinical programs** or **refusal** by regulators to approve product candidates[160](index=160&type=chunk) - The company may be required to develop and obtain approval for a **companion diagnostic** for its product candidates (e.g., for **Nectin4**), which could **delay or prevent commercialization**[175](index=175&type=chunk) [Risks Related to Manufacturing, Commercialization and Reliance on Third Parties](index=38&type=section&id=Risks%20Related%20to%20Manufacturing%2C%20Commercialization%20and%20Reliance%20on%20Third%20Parties) The company relies heavily on third parties (**CROs** and **CDMOs**) for **clinical trial** conduct and manufacturing, facing risks of delays, quality issues, and challenges in market acceptance or favorable pricing for approved products - The company is **dependent on third-party CROs** to conduct **clinical trials** and **third-party CDMOs** for manufacturing, creating risks related to quality, timing, and regulatory compliance (**GLP**, **GCP**, **cGMP**)[190](index=190&type=chunk)[193](index=193&type=chunk) - Manufacturing antibody drug conjugate products is **complex** and may encounter **difficulties in production**, scale-up, and stability, potentially delaying or preventing supply for trials or commercial sale[196](index=196&type=chunk) - Approved products may **fail to achieve market acceptance** from physicians, patients, and payors, and may face **unfavorable pricing** or **reimbursement policies**, **hindering profitability**[201](index=201&type=chunk)[202](index=202&type=chunk) [Risks Related to Our Intellectual Property](index=44&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's success depends on robust **intellectual property protection**, facing risks of patent challenges, **in-license breaches**, infringement litigation, and **trade secret misappropriation** - The company's ability to successfully commercialize its products is at risk if it cannot obtain and maintain **sufficient patent protection** for its platform technologies and product candidates[276](index=276&type=chunk) - The company relies on an **in-license agreement** with **WuXi Biologics** for a cell line used to manufacture components of **SBT6050**. A **breach of this agreement** could result in **loss of rights** and **adversely affect** the program[293](index=293&type=chunk) - The company could be sued for **infringing** the **intellectual property rights** of third parties, which could be **costly**, **time-consuming**, and **prevent or delay** the commercialization of product candidates[303](index=303&type=chunk) - The company also relies on **trade secrets**, which are difficult to protect and could be disclosed or misappropriated, **harming its competitive position**[321](index=321&type=chunk) [Risks Related to the Securities Markets and Ownership of Our Common Stock](index=54&type=section&id=Risks%20Related%20to%20the%20Securities%20Markets%20and%20Ownership%20of%20Our%20Common%20Stock) Ownership of the company's common stock involves risks including **high price volatility**, **significant control** by principal stockholders, potential **dilution** from future sales, and reduced attractiveness as an **emerging growth company** - The price of the company's common stock is subject to **extreme volatility**, which is common for biotechnology and pharmaceutical companies[331](index=331&type=chunk) - Principal stockholders and management own a **significant percentage** of the stock and can exert **significant control** over matters subject to stockholder approval[334](index=334&type=chunk) - Future sales and issuances of common stock, including under equity incentive plans, could result in **additional dilution** to stockholders and cause the **stock price to fall**[339](index=339&type=chunk) - The company is an "**emerging growth company**" and intends to take advantage of **reduced reporting requirements**, which may make its common stock **less attractive** to some investors[344](index=344&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the use of proceeds from the company's December **2020** **Initial Public Offering**, confirming **no material change** in the planned use of funds - The company's **IPO** in December **2020** generated **net proceeds** of **$255.3 million**[360](index=360&type=chunk) - Through June **30**, **2021**, the company has used approximately **$18.0 million** of the **net proceeds** from its **IPO**[361](index=361&type=chunk) [Defaults Upon Senior Securities](index=74&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section is **not applicable** to the company - **Not applicable**[362](index=362&type=chunk) [Mine Safety Disclosures](index=74&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is **not applicable** to the company - **Not applicable**[363](index=363&type=chunk) [Other Information](index=74&type=section&id=Item%205.%20Other%20Information) This section is **not applicable** to the company - **Not applicable**[364](index=364&type=chunk) [Exhibits](index=75&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form **10-Q**, including corporate governance documents and **officer certifications** - The report includes exhibits such as the Amended and Restated Certificate of Incorporation, Bylaws, and **officer certifications** pursuant to the Sarbanes-Oxley Act[366](index=366&type=chunk)