LianBio
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Operating expenses: | | | | | | | |
| | | | | | | |
Research and development | $ | 28,591 | | | $ | 93,030 | | | $ | 40,920 | | | $ | 146,383 | |
General and administrative | 14,551 | | | 6,461 | | | 30,639 | | | 13,607 | |
Total operating expenses | 43,142 | | | 99,491 | | | 71,559 | | | 159,990 | |
Loss from operations | (43,142) | | | (99,491) | | | (71,559) | | | (159,990) | |
Other income (expense): | | | | | | | |
Interest income, net | 553 | | | 106 | | | 833 | | | 139 | |
Other income (expense), net | 203 | | | (68) | | | 620 | | | (192) | |
Net loss before income taxes | (42,386) | | | (99,453) | | | (70,106) | | | (160,043) | |
Income taxes | 5 | | | 975 | | | 11 | | | 1,950 | |
Net loss | (42,391) | | | (100,428) | | | (70,117) | | | (161,993) | |
Other comprehensive (loss) income: | | | | | | | |
Foreign currency translation (loss) income, net of tax | (421) | | | 122 | | | (814) | | | 130 | |
Unrealized loss on marketable securities, net of tax | (291) | | | — | | | (1,114) | | | — | |
Comprehensive loss | $ | (43,103) | | | $ | (100,306) | | | $ | (72,045) | | | $ | (161,863) | |
Net loss per share attributable to ordinary shareholders, basic and diluted | $ | (0.39) | | | $ | (4.90) | | | $ | (0.65) | | | $ | (7.91) | |
Weighted-average shares outstanding used in computing net loss per share attributable to ordinary shareholders, basic and diluted | 107,922,501 | | | 20,477,338 | | | 107,600,767 | | | 20,477,338 | |
See accompanying notes to the consolidated financial statements
LianBio
Consolidated Statements of Redeemable Convertible Preferred Shares and Shareholders’ Equity (Deficit)
(In thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redeemable Convertible Preferred Shares | | | Ordinary Shares | | Additional Paid in Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total LianBio Shareholders’ Equity | | Non- Controlling Interest | | Total Shareholders’ Equity (Deficit) |
| Shares | | Amount | | | Shares | | Amount | | | | | | |
Balance, December 31, 2021 | — | | | $ | — | | | | 107,275,458 | | | $ | 2 | | | $ | 713,269 | | | $ | 526 | | | $ | (360,235) | | | $ | 353,562 | | | $ | 33,774 | | | $ | 387,336 | |
Share-based compensation expense | — | | | — | | | | — | | | — | | | 4,669 | | | — | | | — | | | 4,669 | | | — | | | 4,669 | |
Receivable from related party | — | | | — | | | | — | | | — | | | 1,710 | | | — | | | — | | | 1,710 | | | — | | | 1,710 | |
Net Loss | — | | | — | | | | — | | | — | | | — | | | — | | | (27,726) | | | (27,726) | | | — | | | (27,726) | |
Comprehensive Loss | — | | | — | | | | — | | | — | | | — | | | (1,216) | | | — | | | (1,216) | | | — | | | (1,216) | |
Balance, March 31, 2022 | — | | | $ | — | | | | 107,275,458 | | | $ | 2 | | | $ | 719,648 | | | $ | (690) | | | $ | (387,961) | | | $ | 330,999 | | | $ | 33,774 | | | $ | 364,773 | |
Share-based compensation expense | — | | | — | | | | — | | | — | | | 4,528 | | | — | | | — | | | 4,528 | | | — | | | 4,528 | |
Exercise of options | — | | | — | | | | 1,000,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Exercise of warrants | — | | | — | | | | 78,373 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net Loss | — | | | — | | | | — | | | — | | | — | | | — | | | (42,391) | | | (42,391) | | | — | | | (42,391) | |
Comprehensive Loss | — | | | — | | | | — | | | — | | | — | | | (712) | | | — | | | (712) | | | — | | | (712) | |
Balance, June 30, 2022 | — | | | $ | — | | | | 108,353,831 | | | $ | 2 | | | $ | 724,176 | | | $ | (1,402) | | | $ | (430,352) | | | $ | 292,424 | | | $ | 33,774 | | | $ | 326,198 | |
LianBio
Consolidated Statements of Redeemable Convertible Preferred Shares and Shareholders’ Equity (Deficit)
(In thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redeemable Convertible Preferred Shares | | | Ordinary Shares | | Additional Paid in Capital | | Accumulated Other Comprehensive (Loss) Income | | Accumulated Deficit | | Total LianBio Shareholders’ Equity (Deficit) | | Non- Controlling Interest | | Total Shareholders’ Equity (Deficit) |
| Shares | | Amount | | | Shares | | Amount | | | | | | |
Balance, December 31, 2020 | 10,971,231 | | | $ | 349,789 | | | | 20,477,338 | | | $ | — | | | $ | 31,132 | | | $ | (40) | | | $ | (163,935) | | | $ | (132,843) | | | $ | 34,773 | | | $ | (98,070) | |
Share-based compensation expense | — | | | — | | | | — | | | — | | | 1,674 | | | — | | | — | | | 1,674 | | | — | | | 1,674 | |
Issuance of Series A Preferred Shares at $56.66, net of issuance costs | 52,947 | | | 2,940 | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Warrants issued in license agreement | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,415 | | | 9,415 | |
Net Loss | — | | | — | | | | — | | | — | | | — | | | — | | | (61,565) | | | (61,565) | | | — | | | (61,565) | |
Comprehensive Income | — | | | — | | | | — | | | — | | | — | | | 8 | | | — | | | 8 | | | — | | | 8 | |
Balance, March 31, 2021 | 11,024,178 | | | $ | 352,729 | | | | 20,477,338 | | | $ | — | | | $ | 32,806 | | | $ | (32) | | | $ | (225,500) | | | $ | (192,726) | | | $ | 44,188 | | | $ | (148,538) | |
Share-based compensation expense | — | | | — | | | | — | | | — | | | 1,443 | | | — | | | — | | | 1,443 | | | — | | | 1,443 | |
Net Loss | — | | | — | | | | — | | | — | | | — | | | — | | | (100,428) | | | (100,428) | | | — | | | (100,428) | |
Comprehensive Income | — | | | — | | | | — | | | — | | | — | | | 122 | | | — | | | 122 | | | — | | | 122 | |
Balance, June 30, 2021 | 11,024,178 | | | $ | 352,729 | | | | 20,477,338 | | | $ | — | | | $ | 34,249 | | | $ | 90 | | | $ | (325,928) | | | $ | (291,589) | | | $ | 44,188 | | | $ | (247,401) | |
LianBio
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, 2022 | | Six Months Ended June 30, 2021 |
Net loss | $ | (70,117) | | | $ | (161,993) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Non-cash share consideration, issued in acquisition of IPR&D | — | | | 9,415 | |
Non-cash operating lease expense (benefit) | 398 | | | (40) | |
Depreciation expense | 409 | | | 137 | |
Share based compensation expense | 9,197 | | | 3,117 | |
Amortization of discounts on investments, net | 1 | | | — | |
Unrealized foreign currency transaction loss (gain), net | 240 | | | (46) | |
Changes in operating assets and liabilities: | | | |
| | | |
| | | |
Decrease (increase) in prepaid expenses and other current assets | 3,130 | | | (1,343) | |
(Increase) decrease in other receivable | (1,281) | | | 20,000 | |
| | | |
Increase in other non-current assets | 8 | | | 1 | |
(Decrease) increase in accounts payable | (1,957) | | | 26,094 | |
Increase in accrued expenses | 7,414 | | | 8,178 | |
(Decrease) increase in other current liabilities | 50 | | | 1,704 | |
| | | |
Net cash used in operating activities | (52,508) | | | (94,776) | |
Cash flows from investing activities: | | | |
Purchase of property and equipment | (673) | | | (67) | |
Purchase of marketable securities | (126,138) | | | — | |
Sales and redemption of marketable securities | 85,125 | | | — | |
Net cash used for investing activities | (41,686) | | | (67) | |
Cash flows from financing activities: | | | |
| | | |
Proceeds from exercise of share options | 1,710 | | | — | |
Proceeds from issuance of redeemable convertible preferred shares | — | | | 3,000 | |
Issuance costs related to redeemable convertible preferred shares | — | | | (60) | |
Net cash provided by financing activities | 1,710 | | | 2,940 | |
Effect of exchange rate changes on cash and cash equivalents | (1,289) | | | 177 | |
Net decrease in cash, cash equivalents and restricted cash | $ | (93,773) | | | $ | (91,726) | |
Cash and cash equivalents, and restricted cash—beginning of period | 248,182 | | | 254,350 | |
Cash and cash equivalents, and restricted cash—ending of period | $ | 154,409 | | | $ | 162,624 | |
Cash and cash equivalents—end of period | $ | 134,334 | | | $ | 142,624 | |
Restricted cash—end of period | $ | 20,075 | | | $ | 20,000 | |
Cash and cash equivalents, and restricted cash—ending of period | $ | 154,409 | | | $ | 162,624 | |
Supplemental disclosure of cash information | | | |
Cash paid for income taxes | $ | 343 | | | $ | — | |
Supplemental disclosure of non-cash operating activities: | | | |
Right-of-use assets obtained in exchange for lease obligations | $ | 1,233 | | | $ | — | |
Issuance costs in accounts payable and other accrued liabilities | $ | — | | | $ | 1,358 | |
Purchase of property and equipment in accounts payable | $ | 938 | | | $ | — | |
See accompanying notes to the consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Share and per Share Data)
(Unaudited)
1. Nature of Business
LianBio (“LianBio” or the “Company”) is a global, science-driven biopharmaceutical company dedicated to developing and commercializing innovative medicines for patients with unmet medical needs, with an initial focus on in-licensing assets for Greater China and other Asian markets.
The Company was incorporated in the Cayman Islands in July 2019 and maintains its Chinese headquarters in Shanghai, China. The Company conducts its corporate activities at its United States headquarters located in Princeton, New Jersey.
On November 3, 2021, the Company completed its initial public offering (“IPO”) through an underwritten sale of 20,312,500 American Depositary Shares (“ADSs") representing 20,312,500 ordinary shares at a price of $16.00 per share. Following the close of the IPO, on December 1, 2021, the underwriters partially exercised their option to purchase additional shares and purchased an additional 593,616 ADSs at the IPO price of $16.00 per ADS. The Company received gross proceeds of $334.5 million in connection with the IPO and subsequent exercise of the underwriters’ option and aggregate net proceeds of $304.8 million after deducting underwriting discounts, commissions and other offering expenses.
Concurrent with the IPO, all of the Company’s convertible preferred shares then-outstanding were automatically converted into an aggregate of 64,467,176 ordinary shares and were reclassified into permanent equity. Following the IPO, there were no preferred shares outstanding.
2. Significant Accounting Policies
(A) Basis of presentation
The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, which include the People’s Republic of China (“PRC”) registered entities directly owned by the Company. All intercompany accounts and transactions have been eliminated in consolidation.
The interim balance sheet as of June 30, 2022, and the interim consolidated statements of operations and comprehensive loss, changes in redeemable convertible preferred shares and shareholders’ equity (deficit) for the three and six months ended June 30, 2022 and 2021, and the cash flows for the six months ended June 30, 2022 and 2021 are unaudited. These unaudited interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, which consist of only normal recurring adjustments, necessary for the fair statement of the Company’s financial information. The financial data and other information disclosed in these notes related to the three and six month periods are also unaudited. The interim results for the three and six months ended June 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods or any future year or period.
(B) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported financial position at the date of the financial statements and the reported results of operations during the reporting period. Such estimates and assumptions affect the reported amounts of assets, liabilities, and expenses, and disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The only material estimates in the accompanying financial statements are the fair value of warrants, share-based compensation, and share options. Actual results could differ from those used in evaluating these accounting estimates.
(i) Concentration of Credit Risk and Other Risks and Uncertainties
In March 2020, the World Health Organization declared the global novel coronavirus disease 2019 (“COVID-19”) outbreak a pandemic. The Company’s operations have not been significantly impacted by the COVID-19 pandemic. However, the Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic will have on its financial condition and operations, including planned clinical trials. The impact of the COVID-19 pandemic on the Company’s financial performance will depend on future developments, including the duration and spread of the pandemic and related governmental advisories and restrictions. These developments and the impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted for an extended period, the Company’s results may be materially adversely affected.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents in deposits at financial institutions that exceed federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to material credit risk due to the financial position of the banking institutions. The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.
The Company’s results of operations involve numerous risks and uncertainties. Factors that could affect the Company’s operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials, uncertainty of regulatory approval of the Company’s potential product candidates, uncertainty of market acceptance of its product candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals and sole source suppliers.
Each of the Company’s product candidates require approvals from the National Medical Products Administration (“NMPA”) in China and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company is denied approval, approval is delayed or the Company is unable to maintain approval for any product candidate, such events could have a materially adverse impact on the Company’s business.
(ii) Liquidity
The Company has incurred operating losses since inception and had an accumulated deficit of $430.4 million as of June 30, 2022 and $360.2 million as of December 31, 2021. The Company’s cash and cash equivalents and marketable securities were $329.3 million and $383.2 million as of June 30, 2022 and December 31, 2021, respectively. The Company has financed its operations to date primarily through equity capital raises.
The Company believes that existing capital resources, including the net proceeds from the IPO in November 2021, will be sufficient to meet projected operating requirements for at least 12 months from the date of issuance of the accompanying consolidated financial statements, though it expects to continue to incur operating losses and negative operating cash flows. The Company will be required to raise additional capital to fund future operations, however, no assurance can be given as to whether additional needed financing will be available on terms acceptable to the Company, if at all. If sufficient funds on acceptable terms are not available when needed, the Company may be required to curtail planned activities to preserve cash resources. These factors may adversely impact the Company’s ability to achieve its business objectives and would likely have an adverse effect on its future business prospects, or even its ability to remain a going concern.
(C) Significant Accounting Policies Update
The Company’s significant accounting policies are disclosed in Note 2, Significant Accounting Policies in the Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the Company’s significant accounting policies during the three and six months ended June 30, 2022.
(D) Recently Issued Accounting Pronouncements Not Yet Adopted
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. As an emerging growth company, the Company has elected to “opt out” of such extended transition period for the implementation of new or revised accounting standards and, as a result, the Company will comply with new or revised accounting standards on the same timeline as other public companies. The Company has evaluated recent accounting pronouncements and believes that there are none that will have a material impact on its financial position or results of operations upon adoption.
3. Material Agreements
License Agreement with QED Therapeutics, Inc.
In October 2019, the Company entered into a license agreement (as subsequently amended, the “QED License Agreement”) with QED Therapeutics, Inc. (“QED”), under which the Company obtained an exclusive license under certain patents and know-how (including patents and know-how that QED licensed from QED’s upstream licensor) to develop, manufacture, use, sell, import, and commercialize QED’s ATP-competitive, FGFR1-3 tyrosine kinase inhibitor, infigratinib, in pharmaceutical products in the licensed territory of Mainland China, Macau, Hong Kong, Taiwan, Thailand, Singapore and South Korea, in the licensed field of human prophylactic and therapeutic uses in cancer indications. In September 2020, the Company entered into an amendment with QED to reduce the licensed territories to include Mainland China, Macau and Hong Kong. In December 2021, the Company entered into a second amendment with QED to modify the Company’s development obligations with respect to certain clinical trials, and change the development milestone payments the Company owes to QED and the royalty rates for the tiered royalties on net sales of licensed products the Company will pay to QED. Under the QED License Agreement, QED received a nonrefundable upfront payment of $10.0 million and was granted warrants to purchase 100,000 ordinary shares in Lian Oncology, a subsidiary of LianBio, valued at $1.0 million. Pursuant to ASC 505-50, as the fair value of the warrants were more reliably determinable than the fair value of the benefits received from the licensing agreement, the Company valued the warrants using the Black-Scholes Model. The warrants were issued in three tranches with the aggregate number of shares across all tranches equaling 10% of the fully diluted equity of Lian Oncology as of the issue date. Vesting of the warrant shares are linked to regulatory milestones and the warrants expire 10 years from the issue date. The amended and restated option agreement also provides QED with the option to choose to either convert the warrant (“Subsidiary Warrant”) into ordinary shares of the Company (“Parent Company Shares”) or a warrant to purchase a certain number of Parent Company Shares (“Parent Company Warrant”) immediately prior to an IPO of the Company. In the event QED chooses to convert the Subsidiary Warrant into Parent Company Shares, the number of Parent Company Shares QED is entitled to receive would be calculated as the aggregate fair market value of the ordinary shares of Lian Oncology that are under the Subsidiary Warrant, divided by the per share fair market value of the Parent Company Shares, on a fully diluted and as-converted basis and as of the date the Company sent QED the notice of the IPO. In the event QED chose to convert the Subsidiary Warrant into the Parent Company Warrant, the number of Parent Company Shares under the Parent Company Warrant QED was entitled to receive would have been calculated as the aggregate intrinsic value of the Subsidiary Warrant (the number of the ordinary shares of Lian Oncology under the Subsidiary Warrant multiplied by the difference between the strike price of the Subsidiary Warrant and the per share fair market value of Lian Oncology), divided by the per share intrinsic value of the Parent Company Warrant (the difference between the strike price of the Parent Company Warrant and the per share fair market value of Parent Company Shares), on a fully diluted and as-converted basis on the date of the warrant conversion. This conversion feature was not required to be bifurcated as it is clearly and closely related to the equity host instrument, pursuant to ASC 815. On October 18, 2021, based on the conversion feature, LianBio issued to QED a warrant to purchase 347,569 of its ordinary shares at an exercise price of $0.000017100448 per share and, concurrently with such issuance, the Subsidiary Warrant was deemed to be performed and settled in full and was irrevocably terminated. The QED License Agreement also required the Company to refund QED for costs incurred on the study through the execution date which was determined to be $2.8 million. Additionally, QED is entitled to receive from the Company development milestone payments of up to $7.0 million upon achievement of specified development milestones, and sales milestone payments of up to $87.5 million based on cumulative net sales of infigratinib, in addition to tiered royalties on net sales of licensed products at the greater of (a) percentage rates in the mid- to high-teens on the net sales of the licensed products, or (b) the applicable rate payable under QED’s agreement with its upstream licensor (capped in the mid-teens).
License Agreement with MyoKardia
In August 2020, the Company entered into an exclusive license agreement (the “MyoKardia License Agreement”) with MyoKardia Inc. (“MyoKardia,” now a wholly-owned subsidiary of Bristol-Myers Squibb (“BMS”)), under which the Company obtained an exclusive license under certain patents and know-how of MyoKardia to develop, manufacture, use, sell, import and commercialize MyoKardia’s proprietary compound, mavacamten, in the licensed territory of Mainland China, Hong Kong, Macau, Taiwan, Thailand and Singapore, and in the licensed field of any indication in humans, which includes any prophylactic or therapeutic use in humans. Under the MyoKardia License Agreement, MyoKardia received a nonrefundable upfront payment of $40.0 million and was granted a warrant to purchase 170,000 ordinary shares in Lian Cardiovascular, a subsidiary of LianBio, valued at $33.8 million. Pursuant to ASC 505-50, as the fair value of the warrants were more reliably determinable than the fair value of the benefits received from the licensing agreement, the Company valued the warrants using the Black-Scholes Model and the underlying assumptions are discussed in further detail in Note 10 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The warrants, representing 17% of the fully diluted equity of Lian Cardiovascular, are exercisable by MyoKardia at any time after issuance. The amended and restated option agreement also provides MyoKardia with the option to choose to either convert the warrant (“Subsidiary Warrant”) into ordinary shares of the Company (“Parent Company Shares”) or a warrant to purchase a certain number of Parent Company Shares (“Parent Company Warrant”) immediately prior to an IPO of the Company. MyoKardia was entitled to choose to convert the Subsidiary Warrant into Parent Company Shares, and the number of Parent Company Shares MyoKardia was entitled to receive would have been calculated as the aggregate fair market value of the ordinary shares of Lian Cardiovascular that are under the Subsidiary Warrant, divided by the per share fair market value of the Parent Company Shares, on a fully diluted and as-converted basis on the date the Company sent MyoKardia the notice of the IPO. Alternatively, MyoKardia was entitled to choose to convert the Subsidiary Warrant into the Parent Company Warrant, the number of Parent Company Shares under the Parent Company Warrant MyoKardia was entitled to receive would be calculated as the aggregate intrinsic value of the Subsidiary Warrant (the number of the ordinary shares of Lian Cardiovascular under the Subsidiary Warrant multiplied by the difference between the strike price of the Subsidiary Warrant and the per share fair market value of Lian Cardiovascular), divided by the per share intrinsic value of the Parent Company Warrant (the difference between the strike price of the Parent Company Warrant and the per share fair market value of Parent Company Shares), on a fully diluted and as-converted basis on the date of the warrant conversion. This conversion feature was not required to be bifurcated as it was clearly and closely related to the equity host instrument, pursuant to ASC 815. As of October 12, 2021, MyoKardia elected not to exercise this option and, therefore, continues to hold its warrant to purchase 170,000 ordinary shares in Lian Cardiovascular. MyoKardia’s option to convert the warrant irrevocably terminated upon the completion of the Company’s IPO. Additionally, MyoKardia was entitled to receive a nonrefundable financing milestone payment of $35.0 million upon a specified financing event, which occurred on October 29, 2020. The financing milestone was recorded at present value upon execution of the MyoKardia License Agreement, with total imputed interest of $2.3 million accreted under the effective interest method through the date the liability was settled. The financing milestone was paid to MyoKardia in December 2020 as a result of the Series A Preferred financing. Additionally, MyoKardia is entitled to receive from the Company development milestone payments of up to $60.0 million upon achievement of specified development milestones, and sales milestone payments of up to $87.5 million based on cumulative net sales of mavacamten, plus tiered royalties on net sales ranging from the low to upper-teens. As of June 30, 2022, the Company has paid for the first development milestone of $5.0 million.
Navire License
In August 2020, pursuant to the BridgeBio exclusivity agreement, the Company entered into an exclusive license agreement with Navire Pharma, Inc. (“Navire”), a BridgeBio affiliate. Pursuant to the license agreement, Navire granted to the Company an exclusive, sublicensable license under certain patents and know-how of Navire to develop, manufacture, use, sell, import and commercialize Navire’s proprietary SHP2 inhibitor, BBP-398 (formerly known as IACS-15509) in the licensed territory of Mainland China, Hong Kong, Macau, Taiwan, Thailand, Singapore, and South Korea. Under the license agreement, Navire received a nonrefundable upfront payment of $8.0 million. Additionally, Navire is entitled to receive from the Company development milestone payments of up to $24.5 million upon achievement of specified development milestones, and sales milestone payments of up to $357.6 million upon achievement of specified commercialization milestones, plus tiered royalties on net sales ranging from approximately 5-15% on the net sales of the licensed products. The Company paid the first development milestone of $8.5 million for IND acceptance in the PRC during the third quarter of 2021.
Pfizer Strategic Collaboration
In November 2020, the Company entered into a strategic collaboration agreement (the “Pfizer Agreement”) with Pfizer Inc. (“Pfizer”), pursuant to which Pfizer will contribute up to $70.0 million of restricted, non-dilutive capital (the “Funds”), including a $20.0 million upfront payment, toward the Company’s in-licensing and co-development activities in Greater China. The Company has accounted for the Pfizer Agreement as a contract to perform research and development services for others under ASC 730-20 and the consideration received for performing these services will be recognized as contra-R&D in the consolidated statement of operations as the services are performed. Upon receipt of the $20.0 million upfront payment in the first quarter of 2021, the upfront payment was recorded as restricted cash within consolidated balance sheet and will remain restricted until such time as the upfront payment is utilized for specified in-licensing and co-development activities or until the Pfizer Agreement terminates. Under the Pfizer Agreement, Pfizer and LianBio will form a joint collaboration committee to discuss potential third party in-license opportunities and development and commercialization of the Company’s products in Greater China. In the event the Company seeks to engage a third-party commercialization partner with respect to the commercialization of the Company’s future products in Greater China, Pfizer will have a right to opt into such product. Upon opting in, a portion of the Funds will be used to pay for development and commercialization costs of such product and Pfizer will thereafter have a right of first negotiation and right of last refusal to obtain the commercialization rights of such product in Greater China, in each instance for additional, separate financial consideration. During the collaboration, Pfizer may provide in-kind support to us for marketing, development and regulatory activities.
ReViral License
In March 2021, the Company entered into an exclusive license agreement (the “ReViral License Agreement”) with ReViral Ltd. (“ReViral,” now a wholly-owned subsidiary of Pfizer). Pursuant to the license agreement, ReViral granted to the Company an exclusive, sublicensable license under the licensed patent rights and know-how to develop, manufacture and commercialize novel antiviral therapeutics that target respiratory syncytial virus in Mainland China, Macau, Hong Kong, and Singapore. Under the license agreement, ReViral received a nonrefundable upfront payment of $14.0 million. Additionally, ReViral is entitled to receive payments from the Company totaling an aggregate of up to $105.0 million upon the achievement of specified development and commercial milestones, up to $45.0 million and $60.0 million, respectively, plus tiered royalties on net sales ranging from ten to the low-teens.
Tarsus License
In March 2021, the Company entered into an exclusive license agreement (the “Tarsus License Agreement”) with Tarsus Pharmaceuticals, Inc. (“Tarsus”). Pursuant to the license agreement, Tarsus granted to the Company an exclusive, sublicensable license under the licensed patent rights and know-how to develop, manufacture and commercialize TP-03 for the treatment of patients with Demodex blepharitis and Meibomian Gland Disease in Mainland China, Macau, Hong Kong and Taiwan. Under the license agreement, Tarsus received a nonrefundable upfront payment of $15.0 million and was granted three warrants to purchase 125,000 ordinary shares in Lian Ophthalmology, a subsidiary of LianBio, valued at $9.4 million (the “Tarsus Warrants”). Pursuant to ASC 505-50, as the fair value of the warrants were more reliably determinable than the fair value of the benefits received from the licensing agreement, the Company valued the warrants using the Black-Scholes Model and the underlying assumptions are discussed in further detail in Note 10 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The warrants were issued in three tranches with the aggregate number of shares across all tranches equaling 12.5% of the fully diluted equity of Lian Ophthalmology as of the issue date. Vesting of the warrant shares are linked to regulatory milestones and the warrants expire 10 years from the issue date. Pursuant to a related option agreement (the “Tarsus Option Agreement”), Tarsus also had the option to convert the warrants into ordinary shares of the Company or warrants to purchase a certain number of the Company’s ordinary shares based on appreciation of the value in the Lian Ophthalmology since the inception of the Tarsus License Agreement. This conversion feature was not required to be bifurcated as it was clearly and closely related to the equity host instrument, pursuant to ASC 815. On October 18, 2021, Tarsus exercised its options to convert the Tarsus Warrants under the Tarsus Option Agreement and the Company subsequently issued to Tarsus 78,373 of its ordinary shares and two warrants to purchase an aggregate of 156,746 of its ordinary shares at an exercise price of $0.000017100448 per share. Following the issuances, the Tarsus Warrants were irrevocably terminated. On June 6, 2022, Tarsus exercised one warrant and the Company subsequently issued 78,373 of its ordinary shares at an exercise price of $0.000017100448 per share. Additionally, Tarsus is entitled to receive a nonrefundable second milestone payment of $10.0 million due and payable within forty-five days following the effective date. Furthermore, Tarsus is entitled to receive payments from the Company totaling an aggregate of up to $175.0 million upon the achievement of specified development and commercial milestones, up to $75.0 million and $100.0 million, respectively, plus tiered royalties at percentage rates ranging from the low- to high-teens on net sales. In the second quarter of 2022, the Company was notified that Tarsus had achieved a certain development milestone and subsequently paid $15 million in June 2022. As of June 30, 2022, the Company has paid an aggregate of $45.0 million to Tarsus as a result of the achievement of various development milestones.
Landos License
In May 2021, the Company entered into an exclusive license agreement (the “Landos License Agreement”) with Landos BioPharma, Inc. (“Landos”). Pursuant to the license agreement, Landos granted to the Company an exclusive, sublicensable license under the licensed patent rights and know-how to develop, manufacture and commercialize novel, gut-restricted small molecule omilancor (formerly known as BT-11) and NX-13 for the treatment of inflammatory bowel disease, that targets the NLRX1 pathway in Mainland China, Hong Kong, Macau, Taiwan, Cambodia, Indonesia, Myanmar, Philippines, Singapore, South Korea, Thailand and Vietnam. Under the license agreement, Landos received a nonrefundable upfront payment of $18.0 million. Additionally, Landos is entitled to receive payments from the Company totaling an aggregate of up to $200.0 million upon the achievement of specified development and commercial milestones, up to $95.0 million and $105.0 million, respectively, plus tiered royalties at percentage rates ranging from the low- to the mid-teens on net sales.
Nanobiotix License
In May 2021, the Company entered into an exclusive license agreement (the “Nanobiotix License Agreement”) with Nanobiotix S.A. (“Nanobiotix”). Pursuant to the license agreement, Nanobiotix granted to the Company an exclusive, sublicensable license under the licensed patent rights and know-how to develop and commercialize NBTXR3, a potential first-in-class radioenhancer in Mainland China, Hong Kong, Taiwan, Macau, South Korea, Singapore and Thailand. Under the license agreement, Nanobiotix received a nonrefundable upfront payment of $20.0 million. Additionally, Nanobiotix is entitled to receive payments from the Company totaling an aggregate of up to $220.0 million upon the achievement of specified development and commercial milestones, up to $65.0 million and $155.0 million, respectively, plus tiered royalties of 10-13% of net sales.
Lyra License
In May 2021, the Company entered into an exclusive license agreement (the “Lyra License Agreement”) with Lyra Therapeutics, Inc. (“Lyra”). Pursuant to the license agreement, Lyra granted to the Company an exclusive, sublicensable license under the licensed patent rights and know-how to develop and commercialize LYR-210, an anti-inflammatory, intra-nasal drug matrix in late-stage development that is designed to treat chronic rhinosinusitis in Mainland China, Hong Kong, Taiwan, Macau, South Korea, Singapore and Thailand. Under the license agreement, Lyra received a nonrefundable upfront payment of $12.0 million. Additionally, Lyra is entitled to receive payments from the Company totaling an aggregate of up to $135.0 million upon the achievement of specified development and commercial milestones, up to $40.0 million and $95.0 million, respectively, plus tiered royalties from the low- to high-teens on net sales. As of June 30, 2022, the Company has paid for the first development milestone of $5.0 million.
4. Marketable Securities and Fair Value Measurements
The following is a summary of marketable securities accounted for as available-for-sale securities at June 30, 2022 and December 31, 2021: | | | | | | | | | | | | | | | | | | | | | | | |
As of June 30, 2022 (in thousands) | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
Commercial paper | $ | 106,388 | | | $ | — | | | $ | (450) | | | $ | 105,938 | |
Corporate debt securities | 14,259 | | | — | | | (167) | | | 14,092 | |
Government obligations | 75,373 | | | — | | | (438) | | | 74,935 | |
Total | $ | 196,020 | | | $ | — | | | $ | (1,055) | | | $ | 194,965 | |
| | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2021 (in thousands) | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
Commercial paper | $ | 145,894 | | | $ | 55 | | | $ | — | | | $ | 145,949 | |
Corporate debt securities | 4,138 | | | — | | | — | | | 4,138 | |
Government obligations | 4,986 | | | — | | | (6) | | | 4,980 | |
Total | $ | 155,018 | | | $ | 55 | | | $ | (6) | | | $ | 155,067 | |
The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of June 30, 2022 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of June 30, 2022 (in thousands) | Securities in an unrealized loss position less than 12 months | | Securities in an unrealized loss position greater than 12 months | | Total |
| Unrealized losses | | Fair Value | | Unrealized losses | | Fair Value | | Unrealized losses | | Fair Value |
Commercial paper | $ | (450) | | | $ | 105,938 | | | $ | — | | | $ | — | | | $ | (450) | | | $ | 105,938 | |
Corporate debt securities | (167) | | | 14,092 | | | — | | | — | | | (167) | | | 14,092 | |
Government obligations | (438) | | | 74,935 | | | — | | | — | | | (438) | | | 74,935 | |
Total | $ | (1,055) | | | $ | 194,965 | | | $ | — | | | $ | — | | | $ | (1,055) | | | $ | 194,965 | |
The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position for a period of less than and greater than 12 months as of December 31, 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2021 (in thousands) | Securities in an unrealized loss position less than 12 months | | Securities in an unrealized loss position greater than 12 months | | Total |
| Unrealized losses | | Fair Value | | Unrealized losses | | Fair Value | | Unrealized losses | | Fair Value |
Commercial paper | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Corporate debt securities | — | | | — | | | — | | | — | | | — | | | — | |
Government obligations | (6) | | | 4,980 | | | — | | | — | | | (6) | | | 4,980 | |
Total | $ | (6) | | | $ | 4,980 | | | $ | — | | | $ | — | | | $ | (6) | | | $ | 4,980 | |
Marketable securities on the balance sheet at June 30, 2022 and December 31, 2021 are as follows:
| | | | | | | | | | | |
| June 30, 2022 |
| Less than 12 Months | | More Than 12 Months |
Commercial paper | $ | 105,938 | | | $ | — | |
Corporate debt securities | 14,092 | | | — | |
Government obligations | 74,935 | | | — | |
Total Marketable securities | $ | 194,965 | | | $ | — | |
| | | | | | | | | | | |
| December 31, 2021 |
| Less than 12 Months | | More Than 12 Months |
Commercial paper | $ | 145,949 | | | $ | — | |
Corporate debt securities | 4,138 | | | — | |
Government obligations | — | | | 4,980 | |
Total Marketable securities | $ | 150,087 | | | $ | 4,980 | |
The Company classifies all of its securities as current as they are all available for sale and are available for current operations.
The following tables present information about the Company's financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:
| | | | | | | | | | | | | | | | | | | | | | | |
As of June 30, 2022 (in thousands) | Level 1 | | Level 2 | | Level 3 | | Total |
Cash equivalents: | | | | | | | |
Money market funds | $ | 64,774 | | | $ | — | | | $ | — | | | $ | 64,774 | |
Commercial paper | — | | | 30,485 | | | — | | | 30,485 | |
| | | | | | | |
Marketable securities: | | | | | | | |
Commercial paper | — | | | 105,938 | | | — | | | 105,938 | |
Corporate debt securities | — | | | 14,092 | | | — | | | 14,092 | |
Government obligations | — | | | 74,935 | | | — | | | 74,935 | |
Total | $ | 64,774 | | | $ | 225,450 | | | $ | — | | | $ | 290,224 | |
| | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2021 (in thousands) | Level 1 | | Level 2 | | Level 3 | | Total |
Cash equivalents: | | | | | | | |
Money market funds | $ | 67,289 | | | $ | — | | | $ | — | | | $ | 67,289 | |
Commercial paper | — | | | 80,541 | | | — | | | 80,541 | |
Corporate debt securities | — | | | 8,165 | | | — | | | 8,165 | |
Marketable securities: | | | | | | | |
Commercial paper | — | | | 145,949 | | | — | | | 145,949 | |
Corporate debt securities | — | | | 4,138 | | | — | | | 4,138 | |
Government obligations | — | | | 4,980 | | | — | | | 4,980 | |
Total | $ | 67,289 | | | $ | 243,773 | | | $ | — | | | $ | 311,062 | |
5. Property and Equipment, Net
Property and equipment consisted of the following:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
Leasehold improvements | $ | 2,877 | | | $ | 807 | |
Furniture and fixtures | 104 | | | 65 | |
Computer equipment and software | 631 | | | 471 | |
Construction in progress | 393 | | | 1,145 | |
| 4,005 | | | 2,488 | |
Accumulated depreciation | (1,013) | | | (606) | |
Total property and equipment, net | $ | 2,992 | | | $ | 1,882 | |
Total depreciation related to property and equipment was $0.2 million and $0.4 million for the three and six months ended June 30, 2022, respectively, and $0.1 million and $0.1 million for the three and six months ended June 30, 2021, respectively.
6. Prepaid Expense and Other Current Assets
Prepaid expense and other current assets consist of the following:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
Advance payments to suppliers and rent deposit | $ | 1,750 | | | $ | 1,499 | |
Prepaid insurance | 3,007 | | | 7,378 | |
Deferred costs | 3 | | | 3 | |
VAT receivable | 1,600 | | | 1,176 | |
Other prepaid expenses | 781 | | | 298 | |
Total prepaid expenses and other current assets | $ | 7,141 | | | $ | 10,354 | |
7. Accrued Expenses
Accrued expenses consist of the following:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
Employee compensation and related benefits | $ | 3,426 | | | $ | 2,309 | |
Professional fees | 6,068 | | | 3,625 | |
Consulting and contracted research | 8,323 | | | 3,925 | |
Other | 155 | | | 117 | |
Total accrued expenses | $ | 17,972 | | | $ | 9,976 | |
8. Commitments and Contingencies
The Company is subject to claims and assessments from time to time in the ordinary course of business. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. As of June 30, 2022 and December 31, 2021, there have been no such matters identified. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within the range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The Company is not currently party to any material legal proceedings.
9. Share-Based Compensation
In December 2019, the Company adopted a shareholder-approved share-based compensation plan (the “2019 Plan”), which permits the granting of incentive share options, nonqualified share options, share awards and certain other awards to its employees, members of its Board of Directors and consultants.
In connection with the IPO, the Company adopted a shareholder-approved share-based compensation plan (the “2021 Equity Plan”), which permits the granting of incentive share options, nonqualified share options, share awards and certain other awards to its employees, members of its Board of Directors and consultants. The maximum number of shares that may be delivered in satisfaction of awards under the 2021 Equity Plan was initially approximately 14.2 million shares, plus the number of shares that remained available for issuance under the 2019 Plan and that may again become available for issuance under such plan, not to exceed approximately 10.7 million shares in the aggregate, and an annual increase, to be added as of January 1st of each year from January 1, 2022, to January 1, 2031, equal to the lesser of (i) four percent (4%) of the number of shares outstanding as of such date; and (ii) the number of shares determined by the Board of Directors on or prior to such date for such year. Subsequent to the effectiveness of the 2021 Equity Plan, no additional awards have been made pursuant to the 2019 Plan. However, any outstanding awards granted under the 2019 Plan will remain outstanding, subject to the terms of the 2019 Plan and award agreements. Through June 30, 2022, there were awards outstanding for approximately 8.6 million ordinary shares under the 2019 Plan and approximately 5.3 million ordinary shares under the 2021 Equity Plan.
Share Option Awards
During the six months ended June 30, 2022, the Company issued options to purchase a total of 433,874 ordinary shares to various employees, directors and board members with a weighted-average exercise price of $3.46 per share option and a weighted-average fair value of $2.37 per share option. The fair-value based method for valuing each share option grant on the grant date uses the Black-Scholes Model, which incorporates a number of valuation assumptions. The weighted-average fair value was estimated based on the following assumptions: risk-free interest rate of 2.56% - 3.19%; expected dividend yield of 0.00%; expected share price volatility of 76.83% - 79.65%; and expected term of 5.50 - 6.08 years.
During the six months ended June 30, 2021 the Company issued options to purchase 3,820,173 ordinary shares with a weighted-average exercise price of $6.84 per share option and a weighted-average fair value of $3.47 per share option. The fair-value based method for valuing each share option grant on the grant date uses the Black-Scholes Model, which incorporates a number of valuation assumptions. The weighted-average fair value was estimated based on the following assumptions: risk-free interest rate of 0.09% - 1.22%; expected dividend yield of 0.00%; expected share price volatility of 60.00%; and expected term of 0.50 - 6.25 years.
As of June 30, 2022, $42.0 million of total unrecognized expense related to non-vested share options is expected to be recognized over a weighted average period of 3.10 years from the date of grant. As of June 30, 2021, $19.8 million of total unrecognized expense related to non-vested share options is expected to be recognized over a weighted average period of 3.56 years from the date of grant. Options granted to senior management and employees generally vest in equal annual increments over four years and grants issued subsequent to the IPO generally vest over four years with 25% vesting over the first year and monthly thereafter.
Performance Share Awards
There were no performance share awards granted during the six months ended June 30, 2022. During the six months ended June 30, 2021 the Company granted certain option awards with both market-vesting conditions and service-vesting conditions to a member of management. The market condition is based on the Company’s enterprise value. Per the terms of the award, these options will vest in two equal tranches based on the following thresholds:
1.50% of the performance options will vest upon satisfaction of the Company achieving an enterprise value of not less than $2.0 billion at any time after the grant date in accordance with the service condition described below.
2. 50% of the performance options will vest upon the satisfaction of the Company achieving an enterprise value of not less than $4.0 billion at any time after the grant date in accordance with the service condition described below.
The enterprise value shall be equal to the number of outstanding ordinary shares of the Company multiplied by the volume weighted average price of a single ordinary share averaged over a period of thirty days ending one day prior to the date of the valuation.
Subject to the market conditions described above, the option contains explicit service vesting conditions, with one-fourth vesting each year over four years.
The issued options are to purchase 1,938,615 ordinary shares with a weighted-average exercise price of $6.90 per share option and a weighted-average fair value of $4.72 per share option. The Company used a Monte-Carlo simulation to determine the grant date fair value for these awards, which takes into consideration the possible outcomes pertaining to the enterprise value market condition based on the following assumptions: risk-free interest rate of 0.81% - 1.63%; expected dividend yield of 0.0%; expected share price volatility of 47.07% - 80.64%; and expected term of 4.87 - 10.00 years.
As of June 30, 2022, there was $6.6 million of total unrecognized compensation cost related to outstanding performance share awards.
No performance-based share units (“PSUs”) were granted during the six months ended June 30, 2022 or 2021. As of June 30, 2022, there was $2.4 million of total unrecognized compensation cost related to outstanding PSUs.
Restricted Share Units
During the six months ended June 30, 2022, the Company granted 24,033 non-vested restricted share units (“RSUs”) to certain employees, with a weighted-average grant date fair value of $2.69 per RSU. As of June 30, 2022, there was $2.6 million of total unrecognized compensation expense related to non-vested RSUs. There were no RSUs granted during the six months ended June 30, 2021.
During the six months ended June 30, 2022 and 2021, the Company did not grant performance-based RSUs. As of June 30, 2022, there was $0.7 million of total unrecognized compensation expense related to non-vested performance-based RSUs. There was no unrecognized compensation expense related to non-vested performance-based RSUs as of June 30, 2021.
10. Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding. Diluted net loss per share is computed by dividing net loss by the weighted-average number of ordinary shares outstanding, plus all additional ordinary shares that would have been outstanding, assuming dilutive potential ordinary shares had been issued for other dilutive securities. For the three and six months ended June 30, 2022 and 2021, diluted and basic net loss per ordinary share were identical since potential ordinary shares were excluded from the calculation, as their effect was anti-dilutive.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 | | Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2022 | | Six Months Ended June 30, 2021 |
Numerator | | | | | | | |
Net Loss attributable to ordinary shareholders | $ | (42,391) | | | $ | (100,428) | | | $ | (70,117) | | | $ | (161,993) | |
Denominator | | | | | | | |
Weighted-average shares – basic and diluted | 107,922,501 | | | 20,477,338 | | | 107,600,767 | | | 20,477,338 | |
Net loss per ordinary share – basic and diluted | $ | (0.39) | | | $ | (4.90) | | | $ | (0.65) | | | $ | (7.91) | |
The following outstanding potentially dilutive securities were excluded from the calculation of diluted net loss per share, because including them would have been anti-dilutive during each period.
| | | | | | | | | | | |
| As of |
| June 30, 2022 | | June 30, 2021 |
Redeemable Convertible Preferred Shares | — | | | 11,024,178 | |
Employee Share Options | 13,183,057 | | | 11,670,902 | |
Non-vested restricted share units | 641,996 | | | — | |
QED Warrants | — | | | 100,000 | |
MyoKardia Warrant | 170,000 | | | 170,000 | |
Tarsus Warrants | — | | | 125,000 | |
Warrants in LianBio issued to QED and Tarsus | 425,942 | | | — | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes thereto as of and for the year ended December 31, 2021 and the related management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. You should read the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections of this report and the section entitled “Risk Factors” in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Some of the numbers included herein have been rounded for the convenience of presentation.
Overview
We are a global, science-driven biopharmaceutical company dedicated to developing and commercializing innovative medicines for patients with unmet medical needs, with an initial focus on in-licensing assets for Greater China and other Asian markets. We have assembled a pipeline of nine assets across five therapeutic areas, each with its own distinct value proposition and the potential to drive new standards of care across cardiovascular, oncology, ophthalmology, inflammatory disease and respiratory indications.
In November 2021, we completed an initial public offering (“IPO”) of our ordinary shares through the sale and issuance of 20,312,500 American Depositary Shares (“ADSs”), at a public offering price of $16.00 per ADS. Following the closing of the IPO, on December 1, 2021, the underwriters partially exercised their option to purchase additional shares and purchased an additional 593,616 ADSs at the initial public offering price of $16.00 per ADS. We received gross proceeds of $334.5 million in connection with the IPO and subsequent exercise of the underwriters’ option and aggregate net proceeds of $304.8 million after deducting underwriting discounts, commissions and other offering expenses.
The following diagram depicts our corporate structure as of June 30, 2022. As of the date of this Quarterly Report on Form 10-Q, the shares of each of our subsidiaries are 100% owned by the respective entity displayed immediately above that subsidiary. Certain warrant rights are outstanding and may be exercised in the future for equity interests in our Cayman parent entity, LianBio, and our subsidiary, Lian Cardiovascular, as described in “Note 10: Equity” in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 31, 2022. Currently, our corporate structure contains no variable interest entities.
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Within the organization, investor cash inflows have all been received by our parent Cayman entity, LianBio. Cash to fund our Chinese operations is transferred from our Cayman parent entity down through our Hong Kong entities and then into our Chinese entities through capital contributions. Cash to fund our operations in the United States is transferred from our Cayman parent entity down to our United States entity through a capital contribution.
Recent Business Highlights and Clinical Development Updates
Mavacamten
In April 2022, our partner Bristol Myers Squibb (“BMS”) presented data from two clinical trials of mavacamten at the American College of Cardiology 71st Annual Scientific Session. Data from the EXPLORER-LTE clinical trial demonstrated sustained improvements in clinically meaningful cardiovascular outcomes at weeks 48 and 84 in patients with symptomatic obstructive hypertrophic cardiomyopathy (“oHCM”) receiving mavacamten. Data from the Phase 3 VALOR-HCM clinical trial demonstrated the addition of mavacamten significantly reduced the need for septal reduction therapy (SRT) in patients with severely symptomatic oHCM who had been appropriate for SRT at baseline.
In April 2022, BMS announced U.S. Food and Drug Administration (“FDA”) approval of mavacamten for the treatment of adults with symptomatic New York Heart Association Class II-III oHCM to improve functional capacity and symptoms.
In May 2022, we announced topline results from a Phase 1 pharmacokinetics (“PK”) study evaluating mavacamten in Chinese healthy volunteers. A single oral administration of mavacamten in Chinese healthy adult subjects showed no new safety signals. The data demonstrated a favorable PK, safety and tolerability profile comparable to that observed in the Phase 1 PK study of mavacamten, conducted by our partner MyoKardia Inc. (“MyoKardia”), now a wholly owned subsidiary of BMS, in healthy volunteers in the United States.
In May 2022, we submitted a New Drug Application (“NDA”) to the Singapore Health Sciences Authority for mavacamten for the treatment of adults with symptomatic New York Heart Association Class II-III oHCM. The submission was based on the FDA approval of mavacamten.
In August 2022, we completed enrollment in the Phase 3 EXPLORER-CN clinical trial in Chinese patients with oHCM. We expect to report topline results from the trial in mid-2023.
TP-03
In May 2022, Tarsus Pharmaceuticals, Inc. (“Tarsus”) announced topline data from Saturn-2. The trial met all primary and secondary endpoints and TP-03 was found to be generally well tolerated. Tarsus has announced that the company will submit a New Drug Application to the FDA in the second half of 2022.
In August 2022, Tarsus announced the initiation of a Phase 2a clinical trial of TP-03 in patients with meibomian gland disease (MGD).
Infigratinib
In July 2022, we submitted a NDA to the Department of Health, the Hong Kong Special Administrative Region, China, for infigratinib for the treatment of adults with previously treated, unresectable, locally advanced or metastatic cholangiocarcinoma with a fibroblast growth factor receptor 2 (“FGFR2”) fusion or other rearrangement. The submission was based on the FDA approval of infigratinib.
LYR-210
In August 2022, we refined our development strategy for LYR-210. We plan to conduct a Phase 3 China standalone trial to support regulatory approval in China, leveraging the results of the ongoing Phase 3 trial of our development partner, Lyra Therapeutics, Inc., which is expected to complete enrollment in mid-2023.
Sisunatovir
In April 2022, our partner ReViral Ltd. (“ReViral”) announced that the Company has entered into a definitive agreement under which Pfizer Inc. will acquire ReViral and its respiratory syncytial virus therapeutic candidates, including sisunatovir. In June 2022, Pfizer announced that it completed its acquisition of ReViral.
BBP-398
In May 2022, our development partner BridgeBio entered into a licensing agreement with BMS to develop and commercialize BBP-398. We hold development and commercialization rights to BBP-398 in Greater China, Thailand, Singapore and South Korea.
NX-13
In August 2022, our development partner Landos Biopharma announced topline results from the company’s Phase 1b clinical trial of NX-13. The data showed that NX-13 was well tolerated following evaluation of multiple doses over four weeks compared with a placebo. Based on these data, Landos plans to initiate a Phase 2 clinical trial to evaluate the safety, efficacy and optimal dosing of NX-13 in ulcerative colitis patients.
Corporate Developments
In April 2022, we announced the formation of the LianBio Scientific Advisory Board (“SAB”). Our SAB is comprised of industry leaders in global drug development who are serving as strategic advisors to LianBio.
In April 2022, we announced the appointment of Wei Wei Chen to our Board of Directors. Ms. Chen brings over 17 years of experience serving as chief financial officer of companies in the consumer retail and healthcare sectors.
Factors Affecting our Results of Operations
Impact of the COVID-19 pandemic on our operations
Beginning in December 2019, the outbreak of the COVID-19 pandemic created business interruptions for companies globally, including us. For example, in the biotechnology sector, companies, including our company, have experienced delays in their ability to enroll patients at clinical trial sites because of the pandemic, potentially leading to delays in the regulatory approval process. Other outbreaks may occur, or there could be further resurgences of the COVID-19 pandemic (such as current outbreaks in certain locations in China, including locations in which we are conducting clinical trials, which have led to extensive lockdowns), which have caused and could further cause business disruptions in the future.
We have been carefully monitoring the COVID-19 pandemic and its impact on our business. We have taken important steps to ensure the workplace safety of our employees when working within our administrative offices, or when traveling to our clinical trial sites. We may take further actions as may be required by federal, state or local authorities.
To date, we have been able to continue our key business activities and advance our clinical programs. However, the COVID pandemic has impacted our clinical trial enrollment and it is possible that our clinical development timelines and business plans could be adversely affected. We maintain regular communication with our vendors and clinical sites to appropriately plan for, and mitigate, the impact of the COVID-19 pandemic on our operations.
Key Components of Results of Operations
Research and development expenses
We believe our ability to successfully develop product candidates will be a significant factor affecting our long-term competitiveness, as well as our future growth and development. Developing high quality product candidates requires a significant investment of resources over a prolonged period of time, and a core part of our strategy is to continue making sustained investment in this area.
We expect our research and development expense to increase significantly in connection with our ongoing activities, particularly as we advance the clinical development of our product candidates and initiate additional clinical trials of, and seek regulatory approval for, these and other future product candidates. These expenses include:
•payments made under third party licensing and asset acquisition agreements;
•employee-related expense, including salaries, related benefits, equity-based compensation and travel expenses for employees engaged in research and development functions;
•expense incurred in connection with the clinical development of our product candidates, including expenses incurred under agreements with contract research organizations (“CROs”);
•costs related to compliance with regulatory requirements; and
•facilities, depreciation and amortization, insurance and other direct and allocated expense incurred as a result of research and development activities.
The following table sets forth the components of our research and development expenses for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 | | Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2022 | | Six Months Ended June 30, 2021 |
Research and development expenses (in thousands): | | | | | | | |
Licensing fees | $ | 20,000 | | | $ | 88,500 | | | $ | 25,000 | | | $ | 136,915 | |
Employee related expense | 2,765 | | | 1,586 | | | 5,588 | | | 3,230 | |
CRO costs | 5,343 | | | 2,076 | | | 9,046 | | | 4,569 | |
Other costs | 483 | | | 868 | | | 1,286 | | | 1,669 | |
Total | $ | 28,591 | | | $ | 93,030 | | | $ | 40,920 | | | $ | 146,383 | |
Licensing arrangements
Our results of operations have been, and we expect them to continue to be, affected by our licensing, collaboration and development agreements. We are generally required to make upfront payments upon entry into such agreements and milestone payments upon the achievement of certain development, regulatory and commercial milestones for the relevant product candidate under these agreements, as well as tiered royalties based on net sales of the license products. These upfront payments and milestone payments upon the achievement of certain development and regulatory milestones are recorded in research and development expense in our consolidated financial statements and totaled $20.0 million and $25.0 million for the three and six months ended June 30, 2022, respectively, and $88.5 million and $136.9 million for the three and six months ended June 30, 2021, respectively.
The following table sets forth a breakdown of licensing fees by program for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2022 | | Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2022 | | Six Months Ended June 30, 2021 |
Licensing fees: | | | | | | | |
Mavacamten | $ | 5,000 | | | $ | — | | | $ | 5,000 | | | $ | — | |
BBP-398 | — | | | 8,500 | | | — | | | 8,500 | |
Sisunatovir | — | | | — | | | — | | | 14,000 | |
TP-03 | 15,000 | | | 30,000 | | | 15,000 | | | 64,415 | |
BT-11 and NX-13 | — | | | 18,000 | | | — | | | 18,000 | |
NBTXR3 | — | | | 20,000 | | | — | | | 20,000 | |
LYR-210 | — | | | 12,000 | | | 5,000 | | | 12,000 | |
Total | $ | 20,000 | | | $ | 88,500 | | | $ | 25,000 | | | $ | 136,915 | |
General and administrative expenses
Our general and administrative expenses consist primarily of salaries and other related costs for personnel in executive, finance and administrative functions. General and administrative expenses also include professional fees for legal, consulting, auditing, tax services and insurance costs.
We expect that our general and administrative expenses will increase in the future to support continued development and commercialization of our product candidates. These increases will likely include increased costs related to hiring additional personnel and fees to outside consultants, attorneys and accountants, among other expenses. Additionally, we have incurred and will continue to incur increased expenses associated with being a public company, including costs of additional personnel, accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and office insurance costs, and investor and public relations costs.
Interest income, net
Interest income, net consists of interest income received on our cash balances and marketable securities and from the amortization/accretion on the premiums/discounts on marketable securities.
Other income (expense), net
Other income (expense), net consists of unrealized gains and losses on foreign currencies held in our China subsidiary, Shanghai LianBio Development Co., Ltd., unrealized foreign exchange activity from the remeasurement of our intercompany payables, bank fees incurred on our cash balances and depositary fees related to our ADSs.
Income taxes
Provision for income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We expect income tax expense to increase over time as the Company continues to grow net income.
We recorded income tax expense of $0.0 million and $0.0 million for the three and six months ended June 30, 2022 and $1.0 million and $2.0 million for the three and six months ended June 30, 2021, respectively.
Results of operations
Comparison of the three months ended June 30, 2022 and June 30, 2021
The following table sets forth a summary of our consolidated results of operations for the periods indicated.
| | | | | | | | | | | |
| Three Months Ended June 30, 2022 | | Three Months Ended June 30, 2021 |
| | | |
| | | |
| | | |
Operating expenses (in thousands): | | | |
| | | |
Research and development | $ | 28,591 | | | $ | 93,030 | |
General and administrative | 14,551 | | | 6,461 | |
Total operating expenses | 43,142 | | | 99,491 | |
Loss from operations | (43,142) | | | (99,491) | |
Other income (expense): | | | |
Interest income, net | 553 | | | 106 | |
Other income (expense), net | 203 | | | (68) | |
Net loss before income taxes | (42,386) | | | (99,453) | |
Income taxes | 5 | | | 975 | |
Net loss | $ | (42,391) | | | $ | (100,428) | |
Research and development expenses
Research and development expenses decreased by $64.4 million from $93.0 million for the three months ended June 30, 2021 to $28.6 million for the three months ended June 30, 2022. For the three months ended June 30, 2022, research and development cost was primarily attributable to (i) $15.0 million related to a development milestone payment payable pursuant with our license agreement with Tarsus (the “Tarsus License Agreement”), (ii) $5.0 million related to a development milestone payment payable pursuant with our license agreement with MyoKardia (the “MyoKardia License Agreement”) and (iii) $3.3 million attributable to development activities to support our clinical trials. The remaining expense was attributable to professional fees.
For the three months ended June 30, 2021, research and development cost was primarily attributable to (i) $30.0 million in upfront and development milestone payments related to the Tarsus License Agreement, (ii) a $20.0 million upfront payment pursuant with our license agreement with Nanobiotix S.A. (the “Nanobiotix License Agreement”), (iii) $18.0 million upfront payment pursuant with our license agreement with Landos BioPharma, Inc. (the “Landos License Agreement”), (iv) $12.0 million upfront payment pursuant to our license agreement with Lyra (the “Lyra License Agreement”) (v) $8.5 million related to a development milestone payment payable pursuant to the exclusive license agreement entered into with Navire Pharma, Inc., co-development and license agreement with ReViral (the “ReViral License Agreement”), (vi) $2.1 million attributable to development activities to support our clinical trials and (vii) $1.6 million attributable to higher personnel-related expense, including share-based compensation expense, as a result of increased employee headcount. The remaining expense was attributable to development activities to support our clinical trials and professional fees.
General and administrative expenses
General and administrative expenses increased by $8.1 million from $6.5 million for the three months ended June 30, 2021 to $14.6 million for the three months ended June 30, 2022. The increase was primarily attributable to a $5.7 million increase in payroll and personnel-related expenses (including share-based compensation expense) for increased employee headcount and a $3.1 million increase in additional costs incurred due to operating as a publicly traded company.
Interest income
Interest income increased by $0.5 million from $0.1 million for the three months ended June 30, 2021 to $0.6 million for the three months ended June 30, 2022. The increase was primarily attributable to our investments in marketable securities.
Other income (expense), net
Other income (expense), net increased by $0.3 million from $(0.1) million for the three months ended June 30, 2021 to $0.2 million for the three months ended June 30, 2022. The increase was primarily attributable to depositary fees related to our ADSs. These increases were partially offset by realized foreign exchange losses on foreign currencies held in our China subsidiary, Shanghai LianBio Development Co., Ltd., and unrealized foreign exchange gain from the remeasurement of our intercompany payables.
Income taxes
Our income tax expense was $0.0 million, resulting in an effective income tax rate of 0.0% for the three months ended June 30, 2022. Our income tax expense was $1.0 million, resulting in an effective income tax rate of (1.0)%, for the three months ended June 30, 2021. The variation in the effective income tax rate was primarily due to the effect of certain nonrecurring taxable income in 2021.
Comparison of the six months ended June 30, 2022 and June 30, 2021
The following table sets forth a summary of our consolidated results of operations for the periods indicated.
| | | | | | | | | | | |
| Six Months Ended June 30, 2022 | | Six Months Ended June 30, 2021 |
| | | |
| | | |
| | | |
Operating expenses (in thousands): | | | |
| | | |
Research and development | $ | 40,920 | | | $ | 146,383 | |
General and administrative | 30,639 | | | 13,607 | |
Total operating expenses | 71,559 | | | 159,990 | |
Loss from operations | (71,559) | | | (159,990) | |
Other income (expense): | | | |
Interest income, net | 833 | | | 139 | |
Other income (expense), net | 620 | | | (192) | |
Net loss before income taxes | (70,106) | | | (160,043) | |
Income taxes | 11 | | | 1,950 | |
Net loss | $ | (70,117) | | | $ | (161,993) | |
Research and development expenses
Research and development expenses decreased by $105.5 million, from $146.4 million for the six months ended June 30, 2021 to $40.9 million for the six months ended June 30, 2022. For the six months ended June 30, 2022, research and development cost was primarily attributable to (i) $15.0 million related to a development milestone payment payable pursuant with the Tarsus License Agreement, (ii) $5.0 million related to a development milestone payment payable pursuant with the MyoKardia License Agreement, (iii) $5.0 million related to a development milestone payment payable pursuant with the Lyra License Agreement, (vi) $9.0 million attributable to development activities to support our clinical trials and (v) $5.6 million attributable to higher personnel-related expense, including share-based compensation expense, as a result of increased employee headcount. The remaining expense was attributable to professional fees.
For the six months ended June 30, 2021, research and development cost was primarily attributable to (i) $55.0 million in upfront milestone payments and $9.4 million of expenses related to warrants issued in connection with the Tarsus License Agreement, (ii) a $20.0 million upfront payment pursuant to the Nanobiotix License Agreement, (iii) a $18.0 million upfront payment pursuant to the Landos License Agreement, (iv) a $14.0 million upfront payment pursuant to the ReViral License Agreement, (v) a $12.0 million upfront payment pursuant to the Lyra License Agreement, and (vi) a $8.5 million development milestone payment pursuant to the exclusive license agreement entered into with Navire. The remaining expense was attributable to higher personnel-related expenses, including share-based compensation expense, and development activities to support our clinical trials and professional fees.
General and administrative expenses
General and administrative expenses increased by $17.0 million from $13.6 million for the six months ended June 30, 2021 to $30.6 million for the six months ended June 30, 2022. The increase was primarily attributable to a $10.4 million increase in payroll and personnel-related expenses (including share-based compensation expense) for increased employee headcount, a $6.2 million increase in additional costs incurred due to operating as a publicly traded company, and a $0.5 million increase, primarily attributable to legal service costs, consulting costs and accounting services.
Interest income, net
Interest income, net increased by $0.7 million from $0.1 million for the six months ended June 30, 2021 to $0.8 million for the six months ended June 30, 2022. The increase was primarily attributable to our investments in marketable securities.
Other income (expense), net
Other income (expense), net increased by $0.8 million from $(0.2) million for the six months ended June 30, 2021 to $0.6 million for the six months ended June 30, 2022. The increase was primarily attributable to depositary fees related to our ADSs. These increases were offset by realized losses on foreign currencies held in our China subsidiary, Shanghai LianBio Development Co., Ltd., and exchange rate changes in the current period impacting the remeasurement of our intercompany payables.
Income taxes
Our income tax expense was $0.0 million, resulting in an effective income tax rate of 0.0% for the six months ended June 30, 2022. Our income tax expense was $2.0 million, resulting in an effective income tax rate of (1.2)%, for the six ended June 30, 2021. The variation in the effective income tax rate was primarily due to the effect of certain nonrecurring taxable income in 2021.
Liquidity and capital resources
Sources of liquidity
Since our incorporation, our operations have been substantially financed with proceeds from sales of preferred shares as part of the Series Seed financing, the Series A financing, the issuance of the 2020 Convertible Notes and our IPO, which was completed in November 2021. As of June 30, 2022, we had cash and cash equivalents and marketable securities of $329.3 million.
We are a holding company with no operations of our own and, as such, we may rely on dividends and other distributions on equity paid by our Chinese subsidiaries to fund any cash and financing requirements we may have, including the funds necessary to pay dividends and other cash distributions to our shareholders or holders of our ADSs or to service any debt we may incur. Deterioration in the financial condition, earnings or cash flow of our subsidiaries for any reason, as well as any changes in Chinese laws or regulations, could limit or impair their ability to pay such distributions. For additional information, see “Part I—Item 1A—Risk Factors—Risks Related to Doing Business in China and Our International Operations—We may rely on dividends and other distributions on equity paid by our Chinese subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our Chinese subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Funding requirements
Our primary use of cash is to fund our operating expenditures, consisting of research and development expense (including activities within our clinical and regulatory initiatives and upfront and milestone payments) and general and administrative expense. Our use of cash is impacted by the timing and extent of the required payments for each of these activities.
To date, we have not generated any material revenue. We do not expect to generate revenue from the sale of our products unless and until we (i) complete development of any of our product candidates; (ii) obtain applicable regulatory approvals; and (iii) successfully commercialize or enter into collaborative agreements for our product candidates. We do not know with certainty when, or if, any of these items will ultimately occur. We expect to incur continuing significant losses for the foreseeable future and for our losses to increase as we ramp up our clinical development programs and begin activities related to commercial launch readiness. We may encounter unforeseen expenses, difficulties, complications, delays and other currently unknown factors that could adversely affect our business. Moreover, since the completion of our IPO, we have incurred and will continue to incur additional costs associated with operating as a publicly traded company.
We will require additional capital to develop our product candidates and fund our operations into the foreseeable future. We anticipate that we will eventually need to raise substantial additional capital, the requirements for which will depend on many factors, including:
•the number and scope of clinical programs we decide to pursue;
•the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates;
•the cost and timing associated with commercializing our product candidates, if they receive regulatory approval;
•the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive regulatory approval;
•the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time;
•the extent to which we acquire or in-license other product candidates and technologies;
•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•our ability to establish and maintain collaborations on favorable terms, if at all;
•our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates and, ultimately, the sale of our products, following regulatory approval;
•the impact of the COVID-19 pandemic and the Russian invasion of Ukraine on our clinical development or operations; and
•the costs associated with being a public company.
A change in the outcome of any of these or other variables with respect to the development and regulatory approval of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. If we raise additional funds by issuing equity securities, our shareholders may experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our ordinary shares, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our shareholders.
Adequate funding may not be available to us on acceptable terms or at all. Our potential inability to raise capital when needed could have a negative impact on our financial condition and our ability to pursue our additional licensing opportunities.
Cash flows
The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented:
| | | | | | | | | | | |
| Six Months Ended June 30, 2022 | | Six Months Ended June 30, 2021 |
Net cash (used in) provided by (in thousands): | | | |
Operating activities | $ | (52,508) | | | $ | (94,776) | |
Investing activities | (41,686) | | | (67) | |
Financing activities | 1,710 | | | 2,940 | |
Net cash used in operating activities
During the six months ended June 30, 2022, operating activities used approximately $52.5 million of cash, primarily due to our net loss of $70.1 million, partially offset by non-cash consideration of $9.2 million related to share-based compensation expense, and other changes related to operating assets and liabilities.
During the six months ended June 30, 2021, operating activities used approximately $94.8 million, primarily due to our net loss of $162.0 million, partially offset by non-cash items of $9.4 million related to the Tarsus Warrant, a decrease of $20.0 million for other receivables related to in-licensing and co-development activities related to our strategic collaboration agreement with Pfizer, a net increase of $34.3 million for accrued expenses and accounts payable related to the Tarsus milestone payment of $20 million and the Navire milestone payment of $8.5 million related to the achievement of developmental milestones, $3.1 million related to share-based compensation expense, and due to changes related to operating assets and liabilities.
Net cash used in investing activities
During the six months ended June 30, 2022, investing activities used approximately $41.7 million, consisting of approximately $126.1 million for the purchases of marketable securities, and approximately $0.7 million for the purchases of property and equipment, partially offset by the sales and redemption of marketable securities of approximately $85.1 million.
During the six months ended June 30, 2021, investing activities used approximately $0.1 million, primarily resulting from the purchases of property and equipment.
Net cash provided by financing activities
During the six months ended June 30, 2022, financing activities provided approximately $1.7 million, primarily resulting from proceeds from the exercise of share options.
During the six months ended June 30, 2021, financing activities provided approximately $2.9 million in net proceeds, primarily resulting from the net proceeds from our issuance of Series A Preferred shares.
Critical accounting policies and significant judgments and estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.
During the six months ended June 30, 2022, there were no material changes to our critical accounting policies as reported in our Annual Report on Form 10-K for the year ended December 31, 2021.
Impact of New Accounting Standards
The adoption of new accounting standards and the impact of recent accounting pronouncements not yet effective on our consolidated financial statements, if any, is discussed in Note 2 to the interim unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.