Rallybio Corp 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward- 100 Table of Contents looking statements contained in the following discussion and analysis. See “Cautionary Note Regarding Forward-Looking Statements.” Our Business We are a clinical-stage biotechnology company comprised of experienced biopharma industry leaders with extensive research, development, and rare disease expertise with a mission to develop and commercialize life-transforming therapies for patients with severe and rare diseases. Since our launch in January 2018, we have built a broad pipeline of promising product candidates aimed at addressing diseases with unmet medical need in the areas of maternal fetal health, complement dysregulation, hematology, and metabolic disorders. Our two most advanced programs are in clinical development: RLYB212, an anti-HPA-1a antibody for the prevention of FNAIT and RLYB116, an inhibitor of C5, with the potential to treat several diseases of complement dysregulation. Both programs have completed Phase 1 clinical trials, and we currently plan to initiate a Phase 2 clinical trial of RLYB212 in the second half of 2024. Maternal Fetal Blood Disorders RLYB212 is a monoclonal anti-HPA-1a antibody for the prevention of FNAIT, a potentially life-threatening rare hematological disease that impacts fetuses and newborns. We have completed two RLYB212 clinical trials: a Phase 1 first-in-human clinical trial and a Phase 1b proof of concept clinical trial. The Phase 1 first-in-human clinical trial was a single-blind, placebo-controlled study that investigated the safety and PK of SC administration of RLYB212 in HPA-1a negative healthy participants. The clinical trial included a single dose cohort and a multiple dose cohort. In the multiple dose cohort, subjects received SC RLYB212 or placebo every 2 weeks for 12 weeks. We reported results from the multi-dose cohort in the fourth quarter of 2023. The data and our clinical pharmacology modeling predictions support a once monthly dosing regimen for the planned Phase 2 clinical trial. In the first quarter of 2023, we announced RLYB212 achieved proof-of-concept in the Phase 1b trial. In this trial, subcutaneous RLYB212 administration produced a dose-dependent, rapid and complete elimination of transfused HPA-1a positive platelets in HPA-1a negative subjects, with both dose groups meeting the pre-specified proof-of-concept criteria of ≥ 90% reduction in mean platelet elimination half-life. Mean platelet elimination half-life was 5.8 hours (0.09mg dose) and 1.5 hours (0.29mg dose) for RLYB212 compared to 71.7 hours for placebo. In both Phase 1 trials, RLYB212 was well-tolerated with no reports of serious or severe adverse events. Both the FDA and EMA have designated RLYB212 as an orphan drug. Orphan drug designations offer certain incentives including tax credits, marketing exclusivity upon any approval, fee waivers, and the ability to interact with both agencies to receive specialized regulatory advice and assistance. We recently engaged with the EMA in such a process in advance of our planned Phase 2 clinical trial. We received feedback from the EMA and are now moving forward with our Clinical Trial Application to support conduct of the Phase 2 study in Europe. Based on the data from the clinical and preclinical programs and following planned discussions with regulatory authorities, we expect to initiate a Phase 2 dose confirmation study for RLYB212 in the second half of 2024. This study will be designed to confirm the RLYB212 dose regimen in expectant mothers at higher risk of FNAIT. Following completion of the Phase 2 dose confirmation study and consultation with regulatory authorities, we expect to initiate a Phase 3 registrational study. We are also conducting a prospective, non-interventional, multinational FNAIT natural history study. This study is designed to screen up to 30,000 expectant mothers presenting at the Gestational Week 10 to 14 prenatal visit to determine the frequency of women at higher FNAIT risk among expectant mothers of different racial and ethnic characteristics, as well as the frequency of HPA-1a alloimmunization and pregnancy outcomes among these women. Subject to discussion with regulatory authorities, we expect that data from this study will contribute to a control dataset for a future single-arm Phase 3 registrational study for RLYB212. The FNAIT natural history study will also operationalize de novo the laboratory test paradigm for FNAIT risk and generate FNAIT laboratory test performance data that we plan to use for future regulatory discussions. As of March 1, 2024 approximately 9,400 women have been screened in the study. The Company expects screening for the natural history study to continue simultaneously with execution of the Phase 2 study. Complement Dysregulation We are also developing therapies that address diseases of complement dysregulation, including PNH, antiphospholipid syndrome and gMG. RLYB116 is a novel, potentially long-acting, subcutaneously injected 101 Table of Contents inhibitor of C5 in development for the treatment of patients with complement-related diseases. RLYB114 is a pegylated C5 inhibitor in development for complement-mediated ophthalmic disorders. We have completed a Phase 1 clinical trial in healthy participants that included the study of RLYB116 as a SAD and a MAD. The SAD portion of the RLYB116 clinical trial included five cohorts with a dose ranging from 2mg up to 300mg. Data from the SAD portion of the trial showed that all study participants that were administered a single 1 mL SC injection of 100 mg of RLYB116 (n=6) demonstrated a reduction in free C5 greater than 99% within 24 hours of dosing. Subcutaneously administered RLYB116 in the SAD portion of the trial was observed to be generally well-tolerated at the 100 mg dose, with mild adverse events and no drug-related serious adverse events reported. The MAD portion of the RLYB116 Phase 1 trial included an adaptive single-blind design with a 4-week treatment duration to evaluate the safety, tolerability, PK, and PD of RLYB116 with multiple dose SC administration. The MAD portion of the trial included 4 cohorts: Cohort 1 (weekly dosing of 100 mg), Cohort 2 (3 doses of 100 mg the first week followed by weekly dosing), Cohort 3 (150 mg weekly dosing reduced to 125 mg weekly dosing) and Cohort 4 (75 mg twice the first week followed by 100 mg twice per week) with post-treatment / study follow-up for 10 weeks. In December 2023, we reported data from the MAD portion of the trial that demonstrated a 100 mg low volume (1 mL) once-a-week dose of subcutaneously administered RLYB116 achieved sustained mean reductions in free C5 of greater than 93%, including at Day 29 with measurement prior to the last dose. The reduction from pre-treatment free C5 at 24 hours after the first dose of 100 mg was greater than 99%. RLYB116 administered in the MAD portion of the trial as a 100 mg once-a-week dose was also observed to be generally well tolerated. Based on the MAD data and additional work we have conducted with RLYB116, we believe that RLYB116 has the potential to be an effective treatment for patients with certain complement-mediated diseases, including gMG. We have prioritized enhancements to the manufacturing process that are intended to improve tolerability at higher doses with a low injection volume and infrequent SC administration, thereby opening up the opportunity to treat a wider range of complement-mediated diseases in addition to gMG including PNH and antiphospholipid syndrome. We expect the manufacturing work to be completed in the second half of 2024. In February 2023, we entered into a collaboration with EyePoint and are using EyePoint’s proprietary technology for sustained intraocular drug delivery, with the initial focus on geographic atrophy, an advanced form of age-related macular degeneration that leads to irreversible vision loss. Rallybio and EyePoint expect to provide an update on this collaboration in the first half of 2024. Hematological Disorders In May 2022, we obtained worldwide exclusive rights to RLYB331, a preclinical, monoclonal antibody that is designed to inhibit MTP-2. The inhibition of MTP-2 significantly increases levels of hepcidin, decreases iron load and treats ineffective erythropoiesis. We believe RLYB331 has the potential to address a significant unmet need for patients with severe anemia with ineffective red blood cell production or erythropoiesis and iron overload, such as polycythemia vera, beta thalassemia and a subset of myelodysplastic syndromes, amongst others. Currently these patients are underserved by the existing standard of care. We are continuing with preclinical activities to support the transition of RLYB331 into clinical development and expect to report data from this program in the first half of 2024. Metabolic Disorders In collaboration with Exscientia, we are working toward the selection of a small molecule development candidate to advance into the clinic targeting an Ectonucleotide Pyrophosphatase/Phosphodiesterase 1 inhibitor for the treatment of patients with HPP. We and Exscientia continue to work toward the selection of a small molecule development candidate to advance into the clinic targeting ENPP1 for the treatment of patients with HPP. Proof of mechanism studies are in progress with a leading global HPP expert. We plan to provide an update on the progress of the program in the second half of 2024. In December 2022, we entered into a strategic alliance to discover, develop, and commercialize novel antibody-based therapeutics for rare diseases. This multi-year, multi-target collaboration will combine AbCellera’s antibody discovery engine with our clinical and commercial expertise in rare diseases to identify optimal clinical candidates with a goal of delivering therapies to patients. The first program is focused on addressing the significant unmet therapeutic needs of patients with rare metabolic diseases. 102 Table of Contents Our Operations Since inception, we have devoted substantially all of our resources to raising capital, organizing and staffing the Company, business planning, conducting discovery and research activities, acquiring or discovering product candidates, establishing and protecting our intellectual property portfolio, developing and progressing our product candidates, preparing for and conducting clinical trials and establishing arrangements with third parties for the manufacture of our product candidates and component materials, including activities relating to our preclinical development and manufacturing activities for each of our programs. We do not have any product candidates approved for sale and have not generated any revenue from product sales. Since our inception, we have funded our operations primarily through equity financings. From our inception and prior to our IPO, we received proceeds of approximately $182.5 million from equity financings. In August 2021, we closed our IPO and issued and sold 7,130,000 shares of common stock, inclusive of 930,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $13.00 per share. We received net proceeds of approximately $83.0 million, after deducting underwriting discounts and commissions and other offering costs. In November 2022, we completed a follow-on offering of approximately $54.8 million pursuant to which we issued 5,803,655 shares of common stock, inclusive of 803,654 shares of common stock sold pursuant to the partial exercise of the underwriters' option to purchase additional shares at a price of $6.00 per share and to certain investors in lieu of common stock, pre-funded warrants to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price for the shares less the $0.0001 per share exercise price for each pre-funded warrant. The net proceeds from the November 2022 follow-on offering were approximately $50.8 million, after deducting underwriting discounts and commissions and other offering costs. As of December 31, 2023, we had cash, cash equivalents and marketable securities of $109.9 million. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements into the middle of 2026. This estimate and our expectation to advance the preclinical and clinical development of RLYB212, RLYB116, and any other product candidates are based on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect, or our clinical trials may be more expensive, time consuming or difficult to design or implement than we currently anticipate. See “—Liquidity and Capital Resources.” We have incurred significant operating losses since inception, including net losses of $74.6 million and $66.7 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $235.2 million. These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. We have not commercialized any products and have never generated revenue from the commercialization of any product. We expect to incur significant additional operating losses in the foreseeable future as we advance our programs through preclinical and clinical development, expand our research and development activities, acquire and develop new product candidates, complete preclinical studies and clinical trials, finance our business development strategy, seek regulatory approval for the commercialization of our product candidates and commercialize our products, if approved. Our expenses will increase substantially over time if and as we: ▪ advance our planned Phase 2 clinical trial for RLYB212, our lead product candidate for our FNAIT program; ▪ advance our FNAIT natural history study and any other studies to support our development program and related regulatory submissions for RLYB212; ▪ plan for and conduct any future clinical trials for RLYB116 and any of our other product candidates; ▪ seek regulatory approvals for RLYB212, RLYB116 and any other product candidates, as well as for any related companion diagnostic, if required; ▪ advance our discovery and preclinical development activities for our product candidates; ▪ continue to discover and develop additional product candidates; ▪ hire additional clinical, scientific, and commercial personnel; ▪ acquire or in-license other product candidates or technologies; 103 Table of Contents ▪ maintain, expand, and protect our intellectual property portfolio; ▪ secure manufacturing sources and supply chain capacity sufficient to produce adequate quantities of our product candidates, including any product candidate for which we obtain regulatory approval; and ▪ establish a sales, marketing and distribution infrastructure to commercialize our programs, if approved, and for any other product candidates for which we may obtain marketing approval. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Our inability to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all. Components of Results of Operations Operating Expenses Research and Development Expenses Research and development expenses consist of costs incurred in connection with our research and development activities, including our drug discovery efforts and the development of our product candidates. We expense research and development costs as incurred, which include: ▪ external research and development expenses incurred under agreements with third parties, such as CROs as well as investigative sites and consultants that conduct our clinical trials and other scientific development services; ▪ costs related to manufacturing material for our clinical trials, including expenses related to the manufacturing scale-up and fees paid to CMOs; ▪ employee-related expenses, including salaries, bonuses, benefits, share-based compensation and other related costs for those employees involved in research and development efforts; ▪ costs of outside consultants, including their fees, and related travel expenses; ▪ expenses to acquire technologies, such as intellectual property, to be used in research and development including in-process research and development ("IPR&D") that has no alternative future use at the time of asset acquisitions; ▪ costs related to compliance with quality and regulatory requirements; and ▪ facilities, depreciation and other indirect costs allocated to employees and activities supporting our research and development efforts. Costs for certain activities are recognized based on an evaluation of the progress to completion of each specific contract using information and data provided to us by our vendors and analyzing the progress of our research studies or other services performed. Significant judgments and estimates are made in determining the expenses incurred balances at the end of any reporting period. Our direct, external research and development expenses consist primarily of fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our process development, manufacturing and clinical development activities. Our direct external research and development expenses also include fees incurred under license and intellectual property purchase agreements. We track these external research and development costs on a program-by-program basis. We do not allocate employee costs, costs associated with our facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources and third-party consultants primarily to conduct our research and development activities as well as for managing our process development, manufacturing and clinical development activities. The successful development of our product candidates is highly uncertain. We plan to continue investing in our research and development activities for the foreseeable future as we continue the development of our product candidates and manufacturing processes and conduct discovery and research activities for our clinical 104 Table of Contents programs. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future clinical trials, regulatory developments, our ongoing assessments as to each product candidate’s commercial potential and the availability of capital. We will need to raise substantial additional capital in the future. Our clinical development costs are expected to increase significantly as our programs advance to later stages of development. We anticipate that our expenses may fluctuate from quarter to quarter, particularly due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of: ▪ the scope, rate of progress and expenses of our ongoing research activities and clinical trials and other research and development activities; ▪ successful enrollment in and completion of clinical trials; ▪ whether our product candidates show safety and efficacy in our clinical trials; ▪ establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; ▪ obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates; ▪ receipt of marketing approvals from applicable regulatory authorities; ▪ commercializing product candidates, if and when approved, whether alone or in collaboration with others; and ▪ continued acceptable safety profile of the products following any regulatory approval. Any changes in the outcome of any of these variables with respect to the development of our product candidates in clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. For example, if the FDA, EMA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. General and Administrative Expenses General and administrative expenses consist primarily of salaries, benefits and share-based compensation for our personnel in executive, legal, business development, finance and accounting, and other administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees paid for accounting, auditing, tax and consulting services, insurance costs, travel expenses and direct and allocated facility costs not otherwise included in research and development expenses. Total Other Income, Net Total other income, net, includes interest income earned on cash, cash equivalents and marketable securities, and income and expense items. Loss on Investment in Joint Venture The Company recognizes its pro-rata share of losses in the joint venture with Exscientia on its consolidated statements of operations and comprehensive loss within the loss on investment in joint venture line item, with a corresponding change to the joint venture investment asset on the consolidated balance sheets for equity method investments for which it does not have a controlling interest in. 105 Table of Contents Results of Operations Comparison of the years ended December 31, 2023 and 2022 The following table summarizes our results of operations: FOR THE YEAR ENDED DECEMBER 31, (in thousands) 2023 2022 CHANGE Operating expenses: Research and development $ 53,544 $ 40,689 $ 12,855 General and administrative 25,388 27,195 (1,807) Total operating expenses 78,932 67,884 11,048 Loss from operations (78,932) (67,884) (11,048) Total other income, net 6,409 2,305 4,104 Loss before equity in losses of joint venture (72,523) (65,579) (6,944) Loss on investment in joint venture 2,041 1,075 966 Net loss $ (74,564) $ (66,654) $ (7,910) Operating Expenses Research and Development Expenses The following table summarizes our research and development costs for each of the periods presented: FOR THE YEAR ENDED DECEMBER 31, (in thousands) 2023 2022 CHANGE Direct research and development by program RLYB212 $ 25,685 $ 13,151 $ 12,534 RLYB116 8,791 7,269 1,522 RLYB114 180 2,116 (1,936) RLYB331 2,418 967 1,451 Other program candidates 813 — 813 Asset acquisition IPR&D expense — 3,073 (3,073) Other unallocated research and development costs Personnel expenses (including share-based compensation) 14,160 13,079 1,081 Other expenses 1,497 1,034 463 Total research and development expenses $ 53,544 $ 40,689 $ 12,855 Research and development expenses were $53.5 million for the year ended December 31, 2023, compared to $40.7 million for the year ended December 31, 2022. The increase of $12.9 million was primarily due to: ▪ a $12.5 million increase in costs related to the development of RLYB212, primarily attributable to an increase in clinical development and manufacturing costs; ▪ a $1.5 million increase in costs related to the development of RLYB116, primarily attributable to an increase in clinical and other related development costs; offset by a decrease in manufacturing costs; ▪ a $1.5 million increase in costs related to the development of RLYB331, primarily attributable to an increase in preclinical research and development and manufacturing costs; and ▪ a $1.1 million increase in payroll and personnel-related expenses, including an increase of $1.1 million in non-cash share-based compensation expense. 106 Table of Contents These increases were partially offset by: ▪ a $3.1 million decrease in asset acquisition IPR&D expense related to the acquisition of the worldwide exclusive rights to Sanofi’s KY1066, now referred to as RLYB331 in the second quarter 2022. We did not record any asset acquisition related IPR&D expense for the year ended December 31, 2023; and ▪ a $1.9 million decrease in costs related to the development of RLYB114, primarily attributable to a decrease in preclinical research and development and manufacturing costs as compared to the year ended December 31, 2022. We anticipate that our research and development expenses will decline given our recent decision to prioritize our portfolio and reduce our research and development headcount. General and Administrative Expenses General and administrative expenses were $25.4 million for the year ended December 31, 2023, compared to $27.2 million for the year ended December 31, 2022. The decrease of $1.8 million is primarily related to a decrease in payroll and personnel-related costs and director and officer insurance premiums; offset by increases in other general and administrative related expenses. We anticipate that our general and administrative expenses related to providing administrative support to our research and development activities will slightly decline in the future in connection with our recent decision to prioritize our development portfolio. Total Other Income, Net Total other income, net, for the year ended December 31, 2023 was $6.4 million compared to $2.3 million for the year ended December 31, 2022. The increase in total other income of $4.1 million is primarily attributable to an increase in interest income from marketable securities. Loss on Investment in Joint Venture Loss on investment in joint venture for the year ended December 31, 2023 was $2.0 million compared to $1.1 million for the year ended December 31, 2022. The increase in loss on investment in joint venture of $1.0 million is primarily attributable to an increase in REVI preclinical development costs. Liquidity and Capital Resources Sources of Liquidity Since our inception, we have funded our operations primarily through equity financings. From our inception and prior to our IPO, we received proceeds of approximately $182.5 million from equity financings. In August 2021, we closed our IPO and issued and sold 7,130,000 shares of common stock, inclusive of 930,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $13.00 per share. We received net proceeds of approximately $83.0 million, after deducting underwriting discounts and commissions and other offering costs. In August 2022, we filed a Registration Statement on Form S-3 (the “Shelf”) with the SEC in relation to the registration and potential future issuance of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof in the aggregate amount of up to $300.0 million. The Shelf was declared effective on August 15, 2022. The Company also simultaneously entered into the Sales Agreement with Cowen. In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time at prices through Cowen acting as our agent. Pursuant to the Sales Agreement, sales of our common stock, if any, will be made in sales deemed to be “at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the "Securities Act"). Under the Sales Agreement, Cowen will be entitled to compensation equal to 3.0% of the gross proceeds of any shares of common stock sold under the Sales Agreement. As of December 31, 2023, the Company had not sold any shares of common stock pursuant to the Sales Agreement. In November 2022, we completed a follow-on offering of approximately $54.8 million consisting of 5,803,655 shares of common stock, inclusive of 803,654 shares of common stock sold pursuant to the partial exercise of the underwriters' option to purchase additional shares at the price of $6.00 per share, and to certain investors in lieu of common stock, pre-funded warrants to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price for the shares less the $0.0001 per share exercise price for each pre-funded warrant. The net proceeds from the November 2022 follow-on 107 Table of Contents offering were approximately $50.8 million, after deducting underwriting discounts and commissions and other offering costs. As of December 31, 2023, we had $109.9 million of cash, cash equivalents and marketable securities. Uses of Liquidity We currently have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years. See "Contractual Obligations" below. Funding Requirements We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements into the middle of 2026. This estimate and our expectation to advance the development of RLYB212, RLYB116, and any other product candidates are based on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect, or our clinical trials may be more expensive, time consuming or difficult to design or implement than we currently anticipate. Management has implemented cash preservation initiatives including conducting a prioritization of its research and development activities with a primary focus on RLYB212, reviewing certain discretionary expenses and managing the timing of other development activities. However, we expect to incur significant expenses and operating losses in the foreseeable future as we advance our product candidates through clinical development, seek regulatory approval and pursue commercialization of any approved product candidates. Because of the numerous risks and uncertainties, length of time and scope of activities associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the actual amount of funds we will require for development, approval and any approved marketing and commercialization activities. Our future capital requirements, both near and long-term, will depend on many factors, including, but not limited to: ▪ the initiation, progress, timing, costs and results of our clinical trials through all phases of development; ▪ the identification, assessment, acquisition and/or development of additional research programs and additional product candidates; ▪ the outcome, timing and cost of meeting regulatory requirements established by the FDA, EMA and other comparable foreign regulatory authorities, including any regulatory designations allowing for priority review and any additional clinical trials required by the FDA, EMA or other comparable foreign regulatory authorities; ▪ the willingness of the FDA, EMA and other comparable foreign regulatory authorities to accept our clinical trial designs, as well as data from our completed and planned preclinical studies and clinical trials, as the basis for review and approval of RLYB212, RLYB116 and any other product candidates; ▪ the cost and timing of the manufacture and supply of non-clinical and clinical trial material for RLYB212, RLYB116 and our other product candidates; ▪ the progress, timing and costs of the development by us or third parties of companion diagnostics, if required, for RLYB212 or any other product candidates, including design, manufacturing and regulatory approval; ▪ the cost of filing, prosecuting and enforcing our patent claims and other intellectual property rights; ▪ the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us; ▪ the costs associated with potential clinical trial liability or product liability claims, including the costs associated with obtaining insurance against such claims and with defending against such claims; ▪ the effect of competing technological and market developments; ▪ the cost of making royalty, milestone or other payments under our current or any future in-license agreements; 108 Table of Contents ▪ our ability to maintain our collaborations with Exscientia and AbCellera on favorable terms and establish new collaborations; ▪ the extent to which we in-license or acquire additional product candidates or technologies; and ▪ the costs of operating as a public company. A change in the outcome of any of these, or other variables with respect to the development of any of our product candidates, could significantly change the costs and timing associated with the development of that product candidate. We will need to continue to rely on additional financing to achieve our business objectives. In addition to the variables described above, if and when any of our product candidates successfully complete development, we will incur substantial additional costs associated with regulatory filings, marketing approvals, post-marketing requirements, maintaining our intellectual property rights and regulatory protection, in addition to other commercial costs. We cannot reasonably estimate these costs at this time. Until such time, if ever, as we generate significant revenue from product sales, we expect to finance our operations through the sale of equity, debt financings, marketing and distribution arrangements and collaborations, strategic alliances and licensing arrangements or other sources. We currently have no credit facility or committed sources of capital. Any future sales of equity will result in dilution to our existing stockholders. If we raise additional funds through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and we may need to dedicate a substantial additional portion of any operating cash flows to the payment of principal and interest on such indebtedness. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, intellectual property, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate product candidate development or future commercialization efforts. Cash Flows The following table summarizes our cash flows for each of the periods presented: FOR THE YEAR ENDED DECEMBER 31, (in thousands) 2023 2022 Net cash used in operating activities $ (60,265) $ (57,284) Net cash provided by (used in) investing activities 27,658 (112,170) Net cash provided by (used in) financing activities 143 51,078 Net decrease in cash and cash equivalents $ (32,464) $ (118,376) Operating Activities During the year ended December 31, 2023, net cash used in operating activities was $60.3 million as compared to $57.3 million for the year ended December 31, 2022. The increase in cash used in operating activities was primarily due to an increase in research and development expenses. Our research and development expenses increased primarily due to the advancement of our RLYB212 and RLYB116 product candidates, the advancement of RLYB331 and an increase in payroll and personnel-related costs. These research and development expenses were offset by a decrease in expenses related to IPR&D expenses associated with the acquisition of worldwide exclusive rights to Sanofi’s KY1066, now referred to as RLYB331 and research and development expenses related to the development of RLYB114 as compared to the year ended December 31, 2022. Investing Activities Net cash provided by investing activities was $27.7 million for the year ended December 31, 2023 as compared to $112.2 million of net cash used in investing actives for the year ended December 31, 2022. The increase in net cash provided by investing activities was primarily related to the proceeds from maturities of highly rated debt securities during the year ended December 31, 2023 as compared to the purchases of highly rated debt securities during the year ended December 31, 2022. 109 Table of Contents Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 was $0.1 million, representing the issuance of common stock under the 2021 Employee Stock Purchase Plan, offset by payments of offering costs related to our November 2022 follow-on offering. Net cash provided by financing activities for the year ended December 31, 2022 was $51.1 million, primarily representing the net proceeds from our November 2022 follow-on offering, after deducting underwriting discounts and commissions and payments of other offering costs. Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2023: PAYMENTS DUE BY PERIOD (in thousands) TOTAL LESS THAN 1 YEAR 1-3 YEARS 3-5 YEARS MORE THAN 5 YEARS Operating lease obligations $ 406 $ 230 $ 176 $ — $ — The contractual obligation amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions and the approximate timing of the actions under the contracts. Purchase and Other Obligations We enter contracts in the normal course of business with CROs and other third-party vendors for clinical trials and testing and manufacturing services. Aside from those included in the table above, most contracts do not contain minimum purchase commitments and are cancellable by us upon written notice. Payments that may be due upon cancellation consist of payments for services provided or expenses incurred. These payments are not included in the table above as the amount and timing of such payments are not known. We may incur contingent payments upon our achievement of clinical, regulatory and commercial milestones, as applicable under agreements we have entered into with various third-party entities pursuant to which we have acquired or in-licensed intellectual property. Due to the uncertainty of the achievement and timing of the events that require payment under these agreements, the amounts to be paid by us are not fixed or determinable at this time and have not been included in the table above. See “Business—License Agreements” and “Business—Asset Purchase Agreements” included elsewhere in this Annual Report on Form 10-K for a description of these agreements. Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2 “Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements. Research and Development Expenses As part of the process of preparing our consolidated financial statements, we are required to estimate our research and development expenses that are incurred as of each reporting period. This process involves reviewing open contracts and purchase orders, communicating with our personnel and with vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date 110 Table of Contents based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. We base our expenses related to research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid balance accordingly. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Although we do not expect our estimates to be materially different from amounts incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. Share-Based Compensation The Company accounts for share-based compensation in accordance with ASC 718, Compensation—Stock Compensation . Generally, share-based compensation is measured at the grant date for all equity-based awards made to employees based on the fair value of the awards and is recognized over the requisite service period, which is generally the vesting period. Share-based compensation for awards with performance conditions are recognized over the service period when achievement of the performance condition is probable. The Company has elected to recognize the actual forfeitures by reducing the share-based compensation in the same period as the forfeitures occur. The Company classifies share-based compensation in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipients’ payroll costs are classified. The Black-Scholes option-pricing model uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield. See Note 2 “Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation” of our consolidated financial statements for additional information on the assumptions utilized in the Black-Scholes option-pricing model. Emerging Growth Company and Smaller Reporting Company As an emerging growth company (an “EGC”) under the JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act, for EGCs include presentation of only two years of audited financial statements in a registration statement for an initial public offering, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements. Additionally, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an EGC. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. Therefore, the reported results of operations contained in our consolidated financial statements may not be directly comparable to those of other public companies. We are also a “smaller reporting company” meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue was less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less 111 Table of Contents than $700.0 million. If we are a smaller reporting company at the time we cease to be an EGC, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. Off-Balance Sheet Arrangements As of December 31, 2023 and 2022, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K. Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 “Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation” to our consolidated financial statements for the year ended December 31, 2023 appearing elsewhere in this Annual Report on Form 10-K. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information under this item. Item 8. Financial Statements and Supplementary Data. The financial information required by Item 8 is located beginning on page F-1 of this Annual Report. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.