10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________to ____________

Commission File Number: 001-39122

 

89bio, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

36-4946844

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

142 Sansome Street, Second Floor

San Francisco, California 94104

94104

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (415) 432-9270

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.001 per share

 

ETNB

 

Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 2, 2023, the registrant had 72,868,455 shares of common stock, $0.001 par value per share, outstanding.

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

Condensed Consolidated Statements of Stockholders’ Equity

3

Condensed Consolidated Statements of Cash Flows

4

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

21

PART II.

OTHER INFORMATION

22

Item 1.

Legal Proceedings

22

Item 1A.

Risk Factors

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3.

Default Upon Senior Securities

40

Item 4.

Mine Safety Disclosures

40

Item 5.

Other Information

40

Item 6.

Exhibits

41

Signatures

42

 

 

i


 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

89bio, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

March 31,
2023

 

 

December 31,
2022

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

350,930

 

 

$

55,255

 

Short-term available-for-sale securities

 

 

129,953

 

 

 

132,905

 

Prepaid and other current assets

 

 

12,747

 

 

 

7,920

 

Total current assets

 

 

493,630

 

 

 

196,080

 

Operating lease right-of-use asset

 

 

322

 

 

 

363

 

Property and equipment, net

 

 

78

 

 

 

92

 

Other assets

 

 

289

 

 

 

289

 

Total assets

 

$

494,319

 

 

$

196,824

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

16,727

 

 

$

12,502

 

Accrued expenses

 

 

7,117

 

 

 

11,944

 

Operating lease liability, current

 

 

171

 

 

 

168

 

Total current liabilities

 

 

24,015

 

 

 

24,614

 

Operating lease liability, non-current

 

 

142

 

 

 

186

 

Term loan, non-current, net

 

 

24,332

 

 

 

20,192

 

Total liabilities

 

 

48,489

 

 

 

44,992

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

73

 

 

 

51

 

Additional paid-in capital

 

 

790,076

 

 

 

467,374

 

Accumulated other comprehensive loss

 

 

(240

)

 

 

(350

)

Accumulated deficit

 

 

(344,079

)

 

 

(315,243

)

Total stockholders’ equity

 

 

445,830

 

 

 

151,832

 

  Total liabilities and stockholders’ equity

 

$

494,319

 

 

$

196,824

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


 

89bio, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

22,306

 

 

$

19,849

 

General and administrative

 

 

6,218

 

 

 

5,259

 

Total operating expenses

 

 

28,524

 

 

 

25,108

 

Loss from operations

 

 

(28,524

)

 

 

(25,108

)

Interest expense

 

 

(2,075

)

 

 

(408

)

Interest income and other, net

 

 

1,763

 

 

 

(48

)

Net loss before income tax

 

 

(28,836

)

 

 

(25,564

)

Income tax expense

 

 

 

 

 

(1

)

Net loss

 

$

(28,836

)

 

$

(25,565

)

Other comprehensive income (loss):

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

 

114

 

 

 

(195

)

Foreign currency translation adjustments

 

 

(4

)

 

 

3

 

Total other comprehensive income (loss)

 

$

110

 

 

$

(192

)

Comprehensive loss

 

$

(28,726

)

 

$

(25,757

)

Net loss per share, basic and diluted

 

$

(0.54

)

 

$

(1.26

)

Weighted-average shares used to compute net loss per share,
   basic and diluted

 

 

53,171,370

 

 

 

20,339,416

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


 

89bio, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2023 and 2022

(Unaudited)

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amounts

 

 

Capital

 

 

(Loss) Income

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2022

 

 

50,560,590

 

 

$

51

 

 

$

467,374

 

 

$

(350

)

 

$

(315,243

)

 

$

151,832

 

Issuance of common stock in public offering, net of issuance costs

 

 

19,461,538

 

 

 

19

 

 

 

296,798

 

 

 

 

 

 

 

 

 

296,817

 

Issuance of common stock in at-the-market public offerings,
   net of issuance costs

 

 

968,000

 

 

 

1

 

 

 

13,421

 

 

 

 

 

 

 

 

 

13,422

 

Issuance of common stock upon exercise of warrants

 

 

1,682,500

 

 

 

2

 

 

 

8,958

 

 

 

 

 

 

 

 

 

8,960

 

Issuance of common stock upon exercise of stock options

 

 

61,408

 

 

 

 

 

 

185

 

 

 

 

 

 

 

 

 

185

 

Issuance of common stock upon vesting of restricted stock units,
   net of withholding taxes

 

 

133,669

 

 

 

 

 

 

(693

)

 

 

 

 

 

 

 

 

(693

)

Issuance of common stock warrants in connection with term loan

 

 

 

 

 

 

 

 

482

 

 

 

 

 

 

 

 

 

482

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,551

 

 

 

 

 

 

 

 

 

3,551

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,836

)

 

 

(28,836

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

110

 

 

 

 

 

 

110

 

Balance as of March 31, 2023

 

 

72,867,705

 

 

$

73

 

 

$

790,076

 

 

$

(240

)

 

$

(344,079

)

 

$

445,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amounts

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

 

20,317,204

 

 

$

20

 

 

$

339,218

 

 

$

(64

)

 

$

(213,217

)

 

$

125,957

 

Issuance of common stock upon exercise of stock options

 

 

12,065

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

29

 

Issuance of common stock upon vesting of restricted stock units, net

 

 

22,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,512

 

 

 

 

 

 

 

 

 

2,512

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,565

)

 

 

(25,565

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(192

)

 

 

 

 

 

(192

)

Balance as of March 31, 2022

 

 

20,351,384

 

 

$

20

 

 

$

341,759

 

 

$

(256

)

 

$

(238,782

)

 

$

102,741

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

89bio, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(28,836

)

 

$

(25,565

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

3,551

 

 

 

2,512

 

Net (accretion) amortization on available-for-sale securities

 

 

(1,040

)

 

 

118

 

Accretion of final payment fee on term loan

 

 

87

 

 

 

121

 

Amortization of debt issuance costs

 

 

132

 

 

 

75

 

Loss on extinguishment of term loan facility

 

 

1,208

 

 

 

 

Noncash operating lease expense

 

 

41

 

 

 

 

Depreciation

 

 

14

 

 

 

18

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid and other current assets

 

 

(4,599

)

 

 

1,942

 

Other assets

 

 

 

 

 

72

 

Accounts payable

 

 

4,225

 

 

 

(2,422

)

Accrued expenses

 

 

(4,827

)

 

 

(1,215

)

Operating lease liability

 

 

(41

)

 

 

 

Net cash used in operating activities

 

 

(30,085

)

 

 

(24,344

)

Cash flows from investing activities:

 

 

 

 

 

 

Proceeds from sales and maturities of available-for-sale securities

 

 

37,880

 

 

 

36,179

 

Purchases of available-for-sale securities

 

 

(33,774

)

 

 

(9,401

)

Purchases of property and equipment

 

 

 

 

 

(6

)

Net cash provided by investing activities

 

 

4,106

 

 

 

26,772

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock in public offering,
   net of issuance costs

 

 

296,817

 

 

 

 

Proceeds from term loan facility, net of issuance costs

 

 

24,363

 

 

 

 

Proceeds from issuance of common stock in at-the-market public offering,
   net of issuance costs

 

 

13,422

 

 

 

 

Proceeds from issuance of common stock upon exercise of warrants

 

 

8,960

 

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

 

185

 

 

 

29

 

Payment of withholding taxes related to restricted stock units

 

 

(693

)

 

 

 

Repayment of term loan facility

 

 

(21,400

)

 

 

 

Net cash provided by financing activities

 

 

321,654

 

 

 

29

 

Net change in cash and cash equivalents, and restricted cash

 

 

295,675

 

 

 

2,457

 

Cash and cash equivalents, and restricted cash at beginning of period

 

 

55,255

 

 

 

52,457

 

Cash and cash equivalents, and restricted cash at end of period

 

$

350,930

 

 

$

54,914

 

Components of cash and cash equivalents, and restricted cash:

 

 

 

 

 

 

Cash and cash equivalents

 

$

350,930

 

 

$

54,889

 

Restricted cash

 

 

 

 

 

25

 

Total cash and cash equivalents, and restricted cash

 

$

350,930

 

 

$

54,914

 

Supplemental disclosures of cash information:

 

 

 

 

 

 

Cash paid for interest

 

$

542

 

 

$

169

 

Cash paid for operating leases

 

$

47

 

 

$

 

Supplemental disclosures of noncash information:

 

 

 

 

 

 

Issuance of common stock warrants in connection with term loan

 

$

482

 

 

$

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

89bio, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

1. Organization and Basis of Presentation

Description of Business

89bio, Inc. (“89bio” or the “Company”) is a clinical-stage biopharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of liver and cardio-metabolic diseases. The Company’s lead product candidate, pegozafermin, a specifically engineered glycoPEGylated analog of fibroblast growth factor 21, is currently being developed for the treatment of nonalcoholic steatohepatitis and for the treatment of severe hypertriglyceridemia.

89bio was formed as a Delaware corporation in June 2019 to carry on the business of 89Bio Ltd., which was incorporated in Israel in January 2018.

Liquidity

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. To date, the Company has not generated revenues from its activities and has incurred substantial operating losses. Management expects the Company to continue to generate substantial operating losses for the foreseeable future until it completes development of its products and seeks regulatory approvals to market such products. The Company had cash and cash equivalents and short-term available-for-sale securities of $480.9 million as of March 31, 2023.

The Company expects that its cash and cash equivalents and short-term available-for-sale securities as of March 31, 2023 will be sufficient to fund operating expenses and capital expenditure requirements for a period of at least one year from the date these unaudited condensed consolidated financial statements are filed with the Securities and Exchange Commission (“SEC”).

2. Summary of Significant Accounting Policies

Unaudited Condensed Consolidated Financial Statements

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting.

The accompanying interim condensed consolidated financial statements are unaudited. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2022 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and comprehensive loss, and cash flows. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2022 was derived from the audited financial statements as of that date. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 15, 2023.

Reclassification

Certain prior period amounts in the Company’s condensed consolidated statements of operations and comprehensive loss have been reclassified to conform to the current period presentation. Specifically, interest expense is disclosed separately on the Company’s condensed consolidated statements of operations and comprehensive loss, which had no impact on reported net loss, comprehensive loss, or loss per share.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

5


 

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include but are not limited to accrued research and development expenses and the fair value of stock options. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.

Fair Value Measurements

Financial assets and liabilities are recorded at fair value on a recurring basis in the condensed consolidated balance sheets. The carrying values of Company’s financial assets and liabilities, including cash and cash equivalents, restricted cash, prepaid and other current assets, accounts payable and accrued expenses approximate to their fair value due to the short-term nature of these instruments. The fair value of the Company’s term loan approximates its carrying value, or amortized cost, due to the prevailing market rates of interest it bears. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. Assets and liabilities recorded at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels are directly related to the amount of subjectivity with the inputs to the valuation of these assets or liabilities as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable inputs for similar assets or liabilities. These include quoted prices for identical or similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market funds and commercial paper that are stated at fair value.

Investments

Investments have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its available-for-sale investments in debt securities at the time of purchase. Generally, investments with original maturities beyond three months at the date of purchase are classified as short-term because it is management’s intent to use the investments to fund current operations or to make them available for current operations. Realized gains and losses, if any, on available-for-sale securities are included in interest income and other, net. The cost of investments sold is based on the specific-identification method. The Company has not experienced any material realized gains or losses in the periods presented.

The Company periodically evaluates whether declines in fair values of its available-for-sale securities below amortized cost are due to credit-related factors or other factors. This evaluation consists of several qualitative and quantitative factors regarding the creditworthiness of the issuers of the security, the severity and duration of the unrealized loss as well as the Company’s ability and intent to hold the available-for-sale security until a forecasted recovery occurs. Additionally, the Company assesses whether it has plans to sell the security or it is more likely than not it will be required to sell any available-for-sale securities before recovery of its amortized cost basis. If a credit loss exists, an allowance for credit losses is recorded in interest income and other, net. To date, the Company has not recorded any impairment charges on its available-for-sale securities related to expected credit losses. Any remaining losses related to other factors are excluded from earnings and are reported as a component of comprehensive loss as an unrealized loss.

Comprehensive Loss

The Company’s comprehensive loss is comprised of net loss and changes in unrealized gains or losses on available-for-sale securities and foreign currency translation adjustments.

6


 

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The Company adopted this new guidance on January 1, 2023, using a modified retrospective approach and adoption did not have a material impact on the Company's consolidated financial statements and related disclosures.

 

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. The Company early adopted ASU 2020-06 as of January 1, 2023, using a modified retrospective approach and adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

3. Fair Value Measurements

The Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2023 were as follows (in thousands):

 

 

 

Valuation

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Hierarchy

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Money market funds

 

Level 1

 

$

25,143

 

 

$

 

 

$

 

 

$

25,143

 

Commercial paper

 

Level 2

 

 

80,534

 

 

 

10

 

 

 

(119

)

 

 

80,425

 

U.S. government bonds

 

Level 2

 

 

18,407

 

 

 

13

 

 

 

(60

)

 

 

18,360

 

Agency bonds

 

Level 2

 

 

23,251

 

 

 

8

 

 

 

(55

)

 

 

23,204

 

Corporate debt securities

 

Level 2

 

 

11,440

 

 

 

2

 

 

 

(32

)

 

 

11,410

 

U.S. treasury bills

 

Level 2

 

 

7,851

 

 

 

4

 

 

 

(13

)

 

 

7,842

 

Agency discount securities

 

Level 2

 

 

2,795

 

 

 

 

 

 

 

 

 

2,795

 

Non-U.S. debt securities

 

Level 2

 

 

1,496

 

 

 

 

 

 

(5

)

 

 

1,491

 

Total cash equivalents and available-
   for-sale securities

 

 

 

$

170,917

 

 

$

37

 

 

$

(284

)

 

$

170,670

 

Classified as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

$