rlyb-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________________________

FORM 10-Q

_____________________________________

(Mark One)


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

For the quarterly period ended March 31, 2024


o			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: 001-40693

_____________________________________

RALLYBIO CORPORATION

(Exact Name of Registrant as Specified in its Charter)

_____________________________________


Delaware			85-1083789
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
234 Church Street, Suite 1020 New Haven, CT			06510
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (203) 859-3820

_____________________________________

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 $0.0001 per share

RLYB

The NASDAQ Global Select 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 x No o

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 x No o

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	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

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. o

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o

As of May 6, 2024, the registrant had 41,449,297 shares of common stock, $0.0001 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	7
	Unaudited Condensed Consolidated Balance Sheets	7
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss	8
	Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity	9
	Unaudited Condensed Consolidated Statements of Cash Flows	10
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	84
Item 5.	Other Information	85
Item 6.	Exhibits	86
Signatures		87

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements concerning:

•the initiation, timing, progress, results, and cost of our research and development programs, and our current and future preclinical and clinical studies, including statements regarding the timing of initiation and completion of our clinical trials for RLYB212, RLYB116 and RLYB332, a long-acting version of the RLYB331 anti-Matriptase-2 antibody, our toxicology program for RLYB212, and the natural history study for our fetal and neonatal alloimmune thrombocytopenia prevention program, and related preparatory work, and the period during which the results of the trials will become available;

•the success, cost and timing of our clinical development of our product candidates, including RLYB212, RLYB116 and RLYB332;

•the potential of our product candidates to treat certain target diseases;

•our ability to initiate, recruit and enroll patients in and conduct our clinical trials at the pace that we project;

•our ability to obtain and maintain regulatory designations allowing for priority review of our product candidates, and our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations or warnings in the label of any of our product candidates, if approved;

•our ability to compete with companies currently marketing or engaged in the development of treatments for diseases that our product candidates are designed to target, including paroxysmal nocturnal hemoglobinuria and generalized myasthenia gravis;

•our reliance on third parties to conduct our clinical trials;

•enhancements to the manufacturing process for RLYB116, and the expected timing of completion thereof;

•our reliance on third parties to manufacture drug substance and drug product for use in our clinical trials;

•the size and growth potential of the markets for RLYB212, RLYB116, RLYB114, RLYB332 and any of our current product candidates or other product candidates we may identify and pursue, and our ability to serve those markets;

•our ability to enter into collaborations, partnerships and other transactions with third parties;

•our ability to identify and advance through clinical development any additional product candidates;

•the commercialization of our current product candidates and any other product candidates we may identify and pursue, if approved, including our ability to successfully build commercial infrastructure or enter into collaborations with third parties to market our current product candidates and any other product candidates we may identify and pursue;

•our ability to retain and recruit key personnel;

•our ability to obtain and maintain adequate intellectual property rights;

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•our expectations regarding government and third-party payor coverage and reimbursement;

•our estimates of our expenses, ongoing losses, capital requirements and our needs for or ability to obtain additional financing;

•our expected uses of the net proceeds from our initial public offering and any subsequent offerings;

•the potential benefits of strategic collaboration agreements and arrangements, including our agreements with Johnson & Johnson, Exscientia Limited and AbCellera Biologics Inc. and our research collaboration with EyePoint Pharmaceuticals, Inc., and the expected timing of updates related thereto, our ability to enter into strategic collaborations or arrangements, including potential business development opportunities and potential licensing partnerships, and our ability to attract collaborators with development, regulatory and commercialization expertise;

•our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012;

•our financial performance;

•developments and projections relating to our competitors or our industry; and

•other risks and uncertainties, including those listed under the section titled “Risk Factors.”

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as guarantees of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual future results, levels of activity, performance and events and circumstances could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risks and uncertainties may emerge from time to time, and it is not possible for management to predict all risks and uncertainties. Except as required by applicable law, we are not obligated to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Trademarks

We use Rallybio as a trademark in the United States ("U.S.") and/or in other countries. This Quarterly Report on Form 10-Q contains references to our trademark and to those belonging to other entities, including Affibody®. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

Risk Factor Summary

Our business is subject to a number of risks that are discussed more fully in the “Risk Factors” section of this Quarterly Report on Form 10-Q. These risks include the following:

•We have incurred significant losses since our inception and anticipate that we will continue to incur losses in the foreseeable future. We have not commercialized any products and have never generated

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revenue from the commercialization of any product. We are not currently profitable, and we may never achieve or sustain profitability;

•We will require significant additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of RLYB212, RLYB116 or any additional product candidates we may develop;

•Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates;

•We are heavily dependent on the success of RLYB212 and RLYB116, which are in early-stage clinical development. If we are not able to develop, obtain regulatory approval for, or successfully commercialize our product candidates, or if we experience significant delays in doing so, our business will be materially harmed;

•We may not be successful in our efforts to identify additional product candidates. Due to our limited resources and access to capital, we must prioritize development of certain product candidates, the choice of which may prove to be wrong and adversely affect our business;

•Preclinical studies and clinical trials are expensive, time consuming and difficult to design and implement, and involve uncertain outcomes. Any product candidates that we advance into clinical trials may not achieve favorable results in later clinical trials, if any, or receive marketing approval. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates;

•Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control, including our focus on rare diseases;

•Results of preclinical studies, clinical trials or analyses that we may announce or publish from time to time, may not be indicative of results obtained in later trials, and any interim results we may publish could be different than final results;

•Any product candidates that we develop or the administration thereof, may cause serious adverse events or undesirable side effects, which may halt their clinical development, delay or prevent marketing approval, or, if approved, require them to be taken off the market, include safety warnings, or otherwise limit their sales;

•The regulatory approval processes of the U.S. Food and Drug Administration (the "FDA"), the European Medicines Agency (the "EMA"), and comparable foreign regulatory authorities, including the Medicines and Healthcare products Regulatory Agency in the United Kingdom (the “MHRA”), are lengthy, time-consuming, and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for RLYB212, RLYB116 or any of our other product candidates, our business will be substantially harmed;

•Our product candidates target rare diseases and conditions, and the market opportunities for RLYB212, RLYB116 or any of our other product candidates, if approved, may be smaller than we anticipate. As a result, our commercial opportunity may be limited and because the target populations of our product candidates are for rare diseases, we must be able to successfully identify patients and capture a significant market share to achieve profitability and growth;

•The FDA, EMA or other comparable foreign regulatory authorities, including the MHRA, could require the clearance or approval of an in vitro diagnostic or companion diagnostic device as a condition of approval for any product candidate that requires or would commercially benefit from such tests, including RLYB212. Failure to successfully validate, develop and obtain regulatory clearance or approval for companion diagnostics on a timely basis or at all could harm our drug development strategy and we may not realize the commercial potential of any such product candidate;

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•We face significant competition from biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively;

•We intend to continue to pursue business development transactions focused on the in-license of additional product candidates or the out-license of rights to product candidates in our pipeline and collaborate with third parties for the development and commercialization of our product candidates. We may not succeed in identifying and acquiring businesses or assets, in-licensing intellectual property rights or establishing and maintaining collaborations, which may significantly limit our ability to successfully develop and commercialize our other product candidates, if at all, and these transactions could disrupt our business, cause dilution to our stockholders or reduce our financial resources; and

•If we are unable to obtain, maintain and enforce patent protection for our technology and product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.

The foregoing is only a summary of some of our risks. For a more detailed discussion of these and other risks you should consider before making an investment in our common stock, see “Risk Factors.”

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

RALLYBIO CORPORATION

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except share and per share amounts)	MARCH 31, 2024		DECEMBER 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	19,301	$	24,494
Marketable securities	74,874		85,435
Prepaid expenses and other current assets	4,370		4,860
Total current assets	98,545		114,789
Property and equipment, net	211		246
Operating lease right-of-use assets	299		346
Investment in joint venture	304		239
Total assets	$	99,359	$	115,620
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	470	$	976
Accrued expenses	9,393		8,068
Operating lease liabilities	223		219
Total current liabilities	10,086		9,263
Operating lease liabilities, noncurrent	116		173
Total liabilities	10,202		9,436
Commitments and contingencies (Note 7)
Stockholders' equity
Common stock, $0.0001 par value per share; 200,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; and 37,811,970 and 37,829,565 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	4		4
Preferred stock, $0.0001 par value per share; 50,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; no shares issued or outstanding as of March 31, 2024 and December 31, 2023, respectively	—		—
Additional paid-in capital	343,498		341,410
Accumulated other comprehensive loss	(71)		15
Accumulated deficit	(254,274)		(235,245)
Total stockholders' equity	89,157		106,184
Total liabilities and stockholders' equity	$	99,359	$	115,620

See accompanying notes of the condensed consolidated financial statements

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RALLYBIO CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss


	FOR THE THREE MONTHS ENDED MARCH 31,
(in thousands, except share and per share amounts)	2024		2023
Operating expenses:
Research and development	$	12,936	$	11,202
General and administrative	6,851		7,172
Total operating expenses	19,787		18,374
Loss from operations	(19,787)		(18,374)
Other income:
Interest income	1,276		1,546
Other income	167		73
Total other income, net	1,443		1,619
Loss before equity in losses of joint venture	(18,344)		(16,755)
Loss on investment in joint venture	685		563
Net loss	$	(19,029)	$	(17,318)

Net loss per common share, basic and diluted	$	(0.47)	$	(0.43)
Weighted-average common shares outstanding, basic and diluted	40,773,615		40,248,893

Other comprehensive (loss) gain:
Net unrealized (loss) gain on marketable securities	(86)		153
Other comprehensive (loss) gain	(86)		153
Comprehensive loss	$	(19,115)	$	(17,165)

See accompanying notes of the condensed consolidated financial statements

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RALLYBIO CORPORATION

Condensed Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)



FOR THE THREE MONTHS ENDED MARCH 31, 2024 and 2023	COMMON			ADDITIONAL PAID-IN CAPITAL		ACCUMULATED DEFICIT		ACCUMULATED OTHER COMPREHENSIVE GAIN (LOSS)		STOCKHOLDERS' EQUITY
(in thousands, except share amounts)	SHARES	AMOUNT
December 31, 2022	37,837,369	$	4	$	330,208	$	(160,681)	$	(214)	$	169,317
Share-based compensation expense	—	—		3,045		—		—		3,045
Forfeiture of restricted common stock	(91,155)	—		—		—		—		—
Net loss	—	—		—		(17,318)		—		(17,318)
Other comprehensive gain (loss)	—	—		—		—		153		153
Balance, March 31, 2023	37,746,214	$	4	$	333,253	$	(177,999)	$	(61)	$	155,197

December 31, 2023	37,829,565	$	4	$	341,410	$	(235,245)	$	15	$	106,184
Share-based compensation expense	—	—		2,088		—		—		2,088
Forfeiture of restricted common stock	(17,595)	—		—		—		—		—
Net loss	—	—		—		(19,029)		—		(19,029)
Other comprehensive gain (loss)	—	—		—		—		(86)		(86)
Balance, March 31, 2024	37,811,970	$	4	$	343,498	$	(254,274)	$	(71)	$	89,157

See accompanying notes of the condensed consolidated financial statements

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RALLYBIO CORPORATION

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	FOR THE THREE MONTHS ENDED MARCH 31,
(in thousands)	2024		2023
Cash Flows Used in Operating Activities:
Net loss	$	(19,029)	$	(17,318)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	35		39
Net accretion of discounts/premiums on debt securities	(539)		(895)
Stock-based compensation	2,088		3,045
Loss on investment in joint venture	685		563
Changes in operating assets and liabilities:
Prepaid expenses, right-of-use assets and other assets	537		(340)
Accounts payable	(506)		(295)
Accrued expenses and operating lease liabilities	1,272		(3,564)
Net cash used in operating activities	(15,457)		(18,765)
Cash Flows Provided By Investing Activities:
Purchases of marketable securities	(10,736)		(29,285)
Proceeds from maturities of marketable securities	21,750		31,500

Investment in joint venture	(750)		(750)
Net cash provided by investing activities	10,264		1,465
Cash Flows Used In Financing Activities:

Payments of offering costs	—		(139)
Net cash used in financing activities	—		(139)
Net decrease in cash and cash equivalents	(5,193)		(17,439)
Cash and cash equivalents —beginning of period	24,494		56,958
Cash and cash equivalents —end of period	$	19,301	$	39,519

See accompanying notes of the condensed consolidated financial statements

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RALLYBIO CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

1. BUSINESS AND LIQUIDITY

Rallybio Corporation and subsidiaries ("Rallybio", the "Company", "we", "our", or "us") is 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 fetal and neonatal alloimmune thrombocytopenia (“FNAIT”) and RLYB116, an inhibitor of complement component 5 (“C5”), with the potential to treat several diseases of complement dysregulation. Both programs have completed Phase 1 clinical studies, and we currently plan to initiate a Phase 2 clinical trial of RLYB212 in the second half of 2024.

The Company had cash, cash equivalents and marketable securities of $94.2 million as of March 31, 2024. The Company currently expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital requirements for more than 12 months from the date these condensed consolidated financial statements are issued. However, we do not anticipate that the current cash, cash equivalents and marketable securities as of March 31, 2024 will be sufficient for us to fund any of our product candidates through regulatory approval, and we will need to raise substantial additional capital to complete the development and commercialization of our product candidates, if approved. We may satisfy our future cash needs through the sale of equity securities, debt financings, corporate collaborations or license agreements, working capital lines of credit, grant funding, interest income earned on invested cash balances or a combination of one or more of these sources.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

Unaudited Financial Information — The unaudited condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).

In the opinion of the Company, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the financial position and results of operations for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

The accompanying unaudited condensed consolidated financial statements include the accounts of Rallybio Corporation and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

These accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (our "Annual Report"). Our significant accounting policies are described in Note 2 of the Notes to the consolidated financial statements included in our Annual Report. There have been no new accounting policies, including the adoption of new accounting standards during the three months ended March 31, 2024, unless otherwise noted below, which could be expected to materially impact the Company's unaudited condensed consolidated financial statements.

Significant Accounting Policies —

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Restructuring

The Company accounts for restructuring charges in accordance with ASC Subtopic 420-10, Exit or Disposal Cost Obligations. The charges related to the workforce reduction are cash-based expenditures related primarily to severance and benefit payments, with such amounts reflected in the Company's condensed consolidated statements of operations and other comprehensive loss. For further details on the Company’s restructuring activities, please refer to Note 9.

3. MARKETABLE SECURITIES

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of our marketable securities by type of security as of March 31, 2024 and December 31, 2023 was as follows:


		MARCH 31, 2024
(in thousands)	Fair Value Hierarchy Level	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
Money market funds	Level 1	$	10,127	$	—	$	—	$	10,127
U.S. treasury securities	Level 1	38,095		4		(27)		38,072
U.S. government agency securities	Level 2	36,850		4		(52)		36,802
		$	85,072	$	8	$	(79)	$	85,001


		DECEMBER 31, 2023
(in thousands)	Fair Value Hierarchy Level	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
Money market funds	Level 1	$	14,538	$	—	$	—	$	14,538
U.S. treasury securities	Level 1	35,976		48		(6)		36,018
U.S. government agency securities	Level 2	51,434		31		(58)		51,407
		$	101,948	$	79	$	(64)	$	101,963

The fair values of marketable securities by classification in the condensed consolidated balance sheets was as follows as of March 31, 2024 and December 31, 2023:


(in thousands)	MARCH 31, 2024		DECEMBER 31, 2023
Cash and cash equivalents	$	10,127	$	16,528
Marketable securities	74,874		85,435
	$	85,001	$	101,963

The fair values of available-for-sale debt securities as of March 31, 2024 and December 31, 2023, by contractual maturity, are summarized as follows:


(in thousands)	MARCH 31, 2024		DECEMBER 31, 2023
Due in one year or less	$	85,001	$	98,110
Due after one year through two years	—		3,853
	$	85,001	$	101,963

The aggregate fair value of available-for-sale debt securities in an unrealized loss position as of March 31, 2024 and December 31, 2023 was $58.4 million and $40.0 million, respectively. As of March 31, 2024, we did not have any investments in a continuous unrealized loss position for more than twelve months. As of March 31, 2024, we believe that the cost basis of our available-for-sale debt securities is recoverable. No allowance for credit losses was recorded as of March 31, 2024 and December 31, 2023.

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4. BALANCE SHEET COMPONENTS

Prepaid expenses and other current assets—

Prepaid expenses and other current assets consisted of the following as of March 31, 2024 and December 31, 2023:


(in thousands)	MARCH 31, 2024		DECEMBER 31, 2023
Research and development	$	2,936	$	2,067
Insurance	252		446
Other prepaids	414		293
Other current assets	768		2,054
	$	4,370	$	4,860

Accrued Expenses—

Accrued expenses consisted of the following as of March 31, 2024 and December 31, 2023:


(in thousands)	MARCH 31, 2024		DECEMBER 31, 2023
Research and development	$	4,563	$	4,123
Compensation and related expenses	3,884		3,166
Professional fees	580		332
Other	366		447
	$	9,393	$	8,068

5. STOCKHOLDERS' EQUITY

Common Stock

The Company had 200,000,000 shares of common stock authorized as of March 31, 2024 and December 31, 2023, of which 37,811,970 and 37,829,565 shares were issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

Preferred Stock

The Company had 50,000,000 shares of preferred stock authorized as of March 31, 2024 and December 31, 2023, of which no shares were outstanding as of March 31, 2024 and December 31, 2023.

Pre-Funded Warrants

In connection with the November 2022 follow-on offering, the Company entered into an agreement with certain investors for pre-funded warrants in lieu of common stock 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 at the November 2022 follow-on offering for common stock less a $0.0001 per share exercise price for each pre-funded warrant.

The Company may not effect the exercise of any pre-funded warrant, and a holder will not be entitled to exercise any portion of any pre-funded warrant if, upon giving effect to such exercise, the aggregate number of shares of common stock beneficially owned by the holder (together with its affiliates) would exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s election upon 61 days’ notice to the Company subject to the terms of such pre-funded warrants, provided that such percentage may in no event exceed 19.99%.

The Company's pre-funded warrant is a freestanding instrument that does not meet the definition of a liability pursuant to ASC 480, Distinguishing Liabilities from Equity, and does not meet the definition of a derivative pursuant to ASC 815, Derivatives and Hedging. The pre-funded warrant is indexed to the Company’s common stock and meets all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, the pre-funded warrant was classified as equity and accounted for as a component of additional paid-in capital at the

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time of issuance. All of the pre-funded warrants related to our November 2022 follow-on offering remain outstanding and unexercised as of March 31, 2024.

Share-based Compensation

Share-based compensation expense is comprised of the Company's stock options, restricted stock awards, restricted stock units and shares issued pursuant to the employee stock purchase plan, and is classified in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023 as follows:


	FOR THE THREE MONTHS ENDED MARCH 31,
(in thousands)	2024		2023
Research and development	$	769	$	1,063
General and administrative	1,319		1,982
	$	2,088	$	3,045

2021 Equity Incentive Plan

In 2021, the board of directors adopted the Rallybio Corporation 2021 Equity Incentive Plan (the "2021 Plan"). The 2021 Plan initially reserved 5,440,344 shares of the Company's common stock that have been issued in respect of outstanding equity awards granted prior to the Company’s IPO, and for future issuances of shares to employees, directors and consultants in the form of stock options, SARs, restricted and unrestricted stock and stock units, performance awards and other awards that are convertible into or otherwise based on the Company's common stock. Dividend equivalents may also be provided in connection with awards under the 2021 Plan. The share pool will automatically increase on January 1st of each year until 2031, by the lesser of (i) five percent of the number of shares of the Company's common stock outstanding as of such date and (ii) the number of shares of the Company's common stock determined by the board of directors on or prior to such date. On January 1, 2024 and January 1, 2023, the 2021 Plan share pool was automatically increased by 1,891,478 and 1,891,868 shares, respectively. As of March 31, 2024, the total number of shares of common stock that were issuable under the 2021 Plan was 8,684,099 shares, of which 3,467,863 shares remained available for future issuance.

The following table summarizes stock option activity for the three months ended March 31, 2024:


Stock Options	Number of Option Shares	Weighted-Average Exercise Price		Weighted-Average Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2023	4,270,544	$	9.98	8.5	$	—
Granted	987,039	$	1.89
Forfeited	(427,421)	$	9.60
Expired	(17,801)	$	12.54
Exercised	—	$	—
Outstanding at March 31, 2024	4,812,361	$	8.35	8.1	$	—
Options exercisable at March 31, 2024	1,899,175	$	11.08	6.8	$	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company's common stock. Options outstanding and exercisable with an exercise price above the closing price as of March 31, 2024 are considered to have no intrinsic value. Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the three months ended March 31, 2024 and 2023 was $1.47 per share and $4.99 per share, respectively. As of March 31, 2024, there was unrecognized share-based compensation expense related to unvested stock options of $13.4 million which the Company expects to recognize over a weighted-average period of approximately 2.5 years.

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The fair value of the stock options granted during the three months ended March 31, 2024 and 2023 was determined using the Black-Scholes option pricing model with the following assumptions:


	FOR THE THREE MONTHS ENDED MARCH 31,
	2024	2023
Expected volatility	89.41% - 94.48%	89.37% - 92.27%
Expected term (years)	5.50 - 6.02	5.50 - 6.08
Risk free interest rate	3.93% - 4.22%	3.68% - 4.52%
Expected dividend yield	—	—
Exercise price	$1.86 - $2.40	$6.19 - $7.83

A summary of the status of the Company's unvested restricted common stock awards at March 31, 2024 and changes during the three months ended March 31, 2024 was as follows:


Restricted Stock Awards	Shares	Weighted-Average Grant Date Fair Value Per Share
Unvested restricted stock awards at December 31, 2023	354,394	$	4.10
Granted	—	$	—
Vested	(102,849)	$	3.50
Forfeited	(17,595)	$	8.49
Outstanding unvested restricted stock awards at March 31, 2024	233,950	$	4.04

As of March 31, 2024, there was unrecognized share-based compensation expense related to unvested restricted stock awards of $0.8 million, which the Company expects to recognize over a weighted-average period of approximately 1.0 year.

A summary of the status of the Company's unvested restricted common stock units at March 31, 2024 and changes during the three months ended March 31, 2024 was as follows:


Restricted Stock Units	Shares	Weighted-Average Grant Date Fair Value Per Share
Unvested restricted stock units at December 31, 2023	220,250	$	8.55
Granted	266,700	$	1.83
Forfeited	(83,075)	$	8.40
Vested	—	$	—
Outstanding unvested restricted stock units at March 31, 2024	403,875	$	4.14

As of March 31, 2024, there was unrecognized share-based compensation expense related to unvested restricted stock units of $1.0 million, which the Company expects to recognize over a weighted-average period of approximately 3.1 years.

2021 Employee Stock Purchase Plan

In connection with the Company's IPO, the board of directors adopted the Rallybio Corporation 2021 Employee Stock Purchase Plan (the "2021 ESPP"), which initially reserved 291,324 shares of the Company's common stock for future issuances. The share pool will automatically increase on January 1st of each year until 2031, by the lesser of (i) one percent of the number of shares of the Company's common stock outstanding as of such date, (ii) 582,648 shares of the Company’s common stock and (iii) the number of shares of the Company's common stock determined by the board of directors on or prior to such date. The 2021 ESPP share pool did not increase on January 1, 2024. On January 1, 2023, the 2021 ESPP share pool was automatically increased by

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378,373 shares. As of March 31, 2024, the total number of shares of the Company's common stock that were available for future issuance under the 2021 ESPP was 872,878 shares. During the three months ended March 31, 2024 and 2023, the Company did not issue any shares under the 2021 ESPP.

The 2021 ESPP allows eligible participants to purchase shares of our common stock through authorized payroll deductions. Pursuant to the 2021 ESPP, the purchase price of the shares will be 85% of the lower of the fair market value of our common stock on the date on which the relevant option was (i) granted and (ii) deemed exercised.

For the three months ended March 31, 2024 and 2023, the total share-based compensation for the 2021 ESPP was $42 thousand and $60 thousand, respectively.

6. INVESTMENT IN JOINT VENTURE

The Company, through one of its wholly-owned subsidiaries, has a 50% interest of the joint venture entity, RE Ventures I, LLC, a limited liability company (“REV-I”). For the three months ended March 31, 2024 and 2023, the Company funded $0.8 million associated with the Company's commitment and its share of REV-I development. The Company did not provide any additional financial support outside of capital contributions to REV-I during the three months ended March 31, 2024 and 2023. While the Company held a 50% interest in the joint venture as of March 31, 2024, based on management’s analysis, the Company is not the primary beneficiary of REV-I and accordingly, the entity is not consolidated in the Company's condensed consolidated financial statements.

For the three months ended March 31, 2024 and 2023, the Company recorded its allocable share of REV-I’s losses, which totaled $0.7 million and $0.6 million, respectively, as a loss on investment in joint venture within the condensed consolidated statements of operations and comprehensive loss. After recognition of its share of losses for the period, the carrying value and maximum exposure to risk of the REV-I investment as of March 31, 2024 and December 31, 2023 was $0.3 million and $0.2 million, respectively, which was recorded in investment in joint venture in the accompanying condensed consolidated balance sheets.

7. COMMITMENTS AND CONTINGENCIES

Purchase Commitments—The Company enters contracts in the normal course of business with contract research organizations and other third-party vendors for clinical trials and testing and manufacturing services. These contracts generally 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 prior to cancellation. As of March 31, 2024 and December 31, 2023 there were no amounts accrued related to termination charges.

8. NET LOSS PER COMMON SHARE

Basic and diluted net loss per common share for the three months ended March 31, 2024 and 2023 was calculated as follows:


	FOR THE THREE MONTHS ENDED MARCH 31,
(in thousands except share and per share amounts)	2024		2023
Net loss	$	(19,029)	$	(17,318)
Weighted-average number of common shares outstanding, basic and diluted	40,773,615		40,248,893
Net loss per common share, basic and diluted	$	(0.47)	$	(0.43)

Basic net loss per share of common stock is based on the weighted-average number of shares of common stock outstanding during the period. Pre-funded warrants to purchase 3,333,388 shares of common stock that were issued in connection with the November 2022 follow-on offering were included in the weighted-average number of common shares outstanding for the three months ended March 31, 2024 and 2023. The weighted average number of common shares outstanding diluted for the three months ended March 31, 2024 and 2023 excludes approximately 5.5 million and 5.1 million stock options and unvested restricted stock awards and units, respectively, which were not dilutive.

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9. RESTRUCTURING

On February 6, 2024, the Company announced a prioritization of its portfolio and a workforce reduction to focus resources primarily on the continued development of RLYB212.

As part of this effort, the Company eliminated approximately 45% of its positions. As a result of these actions, the Company incurred charges of approximately $3.3 million. The charges related to the workforce reduction are cash-based expenditures related primarily to severance and benefit payments. The Company recognized all such charges during the three months ended March 31, 2024. During the three months ended March 31, 2024, $2.0 million was recorded in research and development expenses and $1.3 million was recorded in general and administrative expenses, with such amounts reflected in the condensed consolidated statements of operations and comprehensive loss. The accrued restructuring liability is included in accrued expenses on the condensed consolidated balance sheets as of March 31, 2024. Substantially all restructuring payments are expected to be completed by December 31, 2024.

The following table summarizes the restructuring accrual activity for the three months ended March 31, 2024:


(in thousands)	MARCH 31, 2024
Beginning accrued severance	$	—
Incurred during the period	3,279
Severance paid during the period	246
	$	3,033

10. SUBSEQUENT EVENTS

On April 9, 2024, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Johnson & Johnson, through its wholly-owned subsidiary, Momenta Pharmaceuticals, Inc. (“J&J”), pursuant to which the Company and J&J will support the development of complementary therapeutic approaches aimed at reducing the risk of FNAIT. Under the Collaboration Agreement, the Company will share certain aggregated, anonymized data with J&J, collected from the Company's FNAIT natural history study and its planned RLYB212 Phase 2 clinical trial that will be restricted to collection of certain natural history data in support of the natural history study. The Company also agreed to disseminate information to its FNAIT study sites related to J&J’s and its affiliates’ research and development of complementary therapeutic approaches aimed at reducing the risk of FNAIT. As part of the Collaboration Agreement, J&J provided the Company with an upfront payment $0.5 million and the Company is eligible to receive additional payments of up to an aggregate of $3.7 million, based upon certain triggers related to the FNAIT studies and its activities under the Collaboration Agreement.

On April 10, 2024, the Company entered into a Securities Purchase Agreement with Johnson & Johnson Innovation – JJDC, Inc. ("JJDC"), pursuant to which the Company sold to JJDC, in an unregistered offering, 3,636,363 shares of its common stock, at a price of $1.82 per share, which represents a 10% premium on the Company’s closing stock price on April 9, 2024, for aggregate gross proceeds of approximately $6.6 million, before deducting estimated offering expenses. The Company agreed, among other things, to file with the SEC a registration statement covering the resale of the shares within 120 days following the closing of the offering.

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Item 2. 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 unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 (our "Annual Report"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, 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 II, Item 1A of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-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 fetal and neonatal alloimmune thrombocytopenia ("FNAIT") and RLYB116, an inhibitor of complement component 5 (“C5"), with the potential to treat several diseases of complement dysregulation. Both programs have completed Phase 1 clinical studies, 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 studies: a Phase 1 first-in-human clinical study and a Phase 1b proof of concept clinical study. The Phase 1 first-in-human clinical study was a single-blind, placebo-controlled study that investigated the safety and pharmacokinetic ("PK") of subcutaneous ("SC") administration of RLYB212 in HPA-1a negative healthy participants. The clinical study 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 study. In this study, SC 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 studies, RLYB212 was observed to be generally 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 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 trial 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 trial for RLYB212 in the second half of 2024. This trial is designed to confirm the RLYB212 dose regimen in pregnant women at higher risk of alloimmunization and FNAIT. Following completion of the Phase 2 dose confirmation trial and consultation with regulatory authorities, we expect to initiate a Phase 3 registrational trial.

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We are also conducting a prospective, non-interventional, multinational FNAIT natural history study. This study is designed to screen up to 30,000 pregnant women presenting at the Gestational Week 10 to 14 prenatal visit to determine the frequency of women at higher FNAIT risk among pregnant women 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 trial 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 May 1, 2024, Rallybio has screened approximately 10,000 pregnant women. The Company expects screening for the natural history study to continue simultaneously with execution of the Phase 2 trial.

On April 9, 2024, we entered into a collaboration agreement (the “Collaboration Agreement”) with Johnson & Johnson, through its wholly-owned subsidiary, Momenta Pharmaceuticals, Inc. (“J&J”), pursuant to which we and J&J will support the development of complementary therapeutic approaches aimed at reducing the risk of FNAIT. Under the Collaboration Agreement, we will share certain aggregated, anonymized data with J&J, collected from the FNAIT natural history study and our planned RLYB212 Phase 2 clinical trial that will be restricted to collection of certain natural history data in support of the natural history study. We also agreed to disseminate information to our FNAIT study sites related to J&J’s and its affiliates’ research and development of complementary therapeutic approaches aimed at reducing the risk of FNAIT. As part of the Collaboration Agreement, J&J provided us with an upfront payment $0.5 million and we are eligible to receive additional payments of up to an aggregate of $3.7 million, based upon certain triggers related to the FNAIT studies and our activities under the Collaboration Agreement. In addition, we received an equity investment of $6.6 million from Johnson & Johnson Innovation – JJDC, Inc. ("JJDC"). See "Liquidity and Capital Resources - Sources of Liquidity" below.

Complement Dysregulation

We are also developing therapies that address diseases of complement dysregulation, including paroxysmal nocturnal hemoglobinuria ("PNH"), antiphospholipid syndrome ("APS") and generalized myasthenia gravis ("gMG"). RLYB116 is a novel, potentially long-acting, subcutaneously injected 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 study in healthy participants that included the study of RLYB116 as a single ascending dose ("SAD") and a multiple ascending dose ("MAD"). The SAD portion of the RLYB116 clinical study included five cohorts with a dose ranging from 2mg up to 300mg. Data from the SAD portion of the study 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 study 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 study included an adaptive single-blind design with a 4-week treatment duration to evaluate the safety, tolerability, PK, and pharmacodynamics ("PD") of RLYB116 with multiple dose SC administration. The MAD portion of the study 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 study 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 study 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 APS. We expect the manufacturing work to be completed in the second half of 2024.

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In February 2023, we entered into a collaboration with EyePoint Pharmaceuticals, Inc. ("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. EyePoint has demonstrated feasibility for sustained delivery of Rallybio’s inhibitor of C5 using EyePoint’s proprietary intraocular drug delivery technology and is working on optimization.

Hematological Disorders

In May 2022, we obtained worldwide exclusive rights to RLYB331, a preclinical, monoclonal antibody that is designed to inhibit Matriptase-2 ("MTP-2"). The inhibition of MTP-2 significantly increases levels of hepcidin, decreases iron load and treats ineffective erythropoiesis. In the first quarter of 2024, we completed nonclinical studies that demonstrated favorable tolerability, dose-dependent PK and sustained PD effects with RLYB332, a long-acting version of the RLYB331 anti-Matriptase-2 antibody. These findings support the continued development of RLYB332 as a potentially best-in-class therapeutic for treating diseases of iron overload. We anticipate presentation of this data in the second half of 2024. We continue to evaluate non-dilutive options to further advance this program, including potential partnerships.

Metabolic Disorders

In collaboration with Exscientia Limited ("Exscientia"), we continue to work toward the selection of a small molecule development candidate to advance into the clinic targeting Ectonucleotide Pyrophosphatase/ Phosphodiesterase 1 ("ENPP1") for the treatment of patients with hypophosphatasia ("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 Biologics Inc.'s ("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.

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 initial public offering ("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.

On April 10, 2024, we entered into a Securities Purchase Agreement with JJDC pursuant to which we sold to JJDC, in an unregistered offering, 3,636,363 shares of our common stock at a price of $1.82 per share, which represents a 10% premium on the Company’s closing stock price on April 9, 2024, for aggregate gross proceeds of approximately $6.6 million, before deducting our estimated offering expenses. We agreed, among other things, to file with the SEC a registration statement covering the resale of the shares within 120 days following the closing of the offering.

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As of March 31, 2024, we had cash, cash equivalents and marketable securities of $94.2 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 $19.0 million and $17.3 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $254.3 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;

▪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;

▪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 contract research organizations ("CROs") as well as investigative

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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 contract manufacturing organizations ("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 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;

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▪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 condensed 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.

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations:


	FOR THE THREE MONTHS ENDED MARCH 31,
(in thousands)	2024		2023		CHANGE
Operating expenses:
Research and development	$	12,936	$	11,202	$	1,734
General and administrative	6,851		7,172		(321)
Total operating expenses	19,787		18,374		1,413
Loss from operations	(19,787)		(18,374)		(1,413)
Total other income, net	1,443		1,619		(176)
Loss before equity in losses of joint venture	(18,344)		(16,755)		(1,589)
Loss on investment in joint venture	685		563		122
Net loss	$	(19,029)	$	(17,318)	$	(1,711)

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Operating Expenses

Research and Development Expenses

The following table summarizes our research and development costs for each of the periods presented:


	FOR THE THREE MONTHS ENDED MARCH 31,
	2024		2023		CHANGE
(in thousands)
Direct research and development by program
RLYB212	$	5,640	$	5,700	$	(60)
RLYB116	1,303		1,234		69
Other program candidates	604		426		178
Other unallocated research and development costs
Personnel expenses (including share-based compensation)	5,170		3,641		1,529
Other expenses	219		201		18
Total research and development expenses	$	12,936	$	11,202	$	1,734

Research and development expenses were $12.9 million for the three months ended March 31, 2024, compared to $11.2 million for the three months ended March 31, 2023. The increase of $1.7 million in 2024 as compared to 2023 was primarily due to:

▪a $1.5 million increase in payroll and personnel-related costs, primarily related to severance costs incurred in connection with the workforce reduction, effective March 6, 2024.

This increase was partially offset by:

▪a $0.1 million decrease in costs related to the development of RLYB212, primarily related to a decrease in manufacturing and other research and development costs, which was largely offset by an increase in clinical development costs.

General and Administrative Expenses

General and administrative expenses were $6.9 million and $7.2 million for the three months ended March 31, 2024 and 2023, respectively. The decrease of $0.3 million in 2024 as compared to 2023 was primarily due to:

▪a $1.0 million decrease in other general and administrative related expenses and a reduction in our director and officer insurance premiums.

This decrease was partially offset by:

▪a $0.7 million increase in payroll and personnel-related costs, primarily related to severance costs incurred in connection with the workforce reduction, effective March 6, 2024; offset by decreases in payroll and personnel-related costs, primarily related to lower ongoing headcount in 2024 as compared to 2023.

Total Other Income, Net

Total other income, net, for the three months ended March 31, 2024 was income of $1.4 million compared to income of $1.6 million for the three months ended March 31, 2023. The change was primarily related to a decrease in interest income from marketable securities.

Loss On Investment In Joint Venture

Loss on investment in joint venture for the three months ended March 31, 2024 was $0.7 million compared to $0.6 million for the three months ended March 31, 2023.

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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 a Sales Agreement (the "Sales Agreement") with Cowen and Company, LLC ("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 March 31, 2024, 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 offering were approximately $50.8 million, after deducting underwriting discounts and commissions and other offering costs.

On April 10, 2024, we entered into a Securities Purchase Agreement with JJDC, pursuant to which we sold to JJDC in an unregistered offering, 3,636,363 shares of our common stock at a price of $1.82 per share, which represents a 10% premium on the Company’s closing stock price on April 9, 2024, for aggregate gross proceeds of approximately $6.6 million, before deducting our estimated offering expenses. We agreed, among other things, to file with the SEC a registration statement covering the resale of the shares within 120 days following the closing of the offering.

As of March 31, 2024, we had $94.2 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

SEC Form 10-Q filed by Rallybio Corporation