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 June 30, 2021

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: 001-39971

 

Landos Biopharma, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

81-5085535

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1800 Kraft Drive, Suite 216

Blacksburg, Virginia

24060

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (540) 218-2232

 

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 $0.01 per share

 

LABP

 

The Nasdaq Stock Market LLC

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 July 29, 2021, the registrant had 40,117,598 shares of common stock, $0.01 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

 

 

 

PART II.

OTHER INFORMATION

29

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 6.

Exhibits

31

Signatures

32

 

 

FORWARD-LOOKING STATEMENTS

 

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about:

 

the timing, progress and results of our clinical trials of omilancor, NX-13 and any other product candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;
the timing of any submission of filings for regulatory approval of, and our ability to obtain and maintain regulatory approvals for, omilancor, NX-13 and any other product candidates for any indication;
 our expectations regarding the size of the patient populations, market acceptance and opportunity for and clinical utility of our product candidates, if approved for commercial use;
 our manufacturing capabilities and strategy, including the scalability and commercial viability of our manufacturing methods and processes;
our expectations regarding the scope of any approved indication for omilancor, NX-13 or any other product candidate;
our ability to successfully commercialize our product candidates;
our ability to leverage our LANCE platform to identify and develop future product candidates;
our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional funding;
our ability to establish or maintain collaborations or strategic relationships and attain any related milestone payments;
our ability to identify, recruit and retain key personnel;

 


 

our ability to protect and enforce our intellectual property position for our product candidates, and the scope of such protection;
our financial performance; 
our competitive position and the development of and projections relating to our competitors or our industry;
the impact of laws and regulations;
the impact of the COVID-19 pandemic; and
our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.

 

You should refer to “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and in "Item 1a. Risk Factors" below for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this report represent our views as of the date of this report. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this report.

 

You should read this report and the documents that we reference in this report, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

All brand names or trademarks appearing in this report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report are referred to without the symbols ® and TM, but such references should not be construed as any indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

 

Unless the context requires otherwise, references in this report to “Landos,” the “Company,” “we,” “us,” and “our” refer to Landos Biopharma, Inc. and its subsidiaries.

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements. (Unaudited)

Landos Biopharma, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,687

 

 

$

2,416

 

Marketable securities, available for sale

 

 

96,440

 

 

 

25,718

 

Incentive and tax receivables

 

 

2

 

 

 

154

 

Prepaid expenses and other current assets

 

 

2,598

 

 

 

202

 

Deferred offering costs

 

 

 

 

 

1,398

 

Total current assets

 

 

117,727

 

 

 

29,888

 

Property, plant and equipment-net

 

 

564

 

 

 

444

 

Total assets

 

$

118,291

 

 

$

30,332

 

Liabilities, convertible preferred stock and stockholders’ (deficit) equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

10,685

 

 

$

8,606

 

Accrued liabilities

 

 

1,590

 

 

 

1,939

 

Other current liabilities

 

 

255

 

 

 

489

 

Total current liabilities

 

 

12,530

 

 

 

11,034

 

Other liabilities

 

 

149

 

 

 

276

 

Total liabilities

 

 

12,679

 

 

 

11,310

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

Convertible preferred stock, $0.01 par value; no shares authorized, issued or outstanding as of June 30, 2021; 11,260,608 shares authorized, issued and
outstanding as of December 31, 2020: aggregate liquidation preference of $
70,254 as of December 31, 2020

 

 

 

 

 

73,037

 

 

 

 

 

 

 

 

Stockholders’ (deficit) equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value; 10,000,000 shares authorized, no shares issued or outstanding as of June 30,2021

 

 

 

 

 

 

Common stock, $0.01 par value; 200,000,000 shares authorized, 39,900,886 shares issued and outstanding as of June 30, 2021; 12,767,909 shares issued and outstanding as of December 31, 2020

 

 

399

 

 

 

71

 

Additional paid-in-capital

 

 

166,805

 

 

 

1,633

 

Accumulated other comprehensive gain (loss)

 

 

(142

)

 

 

10

 

Accumulated deficit

 

 

(61,450

)

 

 

(55,729

)

Total stockholders' (deficit) equity

 

 

105,612

 

 

 

(54,015

)

Total liabilities, convertible preferred stock and stockholders’ (deficit) equity

 

$

118,291

 

 

$

30,332

 

 

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

 

 

3


 

Landos Biopharma, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue - License Fee:

 

$

18,000

 

 

 

 

 

$

18,000

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

     Research and development

 

 

11,522

 

 

 

3,723

 

 

 

18,776

 

 

$

8,413

 

General and administrative

 

 

2,596

 

 

 

1,365

 

 

 

5,241

 

 

 

2,445

 

Total operating expenses

 

 

14,118

 

 

 

5,088

 

 

 

24,017

 

 

 

10,858

 

Gain/(Loss) from operations

 

 

3,882

 

 

 

(5,088

)

 

 

(6,017

)

 

 

(10,858

)

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

R&D Incentive Income

 

 

41

 

 

 

 

 

 

41

 

 

 

 

Gain/(loss) from foreign exchange

 

 

(5

)

 

 

175

 

 

 

13

 

 

 

(47

)

Other income, net

 

 

179

 

 

 

136

 

 

 

242

 

 

 

332

 

Other income (expense), net

 

 

215

 

 

 

311

 

 

 

296

 

 

 

285

 

Net income/(loss)

 

 

4,097

 

 

 

(4,777

)

 

 

(5,721

)

 

 

(10,573

)

Net income/(loss) per share, basic and diluted

 

 

0.12

 

 

 

(0.73

)

 

 

(0.19

)

 

 

(1.61

)

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

 

 

33,639,481

 

 

 

12,067,905

 

 

 

29,875,877

 

 

 

11,971,314

 

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

 

 

34,384,784

 

 

 

12,067,905

 

 

 

29,875,877

 

 

 

11,971,314

 

Net income/(loss)

 

 

4,097

 

 

 

(4,777

)

 

 

(5,721

)

 

 

(10,573

)

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

 

 

(40

)

 

 

774

 

 

 

(152

)

 

 

88

 

Comprehensive income/(loss)

 

 

4,057

 

 

 

(4,003

)

 

 

(5,873

)

 

 

(10,485

)

 

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

 

4


 

Landos Biopharma, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income/(loss)

 

$

(5,721

)

 

$

(10,573

)

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

 

 

 

 

 

 

Compensation expense related to vesting of common stock issued to Xontogeny

 

 

 

 

 

27

 

Depreciation of property and equipment

 

 

93

 

 

 

66

 

Accrued interest on marketable securities

 

 

415

 

 

 

 

Stock-based compensation expense

 

 

1,335

 

 

 

 

Net realized gain/(loss) on sale of marketable securities

 

 

2

 

 

 

44

 

Net (accretion of discount) amortization of premium on marketable securities

 

 

245

 

 

 

73

 

Gain/(loss) from foreign exchange

 

 

13

 

 

 

46

 

Other

 

 

 

 

 

33

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Incentive and tax receivables

 

 

152

 

 

 

(27

)

Prepaid expenses and other assets

 

 

(1,412

)

 

 

(2

)

Accounts payable

 

 

2,067

 

 

 

1,731

 

Other liabilities

 

 

(349

)

 

 

(610

)

Net cash (used in) operating activities

 

 

(3,160

)

 

 

(9,192

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(213

)

 

 

(79

)

Purchase of available-for-sale marketable securities

 

 

(85,409

)

 

 

(10,092

)

Proceeds from sales and maturities of marketable securities

 

 

14,289

 

 

 

13,908

 

Net cash (used in) provided by investing activities

 

 

(71,333

)

 

 

3,737

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Net proceeds from initial public offering

 

 

90,506

 

 

 

 

Proceeds from exercise of stock options

 

 

258

 

 

 

 

Net cash provided by financing activities

 

 

90,764

 

 

 

 

Net change in cash and cash equivalents

 

 

16,271

 

 

 

(5,455

)

Cash and cash equivalents at beginning of period

 

 

2,416

 

 

 

9,808

 

Effect of exchange rates on cash

 

 

 

 

 

(46

)

Cash and cash equivalents at end of period

 

$

18,687

 

 

$

4,307

 

 

 

 

 

 

 

 

Supplemental non-cash disclosure:
NONCASH INVESTING AND FINANCING ACTIVITY:

 

 

 

 

 

 

Deferred offering costs included in accounts payable and accrued liabilities

 

$

 

 

$

246

 

Purchases of fixed assets in accounts payable

 

 

 

 

 

11

 

Reclassification of par to additional paid-in-capital

 

 

2

 

 

 

 

Reclassification of series A and B convertible preferred stock to common stock

 

 

72,925

 

 

 

 

Unrealized gain on available-for-sale marketable securities

 

 

152

 

 

 

88

 

 

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

 

5


 

Landos Biopharma, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

 

 

 

Convertible
preferred stock

 

 

 

Convertible
preferred stock

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amounts

 

 

 

Shares

 

 

Amounts

 

 

Shares

 

 

Amounts

 

 

Additional
paid-in
capital

 

 

Tranche
right

 

 

Accumulated
deficit

 

 

Accumulated
other
comprehensive
loss

 

 

Total
stockholders’
deficit

 

Balance at December 31, 2019

 

 

11,260,608

 

 

 

73,037

 

 

 

 

 

 

 

 

 

 

11,784,148

 

 

$

63

 

 

$

16

 

 

 

 

 

$

(25,585

)

 

$

(77

)

 

$

(25,583

)

Compensation expense related to vesting of common stock issued to Xontogeny

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

193,182

 

 

 

2

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

14

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(686

)

 

 

(686

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,796

)

 

 

 

 

 

(5,796

)

Balance at March 31, 2020

 

 

11,260,608

 

 

 

73,037

 

 

 

 

 

 

 

 

 

 

11,977,330

 

 

 

65

 

 

 

28

 

 

 

 

 

 

(31,381

)

 

 

(763

)

 

 

(32,051

)

Compensation expense related to vesting of common stock issued to Xontogeny

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

193,182

 

 

 

1

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

13

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

774

 

 

 

774

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,777

)

 

 

 

 

 

(4,777

)

Balance at June 30, 2020

 

 

11,260,608

 

 

 

73,037

 

 

 

 

 

 

 

 

 

 

12,170,512

 

 

 

66

 

 

 

40

 

 

 

 

 

 

(36,158

)

 

 

11

 

 

 

(36,041

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible
preferred stock

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amounts

 

 

 

Shares

 

 

Amounts

 

 

Additional
paid-in
capital

 

 

Tranche
right

 

 

Accumulated
deficit

 

 

Accumulated
other
comprehensive
loss

 

 

Total
stockholders’
equity (deficit)

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

11,260,608

 

 

$

73,037

 

 

 

 

12,767,909

 

 

$

71

 

 

$

1,633

 

 

 

 

 

$

(55,729

)

 

$

10

 

 

$

(54,015

)

 

 

 

 

 

 

Conversion of preferred stock to common stock upon closing of the initial public offering

 

 

(11,260,608

)

 

 

(73,037

)

 

 

 

20,549,478

 

 

 

262

 

 

 

72,775

 

 

 

 

 

 

 

 

 

 

 

 

73,037

 

 

 

 

 

 

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

 

 

6,250,000

 

 

 

63

 

 

 

90,443

 

 

 

 

 

 

 

 

 

 

 

 

90,506

 

 

 

 

 

 

 

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,023

 

 

 

 

 

 

 

 

 

 

 

 

1,023

 

 

 

 

 

 

 

Exercise of Stock Options

 

 

 

 

 

 

 

 

 

299,282

 

 

 

3

 

 

 

555

 

 

 

 

 

 

 

 

 

 

 

 

558

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(112

)

 

 

(112

)

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,818

)

 

 

 

 

 

(9,818

)

 

 

 

 

 

 

Balance at March 31, 2021

 

 

 

 

$

 

 

 

 

39,866,669

 

 

$

399

 

 

$

166,429

 

 

 

 

 

$

(65,547

)

 

$

(102

)

 

$

101,179

 

 

 

 

 

 

 

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

312

 

 

 

 

 

 

 

 

 

 

 

 

312

 

 

 

 

 

 

 

Exercise of Stock Options

 

 

 

 

 

 

 

 

 

34,217

 

 

 

 

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

64

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(40

)

 

 

(40

)

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,097

 

 

 

 

 

 

4,097

 

 

 

 

 

 

 

Balance at June 30, 2021

 

 

 

 

$

 

 

 

 

39,900,886

 

 

$

399

 

 

$

166,805

 

 

 

 

 

$

(61,450

)

 

$

(142

)

 

$

105,612

 

 

 

 

 

 

 

 

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

 

6


 

Landos Biopharma, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Organization and description of the business

 

Landos Biopharma, Inc. (“Landos”) is a late-clinical-stage biopharmaceutical company that utilizes its LANCE® Advanced A.I. platform to discover and develop novel oral therapeutics for patients with autoimmune diseases. To date LANCE® has discovered seven new mechanisms of action, including the LANCL2, NLRX1 and PLXDC2 immunometabolic pathways. These new pathways offer a unique and differentiated way to modulate dysregulated immune responses that are connected to autoimmune diseases, a market expected to reach $153 billion by 2025.

 

The Company’s core expertise is in the development of therapeutic candidates that target novel pathways at the interface of immunity and metabolism. Based on our understanding of the role that cellular metabolic pathways have on modulating inflammatory responses, the Company aims to down-regulate these inflammatory responses by changing the metabolic processes in targeted cells.

 

The Company leverages its proprietary advanced AI-based precision medicine platform and growing reference datasets, which we refer to as our LANCE® advanced A.I. platform, to identify novel therapeutic targets and biomarkers based on predictions of immunometabolic function and create therapeutic candidates for autoimmune disease to engage those targets in areas of unmet medical need.

 

The Company utilizes its unique and proprietary animal models, which allows precise conduct of its research and development activities, as compared to other animal models available for purchase in the marketplace, to evaluate safety and efficacy profiles of its product candidates.

 

LANCE Platform and Expansible Inflammation & Immunology Pipeline

 

The Company’s LANCE platform accelerates the drug development process by shortening timelines and reducing costs. LANCE® has yielded 17 active preclinical and clinical programs through June 30, 2021.  In addition, the Company expects LANCE® will continue to assist in developing new and novel product candidates to enhance the Company’s expansible inflammation & immunology (I&I) pipeline in the future.

 

Lead Therapeutic Assets and Clinical Trial Plans

 

Lead asset omilancor is a novel once-daily, oral, gut-restricted small molecule drug candidate that targets the LANCL2 pathway for the treatment of ulcerative colitis (“UC”), Crohn’s disease (“CD”), Eosinophilic Esophagitis (“EOE”) and topical formulations have been developed for psoriasis and atopic dermatitis.

 

The Company successfully completed a global Phase 2 clinical trial of omilancor for UC in 2020. And, in June 2021, the company successfully completed an End-of-Phase 2 meeting with the US FDA and secured agreement on the key elements necessary for regulatory approval. This has enabled the company to initiate clinical trial site feasibility studies for the planned pivotal global Phase 3 program of omilancor in UC that will consist of two concurrent global pivotal trials: PACIFY I and PACIFY II. The Company believes that the agreed upon inclusion criteria of the pending global Phase 3 program, if successful, may potentially make omilancor eligible to be prescribed to approximately 90% of all UC patients. According to Global Data, sales of UC drugs in the US in 2021 are anticipated to approximate $5.7 billion and may reach $7.3 billion in 2025 when omilancor might be ready to be commercialized for UC. Additionally, the Company initiated a Phase 2 trial of omilancor in 150 patients with CD in the first half of 2021 with data readout for this trial expected in the first half of 2022.

 

NX-13 is a novel, once-daily, oral, gut-restricted small molecule drug candidate for the treatment of inflammatory bowel disease, that targets the NLRX1 pathway. NX-13 is undergoing Phase 1b clinical testing in 40 UC patients with data readout expected in the first quarter of 2022.

 

Continued Drug Discovery and Pipeline Development Activities

 

The Company is a platform company that continues to discover innovative therapeutic targets, with the aim to begin clinical development of at least one new drug candidate in each of the next five years. The Company also has a robust pipeline of seventeen (17) product candidates for various autoimmune diseases, including: lupus, rheumatoid arthritis, multiple sclerosis, and type 1 diabetes a market expected to reach $153 billion by 2025. At least several of which the Company anticipates advancing to Phase 1 clinical testing in 2021 and 2022.

 

 

7


 

Business Development and Financing Activities

 

We are actively seeking cash inflows from non-dilutive product candidate licensing activities to negotiate for up-front and milestone payments and potential royalty payments on future sales for our pipeline of product candidates while advancing our core programs to commercialization.

 

In May 2021, Landos received $18 million in an upfront payment from LianBio related to a license agreement for the Greater China and select Asian markets. The LianBio agreement may provide us up to an additional $200 million from the achievement of commercial and milestone payments, and low-mid double-digit royalties in net sales in the territory. LianBio also committed to recruitment of up to 25% of patients in our Phase 3 pivotal trials.

 

During February 2021, the Company completed its initial public offering (“IPO”) that resulted in net proceeds of $90.5 million. As a result of the IPO, $72.9 million of convertible preferred stock converted to common stock, in accordance with the terms of those financing agreements negotiated prior to the IPO.

 

We will need additional financing to initiate and complete our planned clinical trials, to continue and expand our research and development operations that support our planned discovery, development and clinical and regulatory activities, to adequately prepare for commercialization of our product candidates that may achieve regulatory approval in the future.

 

Liquidity and Capital Resources

 

As of June 30, 2021, the Company had cash, cash equivalents and marketable securities of $115.1 million, which it believes will be sufficient to fund its planned operations through end of 2023.

 

Since our inception in 2017 through June 30, 2021, we funded operations through the issuance of convertible preferred stock and convertible promissory notes, through proceeds from our IPO, and through the upfront payment from the LianBio territory deal.  We expect to incur substantial operating losses for at least the next several years. 

 

2. Summary of significant accounting policies

 

Basis of presentation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Landos Biopharma Australia Pty Ltd. (“Landos Australia”). All intercompany balances and transactions have been eliminated in consolidation.  The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2020. In the opinion of the Company’s management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of its financial position, operating results and cash flows for the periods presented have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full year, for any other interim period or for any future year.  

 

Use of estimates

 

The preparation of 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 at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions made in the accompanying consolidated financial statements include but are not limited to accrued liabilities, fair value of equity instruments, and uncertain tax positions. 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 materially differ from those estimates

 

COVID-19

 

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease (“COVID-19”) as a pandemic, and the Company expects its operations in all locations to be affected as the virus and its variants continue to proliferate. The Company has adjusted certain aspects of its operations to protect employees and customers while still meeting customers’ needs for vital technology. The Company will continue to monitor the situation closely and it is possible that further measures will be

 

8


 

implemented. In light of the uncertainty as to the severity and duration of the pandemic, the impact on the financial position of the company, if any, is uncertain at this time.

 

Revenue Recognition for Out-License Arrangements

 

Under ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”), an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. 

 

The Company assesses its license arrangements within the scope of Topic 606 in accordance with this framework as follows:

 

License revenue

 

The Company first assesses whether the goods or services promised within each contract are distinct to identify those that are performance obligations. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. In assessing whether a promised good or service is distinct, and therefore a performance obligation, the Company considers factors such as the research, manufacturing and commercialization capabilities of the customer and the availability of the associated expertise in the general marketplace. The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, the Company is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations.

 

The transaction price is determined and allocated to the identified performance obligations in proportion to their stand-alone selling prices (“SSP”) on a relative SSP basis. SSP is based on observable prices of the performance obligations or, when such prices are not observable, are estimated based on factors such as forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. 

 

If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount method. The Company includes the amount of estimated variable consideration in the transaction price to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

 

If an arrangement includes development, regulatory or commercial milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

 

In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensee and the transfer of the promised goods or services to the licensees will be one year or less. For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation