10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 September 30, 2022

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 001-39756

 

Silverback Therapeutics, Inc.

(Exact name of Registrant as specified in its Charter)

 

 

 

 

Delaware

81-1489190

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

500 Fairview Ave N, Suite 600

Seattle, Washington

98109

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (206) 456-2900

 

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

SBTX

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 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, a 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 October 31, 2022 there were 36,058,338 shares of registrant’s common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

 

 

 

Page

 

PART I

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

5

 

Condensed Balance Sheets

5

 

Condensed Statements of Operations and Comprehensive Loss

6

 

Condensed Statements of Stockholders’ Equity (Deficit)

7

 

Condensed Statements of Cash Flows

9

 

Notes to Unaudited Condensed Financial Statements

10

Item 2.

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

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

32

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

52

Item 3.

Defaults Upon Senior Securities

52

Item 4.

Mine Safety Disclosures

52

Item 5.

Other Information

52

Item 6.

Exhibits

53

 

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

the proposed merger with ARS Pharmaceuticals, Inc. ("ARS Pharma") and the expected timing, completion, effects and potential benefits thereof;
the expected exchange ratio and relative ownership percentages of the stockholders of ARS Pharma and Silverback in the combined company;
the expected level of Silverback net cash at the closing of the proposed merger;
our evaluation of strategic alternatives with a goal to enhance stockholder value, including the proposed merger with ARS Pharma, or if the proposed merger with ARS Pharma is not consummated, the possibility of a different merger or sale of the company, the sale of the company’s assets in one or more transactions to one or more third parties or a liquidation and dissolution of the company;
our plans to reduce our workforce, the expected cash and non-cash charges related thereto and the timing thereof;
our plans to research, develop, and commercialize SBT8230 and any future product candidates;
our ability to attract and retain key scientific and management personnel;
our ability to attract and retain collaborators with development, regulatory and commercialization expertise;
our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012;
the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;
our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates and our ability to operate our business without infringing upon the intellectual property rights of others;
the impact of the COVID-19 pandemic on our business and operations; and
other risks and uncertainties, including those described under Part II, Item 1A, “Risk Factors” of this Quarterly Report.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A, “Risk Factors” of this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Unless the context otherwise indicates, references in this Quarterly Report to the terms “Silverback”, “the Company”, “we”, “our” and “us” refer to Silverback Therapeutics, Inc., and references to our “common stock” refers to our voting common stock.

 

3


 

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

An investment in shares of our common stock involves a high degree of risk. Below is a list of the more significant risks associated with our business. This summary does not address all of the risks that we face. Additional discussion of the risks listed in this summary, as well as other risks that we face, are set forth under Part II, Item 1A, “Risk Factors” in this Quarterly Report. Some of the material risks associated with our business include the following:

Failure to complete the Merger may result in us and ARS Pharma paying a termination fee to the other party and could harm the price of our common stock and future business and operations of each company.
We may not be able to divest our legacy programs within the timeframe under the Merger Agreement, on favorable terms or at all, which may result in the value of such assets not being included in the calculation of the exchange ratio.
If the conditions to the closing of the Merger are not met, the Merger may not occur.
The market price of our common stock following the Merger may decline as a result of the Merger.
We and ARS Pharma may become involved in securities litigation or stockholder derivative litigation in connection with the Merger, and this could divert the attention of our and ARS Pharma management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs and damages.
We have a limited operating history, have incurred net losses since our inception, and anticipate that we will continue to incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, may not be able to sustain it.
If the Merger is not completed, we may be unsuccessful in completing an alternative transaction on terms that are as favorable as the terms of the proposed Merger, or at all, and we may be unable to reestablish a viable operating business.
The COVID-19 pandemic has had, and could continue to have, an adverse impact on our business, including on our preclinical studies and planned clinical trials, supply chain, and business development activities.
We are currently party to an in-license agreement under which we were granted rights to manufacture certain components of our product candidates. If we breach our obligations under these agreements, we may be required to pay damages, lose our rights to these technologies or both, which would adversely affect our business and prospects.
We may rely on trade secret and proprietary know-how, which can be difficult to trace and enforce and, if we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
The price of our common stock could be subject to volatility related or unrelated to our operations.

4


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Silverback Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except share and par value data)

(unaudited)

 

 

 

 

September 30,

 

 

December 31,

 

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

203,224

 

 

$

254,045

 

Short-term investments

 

 

 

63,400

 

 

 

 

Prepaid expenses and other current assets

 

 

 

4,175

 

 

 

7,447

 

Total current assets

 

 

 

270,799

 

 

 

261,492

 

Long-term investments

 

 

 

 

 

 

64,780

 

Restricted cash

 

 

 

250

 

 

 

250

 

Right-of-use asset

 

 

 

 

 

 

4,733

 

Property and equipment, net

 

 

 

15

 

 

 

2,212

 

Total assets

 

 

$

271,064

 

 

$

333,467

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

 

$

126

 

 

$

2,078

 

Accrued expenses

 

 

 

3,649

 

 

 

11,727

 

Current portion of lease liability

 

 

 

215

 

 

 

1,087

 

Total current liabilities

 

 

 

3,990

 

 

 

14,892

 

Lease liability, net of current portion

 

 

 

 

 

 

4,760

 

Total liabilities

 

 

 

3,990

 

 

 

19,652

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred Stock, $0.0001 par value per share; 10,000,000 shares authorized at September 30, 2022 and December 31, 2021; no shares issued and outstanding at September 30, 2022 and December 31, 2021

 

 

 

 

 

 

 

Common stock, $0.0001 par value per share; 200,000,000 shares authorized at September 30, 2022 and December 31, 2021, 35,895,940 and 35,133,934 shares issued and 35,882,653 and 35,107,651 shares outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

 

516,829

 

 

 

500,349

 

Accumulated other comprehensive loss

 

 

 

(1,623

)

 

 

(326

)

Accumulated deficit

 

 

 

(248,136

)

 

 

(186,212

)

Total stockholders’ equity

 

 

 

267,074

 

 

 

313,815

 

Total liabilities, and stockholders’ equity

 

 

$

271,064

 

 

$

333,467

 

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

 

 

5


 

Silverback Therapeutics, Inc.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

8,363

 

 

$

15,641

 

 

$

37,505

 

 

$

45,630

 

General and administrative

 

 

10,256

 

 

 

7,040

 

 

 

25,610

 

 

 

20,447

 

Gain on lease remeasurement

 

 

(774

)

 

 

 

 

 

(774

)

 

 

 

Loss on sale of property and equipment

 

 

1,094

 

 

 

 

 

 

1,094

 

 

 

 

Total operating expenses

 

 

18,939

 

 

 

22,681

 

 

 

63,435

 

 

 

66,077

 

Loss from operations

 

 

(18,939

)

 

 

(22,681

)

 

 

(63,435

)

 

 

(66,077

)

Interest income, net

 

 

1,075

 

 

 

26

 

 

 

1,511

 

 

 

59

 

Net loss

 

 

(17,864

)

 

 

(22,655

)

 

 

(61,924

)

 

 

(66,018

)

Unrealized loss on available-for-sale securities

 

 

(75

)

 

 

(34

)

 

 

(1,297

)

 

 

(34

)

Comprehensive loss

 

 

(17,939

)

 

 

(22,689

)

 

 

(63,221

)

 

 

(66,052

)

Net loss per share, basic and diluted

 

$

(0.50

)

 

$

(0.65

)

 

$

(1.76

)

 

$

(1.89

)

Weighted-average shares used in computing net loss per share
   attributable to common stockholders, basic and diluted

 

 

35,457,960

 

 

 

35,001,466

 

 

 

35,248,690

 

 

 

34,884,656

 

 

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

6


 

Silverback Therapeutics, Inc.

Condensed Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

(unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated Other

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Comprehensive Loss

 

 

Deficit

 

 

Equity

 

Balance as of January 1, 2022

 

 

35,107,651

 

 

$

4

 

 

$

500,349

 

 

$

(326

)

 

$

(186,212

)

 

$

313,815

 

Exercise of common stock options and vesting of early exercised common stock options

 

 

15,679

 

 

 

 

 

 

19

 

 

 

 

 

 

 

 

 

19

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,949

 

 

 

 

 

 

 

 

 

4,949

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(922

)

 

 

(24,631

)

 

 

(25,553

)

Balance as of March 31, 2022

 

 

35,123,330

 

 

$

4

 

 

$

505,317

 

 

$

(1,248

)

 

$

(210,843

)

 

$

293,230

 

Exercise of common stock options, shares issued under the employee stock purchase plan, and vesting of early exercised common stock options

 

 

46,395

 

 

 

 

 

 

150

 

 

 

 

 

 

 

 

 

150

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,140

 

 

 

 

 

 

 

 

 

5,140

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(300

)

 

 

(19,429

)

 

 

(19,729

)

Balance as of June 30, 2022

 

 

35,169,725

 

 

$

4

 

 

$

510,607

 

 

$

(1,548

)

 

$

(230,272

)

 

$

278,791

 

Exercise of common stock options, shares issued under the employee stock purchase plan, vesting of restricted stock unit awards, and vesting of early exercised common stock options

 

 

712,928

 

 

 

 

 

 

1,185

 

 

 

 

 

 

 

 

 

1,185

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,037

 

 

 

 

 

 

 

 

 

5,037

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(75

)

 

 

(17,864

)

 

 

(17,939

)

Balance as of September 30, 2022

 

 

35,882,653

 

 

$

4

 

 

$

516,829

 

 

$

(1,623

)

 

$

(248,136

)

 

$

267,074

 

 

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

 

 

 

 

 

7


 

Silverback Therapeutics, Inc.

Condensed Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

(unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated Other

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Comprehensive Loss

 

 

Deficit

 

 

Equity

 

Balance as of January 1, 2021

 

 

34,701,274

 

 

$

3

 

 

$

479,608

 

 

$

 

 

$

(96,734

)

 

$

382,877

 

Exercise of common stock options and vesting of early exercised common stock options

 

 

125,930

 

 

 

 

 

 

254

 

 

 

 

 

 

 

 

 

254

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,285

 

 

 

 

 

 

 

 

 

4,285

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,867

)

 

 

(18,867

)

Balance as of March 31, 2021

 

 

34,827,204

 

 

$

3

 

 

$

484,147

 

 

$

 

 

$

(115,601

)

 

$

368,549

 

Exercise of common stock options, shares issued under the employee stock purchase plan, and vesting of early exercised common stock options

 

 

135,881

 

 

 

1

 

 

 

866

 

 

 

 

 

 

 

 

 

867

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,730

 

 

 

 

 

 

 

 

 

4,730

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,496

)

 

 

(24,496

)

Balance as of June 30, 2021

 

 

34,963,085

 

 

$

4

 

 

$

489,743

 

 

$

 

 

$

(140,097

)

 

$

349,650

 

Exercise of common stock options and vesting of early exercised common stock options

 

 

74,051

 

 

 

 

 

 

154

 

 

 

 

 

 

 

 

 

154

 

Stock-based compensation

 

 

 

 

 

 

 

 

5,019

 

 

 

 

 

 

 

 

 

5,019

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(34

)

 

 

(22,655

)

 

 

(22,689

)

Balance as of September 30, 2021

 

 

35,037,136

 

 

$

4

 

 

$

494,916

 

 

$

(34

)

 

$

(162,752

)

 

$

332,134

 

 

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

8


 

Silverback Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(61,924

)

 

$

(66,018

)

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

 

 

 

 

 

 

Depreciation and amortization expense

 

 

533

 

 

 

596

 

Stock-based compensation

 

 

15,126

 

 

 

14,034

 

Non-cash lease expense

 

 

728

 

 

 

903

 

Amortization of debt issuance costs

 

 

 

 

 

2

 

Gain on lease remeasurement

 

 

(774

)

 

 

 

Loss on sale of property and equipment

 

 

1,094

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

4,608

 

 

 

(608

)

Accounts payable and accrued expenses

 

 

(10,013

)

 

 

6,422

 

Lease liability

 

 

(853

)

 

 

(786

)

Net cash used in operating activities

 

 

(51,475

)

 

 

(45,455

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of available for sale securities

 

 

 

 

 

(39,971

)

Purchase of property and equipment

 

 

(684

)

 

 

(822

)

Net cash used in investing activities

 

 

(684

)

 

 

(40,793

)

Cash flows from financing activities:

 

 

 

 

 

 

Principal payments on term loan payable

 

 

 

 

 

(846

)

Proceeds from exercise of common stock options and employee stock purchase plan

 

 

1,338

 

 

 

1,185

 

Net cash provided by financing activities

 

 

1,338

 

 

 

339

 

Change in cash, cash equivalents, and restricted cash

 

 

(50,821

)

 

 

(85,909

)

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

 

 

254,295

 

 

 

386,919

 

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

 

$

203,474

 

 

$

301,010

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Right-of-use assets and lease liabilities recognized

 

$

 

 

$

3,733

 

Right-of-use assets and lease liabilities derecognized

 

$

4,779

 

 

$

 

Sales of property and equipment in prepaid expenses and other current assets

 

$

1,316

 

 

$

 

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

 

 

9


 

Silverback Therapeutics, Inc.

Notes to Unaudited Condensed Financial Statements

1. Organization and Nature of Business

Silverback Therapeutics, Inc. (“Silverback” or “the Company”) is a biopharmaceutical company focused on leveraging its proprietary ImmunoTAC technology platform to develop systemically delivered and tissue targeted therapeutics for the treatment of chronic viral infections, cancer, and other serious diseases. The Company’s ImmunoTAC platform is the result of a focused effort to discover ways to systemically deliver disease-modifying small molecules in a directed fashion to sites of disease. The Company’s platform enables it to strategically pair proprietary linker-payloads that modulate key disease-modifying pathways with monoclonal antibodies directed at specific disease sites. The Company was formed in Seattle, Washington and incorporated in the state of Delaware on January 4, 2016.

 

On March 28, 2022, the Company’s board of directors approved a corporate restructuring plan to discontinue the Company’s clinical development programs for SBT6050 and SBT6290 and to prioritize resources on the development of the Company’s SBT8230 program and early-stage discovery programs (the “March Restructuring Plan”). In connection with the March Restructuring Plan, the Company’s workforce was reduced by 27%, with substantially all of the reduction in personnel completed by July 15, 2022. The Company initiated the reduction in force on March 31, 2022 and provided severance payments, continuation of group health insurance coverage, and other benefits for a specified period to the affected employees.

 

On July 21, 2022, as amended on August 11, 2022 and October 25, 2022, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with ARS Pharmaceuticals, Inc., a Delaware corporation (“ARS Pharma”), a biopharmaceutical company focused on the development of neffy, a needle-free epinephrine nasal spray, for the emergency treatment of Type I allergic reactions, and Sabre Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Silverback (“Merger Sub”). Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will be merged with and into ARS Pharma, with ARS Pharma surviving as a wholly owned subsidiary of Silverback (the “Merger”). The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes. The transaction is anticipated to be completed during the fourth quarter of 2022.

 

In connection with the Merger Agreement and in order to preserve cash resources, the Company has reduced its workforce by approximately 78% as of September 30, 2022, and an additional 17% will be terminated by transaction close. The Company anticipates the rest of the employees will remain with the combined company post-close. All employees affected by the workforce reduction will be eligible to receive, among other things, severance payments based on the applicable employee’s level and years of service with the Company and the continuation of group health insurance coverage for a specified time period post-termination.

Risks and Uncertainties

 

The Company is subject to a number of inherent risks which include, but are not limited to, the need to obtain adequate additional funding, possible failure of clinical trials or other events demonstrating a lack of clinical safety or efficacy of its product candidates, dependence on key personnel, reliance on third-party service providers for manufacturing drug product and conducting clinical trials, the ability to successfully secure its proprietary technology, and risks related to the regulatory approval and commercialization of a product candidate. Additionally, the development and commercialization of new drug products is highly competitive. Products or technologies developed by competitors may diminish or render obsolete the Company’s existing products under development. Moreover, the Company is subject to a number of risks related to the proposed Merger with ARS Pharma which include, but are not limited to, the failure to complete the Merger may result in the Company paying a termination fee to ARS Pharma, the inability of the Company to divest its legacy programs within the timeframe required under the Merger Agreement, on favorable terms or at all, if the Merger is not completed, the Company may be unsuccessful in completing an alternative transaction on terms that are as favorable as the terms of the Merger, or at all, and the Company may be unable to reestablish a viable operating business.

Liquidity and Capital Resources

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred net operating losses since its inception and had an accumulated deficit of $248.1 million as of September 30, 2022. The Company had cash, cash equivalents, and investments of $266.6 million as of September 30, 2022 and has not generated positive cash flows from operations. To date, the Company has funded its operations primarily through the issuance of redeemable convertible preferred stock, convertible notes, and the sale of common stock in connection with the Company’s initial public offering (“IPO”). The Company’s currently available cash, cash equivalents, and restricted cash as of September 30, 2022 are sufficient to meet its anticipated cash requirements for the 12 months following the date the financial statements are issued. Management considers

10


 

that there are no conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern for a period of at least 12 months from the date the financial statements are issued.

Management expects operating losses to continue for the foreseeable future. There can be no assurance that the Company will ever earn revenues or achieve profitability, or if achieved, that they will be sustained on a continuing basis. The Company may be unable to secure financing when needed, or if available, such financings may be under terms that are unfavorable to the Company or the current stockholders. If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations.

11


 

2. Summary of Significant Accounting Policies

Basis of Presentation

The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”), of the Financial Accounting Standards Board (“FASB”).

Unaudited Interim Condensed Financial Statements

The accompanying condensed balance sheet as of September 30, 2022, the condensed statements of operations and comprehensive loss and condensed statements of stockholders’ equity (deficit) for the three and nine months ended September 30, 2022 and 2021, and the condensed statements of cash flows for the nine months ended September 30, 2022 and 2021, are unaudited. The balance sheet as of December 31, 2021 was derived from the audited financial statements as of and for the year ended December 31, 2021. The unaudited interim condensed financial statements have been prepared on a basis consistent with the audited annual financial statements as of and for the year ended December 31, 2021, and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, 2022, the condensed results of its operations for the three and nine months ended September 30, 2022 and 2021, and its cash flows for the nine months ended September 30, 2022 and 2021. The financial data and other information disclosed in these notes related to the nine months ended September 30, 2022 and 2021 are also unaudited. The condensed results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022 or any other period.

Use of Estimates

The preparation of the Company’s financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to accruals for research and development expenses, valuation of equity awards, and valuation allowances for deferred tax assets. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates.

The full extent to which the coronavirus (“COVID-19”) pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses, clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets. The Company has considered potential impacts arising from the COVID-19 pandemic and is not presently aware of any events or circumstances that would require the Company to update its estimates, judgments or revise the carrying value of its assets or liabilities.

Fair Value of Financial Instruments

Cash and cash equivalents, restricted cash, and investments are carried at fair value. Accounts payable and accrued expenses are carried at cost, which approximates fair value given their short-term nature.

Cash and Cash Equivalents

Cash equivalents are comprised of short-term, highly-liquid investments with maturities of 90 days or less at the date of purchase. At September 30, 2022 and December 31, 2021, the Company’s cash equivalents consisted of money market funds.