UNITY BIOTECHNOLOGY, INC. You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled "Selected Financial Data" and our audited financial statements and related notes included elsewhere in this report. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled "Risk Factors" included elsewhere in this report.
Overview
We are a biotechnology company engaged in researching and developing therapeutics to slow, halt, or reverse diseases of aging. Our initial focus is on creating senolytic medicines to selectively eliminate senescent cells and thereby treat diseases of aging, such as ophthalmologic diseases.
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in CST of -5.4 microns from baseline compared to a worsening (increase) of +34.6 microns in sham-treated patients (p=0.1244). The proportion of rescue-free patients at 24 weeks was greater on UBX1325 (59.4%) as compared to sham (37.5%) with fewer total rescues and longer time-to-rescue in UBX1325-treated patients as compared to sham. UBX1325 demonstrated a favorable safety and tolerability profile with no cases of intraocular inflammation, retinal artery occlusion, endophthalmitis, or vasculitis. Patients will continue to be followed through 48 weeks post-treatment in a long-term follow-up, with data expected in the second quarter of 2023.
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Since the commencement of our operations, we have invested a significant portion
of our efforts and financial resources in research and development activities,
and we have incurred net losses each year since inception. Our net losses were
Substantially all of our net losses have resulted from costs incurred in
connection with our research and development programs and from general and
administrative costs associated with our operations. Based on our current
operating plans, we expect our existing capital resources will fund our planned
operating expenses into the first quarter of 2024, which is expected to fund key
clinical data readouts for UBX1325. Our capital resources will fund operations
less than 12 months from the date of this Annual Report, as a result we
concluded that this circumstance raises substantial doubt about our ability to
continue as a going concern. We will need to raise additional capital; however,
adequate funding may not be available to us on acceptable terms, or at all,
particularly in light of the current economic uncertainty, high interest rates,
rising inflation, the government closure of
We expect to continue to incur net operating losses for at least the next several years as we continue our research and development efforts, advance our drug candidates through preclinical and clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization. We do not expect to generate revenue from any drug candidates that we develop until we obtain regulatory approval for one or more of such drug candidates and commercialize our products or enter into collaborative agreements with third parties.
We rely on third parties in the conduct of our preclinical studies and clinical trials and for manufacturing and supply of our drug candidates. We have no internal manufacturing capabilities, and we will continue to rely on third parties, many of whom are single-source suppliers, for our preclinical and clinical trial materials, as well as the commercial supply of our products. In addition, we do not yet have a marketing or sales organization or commercial
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infrastructure. Accordingly, we will incur significant expenses to develop a marketing and sales organization and commercial infrastructure in advance of generating any product sales.
COVID-19 Update
The COVID-19 pandemic has placed strains on the providers of healthcare services, including the healthcare institutions, clinical research organizations, or CROs, and Institutional Review Boards under whose auspices we conduct our clinical trials. These strains have resulted in limits on the initiation of new clinical trials, slowing or halting enrollment in existing trials and restrictions placed upon on-site monitoring activities of clinical trials. Prior to the initiation of our Phase 1 and Phase 2 studies of UBX1325, we amended the clinical study protocols to enable remote data collection for clinical sites that were limited in their ability to conduct study visits in person, for either site or patient safety reasons. We also instituted remote data source verification procedures to limit the extent that on-site monitoring was required.
Although we rely on third party manufacturers to supply UBX1325, there have been no disruptions in our supply chain of drug manufacturers necessary to conduct our Phase 1 and Phase 2 studies of UBX1325, and we believe we have sufficient supply of drug inventories to complete our current studies in ophthalmologic disease.
Reverse Stock Split
On
The reverse stock split did not affect the number of authorized shares of common stock or the par value of our common stock.
Components of Our Results of Operations
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for the development of our drug candidates, which include:
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personnel-related expenses, including salaries, benefits, severance, and stock-based compensation for personnel contributing to research and development activities;
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laboratory expenses including supplies and services;
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clinical trial expenses;
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expenses incurred under agreements with third-party contract manufacturing organizations, contract research organizations, research and development service providers, academic research institutions, and consultants;
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expenses related to license and sponsored research agreements; and
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facilities and other allocated expenses, including expenses for rent and facilities maintenance, and depreciation and amortization.
We expect our research and development expenses to increase as we advance our drug candidates into and through preclinical and clinical trials and pursue regulatory approval of our drug candidates. The process of conducting the clinical trials required to obtain regulatory approval is costly and time-consuming. Clinical trials generally become larger and more costly to conduct as they advance into later stages and we are required to make estimates for expense accruals related to clinical trial expenses. The actual probability of success for our drug candidates may be affected by a variety of factors including: the safety and efficacy of our drug candidates, early clinical data, investment in our clinical program, the ability of collaborators, if any, to successfully develop any drug candidates we license to them, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our drug candidates. Program costs that are direct external expenses are tracked on a program-by-program basis once they enter clinical studies. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our drug candidates.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs,
allocated facilities costs and other expenses for outside professional services,
including legal, audit and accounting services, and depreciation and
amortization expense related to property and equipment. Personnel costs consist
of salaries, benefits, severance, and stock-based compensation. We expect to
continue to incur additional expenses associated with operating as a public
company, including expenses related to compliance with the rules and regulations
of the
Change Fair Value of Contingent Consideration
Certain of our license agreements include contingent consideration in the form of additional issuances of our common stock based on the achievement of certain milestones. For asset acquisitions, we assess whether such contingent consideration obligation meets the definition of a derivative and/or can be equity classified, until such time that the contingency or equity classification criteria is met or expires. We have recorded a liability related to contingent consideration as the net settlement criteria of the definition of a derivative had been met and equity classification criteria had not been met. The derivative related to this contingent consideration was measured at fair value as of each balance sheet date with the related change in fair value being reflected in operating results. Gains or losses on contingent consideration expense is driven by changes in the estimated fair value of the liability, which is determined using a probability-weighted valuation approach model that reflects the probability and timing of future issuances of our common shares.
Interest Income
Interest income is primarily related to interest earned on our marketable securities.
Interest Expense
Interest expense relates to interest on the Loan Agreement entered into on
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Other Income (Expense), Net
We held an equity investment in an entity called Ascentage Pharma Group
International, or
Results of Operations
Comparison of the Years Ended
The following table sets forth the significant components of our results of
operations (in thousands):
Year ended December 31,
2022 2021 Change
Summary of Operations Data:
Licensing revenue - related party $ 236 $ 4,784 $ (4,548 )
Operating expenses:
Research and development 36,859 38,393 (1,534 )
General and administrative 20,949 23,056 (2,107 )
Total operating expenses 57,808 61,449 (3,641 )
Loss from operations (57,572 ) (56,665 ) (907 )
Interest income 1,220 100 1,120
Interest expense (3,558 ) (3,177 ) (381 )
Other income (expense), net (17 ) (983 ) 966
Net loss $ (59,927 ) $ (60,725 ) $ 798 Licensing Revenue -
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Research and Development
Research and development expenses decreased by
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General and Administrative
General and administrative expenses decreased by
Interest Income
Our interest income was
Interest Expense
Our interest expense of
Other Income (Expense), Net
Other income, net, was immaterial for the year ended
Comparison of the years ended
The following table sets forth the significant components of our results of
operations (in thousands):
Year ended December 31,
2021 2020 Change
Summary of Operations Data:
Licensing revenue - related party $ 4,784 $ - $ 4,784
Operating expenses:
Research and development 38,393 67,309 (28,916 )
General and administrative 23,056 24,025 (969 )
Change in fair value of contingent consideration - (33 ) 33
Impairment of long-lived assets - 2,629 (2,629 )
Total operating expenses 61,449 93,930 (32,481 )
Loss from operations (56,665 ) (93,930 ) 37,265
Interest income 100 1,196 (1,096 )
Interest expense (3,177 ) (1,292 ) (1,885 )
Other income (expense), net (983 ) 182 (1,165 )
Net loss $ (60,725 ) $ (93,844 ) $ 33,119 Licensing Revenue -
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for an upfront fee of
Research and Development
Research and development expenses decreased by
General and Administrative
General and administrative expenses decreased by
Change in Fair Value of Contingent Consideration
There was no contingent consideration liability at
Impairment of Long-Lived Assets
Impairment charges consisted of impairment of long-lived assets. There were no
impairment charges during the year ended
Interest Income
Our interest income was
Interest Expense
Our interest expense of
Other Income (Expense), Net
Other expense, net, was
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Liquidity, Capital Resources and Capital Requirements
Sources of Liquidity
We have incurred net losses each year since inception. We do not have any
products approved for sale and have never generated any revenue from product
sales. Historically, we have incurred operating losses as a result of ongoing
efforts to develop our drug candidates, including conducting ongoing research
and development, preclinical studies and providing general and administrative
support for these operations. Our net losses were
Further, based on our public float, as of the date of the filing of this Annual
Report on Form 10-K, we are only permitted to utilize a shelf registration
statement, including the registration statements under which our ATM Offering
Programs are operated, subject to Instruction I.B.6 to Form S-3, which is
referred to as the "baby shelf" rule. For so long as our public float is less
than
We have historically financed our operations primarily through private placements of preferred stock and promissory notes, as well as public equity issuances, such as our initial public offering, and more recently through proceeds from our Loan Agreement, our prior and existing at-the-market offering programs, the Equity Purchase Agreement, and the sale of common stock and warrants in the Follow-On Offering (each as defined below) and we will continue to be dependent upon equity and/or debt financing to operate our business until we are able to generate positive cash flows from our operations.
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required cash reserve amount shall be reduced by the principal amount of the
converted loan to not less than
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Future Funding Requirements
To date we have not generated any product revenue. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our drug candidates, and begin to commercialize any approved products. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. Moreover, since becoming a public company, we continue to incur additional ongoing costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.
Until we can generate a sufficient amount of revenue from the commercialization of our drug candidates or from collaborative agreements with third parties, if ever, we expect to finance our future cash needs through various means. We do not have any committed external source of funds. Additional capital may be raised through the sale of our equity securities through our ATM Offering programs or otherwise, incurring debt, entering into licensing or collaboration agreements with partners, receiving research contributions, grants or other sources of financing to fund our operations. There can be no assurance that sufficient funds will be available to us on attractive terms or at all. If we are unable to obtain additional funding from these or other sources, it may be necessary to significantly reduce our
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rate of spending through reductions in staff and delaying, scaling back, or stopping certain research and development programs. Insufficient liquidity may also require us to relinquish rights to drug candidates at an earlier stage of development or on less favorable terms than we would otherwise choose.
Based on our current operating plans, we expect our existing capital resources will fund our planned operating expenses into the first quarter of 2024, which is expected to fund key clinical data readouts for UBX1325. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development, and commercialization of biotechnology products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
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the results of our ongoing clinical trials of UBX1325;
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our ability to reduce our operating expenses;
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the scope, progress, results and costs of researching and developing our drug candidates, and conducting preclinical studies and clinical studies;
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potential delays in or an increase in costs associated with our ongoing or planned preclinical studies or clinical trials;
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the timing of, and the costs involved in, obtaining regulatory approvals for our current drug candidates or any future drug candidates;
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the number and characteristics of any additional drug candidates we develop or acquire;
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the timing and amount of any milestone payments we are required to make pursuant to our license agreements;
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the cost of manufacturing our current drug candidates or any future drug candidates and any products we successfully commercialize;
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the cost of commercialization activities if our current drug candidates or any future drug candidates are approved for sale, including marketing, sales and distribution costs;
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our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;
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any product liability or other lawsuits related to our products;
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the costs associated with being a public company;
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and
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our ability to utilize our ATM Offering Programs and raise additional capital;
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the availability of capital in the technology and life sciences industries
following the government closure of
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whether or not we can maintain compliance with the continued listing requirements of Nasdaq; and
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the timing, receipt and amount of sales of any future approved products, if any.
Cash Flows
The following table sets forth a summary of the primary sources and uses of cash and restricted cash for each of the periods presented below (in thousands):
Year ended December 31,
2022 2021 2020
Cash used in operating activities $ (51,029 ) $ (45,060 ) $ (78,333 ) Cash provided by (used in) investing activities (24,545 ) 39,313 (5,208 ) Cash provided by financing activities
54,855 20,845 63,875
Net increase (decrease) in cash and
restricted cash$ (20,719 ) $ 15,098 $ (19,666 ) Operating Activities
Cash used in operating activities of
Cash used in operating activities of
Cash used in operating activities of
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Investing Activities
Cash used in investing activities of
Cash provided by investing activities of
Cash used in investing activities of
Financing Activities
Cash provided by financing activities of
Cash provided by financing activities of
Cash provided by financing activities of
Contractual Obligations and Other Commitments
Our contractual obligations and commitments relate primarily to our Loan Agreement, operating leases and non-cancelable purchase obligations under agreements with various research and development organizations and suppliers in the ordinary course of business. See Note 7, "Commitments and Contingencies" and Note 8, "Term Loan Facility," to our financial statements for further information.
We are party to various license agreements pursuant to which we have in-licensed
rights to various technologies, including patents, research "know-how" and
proprietary research tools, for the discovery, research, development and
commercialization of drug candidates to treat age-related diseases. The license
agreements obligate us to make certain milestone payments related to specified
clinical development and sales milestone events, as well as tiered royalties in
the low-single digits based on sales of licensed products. See Note 5 to our
financial statements "License Revenue, Agreements and
Indemnification
In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is
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unknown because it involves claims that may be made against us in the future but have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.
In accordance with our certificate of incorporation and bylaws, we have potential indemnification obligations to our officers and directors for specified events or occurrences, subject to some limits, while they are serving at our request in such capacities. There have been no claims to date, and we have director and officer insurance that may enable us to recover a portion of any amounts paid for future potential claims.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this prospectus, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
Research and Development Expenses and Accruals
Costs related to research and development of drug candidates are charged to research and development expense as incurred. Research and development costs include, but are not limited to, payroll and personnel expenses for personnel contributing to research and development activities, laboratory supplies, outside services, licenses acquired to be used in research and development, manufacturing of clinical material, pre-clinical testing and consultants and allocated overhead, including rent, equipment, depreciation and utilities. Research and development costs are expensed as incurred unless there is an alternative future use in other research and development projects. Payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized as expense in the period in which the related goods are received or services are rendered. Such payments are evaluated for current or long-term classification based on when they will be realized.
As part of the process of preparing our financial statements, we are required to estimate expenses resulting from our obligations under contracts with vendors and consultants and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. Our objective is to reflect the appropriate expenses in our financial statements by matching those expenses with the period in which services and efforts are expended. We account for these expenses according to the progress of the production of clinical trial materials or based on progression of the clinical trial, as measured by patient progression and the timing of various aspects of the trial. We determine accrual estimates by taking into account discussion with applicable personnel and outside service providers as to the progress or state of consummation of goods and services, or the services completed. During the course of a clinical trial, we adjust the rate of expense recognition if actual results differ from our estimates. We make estimates of accrued expenses as of each balance sheet date in our financial statements based on the facts and circumstances known at that time. Our clinical trial accrual is dependent in part upon the timely and accurate reporting of contract research organizations, contract manufacturers and other third-party vendors. Although we do not expect our estimates to be materially different from amounts
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actually incurred, our understanding of the status and timing of services
performed relative to the actual status and timing of services performed may
vary and may result in our reporting changes in estimates in any particular
period. Adjustments to prior period estimates have not been material for the
years ended
We have and may continue to enter into license agreements to access and utilize certain technology. We evaluate if the license agreement is an acquisition of an asset or a business. To date none of our license agreements have been considered to be an acquisition of a business. For asset acquisitions, the upfront payments to acquire such licenses, as well as any future milestone payments made before product approval, are immediately recognized as research and development expense when due, provided there is no alternative future use of the rights in other research and development projects. These license agreements may also include contingent consideration in the form of cash and additional issuances of our common stock.
Stock-Based Compensation
We recognize compensation costs related to stock-based awards granted based on the estimated fair value of the awards on the date of grant, and we recognize forfeitures as they occur. For awards that vest solely based on service conditions or a combination of service and performance conditions, we estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of the awards is generally recognized on a straight-line basis over the requisite service period, which is typically their vesting period. We recognize forfeitures as they occur.
The market traded price of the shares of common stock underlying the stock-based awards is the fair value of our stock as reported on the Nasdaq Global Select Market on the grant date.
The Black-Scholes option-pricing model requires the use of highly subjective assumptions to determine the fair value of stock-based awards. These assumptions include:
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Expected term-The expected term represents the period that the stock-based awards are expected to be outstanding. We use, due to insufficient historical data, the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the options.
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Expected volatility-Due to our limited trading history for our common stock, the expected volatility is estimated based on the average historical volatilities of common stock of comparable publicly traded entities over a period equal to the expected term of the stock option grants. The comparable companies are chosen based on their size, stage in the product development cycle or area of specialty. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.
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Risk-free interest rate-The risk-free interest rate is based on the
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Expected dividend-We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.
We have also granted stock options to certain key employees that vest in
conjunction with certain market conditions. The Company uses the
As of
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JOBS Act Accounting Election
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS
Act, emerging growth companies can delay adopting new or revised accounting
standards issued subsequent to the enactment of the JOBS Act until such time as
those standards apply to private companies. We have irrevocably elected to avail
ourselves of this exemption from new or revised accounting standards and,
therefore, will not be subject to the same new or revised accounting standards
as other public companies that are not emerging growth companies. We also rely
on other exemptions provided by the JOBS Act, including, without limitation,
providing an auditor's attestation report on our system of internal controls
over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.
We will remain an emerging growth company until the earlier of (1) the last day
of the year following the fifth anniversary of the consummation of our IPO, (2)
the last day of the year in which we have total annual gross revenue of at least
We expect that we will no longer qualify as an emerging growth company after
Recent Accounting Pronouncements
See Note 2 to our Financial Statements "Summary of Significant Accounting Policies" for information.
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