Filed pursuant to Rule 424(b)(3)
Registration Statement No. 333-258100
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PROSPECTUS SUPPLEMENT
(to prospectus dated March 1, 2022)
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95,645,056 Shares of Common Stock
This prospectus supplement updates and amends the prospectus dated
March 1, 2022 (as supplemented to date, the “Prospectus”), which
forms a part of our Registration Statement on Post-Effective
Amendment No. 1 to the Form S-1 (Registration Statement No.
333-258100) filed with the Securities and Exchange Commission (the
“SEC”) on February 24, 2022 and declared effective by the SEC on
March 1, 2022.
The Prospectus and this prospectus supplement relate to (i) the
resale of 4,286,500 shares of common stock, par value $0.0001 per
share (the “Common Stock”) issued in connection with the
Domestication (as defined in the Prospectus) by certain of the
selling securityholders named in the Prospectus (each a “selling
securityholder” and, collectively, the “selling securityholders”),
(ii) the resale of 69,655,827 shares of Common Stock issued in
connection with the Business Combination (as defined in the
Prospectus) by certain of the selling securityholders, (iii) the
resale of 20,000,000 shares of common stock issued in the PIPE
Financing (as defined in the Prospectus) by certain of the selling
securityholders, and (iv) the issuance by us and resale of
1,702,729 shares of Common Stock reserved for issuance upon the
exercise of certain outstanding options to purchase Common
Stock.
This prospectus supplement should be read in conjunction with the
Prospectus, which is to be delivered with this prospectus
supplement. This prospectus supplement updates, amends and
supplements the information included or incorporated by reference
in the Prospectus. If there is any inconsistency between the
information in the Prospectus and this prospectus supplement, you
should rely on the information in this prospectus
supplement.
This prospectus supplement is not complete without, and may not be
delivered or utilized except in connection with, the Prospectus,
including any amendments or supplements to it.
Quarterly Report on Form 10-Q
On August 2, 2022, we filed a Quarterly Report on Form 10-Q
with the SEC. The Quarterly Report on Form 10-Q is attached
hereto.
We are an “emerging growth company,” as defined under the federal
securities laws, and, as such, may elect to comply with certain
reduced public company reporting requirements for future
filings.
Investing in our securities involves a high degree of risk. Before
buying any securities, you should carefully read the discussion of
the risks of investing in our securities in the section titled
“Risk
Factors”
beginning on page 6 of the Prospectus.
You should rely only on the information contained in the
Prospectus, this prospectus supplement or any prospectus supplement
or amendment hereto. We have not authorized anyone to provide you
with different information.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus supplement is August 2,
2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022
OR
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission File Number 001-39434
NAUTILUS BIOTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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98-1541723 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
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2701 Eastlake Avenue East Seattle, Washington
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98102
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(Address of principal executive offices) |
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(Zip Code) |
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(206) 333-2001
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(Registrant's telephone number, including area code) |
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(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered |
Common Stock, par value $0.0001 per share |
NAUT |
The Nasdaq Stock Market LLC
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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, 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.
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Large accelerated filer |
o |
Accelerated filer |
o |
Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
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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.
o
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
As of July 29, 2022, the registrant had 124,663,186 shares of
common stock, $0.0001 par value per share,
outstanding.
NAUTILUS BIOTECHNOLOGY, INC.
TABLE OF CONTENTS
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Page
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act,
that are based on our management’s beliefs and assumptions and on
information currently available to our management. The
forward-looking statements are contained principally in the section
entitled “Risk Factors” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.” Forward-looking
statements include, but are not limited to, statements concerning
the following:
•our
dependence on the success of our proteomics platform (the “Nautilus
platform”), which remains in the development stage and subject to
scientific and technical validation;
•our
expectations regarding the timing and progress of the development
of the Nautilus platform;
•our
estimates of our addressable market, market growth, future revenue,
key performance indicators, expenses, capital requirements and
needs for additional financing;
•our
expectations regarding the rate and degree of market acceptance of
the Nautilus platform;
•the
impact of the Nautilus platform on the field of proteomics and the
size and growth of the addressable proteomics market;
•our
ability to manage and grow our business and commercialize our
Nautilus platform;
•our
ability to successfully implement our three phase commercial launch
plan;
•the
implementation of our business model and strategic plans for the
Nautilus platform;
•our
ability to establish and maintain intellectual property protection
for our products or avoid or defend claims of
infringement;
•our
ability to recognize the anticipated benefits of the Business
Combination (as defined in Part I, Item I, Note 1, “Description of
Business and Basis of Presentation,” in our notes to condensed
consolidated financial statements in this Quarterly Report on Form
10-Q), which may be affected by, among other things, competition,
our ability to grow and manage future growth effectively, and our
ability to retain our key employees;
•our
expectations regarding the use of proceeds from the Business
Combination;
•the
performance of third-party manufacturers and
suppliers;
•changes
in applicable laws or regulations;
•our
ability to raise financing in the future;
•our
success in retaining or recruiting, or changes required in, our
officers, key employees or directors or other key
personnel;
•the
volatility of the trading price of our common stock;
•our
ability to develop and commercialize new products;
•our
expectations about market trends;
•the
impact of local, regional, national and international economic
conditions and events;
•the
effect of COVID-19 on the foregoing; and
•other
factors including but not limited to those detailed under the
section entitled “Risk
Factors.”
Forward-looking statements include statements that are not
historical facts and can be identified by terms such as
“anticipates,” “believes,” “could,” “seeks,” “estimates,”
“expects,” “intends,” “may,” “plans,” “potential,” “predicts,”
“projects,” “should,” “will,” “would,” or similar expressions and
the negatives of those terms.
Forward-looking statements 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 the forward-looking statements. We discuss these risks in
greater detail in Part II, Item 1A, “Risk Factors,” elsewhere in
this Quarterly Report on Form 10-Q. Given these uncertainties, you
should not place undue reliance on these forward-looking
statements. Moreover, we operate in a very competitive and rapidly
changing environment. New risks emerge from time to time. It is not
possible for us to predict all risks, nor can we assess the impact
of all factors on our business or the extent to which any factor,
or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make. In light of these risks, uncertainties and
assumptions, the future events and trends discussed in this
Quarterly Report on Form 10-Q may not occur and actual results
could differ materially and adversely from those anticipated or
implied in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on
Form 10-Q relate only to events as of the date on which the
statements are made. Except as required by law, we assume no
obligation to update these forward-looking statements, or to update
the reasons actual results could differ materially from those
anticipated in these forward-looking statements, even if new
information becomes available in the future.
This Quarterly Report on Form 10-Q also contains estimates,
projections and other information concerning our industry, our
business, and market opportunity, including data regarding the
estimated size of the market. Information that is based on
estimates, forecasts, projections, market research or similar
methodologies is inherently subject to uncertainties and actual
events or circumstances may differ materially from events and
circumstances reflected in this information. Unless otherwise
expressly stated, we obtained this industry, business, market and
other data from reports, research surveys, studies and similar data
prepared by market research firms and other third parties,
industry, medical and general publications, government data and
similar sources.
This Quarterly Report on Form 10-Q contains references to
trademarks and service marks belonging to other entities. Solely
for convenience, trademarks and trade names referred to in this
Quarterly Report on Form 10-Q may appear without the ® or TM
symbols, but such references are not intended to indicate, in any
way, that the applicable licensor will not assert, to the fullest
extent under applicable law, its rights to these trademarks and
trade names. We do not intend our use or display of other
companies’ trade names, trademarks or service marks to imply a
relationship with, or endorsement or sponsorship of it by, any
other companies.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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Nautilus Biotechnology, Inc.
Condensed Consolidated Balance Sheets
As of June 30, 2022 and December 31, 2021 (Unaudited) |
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(in thousands, except share and per share amounts) |
June 30,
2022 |
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December 31,
2021 |
Assets |
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Current assets: |
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Cash and cash equivalents |
$ |
210,354 |
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$ |
185,619 |
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Short-term investments |
88,984 |
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160,110 |
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Prepaid expenses and other current assets |
4,108 |
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3,493 |
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Total current assets |
303,446 |
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349,222 |
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Property and equipment, net |
3,402 |
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2,483 |
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Operating lease right-of-use assets |
28,304 |
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29,377 |
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Long-term investments |
35,558 |
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16,371 |
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Other long term assets |
997 |
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997 |
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Total assets |
$ |
371,707 |
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$ |
398,450 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
$ |
1,429 |
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$ |
1,723 |
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Accrued expenses and other liabilities |
3,108 |
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3,119 |
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Current portion of operating lease liability |
1,562 |
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970 |
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Total current liabilities |
6,099 |
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5,812 |
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Operating lease liability, net of current portion |
28,050 |
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29,062 |
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Total liabilities |
34,149 |
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34,874 |
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Commitments and contingencies (Note 10) |
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Stockholders’ equity: |
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Preferred stock, $0.0001 par value, 200,000,000 authorized as of
June 30, 2022 and December 31, 2021; 0 shares issued and
outstanding as of June 30, 2022 and December 31, 2021
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— |
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— |
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Common stock, $0.0001 par value, 1,000,000,000 shares authorized as
of June 30, 2022 and December 31, 2021; 124,562,745 and 124,303,083
shares issued and outstanding as of June 30, 2022 and December 31,
2021, respectively
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12 |
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12 |
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Additional paid-in capital |
449,406 |
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444,388 |
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Accumulated other comprehensive loss |
(768) |
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(184) |
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Accumulated deficit |
(111,092) |
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(80,640) |
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Total stockholders’ equity |
337,558 |
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363,576 |
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Total liabilities and stockholders’ equity |
$ |
371,707 |
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$ |
398,450 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
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Nautilus Biotechnology, Inc.
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 2022 and 2021
(Unaudited) |
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Three Months Ended June 30, |
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Six Months Ended June 30, |
(in thousands, except share and per share amounts) |
2022 |
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2021 |
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2022 |
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2021 |
Operating expenses |
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Research and development |
$ |
8,856 |
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$ |
6,380 |
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$ |
18,514 |
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$ |
11,215 |
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General and administrative |
6,616 |
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4,317 |
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12,980 |
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7,899 |
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Total operating expenses |
15,472 |
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10,697 |
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31,494 |
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19,114 |
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Other income (expense), net |
783 |
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(16) |
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1,042 |
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(8) |
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Net loss |
$ |
(14,689) |
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|
$ |
(10,713) |
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$ |
(30,452) |
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$ |
(19,122) |
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Net loss per share attributable to common stockholders, basic and
diluted |
$ |
(0.12) |
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$ |
(0.19) |
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$ |
(0.24) |
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$ |
(0.43) |
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Weighted-average shares used in computing net loss per share
attributable to common stockholders, basic and diluted |
124,494,036 |
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55,070,480 |
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124,456,518 |
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44,096,149 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
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Nautilus Biotechnology, Inc.
Condensed Consolidated Statements of Comprehensive Loss
Three and Six Months Ended June 30, 2022 and 2021
(Unaudited) |
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Three Months Ended June 30, |
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Six Months Ended June 30, |
(in thousands) |
2022 |
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2021 |
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2022 |
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2021 |
Net loss |
$ |
(14,689) |
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$ |
(10,713) |
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$ |
(30,452) |
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$ |
(19,122) |
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Other comprehensive loss: |
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Unrealized loss on securities available-for-sale |
(214) |
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(12) |
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(584) |
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(13) |
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Total other comprehensive loss |
(214) |
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(12) |
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(584) |
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(13) |
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Comprehensive loss |
$ |
(14,903) |
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$ |
(10,725) |
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$ |
(31,036) |
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$ |
(19,135) |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
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Nautilus Biotechnology, Inc.
Condensed Consolidated Statements of Redeemable Convertible
Preferred Stock and Stockholders’ Equity
Three and Six Months Ended June 30, 2022 and 2021
(Unaudited)
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Three Months Ended June 30, 2022 |
Redeemable Convertible Preferred Stock |
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Additional Paid-in Capital |
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Accumulated Other Comprehensive Loss |
|
Accumulated Deficit |
|
Total Stockholders’Equity |
|
Series Seed |
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Series A |
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Series B |
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Common Stock |
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(in thousands, except share amounts) |
Shares |
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Amount |
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Shares |
|
Amount |
|
Shares |
|
Amount |
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Shares |
|
Amount |
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Balances at March 31, 2022 |
— |
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$ |
— |
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|
— |
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$ |
— |
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|
— |
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|
$ |
— |
|
|
|
124,456,653 |
|
|
$ |
12 |
|
|
$ |
446,654 |
|
|
$ |
(554) |
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|
$ |
(96,403) |
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$ |
349,709 |
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Issuance of common stock upon exercise of vested stock
options |
— |
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— |
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— |
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— |
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— |
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— |
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57,739 |
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— |
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|
32 |
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— |
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— |
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32 |
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Issuance of common stock under employee stock purchase
plan |
— |
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— |
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— |
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— |
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— |
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— |
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48,353 |
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— |
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|
153 |
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— |
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— |
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|
153 |
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Stock-based compensation expense |
— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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|
2,567 |
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— |
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|
— |
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|
2,567 |
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Other comprehensive loss |
— |
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— |
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— |
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— |
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|
— |
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— |
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— |
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— |
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|
— |
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(214) |
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— |
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(214) |
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Net loss |
— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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(14,689) |
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|
(14,689) |
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Balances at June 30, 2022
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— |
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$ |
— |
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— |
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$ |
— |
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|
— |
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|
$ |
— |
|
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|
124,562,745 |
|
|
$ |
12 |
|
|
$ |
449,406 |
|
|
$ |
(768) |
|
|
$ |
(111,092) |
|
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$ |
337,558 |
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Three Months Ended June 30, 2021 |
Redeemable Convertible Preferred Stock |
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Additional Paid-in Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Deficit |
|
Total Stockholders’ (Deficit) Equity |
|
Series Seed |
|
Series A |
|
Series B |
|
|
Common Stock |
|
|
|
|
(in thousands, except share amounts) |
Shares
(1)
|
|
Amount |
|
Shares
(1)
|
|
Amount |
|
Shares
(1)
|
|
Amount |
|
|
Shares
(1)
|
|
Amount |
|
|
|
|
Balances at March 31, 2021 |
13,174,805 |
|
|
$ |
5,494 |
|
|
16,836,436 |
|
|
$ |
27,067 |
|
|
22,164,724 |
|
|
$ |
75,857 |
|
|
|
33,069,513 |
|
|
$ |
1 |
|
|
$ |
1,936 |
|
|
$ |
2 |
|
|
$ |
(38,734) |
|
|
$ |
(36,795) |
|
Issuance of common stock upon exercise of vested stock
options |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
65,003 |
|
|
— |
|
|
46 |
|
|
— |
|
|
— |
|
|
46 |
|
Issuance of common stock upon exercise of warrants |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
62,772 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Conversion of redeemable convertible preferred stock into common
stock in connection with the reverse recapitalization |
(13,174,805) |
|
|
(5,494) |
|
|
(16,836,436) |
|
|
(27,067) |
|
|
(22,164,724) |
|
|
(75,857) |
|
|
|
52,175,965 |
|
|
7 |
|
|
108,411 |
|
|
— |
|
|
— |
|
|
108,418 |
|
Issuance of common stock upon the reverse recapitalization, net of
issuance costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
38,721,137 |
|
|
4 |
|
|
327,276 |
|
|
— |
|
|
— |
|
|
327,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
1,820 |
|
|
— |
|
|
— |
|
|
1,820 |
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(12) |
|
|
— |
|
|
(12) |
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,713) |
|
|
(10,713) |
|
Balances at June 30, 2021
|
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
|
124,094,390 |
|
|
$ |
12 |
|
|
$ |
439,489 |
|
|
$ |
(10) |
|
|
$ |
(49,447) |
|
|
$ |
390,044 |
|
|
|
|
Nautilus Biotechnology, Inc.
Condensed Consolidated Statements of Redeemable Convertible
Preferred Stock and Stockholders’ Equity
Three and Six Months Ended June 30, 2022 and 2021
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2022 |
Redeemable Convertible Preferred Stock |
|
|
|
|
|
|
Additional Paid-in Capital |
|
Accumulated Other Comprehensive Loss |
|
Accumulated Deficit |
|
Total Stockholders’Equity |
|
Series Seed |
|
Series A |
|
Series B |
|
|
Common Stock |
|
|
|
|
(in thousands, except share amounts) |
Shares
(1)
|
|
Amount |
|
Shares
(1)
|
|
Amount |
|
Shares
(1)
|
|
Amount |
|
|
Shares
(1)
|
|
Amount |
|
|
|
|
Balances at December 31, 2021 |
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
|
124,303,083 |
|
|
$ |
12 |
|
|
$ |
444,388 |
|
|
$ |
(184) |
|
|
$ |
(80,640) |
|
|
$ |
363,576 |
|
Issuance of common stock upon exercise of vested stock
options |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
211,309 |
|
|
— |
|
|
188 |
|
|
— |
|
|
— |
|
|
188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under employee stock purchase
plan |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
48,353 |
|
|
— |
|
|
153 |
|
|
— |
|
|
— |
|
|
153 |
|
Stock-based compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
4,677 |
|
|
— |
|
|
— |
|
|
4,677 |
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(584) |
|
|
— |
|
|
(584) |
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(30,452) |
|
|
(30,452) |
|
Balances at June 30, 2022###
|
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
|
124,562,745 |
|
|
$ |
12 |
|
|
$ |
449,406 |
|
|
$ |
(768) |
|
|
$ |
(111,092) |
|
|
$ |
337,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021 |
Redeemable Convertible Preferred Stock |
|
|
|
|
|
|
Additional Paid-in Capital |
|
Accumulated Other Comprehensive Income (Loss) |
|
Accumulated Deficit |
|
Total Stockholders’ (Deficit) Equity |
|
Series Seed |
|
Series A |
|
Series B |
|
|
Common Stock |
|
|
|
|
(in thousands, except share amounts) |
Shares
(1)
|
|
Amount |
|
Shares
(1)
|
|
Amount |
|
Shares
(1)
|
|
Amount |
|
|
Shares
(1)
|
|
Amount |
|
|
|
|
Balances at December 31, 2020 |
13,174,805 |
|
|
$ |
5,494 |
|
|
16,836,436 |
|
|
$ |
27,067 |
|
|
22,164,724 |
|
|
$ |
75,857 |
|
|
|
33,069,513 |
|
|
$ |
1 |
|
|
$ |
600 |
|
|
$ |
3 |
|
|
$ |
(30,325) |
|
|
$ |
(29,721) |
|
Issuance of common stock upon exercise of vested stock
options |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
65,003 |
|
|
— |
|
|
46 |
|
|
— |
|
|
— |
|
|
46 |
|
Issuance of common stock upon exercise of warrants |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
62,772 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Conversion of redeemable convertible preferred stock into common
stock in connection with the reverse recapitalization |
(13,174,805) |
|
|
(5,494) |
|
|
(16,836,436) |
|
|
(27,067) |
|
|
(22,164,724) |
|
|
(75,857) |
|
|
|
52,175,965 |
|
|
7 |
|
|
108,411 |
|
|
— |
|
|
— |
|
|
108,418 |
|
Issuance of common stock upon the reverse recapitalization, net of
issuance costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
38,721,137 |
|
|
4 |
|
|
327,276 |
|
|
|
|
|
|
327,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
3,156 |
|
|
— |
|
|
— |
|
|
3,156 |
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(13) |
|
|
— |
|
|
(13) |
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(19,122) |
|
|
(19,122) |
|
Balances at June 30, 2021###
|
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
|
124,094,390 |
|
|
$ |
12 |
|
|
$ |
439,489 |
|
|
$ |
(10) |
|
|
$ |
(49,447) |
|
|
$ |
390,044 |
|
(1) The shares of the Company’s common and
redeemable convertible preferred stock, prior to the Business
Combination (as defined in Note 1) have been retroactively restated
to reflect the exchange ratio of approximately 3.6281 established
in the Business Combination as described in Note 3.
The accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
Nautilus Biotechnology, Inc.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2022 and 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
(in thousands) |
2022 |
|
2021 |
Cash flows from operating activities |
|
|
|
Net loss |
$ |
(30,452) |
|
|
$ |
(19,122) |
|
Adjustments to reconcile net loss to net cash used in operating
activities |
|
|
|
Depreciation |
562 |
|
|
479 |
|
Stock-based compensation |
4,677 |
|
|
3,156 |
|
Amortization of premiums on securities, net |
(147) |
|
|
213 |
|
Amortization of operating lease right-of-use assets |
1,073 |
|
|
760 |
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
Prepaid expenses and other assets |
(503) |
|
|
(331) |
|
Accounts payable |
(643) |
|
|
725 |
|
Accrued expenses and other liabilities |
(11) |
|
|
410 |
|
Operating lease liability |
(420) |
|
|
(835) |
|
Net cash used in operating activities |
(25,864) |
|
|
(14,545) |
|
Cash flows from investing activities |
|
|
|
Proceeds from maturities of securities |
105,575 |
|
|
40,000 |
|
Purchases of securities |
(54,185) |
|
|
(100,035) |
|
Purchases of property and equipment |
(1,132) |
|
|
(1,013) |
|
Net cash provided by (used in) investing activities |
50,258 |
|
|
(61,048) |
|
Cash flows from financing activities |
|
|
|
Proceeds from exercise of stock options |
188 |
|
|
46 |
|
Proceeds from issuance of common stock under employee stock
purchase plan |
153 |
|
|
— |
|
Net proceeds from reverse recapitalization and PIPE
financing |
— |
|
|
335,409 |
|
Payments of offering costs |
— |
|
|
(8,082) |
|
|
|
|
|
Net cash provided by financing activities |
341 |
|
|
327,373 |
|
Net increase in cash, cash equivalents and restricted
cash |
24,735 |
|
|
251,780 |
|
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of
period |
186,461 |
|
|
37,219 |
|
Cash, cash equivalents and restricted cash at end of
period |
$ |
211,196 |
|
|
$ |
288,999 |
|
|
|
|
|
Supplementary cash flow information on non-cash
activities |
|
|
|
Acquisitions of property and equipment included in accounts
payable |
$ |
413 |
|
|
$ |
101 |
|
Deferred offering costs in accounts payable and accrued expenses
and other liabilities |
$ |
— |
|
|
$ |
47 |
|
Conversion of redeemable convertible preferred stock into common
stock in connection with the reverse recapitalization |
$ |
— |
|
|
$ |
108,418 |
|
Deferred offering costs reclassified to equity |
$ |
— |
|
|
$ |
8,129 |
|
Modification to reduce right-of-use assets and lease
liability |
$ |
— |
|
|
$ |
3,254 |
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
|
1.Description
of Business and Basis of Presentation
Nautilus Biotechnology, Inc. (the “Company”) is a biotechnology
company incorporated in 2016 and based in Seattle, Washington with
laboratory operations in San Carlos, California. Since the
Company’s incorporation in 2016, the Company has devoted
substantially all of its resources to research and development
activities, including with respect to its proteomics platform,
business planning, establishing and maintaining its intellectual
property portfolio, hiring personnel, raising capital and providing
general and administrative support for these
operations.
On June 9, 2021 (the “Closing Date”), Nautilus Biotechnology, Inc.
a Delaware corporation (f/k/a ARYA Sciences Acquisition Corp. III,
a Cayman Islands exempted company and the Company’s predecessor
company (“ARYA”)), consummated the previously announced business
combination (the “Business Combination”) pursuant to the terms of
that certain Business Combination Agreement, dated as of February
7, 2021 (the “BCA”), by and among ARYA, Mako Merger Sub, Inc., a
Delaware corporation and wholly-owned subsidiary of ARYA (“Mako
Merger Sub”), and Nautilus Subsidiary, Inc., a Delaware corporation
(f/k/a Nautilus Biotechnology, Inc.) (“Legacy Nautilus”). As a
result of the Business Combination, ARYA changed its name to
“Nautilus Biotechnology, Inc.” and Mako Merger
Sub merged with and into Legacy Nautilus with Legacy Nautilus
surviving as the surviving company and becoming a wholly-owned
subsidiary of ARYA (the “Merger” and, collectively with the other
transactions described in the BCA, the “Reverse
Recapitalization”).
In addition, in conjunction with the completion of the Business
Combination, certain investors (“PIPE Investors”) subscribed for
the purchase of an aggregate of 20,000,000 shares of common stock
of the Company (“New Nautilus Common Stock”) at a price of $10.00
per share for aggregate gross proceeds of $200.0 million
(“PIPE Financing”).
Please refer to Note 3 “Reverse Recapitalization” for further
details of the Business Combination.
Basis of Presentation
The condensed consolidated financial statements and accompanying
notes are unaudited and have been prepared in accordance with
accounting principles generally accepted in the United States of
America (“U.S. GAAP”) and regulations of the U.S. Securities and
Exchange Commission (the “SEC”) for interim financial reporting.
All intercompany transactions and balances have been eliminated
upon consolidation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with U.S. GAAP have been condensed or omitted pursuant to such
rules and regulations. The condensed consolidated financial
statements were prepared on the same basis as the audited financial
statements and, in the opinion of management, reflect all
adjustments, which include only normal recurring adjustments
necessary for a fair statement of the Company’s financial position
as of June 30, 2022, the results of its operations for the
three and six months ended June 30, 2022 and 2021 and its cash
flows for the six months ended June 30, 2022 and 2021. The results
of operations for the three and six months ended June 30, 2022 are
not necessarily indicative of the results that may be expected for
the year ending December 31, 2022. These financial statements
and accompanying notes should be read in conjunction with the
consolidated financial statements and notes thereto in the
Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2021 on file with the SEC. The Company’s reporting
currency is the U.S. dollar.
Going Concern
The Company’s condensed consolidated financial statements have been
prepared on the basis of continuity of operations, the realization
of assets, and the satisfaction of liabilities in the ordinary
course of business. Since inception, the Company has been engaged
in developing its technology, raising capital, and recruiting
personnel. The Company’s operating plan may change as a result of
many factors currently unknown and there can be no assurance that
the current operating plan will be achieved in the time frame
anticipated by the Company, and it may need to seek additional
funds sooner than planned. If adequate funds are not available to
the Company on a timely basis, it may be required to delay, limit,
reduce, or terminate certain commercial efforts, or pursue merger
or acquisition strategies, all of which could adversely affect the
holdings or the rights of the Company’s stockholders. The Company
has incurred net operating losses and negative cash flows from
operations in every year since
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
inception and expects this to continue for the foreseeable future.
As of June 30, 2022, the Company had an accumulated deficit of
$111.1 million.
The Company has funded its operations primarily with proceeds from
the issuance of redeemable convertible preferred stock and common
stock. In June 2021, the Company received gross proceeds of
approximately $345.5 million from PIPE Investors and the Business
Combination offset by approximately $18.2 million of transaction
costs and underwriters’ fees relating to the closing of the
Business Combination. The Company had cash, cash equivalents, and
short-term investments of $299.3 million as of June 30, 2022.
As of the date on which these condensed consolidated financial
statements were available to be issued, the Company believes that
its cash, cash equivalents, and short-term investments will be
sufficient to fund its operations for the next twelve months
following the issuance of the condensed consolidated financial
statements. The Company’s actual results could vary as a result of,
and its near and long-term future capital requirements will depend
on many factors, including its growth rate and the timing and
extent of spending to support its research and development efforts.
The Company has based its estimates on assumptions that may prove
to be wrong, and it could use its available capital resources
sooner than it currently expects. The Company may be required to
seek additional equity or debt financing. Future liquidity and cash
requirements will depend on numerous factors. In the event that
additional financing is required, the Company may not be able to
raise it on acceptable terms or at all. If the Company is unable to
raise additional capital when desired, or if it cannot expand its
operations or otherwise capitalize on its business opportunities
because it lacks sufficient capital, its business, operating
results, and financial condition would be adversely
affected.
Impact of the COVID-19 Coronavirus
In December 2019, COVID-19 was first reported to the World Health
Organization (“WHO”), and in January 2020, the WHO declared the
outbreak to be a public health emergency. In March 2020, the WHO
characterized COVID-19 as a pandemic. Since then, the COVID-19
pandemic and efforts to control its spread have significantly
curtailed the movement of people, goods, and services worldwide. As
a result, the Company has taken certain measures in response to
COVID-19.
While the duration and extent of the COVID-19 pandemic depends on
future developments that cannot be accurately predicted at this
time, such as the extent and effectiveness of containment and
mitigation actions, it has already had an adverse effect on the
global economy, and the ultimate societal and economic impact of
the COVID-19 pandemic remains unknown. Additionally, concerns over
the economic impact of COVID-19 have caused extreme volatility in
financial and other capital markets, which may adversely affect the
Company’s ability to access capital markets in the future.
Furthermore, the impact of the COVID-19 pandemic could adversely
impact the Company’s cash flows and operations and delay the
Company’s research and development activities.
While the Company has developed and continues to develop plans to
help mitigate the potential negative impact of COVID-19, these
efforts may not be effective, and any protracted economic downturn
will likely limit the effectiveness of its efforts. Accordingly, it
is not possible for the Company to predict the duration and
ultimate extent to which this will affect its business, future
results of operations, and financial condition at this
time.
2.Significant
Accounting Policies
Use of Estimates
The preparation of the condensed consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as
of the date of the condensed consolidated financial statements, and
the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates. Significant
estimates include determining the estimated lives of property and
equipment, stock-based compensation including the estimated fair
value per share of common stock prior to the date the Company
became public, research and development accruals, and the valuation
allowance for deferred tax assets. These estimates and assumptions
are based on management’s best estimates and judgment. Management
evaluates its estimates and assumptions on an ongoing basis using
historical experience and other factors, including the current
economic environment, which management believes to be reasonable
under the circumstances. The Company adjusts such estimates and
assumptions when facts and circumstances dictate. Changes in those
estimates resulting from continuing changes in
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
the economic environment will be reflected in the financial
statements in future periods. As future events and their effects
cannot be determined with precision, actual results could
materially differ from those estimates and
assumptions.
Concentrations of Credit Risk and Other Risks and
Uncertainties
Credit risk represents the accounting loss that would be recognized
as of the reporting date if counterparties failed completely to
perform as contracted.
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist of cash balances maintained
in excess of federal depository insurance limits and investments in
U.S. Treasury securities that are not federally insured. The
Company has not experienced any losses in such accounts and
believes it is not exposed to significant credit risk on cash or
investments. The Company relies, and expects to continue to rely,
on a number of vendors to provide services, supplies and materials
related to its research and development programs. The Company
relies on single source suppliers for certain components and
materials used in the Nautilus platform. The loss of any of these
single source suppliers would require the Company to expend
significant time and effort to locate and qualify an alternative
source of supply for these components. The Company also relies, and
expects to continue to rely, on third-party manufacturers and, in
many cases, single third-party manufacturers for the production of
certain reagents and antibodies. These programs could be adversely
affected by a significant interruption in these services or the
availability of materials.
The Company is subject to risks similar to those of
other pre-clinical stage companies in the
biopharmaceutical industry, including dependence on key
individuals, the need to develop commercially viable products,
competition from other companies, many of whom are larger and
better capitalized, the impact of the COVID-19 pandemic and the
need to obtain adequate additional financing to fund the
development of its products. There can be no assurance that the
Company’s research and development will be successfully completed,
that adequate protection for the Company’s intellectual property
will be maintained, that any products developed will obtain
required regulatory approval or that any approved products will be
commercially viable. Even if the Company’s development efforts are
successful, it is uncertain when, if ever, the Company will
generate significant revenue from the sale of its
products.
Segment Reporting
Operating segments are defined as components of an entity where
discrete financial information is evaluated regularly by the chief
operating decision market
(“CODM”) in deciding how to allocate resources and in assessing
performance. The Company’s Chief Executive Officer is its CODM. The
Company’s CODM reviews
financial information presented on a consolidated basis for the
purposes of making operating decisions, allocating resources and
evaluating financial performance. As such, the Company has
determined that it operates in one operating and one reportable
segment. The Company’s long-lived assets are entirely based in the
United States.
Cash and Cash Equivalents
The Company considers all highly-liquid investments with an
original maturity of three months or less as of the date of
acquisition to be cash equivalents.
Investments
The Company considers investments with an original maturity greater
than three months and remaining maturities less than one year to be
short-term investments. The Company classifies those investments
that are not required for use in current operations and that mature
in more than 12 months as long-term investments.
The Company classifies its investments as available for sale and
reports them at fair value, with unrealized gains and losses
recorded in accumulated other comprehensive income (loss). For
investments sold prior to maturity, the cost of investments sold is
based on the specific identification method. Realized gains and
losses on the sale of investments are recorded in other income
(expense), net in the condensed consolidated statement of
operations.
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
Other-than-temporary Impairment
The Company evaluates its investments with unrealized losses for
other-than-temporary impairment. When assessing investments for
other-than-temporary declines in value, the Company considers
factors such as, among other things, the extent and length of time
the investment’s fair value has been lower than its cost basis, the
financial condition and near-term prospects of the investment, the
Company’s ability and intent to retain the investment for a period
of time sufficient to allow for any anticipated recovery in fair
value, and the expected cash flows from the security. If any
adjustments to fair value reflects a decline in the value of the
investment that the Company considers to be “other than temporary,”
the Company reduces the investment to fair value through a charge
to the condensed consolidated statement of operations and condensed
consolidated statement of comprehensive loss. No such adjustments
were necessary during the periods presented.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received for sale
of an asset or paid for transfer of a liability, in an orderly
transaction between market participants at the measurement date.
U.S. GAAP establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value.
The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level
1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements). These tiers include:
Level 1, defined as observable inputs such as quoted prices for
identical instruments in active markets;
Level 2, defined as inputs other than quoted prices in active
markets that are either directly or indirectly observable such as
quoted prices for similar instruments in active markets or quoted
prices for identical or similar instruments in markets that are not
active; and
Level 3, defined as unobservable inputs in which little or no
market data exists, therefore requiring an entity to develop its
own assumptions, such as valuations derived from valuation
techniques in which one or more significant inputs or significant
value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might
be categorized within different levels of the fair value hierarchy.
In those instances, the fair value measurement is categorized in
its entirety in the fair value hierarchy based on the lowest level
input that is significant to the fair value
measurement.
The carrying amounts of cash and cash equivalents, prepaid expenses
and other current assets, accounts payable and accrued expenses and
other liabilities approximate their respective fair values due to
their short-term nature.
Leases
The Company determines if an arrangement includes a lease at
inception by assessing whether there is an identified asset and
whether the contract conveys the right to control the use of the
identified asset for a period of
time in exchange for consideration. Operating leases with a term of
more than one year are included in operating lease right-of-use
(“ROU”) assets and operating lease liabilities on the Company's
condensed consolidated balance sheets. ROU assets represent the
Company's right to use an underlying asset for the lease term and
lease liabilities represent the obligation to make lease payments.
Operating lease ROU assets and liabilities are recognized on the
lease commencement date based on the present value of the future
minimum lease payments over the lease term. The Company uses the
incremental borrowing rate commensurate with the lease term based
on the information available at the lease commencement date in
determining the present value of the lease payments as the
Company's leases generally do not provide an implicit rate. ROU
assets initially equal the lease liability, adjusted for any
prepaid lease payments and initial direct costs incurred, less any
lease incentives received. Certain of the Company's leases include
renewal options which allow the Company to, at its election, renew
or extend the lease for a fixed or indefinite period of time. These
renewal periods are included in the lease terms when the Company is
reasonably certain the options will be exercised. Lease expense is
recognized on a straight-line basis over the lease term when leases
are operating leases. If it is considered a finance lease, expense
is recognized over the lease term within
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
interest expense and amortization in the Company’s condensed
consolidated statements of operations. The Company also has lease
arrangements with lease and non-lease components. The Company
elected the practical expedient not to separate non-lease
components from lease components for the Company's facility leases
and to account for the lease and non-lease components as a single
lease component. The Company also elected to apply the short-term
lease measurement and recognition exemption in which ROU assets and
lease liabilities are not recognized for leases with terms of 12
months or less.
Comprehensive Loss
Comprehensive loss consists of net loss and other gains or losses
affecting stockholders’ equity that, under U.S. GAAP are excluded
from net loss. For the three and six months ended June 30, 2022 and
2021, unrealized losses on debt securities were included as
components of comprehensive loss.
Accounting Pronouncements
The Company is provided the option to adopt new or revised
accounting guidance as an “emerging growth company” under the
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) either
(1) within the same periods as those
otherwise applicable to public business entities, or (2) within the
same time periods as non-public business entities, including early
adoption when permissible. With the exception of standards the
Company elected to early adopt, when permissible, the Company has
elected to adopt new or revised accounting guidance within the same
time period as non-public business entities, as indicated
below.
Recently Adopted Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04,
“Reference Rate Reform (Topic 848).”
The amendments in ASU 2020-04 provide optional expedients and
exceptions for applying
generally accepted accounting principles to contracts, hedging
relationships, and other transactions affected by reference rate
reform if certain criteria are met. The amendments in this ASU are
effective for all entities as of March 12, 2020 through December
31, 2022. An entity may elect to apply the amendments for contract
modifications by Topic or Industry Subtopic as of any date from the
beginning of an interim period that includes or is subsequent to
March 12, 2020, or prospectively from the date that the financial
statements are available to be issued. Once elected for a Topic or
an Industry Subtopic, the amendments must be applied prospectively
for all eligible contract modifications for that Topic or Industry
Subtopic. The Company adopted this guidance effective January 1,
2022 using the prospective method, which did not have a material
impact on the Company’s condensed consolidated financial
statements.
Recently Issued Accounting Pronouncements Not Yet
Adopted
In June 2016, the FASB issued ASU No. 2016-13,
“Financial Instruments- Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments”,
which amends existing guidance on the impairment of financial
assets and adds an impairment model that is based on expected
losses rather than incurred losses and requires an entity to
recognize as an allowance its estimate of expected credit losses
for its financial assets. An entity will apply this guidance
through a cumulative-effect adjustment to retained earnings upon
adoption (a modified-retrospective approach) while a prospective
transition approach is required for debt securities for which an
other-than-temporary impairment had been recognized before the
effective date. This ASU is effective for the Company for its
fiscal year ending December 31, 2023. Early adoption is permitted.
The Company is in the process of evaluating the impact of the
adoption of this ASU on its condensed consolidated financial
statements and related disclosures. The Company does not anticipate
adoption to have a material impact on its condensed consolidated
financial statements.
In December 2019, the FASB issued ASU No. 2019-12,
“Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes”,
which enhances and simplifies various aspects of the income tax
accounting guidance, including requirements such as the elimination
of exceptions related to the approach for intraperiod tax
allocation, the methodology for calculating income taxes in an
interim period, the recognition of deferred tax liabilities for
outside basis differences, ownership changes in investments, and
tax basis step-up in goodwill obtained in a transaction that
is not a business combination. This ASU is effective for the
Company for its fiscal year ending December 31, 2022. Early
adoption is permitted. The Company is in the process of evaluating
the impact of the
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
adoption of this ASU on its condensed consolidated financial
statements and related disclosures. The Company does not anticipate
adoption to have a material impact on its condensed consolidated
financial statements.
3.Reverse
Recapitalization
On June 9, 2021, Mako Merger Sub merged with Legacy Nautilus, with
Legacy Nautilus surviving as the surviving company and as a
wholly-owned subsidiary of ARYA.
As a result of the Business Combination, Legacy Nautilus equity
holders received an aggregate number of shares of New Nautilus
Common Stock equal to (i) $900.0 million plus
$24.3 million, which reflects the aggregate exercise price of
all stock options (whether vested or unvested) of Legacy Nautilus
at the consummation of the Business Combination, divided by (ii)
$10.00 giving effect to the exchange ratio of approximately 3.6281
(“Exchange Ratio”) based on the terms of the Business Combination
Agreement. For purposes of calculating the aggregate number of New
Nautilus Common Stock issuable to each holder of Legacy Nautilus
Common Stock pursuant to the Business Combination Agreement, all
Legacy Nautilus Common Stock held by such holder was aggregated,
and the Exchange Ratio was applied to that aggregate number of
shares held by such holder, and not on a share-by-share basis, and
the number of New Nautilus Common Stock issued was rounded down to
the nearest whole share. At the Closing Date, (i) an aggregate of
18,721,137 shares of Class A and Class B ordinary shares of ARYA
were exchanged for an equivalent number of Common Stock, (ii) an
aggregate of 85,324,118 shares of Common Stock were issued in
exchange for the shares of Nautilus outstanding as of immediately
prior to the Business Combination and (iii) an aggregate of
20,000,000 shares of Common stock were issued to the PIPE Investors
in the PIPE Financing with total gross proceeds of
$200.0 million. Moreover, at the Closing, all options to
purchase shares of Nautilus were exchanged for comparable options
to purchase shares of Common Stock based on an implied Legacy
Nautilus equity value of $900.0 million. Immediately after
giving effect to the transactions, there were 124,045,255 shares of
Common Stock outstanding and 7,106,767 shares of Common Stock
subject to outstanding options under the 2017 Plan.
The Business Combination is accounted for as a reverse
recapitalization under U.S. GAAP. This determination is primarily
based on Legacy Nautilus stockholders comprising a relative
majority of the voting power of Nautilus and having the ability to
nominate the members of the Board, Legacy Nautilus’s operations
prior to the acquisition comprising the only ongoing operations of
Nautilus, and Legacy Nautilus’s senior management comprising a
majority of the senior management of Nautilus. Under this method of
accounting, ARYA is treated as the “acquired” company for financial
reporting purposes. Accordingly, for accounting purposes, the
financial statements of Nautilus represent a continuation of the
financial statements of Legacy Nautilus with the Business
Combination being treated as the equivalent of Nautilus issuing
stock for the net assets of ARYA, accompanied by a
recapitalization. The net assets of ARYA are stated at historical
costs, with no goodwill or other intangible assets recorded.
Operations prior to the Business Combination are presented as those
of Nautilus.
All periods prior to the Business Combination have been
retrospectively adjusted using the Exchange Ratio for the
equivalent number of shares outstanding immediately after the
Business Combination to effect the reverse
recapitalization.
In connection with the Business Combination, the Company raised
$335.4 million of net proceeds. This amount was comprised of
$135.4 million of cash held in ARYA’s trust account from its
initial public offering, net of ARYA’s transaction costs and
underwriters’ fees of $10.1 million, and $200.0 million
of cash in connection with the PIPE Financing. The Company incurred
$8.1 million of transaction costs, consisting of banking,
legal, and other professional fees which were recorded as a
reduction to additional paid-in capital.
The number of shares of Common Stock issued immediately following
the consummation of the Business Combination was:
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
|
|
|
|
|
|
|
Number of Shares |
Common Stock of ARYA outstanding prior to the Business
Combination |
19,186,500 |
|
Less redemption of ARYA shares |
(465,363) |
|
Common Stock of ARYA |
18,721,137 |
|
Shares issued in PIPE Financing |
20,000,000 |
|
Business Combination and PIPE Financing shares |
38,721,137 |
|
Legacy Nautilus shares |
85,324,118 |
|
Total shares of Common Stock immediately after the Business
Combination |
124,045,255 |
|
4.Fair
Value Measurements
The following table details the assets carried at fair value and
measured on a recurring basis within the three levels of fair value
as of June 30, 2022 and December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
Gross Unrealized |
|
|
|
Reported as: |
June 30, 2022 |
|
Amortized Cost |
|
Gains |
|
Losses |
|
Fair Value |
|
Cash and cash equivalents |
|
Short-term investments |
|
Long-term investments |
Level 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds |
|
$ |
1,821 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,821 |
|
|
$ |
1,821 |
|
|
$ |
— |
|
|
$ |
— |
|
U.S. treasury securities |
|
39,405 |
|
|
18 |
|
|
(246) |
|
|
39,177 |
|
|
— |
|
|
14,976 |
|
|
24,201 |
|
Total Level 1 |
|
41,226 |
|
|
18 |
|
|
(246) |
|
|
40,998 |
|
|
1,821 |
|
|
14,976 |
|
|
24,201 |
|
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
266,695 |
|
|
2 |
|
|
(207) |
|
|
266,490 |
|
|
208,533 |
|
|
57,957 |
|
|
— |
|
Corporate debt securities |
|
7,365 |
|
|
— |
|
|
(135) |
|
|
7,230 |
|
|
— |
|
|
7,230 |
|
|
— |
|
Agency bonds |
|
20,378 |
|
|
19 |
|
|
(219) |
|
|
20,178 |
|
|
— |
|
|
8,821 |
|
|
11,357 |
|
Total Level 2 |
|
294,438 |
|
|
21 |
|
|
(561) |
|
|
293,898 |
|
|
208,533 |
|
|
74,008 |
|
|
11,357 |
|
Total Level 1 and Level 2 |
|
$ |
335,664 |
|
|
$ |
39 |
|
|
$ |
(807) |
|
|
$ |
334,896 |
|
|
$ |
210,354 |
|
|
$ |
88,984 |
|
|
$ |
35,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
Gross Unrealized |
|
|
|
Reported as: |
December 31, 2021 |
|
Amortized Cost |
|
Gains |
|
Losses |
|
Fair Value |
|
Cash and cash equivalents |
|
Short-term investments |
|
Long-term investments |
Level 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds |
|
$ |
21,925 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
21,925 |
|
|
$ |
21,925 |
|
|
$ |
— |
|
|
$ |
— |
|
U.S. treasury securities |
|
15,156 |
|
|
— |
|
|
(20) |
|
|
15,136 |
|
|
— |
|
|
15,136 |
|
|
— |
|
Total Level 1 |
|
37,081 |
|
|
— |
|
|
(20) |
|
|
37,061 |
|
|
21,925 |
|
|
15,136 |
|
|
— |
|
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
301,906 |
|
|
2 |
|
|
(90) |
|
|
301,818 |
|
|
163,694 |
|
|
138,124 |
|
|
— |
|
Corporate debt securities |
|
14,299 |
|
|
— |
|
|
(36) |
|
|
14,263 |
|
|
— |
|
|
6,850 |
|
|
7,413 |
|
Agency bonds |
|
8,998 |
|
|
— |
|
|
(40) |
|
|
8,958 |
|
|
— |
|
|
— |
|
|
8,958 |
|
Total Level 2 |
|
325,203 |
|
|
2 |
|
|
(166) |
|
|
325,039 |
|
|
163,694 |
|
|
144,974 |
|
|
16,371 |
|
Total Level 1 and Level 2 |
|
$ |
362,284 |
|
|
$ |
2 |
|
|
$ |
(186) |
|
|
$ |
362,100 |
|
|
$ |
185,619 |
|
|
$ |
160,110 |
|
|
$ |
16,371 |
|
Contractual maturities of short-term investments as of
June 30, 2022 and December 31, 2021 are due in one year
or less. Contractual maturities of long-term investments as of
June 30, 2022 and December 31, 2021 are due
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
after 1 year through 2 years. There were no continuous unrealized
loss positions in excess of twelve months as of June 30, 2022 and
December 31, 2021.
5.Composition
of Certain Condensed Consolidated Financial Statement Line
Items
Property and Equipment, Net
Property and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
June 30,
2022 |
|
December 31,
2021 |
Laboratory equipment |
$ |
4,460 |
|
|
$ |
4,032 |
|
Computer hardware |
157 |
|
|
157 |
|
Furniture, fixtures and office equipment |
26 |
|
|
1 |
|
Leasehold improvements |
8 |
|
|
8 |
|
Construction in progress |
1,307 |
|
|
279 |
|
|
5,958 |
|
|
4,477 |
|
Less: Accumulated depreciation |
(2,556) |
|
|
(1,994) |
|
Total |
$ |
3,402 |
|
|
$ |
2,483 |
|
The Company recorded depreciation expense of $0.3 million and $0.6
million for the three and six months ended June 30, 2022 and $0.3
million and $0.5 million for the three and six months ended June
30, 2021, respectively, which was primarily allocated to research
and development expense.
Other Long Term Assets
Other long term assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
June 30,
2022 |
|
December 31,
2021 |
Restricted cash |
$ |
842 |
|
|
$ |
842 |
|
Deposits
|
155 |
|
|
155 |
|
|
|
|
|
Total |
$ |
997 |
|
|
$ |
997 |
|
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
June 30,
2022 |
|
December 31,
2021 |
Employee compensation |
$ |
1,299 |
|
|
$ |
1,465 |
|
Accrued research and development |
874 |
|
|
518 |
|
Accrued professional and consulting fees |
539 |
|
|
411 |
|
Accrued facilities |
— |
|
|
337 |
|
Other |
396 |
|
|
388 |
|
Total |
$ |
3,108 |
|
|
$ |
3,119 |
|
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
June 30,
2022 |
|
December 31,
2021 |
Cash and cash equivalents |
$ |
210,354 |
|
|
$ |
185,619 |
|
Restricted cash included in other long term assets |
842 |
|
|
842 |
|
Total |
$ |
211,196 |
|
|
$ |
186,461 |
|
6.Redeemable
Convertible Preferred Stock
On June 9, 2021, upon the closing of the Business Combination (as
defined in Note 1 and further described in Note 3), all of the
outstanding redeemable convertible preferred stock was converted to
New Nautilus Common Stock pursuant to the Exchange Ratio effective
immediately prior to the Business Combination and the remaining
amount was reclassified to additional paid-in capital. As of
June 30, 2022 the Company had no issued and outstanding
Preferred Stock shares.
7.Common
Stock
On June 9, 2021, the Business Combination (as defined in Note 1 and
further described in Note 3) was consummated and the Company issued
38,721,137 shares for an aggregate purchase price of
$327.3 million, net of issuance costs of $8.1 million.
Immediately following the Business Combination, there were
124,045,255 shares of Common Stock outstanding. The holder of each
share of Common Stock is entitled to one vote.
The Company has retroactively adjusted the shares issued and
outstanding prior to June 9, 2021 to give effect to the exchange
ratio established in the Business Combination Agreement to
determine the number of shares of Common Stock into which they were
converted.
In June 2021, pursuant to the Business Combination, the Company
amended its certificate of incorporation to increase the number of
authorized common stock shares to 1,000,000,000 shares. There were
124,562,745 shares issued and outstanding as of June 30,
2022.
Common Stock Reserved for Future Issuance
Shares of common stock reserved for future issuance on an as-if
converted basis, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2022 |
|
December 31,
2021 |
Stock options issued and outstanding |
11,650,794 |
|
|
8,550,076 |
|
Shares available for grant under 2021 Equity Incentive
Plan |
17,384,590 |
|
|
14,481,463 |
|
Shares available for grant under 2021 Employee Stock Purchase
Plan
|
2,439,577 |
|
|
1,244,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares of common stock reserved |
31,474,961 |
|
|
24,276,439 |
|
8.Income
Taxes
The Company accounts for income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary
to reduce deferred tax assets to the amounts expected to be
realized. For the three and six months ended June 30, 2022 and
2021, no income tax expense or benefit was recognized, primarily
due to a full valuation allowance recorded against its deferred tax
asset.
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
9.Stock
Option Plan and Stock-based Compensation
On June 8, 2021, the stockholders of the Company approved the 2021
Equity Incentive Plan (“2021 Plan”) and the 2021 Employee Stock
Purchase Plan (“2021
ESPP”). As of
June 30, 2022, 17,384,590 and 2,439,577 shares were available
for grant under the 2021 Plan and 2021 ESPP,
respectively.
2021 Employee Stock Purchase Plan
Under the 2021 ESPP, the Company can grant stock options to
employees to purchase shares of Common Stock at a purchase price
which equal to 85% of the fair market value of common stock on the
enrollment date or on the exercise date, whichever is lower.
Participants are permitted to purchase shares of the Company’s
Common Stock at 85% of the lower of the fair market value of the
Company’s Common Stock on the first trading day of an offering
period or on the last trading date in each purchase period.
Participants may end their participation at any time during an
offering and will be paid their accrued contributions that have not
yet been used to purchase shares. Participation ends automatically
upon termination of employment with the Company. The number of
shares of common stock available for issuance under the 2021 ESPP
will be increased on the first day of each fiscal year beginning on
January 1, 2022, in an amount equal to the least of (i) 3,734,500
shares of common stock, (ii) a number of shares
of common stock equal to one percent (1%) of the total number of
shares of all classes of common stock of the Company on the last
day of the immediately preceding fiscal year, or (iii) such number
of shares determined by the Administrator no later than the last
day of the immediately preceding fiscal year. On January 1, 2022,
the number of shares available under the ESPP increased by
1,243,030 shares pursuant to this feature.
The first offering period was from October 1, 2021 through June 1,
2022. For subsequent offering periods, the Company will be offering
a six month purchase period. As of June 30, 2022, 48,353
shares of common stock were purchased under the 2021
ESPP.
2021 Equity Incentive Plan
Under the 2021 Plan, the Company can grant incentive stock options,
nonstatutory stock options, stock appreciation
rights,
restricted stock, restricted stock units and performance awards to
employees, directors and consultants.
Options generally expire ten years after the date of grant.
The number of shares available for issuance under the 2021 Plan
will be increased on the first day of each fiscal year, beginning
on January 1, 2022, in an amount equal to the least of (i)
18,672,200 shares, (ii) a number of shares equal to five percent
(5%) of the total number of shares of all classes of common stock
of the Company outstanding on the last day of the immediately
preceding fiscal year, or (iii) such number of shares determined by
the Administrator no later than the last day of the immediately
preceding fiscal year.
On January 1, 2022, the number of shares available under the 2021
Plan increased by 6,215,154 shares pursuant to this
feature.
2017 Equity Incentive Plan
At the time of adoption of the 2021 Plan and the 2021 ESPP, no
further awards will be granted under the 2017 Equity Incentive Plan
(“2017 Plan”) and 7,106,767 shares of common stock were initially
reserved for outstanding awards issued under the 2017
Plan.
In determining the compensation cost of the option awards, the fair
value for each option award has been estimated using the
Black Scholes model.
The significant assumptions used in these calculations are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Expected term (in years) |
5.3 - 6.1
|
|
5.6 - 6.1
|
|
5.3 - 6.1
|
|
5.5 - 6.6
|
Expected volatility |
105.2% - 109.1%
|
|
93.0% - 93.7%
|
|
105.2% - 110.0%
|
|
92.0% - 94.2%
|
Expected dividend rate |
0.0 |
% |
|
0.0 |
% |
|
0.0 |
% |
|
0.0 |
% |
Risk free interest rate |
2.80% - 3.36%
|
|
0.91% - 1.02%
|
|
1.73% - 3.36%
|
|
0.53% - 1.02%
|
Stock price |
$2.70 - $4.72
|
|
$10.10 - $11.16
|
|
$2.70 - $4.72
|
|
$7.56 - $11.16
|
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
Expected term: The expected term of stock options represents the
weighted-average period the stock options are expected to remain
outstanding. The Company does not have sufficient historical
exercise and post-vesting termination activity to provide accurate
data for estimating the expected term of options and has opted to
use the “simplified method,” whereby the expected term equals the
arithmetic average of the vesting term and the original contractual
term of the option.
Expected volatility: Historically, the Company has been a private
company and lacked company‑specific historical and implied
volatility information for its common stock. Therefore, the
expected volatility of the Company’s common stock was determined by
using an average of historical volatilities of selected industry
peers deemed to be comparable to the Company’s business
corresponding to the expected term of the awards and the Company
expects to continue to do so until such time as the Company has
adequate historical data regarding the volatility of its traded
common stock price.
Expected dividend yield: The expected dividend rate is zero as the
Company has no history or expectation of declaring dividends on its
common stock.
Risk-free interest rate: The risk-free interest rate is based on
the U.S. Treasury yield curve in effect at the time of grant for
zero-coupon U.S. Treasury notes with maturities corresponding to
the expected term of the awards.
Fair value of common stock: Prior to the Business Combination, the
fair value of the shares of common stock underlying the stock
options has historically been determined by the Company’s Board of
Directors. Because there has been no public market for the common
stock, the Board of Directors has determined the fair value of the
common stock at the time of grant of the option by contemporaneous
valuations performed by an unrelated third-party valuation firm as
well as a number of objective and subjective factors including
valuation of comparable companies, sales of convertible preferred
stock to unrelated third parties, operating and financial
performance, the implied equity value of the Company as
contemplated by the Business Combination, the lack of liquidity of
capital stock and general and industry specific economic outlook,
among other factors. The fair value of common stock was determined
in accordance with applicable elements of the American Institute of
Certified Public Accountants Practice Aid, Valuation of
Privately-Held-Company Equity Securities Issued as Compensation.
Subsequent to the completion of the Business Combination (as
defined in Note 1 and further described in Note 3) the fair value
of the Company’s common stock is determined based on its closing
market price.
The awards granted in late January 2021 had an exercise price equal
to the grant date fair value of the Company’s common stock. The
Company’s board of directors made a determination of the fair
market value of the Company’s common stock which contemplated the
implied equity value of the Company per the Business Combination
Agreement that was executed on February 7, 2021.
The following table summarizes option award activity during the six
months ended June 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Stock Option Awards |
|
Weighted Average Exercise Price |
|
Weighted Average Remaining Contractual Life (Years) |
|
Aggregate Intrinsic Value (in thousands) |
Outstanding as of December 31, 2021
|
8,550,076 |
|
|
$ |
4.66 |
|
|
|
|
|
Granted |
4,037,863 |
|
|
$ |
3.81 |
|
|
|
|
|
Exercised |
(211,309) |
|
|
$ |
0.89 |
|
|
|
|
|
Forfeited |
(725,836) |
|
|
$ |
8.11 |
|
|
|
|
|
Outstanding as of June 30, 2022
|
11,650,794 |
|
|
$ |
4.21 |
|
|
8.8 |
|
$ |
7,964 |
|
Options vested and expected to vest as of June 30,
2022
|
11,650,794 |
|
|
$ |
4.21 |
|
|
|
|
|
Vested and exercisable at June 30, 2022
|
3,279,223 |
|
|
$ |
3.59 |
|
|
7.7 |
|
$ |
4,474 |
|
As of June 30, 2022, there was $31.0 million of total
unrecognized compensation expense expected to be recognized over a
weighted average-period of 2.94 years. Aggregate intrinsic value
represents the difference between the fair market value of the
common stock and the exercise price of outstanding, in-the-money
options.
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
Stock-based Compensation Expense
The following sets forth the total stock-based compensation expense
for the Company’s stock options included in the Company’s condensed
consolidated statement of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in thousands) |
2022 |
|
2021 |
|
2022 |
|
2021 |
Research and development |
$ |
975 |
|
|
$ |
666 |
|
|
$ |
1,843 |
|
|
$ |
1,163 |
|
General and administrative |
1,592 |
|
|
1,154 |
|
|
2,834 |
|
|
1,993 |
|
Total stock-based compensation expense |
$ |
2,567 |
|
|
$ |
1,820 |
|
|
$ |
4,677 |
|
|
$ |
3,156 |
|
10.Commitments
and Contingencies
Purchase Commitments
Open purchase commitments are for the purchase of goods and
services related to, but not limited to, research and development,
facilities, and professional services under non-cancellable
contracts. They were not recorded as liabilities on the condensed
consolidated balance sheet as of June 30, 2022 as the Company
had not yet received the related goods or services. As of
June 30, 2022, the Company had open purchase commitments for
goods and services of $2.0 million, which are expected to be
received through the next 12 months.
Legal Proceedings
From time to time, the Company may become involved in litigation
relating to claims arising from the ordinary course of business.
Management believes that there are currently no claims or actions
pending against the Company where the ultimate disposition could
have a material adverse effect on the Company’s results of
operations, financial condition or cash flows.
Leases
The Company is obligated under certain non-cancellable operating
leases for office space and laboratory space. This space includes
operating leases in Seattle, Washington, and San Carlos,
California.
Seattle Leases
The operating lease in Seattle, Washington expired in April 2021
and continued to be renewed month to month until August
2021.
In July 2021, the
Company entered into a 7-year non-cancellable operating lease,
which commenced in August 2021, for an additional office space in
Seattle, Washington. Total non-cancellable payments under this
lease aggregate $4.5 million through June 2028.
San Carlos Leases
In February 2021, the Company amended its existing facility lease
contract in San Carlos, California which was executed to shorten
the remaining term of the lease to expire in December 2021 and
reduce monthly lease payments and was accounted for as a
modification. The impact of this modification reduced the operating
lease right-of-use asset and lease liability balance as a
$3.3 million non-cash adjustment. In September 2021, the
Company further amended the facility lease contract in San Carlos,
California to shorten the remaining term of the lease to expire in
October 2021 and was also accounted for as a
modification.
In December 2020, the Company entered into a new lease in San
Carlos, California for ten years which commenced in October 2021
and expiring in October 2031 with total minimum lease payments
of
$40.7 million.
In December 2020, the Company also entered into a temporary office
space lease agreement in San Carlos, California which commenced in
February 2021 and expired in October 2021 with total minimum lease
payments of
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
$1.2 million. The temporary office space lease agreement was
recognized as a short-term lease due to the election of the
short-term lease measurement and recognition
exemption.
In December 2021, the Company entered into another lease in San
Carlos, California for nine years expected to commence in December
2022 and expiring in October 2031. The Company can terminate this
lease after five years from commencement date without bearing any
significant termination penalties and therefore the Company
concluded that the lease term is five years with total minimum
lease payments of $7.2 million. The Company may borrow funds
from the landlord of up to $2.0 million with an interest rate
of 7% to finance its tenant improvements. No amounts have been
borrowed as of June 30, 2022.
The components of lease costs, which were included in operating
expenses in condensed consolidated statements of operations, were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in thousands) |
2022 |
|
2021 |
|
2022 |
|
2021 |
Fixed operating lease costs |
$ |
1,182 |
|
|
$ |
362 |
|
|
$ |
2,365 |
|
|
$ |
863 |
|
Variable operating lease costs |
380 |
|
|
10 |
|
|
818 |
|
|
20 |
|
Short-term lease costs |
6 |
|
|
440 |
|
|
11 |
|
|
619 |
|
|
|
|
|
|
|
|
|
Total lease costs |
$ |
1,568 |
|
|
$ |
812 |
|
|
$ |
3,194 |
|
|
$ |
1,502 |
|
For the six months ended June 30, 2022 and 2021, cash paid for
amounts included in the measurement of operating lease liabilities
included in cash flows used in operating activities was $1.7
million and $0.8 million, respectively.
As of June 30, 2022, the weighted-average remaining lease term
and weighted-average discount rate for operating leases is 9.0
years and 8.9% respectively.
The following table summarizes the Company's future principal
contractual obligations for operating lease commitments as of
June 30, 2022:
|
|
|
|
|
|
|
Lease Obligations |
(in
thousands) |
Six months ending December 31, 2022 |
$ |
1,812 |
|
2023 |
4,440 |
|
2024 |
4,569 |
|
2025 |
4,701 |
|
2026 |
4,837 |
|
2027 and thereafter |
22,942 |
|
Total future minimum lease payments |
43,301 |
|
Less: Imputed interest |
(13,689) |
|
Total operating lease liabilities |
$ |
29,612 |
|
Guarantees and Indemnifications
In the ordinary course of business, the Company enters into
agreements that may include indemnification provisions. Pursuant to
such agreements, the Company may indemnify, hold harmless and
defend an indemnified party for losses suffered or incurred by the
indemnified party. Some of the provisions will limit losses to
those arising from third-party actions. In some cases, the
indemnifications will continue after the termination of the
agreement. The maximum potential amount of future payments the
Company could be required to make under these provisions is not
determinable. The Company has never incurred material costs to
defend lawsuits or settle claims related to these indemnification
provisions.
|
|
|
Nautilus Biotechnology, Inc.
Notes to Condensed Consolidated Financial
Statements—(Continued)
(Unaudited)
|
The Company has also agreed to indemnify its directors and
executive officers for costs associated with any fees, expenses,
judgments, fines and settlement amounts incurred by them in any
action or proceeding to which any of them are, or are threatened to
be, made a party by reason of their service as a director or
officer. The Company maintains director and officer insurance
coverage that would generally enable it to recover a portion of any
future amounts paid. The Company may be subject to indemnification
obligation by law with respect to the actions of its employees
under certain circumstances and in certain
jurisdictions.
Letter of Credit
In conjunction with the San Carlos lease agreement entered in
December 2020, the Company issued a cash-collateralized letter of
credit in lieu of security deposit of $0.6 million. In conjunction
with the San Carlos lease agreement entered in December 2021, the
Company amended the existing cash-collateralized letter of credit
and increased the amount to $0.8 million. The cash amount is
recorded as restricted cash under Other long-term assets on the
Company’s condensed consolidated balance sheets.
11.Basic
and Diluted Net Loss per Share
The following tables set forth the computation of the Company’s
basic and diluted net loss per share attributable to common
stockholders for the three and six months ended June 30, 2022 and
2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in thousands, except share and per share amounts) |
2022 |
|
2021 |
|
2022 |
|
2021 |
Numerator: |
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
$ |
(14,689) |
|
|
$ |
(10,713) |
|
|
$ |
(30,452) |
|
|
$ |
(19,122) |
|
Denominator: |
|
|
|
|
|
|
|
Weighted average common shares outstanding |
124,494,036 |
|
|
55,070,480 |
|
|
124,456,518 |
|
|
44,130,773 |
|
Less:
Weighted-average unvested restricted shares and shares subject to
repurchase
|
— |
|
|
— |
|
|
— |
|
|
(34,624) |
|
Weighted average shares used in computing net loss per share
attributable to common stockholders, basic and diluted |
124,494,036 |
|
|
55,070,480 |
|
|
124,456,518 |
|
|
44,096,149 |
|
Net loss per share attributable to common stockholders, basic and
diluted: |
$ |
(0.12) |
|
|
$ |
(0.19) |
|
|
$ |
(0.24) |
|
|
$ |
(0.43) |
|
As a result of the Business Combination, the Company has
retroactively adjusted the weighted-average number of shares of
Common Stock outstanding prior to the Closing Date by multiplying
them by the Exchange Ratio of 3.6281 used to determine the number
of shares of New Nautilus Common Stock into which they converted
(as described in Note 3). The Common Stock issued as a result of
the redeemable convertible preferred stock conversion on the
Closing Date was included in the basic net loss per share
calculation on a prospective basis.
The potential shares of common stock that were excluded from the
computation of diluted net loss per share attributable to common
stockholders for the periods presented because including them would
have had an antidilutive effect were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three and Six Months Ended
June 30, |
|
|
|
|
|
2022 |
|
2021 |
Options to purchase common stock |
|
|
|
|
11,650,794 |
|
8,014,879 |
Employee stock purchase plan |
|
|
|
|
61,411 |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total potentially dilutive common share equivalents |
|
|
|
|
11,712,205 |
|
8,014,879 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that our
management believes is relevant to an assessment and understanding
of Nautilus Biotechnology, Inc.’s (“Nautilus” or the “Company”)
condensed consolidated results of operations and financial
condition. The discussion should be read together with the
condensed consolidated financial statements and the accompanying
notes to those statements that are included elsewhere in this
Quarterly Report on Form 10-Q and the audited financial statements
for the year ended December 31, 2021 and the related notes included
in the Company’s Annual Report on Form 10-K filed with the SEC on
February 24, 2022. This discussion may contain forward-looking
statements based upon current expectations that involve risks and
uncertainties. Nautilus’ actual results may differ materially from
those anticipated in these forward-looking statements as a result
of various factors, including those set forth in the section titled
“Risk Factors” in Part II, Item 1A as set forth in this Quarterly
Report on Form 10-Q.
Unless otherwise indicated or the context otherwise requires,
references in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” section to
“Nautilus,” “we,” “us,” “our” and other similar terms refer to the
business and operations of Legacy Nautilus prior to the Business
Combination and to New Nautilus and its consolidated subsidiary
following the Business Combination.
Overview
We are a development stage life sciences company creating a
platform technology for quantifying and unlocking the complexity of
the proteome. Our mission is to transform the field of proteomics
by democratizing access to the proteome and enabling fundamental
advancements across human health and medicine. We were founded on
the belief that incremental advancements of existing technologies
are inadequate, and that a bold scientific leap would be required
to radically reinvent proteomics and revolutionize precision
medicine. Our vision is to integrate our breakthrough innovations
in computer science, engineering, and biochemistry to develop and
commercialize a proteomic analysis technology of extreme
sensitivity and scale. To accomplish this, we have built a
prototype of a proteome analysis system, an instrument to perform
massively parallel single protein molecule measurements which will
be further developed to deliver the speed, simplicity, accuracy,
and versatility that we believe is necessary to establish a new
gold standard in the field.
Since our incorporation in 2016, we have devoted substantially all
of our resources to research and development activities, including
with respect to our proteomics platform, or Nautilus platform,
business planning, establishing and maintaining our intellectual
property portfolio, hiring personnel, raising capital and providing
general and administrative support for these operations. We do not
have any products available for commercial sale, and we have not
generated any revenue from our Nautilus platform or other sources
since inception. Our ability to generate revenue sufficient to
achieve profitability, if ever, will depend on the successful
development and eventual commercialization of our Nautilus
platform, which we expect, if it ever occurs, will take a number of
years. Our Nautilus platform, which includes our end-to-end
solution comprised of instruments, consumables, and software
analysis, is currently under development and will require
significant additional research and development efforts, including
extensive testing prior to commercialization. These efforts require
significant amounts of additional capital and adequate personnel
infrastructure. There can be no assurance that our research and
development activities will be successfully completed, or that our
Nautilus platform will be commercially viable.
In order to commercialize our Nautilus platform in volume, we will
need to establish internal manufacturing capacity or to contract
with one or more manufacturing partners, or both. Our technology is
complex, and the manufacturing process for our products will be
similarly complex, involving a large number of unique precision
parts in addition to the production of various reagents and
antibodies. We may encounter unexpected difficulties in
manufacturing our Nautilus platform, instruments, and related
consumables. Among other factors, we will need to develop reliable
supply chains for the various components in the Nautilus platform,
instruments, and consumables to support large-scale commercial
production. In connection with our Nautilus platform, we intend to
utilize over 300 complex reagents and various antibodies in order
to generate deep proteomic information at the speed and
scale
which we expect our Nautilus platform to perform. Such reagents and
antibodies are expected to be more difficult to manufacture and
more expensive to procure. There is no assurance that we will be
able to build manufacturing or consumable production capacity
internally or find one or more suitable manufacturing or production
partners, or both, to meet the volume and quality requirements
necessary to be successful in the proteomics market.
Given our stage of development, we have not yet established a
commercial organization or distribution capabilities. We do intend
to build a commercial infrastructure to support sales of our
products. We expect to manage sales, marketing and distribution
through both internal resources and third-party relationships. We
plan to commercialize our proteomics platform using a three-phase
plan that has been shown to be effective and optimal for
introducing disruptive products in numerous life sciences
technology markets. The first phase is expected to involve
collaboration with biopharmaceutical companies and key opinion
leaders to validate the performance and utility of Nautilus’
product, during which we do not expect to recognize significant
revenue, if any. The second phase will include an early access
limited release phase in which we expect to recognize limited
revenue. Finally, the third phase is anticipated to include a
broader commercial launch. We are currently in the collaboration
phase during which we have entered into and are seeking to enter
into collaborations with a small number of research customers,
including with biopharmaceutical companies and key opinion leaders
in proteomics whose assessment and validation of our products can
significantly influence other researchers in their respective
markets and/or fields. During the early access limited release
phase, we plan to leverage our publications to drive awareness and
customer demand to pre-sell instruments and reagents to select
customers performing large-scale proteomics research. We do not
anticipate that these activities will result in any material
revenue. During the second phase, we expect to work closely with
early access customers to demonstrate a unique value proposition
for our Nautilus platform. During this phase, we plan to provide
early access program partners with broad-scale analysis and
profiling of samples analyzed in our facility and shared via a
cloud platform. We anticipate meaningful early access engagements
and associated revenue to begin at the start of 2024. We expect
this second phase to lead into the third phase of broad
commercialization and launch of the proteome analysis platform in
mid-2024.
We intend to commercialize our Nautilus platform through a direct
sales channel in the United States, and through both direct and
distributor sales channels in regions outside the United States.
Given our stage of development, we currently have no marketing,
sales, commercial product distribution or service and support
capabilities. We intend to build the necessary infrastructure for
these activities in the United States, European Union, the United
Kingdom, and potentially other countries and regions, including
Asia-Pacific, as we execute on our three phase commercial launch
strategy for our Nautilus platform.
Prior to the Business Combination, we financed our operations
primarily through private placements of convertible preferred stock
and had raised aggregate net proceeds of $108.4 million from
these private placements. In connection with the consummation of
the Business Combination and PIPE Financing, we received additional
gross proceeds of approximately $345.5 million from PIPE Investors
and the Business Combination, offset by approximately $18.2 million
of transaction costs and underwriters’ fees relating to the closing
of the Business Combination. As of June 30, 2022, we had cash,
cash equivalents and short-term investments of $299.3 million.
Based on this, we believe that our existing cash, cash equivalents,
and short-term investments will enable us to fund our planned
operating expenses and capital expenditures through at least the
next 12 months.
We have incurred significant losses since the commencement of our
operations. Our net loss was $30.5 million during the six months
ended June 30, 2022, and we expect to continue to incur significant
losses for the foreseeable future as we continue our research and
development activities and planned commercialization of our
proteomics platform. As of June 30, 2022, we had an
accumulated deficit of $111.1 million. These losses have resulted
primarily from costs incurred in connection with research and
development activities and to a lesser extent from general and
administrative costs associated with our operations. We expect to
incur significant and increasing expenses and operating losses for
the foreseeable future. Our net losses may fluctuate significantly
from period to period, depending on the timing of and expenditures
on our planned commercialization and research and development
activities.
We expect our expenses and capital requirements will increase
substantially in connection with our ongoing activities as
we:
•continue
our research and development activities, including with respect to
our Nautilus platform;
•undertake
activities to establish sales, marketing and distribution
capabilities for our Nautilus platform;
•incur
setup costs related to production tooling and required
testing;
•maintain,
protect and expand our intellectual property portfolio, including
patents, trade secrets and know how;
•implement
operational, financial and management information
systems;
•attract,
hire and retain additional management, scientific and
administrative personnel; and
•operate
as a public company.
As a result, we will require substantial additional funding to
develop our products and support our continuing operations. Until
such time that we can generate significant revenue from product
sales, if ever, we expect to finance our operations through the
sale of equity, debt financings or other capital sources, which
could include income from collaborations, strategic partnerships or
marketing, distribution or licensing arrangements with third
parties or from grants. We may be unable to raise additional funds
or to enter into such agreements or arrangements on favorable
terms, or at all. Our ability to raise additional funds may be
adversely impacted by potential worsening global economic
conditions and the recent disruptions to, and volatility in, the
credit and financial markets in the United States and worldwide
resulting from the ongoing COVID‑19 pandemic, the conflicts in
Eastern Europe, and otherwise. Our failure to obtain sufficient
funds on acceptable terms when needed could have a material adverse
effect on our business, results of operations or financial
condition, and could force us to delay, reduce or eliminate our
product development or future commercialization efforts. We may
also be required to grant rights to develop and market products
that we would otherwise prefer to develop and market ourselves. The
amount and timing of our future funding requirements will depend on
many factors, including the pace and results of our development
efforts. We cannot assure you that we will ever be profitable or
generate positive cash flow from operating activities.
Impact of COVID-19 Pandemic
The global COVID-19 pandemic continues to rapidly evolve. The
extent of the impact of the COVID-19 pandemic on our business,
operations and development timelines and plans remains uncertain,
and will depend on certain developments, including the duration and
spread of the outbreak and its impact on our development
activities, third-party manufacturers, and other third parties with
whom we do business, as well as its impact on regulatory
authorities and our key scientific and management personnel. As the
COVID-19 pandemic has developed, we have taken numerous steps to
help ensure the health and safety of our employees. We are
maintaining hygiene and respiratory protocols; controls for social
distancing; enhanced cleaning, disinfecting, decontamination, and
ventilation protocols; health policies; and usage of personal
protective equipment, where appropriate. During March and April of
2020 in which stay at home orders were in place in the state of
California and Washington, the volume of ongoing lab work was
reduced, and only critical program work in the lab continued with
staggered lab employee work shifts to minimize risk of exposure to
COVID-19, which disrupted and delayed our ability to conduct
development activities. While we were broadly able to resume normal
operations in August 2021, if any resurgence or worsening of the
COVID-19 pandemic causes us to reinstitute these measures we may
experience additional disruption and/or delays in our ability to
conduct development activities.
We have been and continue to actively monitor our supply chain
during the COVID-19 pandemic, including third-party materials and
suppliers. To date, we have experienced some supply disruptions due
to the pandemic, including closures at certain chip manufacturers,
which led to extended lead times for certain chips; diversion of
certain lab materials needed to support COVID-19 relief efforts;
and lower availability of certain reagents. While certain of these
disruptions have been resolved since the start of the COVID-19
pandemic, we are continuing to
monitor our supply chain and contingency planning is ongoing with
our partners to reduce the possibility of an interruption to our
development activities or the availability of necessary
materials.
The ultimate impact of the COVID-19 pandemic or a similar health
epidemic is highly uncertain and subject to change. To the extent
possible, we are conducting business as usual, with necessary or
advisable modifications to employee travel, with masking and
vaccination requirements in our offices, and with our employees
working remotely fully or intermittently as able from March 2020
until August 2022. We will continue to actively monitor the rapidly
evolving situation related to COVID-19 and may take further actions
that alter our operations, including those that may be required by
federal, state or local authorities, or that we determine are in
the best interests of our employees and other third parties with
whom we do business. At this point, the extent to which the
COVID-19 pandemic may affect our future business, operations and
development timelines and plans, including the resulting impact on
our expenditures and capital needs, remains uncertain.
Reverse Recapitalization Transaction
On June 9, 2021 (the “Closing Date”), Nautilus Biotechnology, Inc.,
a Delaware corporation (f/k/a ARYA Sciences Acquisition Corp III, a
Cayman Islands
exempted company and our predecessor company (“ARYA”)) (the
“Company”), consummated its previously announced business
combination (the “Business Combination”) pursuant to the terms of
that certain Business Combination Agreement, dated as of February
7, 2021 (the “Business Combination Agreement”), by and among ARYA,
Mako Merger Sub, Inc., a Delaware corporation and wholly-owned
subsidiary of ARYA (“Mako Merger Sub”), and Nautilus Subsidiary,
Inc., a Delaware corporation (f/k/a Nautilus Biotechnology, Inc.)
(“Legacy Nautilus”).
Pursuant to the terms of the Business Combination Agreement, on the
Closing Date, (i) ARYA changed its jurisdiction of incorporation by
deregistering as a Cayman Islands exempted company and continuing
and domesticating as a corporation incorporated under the laws of
the State of Delaware (the “Domestication”), upon which ARYA
changed its name to “Nautilus Biotechnology, Inc.” (together with
its consolidated subsidiary, “New Nautilus” or “Nautilus”) and (ii)
Mako Merger Sub merged with and into Legacy Nautilus (the
“Merger”), with Legacy Nautilus as the surviving company in the
Merger and, after giving effect to such Merger, Legacy Nautilus
becoming a wholly-owned subsidiary of New Nautilus.
In accordance with the terms and subject to the conditions of the
Business Combination Agreement, at the effective time of the Merger
(the “Effective Time”), (i) each share of Legacy Nautilus
outstanding as of immediately prior to the Effective Time was
exchanged for shares of common stock of New Nautilus, par value
$0.0001 per share (“Common Stock”), and (ii) all vested and
unvested options to purchase shares of Legacy Nautilus were
exchanged for comparable options to purchase shares of Common
Stock, in each case, based on an implied Legacy Nautilus equity
value of $900,000,000.
As of the open of trading on June 10, 2021, the Common Stock of the
Company, formerly those of ARYA, began trading on the Nasdaq Global
Select Market (“Nasdaq”) under the symbol “NAUT.”
In conjunction with the consummation of the Business Combination
with ARYA, we received gross proceeds of approximately $345.5
million from PIPE Investors and the Business Combination, offset by
approximately $18.2 million of transaction costs and underwriters’
fees relating to the closing of the Business
Combination.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue and we may not generate
any revenue from the sale of products or from other sources in the
near future.
Operating Expenses
Research and Development Expense
Research and development expenses account for a significant portion
of our operating expenses and consist primarily of salaries,
related benefits and stock-based compensation expense of product
development personnel, facilities costs, laboratory supplies and
equipment, depreciation and amortization, external costs of vendors
engaged to conduct research and development activities, and
allocated expenses for technology and facilities. We expense
research and development expenses in the periods in which they are
incurred.
We plan to continue to invest in our research and development
efforts and to increase our investment in research and development
efforts related to our product development. As a result, we expect
research and development expenses to increase in absolute dollars
as we continue to advance our product development, hire additional
personnel and retain existing personnel, purchase supplies and
materials and allocate expense to our research and development
facilities.
General and Administrative Expenses
General and administrative expenses consist of salaries and
benefits, and stock-based compensation expense for personnel in
executive, operations, legal, human resources, finance, marketing,
commercial, IT personnel and administrative functions, professional
fees for legal, patent, consulting, accounting and audit services,
and allocated expenses for technology and facilities. We expense
general and administrative expenses in the periods in which they
are incurred.
We expect that our general and administrative expenses will
increase substantially over the next several years as we hire
additional personnel to support the continued research and
development of our products and commercial activities supporting
the growth of our business. We also anticipate that we will incur
substantially higher expenses as a result of operating as a public
company, including
expenses related to accounting, audit, legal, regulatory,
insurance, compliance with the rules and regulations of the SEC,
Sarbanes-Oxley Act and
those of any national securities exchange on which our securities
are traded, director and officer insurance, investor and public
relations, and other administrative and professional
services.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income
on our cash, cash equivalents and investments and other
miscellaneous nonrecurring expenses such as loss on disposal of
property and equipment.
Results of Operations
Comparison of the Three Months Ended June 30, 2022 to the Three
Months Ended June 30, 2021
The following table shows our condensed consolidated statements of
operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Change
($) |
|
Change
(%) |
|
2022 |
|
2021 |
|
|
|
(in thousands) |
|
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development |
$ |
8,856 |
|
|
$ |
6,380 |
|
|
$ |
2,476 |
|
|
39 |
% |
General and administrative |
6,616 |
|
|
4,317 |
|
|
2,299 |
|
|
53 |
% |
Total operating expenses |
15,472 |
|
|
10,697 |
|
|
4,775 |
|
|
45 |
% |
Other income (expense), net |
783 |
|
|
(16) |
|
|
799 |
|
|
(4994) |
% |
Net loss |
$ |
(14,689) |
|
|
$ |
(10,713) |
|
|
$ |
(3,976) |
|
|
37 |
% |
Research and Development Expenses
Research and development expenses were $8.9 million for the three
months ended June 30, 2022, compared to $6.4 million for the three
months ended June 30, 2021, an increase of $2.5 million, or 39%.
The increase was primarily due to a $1.8 million increase in
salaries, related benefits, and stock-based compensation, a $0.8
million increase in costs for development services and a $0.5
million increase in facilities costs, partially offset by a $0.5
million reduction in laboratory supplies and equipment
expense.
General and Administrative Expenses
General and administrative expenses were $6.6 million for the three
months ended June 30, 2022, compared to $4.3 million for the three
months ended June 30, 2021, an increase of $2.3 million,
or 53%. The increase was primarily due to a $1.1 million
increase in salaries, related benefits, and stock-based
compensation, a $0.5 million increase in insurance costs and a $0.3
million increase in facilities costs.
Other Income (Expense), Net
Other income (expense), net for the three months ended June 30,
2022 as compared to the three months ended June 30, 2021 changed
primarily due to income from accretion and amortization on
investments and interest income.
Comparison of the Six Months Ended June 30, 2022 to the Six Months
Ended June 30, 2021
The following table shows our condensed consolidated statements of
operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
Change
($) |
|
Change
(%) |
|
2022 |
|
2021 |
|
|
|
(in thousands) |
|
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development |
$ |
18,514 |
|
|
$ |
11,215 |
|
|
$ |
7,299 |
|
|
65 |
% |
General and administrative |
12,980 |
|
|
7,899 |
|
|
5,081 |
|
|
64 |
% |
Total operating expenses |
31,494 |
|
|
19,114 |
|
|
12,380 |
|
|
65 |
% |
Other income (expense), net |
1,042 |
|
|
(8) |
|
|
1,050 |
|
|
(13125) |
% |
Net loss |
$ |
(30,452) |
|
|
$ |
(19,122) |
|
|
$ |
(11,330) |
|
|
59 |
% |
Research and Development Expenses
Research and development expenses were $18.5 million for the six
months ended June 30, 2022, compared to $11.2 million for the six
months ended June 30, 2021, an increase of $7.3 million, or 65%.
The increase was primarily due to a $3.9 million increase in
salaries, related benefits, and stock-based compensation, a $1.7
million increase in
costs for development services,
a $1.2 million increase in facilities costs and a $0.6 million
increase in laboratory supplies and equipment
expense.
General and Administrative Expenses
General and administrative expenses were $13.0 million for the six
months ended June 30, 2022, compared to $7.9 million for the six
months ended June 30, 2021, an increase of $5.1 million,
or 64%. The increase was primarily due to a $2.4 million
increase in salaries, related benefits, and stock-based
compensation, a $1.3 million increase in insurance costs and a
$0.6 million increase in facilities costs.
Other Income (Expense), Net
Other income (expense), net for the six months ended June 30, 2022
as compared to the six months ended June 30, 2021 changed primarily
due to income from accretion and amortization on investments and
interest income.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue from product
sales and have incurred significant operating losses and negative
cash flows from our operations. Our net loss was $30.5 million for
the six months ended June 30, 2022. As of June 30, 2022, we
had an accumulated deficit of $111.1 million. Prior to the Business
Combination, we funded our operations primarily with proceeds from
the sale of convertible preferred stock. Prior to the Business
Combination, we had raised net proceeds of $108.4 million from
these private placements of our convertible preferred stock. In
June 2021, in conjunction with the consummation of the Business
Combination with ARYA, we received additional gross proceeds of
approximately $345.5 million from PIPE Investors and the Business
Combination, offset by approximately $18.2 million of transaction
costs and underwriters’ fees relating to the closing of the
Business Combination. As of June 30, 2022, we had cash, cash
equivalents and short-term investments of $299.3
million.
Our primary uses of cash to date have been to fund our research and
development activities, business planning, establishing and
maintaining our intellectual property portfolio, hiring personnel,
raising capital, and providing general and administrative support
for these operations.
Funding Requirements
To date, we have not generated any revenue and we may not generate
any revenue from the sale of products or from other sources in the
near future. We expect our expenses and capital requirements will
increase substantially in connection with our ongoing activities as
we:
•continue
our research and development activities, including with respect to
our proteomics platform;
•undertake
activities to establish sales, marketing and distribution
capabilities for our proteomics platform;
•incur
setup costs related to production tooling and required
testing;
•maintain,
protect and expand our intellectual property portfolio, including
patents, trade secrets and know how;
•implement
operational, financial and management information
systems;
•attract,
hire and retain additional management, scientific and
administrative personnel; and
•operate
as a public company.
Based on our planned operations, we expect our current cash, cash
equivalents, and short-term investments will be sufficient to fund
our operating expenses and capital expenditures for at least the
next 12 months. We continue to face challenges and uncertainties
and, as a result, our available capital resources may be consumed
more rapidly than currently expected due to: delays in execution of
our development plans; the scope and timing of our investment in
our sales, marketing, and distribution capabilities; changes we may
make to the business that affect ongoing operating expenses; the
costs of filing, prosecuting, defending and enforcing any patent
claims and other intellectual property rights; changes we may make
in our business or commercialization strategy; changes we may make
in our research and development spending plans; our need to
implement additional infrastructure and internal systems; the
impact of the COVID-19 pandemic; and other items affecting our
forecasted level of expenditures and use of cash resources
including potential acquisitions.
Until such time as we can generate significant revenue from
commercialization of our products, if ever, we will continue to
require substantial additional capital to develop our proteomics
platform and fund operations for the foreseeable future. We intend
to obtain such capital through public or private equity offerings
or debt financings, credit or loan facilities or a combination of
one or more of these funding sources. We may also seek additional
financing opportunistically. We may be unable to raise additional
funds on favorable terms or at all. Our ability to raise additional
funds may be adversely impacted by potential worsening global
economic conditions and the recent
disruptions to, and volatility in, the credit and financial markets
in the United States and worldwide resulting from the ongoing
COVID‑19 pandemic, the conflicts in Eastern Europe, and otherwise.
Our failure to raise additional capital, if needed, would have a
negative impact on our financial condition and our ability to
execute our business plan.
Our expected future capital requirements depend on many factors
including expansion of our product portfolio and the timing and
extent of spending on sales and marketing and the development of
our technology. If we raise additional funds by issuing equity
securities, our stockholders will experience dilution. Any future
debt financing into which we enter may impose upon us additional
covenants that restrict our operations, including limitations on
our ability to incur liens or additional debt, pay dividends,
repurchase our common stock, make certain investments and engage in
certain merger, consolidation or asset sale transactions. Any debt
financing or additional equity that we raise may contain terms that
are not favorable to us or our stockholders.
Historical Cash Flows
For the Six Months Ended June 30, 2022 and 2021
The following table summarizes our cash flows for the six months
ended June 30, 2022 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
(in thousands) |
Net cash used in operating activities |
$ |
(25,864) |
|
|
$ |
(14,545) |
|
Net cash provided by (used in) investing activities |
50,258 |
|
|
(61,048) |
|
Net cash provided by financing activities |
341 |
|
|
327,373 |
|
Net increase in cash, cash equivalents and restricted
cash |
$ |
24,735 |
|
|
$ |
251,780 |
|
Operating Activities
During the six months ended June 30, 2022, net cash used in
operating activities was $25.9 million, primarily resulting from
our operating loss of $30.5 million and decrease in net changes in
assets and liabilities aggregating $1.6 million, primarily driven
by $0.6 million decrease in accounts payable and a $0.5 million
increase in prepaid expenses and other assets. Net cash used in
operating activities was partially offset by non-cash charges
aggregating $6.2 million, which primarily included $4.7 million of
stock-based compensation and $1.1 million amortization of operating
lease right-of-use assets.
During the six months ended June 30, 2021, net cash used in
operating activities was $14.5 million, primarily resulting from
our operating loss of $19.1 million, offset by non-cash charges
aggregating $4.6 million, which primarily included $3.2 million of
stock-based compensation and $0.8 million amortization of operating
lease right-of-use assets.
Investing Activities
During the six months ended June 30, 2022, net cash provided by
investing activities was $50.3 million, primarily resulting
from $105.6 million in proceeds from maturities of securities,
partially offset by $54.2 million in purchases of securities and
$1.1 million in purchases of property and equipment.
During the six months ended June 30, 2021, net cash used in
investing activities was $61.0 million, primarily resulting from
$100.0 million in purchases of securities, partially offset by
$40.0 million in proceeds from maturities of
securities.
Financing Activities
During the six months ended June 30, 2022, net cash provided by
financing activities was $0.3 million of proceeds from exercise of
stock options and issuance of common stock under the employee stock
purchase plan.
During the six months ended June 30, 2021, net cash provided by
financing activities was $327.4 million primarily resulting from
$335.4 million in proceeds from the Business Combination and PIPE
Financing, offset by $8.1 million in payments of offering
costs.
Contractual Obligations and Commitments
For a discussion of our contractual obligations and commitments,
refer to Part I, Item 1, Note 10, “Commitments and Contingencies,”
in our notes to condensed consolidated financial statements in this
Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results
of operations are based upon our condensed consolidated financial
statements, which have been prepared in accordance with generally
accepted accounting principles in the United States. The
preparation of these condensed consolidated financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, and expenses. We evaluate
our estimates and assumptions on an ongoing basis, and base our
estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the
results of which form the basis for the judgments we make about the
carrying value of assets and liabilities that are not readily
apparent from other sources. Because these estimates can vary
depending on the situation, actual results may differ from these
estimates. Making estimates and judgments about future events is
inherently unpredictable and is subject to significant
uncertainties, some of which are beyond our control. Should any of
these estimates and assumptions change or prove to have been
incorrect, it could have a material impact on our results of
operations, financial position and statement of cash
flows.
Other than the policies noted in Part I, Item 1, Note 2,
“Significant Accounting Policies,” in our notes to condensed
consolidated financial statements in this Quarterly Report on Form
10-Q, there have been no material changes to our critical
accounting policies and estimates as compared to those disclosed in
our audited financial statements as of and for the years ended
December 31, 2021 and 2020.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, including
the expected dates of adoption and estimated effects, if any, on
our condensed consolidated financial statements, see Part I, Item
1, Note 2 “Significant Accounting Policies” in our notes to
condensed consolidated financial statements in this Quarterly
Report on Form 10-Q.
Emerging Growth Company Accounting Election
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act,
permits an “emerging growth company” such as us to take advantage
of an extended transition period to comply with new or revised
accounting standards applicable to public companies until those
standards would otherwise apply to private companies. We have
elected to use this extended transition period under the JOBS Act
until the earlier of the date we (i) are no longer an emerging
growth company or (ii) affirmatively and irrevocably opt out of the
extended transition period provided in the JOBS Act. As a result,
our financial statements may not be comparable to the financial
statements of issuers who are required to comply with the effective
dates for new or revised accounting standards that are applicable
to public companies, which may make comparison of our financials to
those of other public companies more difficult.
We will cease to be an emerging growth company on the date that is
the earliest of (i) the last day of the fiscal year in which we
have total annual gross revenue of $1.07 billion or more, (ii) the
last day of our fiscal year following the fifth anniversary of the
date of the closing of ARYA’s initial public offering, (iii) the
date on which we have issued more than $1.0 billion in
nonconvertible debt during the previous three years or (iv) the
date on which we are deemed to be a large accelerated filer under
the rules of the Securities and Exchange Commission.
Further, even after we no longer qualify as an emerging growth
company, we may still qualify as a “smaller reporting company,”
which would allow us to take advantage of many of the same
exemptions from disclosure requirements, including reduced
disclosure obligations regarding executive compensation in our
periodic reports and
proxy statements. We cannot predict if investors will find our
common shares less attractive because we may rely on these
exemptions. If some investors find our common shares less
attractive as a result, there may be a less active trading market
for our common shares and our share price may be more
volatile.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Qualitative and Quantitative Disclosures About Market
Risk
Our market risk exposure is primarily a result of fluctuations in
interest rates and inflation. We do not hold or issue financial
instruments for trading purposes.
Interest Rate Risk
We had cash, cash equivalents, short-term and long-term investments
of $334.9 million as of June 30, 2022. The primary goals of
our investment policy are liquidity and capital preservation. We do
not enter into investments for trading or speculative purposes. The
carrying amount of our cash equivalents reasonably approximates
fair value, due to the short maturities of these instruments. Our
investments are exposed to market risk due to a fluctuation in
interest rates, which may affect the fair market value of our
investments in marketable securities. As of June 30, 2022, the
effect of a hypothetical 1.00% (100 basis point) change in interest
rates would have changed the fair value of our marketable
securities by $1.1 million. Such change would only be realized if
we sold the marketable securities prior to maturity.
Inflation Risk
Inflation generally affects us by increasing our cost of labor and
goods and services. We believe that inflation has had some effect
on our financial results during the periods presented. If we
experience continued or future inflationary pressure, it may impact
the costs of our operations as well as the costs to manufacture,
sell and distribute our products and provide our services in the
future. We may not be able to fully offset those increased costs
through reduced spending or price increases to our products and
services.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as
defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act, as
of the end of the period covered by this Quarterly Report on Form
10-Q. In designing and evaluating the disclosure controls and
procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can provide only
reasonable and not absolute assurance of achieving the desired
control objectives and management necessarily applies its judgment
in evaluating the cost benefit relationship of possible controls
and procedures. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective at the reasonable assurance
level as of June 30, 2022.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial
reporting during the quarter ended June 30, 2022 that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Control systems, no matter how well conceived and operated, are
designed to provide a reasonable, but not an absolute, level of
assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of
fraud, if any, have been detected. Because of the inherent
limitations in any control system, misstatements due to error or
fraud may occur and not be detected.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various claims and
legal proceedings. Regardless of outcome, litigation and other
legal and administrative proceedings can have an adverse impact on
us because of defense and settlement costs, diversion of management
resources and other factors. We are currently not a party to any
legal proceedings the outcome of which, if determined adversely to
us, would individually or in the aggregate have a material adverse
effect on our business, financial condition, and results of
operations.
ITEM 1A. RISK FACTORS
You should consider carefully the following information about the
risks described below, together with the other information
contained in this Quarterly Report on Form 10-Q and in our other
public filings, in evaluating our business. If any of the following
risks actually occurs, our business, financial condition, results
of operations, and future growth prospects would likely be
materially and adversely affected. In these circumstances, the
market price of our common stock would likely decline.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that
you should consider before investing in our company, as more fully
described below. The principal factors and uncertainties that make
investing in our company risky include, among others:
Risks Related to Our Business
•We
are a development stage company that has incurred net losses in
every period to date, has not yet commercialized any products, and
expects to continue to incur significant losses as we develop our
business.
•Our
business is entirely dependent on the successful development and
commercialization of our proteomics platform (the “Nautilus
platform”), which remains in the development stage and could be
subject to delays, technical challenges and market acceptance
challenges.
•We
may not compete successfully with our initial or future products in
the highly competitive life sciences technology
market.
•We
are dependent upon third parties for certain aspects of the
development and commercialization of the Nautilus
platform.
•Our
business depends significantly on research and development spending
by pharmaceutical companies as well as by academic institutions and
other research institutions and any reduction in spending could
limit demand for our products.
•We
may not be able to launch our Nautilus platform successfully and
even if it is successful, we may experience material delays in our
commercialization program relative to current
expectations.
•Our
operating results may fluctuate significantly in the future, which
makes our future operating results difficult to predict and could
cause our operating results to fall below expectations or our
guidance.
•We
may need to raise additional capital to fund our development and
commercialization plans.
Risks Related to Our Intellectual Property
•We
may be unable to obtain and maintain sufficient intellectual
property protection for our products and technology, or if the
scope of our intellectual property protection obtained is not
sufficiently broad, competitors could develop and commercialize
products similar or identical to ours.
•We
may not be able to protect our intellectual property and
proprietary rights throughout the world.
Risks Related to Litigation
•We
may become involved in litigation to enforce or defend our
intellectual property rights, or to defend ourselves from claims
that we infringe the intellectual property rights of
others.
•We
may face liability and/or negative publicity for any unknown
defects or errors in our products.
Risks Related to Regulatory and Legal Compliance
Matters
•Our
products may, in the future, be subject to regulation by the FDA or
other regulatory authorities.
•We
are currently subject to, and may in the future become subject to
additional, U.S. federal and state laws and regulations, as well as
the laws and regulations of other countries, relating to how we
collect, store and process personal information.
•Future
expansion of our development and commercialization activities
outside of the United States, may subject us to an increased risk
of inadvertently conducting activities in a manner that violates
the U.S. Foreign Corrupt Practices Act and similar
laws.
•Environmental
and health safety laws, including any failure to comply with such
laws, may result in liabilities, expenses and restrictions on our
operations.
•Our
employees, independent contractors, consultants, commercial
partners, distributors and vendors may engage in misconduct or
other improper activities, including noncompliance with regulatory
standards and requirements.
Risks Related to our Operations
•We
may experience a significant disruption in our information
technology systems or breaches of data security.
•We
are highly dependent on our key personnel, and if we are unable to
recruit and retain key executives and scientists, we may not be
able to achieve our goals.
•Our
operations and financial results could be adversely impacted by
global and national events, such as the COVID-19 pandemic,
conflicts in Eastern Europe, and general economic
downturns.
•Global
supply chain interruptions may negatively impact the development
and commercialization of our products.
Risks Related to Our Common Stock
•The
price of and market for our Common Stock may be volatile, which
could result in substantial losses for investors and/or an
inability to readily trade in our Common Stock.
General Risk Factors
•We
will incur significant increased costs and management resources as
a result of operating as a public company.
•Reports
published by analysts, including projections in those reports that
differ from our actual results, could adversely affect the price
and trading volume of our common shares.
•Our
ability to timely and accurately report our financial results and
projections as a public company may be impacted by the
effectiveness of our internal controls, and our estimates and
judgments relating to critical accounting policies.
Risks Related to Our Business
We are a development stage company that has incurred net losses in
every period to date, has not yet commercialized any products, and
expects to continue to incur significant losses as we develop our
business. We may never achieve profitability.
We are a development stage company that has incurred net losses in
each quarterly and annual period since inception and that has not
yet generated any revenue. We expect to incur increasing costs as
we continue to devote substantially all of our resources towards
the development and anticipated future commercialization of
our
Nautilus
platform, which includes our end-to-end solution comprised of
instruments, consumables, and software analysis. We cannot be
certain if we will ever generate revenue or if or when we will
produce sufficient revenue from operations to support our costs.
Even if profitability is achieved, we may not be able to sustain
profitability. We incurred net losses of $14.7 million and
$10.7 million during the three and six months ended June 30,
2022 and 2021, respectively. As of June 30, 2022, we had an
accumulated deficit of $111.1 million. These losses and accumulated
deficit were primarily due to the substantial investments we made
in the scientific and technological development of our
Nautilus
platform. We expect to incur substantial losses and negative cash
flows for the foreseeable future. In addition, as a public company,
we will incur significant legal, accounting, and other expenses
that we did not incur as a private company. These increased
expenses will make it harder for us to achieve and sustain future
profitability. We may incur significant losses in the future for a
number of reasons, many of which are beyond our control, including
the other risks described in this Quarterly Report on Form
10-Q.
Our business is entirely dependent on the success of our Nautilus
platform, which remains in the development stage and subject to
scientific and technical validation. If we are unable to develop
and commercialize our Nautilus platform successfully and in a
manner that provides currently anticipated functionality and levels
of performance, we may never be able to recognize any revenue, and
our business, operating results, and financial condition will
suffer.
Our future success is entirely dependent on our ability to
successfully develop and commercialize our
Nautilus
platform, which is based on innovative yet complex and unproven
technologies and which is anticipated to be used in demanding
scientific research that requires substantial levels of accuracy
and precision. We are investing substantially all of our management
efforts and financial resources in the development and
commercialization of our
Nautilus
platform. Additionally, in developing our platform technology, we
may rely on co-development partners to assist us in the development
of certain component technologies in our platform. We have
experienced difficulties with some of these partners successfully
delivering these component technologies on time and to our
specifications, and these partners may not be successful in
delivering these component technologies on time, to our
specifications, or at all, in the future, which could have an
adverse impact on our ability to meet our development timelines,
and/or our products level of currently anticipated functionality
and performance. While our goal is to leverage our
Nautilus platform
to comprehensively measure the human proteome, the human proteome
is dynamic and far more complex and diverse in structure,
composition and number of variants than either the genome or
transcriptome. If we cannot successfully complete platform
development, if we are unable to achieve our goals for mapping the
proteome, if our products fail to deliver currently anticipated
functionality and levels of performance, if our products are found
by a court of law to infringe the intellectual property of another
party, or if we are unable to obtain broad scientific and market
acceptance of our products and technologies, we may never recognize
material revenue and may be unable to continue our
operations.
We have not yet commercially launched our Nautilus platform. We may
not be able to launch our Nautilus platform successfully and even
if it is successful, we may experience material delays in our
commercialization program relative to current
expectations.
We anticipate commercializing our
Nautilus
platform in three phases involving first collaboration with
biopharmaceutical companies and key opinion leaders to validate the
performance and utility of our product, during which we do not
expect to recognize significant revenue, if any; secondly an early
access limited release phase in which we expect to recognize
limited revenue; and finally a broader commercial launch phase. We
are currently in the collaboration phase during which we have
entered into and are seeking to enter into collaborations with a
small number of research customers, including with
biopharmaceutical companies and key opinion leaders in
proteomics
whose assessment and validation of our products can significantly
influence other researchers in their respective markets and/or
fields. We do not anticipate that these activities will result in
any material revenue. During the second, early access phase, we
expect to work closely with early access customers to demonstrate a
unique value proposition for our
Nautilus
platform. During this phase, we plan to provide early access
program partners with broad-scale analysis and profiling of samples
analyzed in our facility and shared via a cloud platform. We
anticipate meaningful early access engagements and associated
revenue to begin at the start of 2024. We expect this second phase
to lead into the third phase of broad commercialization and launch
of the proteome analysis platform in mid-2024.
Achieving the scientific and commercial objectives identified above
within currently anticipated timelines will require substantial
investments in our technologies and in the underlying science.
Scientific and technological development of the nature being
undertaken by us is extraordinarily complex, and there can be no
assurances that any of these phases of commercial development will
be successful or that they will be completed within the timelines
currently anticipated. Given the scientific and technical
complexity of our products, we could experience material delays in
product development and commercial launch. If our research and
product development efforts do not result in commercially viable
products within the anticipated timelines, our business, operating
results, and financial condition will be adversely
affected.
The commercialization of our products will require us to establish
relationships and successfully collaborate with leading life
science companies and research institutions, initially to test and
validate our products and subsequently as we seek to expand the
markets for our products. We may be unable to establish sufficient
collaborations of this nature, and such collaborations could result
in agreements that limit or otherwise impair our flexibility to
pursue other strategic opportunities.
As noted above, establishing collaborations and partnerships with
large pharmaceutical and biotechnology companies and with major
research institutions is a material element of our
commercialization strategy. While early collaborations are expected
to focus on the assessment and validation of our
Nautilus
platform with a focus in part on publication of results in
peer-reviewed scientific journals, we also intend to pursue
additional, potentially revenue-generating collaborations in areas
of biological interest. Among other examples, we may pursue
collaborations relating to the development and commercialization of
therapeutic product candidates targeting proteins identified by
our
Nautilus
platform.
There can be no assurance that we will be successful in developing
or maintaining collaborations or that, if established, these
collaborations will achieve the desired objectives. Establishing
collaborations is difficult and time-consuming. Discussions may not
lead to collaborations on favorable terms, if at all, and
particularly where we are negotiating against major pharmaceutical
companies, we may have relatively less leverage in negotiating
favorable terms. To the extent we agree to work exclusively with a
party in a given field, our opportunities to collaborate with
others in that field would be limited. Certain parties may seek to
partner with other companies in addition to us in connection with a
project. This, in turn, may limit the commercial potential of any
products that are the subject of such collaborations. Potential
collaborators may elect not to work with us based upon their
assessment of our financial, regulatory, commercial or intellectual
property position.
Even if we are successful in entering into collaborations, the
success of such collaborations will depend heavily on the efforts
and activities of our collaborators.
Scientific collaborations of the nature we propose to pursue are
subject to numerous risks, including that:
•collaborators
may have significant discretion in determining the efforts and
resources that they will apply to a specific project;
•collaborators
may not pursue development and commercialization of products or may
elect not to continue or renew development or commercialization
programs based on trial or test results, changes in their strategic
focus due to the acquisition of competitive products, availability
of funding, or other external factors such as a business
combination that diverts resources or creates competing
priorities;
•collaborators
may own intellectual property covering products that result from
our collaboration with them, and in such cases, we would not have
the right to develop or commercialize such intellectual
property;
•collaborators
may co-own intellectual property covering products that result from
our collaboration with them, and in such cases, we would not have
the right to exclude others from developing or commercializing such
intellectual property;
•collaborators
could independently develop, or develop with third parties,
products that compete directly or indirectly with product
candidates that are being developed under the collaboration with
us;
•a
collaborator with marketing, manufacturing, and distribution rights
to one or more products may not commit sufficient resources to or
otherwise not perform satisfactorily in carrying out these
activities;
•we
could grant exclusive rights to our collaborators that would
prevent us from collaborating with others;
•collaborators
may not properly maintain or defend our intellectual property
rights or may use our intellectual property or proprietary
information in a way that gives rise to actual or threatened
litigation that could jeopardize or invalidate our intellectual
property or proprietary information or expose us to potential
liability;
•disputes
may arise between us and a collaborator that cause the delay or
termination of the research, development, or commercialization of
products or that result in costly litigation or arbitration that
diverts management attention and resources;
•collaborations
may be terminated, and, if terminated, in addition to reducing our
revenue, may reduce exposure to research and clinical trials that
facilitate the collection and incorporation of new information into
our platform; and
•a
collaborator’s sales and marketing activities or other operations
may not be in compliance with applicable laws resulting in civil or
criminal proceedings.
In addition, before obtaining marketing approval from regulatory
authorities for the sale of product candidates subject to future
collaborations, our collaborators must conduct extensive clinical
trials to demonstrate the safety and efficacy of the product
candidates. If clinical trials of product candidates resulting from
collaborations are prolonged or delayed, collaborators may be
unable to obtain required regulatory approvals and therefore be
unable to commercialize product candidates on a timely basis or at
all, which may have a material impact on the revenue recognized
from such collaborations.
Even if we are able to complete development of our Nautilus
platform, we may not achieve or maintain significant commercial
market acceptance.
Even if we are able to complete development of our
Nautilus
platform, the platform will be subject to market forces and
adoption curves common to new technologies. The market for novel
proteomics technologies and products like those being developed by
us is in the early stages of development. While these technologies
present the potential to displace legacy products, changing
long-standing scientific workflows with new instruments requiring
substantial capital expenditures will require us to invest
substantial financial and management resources to educate potential
customers on the benefits of our
Nautilus
platform relative to existing technologies and to validate
our
Nautilus
platform’s ability to meet customer requirements. In that regard,
we anticipate that our initial market focus will be pharmaceutical
development and associated research, which are characterized by
demanding and exacting requirements for product performance and
accuracy. If widespread adoption of our
Nautilus
platform takes longer than anticipated or does not occur, our
business will be materially and adversely affected.
More specifically, the successful introduction of new technologies
in life science markets requires substantial engagement with the
scientific community in order to encourage community acceptance of
the utility, performance, and cost of the technology relative to
its benefits in the applicable field or fields of research. The
life sciences scientific community is often led by a small number
of early adopters and key opinion leaders who significantly
influence the larger community through publications in
peer-reviewed journals. In these journal publications, the
researchers describe not only their discoveries but also the
methods and typically the products used to fuel these
discoveries. We expect that references to the use of our
Nautilus platform
in peer-reviewed journal publications will be critical to our
ability to obtain widespread acceptance within the scientific
community. In addition, continuing collaborative relationships with
key opinion leaders will be vital to maintaining any market
acceptance we achieve. If too few researchers describe the use of
our products, too many researchers shift to a competing product and
publish research outlining their use of that product, or too many
researchers negatively describe the use of our products in
publications, customers may be less willing to engage with us
concerning our products, which could materially delay our
commercialization plan and/or substantially extend our sales
cycles. Moreover, these customers may ultimately be less willing to
purchase our products, which would adversely affect our business
and future revenue.
Specific, material factors that will influence our ability to
achieve market acceptance include the following:
•the
ability of our marketing and engagement initiatives to increase
awareness of the capabilities of our Nautilus
platform;
•the
ability of our Nautilus platform to demonstrate reliable
performance in intended use applications, in particular, when the
platform is used by customers in their own research;
•our
ability to demonstrate that the functionality and performance of
our Nautilus platform relative to alternative products and
technologies justifies the substantial anticipated cost of the
platform;
•the
willingness of prospective customers to adopt new products and
workflows;
•the
ease of use of our Nautilus platform and whether it reliably
provides significant advantages over alternative products and
technologies;
•the
rate of adoption of our Nautilus platform by biopharmaceutical
companies, laboratories, academic institutions and
others;
•our
ability to develop new products, workflows, and solutions that meet
customer requirements;
•the
introduction or development and commercialization by competitors of
new products or enhancements to existing products with
functionality and/or performance similar to our Nautilus platform;
and
•the
impact of our investments in product innovation and commercial
growth.
We cannot assure you that we will be successful in addressing any
of these criteria or any additional criteria that might affect the
market acceptance of our products. If we are unsuccessful in
achieving and maintaining market acceptance of our
Nautilus platform,
our business, financial condition and results of operations would
be adversely affected.
We have no experience in manufacturing our products at commercial
scale. If we are unable to establish manufacturing capacity by
ourselves or with partners in a timely manner after completing
development, commercialization of our Nautilus platform would be
delayed, which would result in lost revenue and harm our
business.
In order for us to commercialize our
Nautilus platform
in volume, we will need to establish internal manufacturing
capacity or to contract with one or more manufacturing partners, or
both. Our technology is complex, and the manufacturing process for
our products will be similarly complex, involving a large number of
unique precision parts in addition to the production of various
reagents and antibodies. We may encounter unexpected difficulties
in manufacturing our
Nautilus platform,
including our proteome analysis system and related consumables.
Among other factors, we will need to develop reliable supply chains
for the various components in our platform and consumables to
support large-scale commercial production. In connection with
our
Nautilus platform,
we intend to utilize over 300 complex reagents and various
antibodies in order to generate deep proteomic information at the
speed and scale which we expect our
Nautilus platform
to perform. Such reagents and antibodies are expected to be more
difficult to manufacture and more expensive to procure. There are
no assurances that we will be able to build manufacturing or
consumable production capacity internally or find one or more
suitable
manufacturing or production partners, or both, to meet the volume
and quality requirements necessary to be successful in the
proteomics market. In addition, in connection with establishing
third party relationships or sourcing component supplies, including
with respect to reagents and antibodies, we may incur costs that
are higher than currently expected and that may adversely affect
our gross margins and operating results following
commercialization. Assuming we complete development of our
Nautilus platform,
we may experience manufacturing and product quality issues as we
increase the scale of our production. Any delay or inability in
establishing or expanding our manufacturing capacity could diminish
our ability to develop or sell our products, result in increased or
unanticipated costs, result in lost revenue, and seriously harm our
business, results of operations and financial
condition.
If we are unable to establish an effective commercial organization,
including effective distribution channels and sales and marketing
functions, we may not be successful in commercializing our Nautilus
platform.
We are only beginning to establish an internal organization focused
specifically on the commercialization of our
Nautilus
platform. Our initial hiring has focused on senior commercial
leadership, and although this leadership has considerable industry
experience, in order to achieve substantial revenue growth and
profitability, we will be required to develop sales, marketing,
distribution, customer service, and customer support capabilities.
Staffing of these functions will frequently require individuals
with the requisite technical and scientific expertise to establish
and support sales of a sophisticated and complex platform for life
sciences experimentation. We will be required to expend substantial
financial resources to hire personnel and develop our commercial
operations prior to commercial launch of our
Nautilus
platform. Accordingly, these initiatives will adversely affect our
operating expenses prior to us having material off-setting revenue,
if any.
To develop these functions successfully, we will face a number of
additional risks, including:
•our
ability to attract, retain, and manage the sales, marketing,
customer service, and customer support force necessary to
commercialize and gain market acceptance for our technology, with
the additional challenge that many of these new hires will require
specific scientific and technological expertise that may be more
difficult to find; and
•the
time and cost of establishing a specialized sales, marketing and
customer service and support force.
In addition to our internal organization, we may seek to enlist one
or more third parties to assist with sales, distribution, and
customer service and support globally or in certain regions of the
world. In certain markets, we could seek to establish partnerships
with larger market participants to provide access to their
distribution channels and which could also involve scientific or
technological collaboration. There is no guarantee, if we do seek
to enter into any of these arrangements, that we will be successful
in attracting desirable partners or that we will be able to enter
into such arrangements on commercially favorable terms. If our
commercialization efforts, or those of any third-party partners,
are not successful, our
Nautilus platform
may not gain market acceptance, which could materially impact our
business and results of operations.
The size of the markets for our Nautilus platform may be smaller
than estimated, and new market opportunities may not develop as
quickly as we expect, or at all, limiting our ability to
successfully sell our products.
The market for proteomics technologies and products is evolving,
making it difficult to predict with any accuracy the size of the
markets for our current and future products, including our
Nautilus platform.
Our estimates of the total addressable market for our current and
future products, including with respect to the proteomics market,
the diagnostic market, and the mass spectrometry market, are based
on a number of internal and third-party estimates and assumptions.
In particular, our estimates are based on our expectations that
researchers in the market for certain life sciences research tools
and technologies will view our products as competitive alternatives
to, or better options than, existing tools and technologies. We
also expect researchers will recognize the ability of our products
to complement, enhance and enable new applications of their current
tools and technologies. We expect them to recognize the value
proposition offered by our products enough to purchase our products
in addition to the tools and technologies they already own.
Underlying each of these expectations are a number of estimates and
assumptions that may be incorrect, including the assumptions that
government or other sources of funding will continue to be
available to life sciences researchers at times and in amounts
necessary to allow them to purchase our
products and that researchers have sufficient samples and an unmet
need for performing proteomics studies at scale across thousands of
samples. In addition, sales of new products into new market
opportunities may take years to develop and mature and we cannot be
certain that these market opportunities will develop as we expect.
New life sciences technology may not be adopted until the
consistency and accuracy of such technology, method or device has
been proven. As a result, the sizes of the annual total addressable
market for new markets and new products are even more difficult to
predict. Our product is an innovative new product, and while we
draw comparisons between the evolution and growth of the genomics
market, the proteomics market may develop more slowly or
differently. In addition, our
Nautilus platform
may not impact the field of proteomics in the same manner or
degree, or within the same time frame, that NGS technologies have
impacted the field of genomics, or at all. While we believe our
assumptions and the data underlying our estimates of the total
addressable market for our products are reasonable, these
assumptions and estimates may not be correct and the conditions
supporting our assumptions or estimates, or those underlying the
third-party data we have used, may change at any time, thereby
reducing the accuracy of our estimates. As a result, our estimates
of the total addressable market for our products may be
incorrect.
The future growth of the market for our current and future products
depends on many factors beyond our control, including recognition
and acceptance of our products by the scientific community and the
growth, prevalence and costs of competing products and solutions.
Such recognition and acceptance may not occur in the near term, or
at all. If the markets for our current and future products are
smaller than estimated or do not develop as we expect, our growth
may be limited and our business, financial condition and
operational results of operations could be adversely
affected.
We are dependent on single source suppliers for some of the
components and materials used in our
Nautilus platform, and the loss of any of these suppliers could
harm our business.
We rely on single source suppliers for certain components and
materials used in our
Nautilus platform,
including our click-reagent
modified oligos, glass or silicon that is nano-fabricated into our
biochips and high-speed stage used in the instrument. The loss of
any of these single source suppliers would require us to expend
significant time and effort to locate and qualify an alternative
source of supply for these components. Though we do not
currently
have contracts for third parties to provide manufacturing
capabilities for our
Nautilus platform,
if we are successful in reaching the point of manufacturing our
products for commercialization, we may rely on a single company for
such manufacturing. Any contractual disputes between us and such
manufacturer or loss of manufacturing ability by such manufacturer
could similarly require significant time, effort and expense to
locate and qualify an alternative source of manufacturing, which
could materially harm our business.
We also rely, and expect to continue to rely, on third-party
manufacturers and, in many cases, single third-party manufacturers
for the production of certain reagents and antibodies needed to
generate the deep proteomic information at the speed and scale
which we expect our
Nautilus platform
to perform. With respect to any antibodies or reagents that are
single sourced, the loss of any suppliers would require significant
time and effort to locate and qualify an alternative source of
supply. Such reagents and antibodies may also become scarce, more
expensive to procure, or not meet quality standards, and we may not
be able to obtain favorable terms in agreements with suppliers.
Given their complexity, our suppliers may not be able to provide
these reagents and antibodies in a cost-effective manner or in a
time frame that is consistent with our expected future needs. If
our suppliers cease or interrupt production or if suppliers fail to
supply materials, products or services to us for any reason, such
interruption could delay development, or interrupt the commercial
supply, with the potential for additional costs and lost revenue.
If this were to occur, we might also need to seek alternative means
to fulfill our manufacturing needs. Any such transition would
require significant efforts in testing and validation and could
result in delays or other issues, which could materially harm our
business.
The life sciences technology market is highly competitive. If we
fail to compete effectively, our business and results of operation
will suffer.
We face significant competition in the life sciences technology
market. We currently compete with technology and diagnostic
companies that
supply components, products, and services to customers engaged in
proteomics analysis. These companies include Agilent Technologies;
Becton, Dickinson and Company; Bruker Corporation;
Danaher; Luminex; Olink Proteomics; Quanterix; SomaLogic;
Quantum-Si; and Thermo Fisher Scientific. We also compete with a
number of emerging companies that are developing proteomic products
and solutions.
Some of our current competitors are large publicly-traded
companies, or are divisions of large publicly-traded companies, and
enjoy a number of competitive advantages over us,
including:
•greater
name and brand recognition;
•greater
financial and human resources;
•broader
product lines;
•larger
sales forces and more established distributor
networks;
•substantial
intellectual property portfolios;
•larger
and more established customer bases and relationships;
and
•better
established, larger scale and lower cost manufacturing
capabilities.
We cannot assure investors that our products will compete favorably
or that we will be successful in the face of increasing competition
from products and technologies introduced by our existing or future
competitors or by companies entering our markets or that are
developed by our customers internally. In addition, we cannot
assure investors that our competitors do not have or will not
develop products or technologies that currently or in the future
will enable them to produce competitive products with superior
functionality or performance or at lower costs than ours or that
are able to run comparable experiments at a lower total experiment
cost. Any failure to compete effectively could materially and
adversely affect our business, financial condition and operating
results.
Even if our Nautilus platform is commercialized and achieves broad
scientific and market acceptance, if we fail to improve it or
introduce compelling new products, our revenue and our prospects
could be harmed.
The life sciences industry is characterized by rapid and
significant technological changes, frequent new product
introductions and enhancements and evolving industry standards.
Even if we are able to commercialize our
Nautilus platform
and achieve broad scientific and market acceptance, our ability to
attract new customers and increase revenue from existing customers
will depend in large part on our ability to enhance and improve
our
Nautilus platform
and to introduce compelling new products. The success of any
enhancement to our
Nautilus platform
or introduction of new products depends on several factors,
including timely completion and delivery, competitive pricing,
adequate quality testing, integration with existing technologies,
freedom from intellectual property encumbrance, appropriately timed
and staged introduction and overall market acceptance. Any new
product or enhancement to our
Nautilus platform
that we develop may not be introduced in a timely or cost-effective
manner, may contain defects, errors, vulnerabilities or bugs, or
may not achieve the market acceptance necessary to generate
significant revenue.
The typical development cycle of new life sciences products can be
lengthy and complicated, and may require new scientific discoveries
or advancements, considerable resources and complex technology and
engineering. Such developments may involve external suppliers and
service providers, making the management of development projects
complex and subject to risks and uncertainties regarding timing,
timely delivery of required components or services and satisfactory
technical performance of such components or assembled products. If
we do not achieve the required technical specifications or
successfully manage new product development processes, or if
development work is not performed according to schedule, then such
new technologies or products may be adversely impacted. If we are
unable to successfully develop new products, enhance our proteomics
product platform to meet customer requirements, compete with
alternative products, or otherwise gain and maintain market
acceptance, our business, results of operations and financial
condition could be harmed.
We rely on third parties for development of certain aspects of the
Nautilus platform, and any failure of these third parties to
perform their respective obligations in a timely manner or to our
specifications could negatively impact our timelines, costs or
product performance.
We are engaged with a number of third party collaborators who
assist us in co-development of certain aspects of the Nautilus
platform, including, for example, certain affinity reagents and
array chip substrates. Our agreements with these third party
collaborators include obligations for these third parties to
deliver certain aspects of technology to be used in the Nautilus
platform in accordance with certain defined timelines, in
accordance with defined specifications, and in accordance with
certain cost limitations. We have also sought to include redundancy
and contingency planning with respect to the efforts of our third
party collaborators where practicable. Despite our contractual
assurances and contingency planning, it is possible that one or
more of our third party collaborators may fail to deliver their
respective technologies to us on time or in accordance with our
specifications, and such failure could negatively impact the timing
of the commercialization of the Nautilus platform, its performance,
or its cost.
Our business will depend significantly on research and development
spending by pharmaceutical companies as well as by academic
institutions and other research institutions. Any reduction in
spending could limit demand for our products and adversely affect
our business, results of operations, financial condition and
prospects.
We expect that our revenue in the foreseeable future will be
derived primarily from sales of our
Nautilus platform
to biotechnology companies and life science laboratories worldwide,
and to a lesser extent, academic institutions and non-profit
organizations. Our success will depend upon demand for and use of
our products. Accordingly, the spending policies of these customers
could have a significant effect on the demand for our technology.
These policies may be based on a wide variety of factors, including
the resources available to make purchases, the spending priorities
among various types of equipment, policies regarding spending
during recessionary periods and changes in the political climate.
In addition, academic, governmental and other research institutions
that fund research and development activities may be subject to
stringent budgetary constraints that could result in spending
reductions, reduced allocations or budget cutbacks, which could
jeopardize the ability of these customers to purchase our products.
Our operating results may fluctuate substantially due to reductions
and delays in research and development expenditures by these
customers. For example, reductions in capital expenditures by these
customers may result in lower than expected system sales and,
similarly, reductions in operating expenditures by these customers
could result in lower than expected sales of our
Nautilus platform.
These reductions and delays may result from factors that are not
within our control, such as:
•changes
in economic conditions;
•changes
in government programs that provide funding to research
institutions and companies;
•changes
in the regulatory environment affecting life science and Ag-Bio
companies engaged in research and commercial
activities;
•differences
in budget cycles across various geographies and
industries;
•market-driven
pressures on companies to consolidate operations and reduce
costs;
•mergers
and acquisitions in the life science and Ag-Bio industries;
and
•other
factors affecting research and development spending.
Any decrease in our customers’ budgets or expenditures or in the
size, scope or frequency of capital or operating expenditures as a
result of the foregoing or other factors could materially and
adversely affect our business, results of operations, financial
condition, and prospects.
Our operating results may fluctuate significantly in the future,
which makes our future operating results difficult to predict and
could cause our operating results to fall below expectations or any
guidance we may provide.
Our quarterly and annual operating results may fluctuate
significantly, which makes it difficult for us to predict our
future operating results. In the near term, as we devote
substantially all of our resources towards the development and
anticipated future commercialization of our
Nautilus
platform, specific factors that may result in fluctuations include,
without limitation:
•the
timing and cost of, and level of investment in, research and
development and commercialization activities relating to, our
Nautilus platform;
•our
ability to successfully establish and successfully maintain
appropriate collaborations and derive revenue from those
collaborations; and
•our
ability to successfully develop and commercialize our Nautilus
platform on our anticipated timeline.
As we transition from a company with a focus on research and
development to a company capable of supporting manufacturing, these
fluctuations may also occur due to a variety of other factors, many
of which are outside of our control, including, but not limited
to:
•the
level of demand for any products we are able to commercialize,
particularly our Nautilus platform, which may vary significantly
from period to period;
•our
ability to drive adoption of our Nautilus platform in our target
markets and our ability to expand into any future target
markets;
•the
impact that economic inflation may have on our costs for
manufacturing our products;
•the
prices at which we will be able to sell our Nautilus
platform;
•the
volume and mix of our sales between consumables, instruments and
software, or changes in the manufacturing or sales costs related to
our products;
•the
timing and amount of expenditures that we may incur to develop,
commercialize or acquire additional products and technologies or
for other purposes, such as the expansion of our
facilities;
•changes
in governmental funding of life sciences research and development
or changes that impact budgets and budget cycles;
•seasonal
spending patterns of our customers;
•the
timing of when we recognize any revenue;
•future
accounting pronouncements or changes in our accounting
policies;
•the
outcome of any future litigation or governmental investigations
involving us, our industry or both;
•higher
than anticipated service, replacement and warranty
costs;
•the
impact of the COVID-19 pandemic, the conflicts in Eastern Europe,
and other national and global events on the economy, investment in
life sciences and research industries, our business operations, and
resources and operations of our customers, suppliers, and
distributors; and
•general
industry, economic and market conditions and other factors,
including factors unrelated to our operating performance or the
operating performance of our competitors.
The cumulative effects of the factors discussed above could result
in large fluctuations and unpredictability in our quarterly and
annual operating results. As a result, comparing our operating
results on a period-to-period basis may not be meaningful.
Investors should not rely on our past results as an indication of
our future performance.
This variability and unpredictability could also result in us
failing to meet the expectations of industry or financial analysts
or investors for any period. If we are unable to commercialize
products or generate revenue, or if our operating results fall
below the expectations of analysts or investors or below any
guidance we may provide, or if the guidance we provide is below the
expectations of analysts or investors, it could cause the market
price of our Common Stock to decline.
We have a limited operating history, which may make it difficult to
evaluate our current business and the prospects for our future
viability, and to predict our future performance.
We are a life sciences technology company with a limited operating
history. We have not completed development of our
Nautilus
platform or any other products and have not generated any revenue
to date. Our operations to date have been limited to developing
our
Nautilus
platform. Our prospects must be considered in light of the
uncertainties, risks, expenses, and difficulties frequently
encountered by companies in their early stages of operations.
Consequently, predictions about our future success or viability are
highly uncertain and may not be as accurate as they could be if we
had a longer operating history or a company history of successfully
developing and commercializing products.
In addition, as a business with a limited operating history, we may
encounter unforeseen expenses, difficulties, complications, delays
and other known and unknown obstacles. We will eventually need to
transition from a company with a focus on research and development
to a company capable of supporting manufacturing and commercial
activities as well, and we may not be successful in such a
transition. We have encountered in the past, and will encounter in
the future, risks and uncertainties frequently experienced by
growing companies with limited operating histories in emerging and
rapidly changing industries. If our assumptions regarding these
risks and uncertainties, which we use to plan and operate our
business, are incorrect or change, or if we do not address these
risks successfully, our results of operations could differ
materially from our expectations, and our business, financial
condition and results of operations could be adversely
affected.
We may need to raise additional capital to fund our development and
commercialization plans.
Based on our current plans, we believe that our available resources
and existing cash, cash equivalents and short-term investments,
will be sufficient to meet our anticipated cash requirements for at
least 12 months from the date of this Quarterly Report on Form
10-Q. If our available resources and existing cash and cash
equivalents and short-term investments are insufficient to satisfy
our liquidity requirements, including because of the realization of
other risks described in this Quarterly Report on Form 10-Q, we may
be required to raise additional capital prior to such time through
issuances of equity or convertible debt securities, enter into a
credit facility or another form of third-party funding or seek
other debt financing.
We may consider raising additional capital in the future to expand
our business, to pursue strategic investments, to take advantage of
financing or acquisition opportunities or for other reasons,
including:
•funding
development and marketing efforts of our Nautilus platform or any
other future products;
•increasing
our sales and marketing and other commercialization efforts to
drive market adoption of our Nautilus platform, once
commercialized;
•expanding
our technologies into additional markets;
•preparing,
filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights;
•acquiring,
licensing or defending against third party intellectual property
rights;
•acquiring
or investing in complementary technologies, businesses or assets;
and
•financing
capital expenditures and general and administrative
expenses.
Our present and future funding requirements will depend on many
factors, including:
•delays
in execution of our development plans;
•the
scope and timing of our investment in our sales, marketing, and
distribution capabilities;
•changes
we may make to our business that affect ongoing operating
expenses;
•the
costs of filing, prosecuting, defending and enforcing any patent
claims and other intellectual property rights;
•changes
we may make in our business or commercialization
strategy;
•changes
we may make in our research and development spending
plans;
•our
need to implement additional infrastructure and internal
systems;
•the
impact of the COVID-19 pandemic; and
•other
items affecting our forecasted level of expenditures and use of
cash resources including potential acquisitions.
The various ways we could raise additional capital carry potential
risks. If we raise funds by issuing equity securities, dilution to
our stockholders could result. If we raise funds by issuing debt
securities, those debt securities could have rights, preferences
and privileges senior to those of holders of our Common Stock. The
terms of debt securities issued or borrowings pursuant to a credit
agreement could impose significant restrictions on our operations.
If we raise funds through collaborations or licensing arrangements,
we might be required to relinquish significant rights to our
technologies or products or grant licenses on terms that are not
favorable to us.
We may be unable to raise additional funds or to enter into such
agreements or arrangements on favorable terms, or at all. Our
ability to raise additional funds may be adversely impacted by
potential worsening global economic conditions and the recent
disruptions to, and volatility in, the credit and financial markets
in the United States and worldwide resulting from the ongoing
COVID‑19 pandemic, the conflicts in Eastern Europe, and otherwise.
If we are unable to obtain adequate financing or financing on terms
satisfactory to us, if we require it, our ability to continue to
pursue our business objectives and to respond to business
opportunities, challenges, or unforeseen circumstances could be
significantly limited, and could have a material adverse effect on
our business, financial condition, results of operations and
prospects.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain sufficient intellectual
property protection for our products and technology, or if the
scope of our intellectual property protection obtained is not
sufficiently broad, competitors could develop and commercialize
products similar or identical to ours, and our ability to
successfully commercialize our products may be
impaired.
Our commercial success depends in part on our ability to protect
our intellectual property and proprietary technologies. We rely on
patent protection, where appropriate and available, as well as a
combination of copyright, trade secret and trademark laws, and
nondisclosure, confidentiality and other contractual restrictions
to protect our proprietary technology. However, these legal means
afford only limited protection and may not adequately protect our
rights or permit us to gain or keep any competitive advantage. If
we fail to obtain, maintain and protect our intellectual property,
third parties may be able to compete more effectively against us.
In addition, we may incur substantial costs related to litigation
or other patent proceedings in our attempts to recover or restrict
use of our intellectual property.
To the extent our intellectual property offers inadequate
protection, or is found to be invalid or unenforceable, we would be
exposed to a greater risk of direct competition. If our
intellectual property does not provide adequate
coverage of our competitors’ products, our competitive position
could be adversely affected, as could our business, financial
condition, results of operations and prospects. Both the patent
application process and the process of managing patent and other
intellectual property disputes are generally unpredictable,
time-consuming and expensive.
Our success depends in large part on our and any future licensor’s
ability to obtain and maintain protection of the intellectual
property we may own or license, whether solely or jointly,
particularly patents, in the United States and other countries with
respect to our products and technologies. We apply for patents to
protect our products, technologies and commercial activities, as we
deem appropriate. However, obtaining and enforcing patents is
costly, time-consuming and complex, and we may fail to apply for
patents on important products and technologies in a timely fashion
or at all, or we may fail to apply for patents in potentially
relevant jurisdictions. We may not be able to file and prosecute
all necessary or desirable patent applications, or maintain,
enforce and license any patents that may issue from such patent
applications, at a reasonable cost or in a timely manner or in all
jurisdictions. It is also possible that we will fail to identify
patentable aspects of our research and development output before it
is too late to obtain patent protection. Moreover, we may not
develop additional proprietary products, methods and technologies
that are patentable. We may not have the right to control the
preparation, filing and prosecution of patent applications, or to
maintain the rights to patents which may be licensed from or to
third parties. In connection with any future licensing arrangements
with third parties, these patents and applications may not be
prosecuted and enforced by such third parties in a manner
consistent with the best interests of our business.
In addition, the patent position of life sciences technology
companies generally is highly uncertain, involves complex legal and
factual questions, and has been the
subject of much litigation in recent years. Changes in either the
patent laws or in interpretations of patent laws in the United
States or other jurisdictions may diminish the value of our
intellectual property. As a result, the issuance, scope, validity,
enforceability, and commercial value of our patent rights are
highly uncertain. It is possible that none of our pending patent
applications will result in issued patents in a timely fashion or
at all, and even if issued, the patents may not provide a basis for
intellectual property protection of commercially viable products or
services, may not provide us with any competitive advantages, or
may be challenged, narrowed or invalidated by third parties. We
cannot predict the breadth of claims that may be allowed or
enforced in our patents or in third-party patents. It is possible
that third parties will design around our current or future patents
such that we cannot prevent such third parties from using similar
technologies and commercializing similar products to compete with
us. Some of our owned or any future licensed patents or patent
applications may be challenged at a future point in time and we may
not be successful in defending any such challenges made against our
patents or patent applications. Any successful third-party
challenge to our patents could result in diminished or lost rights,
for example, due to narrowing, unenforceability or invalidity of
such patents and increased competition to our business. The outcome
of patent litigation or other proceedings is generally uncertain,
and any attempt by us to enforce our patent rights against others
or to challenge the patent rights of others may not be successful,
or, regardless of success, may take substantial time and result in
substantial cost, and may divert our efforts and attention from
other aspects of our business. Any of the foregoing events could
have a material adverse effect on our business, financial condition
and results of operations.
The U.S. law relating to the patentability of certain inventions in
the life sciences technology industry is uncertain and rapidly
changing, which may adversely impact our existing patents or our
ability to obtain patents in the future.
Changes in either the patent laws or interpretation of the patent
laws in the United States or in other jurisdictions could increase
the uncertainties and costs surrounding the prosecution of patent
applications and the enforcement or defense of issued patents. In
the last decade, the US Congress made sweeping changes to patent
law in passing the America Invents Act (AIA). These changes
include, among others, allowing third-party submission of prior art
to the United States Patent and Trademark Office (USPTO) during
patent prosecution and additional procedures to challenge the
validity of a patent by USPTO administered post-grant proceedings,
including post-grant review, inter partes review and derivation
proceedings. The changes brought about by the AIA have not been
extensively tested, and therefore increase the uncertainties and
costs surrounding the prosecution of our patent applications and
the enforcement or defense of our issued patents, all of which
could have a material adverse effect on our business, financial
condition, results of operations and prospects.
Various courts, including the U.S. Supreme Court, have recently
rendered decisions that impact the scope of patentability of
certain inventions or discoveries relating to our technology and
commercial goals. Specifically, these
decisions have substantially increased the probability that patent
claims will be ruled patent ineligible for reciting a natural
phenomenon, law of nature or abstract idea. Furthermore, in view of
these decisions, since December 2014, the USPTO has published and
continues to publish revised guidelines for patent examiners to
apply when examining claims for patent eligibility. Patent claims
relating to software algorithms, biologically-derived reagents,
methods for analyzing biological systems and other subject matters
that underlies our technology and commercial goals are impacted by
these changes.
Actions taken by the U.S. Congress, federal courts and USPTO have
from time to time narrowed the scope of patent protection available
in certain circumstances and weakened the rights of patent owners
in certain situations. Similar changes have been made by
authorities in other jurisdictions. In addition to increasing
uncertainty with regard to our ability to obtain patents in the
future, such changes create uncertainty with respect to the value
of patents, once obtained. Depending on decisions by authorities in
various jurisdictions, the laws and regulations governing patents
could change in unpredictable ways that may have a material adverse
effect on our ability to obtain new patents and to defend and
enforce our existing patents and patents that we might obtain in
the future.
We cannot assure you that our patent portfolio will not be
negatively impacted by the current uncertain state of the law, new
court rulings or changes in guidance or procedures issued by
governments or patent offices around the world. From
time
to time, the U.S. Supreme Court, other federal courts, the U.S.
Congress or the USPTO may change the standards of patentability,
scope and validity of patents within the life sciences technology
and any such changes, or any similar adverse changes in the patent
laws of other jurisdictions, could have a negative impact on our
business, financial condition, prospects and results of
operations.
We may not be able to protect our intellectual property rights
throughout the world.
Filing, prosecuting and defending patents on our Nautilus platform
in all countries throughout the world would be prohibitively
expensive, and our intellectual property rights in some countries
outside the United States can be less extensive than those in the
United States.
The laws of some foreign countries do not protect intellectual
property rights to the same extent as the laws of the United
States, and we and any future licensor may encounter difficulties
in protecting and defending such rights in foreign jurisdictions.
Consequently, we and any future licensor may not be able to prevent
third parties from practicing our inventions in some or all
countries outside the United States, or from selling or importing
products made using our or any future licensor’s inventions in and
into the United States or other jurisdictions. Competitors and
other third parties may be able to use our technologies in
jurisdictions where we have not obtained patent protection to
develop our own products and technologies and may also export
infringing products to territories where we have patent protection,
but enforcement is not as strong as that in the United States.
These products may compete with our products. We and any future
licensor’s patents or other intellectual property rights may not be
effective or sufficient to prevent them from competing. In
addition, certain countries have compulsory licensing laws under
which a patent owner may be compelled to grant licenses to other
parties. Furthermore, many countries limit the enforceability of
patents against other parties, including government agencies or
government contractors. In these countries, the patent owner may
have limited remedies, which could materially diminish the value of
any patents.
Many companies have encountered
significant problems in protecting and defending intellectual
property rights in foreign jurisdictions. The legal systems of many
other countries do not favor the enforcement of patents and other
intellectual property protection, which could make it difficult for
us to stop the misappropriation or other violations of our
intellectual property rights including infringement of our patents
in such countries. The legal systems in certain countries may also
favor state-sponsored companies or companies headquartered in
particular jurisdictions over our patents and other intellectual
property protection. The absence of harmonized intellectual
property protection laws and effective enforcement makes it
difficult to ensure consistent respect for patent, trade secret,
and other intellectual property rights on a worldwide basis. As a
result, it is possible that we will not be able to enforce our
rights against third parties that misappropriate our proprietary
technology in those countries.
Proceedings to enforce our or any future licensor’s patent rights
in foreign jurisdictions could result in substantial cost and
divert our efforts and attention from other aspects of our
business, could put our and any future licensor’s patents at risk
of being invalidated or interpreted narrowly and our and any future
licensor’s patent applications at risk of not issuing, and could
provoke third parties to assert claims against us. We and any
future licensor may not prevail in any lawsuits that we and any
future licensor initiates, or that are initiated against us or any
future licensor, and the damages or other remedies awarded, if any,
may not be commercially meaningful. In addition, changes in the law
and legal decisions by courts in the United States and foreign
countries may affect our ability to obtain adequate protection for
our products, services and other technologies and the enforcement
of intellectual property. Accordingly, our efforts to enforce our
intellectual property rights around the world may be inadequate to
obtain a significant commercial advantage from the intellectual
property that we develop or license. Any of the foregoing events
could have a material adverse effect on our business, financial
condition, results of operations and prospects.
We may become involved in lawsuits to defend against third-party
claims of infringement, misappropriation or other violations of
intellectual property or to protect or enforce our intellectual
property, any of which could be expensive, time consuming and
unsuccessful, and may prevent or delay our development and
commercialization efforts.
Litigation may be necessary for us to enforce our patent and
proprietary rights and/or to determine the scope, coverage and
validity of others’ proprietary rights. Litigation on these matters
has been prevalent in our industry and we expect that this will
continue. To determine the priority of inventions, we may have to
initiate and participate in interference proceedings declared by
the USPTO that could result in substantial legal fees and could
substantially affect the scope of our patent protection. Also, our
intellectual property may be subject to significant administrative
and litigation proceedings such as invalidity, unenforceability,
re-examination and opposition proceedings against our patents. The
outcome of any litigation or other proceeding is inherently
uncertain and might not be favorable to us, and we might not be
able to obtain licenses to technology that we require or a
competitor may have already obtained an exclusive license to such
technology in all fields. Even if such licenses are obtainable,
they may not be available at a reasonable cost. We could therefore
incur substantial costs related to royalty payments for licenses
obtained from third parties, which could negatively affect our
gross margins. In some cases, the outcome of litigation may be to
enjoin us from commercializing a patent protected technology. We
could encounter delays in product introductions, or interruptions
in product sales, as we develop alternative methods or
products.
In addition, if we resort to legal proceedings to enforce our
intellectual property rights or to determine the validity, scope
and coverage of the intellectual property or other proprietary
rights of others, the proceedings could be burdensome and
expensive, even if we were to prevail.
Our commercial success may depend in part on our non-infringement
of the patents or proprietary rights of third parties. Numerous
significant intellectual property issues have been litigated, and
will likely continue to be litigated, between existing and new
participants in the life sciences market and competitors may assert
that our products infringe their intellectual property rights as
part of a business strategy to impede our successful entry into
those markets. Third parties may assert that we are employing our
proprietary technology without authorization. We are aware that
there are issued third party patents that are in the general
proteomics field. Specifically, we are aware of various U.S.
patents and U.S. non-provisional applications assigned to
Washington University and the National Institute of Health, with
claims directed to characterizing and identifying a polypeptide
strand.
In addition, our competitors and others may have patents or may in
the future obtain patents and may claim that use of our products
infringes these patents. As we move into new markets and
applications for our products, incumbent participants in such
markets may assert their patents and other proprietary rights
against us as a means of slowing or preventing our entry into such
markets, or as a means to extract substantial license and royalty
payments from us.
Issued patents covering our products could be found invalid or
unenforceable if challenged.
Our owned and any future licensed patents and
patent applications may be subject to validity, enforceability and
priority disputes. The issuance of a patent is not conclusive as to
its inventorship, scope, validity or enforceability.
Some of our patents or patent applications may be challenged at a
future point in time in opposition, derivation,
reexamination,
inter partes
review, post-grant review or interference or other similar
proceedings. Any successful third-party challenge to our patents in
this or any other proceeding could result in the unenforceability
or invalidity of such patents, which may lead to
increased
competition to our business, which could have a material adverse
effect on our business, financial condition, results of operations
and prospects. In addition, if we or any future licensor initiates
legal proceedings against a third party to enforce a patent
covering our products, the defendant could counterclaim that such
patent covering our products, as applicable, is invalid and/or
unenforceable. In patent litigation in the United States, defendant
counterclaims alleging invalidity or unenforceability are
commonplace. There are numerous grounds upon which a third party
can assert invalidity or unenforceability of a patent. Grounds for
a validity challenge could be an alleged failure to meet any of
several statutory requirements, including, but not limited to, lack
of novelty, obviousness or non-enablement. Grounds for an
unenforceability assertion could be an allegation that someone
connected with prosecution of the patent withheld relevant
information from the relevant patent office, or made a
misleading
statement, during prosecution. Third parties may also raise similar
claims before administrative bodies in the United States or abroad,
even outside the context of litigation. Such mechanisms include ex
parte re-examination,
inter partes
review, post-grant review, derivation and equivalent proceedings in
non-U.S. jurisdictions, such as opposition proceedings. Such
proceedings could result in revocation of or amendment to our
patents in such a way that they no longer cover and protect our
products. With respect to the validity of our patents, for example,
we cannot be certain that there is no invalidating prior art of
which us, any future licensor, our patent counsel and the patent
examiner were unaware during prosecution. The outcome following
legal assertions of invalidity and unenforceability during patent
litigation is unpredictable. If a defendant or other third party
were to prevail on a legal assertion of invalidity or
unenforceability, we would lose at least part, and perhaps all, of
the patent protection for our products and technologies, which
could have a material adverse effect on our business, financial
condition, results of operations and prospects. In addition, if the
breadth or strength of protection provided by our patents and
patent applications is threatened, regardless of the outcome, it
could dissuade companies from collaborating with us to license
intellectual property or develop or commercialize current or future
products.
We may not be aware of all third-party intellectual
property rights potentially relating to our products. Publications
of discoveries in the scientific literature often lag behind the
actual discoveries, and patent applications in the United States
and other jurisdictions are typically not published until
approximately 18 months after filing or, in some cases, not until
such patent applications issue as patents. We might not have been
the first to make the inventions covered by each of our pending
patent applications and we might not have been the first to file
patent applications for these inventions. To determine the priority
of these inventions, we may have to participate in interference
proceedings, derivation proceedings or other post-grant proceedings
declared by the USPTO, or other similar proceedings in non-U.S.
jurisdictions, that could result in substantial cost to us and the
loss of valuable patent protection. The outcome of such proceedings
is uncertain. No assurance can be given that other patent
applications will not have priority over our patent applications.
In addition, changes to the patent laws of the United States in the
last decade allow for various post-grant opposition proceedings
that have not been extensively tested, and their outcome is
therefore uncertain. Furthermore, if third parties bring these
proceedings against our patents, regardless of the merit of such
proceedings and regardless of whether we are successful, we could
experience significant costs and our management may be distracted.
Any of the foregoing events could have a material adverse effect on
our business, financial condition, results of operations and
prospects.
If we are unable to protect the confidentiality of our trade
secrets, the value of our technology could be materially adversely
affected, and our business could be harmed.
We rely heavily on trade secrets and confidentiality agreements to
protect our unpatented know-how, technology and other proprietary
information, including parts of our
Nautilus platform,
and to maintain our competitive position. However, trade secrets
and know-how can be difficult to protect. In particular, we
anticipate that with respect to our technologies, these trade
secrets and know how will over time be disseminated within the
industry through independent development, the publication of
journal articles describing the methodology, and the movement of
personnel between academic and industry scientific
positions.
In addition to pursuing patents on our technology, we take steps to
protect our intellectual property and proprietary technology by
entering into agreements, including confidentiality agreements,
non-disclosure agreements and intellectual property assignment
agreements, with our employees, consultants, academic
institutions,
corporate partners and, when needed, our advisers. However, we
cannot be certain that such agreements have been entered into with
all relevant parties, and we cannot be certain that our trade
secrets and other confidential proprietary information will not be
disclosed or that competitors or other third parties will not
otherwise gain access to our trade secrets or independently develop
substantially equivalent information and techniques. For example,
any of these parties may breach the agreements and disclose our
proprietary information, including our trade secrets, and we may
not be able to obtain adequate remedies for such breaches. Such
agreements may not be enforceable or may not provide meaningful
protection for our trade secrets or other proprietary information
in the event of unauthorized use or disclosure or other breaches of
the agreements, and we may not be able to prevent such unauthorized
disclosure, which could adversely impact our ability to establish
or maintain a competitive advantage in the market, business,
financial condition, results of operations and
prospects.
Monitoring unauthorized disclosure is difficult, and we do not know
whether the steps we have taken to prevent such disclosure are, or
will be, adequate. If we were to enforce a claim that a third party
had wrongfully obtained and was using our trade secrets, it would
be expensive and time-consuming, it could distract our personnel,
and the outcome would be unpredictable. In addition, courts outside
the United States may be less willing to protect trade
secrets.
We also seek to preserve the integrity and confidentiality of our
confidential proprietary information by maintaining physical
security of our premises and physical and electronic security of
our information technology systems, but it is possible that these
security measures could be breached. If any of our confidential
proprietary information were to be lawfully obtained or
independently developed by a competitor or other third party,
absent patent protection, we would have no right to prevent such
competitor from using that technology or information to compete
with us, which could harm our competitive position. Competitors or
third parties could purchase our products and attempt to replicate
some or all of the competitive advantages we derive from our
development efforts, design around our protected
technology,
develop their own competitive technologies that fall outside the
scope of our intellectual property rights or independently develop
our technologies without reference to our trade secrets. If any of
our trade secrets were to be disclosed to or independently
discovered by a competitor or other third party, it could
materially and adversely affect our business, financial condition,
results of operations and prospects.
We may be subject to claims challenging the inventorship of our
patents and other intellectual property.
We or any future licensor may be subject to claims that former
employees, collaborators or other third parties have an interest in
our patents, trade secrets or other intellectual property. For
example, us or any future licensor may have inventorship disputes
arise from conflicting obligations of employees, consultants or
others who are involved in developing our products. In addition,
counterparties to our consulting, software development, and other
agreements may assert that they have an ownership interest in
intellectual property developed under such arrangements. Litigation
may be necessary to defend against claims challenging ownership or
inventorship of our or any future licensor’s ownership of our
patents, trade secrets or other intellectual property. If we or any
future licensor fails in defending any such claims, in addition to
paying monetary damages, we may lose valuable intellectual property
rights, such as exclusive ownership of, or right to use,
intellectual property that is important
to our
Nautilus platform,
including our software, workflows, consumables and reagent kits. In
such an event, we may be required to obtain licenses from third
parties and such licenses may not be available on commercially
reasonable terms or at all or may be non-exclusive. If we are
unable to obtain and maintain such licenses, we may need to cease
the development, manufacture or commercialization of our products
and technologies. Even if we are successful in defending against
such claims, litigation could result in substantial costs and be a
distraction to management and other employees, and certain
customers or partners may defer engaging with us until the
particular dispute is resolved. Any of the foregoing could have a
material adverse effect on our business, financial condition,
results of operations and prospects.
We may not be able to protect and enforce our trademarks and trade
names or build name recognition in our markets of interest thereby
harming our competitive position.
The registered or unregistered trademarks or trade names that we
own may be challenged, infringed, circumvented, declared generic,
lapsed or determined to be infringing on or dilutive of other
marks. We may not be able to protect our rights in these trademarks
and trade names, which we need in order to build name recognition.
In
addition, third parties have filed, and may in the future file, for
registration of trademarks similar or identical to our trademarks,
thereby impeding our ability to build brand identity and possibly
leading to market confusion. In addition, there could be potential
trade name or trademark infringement claims brought by owners of
other registered trademarks or trademarks that incorporate
variations of our registered or unregistered trademarks or trade
names. Further, we have and may in the future enter into agreements
with owners of such third-party trade names or trademarks to avoid
potential trademark litigation which may limit our ability to use
our trade names or trademarks in certain fields of business. Over
the long term, if we are unable to establish name recognition based
on our trademarks and trade names, then we may not be able to
compete effectively, and our business, financial condition, results
of operations and prospects may be adversely affected. Our efforts
to enforce or protect our proprietary rights related to trademarks,
domain names, copyrights or other intellectual property may be
ineffective and could result in substantial costs and diversion of
resources. Any of the foregoing events could have a material
adverse effect on our business, financial condition and results of
operations.
Patent terms may be inadequate to protect our competitive position
on our Nautilus platform for an adequate amount of
time.