10-Q/A
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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM
10-Q/A
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number:
001-40947
 
 
LianBio
(Exact Name of Registrant as Specified in its Charter)
 
 
 
Cayman Islands
 
98-1594670
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
   
103 Carnegie Center Drive, Suite 309
Princeton, NJ
 
08540
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (609)
486-2308
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which
 
registered
American depositary shares, each representing 1 ordinary share, $0.000017100448 par value per share
 
LIAN
 
The Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☐    No  ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer
 
  
Accelerated filer
 
       
Non-accelerated
filer
     Smaller reporting company  
       
Emerging growth company           
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  
As of December 1, 2021, 107,238,910 
ordinary shares of the registrant, par value $0.000017100448 per share, were outstanding, of which 20,906,116 ordinary shares were held in the form of American Depositary Shares.
 
 
 
EXPLANATORY
This Amendment No. 1 to the Quarterly Report on Form 10-Q is being filed solely to furnish the Interactive Data files as Exhibit 101 and 104, in accordance with Rule 405 of Regulation S-T. This Amendment does not reflect any events occurring subsequent to the filing date of the original Form 10-Q for the quarter ended September 30, 2021 or in any way modify or update disclosures made in the original Form 10-Q filing for the quarter ended September 30, 2021.​​​​​​​

Table of Contents
Table of Contents
 
         
Page
 
PART I.
        7  
Item 1.
        7  
        7  
        8  
        9  
        11  
        12  
Item 2.
        30  
Item 3.
        42  
Item 4.
        42  
PART II.
        43  
Item 1.
        43  
Item 1A.
        43  
Item 2.
        120  
Item 3.
        120  
Item 4.
        121  
Item 5.
        121  
Item 6.
        121  
     125  
 
2

Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, about us and our industry that involve substantial risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. All statements other than statements of historical facts contained in this Quarterly Report on Form
10-Q,
including statements regarding our strategy, future operations, future financial position, prospects, plans, objectives of management and expected growth, are forward-looking statements. These statements are based on our current beliefs, expectations and assumptions regarding our intentions, beliefs or current expectations concerning, among other things, the future of our business, future plans and strategies, our operational results and other future conditions. Forward-looking statements involve known and unknown risks, uncertainties and other important 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.
Forward-looking statements can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “seek,” “target,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:
 
   
our ability to successfully develop, gain regulatory approval for and launch commercial products in Greater China and other Asian markets;
 
   
our ability to deliver innovative therapeutic solutions to patients and become a leading biopharmaceutical company in Greater China, including Mainland China, Hong Kong, Taiwan and Macau, and other Asian markets;
 
   
our plans and ability to leverage data generated in our partners’ global registrational trials and clinical development programs to obtain regulatory approval for and bring our current product candidates to market in our licensed territories, and our plans to maximize patient reach for each of our product candidates;
 
   
our partners’ announced plans and expectations with respect to the success, cost and timing of their product development activities, preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the timing of expected review from regulatory authorities and the period during which the results of the trials are expected to become available;
 
   
our ability to expand our pipeline through the continued strategic
in-licensing
of innovative and complementary product candidates with the potential to become the new standard of care in Greater China and other Asian markets;
 
   
our ability to successfully establish an international infrastructure, including by building a focused salesforce in China and leveraging the commercial infrastructure we create to benefit our other assets;
 
   
our ability to establish and maintain relationships and collaborations with investors that will contribute to our success in sourcing value and creating partnerships to enable us to build out a broad and clinically validated pipeline;
 
   
our ability to design, initiate and complete any clinical trials to advance our current product candidates, including mavacamten,
TP-03,
NBTXR3, infigratinib,
BBP-398,
LYR-210,
omilancor,
NX-13
and sisunatovir, as well as any future product candidates, towards regulatory approval in China;
 
   
our ability to conduct, and the timing of and costs related to, our product development activities, including any preclinical studies and related clinical trials in Greater China and other Asian markets of our current and any future product candidates, and our ability to obtain, and the timing of and costs related to, potential regulatory approval of such product candidates in Greater China and other Asian markets;
 
   
our plans to pursue the development of certain product candidates for additional treatment indications;
 
   
our ability to successfully utilize the data we may generate from any clinical trials we conduct in Greater China or other territories, including in conjunction with data from clinical trials conducted by our partners, to seek regulatory approval in Greater China and other Asian markets;
 
   
our plans and ability to join our current and future partners’ clinical and registrational trials;
 
   
our ability to design and implement the development strategies for our product candidates in each of our licensed territories and, where applicable, our ability to design and implement global development strategies for our product candidates in new indications in connection with our local development strategies;
 
   
the potential for certain of our current and future product candidates to have more benign safety profiles or result in a differentiated safety profiles than currently available therapeutic options;
 
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the size, composition and growth potential of the patient populations and markets we intend to target with our product candidates and our ability to develop and commercialize product candidates to address those patient populations and markets;
 
   
our ability to successfully procure from third parties sufficient supply of our product candidates for any preclinical studies, clinical trials or commercial use, if approved;
 
   
our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates and our general and administrative expenses;
 
   
the rate and degree of market acceptance of our product candidates;
 
   
our ability to attract and retain key scientific or management personnel;
 
   
the impact of laws and regulations and of any legal and regulatory developments in our licensed territories or internationally;
 
   
our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;
 
   
our ability to license intellectual property relating to our product candidates and to comply with our existing license and collaboration agreements;
 
   
our reliance on third parties to conduct product development, manufacturing and other services, and any agreements we have or into which we may enter with such parties in connection with the commercialization of our product candidates and any other approved product;
 
   
our expectations regarding the time during which we will be an emerging growth company or smaller reporting company;
 
   
the direct and indirect impact of the
COVID-19
pandemic on our business, operations and the markets and communities in which we and our partners, collaborators and vendors operate;
 
   
our estimates of our expenses, capital requirements and needs for additional financing; and
 
   
other risks and uncertainties, including those listed under the caption “Risk Factors.”
Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution investors that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form
10-Q.
In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form
10-Q,
those results or developments may not be indicative of results or developments in subsequent periods.
Given these risks and uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Quarterly Report on Form
10-Q
speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data. Investors should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form
10-Q.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form
10-Q,
and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Unless the context requires otherwise, references in this report to the “Company,” “LianBio,” “we,” “us” and “our” refer to LianBio and its consolidated subsidiaries.
 
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Risk Factors Summary
Our business is subject to a number of risks that are discussed more fully in the “Risk Factors” section of this Quarterly Report on Form
10-Q.
These risks include the following:
 
   
China’s economic, political and social conditions, as well as governmental policies, could affect the business environment and financial markets in China, our ability to operate our business, our liquidity and our access to capital.
 
   
Although the audit report included in our final prospectus dated October 31, 2021 and filed with the Securities and Exchange Commission (the “SEC”) on November 2, 2021 is prepared by U.S. auditors who are currently inspected by the Public Company Accounting Oversight Board (the “PCAOB”), there is no guarantee that future audit reports will be prepared by auditors inspected by the PCAOB and, as such, in the future investors may be deprived of the benefits of such inspection. Furthermore, trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCA Act”) if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely or the SEC identifies us as a Commission-Identified Issuer, and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist our securities. In addition, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.
 
   
Proceedings brought by the SEC against China-based accounting firms could result in our inability to file future financial statements in compliance with the requirements of the Exchange Act.
 
   
The Chinese government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of our ADSs. For additional information regarding the risks associated with having the majority of our operations in China, see “Risk Factors—Risks Related to Doing Business in China and Our International Operations.”
 
   
Both recent and future economic, political and social conditions, as well as governmental policies and regulatory actions implemented in China, could affect our ability to operate our business. The Chinese government has provided new guidance on China-based companies raising capital outside of China. Due to our extensive operations in China, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising or other activities by companies with extensive operations in China could adversely affect our business, results of operations and the market price of our ADSs.
 
   
Changes in the legal, political and economic policies of the Chinese government, the relations between China and the United States, or Chinese or United States regulations may materially and adversely affect our business, financial condition, results of operations and the market price of our ADSs, which could cause the value of our ADSs to significantly decline or to become worthless. Any such changes may take place quickly and with very little notice. Recent statements made and regulatory actions undertaken by China’s government, including the recent enactment of the Data Security Law of the People’s Republic of China (the “Data Security Law”), as well as our obligations to comply with China’s Cybersecurity Review Measures (revised draft for public consultation), regulations and guidelines relating to the multi-level protection scheme, the Personal Information Protection Law of the People’s Republic of China (the “Personal Information Protection Law”) and any other future laws and regulations may require us to incur significant expenses and could materially affect our ability to conduct our business, accept foreign investments, list on a foreign exchange or stay listed on Nasdaq. For additional information, see “Risk Factors—Risks Related to Doing Business in China and Our International Operations.”
 
   
We are not currently required to obtain approval or prior permission from the China Securities Regulatory Commission (the “CSRC”) or any other Chinese regulatory authority under the Chinese laws and regulations currently in effect to conduct a public offering in foreign capital markets. As there are uncertainties with respect to the Chinese legal system and changes in laws, regulations and policies, including how those laws and regulations will be interpreted or implemented by the CSRC or any other Chinese regulatory authority, there can be no assurance that we will not be subject to such requirements, approvals or permissions in order to continue our operations in the future. We are required to obtain business licenses from Chinese authorities in connection with our general business activities currently conducted in China.
 
   
The Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our ADSs to investors and could cause the value of our ADSs to significantly decline or become worthless.
 
   
Pharmaceutical companies in China are required to comply with extensive regulations and hold a number of permits and licenses to carry on their business. Our ability to obtain and maintain these regulatory approvals is uncertain, and future government regulation may place additional burdens on our efforts to commercialize our product candidates.
 
   
We have incurred significant losses since our incorporation, have not generated any revenue from product sales to date and anticipate that we will continue to incur losses in the future and may never achieve or maintain profitability.
 
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We will likely need substantial additional funding for our future
in-licensing
and product development programs and commercialization efforts, which may not be available on acceptable terms, or at all. If we are unable to raise capital on acceptable terms when needed, we could incur losses or be forced to delay, reduce or terminate such efforts.
 
   
We have a very limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.
 
   
We are heavily dependent on the successful development and commercialization of our late-stage product candidates, including mavacamten,
TP-03
and NBTXR3.
 
   
All of our product candidates are still in clinical development. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates or experience significant delays in doing so, our business, financial condition, results of operations and prospects will be materially adversely affected.
 
   
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining or maintaining regulatory approval of our product candidates in other jurisdictions.
 
   
Our failure to comply with data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.
 
   
If we breach our licenses or other intellectual property-related agreements for our product candidates or otherwise experience disruptions to our business relationships with our licensors, we could lose the ability to continue the development and commercialization of our product candidates.
 
   
We rely on Perceptive Advisors (“Perceptive”), our founder and a significant shareholder in our company, as a source for identifying partners from which we may
in-license
product candidates. If Perceptive divests of its investment in our company or is no longer a significant shareholder, we may lose access to its expertise in sourcing opportunities and our business could be substantially harmed. Perceptive and its affiliates exercise significant influence over our Company, which may limit the ability of our investors and other holders to influence corporate matters and could delay or prevent a change in corporate control. As of December 1, 2021, Perceptive and its affiliates beneficially own 52.5% of our ordinary shares, based on the number of shares outstanding as of December 1, 2021. Two of our current
non-employee
directors are affiliated with Perceptive. We have also entered into a director nomination agreement (the “Director Nomination Agreement”) with Perceptive that provides Perceptive the right to designate nominees to our board of directors so long as Perceptive beneficially owns 5% or more of the total number of shares that it owns as of the completion of our initial public offering. Additionally, Perceptive may invest in or advise businesses that directly or indirectly compete with certain portions of our business or that are suppliers or customers of our business in such a way that may not always coincide with minority ADS holders’ interests.
 
   
We rely on third parties to conduct some of our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
 
   
If we are unable to obtain and maintain patent and other intellectual property protection for our technology and product candidates through intellectual property rights, or if the scope of such intellectual property rights obtained is not sufficiently broad, third parties may compete directly against us, and our ability to successfully develop and commercialize any of our product candidates and technology may be adversely affected.
The foregoing is only a summary of some of our risks. For a more detailed discussion of these and other risks investors should consider before making an investment in our securities, see “Risk Factors.”
 
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PART
I-FINANCIAL
INFORMATION
Item 1. Financial Statements.
LianBio
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
 
 
  
September 30,
2021
 
 
December 31,
2020
 
Assets
  
 
Current assets:
  
 
Cash and cash equivalents
   $ 109,015     $ 254,350  
Prepaid expenses and other current assets
     6,204       2,396  
Other receivable
     5,784       20,000  
    
 
 
   
 
 
 
Total current assets
     121,003       276,746  
Restricted cash,
non-current
     20,000           
Property and equipment, net
     707       822  
Operating lease
right-of-use
assets
     206       1,706  
Other
non-current
assets
     10       12  
    
 
 
   
 
 
 
Total assets
   $ 141,926     $ 279,286  
    
 
 
   
 
 
 
Liabilities, Redeemable Convertible Preferred Shares and Shareholders’ Deficit
                
Current liabilities:
                
Accounts payable
   $ 1,639     $ 4,329  
Accrued expenses
     12,630       998  
Current portion of operating lease liabilities
     306       539  
Withholding tax payable
     5,957           
Other current liabilities
     1,727       360  
    
 
 
   
 
 
 
Total current liabilities
     22,259       6,226  
Operating lease liabilities
              1,341  
Nonrefundable research deposit
     20,000       20,000  
    
 
 
   
 
 
 
Total liabilities
     42,259       27,567  
    
 
 
   
 
 
 
Commitments and contingencies (Note 7)
           
Redeemable convertible preferred shares, $0.0001 par value. Authorized 11,024,178 and 10,971,231 shares as of September 30, 2021 and December 31, 2020, respectively; 11,024,178 and 10,971,231 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
     352,729       349,789  
    
 
 
   
 
 
 
Shareholders’ deficit:
                
Ordinary shares, $0.000017100448 par value. Authorized 2,859,432,812 shares as of September 30, 2021; 21,787,245 shares issued and outstanding at September 30, 2021; Authorized 2,859,742,435 shares as of December 31, 2020; 20,477,338 shares issued and outstanding at December 31, 2020
                  
Additional
paid-in
capital
     41,726       31,132  
Accumulated other comprehensive income (loss)
     64       (40
Accumulated deficit
     (339,040     (163,935
    
 
 
   
 
 
 
Total LianBio shareholders’ deficit
     (297,250     (132,843
Non-controlling
interest
     44,188       34,773  
    
 
 
   
 
 
 
Total shareholders’ deficit
     (253,062     (98,070
    
 
 
   
 
 
 
Total liabilities, redeemable convertible preferred shares and shareholders’ deficit
   $ 141,926     $ 279,286  
    
 
 
   
 
 
 
See accompanying notes to the consolidated financial statements
 
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LianBio
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
 
 
  
Three Months
Ended

September 30,
2021
 
 
Three Months
Ended

September 30,
2020
 
 
Nine Months
Ended
September 30,
2021
 
 
Nine Months
Ended
September 30,
2020
 
Operating expenses:
  
 
 
 
Research and development
   $ 4,655     $ 116,915     $ 151,038     $ 118,173  
General and administrative
     8,889       2,129       22,496       7,492  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     13,544       119,044       173,534       125,665  
Operating loss
     (13,544     (119,044     (173,534     (125,665
Other income (expense):
                                
Interest income (expense), net
     32       (1,293     171       (1,280
Other income (expense), net
     3       99       (189     81  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss before income taxes
     (13,509     (120,238     (173,552     (126,864
Income (benefit) taxes
     (397              1,553       2  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
     (13,112     (120,238     (175,105     (126,866
Other comprehensive (loss) income:
                                
Foreign currency translation (loss) income, net of tax
     (26     (3     104       (56
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive loss
   $ (13,138   $ (120,241   $ (175,001   $ (126,922
Net loss per share attributable to ordinary shareholders, basic and diluted
   $ (0.63   $ (11.71   $ (8.52   $ (12.36
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted-average shares outstanding used in computing net loss per share attributable to ordinary shareholders, basic and diluted
     20,690,908       10,265,811       20,549,310       10,265,811  
    
 
 
   
 
 
   
 
 
   
 
 
 
See accompanying notes to the consolidated financial statements
 
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Table of Contents
 
LianBio
Consolidated Statements of Redeemable Convertible Preferred Shares and Shareholders’ Deficit
(In thousands, except share amounts)
(Unaudited)
 
 
  
Redeemable
Convertible Preferred
Shares
 
  
Ordinary Shares
 
  
Additional
Paid in
Capital
 
  
Accumulated
Other
Comprehensive
(Loss) Income
 
 
Accumulated
Deficit
 
 
Total LianBio
Shareholders’
Deficit
 
 
Non-
Controlling
Interest
 
  
Total
Shareholders’
Deficit
 
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
Balance, December 31, 2020
    10,971,231    
$
349,789       20,477,338    
$
—      
$
31,132    
$
(40  
$
(163,935  
$
(132,843  
$
34,773    
$
(98,070
Share
-
based compensation expense
    —         —         —         —         1,674       —         —         1,674       —         1,674  
Issuance
 
of
 
Series
 
A
 
Preferred
 
Shares
at
 
$56.66
,
 
net
 
of
 
issuance
 
costs
    52,947       2,940       —         —         —         —         —         —         —         —    
Warrants issued in license agreement
    —         —         —         —         —         —         —         —         9,415       9,415  
Net Loss
    —         —         —         —         —         —         (61,565     (61,565     —         (61,565
Comprehensive Income
    —         —         —         —         —         8       —         8       —         8  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance, March 31, 2021
    11,024,178     $ 352,729       20,477,338    
$
—       $ 32,806    
$
(32   $ (225,500  
$
(192,726   $ 44,188    
$
(148,538
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense
    —         —         —         —         1,443       —         —         1,443       —         1,443  
Net Loss
    —         —         —         —         —         —         (100,428     (100,428     —         (100,428
Comprehensive Income
    —         —         —         —         —         122       —         122       —         122  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance, June 30, 2021
    11,024,178    
$
352,729       20,477,338    
$
—       $ 34,249    
$
90    
$
(325,928  
$
(291,589  
$
44,188    
$
(247,401
Share-based
 
compensation
 
expense
    —         —         —         —         2,168       —         —         2,168       —         2,168  
Exercise of options
    —         —         1,309,907       —         5,309       —         —         5,309       —         5,309  
Net Loss
    —         —         —         —         —         —         (13,112     (13,112     —         (13,112
Comprehensive loss
    —         —         —         —         —         (26     —         (26     —         (26
Balance, September 30, 2021
    11,024,178    
$
352,729       21,787,245    
$
—       $ 41,726    
$
64    
$
(339,040  
$
(297,250  
$
44,188    
$
(253,062
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
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Table of Contents
 
LianBio
Consolidated Statements of Redeemable Convertible Preferred Shares and Shareholders’ Deficit
(In thousands, except share amounts)
(Unaudited)
 
 
  
Redeemable
Convertible Preferred
Shares
 
  
Ordinary Shares
 
  
Additional
Paid in
Capital
 
  
Accumulated
Other
Comprehensive
(Loss) Income
 
 
Accumulated
Deficit
 
 
Total LianBio
Shareholders’
Deficit
 
 
Non-
Controlling
Interest
 
  
Total
Shareholders’
Deficit
 
 
  
Shares
 
  
Amount
 
  
Shares
 
  
Amount
 
Balance, December 31, 2019
    5,500,000    
$
55,000       10,265,811    
$
   
$
8,516    
$
   
$
(24,331
)
 
 
$
(15,815
)
 
 
$
999    
$
(14,816
)
 
Share-based compensation
 
expense
   
  
     
  
     
  
     
  
      1,500      
  
     
  
      1,500      
  
      1,500  
Net Loss
   
  
     
  
     
  
     
  
     
  
     
  
      (4,114
)
 
    (4,114
)
 
   
  
      (4,114
)
 
Comprehensive loss
   
  
     
  
     
  
     
  
     
  
      (54
)
 
   
  
      (54
)
 
   
  
      (54
)
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance, March 31, 2020
    5,500,000    
$
55,000       10,265,811    
$
    $ 10,016    
$
(54
)
 
 
$
(28,445
)
 
 
$
(18,483  
$
999    
$
(17,484
)
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Share-based compensation expense
   
  
     
  
     
  
     
  
      375      
  
     
  
      375      
  
      375  
Beneficial
 
conversion
 
feature
 
on
 
issuance
of convertible notes
   
  
     
  
     
  
     
  
      2,439      
  
     
  
      2,439      
  
      2,439  
Net Loss
   
  
     
  
     
  
     
  
     
  
     
  
      (2,514
    (2,514    
  
      (2,514
)
 
Comprehensive Income
   
  
     
  
     
  
     
  
     
  
      1       —         1      
  
      1  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance, June 30, 2020
    5,500,000    
$
55,000       10,265,811    
$
   
$
12,830    
$
(53
)
 
 
$
(30,959
)
 
 
$
(18,182
)
 
  $ 999    
$
(17,183
)
 
Share-based compensation expense
   
  
     
  
     
  
     
  
      383      
  
     
  
      383      
  
      383  
Warrants issued in license
 
agreement
   
  
     
  
     
  
     
  
     
  
     
  
     
  
     
  
      33,774       33,774  
Net Loss
   
  
     
  
     
  
     
  
     
  
     
  
      (120,238     (120,238
)
 
   
  
      (120,238
Comprehensive Loss
   
  
     
  
     
  
     
  
      —         (3
)
 
   
  
      (3
)
 
   
  
      (3
)
 
Balance, September 30, 2020
    5,500,000    
$
55,000       10,265,811    
$
   
$
13,213    
$
(56
)
 
 
$
(151,197
)
 
 
$
(138,040
 
$
34,773    
$
(103,267
)
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
See accompanying notes to the consolidated financial statements
 
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Table of Contents
 
LianBio
Consolidated Statements of Cash Flows
(In thousands)
 
 
  
Nine Months
Ended
September 30,
2021
 
 
Nine Months
Ended
September 30,
2020
 
Net loss
   $ (175,105   $ (126,866
Adjustments to reconcile net loss to net cash used in operating activities:
                
Non-cash
share
consideration, issued in acquisition of IPR&D
     9,415       33,774  
Amortization of beneficial conversion feature
              619  
Non-cash
operating lease expense
 (benefit)
     (76     108  
Depreciation expense
     278       30  
Share based compensation expense
     5,285       2,258  
Unrealized foreign currency transaction (gain), net
     (56     (142
Changes in operating assets and liabilities:
                
Increase in prepaid expenses and other current assets
     (3,801     (1,251
Decrease in other receivable
     14,216           
Decrease (increase) in other
non-current
assets
     2       (7
(Decrease) increase in accounts payable
     (2,690     400  
Increase in accrued expenses
     11,568       3,409  
Increase in
amount due
related to the MyoKardia license
              33,281  
Increase (decrease) in other current liabilities
     1,434       (41
Increase in withholding tax payable
     5,957           
In
crease in related party payable
              5,155  
    
 
 
   
 
 
 
Net cash used in operating activities
     (133,573     (49,273
Cash flows from investing activities:
                
Purchase of property and equipment
     (159     (335
    
 
 
   
 
 
 
Net cash used for investing activities
     (159     (335
Cash flows from financing activities:
                
Proceeds from exercise of
share
options
     5,309           
Proceeds from issuance of redeemable convertible preferred shares
     3,000           
Issuance costs related to redeemable convertible preferred shares
     (60         
Issuance of convertible notes
              15,000  
Debt issuance costs related to convertible notes
              (36
    
 
 
   
 
 
 
Net cash provided by financing activities
     8,249       14,964  
Effect of exchange rate changes on cash and cash equivalents
     148       (75
Net decrease in cash, cash equivalents and restricted cash
   $ (125,335   $ (34,719
Cash and cash equivalents, and restricted cash
beginning of period
     254,350     $ 43,300  
    
 
 
   
 
 
 
Cash and cash equivalents, and restricted cash
ending of period
   $ 129,015     $ 8,581  
    
 
 
   
 
 
 
Cash and cash equivalents
end of period
   $ 109,015     $ 8,581  
Restricted cash
end of period
   $ 20,000     $     
    
 
 
   
 
 
 
Cash and cash equivalents, and restricted cash
ending of period
   $ 129,015     $ 8,581  
    
 
 
   
 
 
 
Supplemental disclosure of
non-cash
financing and investing activities:
                
Right-of-use
assets obtained in exchange for lease obligations
   $ 247     $ 1,331  
Issuance costs in accounts payable and other accrued liabilities
     3,310       305  
Beneficial conversion feature related to convertible notes
              2,439  
See accompanying notes to the consolidated financial statements
 
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Table of Contents
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Thousands, Except Share and per Share Data)
(Unaudited)
1. Nature of Business
LianBio (“LianBio” or the “Company”) is a global, science-driven biopharmaceutical company dedicated to developing and commercializing innovative medicines for patients with unmet medical needs, with an initial focus on
in-licensing
assets for Greater China and other Asian markets.
The Company was incorporated in the Cayman Islands in July 2019 and maintains its Chinese headquarters in Shanghai, China. The Company conducts its corporate activities at its United States headquarters located in Princeton, New Jersey.
On November 3, 2021, the Company completed its initial public offering (“IPO”) through an underwritten sale of 20,312,500 ADSs representing 20,312,500 ordinary shares at a price of $16.00 per share. Following the close of the IPO, on December 1, 2021, the underwriters exercised their option to purchase an additional 593,616 ADSs at the initial public offering price of $16.00 per ADS. The Company received gross proceeds of $334.5 million in connection with the IPO and subsequent exercise of the underwriters’ options and aggregate net proceeds of $311.1 
million after deducting underwriting discounts and commissions. 
Concurrent with the IPO, all of the Company’s convertible preferred shares
then-
outstanding (see Note 9) were automatically converted into an aggregate of 64,467,177 ordinary shares and were reclassified into permanent equity. Following the IPO, there were no preferred shares outstanding.
2. Significant Accounting Policies
(A) Basis of presentation
The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, which include the People’s Republic of China (“PRC”) registered entities directly owned by the Company. All intercompany accounts and transactions have been eliminated in consolidation.
The interim balance sheet as of September 30, 2021, and the interim consolidated statements of operations and comprehensive loss, changes in redeemable convertible preferred shares and shareholders’ deficit for the three and nine months ended September 30, 2021 and 2020, and the cash flows for the nine months ended September 30, 2021 and 2020 are unaudited. These unaudited interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, which consist of only normal recurring adjustments, necessary for the fair statement of the Company’s financial information. The financial data and other information disclosed in these notes related to the three- and nine-month periods are also unaudited. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods or any future year or period.
(B) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported financial position at the date of the financial statements and the reported results of operations during the reporting period. Such estimates and assumptions affect the reported amounts of assets, liabilities, and expenses, and disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The only material estimates in the accompanying financial statements are the fair value of warrants, share-based compensation, and share options. Actual results could differ from those used in evaluating these accounting estimates.
 
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Table of Contents
(i) Concentration of Credit Risk and Other Risks and Uncertainties
In March 2020, the World Health Organization declared the global novel coronavirus disease 2019
(“COVID-19”)
outbreak a pandemic. The Company’s operations have not been significantly impacted by the
COVID-19
pandemic. However, the Company cannot at this time predict the specific extent, duration, or full impact that the
COVID-19
pandemic will have on its financial condition and operations, including planned clinical trials. The impact of the
COVID-19
pandemic on the Company’s financial performance will depend on future developments, including the duration and spread of the pandemic and related governmental advisories and restrictions. These developments and the impact of the
COVID-19
pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy continue to be impacted for an extended period, the Company’s results may be materially adversely affected.
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents in deposits at financial institutions that exceed federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to material credit risk due to the financial position of the banking institutions. The Company has no
off-balance
sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.
The Company’s results of operations involve numerous risks and uncertainties. Factors that could affect the Company’s operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials, uncertainty of regulatory approval of the Company’s potential product candidates, uncertainty of market acceptance of its product candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals and sole source suppliers.
Each of the Company’s product candidates require approvals from the National Medical Products Administration (“NMPA”) in China and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company is denied approval, approval is delayed or the Company is unable to maintain approval for any product candidate,
such events
could have a materially adverse impact on the Company’s business.
(ii) Liquidity
The Company has incurred operating losses since inception and had an accumulated deficit of $339.0 million as of September 30, 2021 and $163.9 million as of December 31, 2020. The Company’s cash and cash equivalents were $109.0 million and $254.4 million as of September 30,
202
1
 and December 31, 202
0
, respectively. The Company has financed its operations to date primarily through equity capital raises.
The Company believes that existing capital resources, including the net proceeds from the IPO in November 2021, will be sufficient to meet projected operating requirements for at least 12 months from the date of issuance of the accompanying consolidated financial statements, though it expects to continue to incur operating losses and negative operating cash flows. The Company will be required to raise additional capital to fund future operations, however, no assurance can be given as to whether additional needed financing will be available on terms acceptable to the Company, if at all. If sufficient funds on acceptable terms are not available when needed, the Company may be required to curtail planned activities to preserve cash resources. These factors may adversely impact the Company’s ability to achieve its business objectives and would likely have an adverse effect on its future business prospects, or even its ability to remain a going concern.
 
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Table of Contents
(C) Net loss per share
Basic net loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. Diluted net loss per share excludes the potential impact of convertible preferred shares and unexercised warrants, because their effect would be anti-dilutive due to the Company’s net loss. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per ordinary share are the same.
(D) Segment Information
Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company operates and manages its business as one reportable and operating segment, which is the business of license acquisitions, regulatory approvals, clinical trials, and commercial activity related to the current portfolio of
in-licensed
products. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating resources and evaluating financial performance.
(E) Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to not avail itself of this exemption and, as a result, will adopt new or revised accounting standards on the relevant effective dates on which adoption of such standards is required for other public companies that are not emerging growth companies.
(F) Fair Value of Financial Instruments
FASB guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
 
 
a.
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.
 
 
b.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 2 includes financial instruments that are valued using models or other valuation methodologies. The Company had no Level 2 assets or liabilities as of September 30, 2021 and December 31, 2020.
 
 
c.
Level 3 – Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when the fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable. The Company had no Level 3 assets or liabilities as of September 30, 2021 and December 31, 2020.
 
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Table of Contents
 
(G) Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents are carried at cost which approximates fair value due to their short-term nature. The Company maintains cash balances at both U.S.-based and foreign- based commercial banks.
Amounts included in restricted cash represent those required to be set aside by a contractual agreement with Pfizer, Inc. (“Pfizer”), and will remain restricted until such time as the upfront payment is utilized for specified
in-licensing
and
co-development
activities or until the agreement terminates.
A summary of cash, cash equivalents and restricted cash is as follows:
 
 
  
September 30,
2021
 
  
December 31,
2020
 
Cash and cash equivalents
   $ 109,015      $ 254,350  
Restricted cash,
non-current
     20,000            
    
 
 
    
 
 
 
Total cash, cash equivalents and restricted cash shown in the statement of cash flows
   $ 129,015      $ 254,350  
    
 
 
    
 
 
 
(H) Property and Equipment
Property and equipment are stated at cost net of accumulated depreciation, which is computed by the straight-line method based on the estimated useful lives of the respective assets, as discussed below. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the leased assets. Maintenance and repair costs are charged to expense as incurred, and expenditures for major renewals and improvements are capitalized. The Company assesses the net book value of its property and equipment for impairment at least annually or when events or circumstances indicate that the carrying amounts may not be recoverable in the ordinary course of its business.
(I) Foreign Currency
The functional currencies of the Company’s foreign subsidiaries primarily are the local currencies of the country in which the subsidiary operates. The Company’s asset and liability accounts are translated using the current exchange rate as of the balance sheet date. Shareholders’ deficit accounts are translated using historical rates at the balance sheet date. Revenue and expense accounts are translated using a weighted average exchange rate over the period ended on the balance sheet date. Adjustments resulting from the translation of the financial statements of the Company’s foreign subsidiaries into U.S. dollars are accumulated as a separate component of shareholders’ deficit within accumulated other comprehensive
income (
loss
).
(J) Research and Development
Costs incurred for research and development are expensed as incurred. Included in research and development expense are personnel related costs, expenditures for laboratory equipment and consumables, payments made pursuant to licensing and acquisition agreements related to
in-process
research and development (“IPR&D”), and the cost of conducting clinical trials. Expenses incurred associated with conducting clinical trials include, but are not limited to, drug development trials and studies, drug manufacturing, laboratory supplies, external research, and payroll. Prepayments the Company makes for research and development services prior to services being rendered are recorded as prepaid expenses in the balance sheet and expensed as the services are provided.
(K) Acquisition of
In-Process
Research and Development
The Company has entered into agreements with third parties to acquire or license pharmaceutical product candidates for development. Such agreements generally require an initial payment by the Company when the contract is executed, and additional payments upon the achievement of certain milestones. Additionally, the Company may be obligated to make future royalty payments in the event the Company commercializes the pharmaceutical product candidate and achieves a certain sales volume. In accordance with FASB ASC Topic 730,
 
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Table of Contents
“Research and Development,” expenditures for research and development, including upfront licensing fees and milestone payments associated with products that have not yet been approved by the NMPA, are charged to research and development expense as incurred as there is no alternative future use. Future contract milestone payments will be recognized as expense when achievement of the milestone is determined to be probable. Once a product candidate receives regulatory approval, subsequent license payments are recorded as an intangible asset and will be amortized over its estimated useful life.
(L) Accruals for Research and Development Expense and Clinical Trials
As part of the process of preparing its financial statements, the Company is required to recognize its expense resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical site agreements in connection with conducting clinical trials. This process involves reviewing open contracts and purchase orders, communicating with the applicable personnel to identify services that have been performed on behalf of the Company and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual cost. The majority of service providers invoice the Company monthly in arrears for services performed. The Company records estimates of accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to the Company at that time. The Company’s clinical trials accruals are dependent on the timely and accurate reporting of contract research organization and other third-party vendors. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in it reporting amounts that are too high or too low for any particular period. The Company periodically confirms the accuracy of its estimates with the service providers and records adjustments if necessary.
(M) Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, the amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax basis of existing assets and liabilities. Deferred tax assets also include realizable tax losses
.
The deferred tax assets may be reduced by a valuation allowance, which is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In addition, management is required to evaluate all available evidence, both positive and negative, when making its judgment to determine whether to record a valuation allowance for a portion, or all, of its deferred tax assets. Deferred tax assets and liabilities are measured using enacted income tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rate is recognized in the period that includes the enactment date.
The Company accounts for uncertainty in income taxes using a
two-step
approach. The first step requires the Company to conclude that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by a tax authority. The second step requires the Company to measure the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon ultimate settlement with tax authority. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Further, the benefit to be recorded in the consolidated financial statements is the amount most likely to be realized assuming a review by the tax authorities having all relevant information and applying current conventions. The Company’s policy is to recognize interest and penalties related to income tax positions taken as a component of the provision for income taxes.
The Company does not anticipate any significant changes to its uncertain tax positions during the next 12 months. As of September 30, 2021, the Company was not aware of any anticipated audits by the IRS or any other state, local, or foreign taxing authorities for any other matters.
 
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Table of Contents
(N) Leases
In accordance with ASC 842, the Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, the Company determines the initial classification and measurement of its
right-of-use
asset and lease liability at the lease commencement date and thereafter if modified. The lease term includes any renewal options that the Company is reasonably assured to exercise. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term. The Company’s policy is to not record leases with an original term of 12 months or less on its consolidated balance sheets and recognizes those lease payments in the income statement on a straight-line basis over the lease term. The Company’s existing leases are for office space.
In addition to rent, leases may require the Company to pay additional costs, such as utilities, maintenance, and other operating costs, which are generally referred to as
non-lease
components. The Company has elected to not separate lease and
non-lease
components for its office leases. Only the fixed costs for lease components and their associated
non-lease
components are accounted for as a single lease component and recognized as a
right-of-use
asset and liability. Rent expense for operating leases is recognized on a straight-line basis over the lease term based on the total lease payments and is included in operating expense in the consolidated statements of operations and comprehensive loss.
(O) Share-Based Compensation
In June 2018, the FASB issued ASU
No. 2018-07,
Improvements to Nonemployee Shared-Based Payment Accounting (“ASU
2018-07”),
which supersedes ASC
505-50
and expands the scope of ASC 718 to include all share-based payments arrangements related to the acquisition of goods and services from both employees and
non-employees.
The Company adopted ASU
2018-07
upon the formation of the Company on July 17, 2019. After the adoption of ASU
2018-07,
the measurement date for
non-employee
awards is the date of grant. Share compensation for shares granted to
non-employees
is determined as the fair value of the equity instruments issued. Compensation expense for
non-employees
is recognized in the same manner as if the Company has paid cash for the goods or services and therefore will be recognized immediately.
ASC 718 requires companies to measure the cost of employee services incurred in exchange for the award of equity instruments based on the estimated fair value of share-based award on the grant date. The share compensation awards issued to employees are equity classified, and the related expense is recognized over the requisite service period. The Company recognizes share-based award forfeitures only as they occur rather than an estimate by applying a forfeiture rate in accordance with ASU
2016-09.
The Company uses a Black-Scholes option-pricing model to value the Company’s share option awards and the Monte Carlo simulation model to value the Company’s performance share awards. The performance share awards vest upon meeting certain market conditions and service conditions. The share option awards generally vest
pro-rata
annually. Using these option-pricing models, the fair value of each share option award and performance share award is estimated on the grant date. The fair value of the share options and performance share awards is expensed on a straight-line basis over the vesting period. The expected volatility assumption used in both models is based on the volatility of the share price of comparable public companies. The expected life used in both models is determined using the “simplified method.” The risk-free interest rate used in both models is based on the implied yield on a U.S. Treasury security at a constant maturity with a remaining term equal to the expected term of the option granted. The dividend yield used in both models is zero, as the Company has never declared a cash dividend.
(P) Deferred Offering Costs
Costs directly related to the Company’s IPO were deferred for expense recognition. These deferred offering costs are temporarily capitalized and consist of legal fees, accounting fees, and other applicable professional services. As of September 30, 2021 and December 31, 2020, $4.5 million and $1.1 million of these deferred offering costs are reported on the accompanying balance sheets within “prepaid expenses and other current assets.” With the completion of the Company’s IPO on November 3, 2021, these deferred offering costs were concurrently reclassified to additional paid in capital
.
 
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Table of Contents
 
(Q) Ordinary Share Split
On October 7, 2021, the Company’s board of directors approved a
5.8478-for-1
forward share split, which was approved by the Company’s shareholders on October 14, 2021. Effective as of October 14, 2021, the Company’s issued and outstanding ordinary shares were impacted by the forward share split. All share and per share data in the consolidated financial statements and notes thereto have been retrospectively revised to reflect the forward share split. Ordinary shares underlying outstanding share options and other equity instruments and the respective exercise prices, if applicable, were proportionately adjusted in accordance with the terms of the appropriate securities agreements. The respective conversion prices related to ordinary shares reserved for issuance upon the conversion of the Company’s convertible preferred shares were proportionately adjusted.
(R) Other Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU
No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU
2018-13”).
The amendments in ASU
2018-13
modify the disclosure requirements of fair value measurements. The Company adopted ASU
2018-13
effective January 1, 2020, and the adoption of this new standard did not have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU
No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU
2019-12”).
ASU
2019-12
enhances and simplifies multiple aspects of the income tax accounting guidance in ASC 740. The standard will be effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. The guidance is generally effective as of January 1, 2021, with early adoption permitted. The Company adopted ASU
2019-12
in the first quarter of 2021 and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU
2016-13, Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduces a new accounting model known as Credit Expected Credit Losses (“CECL”). CECL requires earlier recognition of credit losses on financial assets, while also providing additional transparency about credit risk. The Company adopted ASU
2016-13
in the third quarter of 2021 and applied the guidance prospectively. The adoption of this new standard did not have a material impact on the Company’s consolidated financial statements.
(S) Recently Issued Accounting Pronouncements Not Yet Adopted
The Company has evaluated recent accounting pronouncements through the date the financial statements were issued and filed with the SEC and believes that there are none that will have a material impact on the Company’s consolidated financial statements. 
 
 
18

 
3
. Material Agreements
License Agreement with QED Therapeutics, Inc.
I
n October 2019, the Company entered into a license agreement (the “QED License Agreement”) with QED Therapeutics, Inc. (“QED”), as amended September 2020, under which the Company obtained an exclusive license under certain patents and
know-how
(including patents and
know-how
that QED licensed from QED’s upstream licensor) to develop, manufacture, use, sell, import, and commercialize QED’s
ATP-competitive,
FGFR1-3
tyrosine kinase inhibitor, infigratinib, in pharmaceutical products in the licensed territory of Mainland China, Macau, Hong Kong, Taiwan, Thailand, Singapore and South Korea, in the licensed field of human prophylactic and
therapeutic uses in cancer indications. In September 2020, the Company entered into an amendment with QED to reduce the licensed territories to include Mainland China, Macau and Hong Kong. Under the QED License Agreement, QED 
received a nonrefundable upfront payment of $10.0 million and was granted warrants to purchase 100,000 ordinary shares in Lian Oncology, a subsidiary of LianBio, valued at $1.0 million. Pursuant to ASC
505-50,
as the fair value of the warrants were more reliably determinable than the fair value of the benefits received from the licensing agreement, the Company valued the warrants using the Black-Scholes Model. The warrants were issued in three tranches with the aggregate number of shares across all tranches equaling 10% of the fully diluted equity of Lian Oncology as of the issue date. Vesting of the warrant shares are linked to regulatory milestones and the warrants expire 10 years from the issue date. The amended and restated option agreement also provides QED with the option to choose to either convert the warrant (“Subsidiary Warrant”) into ordinary shares of the Company (“Parent Company Shares”) or a warrant to purchase a certain number of Parent Company Shares (“Parent Company Warrant”) immediately prior to an IPO of the Company. In the event QED chooses to convert the Subsidiary Warrant into Parent Company Shares, the number of Parent Company Shares QED is entitled to receive would be calculated as the aggregate fair market value of the ordinary shares of Lian Oncology that are under the Subsidiary Warrant, divided by the per share fair market value of the Parent Company Shares, on a fully diluted and
as-converted
basis and as of the date the Company sent QED the notice of the IPO. QED was entitled to choose to convert the Subsidiary Warrant into the Parent Company Warrant, the number of Parent Company Shares under the Parent Company Warrant QED was entitled to receive would have been calculated as the aggregate intrinsic value of the Subsidiary Warrant (the number of the ordinary shares of Lian Oncology under the Subsidiary Warrant multiplied by the difference between the strike price of the Subsidiary Warrant and the per share fair market value of Lian Oncology), divided by the per share intrinsic value of the Parent Company Warrant (the difference between the strike price of the Parent Company Warrant and the per share fair market value of Parent Company Shares), on a fully diluted and
as-converted
basis on the date of the warrant conversion. This conversion feature was not required to be bifurcated as it is clearly and closely related to the equity host instrument, pursuant to ASC 815. On October 18, 2021, based on the conversion feature, LianBio issued to QED a warrant to purchase 347,569 of its ordinary shares at an exercise price of $0.000017100448 per share and, concurrently with such issuance, the Subsidiary Warrant was deemed to be performed and settled in full and were irrevocably terminated. The QED License Agreement also required the Company to refund QED for costs incurred on the study through the execution date which was determined to be $2.8 million and was recorded as a related party payable as of December 31, 2019 on the consolidated balance sheet. Additionally, QED is entitled to receive from the Company development milestone payments of up to $45.0 million upon achievement of specified development milestones, and sales milestone payments of up to $87.5 million based on cumulative net sales of infigratinib, in addition to tiered royalties on net sales of licensed products at the greater of (a) percentage rates in the
low-
to
mid-teens
on the net sales of the licensed products, or (b) the applicable rate payable under QED’s agreement with its upstream licensor (capped in the
mid-teens).
License Agreement with MyoKardia
In August 2020, the Company entered into an exclusive license agreement (the “MyoKardia License Agreement”) with MyoKardia Inc. (“MyoKardia
,” now a wholly-owned subsidiary of Bristol-Myers Squibb
”), under which the Company obtained an exclusive license under certain patents and
know-how
of MyoKardia to develop, manufacture, use, sell, import and commercialize MyoKardia’s proprietary compound, mavacamten, in the licensed territory of Mainland China, Hong Kong, Macau, Taiwan, Thailand and Singapore, and in the licensed field of any indication in humans, which includes any prophylactic or therapeutic use in humans. Under the MyoKardia License Agreement, MyoKardia received a nonrefundable upfront payment of $40.0 million and was granted
a warrant
exercisable into
170,000 ordinary shares in Lian Cardiovascular, a subsidiary of LianBio, valued at $33.8 million. Pursuant to
ASC 505-50,
as the fair value of the warrants were more reliably determinable than the fair value of the benefits received from the licensing agreement, the Company valued the warrants using the Black-Scholes Model and the underlying assumptions are discussed in further detail in Note 9. The warrants, representing 17% of the fully diluted equity of Lian Cardiovascular, are exercisable by MyoKardia at any time after issuance. The amended and restated option agreement also provides MyoKardia with the option to choose to either convert the warrant (“Subsidiary Warrant”) into ordinary shares of the Company (“Parent Company Shares”) or a warrant to purchase a certain number of Parent Company Shares (“Parent Company Warrant”) immediately prior to an IPO of the Company. MyoKardia was entitled to choose to convert the Subsidiary Warrant into Parent Company Shares, the number of Parent Company Shares MyoKardia was entitled to receive would have been calculated as the aggregate
 
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fair market value of the ordinary shares of Lian Cardiovascular that are under the Subsidiary Warrant, divided by the per share fair market value of the Parent Company Shares, on a fully diluted and as-converted basis on the date the Company sent MyoKardia the notice of the IPO. 
MyoKardia was entitled to choose to convert the Subsidiary Warrant into the Parent Company Warrant, the number of Parent Company Shares under the Parent Company Warrant MyoKardia was entitled to receive would be calculated as the aggregate intrinsic value of the Subsidiary Warrant (the number of the ordinary shares of Lian Cardiovascular under the Subsidiary Warrant multiplied by the difference between the strike price of the Subsidiary Warrant and the per share fair market value of Lian Cardiovascular), divided by the per share intrinsic value of the Parent Company Warrant (the difference between the strike price of the Parent Company Warrant and the per share fair market value of Parent Company Shares), on a fully diluted and
as-converted
basis on the date of the warrant conversion. This conversion feature was not required to be bifurcated as it is clearly and closely related to the equity host instrument, pursuant to ASC 815. As of October 12, 2021, MyoKardia elected not to exercise this option and, therefore, continues to hold its warrant to purchase 170,000 ordinary shares in Lian Cardiovascular. MyoKardia’s option to convert the warrant irrevocably terminated upon the completion of the Company’s IPO. Additionally, MyoKardia was entitled to receive a nonrefundable financing milestone payment of $35.0 million upon a specified financing event, which occurred on October 29, 2020. The financing milestone was recorded at present value upon execution of the MyoKardia License Agreement, with total imputed interest of $2.3 million accreted under the effective interest method through the date the liability was settled. The financing milestone was paid to MyoKardia in December 2020 as a result of the Series A Preferred financing. Additionally, MyoKardia is entitled to receive from the Company development milestone payments of up to $60.0 million upon achievement of specified development milestones, and sales milestone payments of up to $87.5 million based on cumulative net sales of mavacamten, plus tiered royalties on net sales ranging from the low to upper-teens.
Navire License
In August 2020, pursuant to the BridgeBio exclusivity agreement, the Company entered into an exclusive license agreement with Navire Pharma, Inc. (“Navire”), a BridgeBio affiliate. Pursuant to the license agreement, Navire granted to the Company an exclusive, sublicensable license under certain patents and
know-how
of Navire to develop, manufacture, use, sell, import and commercialize Navire’s proprietary SHP2 inhibitor,
BBP-398
(formerly known as IACS-15509) in the licensed territory of Mainland China, Hong Kong, Macau, Taiwan, Thailand, Singapore, and South Korea. Under the license agreement, Navire received a nonrefundable upfront payment of $8.0 million. Additionally, Navire is entitled to receive from the Company development milestone payments of up to $24.5 million upon achievement of specified development milestones, and sales milestone payments of up to $357.6 million upon achievement of specified commercialization milestones, plus tiered royalties on net sales ranging from approximately
5-15%
on the net sales of the licensed products. As of September 30, 2021, the Company
 had
recorded and paid the first development milestone of $8.5 million for IND acceptance in the PRC.
Pfizer Strategic Collaboration
In November 2020, the Company entered into a strategic collaboration agreement (the “Pfizer Agreement”) with Pfizer Inc. (“Pfizer”), pursuant to which Pfizer will contribute up to $70.0 million of restricted,
non-dilutive
capital (the “Funds”), including a $20.0 million upfront payment, toward the Company’s
in-licensing
and
co-development
activities in Greater China. The Company has accounted for the Pfizer Agreement as a contract to perform research and development services for others under ASC
730-20
and the consideration received for performing these services will be recognized as
contra-R&D
in the consolidated statement of operations as the services are performed. Additionally, as the upfront payment of the $20.0 million was received subsequent to December 31, 2020, the Company recognized a receivable for this amount on the consolidated balance sheet as of December 31, 2020. Upon receipt in 2021, the upfront payment was recorded as restricted cash within consolidated balance sheet and will remain restricted until such time as the upfront payment is utilized for specified
in-licensing
and
co-development
activities or until the Pfizer Agreement terminates. Under the Pfizer Agreement, Pfizer and LianBio will form a joint collaboration committee to discuss potential third party
in-license
opportunities and development and commercialization of the Company’s products in Greater China. In the event the Company seeks to engage a third-party commercialization partner with respect to the commercialization of the Company’s future products in Greater China, Pfizer will have a right to opt into such product. Upon opting in, a portion of the Funds will be used to pay for development and commercialization costs of such product and Pfizer will thereafter have a right of first negotiation and right of last refusal to obtain the commercialization rights of such product in Greater China, in each instance for additional, separate financial consideration. During the collaboration, Pfizer may provide
in-kind
support to us for marketing, development, and regulatory activities.
 
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ReViral License
In March 2021, the Company entered into an exclusive license agreement (the “ReViral License Agreement”) with ReViral Ltd. (“ReViral”). Pursuant to the license agreement, ReViral granted to the Company an exclusive, sublicensable license under the licensed patent rights and
know-how
to develop, manufacture and commercialize novel antiviral therapeutics that target respiratory syncytial virus in Mainland China, Macau, Hong Kong, and Singapore. Under the license agreement, ReViral received a nonrefundable upfront payment of $14.0 million. Additionally, ReViral is entitled to receive payments from the Company totaling an aggregate of up to $105.0 million upon the achievement of specified development and commercial milestones, up to $45.0 million and $60.0 million, respectively, plus tiered royalties on net sales ranging from ten to the
low-teens.
Tarsus License
In March 2021, the Company entered into an exclusive license agreement (the “Tarsus License Agreement”) with Tarsus Pharmaceuticals, Inc. (“Tarsus”). Pursuant to the license agreement, Tarsus granted to the Company an exclusive, sublicensable license under the licensed patent rights and
know-how
to develop, manufacture and commercialize
TP-03
for the treatment of patients with Demodex Blepharitis (“DB”) and Meibomian Gland Disease (“MGD”) in Mainland China, Macau, Hong Kong, and Taiwan. Under the license agreement, Tarsus received a nonrefundable upfront payment of $15.0 
million and was granted three warrants exercisable into
 125,000 ordinary shares in Lian Ophthalmology, a subsidiary of LianBio, valued at $9.4 million (the “Tarsus Warrants”). Pursuant to
ASC 505-50,
as the fair value of the warrants were more reliably determinable than the fair value of the benefits received from the licensing agreement, the Company valued the warrants using the Black-Scholes Model and the underlying assumptions are discussed in further detail in Note 9. The warrants were issued in three tranches with the aggregate number of shares across all tranches equaling 12.5% of the fully diluted equity of Lian Ophthalmology as of the issue date. Vesting of the warrant shares are linked to regulatory milestones and the warrants expire 10 years from the issu
e
 date. Pursuant to a related option agreement (the “Tarsus Option Agreement”), Tarsus also had the option to convert the warrants into ordinary shares of the Company (“Parent Company Shares”) or warrants to purchase a certain number of the Company’s ordinary shares (“Parent Company Warrants”) based on appreciation of the value in the Lian Ophthalmology since the inception of the Tarsus License Agreement. This conversion feature was not required to be bifurcated as it is clearly and closely related to the equity host instrument, pursuant to ASC 815. On October 18, 2021, Tarsus exercised its options to convert the Tarsus Warrants under the Tarsus Option Agreement. Accordingly, the Company subsequently issued to Tarsus 78,373 of its ordinary shares and two warrants to purchase an aggregate of 156,746 of its ordinary shares at an exercise price of $0.000017100448 per share. Following such issuances, the Tarsus Warrants were irrevocably terminated. Additionally, Tarsus is entitled to receive a nonrefundable second milestone payment of $10.0 million due and payable within forty-five days following the effective date. Additionally, Tarsus is entitled to receive payments from the Company totaling an aggregate of up to $175.0 million upon the achievement of specified development and commercial milestones, up to $75.0 million and $100.0 million, respectively, plus tiered royalties at percentage rates ranging from the
low-
to high-teens on net sales. During 2021, the Company was notified that Tarsus had dosed the first patient in the
Saturn-2
Clinical Trial and achievement of the primary endpoint of the
Saturn-1
Clinical Trial. The following milestones resulted in payments of $20.0 million being paid to Tarsus during the nine months ended September 30, 2021.
Landos License
In May 2021, the Company entered into an exclusive license agreement (the “Landos License Agreement”) with Landos Biopharma, Inc. (“Landos”). Pursuant to the license agreement, Landos granted to the Company an exclusive, sublicensable license under the licensed patent rights and
know-how
to develop, manufacture and commercialize novel,
gut-restricted
small molecule
BT-11
and
NX-13
for the treatment of inflammatory bowel disease, that targets the NLRX1 pathway in Mainland China, Hong Kong, Macau, Taiwan, Cambodia, Indonesia, Myanmar, Philippines, Singapore, South Korea, Thailand, and Vietnam. Under the license agreement, Landos received a nonrefundable upfront payment of $18.0 million. Additionally, Landos is entitled to receive payments from the Company totaling an aggregate of up to $200.0 million upon the achievement of specified development and commercial milestones, up to $95.0 million and $105.0 million, respectively, plus tiered royalties at percentage rates ranging from the
low-
to the
mid-teens
on net sales.
 
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Nanobiotix License
In May 2021, the Company entered into an exclusive license agreement (the “Nanobiotix License Agreement”) with Nanobiotix S.A. (“Nanobiotix”). Pursuant to the license agreement, Nanobiotix granted to the Company an exclusive, sublicensable license under the licensed patent rights and
know-how
to develop and commercialize NBTXR3, a potential
first-in-class
radioenhancer in Mainland China, Hong Kong, Taiwan, and Macau, South Korea, Singapore and Thailand. Under the license agreement, Nanobiotix received a nonrefundable upfront payment of $20.0 million. Additionally, Nanobiotix is entitled to receive payments from the Company totaling an aggregate of up to $220.0 million upon the achievement of specified development and commercial milestones, up to $65.0 million and $155.0 million, respectively, plus tiered royalties of
10-13%
of net sales.
Lyra License
In May 2021, the Company entered into an exclusive license agreement (the “Lyra License Agreement”) with Lyra Therapeutics, Inc. (“Lyra”). Pursuant to the license agreement, Lyra granted to the Company an exclusive, sublicensable license under the licensed patent rights and
know-how
to develop and commercialize
LYR-210,
an anti-inflammatory, intra-nasal drug matrix in late-stage development that is designed to treat chronic rhinosinusitis (“CRS”) in Mainland China, Hong Kong, Taiwan, and Macau, South Korea, Singapore and Thailand. Under the license agreement, Lyra received a nonrefundable upfront payment of $12.0 million. Additionally, Lyra is entitled to receive payments from the Company totaling an aggregate of up to $135.0 million upon the achievement of specified development and commercial milestones, up to $40.0 million and $95.0 million, respectively, plus tiered royalties from the
low-
to high-teens on net sales.
4. Property and Equipment, Net
Property and equipment consisted of the following:
 
 
  
September 30,
2021
 
  
December 31,
2020
 
Leasehold improvements
   $ 697      $ 693  
Furniture and fixtures
     7        7  
Computer equipment and software
     283        180  
Construction in progress
     70        18  
    
 
 
    
 
 
 
       1,057        898  
Accumulated depreciation
     (350      (76
    
 
 
    
 
 
 
Total property and equipment, net
   $ 707      $ 822  
    
 
 
    
 
 
 
Total depreciation related to property and equipment for the three and nine months
ended
September 30, 2021 and 2020 was $134.0 thousand, $271.0 thousand, $27.0 thousand, and $28.0 thousand, respectively.
5. Prepaid Expense and Other Current Assets
Prepaid expense and other current assets consist of the following:
 
 
  
September 30,
2021
 
  
December 31,
2020
 
Advance payments to suppliers and rent deposit
   $ 816      $ 1,070  
Prepaid insurance
     99        74  
Deferred costs
     4,545        970  
VAT receivable
     621        261  
Other prepaid expenses
     123        21  
    
 
 
    
 
 
 
Total prepaid expenses and other current assets
   $ 6,204      $ 2,396  
    
 
 
    
 
 
 
 
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6. Accrued Expenses
Accrued expenses consist of the following:
 
 
  
September 30,
2021
 
  
December 31,
2020
 
Employee compensation and related benefits
   $ 2,705      $ 236  
Professional fees
     5,417        683  
Consulting and contracted research
     4,484        49  
Other
     24        30  
    
 
 
    
 
 
 
Total accrued expenses
   $ 12,630      $ 998  
    
 
 
    
 
 
 
7. Commitments and Contingencies
The Company is subject to claims and assessments from time to time in the ordinary course of business. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. As of September 30, 2021 and December 31, 2020, there have been no such matters identified. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within the range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The Company is not currently party to any material legal proceedings.
8. Share-Based Compensation
In December 2019, the Company adopted a shareholder-approved share-based compensation plan (the “2019 Plan”), which permits the granting of incentive share options, nonqualified share options, share awards and certain other awards to its employees, members of its Board of Directors, and consultants.
The stated maximum availability of ordinary shares under the 2019 Plan is 12.0 million shares. Through September 30, 2021, there were awards issued for 9.7 million ordinary shares under this plan.
In connection with the IPO, the Company adopted a shareholder-approved share-based compensation plan (the “2021 Equity Plan”), which permits the granting of incentive share options, nonqualified share options, share awards and certain other awards to its employees, members of its Board of Directors, and consultants. The stated maximum availability of ordinary shares under the 2021 Equity Plan is 14.2 million shares.
Share Option Awards
Share option grants provide the right to purchase a specified number of ordinary shares from the Company at a specified price during a specified period of time. The share option exercise price per share is the fair market value of the Company’s ordinary shares on the date of the grant of the share option. The share options generally have a vesting period of four years.
In January 2020, the Company issued options to purchase 2,999,920 ordinary shares to senior management at an exercise price of $1.71 per share. During December 2020, the Company issued options to purchase an aggregate of 5,374,114 ordinary shares to employees, senior management and
non-employee
directors at an exercise price of $6.49 per share.
During the nine months ended September 30, 2021, the Company issued 5,758,787 options to purchase ordinary shares to senior management at exercise prices ranging from $6.49 to $6.90.
 
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During the nine months ended September 30, 2020, the Company issued 2,999,920 options to purchase ordinary shares to senior management at an exercise price of $1.71.
A summary of share option activity is as follows:
 
    
Number of
Options
    
Weighted
Average
Exercise
Price
    
Average
Remaining
Contractual
Terms in
Years
    
Aggregate
Intrinsic
Value
 
Outstanding at December 31, 2020
     8,374,034      $ 4.78        9.62      $ 14,323  
Granted
     3,820,173      $ 6.84        —          —    
Exercised
     (1,309,907    $ 4.06        —          —    
Expired or forfeited
     (3,075,938    $ 5.97        —          —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Outstanding at September 30, 2021
     7,808,362      $ 5.44        9.14      $ 60,544  
Vested or expected to vest at September 30, 2021
     1,528,222      $ 2.33        8.38      $ 16,612  
Exercisable at September 30, 2021
     1,528,222      $ 2.33        8.38      $ 16,612  
As of September 30, 2021, $18.1 million of total unrecognized expense relates to
non-vested
share options is expected to be recognized over a weighted average period of 3.36 years from the date of grant. Options granted to senior management and employees generally vest in equal annual increments over four years.
Performance Share Awards
In May 2021, the Company granted certain option awards with both market-vesting conditions and service-vesting conditions to a member of management. The market condition is
based
on the Company’s enterprise value. Per the terms of the award, these options will vest in two equal tranches based on the following thresholds:
1. 25
% of the performance options shall vest upon the satisfaction of the Company achieving an enterprise value of not less than $2.0 billion at any time after the grant date in accordance with the service condition described below.
2. 25% of the performance options shall vest upon the satisfaction of the Company achieving an enterprise value of not less than $4.0 billion at any time after the grant date in accordance with the service condition described below.
The enterprise value shall be equal to the number of outstanding ordinary shares of the Company multiplied by the volume weighted average price of a single ordinary share averaged over a period of thirty days ending one day prior to the date of the valuation.
Subject to the market conditions described above, the option contains explicit service vesting conditions, with
one-fourth
vesting each year over four years.
A summary of the activity associated with these awards is as follows:
 
    
Number of
Options
    
Weighted
Average
Exercise
Price
    
Average
Remaining
Term of
Options
(Years)
    
Aggregate
Intrinsic
Value
 
Outstanding at January 1, 2021
                         —          —    
Granted
     1,938,615      $ 6.90        9.88        —    
Vested
                                   
Exercised
     —          —          —          —    
Expired of forfeited
     —          —          —          —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Outstanding at September 30, 2021
     1,938,615      $ 6.90        9.88        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Non-vested
share units as of September 30, 2021
     1,938,615      $ 6.90        9.88        —    
 
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The Company used a Monte-Carlo simulation to determine the grant date fair value for these awards, which takes into consideration the possible outcomes pertaining to the enterprise value market condition. The assumptions used in the Monte-Carlo simulation for the performance share units along with the weighted-average grant date fair value for awards granted in the periods presented are as follows:
 
Expected volatility
   47.07%—80.64%
Dividend Yield
   0%
Risk-free interest rate
   0.81%—1.63%
Expected term, in years
   4.8710.00
    
 
Weighted average grant date fair value per share
   $4.72
As of September 30, 2021, there was $8.3 million of total unrecognized of compensation cost related to the performance share units.
9. Equity
Ordinary Shares
As of September 30, 2021, the Company was authorized to issue up to 2,923,900,005 shares, of which 2,859,432,812 were authorized as ordinary shares with a par value of $0.000017100448, 5,500,000 were authorized Series Seed Preferred Shares with a par value of $0.0001, and 5,524,178 were authorized Series A Preferred Shares with a par value of $0.0001.
As of December 31, 2020, the Company was authorized to issue up to 2,923,900,005 shares, of which 2,859,742,435 were authorized as ordinary shares with a par value of $0.000017100448, 5,500,000 were authorized Series Seed Preferred Shares with a par value of $0.0001, and 5,471,231 were authorized Series A Preferred Shares with a par value of $0.0001.
Preferred Shares
The authorized, issued and outstanding shares, issue price, conversion price, liquidation preference and carrying value of the Company’s redeemable convertible preferred shares as of the dates indicated were as follows (in thousands, except for share and per share data):
 
 
  
September 30, 2021
 
 
  
Shares
Authorized
 
  
Shares
Issued and
Outstanding
 
  
Issue
Price
 
  
Per Share
Conversion
Price
 
  
Liquidation
Preference
 
  
Carrying
Value
 
Series Seed
     5,500,000        5,500,000      $ 10.00      $ 1.72      $ 55,000      $ 55,000  
Series A
     5,524,178        5,524,178      $ 56.66      $ 9.69        297,729        297,729  
                                        
 
 
    
 
 
 
                                         $ 352,729      $ 352,729  
                                        
 
 
    
 
 
 
 
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December 31, 2020
 
 
  
Shares
Authorized
 
  
Shares
Issued and
Outstanding
 
  
Issue
Price
 
  
Per Share
Conversion
Price
 
  
Liquidation
Preference
 
  
Carrying
Value
 
Series Seed
  
 
5,500,000
 
  
 
5,500,000
 
  
$
10.00
 
  
$
1.72
 
  
$
55,000
 
  
$
55,000
 
Series A
  
 
5,471,231
 
  
 
5,471,231
 
  
$
56.66
 
  
$
9.69
 
  
 
294,789
 
  
 
294,789
 
 
  
     
  
     
  
     
  
     
  
 
 
 
  
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
$349,789
 
  
$349,789
 
 
  
     
  
     
  
     
  
     
  
 
 
 
  
 
 
 
The Company’s redeemable convertible preferred shares are not liability classified as they do not embody an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified date or an event certain to occur. Due to the conversion at the option of the holder and redemption upon an occurrence that is not solely within the Company’s control, the Company classified the redeemable convertible preferred shares in mezzanine equity rather than as a component of shareholders’ deficit.
The characteristics of the redeemable convertible preferred shares are as follows:
Voting
The holders of the redeemable convertible preferred shares have one vote for each ordinary share into which the shares of redeemable convertible shares may be converted, subject to certain limitations.
Dividends
<