SEC Filing - Rani Therapeutics, LLC

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐	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: 001-40672

RANI THERAPEUTICS HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	86-3114789
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2051 Ringwood Avenue San Jose, California	95131
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (408) 457-3700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

RANI

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 12, 2021, the registrant had 19,711,874 shares of Class A common stock, $0.0001 par value per share, outstanding, and 29,290,391 shares of Class B common stock, $0.0001 par value per share, outstanding and no shares of Class C common stock, $0.0001 par value per share, outstanding. Certain holders of units of our consolidated subsidiary, Rani Therapeutics, LLC who do not hold shares of our Class B common stock can exchange their units for 1,545,811 shares of our Class A common stock.

Table of Contents


		Page

	Special Note Regarding Forward-Looking Statements	3
PART I.	FINANCIAL INFORMATION

	RANI THERAPEUTICS HOLDINGS, INC.
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity / Convertible Preferred Units and Members' Deficit	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

PART II.	OTHER INFORMATION	40

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	95
Item 3.	Defaults Upon Senior Securities	96
Item 4.	Mine Safety Disclosures	96
Item 5.	Other Information	96
Item 6.	Exhibits	97
Signatures		98

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and consolidated financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, manufacturing costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and 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.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” “seek,” “aim,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:


	•		the progress and focus of our current and future clinical trials in the United States and abroad, and the reporting of data from those trials;


	•		our ability to advance product candidates into and successfully complete clinical trials;


	•		the beneficial characteristics, safety, efficacy, and therapeutic effects of our product candidates;


	•		our potential and ability to successfully manufacture and supply our product candidates for clinical trials and for commercial use, if approved;


	•		our ability to redesign and conduct additional preclinical and clinical studies of any future design of the RaniPill capsule to accommodate target payloads that are larger than the current capacity of the RaniPill capsule;


	•		our ability to further develop and expand our platform technology;


	•		our ability to utilize our technology platform to generate and advance additional product candidates;


	•		the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;


	•		our financial performance;


	•		our plans relating to commercializing our product candidates, if approved;


	•		our ability to selectively enter into strategic partnership and the expected potential benefits thereof;


	•		the implementation of our strategic plans for our business and product candidates;


	•		our ability to continue to scale and optimize our manufacturing processes by expanding our use of automation;


	•		our estimates of the number of patients in the United States who suffer from the indications we target and the number of patients that will enroll in our clinical trials;


	•		the size of the market opportunity for our product candidates in each of the indications we target;


	•		our ability to continue to innovate and expand our intellectual property by developing novel formulations and new applications of the RaniPill capsule;


	•		our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available;


	•		the scope of protection we are able to establish and maintain for intellectual property rights, including our technology platform and product candidates;


	•		the sufficiency of our existing cash and cash equivalents to fund our future operating expenses and capital expenditure requirements;


	•		our expectations regarding the impact of the COVID-19 pandemic on our business;


	•		developments relating to our competitors and our industry, including competing product candidates and therapies; and


	•		our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations, and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, or otherwise.

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 you are cautioned not to unduly rely upon these statements.

RANI THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)


	September 30,			December 31,
	2021			2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	129,743		$	73,058
Related party note receivable		—			1,720
Prepaid expenses		2,622			167
Total current assets		132,365			74,945
Property and equipment, net		4,593			4,470
Total assets	$	136,958		$	79,415
Liabilities, Convertible Preferred Units and Stockholders' Equity / Members’ Deficit
Current liabilities:
Accounts payable	$	1,311		$	537
Related party payable		290			145
Accrued expenses		3,649			550
Deferred revenue		—			2,717
Current portion of long-term debt		—			1,359
Total current liabilities		5,250			5,308
Preferred unit warrant liability		—			320
Long-term debt, less current portion		—			2,412
Total liabilities		5,250			8,040
Commitments and contingencies (Note 10)
Convertible preferred units		—			184,714
Stockholders' equity / members’ deficit:
Common units		—			664
Preferred stock, $0.0001 par value - 20,000 shares authorized; none issued and outstanding as of September 30, 2021		—			—
Class A common stock, $0.0001 par value - 800,000 shares authorized; 19,712 issued and outstanding as of September 30, 2021		2			—
Class B common stock, $0.0001 par value - 40,000 shares authorized; 29,290 issued and outstanding as of September 30, 2021		3			—
Class C common stock, $0.0001 par value - 20,000 shares authorized; none issued and outstanding as of September 30, 2021		—			—
Additional paid-in capital		54,503			—
Accumulated deficit		(3,142	)		(114,003	)
Total stockholders' equity attributable to Rani Therapeutics Holdings, Inc. / (members' deficit)		51,366			(113,339	)
Non-controlling interest		80,342			—
Total stockholders' equity / (members' deficit)		131,708			(113,339	)
Total liabilities, convertible preferred units and stockholders' equity / (members' deficit)	$	136,958		$	79,415

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

RANI THERAPEUTICS HOLDINGS, INC.

CONDENSED Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Contract revenue	$	—		$	108		$	2,717		$	252
Operating expenses
Research and development		11,959			2,090			19,065			8,708
General and administrative		15,822			845			21,889			3,144
Total operating expenses	$	27,781		$	2,935		$	40,954		$	11,852
Loss from operations		(27,781	)		(2,827	)		(38,237	)		(11,600	)
Other income (expense), net
Interest income		13			13			73			87
Loss on extinguishment of debt		(700	)		—			(700	)		—
Interest expense and other, net		(110	)		(64	)		(467	)		(66	)
Change in estimated fair value of preferred unit warrant		(85	)		—			(371	)		655
Loss before income taxes		(28,663	)		(2,878	)		(39,702	)		(10,924	)
Income tax expense		(37	)		(5	)		(81	)		(23	)
Net loss and comprehensive loss	$	(28,700	)	$	(2,883	)	$	(39,783	)	$	(10,947	)
Net loss attributable to non-controlling interest		(25,558	)		(2,883	)		(36,641	)		(10,947	)
Net loss attributable to Rani Therapeutics Holdings, Inc.	$	(3,142	)	$	—		$	(3,142	)	$	—
Net loss per Class A common share attributable to Rani Therapeutics Holdings, Inc., basic and diluted	$	(0.16	)				$	(0.16	)
Weighted-average Class A common shares outstanding—basic and diluted		19,437						19,437

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

RANI THERAPEUTICS HOLDINGS, INC.

CONDENSED Consolidated Statements of Changes in STOCKHOLDERS’ Equity/CONVERTIBLE PREFERRED UNITS AND MEMBERS' Deficit

(in thousands)

(Unaudited)


							Class A Common Stock					Class B Common Stock
For the Nine Months Ended September 30, 2021	Convertible Preferred Units			Members’ Deficit			Shares			Amount		Shares		Amount		Additional Paid In Capital			Accumulated Deficit			Non-Controlling Interest			Total Stockholders' Equity/Members' (Deficit)
Activity prior to initial public offering ("IPO") and related Organizational Transactions
Balance at December 31, 2020	$	184,714		$	(113,339	)		—		$	—		—	$	—	$	—		$	—		$	—		$	(113,339	)
Issuance of Series E preferred units		6,320			—			—			—		—		—		—			—			—			—
Exercise of warrant for common units		—			13			—			—		—		—		—			—			—			13
Equity-based compensation from secondary sales transactions		—			453			—			—		—		—		—			—			—			453
Net loss		—			(5,598	)		—			—		—		—		—			—			—			(5,598	)
Balance at March 31, 2021	$	191,034		$	(118,471	)		—		$	—		—	$	—	$	—		$	—		$	—		$	(118,471	)
Equity-based compensation		—			282			—			—		—		—		—			—			—			282
Net loss		—			(5,485	)		—			—		—		—		—			—			—			(5,485	)
Balance at June 30, 2021	$	191,034		$	(123,674	)		—		$	—		—	$	—	$	—		$	—		$	—		$	(123,674	)
Equity-based compensation		—			17,042			—			—		—		—		—			—			—			17,042
Exercise of warrant for common units		—			13			—			—		—		—		—			—			—			13
Settlement of preferred unit warrant liability		691			—			—			—		—		—		—			—			—			—
Net loss		—			(20,644	)		—			—		—		—		—			—			—			(20,644	)
Effects of the IPO and related Organizational Transactions
Effects of Organizational Transactions		(191,725	)		127,263			12,048			1		29,290		3		18,106			—			46,352			191,725
Issuance of Class A common stock in connection with the IPO, net of issuance costs of $10,686		—			—			7,667			1		—		—		73,647			—			—			73,648
Non-controlling interest adjustment for purchase of newly issued Class A units of Rani LLC with proceeds from the IPO		—			—			—			—		—		—		(37,895	)		—			37,895			—
Net loss		—			—			—			—		—		—		—			(149	)		(233	)		(382	)
Activity subsequent to the IPO and related Organizational Transactions
Equity-based compensation		—			—			—			—		—		—		646			—			1,010			1,656
Forfeiture of restricted stock awards		—			—			(3	)		—		—		—		(1	)		—			(1	)		(2	)
Net loss		—			—			—			—		—		—		—			(2,993	)		(4,681	)		(7,674	)
Balance at September 30, 2021	$	—		$	—			19,712		$	2		29,290	$	3	$	54,503		$	(3,142	)	$	80,342		$	131,708


	Convertible Preferred				Common
For the Nine Months Ended September 30, 2020	Units		Amount		Units		Amount		Accumulated Deficit			Total Members’ Deficit
Balance at December 31, 2019		17,085	$	115,505		46,890	$	664	$	(97,300	)	$	(96,636	)
Net loss		—		—		—		—		(5,350	)		(5,350	)
Balance at March 31, 2020		17,085	$	115,505		46,890	$	664	$	(102,650	)	$	(101,986	)
Net loss		—		—		—		—		(2,714	)		(2,714	)
Balance at June 30, 2020		17,085	$	115,505		46,890	$	664	$	(105,364	)	$	(104,700	)
Net loss		—