RLYB US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. See “Cautionary Note Regarding Forward-Looking Statements.”

Our Business

We are a clinical-stage biotechnology company committed to identifying and accelerating the development of life-transforming therapies for patients with severe and rare diseases. Since our launch in January 2018, we have built a portfolio of promising product candidates, which are now in development to address rare diseases in the areas of maternal fetal blood disorders, complement dysregulation, hematology, and metabolic disorders. We have assembled a team of experienced biopharma industry leaders with extensive research, development, and rare disease expertise to deliver on our mission of becoming a leader in the development of therapies for patients with rare diseases. We are drawing on our decades of knowledge and experience with a determination to tackle the undone, the too difficult, the inaccessible – and change the odds for rare disease patients.

Maternal Fetal Blood Disorders

RLYB212 is a monoclonal anti-HPA-1a antibody for the prevention of FNAIT, a potentially life-threatening rare hematological disease that impacts fetuses and newborns. We are currently conducting multiple clinical trials as part of the development program for RLYB212.

We have received approval for two CTAs for RLYB212 in Germany; the first for a Phase 1 first-in-human trial and the second for a Phase 1b proof of concept trial. In January 2022, we announced that the first subjects were dosed in the Phase 1 study. This ongoing single-blind, placebo-controlled Phase 1 study is designed to evaluate the safety and PK of single and repeat subcutaneous doses of RLYB212 in HPA-1a negative healthy subjects. In the second quarter of 2022, we initiated the Phase 1b proof-of-concept study to evaluate the ability of subcutaneous RLYB212 to rapidly eliminate transfused HPA-1a positive platelets from the circulation of HPA-1a negative healthy subjects. In the third quarter of 2022 we announced preliminary results from the proof-of-concept study, demonstrating RLYB212 rapidly and completely eliminates HPA-1a positive platelets with a greater than 90% reduction of the mean platelet elimination half-life compared to placebo, consistent with proof-of-concept criteria. We also announced that dosing had commenced under an amended protocol that expanded the dose range of RLYB212, thereby providing a broader range of PK and PD data.

In the first quarter of 2023, we announced proof-of-concept in a Phase 1b study for RLYB212. Results showed that one week after a single subcutaneous dose, RLYB212 was able to rapidly and completely eliminate transfused, HPA-1a positive platelets in HPA-1a negative subjects with additional findings from the study that show a reduction in mean platelet elimination half-life was greater than 90% in both RLYB212 dose groups compared to placebo and was dose related. We believe that the broad range of PK and PD data in the Phase 1b study will allow for substantive modeling to inform dose selection for a future registrational study.

In the first quarter of 2023, we also initiated the multi-dose cohort of its single-center Phase 1 trial in Europe. This portion of the Phase 1 study will evaluate safety and PK of RLYB212 based on repeat dosing over 12 weeks in healthy male and female participants. The Company expects results from this cohort of subjects in the fourth quarter of 2023.

Additionally, we are conducting a FNAIT natural history alloimmunization study. This prospective, non-interventional, multinational natural history study is designed to screen up to 30,000 expectant mothers presenting at Gestation Week 10 to 14 prenatal visit to determine the frequency of women at higher FNAIT risk among expectant mothers of different racial and ethnic characteristics, as well as the frequency of HPA-1a alloimmunization and pregnancy outcomes among these women. Subject to discussion with regulatory authorities, we expect that data from this study will contribute to a control dataset for a future single-arm Phase

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2/3 registration trial for RLYB212. The FNAIT natural history study will operationalize de novo the laboratory test paradigm for FNAIT risk and generate FNAIT laboratory test performance data that we plan to use for future regulatory discussions. Screening of expectant mothers is ongoing.

Given the favorable development profile of RLYB212 to date, the data generated to date for RLYB212, and the expected manufacturing and supply efficiencies for RLYB212, RLYB211, a plasma-derived polyclonal anti-HPA-1a antibody, will not be advanced further in clinical development.

Complement Dysregulation

We are also focused on developing therapies that address diseases of complement dysregulation, including PNH, gMG, severe dermatologic indications, and ophthalmic disorders. RLYB116 is a novel, potentially long-acting, subcutaneously administered inhibitor of C5 in development for the treatment of patients with PNH and gMG. We received approval in the fourth quarter of 2021 for a HREC submission to support the Phase 1 trial of RLYB116 in healthy participants and in the first quarter of 2022, we initiated the Phase 1 trial in Australia. The single-blind, placebo-controlled dose escalation study is designed to evaluate the safety, PK, and PD of single dose RLYB116 in healthy volunteers. In November 2022, we announced positive topline results from our Phase 1 single ascending dose study of RLYB116. These data showed that all study participants that were administered a single 1 mL subcutaneous injection of 100 mg of RLYB116 (n=6) demonstrated a reduction in free C5 greater than 99% within 24 hours of dosing. The terminal elimination half-life of RLYB116 was greater than 300 hours. Subcutaneously administered RLYB116 was observed to be well-tolerated at the 100 mg dose, with mild adverse events and no drug-related serious adverse events reported. In the fourth quarter of 2022 we initiated dosing in the first multiple ascending dose cohort of a Phase 1 study of RLYB116 and initial data are expected in the fourth quarter of 2023.

RLYB114 is a pegylated C5 inhibitor in preclinical development for the treatment of complement-mediated. We continue to advance development of RLYB114, formulated for intravitreal injection, for the treatment of ophthalmic disorders.

Hematological Disorders

In May 2022, we obtained worldwide exclusive rights to Sanofi’s KY1066, now referred to as RLYB331, a preclinical antibody. We believe RLYB331 has the potential to address a significant unmet need for patients with severe anemias with ineffective erythropoiesis and iron overload, including beta thalassemia and a subset of lower risk myelodysplastic syndromes. Currently these patients are underserved by the existing standard of care. RLYB331 is a preclinical therapeutic monoclonal antibody that inhibits MTP-2. The inhibition of MTP-2 significantly increases levels of hepcidin, decreases iron load and treats ineffective erythropoiesis. We are continuing to conduct IND-enabling activities for RLYB331 to support transition of the asset into clinical development.

Metabolic Disorders

Additionally, in collaboration with Exscientia, we continue to work toward the selection of a small molecule development candidate to advance into the clinic targeting ENPP1 for the treatment of patients with HPP. Significant progress has been made to identify a lead compound and generate mouse in vivo biomarker evidence to support modulation of on-target activity. Through our collaboration with a leading global HPP expert, in vivo efficacy data is expected in the second half of 2023. Following those results, both companies expect to commence IND-enabling studies.

In December 2022, the Company entered into a strategic alliance with AbCellera to discover, develop, and commercialize novel antibody-based therapeutics for rare diseases. This multi-year, multi-target collaboration will combine AbCellera’s antibody discovery engine with Rallybio’s clinical and commercial expertise in rare diseases to identify optimal clinical candidates and ultimately deliver therapies to patients. The partnership’s first program will focus on addressing the significant unmet therapeutic needs of patients with rare metabolic diseases.

Recent Updates

In January 2023, Rallybio announced the appointment of Jonathan I. Lieber as CFO, effective February 1, 2023. Mr. Lieber succeeds Jeffrey Fryer, CPA, Rallybio’s Co-Founder and former CFO. The Company announced Mr. Fryer’s retirement in June 2022, and following a transition period with Mr. Lieber, Mr. Fryer departed the company on February 15, 2023. Mr. Lieber brings more than 30 years of experience as a CFO for public and private life sciences companies and an investment banker.

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Our Operations

Since inception, we have devoted substantially all of our resources to raising capital, organizing and staffing the Company, business planning, conducting discovery and research activities, acquiring or discovering product candidates, establishing and protecting our intellectual property portfolio, developing and progressing our product candidates, preparing for clinical trials and establishing arrangements with third parties for the manufacture of our product candidates and component materials, including activities relating to our preclinical development and manufacturing activities for each of our programs. We do not have any product candidates approved for sale and have not generated any revenue from product sales.

Since our inception, we have funded our operations primarily through equity financings. From our inception and prior to our initial public offering IPO, we received proceeds of approximately $182.5 million from equity financing. In August 2021, we closed our IPO and issued and sold 7,130,000 shares of common stock, inclusive of 930,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $13.00 per share. We received net proceeds of approximately $83.0 million, after deducting underwriting discounts and commissions and other offering costs.

In November 2022, we completed a follow-on offering of approximately $54.8 million pursuant to which we issued 5,803,655 shares of common stock, inclusive of 803,654 shares of common stock sold pursuant to the partial exercise of the underwriters' option to purchase additional shares at a price of $6.00 per share and to certain investors in lieu of common stock, pre-funded warrants to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price for the shares less the $0.0001 per share exercise price for each pre-funded warrant. The net proceeds from the November 2022 follow-on offering were approximately $50.8 million, after deducting underwriting discounts and commissions and other offering costs.

As of December 31, 2022, we had cash, cash equivalents and marketable securities of $169.0 million. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2025. This estimate and our expectation to advance the preclinical and clinical development of RLYB212, RLYB116, and any other product candidates are based on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect, or our clinical trials may be more expensive, time consuming or difficult to design or implement than we currently anticipate. See “—Liquidity and Capital Resources.”

We have incurred significant operating losses since inception, including net losses of $66.7 million and $47.0 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $160.7 million. These losses have resulted primarily from costs incurred in connection with research and development activities and general and administrative costs associated with our operations. We have not commercialized any products and have never generated revenue from the commercialization of any product. We expect to incur significant additional operating losses in the foreseeable future as we advance our programs through preclinical and clinical development, expand our research and development activities, acquire and develop new product candidates, complete preclinical studies and clinical trials, finance our business development strategy, seek regulatory approval for the commercialization of our product candidates and commercialize our products, if approved. Our expenses will increase substantially if and as we:

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advance our Phase 1 clinical trial for RLYB212, our product candidate for our FNAIT prevention program;

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advance our clinical trial for RLYB116, and file an IND or a CTA for other product candidates;

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advance our natural history alloimmunization study of FNAIT and other studies to support our development program and related regulatory submissions for RLYB212;

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seek regulatory approvals for RLYB212, RLYB116 and any other product candidates, as well as for any related companion diagnostic, if required;

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continue our discovery and development joint venture with Exscientia;

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continue our discovery and development collaboration with AbCellera;

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continue to discover and develop additional product candidates;

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hire additional clinical, scientific, and commercial personnel;

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add operational, financial, and management personnel, including personnel to support our product development and planned future commercialization efforts and to support our operations as a public company;

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acquire or in-license other product candidates or technologies;

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maintain, expand, and protect our intellectual property portfolio;

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secure a commercial manufacturing source and supply chain capacity sufficient to produce commercial quantities of any product candidate for which we obtain regulatory approval; and

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establish a sales, marketing and distribution infrastructure to commercialize our programs, if approved, and for any other product candidates for which we may obtain marketing approval.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Our inability to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to us, or at all.

Reorganization

Prior to the IPO and the Reorganization, the Company was a 100% owned subsidiary of Rallybio Holdings, a Delaware limited liability company which was incorporated in Delaware on March 22, 2018 and Rallybio Holdings held 100% of the outstanding membership units in five wholly-owned subsidiaries; Rallybio, LLC, Rallybio IPA, LLC, Rallybio IPB, LLC, Rallybio IPD, LLC, and IPC Research, LLC. On June 30, 2021, Rallybio Holdings completed a series of transactions pursuant to which (i) Rallybio IPD, LLC, a direct subsidiary of Rallybio Holdings that was formed in Delaware in May 2020, was converted from a Delaware limited liability company to a Delaware corporation and changed its name to Rallybio Corporation, and (ii) four direct subsidiaries of Rallybio Corporation, each a Delaware limited liability company (collectively the "Merger Subs"), each consummated a separate merger with one of Rallybio Holdings direct subsidiaries, other than Rallybio IPD, LLC (collectively the "Asset Subsidiaries"), with the Asset Subsidiaries surviving the mergers and Rallybio Holdings receiving common stock of the Company in exchange for its interest in each Asset Subsidiary, which resulted in the Asset Subsidiaries becoming subsidiaries of the Company and the Company becoming the only direct subsidiary of Rallybio Holdings. On July 28, 2021, immediately prior to the completion of the IPO, Rallybio Holdings liquidated and distributed 100% of the capital stock of the Company, consisting solely of common stock, to the unitholders of Rallybio Holdings. The liquidation of Rallybio Holdings and distribution of the capital stock of Rallybio Corporation to the unitholders of Rallybio Holdings is referred to as the “Liquidation” and these other transactions are collectively referred to as the “Reorganization.” As a result of the Reorganization and subsequent Liquidation, the unitholders of Rallybio Holdings became the holders of common stock of Rallybio Corporation, and the Company's consolidated financial statements are subsequently reported from Rallybio Corporation.

Impact of COVID-19

We continue to monitor the potential impact of the COVID-19 pandemic on our business and financial statements. To date, we have not incurred impairment losses in the carrying values of our assets as a result of the COVID-19 pandemic and we are not aware of any specific related event or circumstance that would require us to revise our estimates reflected in our financial statements. We are following, and plan to continue to follow, recommendations from federal, state and local governments regarding workplace policies, practices and procedures.

We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and prospects in the future. The extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, financial condition and liquidity, including our ability to obtain financing and planned and future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, including the availability, administration rates and duration of efficacy of vaccines and their effectiveness against the current or new variants of the virus, and the duration and intensity of the related effects.

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Components of Results of Operations

Operating Expenses

Research and Development Expenses

Research and development expenses consist of costs incurred in connection with our research and development activities, including our drug discovery efforts and the development of our product candidates. We expense research and development costs as incurred, which include:

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external research and development expenses incurred under agreements with third parties, such as CROs as well as investigative sites and consultants that conduct our clinical trials and other scientific development services;

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costs related to manufacturing material for our clinical trials, including fees paid to CMOs;

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manufacturing scale-up expenses and the cost of acquiring and manufacturing clinical trial materials;

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employee-related expenses, including salaries, bonuses, benefits, share-based compensation and other related costs for those employees involved in research and development efforts;

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costs of outside consultants, including their fees, and related travel expenses;

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expenses to acquire technologies, such as intellectual property, to be used in research and development including in-process research and development ("IPR&D") that has no alternative future use at the time of asset acquisitions;

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costs related to compliance with regulatory requirements; and

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facilities, depreciation and other indirect costs allocated to employees and activities supporting our research and development efforts.

Costs for certain activities are recognized based on an evaluation of the progress to completion of each specific contract using information and data provided to us by our vendors and analyzing the progress of our research studies or other services performed. Significant judgments and estimates are made in determining the expenses incurred balances at the end of any reporting period.

Our direct, external research and development expenses consist primarily of fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our process development, manufacturing and clinical development activities. Our direct external research and development expenses also include fees incurred under license and intellectual property purchase agreements. We track these external research and development costs on a program-by-program basis.

We do not allocate employee costs, costs associated with our facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources and third-party consultants primarily to conduct our research and development activities as well as for managing our process development, manufacturing and clinical development activities.

The successful development of our product candidates is highly uncertain. We plan to substantially increase our research and development expenses in the foreseeable future as we continue the development of our product candidates and manufacturing processes and conduct discovery and research activities for our clinical programs. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. We will need to raise substantial additional capital in the future. Our clinical development costs are expected to increase significantly with our ongoing clinical trials. We anticipate that our expenses will increase substantially and may fluctuate from quarter to quarter, particularly due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:

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the scope, rate of progress and expenses of our ongoing research activities and clinical trials and other research and development activities;

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successful enrollment in and completion of clinical trials;

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whether our product candidates show safety and efficacy in our clinical trials;

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receipt of marketing approvals from applicable regulatory authorities;

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establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

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obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

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commercializing product candidates, if and when approved, whether alone or in collaboration with others; and

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continued acceptable safety profile of the products following any regulatory approval.

Any changes in the outcome of any of these variables with respect to the development of our product candidates in clinical development could mean a significant change in the costs and timing associated with the development of these product candidates. We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. For example, if the FDA, the EMA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, benefits and share-based compensation for our personnel in executive, legal, business development, finance and accounting, and other administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees paid for accounting, auditing, tax and consulting services, insurance costs, travel expenses and direct and allocated facility costs not otherwise included in research and development expenses.

Total Other Income, Net

Total other income, net, includes interest income earned on cash, cash equivalents and marketable securities, interest expense and other income and expense items.

Loss on Investment in Joint Venture

The Company recognizes its pro-rata share of losses in the joint venture with Exscientia on its consolidated statements of operations and comprehensive loss within the loss on investment in joint venture line item, with a corresponding change to the joint venture investment asset on the consolidated balance sheets for equity method investments for which it does not have a controlling interest in.

Results of Operations

Comparison of the years ended December 31, 2022 and 2021

The following table summarizes our results of operations:

FOR THE YEAR ENDEDDECEMBER 31,

(in thousands)

Operating expenses:

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Operating Expenses

Research and Development Expenses

The following table summarizes our research and development costs for each of the periods presented:

FOR THE YEAR ENDEDDECEMBER 31,

(in thousands)

Direct research and development by program

Other program candidates — 55 (55 )

Asset acquisition IPR&D expense 3,073 — 3,073

Other unallocated research and development costs

Personnel expenses (including share-based compensation) 13,079 6,604 6,475

Research and development expenses were $40.7 million for the year ended December 31, 2022, compared to $26.9 million for the year ended December 31, 2021. The increase of $13.8 million was primarily due to:

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a $3.1 million increase in asset acquisition IPR&D expense related to the second quarter 2022 acquisition of the worldwide exclusive rights to Sanofi's KY1066, now referred to as RLYB331;

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a $2.2 million increase in costs related to the development of RLYB212, primarily attributable to an increase in clinical development costs;

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a $2.0 million increase in costs related to the development of RLYB116, primarily attributable to an increase in clinical development costs and clinical manufacturing costs;

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a $1.0 million increase in costs related to the development of RLYB331, primarily attributable to an increase in preclinical research and development costs after the asset acquisition in the second quarter of 2022; and

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a $6.5 million increase in personnel expenses, including an increase of $2.4 million in non-cash share-based compensation expense, primarily due to an increase in research and development related headcount in 2022.

These increases were partially offset by:

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a $1.2 million decrease related to the development of RLYB211 as we prioritized development of RLYB212, and subsequently made the decision to not continue the development of RLYB211.

We anticipate that our research and development expenses will continue to increase as we continue to advance our current research programs.

General and Administrative Expenses

General and administrative expenses were $27.2 million for the year ended December 31, 2022, compared to $18.7 million for the year ended December 31, 2021. The increase of $8.5 million is primarily related to an increase in payroll and personnel-related costs due to an increase in general and administrative related headcount, including an increase of $3.5 million in non-cash share-based compensation expense and an increase in costs associated with operating as a public company for a full year in 2022 as compared to 2021.

We anticipate that our general and administrative expenses related to providing administrative support to our research and development activities will continue to increase as we continue to support our growing research and development activities.

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Total Other Income, Net

Total other income, net, for the year ended December 31, 2022 was $2.3 million compared to $0.1 million for the year ended December 31, 2021. The increase in total other income of $2.2 million is primarily attributable to an increase in interest income from marketable securities.

Loss On Investment In Joint Venture

Loss on investment in joint venture for the year ended December 31, 2022 was $1.1 million compared to $1.5 million for the year ended December 31, 2021.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have funded our operations primarily through equity financings. From our inception and prior to our IPO, we received proceeds of approximately $182.5 million from equity financings. In August 2021, we closed our IPO and issued and sold 7,130,000 shares of common stock, inclusive of 930,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $13.00 per share. We received net proceeds of approximately $83.0 million, after deducting underwriting discounts and commissions and other offering costs.

In August 2022, we filed a Registration Statement on Form S-3 (the “Shelf”) with the SEC in relation to the registration and potential future issuance of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof in the aggregate amount of up to $300.0 million. The Shelf was declared effective on August 15, 2022. The Company also simultaneously entered into a Sales Agreement with Cowen. In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time at prices through Cowen acting as our agent. Pursuant to the Sales Agreement, sales of our common stock, if any, will be made in sales deemed to be “at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the "Securities Act"). Under the Sales Agreement, Cowen will be entitled to compensation equal to 3.0% of the gross proceeds of any shares of common stock sold under the Sales Agreement. As of December 31, 2022, the Company has not sold any shares of common stock pursuant to the Sales Agreement.

In November 2022, we completed a follow-on offering of approximately $54.8 million consisting of 5,803,655 shares of common stock, inclusive of 803,654 shares of common stock sold pursuant to the partial exercise of the underwriters' option to purchase additional shares at the price of $6.00 per share, and to certain investors in lieu of common stock, pre-funded warrants to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price for the shares less the $0.0001 per share exercise price for each pre-funded warrant. The net proceeds from the November 2022 follow-on offering were approximately $50.8 million, after deducting underwriting discounts and commissions and other offering costs.

As of December 31, 2022, we had $169.0 million of cash, cash equivalents and marketable securities.

Uses of Liquidity

We currently have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years. See "Contractual Obligations"below.

Funding Requirements

We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements into the first quarter of 2025. These initiatives do not impact the future clinical development plans for RLYB212 or RLYB116. This estimate and our expectation to advance the preclinical and clinical development of RLYB212, RLYB116, and any other product candidates are based on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect, or our clinical trials may be more expensive, time consuming or difficult to design or implement than we currently anticipate.

The Company has implemented cash preservation initiatives including reviewing certain discretionary expenses and managing the timing of certain future preclinical development activities. However, we expect to incur significant expenses and operating losses in the foreseeable future as we advance our product candidates through clinical development, seek regulatory approval and pursue commercialization of any approved product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company.

Because of the numerous risks and uncertainties, length of time and scope of activities associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the actual

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amount of funds we will require for development, approval and any approved marketing and commercialization activities. Our future capital requirements, both near and long-term, will depend on many factors, including, but not limited to:

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the initiation, progress, timing, costs and results of our clinical trials through all phases of development, including our Phase 1 and Phase 1b clinical trials for RLYB212, the clinical trial for RLYB116 and the development of any other product candidates;

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the identification, assessment, acquisition and/or development of additional research programs and additional product candidates;

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the outcome, timing and cost of meeting regulatory requirements established by the FDA, EMA and other comparable foreign regulatory authorities, including any additional clinical trials required by the FDA, EMA or other comparable foreign regulatory authorities;

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the willingness of the FDA, EMA and other comparable foreign regulatory authorities to accept our clinical trial designs, as well as data from our completed and planned preclinical studies and clinical trials, as the basis for review and approval of RLYB212, RLYB116 and any other product candidates;

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the cost and timing of the manufacture and supply of non-clinical and clinical trial material for RLYB212, RLYB116 and our other product candidates;

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the progress, timing and costs of the development by us or third parties of companion diagnostics, if required, for RLYB212 or any other product candidates, including design, manufacturing and regulatory approval;

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the cost of filing, prosecuting and enforcing our patent claims and other intellectual property rights;

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the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us;

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the costs associated with potential clinical trial liability or product liability claims, including the costs associated with obtaining insurance against such claims and with defending against such claims;

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the effect of competing technological and market developments;

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our ability to develop and commercialize products that are considered medically and/or financially differentiated to competitive products by physicians, patients and payers;

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the cost and timing of completion of commercial-scale manufacturing activities;

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the cost of making royalty, milestone or other payments under our current or any future in-license agreements;

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our ability to maintain our collaboration with Exscientia on favorable terms and establish new collaborations;

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the extent to which we in-license or acquire additional product candidates or technologies;

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the severity, duration and impact of the COVID-19 pandemic, which may adversely impact our business;

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the cost of establishing sales, marketing and distribution capabilities for our product candidates, if approved;

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the initiation, progress and timing of our commercialization of RLYB212 and RLYB116, if approved, or any other product candidates;

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the availability of third-party coverage and reimbursement for and pricing of any approved products; and

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the costs of operating as a public company.

A change in the outcome of any of these, or other variables with respect to the development of any of our product candidates, could significantly change the costs and timing associated with the development of that product candidate. We will need to continue to rely on additional financing to achieve our business objectives.

In addition to the variables described above, if and when any of our product candidates successfully complete development, we will incur substantial additional costs associated with regulatory filings, marketing approval,

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post-marketing requirements, maintaining our intellectual property rights and regulatory protection, in addition to other commercial costs. We cannot reasonably estimate these costs at this time.

Until such time, if ever, as we generate significant revenue from product sales, we expect to finance our operations through the sale of equity, debt financings, marketing and distribution arrangements and collaborations, strategic alliances and licensing arrangements or other sources. We currently have no credit facility or committed sources of capital. If we raise additional funds through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and we may need to dedicate a substantial additional portion of any operating cash flows to the payment of principal and interest on such indebtedness. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, intellectual property, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate product candidate development or future commercialization efforts.

Cash Flows

The following table summarizes our cash flows for each of the periods presented:

FOR THE YEAR ENDEDDECEMBER 31,

(in thousands)

Net cash used in operating activities $ (57,284 ) $ (45,533 )

Net cash used in investing activities (112,170 ) (2,333 )

Net cash provided by financing activities 51,078 82,967

Net (decrease) increase in cash and cash equivalents $ (118,376 ) $ 35,101

Operating Activities

During the year ended December 31, 2022, net cash used in operating activities was $57.3 million as compared to $45.5 million for the year ended December 31, 2021. The increase in cash used in operating activities was primarily due to an increase in both research and development and general and administrative expenses. Our research and development expenses increased as a result of IPR&D expenses associated with the acquisition of worldwide exclusive rights to Sanofi’s KY1066, now referred to as RLYB331, in addition to an increase in research in development expenses related to efforts to advance the development of our product candidates and an increase in research and development headcount related expenses, as compared to the year ended December 31, 2021. General and administrative expenses increased due to increases in our general and administrative supporting functions and the costs of operating as a public company, as compared to the year ended December 31, 2021.

Investing Activities

Net cash used in investing activities was $112.2 million for the year ended December 31, 2022 as compared to $2.3 million for the year ended December 31, 2021. The increase in net cash used in investing activities was primarily related to the purchases of highly rated debt securities as compared to the year ended December 31, 2021.

Financing Activities

Net cash provided by financing activities was $51.1 million for the year ended December 31, 2022, primarily representing the net proceeds from our November 2022 follow-on offering, after deducting underwriting discounts and commissions and payments of other offering costs. Net cash provided by financing activities was $83.0 million for the year ended December 31, 2021, representing the net proceeds from the IPO after deducting underwriting discounts and commissions and payments of other offering costs.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2022:

PAYMENTS DUE BY PERIOD

(in thousands) TOTAL LESS THAN1 YEAR 1-3 YEARS 3-5 YEARS MORE THAN5 YEARS

Operating lease obligations $ 586 $ — $ 586 $ — $ —

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The contractual obligation amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions and the approximate timing of the actions under the contracts.

Purchase and Other Obligations

We enter contracts in the normal course of business with CROs and other third-party vendors for clinical trials and testing and manufacturing services. Aside from those included in the table above, most contracts do not contain minimum purchase commitments and are cancellable by us upon written notice. Payments that may be due upon cancellation consist of payments for services provided or expenses incurred. These payments are not included in the table above as the amount and timing of such payments are not known.

We may incur contingent payments upon our achievement of clinical, regulatory and commercial milestones, as applicable under agreements we have entered into with various third-party entities pursuant to which we have acquired or in-licensed intellectual property. Due to the uncertainty of the achievement and timing of the events that require payment under these agreements, the amounts to be paid by us are not fixed or determinable at this time and have not been included in the table above. See “Business—License Agreement” and “Business—Asset Purchase Agreements” included elsewhere in this Annual Report on Form 10-K for a description of these agreements.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 “Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our research and development expenses that are incurred as of each reporting period. This process involves reviewing open contracts and purchase orders, communicating with our personnel and with vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary.

We base our expenses related to research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid balance accordingly. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

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Although we do not expect our estimates to be materially different from amounts incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period.

Share-Based Compensation

The Company accounts for share-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Generally, share-based compensation is measured at the grant date for all equity-based awards made to employees based on the fair value of the awards and is recognized over the requisite service period, which is generally the vesting period. Share-based compensation for awards with performance conditions are recognized over the service period when achievement of the performance condition is probable. The Company has elected to recognize the actual forfeitures by reducing the share-based compensation in the same period as the forfeitures occur. The Company classifies share-based compensation in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipients’ payroll costs are classified.

The Black-Scholes option-pricing model uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield. See Note 2 “Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation” of our consolidated financial statements for additional information on the assumptions utilized in the Black-Scholes option-pricing model.

Incentive Units

Certain common shares of Rallybio Corporation were issued during the Liquidation of Rallybio Holdings to previous unit holders of Rallybio Holdings in respect of profit interest incentive units. See Note 2 “Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation” of our consolidated financial statements for additional information on the Reorganization. Prior to our IPO, we periodically granted incentive units to employees which vest over a four-year period. These incentive units were issued in the form of profits interests providing the employee with compensation equal to the increase in the value of the unit over a participation threshold per unit, as determined at the time of grant. The holder, therefore, had the right to participate in distributions of profits only in excess of such participation threshold. The participation threshold was based on the valuation of a single common unit on or around the grant date.

Prior to our IPO, we measured equity-based compensation based on the grant date fair value of the unit-based awards and recognized equity-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period of the respective award. Unit-based compensation expense is classified in our consolidated statements of operations and comprehensive loss based on the function to which the related services are provided or in the same manner in which the grantee’s payroll costs are classified. Forfeitures are accounted for as they occur.

As there had been no public market for our common units, prior to the IPO, the estimated fair value of our common units had been determined by the Rallybio Holdings board of managers after considering valuation reports provided by an independent third-party valuation firm. In accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, a third-party valuation firm prepared valuations of our common units using an option pricing method ("OPM") which uses market approaches, and a Black-Scholes option pricing model to estimate our enterprise value or a hybrid method, combining the OPM with the probability weighted expected return method (“PWERM”). The OPM treats common units and preferred units as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes to value the common units of the company. The PWERM values each class of equity based on an analysis of the range of potential future enterprise values of the company and the manner in which those values would accrue to the owners of the different classes of equity. The PWERM involves estimating the overall value of the subject company under various liquidity event scenarios and allocating the value to the various share classes based on their respective claim on the proceeds as of the date of each event. A discount for lack of marketability of the common units is then applied to arrive at an indication of value for the common units as of the valuation date. The OPM methodology was utilized for incentive unit grants during the first quarter 2021 while a hybrid method that incorporated both the OPM and the PWERM methodology was used for grants of incentive units in the second quarter of 2021.

There are significant judgments related to volatility and time to liquidity as well as estimates inherent in these valuations. These judgments and estimates include assumptions regarding our future operating performance, the

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stage of development of our product candidates, the timing of a potential IPO or other liquidity events and the determination of the appropriate valuation methodology at each valuation date. The assumptions underlying these valuations represent management’s best estimates, which involve inherent uncertainties and the application of management judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our equity-based compensation expense could be materially different. Subsequent to the IPO, the fair value of our common stock was determined based on the quoted market price of our common stock.

In connection with the Liquidation, holders of common and incentive units of Rallybio Holdings received shares of common stock and restricted stock of Rallybio Corporation, based upon a conversion price determined by the board of managers of Rallybio Holdings immediately prior to the Liquidation. Holders of incentive units of Rallybio Holdings that were vested as of the consummation of the Reorganization received shares of common stock of the Corporation with respect to such units. Holders of incentive units of Rallybio Holdings that were unvested as of the consummation of the Reorganization received shares of restricted stock of the Corporation with respect to such units. The shares of restricted common stock are subject to the same vesting conditions as the incentive units for which such shares were exchanged.

Emerging Growth Company and Smaller Reporting Company

As an emerging growth company (an “EGC”) under the JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act, for EGCs include presentation of only two years of audited financial statements in a registration statement for an initial public offering, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements. Additionally, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an EGC. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. Therefore, the reported results of operations contained in our consolidated financial statements may not be directly comparable to those of other public companies.

We are also a “smaller reporting company” meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue was less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an EGC, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Off-Balance Sheet Arrangements

As of December 31, 2022 and 2021, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 “Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation” to our consolidated financial statements for the year ended December 31, 2022 appearing elsewhere in this Annual Report on Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information under this item.

Item 8. Financial Statements and Supplementary Data.

The financial information required by Item 8 is located beginning on page F-1 of this Annual Report.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our chief executive officer and chief financial officer (our principal executive officer and principal financial and accounting officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company on the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including, our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

Management's Annual Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our management, under the supervision and with the participation of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on the results of its evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

Internal control over financial reporting includes policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and disposition of assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with the authorization of its management and directors; and (3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on its financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting.

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There has been no change in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not Applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item 10 will be included in our Definitive Proxy Statement to be filed with the Securities Exchange Commission with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 11. Executive Compensation.

The information required by this Item 11 will be included in our Definitive Proxy Statement to be filed with the Securities Exchange Commission with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item 12 will be included in our Definitive Proxy Statement to be filed with the Securities Exchange Commission with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item 13 will be included in our Definitive Proxy Statement to be filed with the Securities Exchange Commission with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

The information required by this Item 14 will be included in our Definitive Proxy Statement to be filed with the Securities Exchange Commission with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(1)

For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference.

(2)

Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto.

(3)

Exhibits:

ExhibitNumber Description

112

4.4* Description of Registrant’s Securities.

113

21.1* Subsidiaries of Registrant.

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

# Indicates management contract or compensatory plan

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+ Portions of this exhibit (indicated by asterisks) have been redacted because they are both not material and the registrant customarily and actually treats such information as private or confidential.

Item 16. Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

RALLYBIO CORPORATION

Date: March 6, 2023 By: /s/ Martin W. Mackay

Martin W. Mackay, Ph.D.

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

Martin W. Mackay, Ph.D. Officer)

Jonathan I. Lieber Accounting and Financial Officer)

/s/ Helen M. Boudreau Director March 6, 2023

Helen M. Boudreau

/s/ Wendy K. Chung Director March 6, 2023

Wendy K Chung, M.D., Ph.D.

/s/ Rob Hopfner Director March 6, 2023

Rob Hopfner, R.Ph., Ph.D., MBA

/s/ Ronald M. Hunt Director March 6, 2023

Ronald M. Hunt

/s/ Lucian Iancovici Director March 6, 2023

Lucian Iancovici, M.D.

/s/ Hui Liu Director March 6, 2023

Hui Liu, Ph.D.

/s/ Christine A. Nash Director March 6, 2023

Christine A. Nash, MBA

/s/ Kush M. Parmar Director March 6, 2023

Kush M. Parmar, M.D., Ph.D.

/s/ Paula Soteropoulos Director March 6, 2023

Paula Soteropoulos

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) F-2

Consolidated Balance Sheets F-3

Consolidated Statements of Operations and Comprehensive Loss F-4

Consolidated Statements of Changes in Stockholders' Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Rallybio Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Rallybio Corporation and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Hartford, Connecticut

March 6, 2023

We have served as the Company's auditor since 2018.

F-2

RALLYBIO CORPORATION

Consolidated Balance Sheets

Assets

Current assets:

Marketable securities 112,036 —

Prepaid expenses and other assets 10,502 5,535

Property and equipment, net 385 511

Operating lease right-of-use assets 524 —

Investment in joint venture 30 805

Liabilities and stockholders' equity

Current liabilities:

Operating lease liabilities 181 —

Accrued expenses, noncurrent — 32

Operating lease liabilities, noncurrent 374 —

Commitments and contingencies (Note 10)

Stockholders' equity

Accumulated other comprehensive loss (214 ) —

Total liabilities and stockholders' equity $ 180,435 $ 182,185

See accompanying notes of the consolidated financial statements

F-3

RALLYBIO CORPORATION

Consolidated Statements of Operations and Comprehensive Loss

FOR THE YEAR ENDEDDECEMBER 31,

(in thousands, except share and per share amounts) 2022 2021

Operating expenses:

Other income (expenses):

Interest expense — (10 )

Loss from continuing operations (65,579 ) (45,508 )

Loss on investment in joint venture 1,075 1,505

Net loss per common share, basic and diluted $ (2.09 ) $ (1.84 )

Other comprehensive loss:

Net unrealized loss on marketable securities 214 —

Other comprehensive loss (214 ) —

See accompanying notes of the consolidated financial statements

F-4

RALLYBIO CORPORATION

Consolidated Statements of Changes in Stockholders' Equity

(in thousands, except share amounts) SHARES AMOUNT CAPITAL DEFICIT LOSS EQUITY

Issuance of restricted common stock 1,589,622 — — — — —

Share-based compensation expense — — 3,645 — — 3,645

Other comprehensive loss — — — — — —

Issuance of common stock from the stock purchase plan 38,845 — 217 — — 217

Issuance of common stock from the stock award plan 2,000 — — — — —

Issuance of common stock from exercise of stock options 2,014 — 21 — — 21

Forfeiture of restricted common stock (139,115 ) — — — — —

Share-based compensation expense — — 9,499 — — 9,499

Other comprehensive loss — — — — (214 ) (214 )

See accompanying notes of the consolidated financial statements

F-5

RALLYBIO CORPORATION

Consolidated Statements of Cash Flows

FOR THE YEAR ENDED DECEMBER 31,

Cash Flows used in Operating Activities:

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

Depreciation and amortization 167 109

Net accretion of discounts/premiums on debt securities (435 ) —

Loss on investment in joint venture 1,075 1,505

Changes in operating assets and liabilities:

Prepaid expenses, right-of-use assets and other assets (4,645 ) (4,507 )

Accrued expenses and operating lease liabilities 3,222 1,704

Net cash used in operating activities $ (57,284 ) $ (45,533 )

Cash Flows used in Investing Activities:

Purchases of marketable securities (201,316 ) —

Proceeds from maturities of marketable securities 89,500 —

Purchase of property and equipment (54 ) (333 )

Investment in joint venture (300 ) (2,000 )

Net cash used in investing activities $ (112,170 ) $ (2,333 )

Cash Flows from Financing Activities:

Proceeds from the issuance of common stock from the stock purchase plan 217 —

Proceeds from the issuance of common stock from exercise of stock options 21 —

Payments of offering costs (693 ) (3,233 )

Net cash provided by financing activities $ 51,078 $ 82,967

Net (decrease) increase in cash and cash equivalents (118,376 ) 35,101

Cash and cash equivalents—end of year $ 56,958 $ 175,334

Supplemental Disclosures of Noncash Investing and Financing Activities:

Offering costs in accounts payable and accrued expenses $ 139 $ —

Property and equipment in accounts payable and accrued expenses $ — $ 13

See accompanying notes of the consolidated financial statements

F-6

RALLYBIO CORPORATION

Notes to Consolidated Financial Statements

1. BUSINESS

Rallybio Corporation and subsidiaries (the "Company", "we", "our", or "us") is a clinical-stage biotechnology company committed to identifying and accelerating the development of life-transforming therapies for patients with severe and rare diseases. Since our launch in January 2018, we have built a portfolio of promising product candidates, which are now in development to address rare diseases in the areas of maternal fetal blood disorders, complement dysregulation, hematology, and metabolic disorders. We have assembled a team of experienced biopharma industry leaders with extensive research, development, and rare disease expertise to deliver on our mission of becoming a leader in the development of therapies for patients with rare diseases. We are drawing on our decades of knowledge and experience with a determination to tackle the undone, the too difficult, the inaccessible – and change the odds for rare disease patients.

In August 2021, the Company completed its initial public offering ("IPO"), pursuant to which it issued and sold 7,130,000 shares of the Company’s common stock, inclusive of 930,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $13.00 per share. The gross proceeds from the IPO, including the exercise of the underwriter's option to purchase additional shares were $92.7 million and the net proceeds were approximately $83.0 million, after deducting underwriting discounts and commissions and other offering costs.

In November 2022, the Company completed a follow-on offering of approximately $54.8 million consisting of 5,803,655 shares of common stock, inclusive of 803,654 shares of common stock sold pursuant to the partial exercise of the underwriters' option to purchase additional shares at the price of $6.00 per share and to certain investors in lieu of common stock, pre-funded warrants to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price for the shares less the $0.0001 per share exercise price for each pre-funded warrant. The net proceeds from the November 2022 follow-on offering were approximately $50.8 million, after deducting underwriting discounts and commissions and other offering costs.

Prior to the IPO and Reorganization, the Company was a 100% owned subsidiary of Rallybio Holdings, LLC ("Rallybio Holdings"), a Delaware limited liability company which was incorporated in Delaware on March 22, 2018 and Rallybio Holdings held 100% of the outstanding membership units in five wholly-owned subsidiaries; Rallybio, LLC, Rallybio IPA, LLC, Rallybio IPB, LLC, Rallybio IPD, LLC, and IPC Research, LLC. On June 30, 2021, Rallybio Holdings completed a series of transactions pursuant to which (i) Rallybio IPD, LLC, a direct subsidiary of Rallybio Holdings that was formed in Delaware in May 2020, was converted from a Delaware limited liability company to a Delaware corporation and changed its name to Rallybio Corporation, and (ii) four direct subsidiaries of Rallybio Corporation, each a Delaware limited liability company (collectively the "Merger Subs"), each consummated a separate merger with one of Rallybio Holdings direct subsidiaries, other than Rallybio IPD, LLC (collectively the "Asset Subsidiaries"), with the Asset Subsidiaries surviving the mergers and Rallybio Holdings receiving common stock of the Company in exchange for its interest in each Asset Subsidiary, which resulted in the Asset Subsidiaries becoming subsidiaries of the Company and the Company becoming the only direct subsidiary of Rallybio Holdings. On July 28, 2021, immediately prior to the completion of the IPO, Rallybio Holdings liquidated and distributed 100% of the capital stock of the Company, consisting solely of common stock, to the unitholders of Rallybio Holdings. The liquidation of Rallybio Holdings and distribution of the capital stock of Rallybio Corporation to the unitholders of Rallybio Holdings is referred to as the “Liquidation” and these other transactions are collectively referred to as the “Reorganization.” As a result of the Reorganization and subsequent Liquidation, the unitholders of Rallybio Holdings became the holders of common stock of Rallybio Corporation, and the Company's consolidated financial statements are subsequently reported from Rallybio Corporation. See Note 2, "Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation" for the basis of presentation of these financial statements after the Reorganization and Liquidation discussed herein.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

IPO and Reorganization — As discussed in Note 1, "Business," in connection with the Reorganization, all of Rallybio Holdings' direct subsidiaries, other than Rallybio Corporation, became direct subsidiaries of the Company prior to the Liquidation of Rallybio Holdings. Prior to the completion of the Company's IPO, Rallybio Holdings liquidated and unitholders of Rallybio Holdings became the holders of common stock of Rallybio Corporation. Subsequent to the Reorganization and the Liquidation of Rallybio Holdings the consolidated financial statements are reported from Rallybio Corporation.

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The capital structure of Rallybio Holdings prior to the Liquidation consisted of four classes of membership units: common units; Series A-1 preferred units; Series A-2 preferred units; Series B preferred units; and incentive common units ("incentive units"). The number of shares of common stock that the holders of each class of units received in the Liquidation was based on the value of Rallybio Holdings prior to the Liquidation, determined by reference to the initial public offering price per share of $13.00. The common stock of the Company was allocated to the holders of existing units in Rallybio Holdings as follows:

•

holders of 33,478,255Series A-1 preferred units and Series A-2 preferred units of Rallybio Holdings received an aggregate of 5,257,590 shares of common stock of the Company;

•

holders of 104,442,965Series B preferred units of Rallybio Holdings received an aggregate of 16,402,235 shares of common stock of the Company;

•

holders of 4,500,000 common units and 1,200,000 of performance based incentive common units of Rallybio Holdings received an aggregate of 706,701 and 188,454, respectively, in shares of common stock of the Company. Shares of common stock issued in respect of unvested common units and performance based incentive common units as of the Liquidation are shares of restricted common stock and subject to vesting in accordance with the vesting schedule applicable to such units; and

•

holders of 20,869,704 incentive units in Rallybio Holdings received an aggregate of 2,444,990 shares of common stock of the Company. Shares of common stock issued in respect of unvested incentive units as of the Liquidation are shares of restricted common stock and continue to be subject to vesting in accordance with the vesting schedule applicable to such incentive units.

As a result of the Liquidation, the holders of units in Rallybio Holdings collectively were issued an aggregate of 24,999,970 shares of common stock of the Company prior to the completion of the IPO.

The Reorganization and subsequent Liquidation resulted in a change in reporting entity as described in ASC 250. In accordance with the guidance applicable to these circumstances, the equity structure has been adjusted in all comparative periods up to the Liquidation to reflect the number of shares of the Company’s common stock, issued to Rallybio Holdings unitholders in connection with the Liquidation. As such, historical Rallybio Holdings convertible redeemable preferred units, common units, and incentive units have been retroactively adjusted in these financial statements to shares and earnings per share in accordance with the ratio of common shares received by each membership unit class. Rallybio Holdings' convertible redeemable preferred units previously classified as mezzanine equity, including the Series B Preferred Unit Agreement executed during the year 2020 with a total aggregate purchase price of $145.2 million, have been retroactively adjusted in these financial statements, converted into common stock, and reclassified to permanent as a result of the retrospective application of the Liquidation and change in reporting entity.

Basis of Presentation—The accompanying consolidated financial statements have been prepared with accounting principles generally accepted in the United States of America (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) promulgated by the Financial Accounting Standards Board (“FASB”).

Principles of Consolidation—The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates—The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. While management believes that estimates and assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates. The most significant estimates are those used in the determination of the fair value of its common units and incentive units awarded to employees prior to the Company's IPO, for purposes of recording stock-based incentive compensation, the fair value of stock options, as well as contracted research and development expenses incurred.

Liquidity and Ability to Continue as a Going Concern—The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Management has evaluated whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Since its inception, the Company has incurred net losses and negative cash flows from operations.

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During the years ended December 31, 2022 and 2021, the Company incurred a net loss of $66.7 million and $47.0 million, respectively. In addition, as of December 31, 2022, the Company had an accumulated deficit of $160.7 million. The Company expects to continue to generate operating losses and negative cash flows in the foreseeable future.

The Company currently expects that cash, cash equivalents and marketable securities of $169.0 million at December 31, 2022 will be sufficient to fund its operating expenses and capital requirements for more than 12 months from the date the consolidated financial statements are issued. However, we do not anticipate that the current cash, cash equivalents and marketable securities as of December 31, 2022 will be sufficient for us to fund any of our product candidates through regulatory approval, and we will need to raise substantial additional capital to complete the development and commercialization of our product candidates, if approved. We may satisfy our future cash needs through the sale of equity securities, debt financings, working capital lines of credit, corporate collaborations or license agreements, grant funding, interest income earned on invested cash balances or a combination of one or more of these sources.

Collaboration Arrangements—The Company considers the nature and contractual terms of an arrangement to assess whether an arrangement involves a joint operating activity that expose two or more parties to significant risks and rewards dependent on the commercial success of the activity. If the Company is an active participant and is exposed to significant risks and rewards dependent on the commercial success of the activity, the Company accounts for such arrangement as a collaborative arrangement under ASC 808, Collaborative Arrangements ("ASC 808"). ASC 808 describes arrangements within its scope and considerations surrounding presentation and disclosure, with recognition matters subjected to other authoritative guidance, in certain cases by analogy.

For arrangements determined to be within the scope of ASC 808 for certain research and development activities where a collaborative partner is not a customer following the guidance of ASC 606, Revenue Recognition ("ASC 606"), the Company accounts for payments due to a collaboration partner as research and development expense and for payments owed to us from our collaboration partner for the reimbursement of research and development costs as a contra-expense in the period such expenses are incurred. The Company classifies payments owed or receivables recorded as other current liabilities and other current assets, respectively, in the Company’s consolidated balance sheets. See Note 3, “License and Collaboration Agreements” for additional details.

Asset Acquisitions—The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If this screen criteria is met, the transaction is accounted for as an asset acquisition. If not, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs, which would meet the definition of a business. The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs. In an asset acquisition, the cost allocated to acquire in-process research and development ("IPR&D") with no alternative future use is charged to research and development expense at the acquisition date. See Note 3, “License and Collaboration Agreements” for additional details.

Variable Interest Entity—The Company evaluates its ownership, contractual, and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical information, among other factors. If the Company determines that an entity in which it holds a contractual, or ownership, interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively. The Company evaluated its investment in RE Ventures I, LLC, a limited liability company (“REV-I”), defined in Note 9, and concluded that it represented a VIE and was not deemed the primary beneficiary. If the Company is not deemed to be the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with the applicable GAAP. See Note 9, “Investment in Joint Venture” for additional details.

Equity Method Investments—The Company accounts for investments for which it does not have a controlling interest in accordance with ASC 323, Investments – Equity Method and Joint Ventures ("ASC 323"). The Company recognizes its pro-rata share of income and losses in “loss on investment in joint venture” on the consolidated statements of operations

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and comprehensive loss, with a corresponding change to the investment in joint venture asset on the consolidated balance sheets.

Financial Instruments—The Company’s principal financial instruments are comprised of cash, cash equivalents, available for sale marketable securities, accounts payable and accrued liabilities. The carrying value of all financial instruments approximates fair value.

Concentrations of Credit Risk—Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company invests its excess cash in money market funds and marketable securities in government insured financial institutions that are subject to minimal credit and market risk. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality, and the Company has not experienced any losses on these deposits.

Cash and Cash Equivalents—The Company classifies amounts on deposit in banks and cash invested temporarily in various instruments, primarily money market funds, with original maturities of three months or less at the time of purchase as cash and cash equivalents. The carrying amounts reported in the consolidated balance sheets represent the fair values of cash and cash equivalents.

Marketable Securities — We invest our excess cash balances in highly rated United States ("U.S.") government-backed debt securities and treasuries. We classify our marketable securities as available-for-sale and accordingly, record such securities at fair value. Debt securities with original maturities of greater than 90 days are classified as available-for-sale marketable securities and debt securities with original maturities of less than 90 days from the date of purchase are classified as cash equivalents.

Unrealized gains and losses on our marketable debt securities that are deemed temporary are included in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. If any adjustment to fair value reflects a significant decline in the value of the security, we evaluate the extent to which the decline is determined to be other-than-temporary and would mark the security to market through a charge to our consolidated statements of operations and comprehensive loss. Credit losses are identified when we do not expect to receive cash flows sufficient to recover the amortized cost basis of a security. In the event of a credit loss, only the amount associated with the credit loss is recognized in operating results, with the amount of loss relating to other factors recorded in accumulated other comprehensive income (loss).

Property and Equipment—Property and equipment are recorded at cost and consists of computer and other equipment, capitalized software, furniture and fixtures and leasehold improvements. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, or for leasehold improvements, over the remaining term of the lease, if shorter. The estimated useful life for each major asset classification are as follows:

Asset Classification Estimated Useful Life

Computer and other equipment 3 years

Capitalized software 3 years

Furniture and fixtures 6 years

Leasehold improvements lesser of lease life or useful life

Maintenance and repairs which do not extend the lives of the assets are charged directly to expense as incurred. Upon retirement or disposal, cost and related accumulated depreciation are removed from the related accounts, and any resulting gain or loss is recognized as a component of income or loss in the consolidated statements of operations and comprehensive loss.

Impairment of Long-Lived Assets—When indications of potential impairments are present, the Company evaluates the carrying value of long-lived assets. The Company adjusts the carrying value of the long-lived assets if the sum of undiscounted expected future cash flows is less than the carrying value. No such impairments were recorded during the years ended December 31, 2022 or 2021.

Leases —At the inception of an arrangement, we determine if an arrangement is, or contains, a lease based on the facts and circumstances present in that arrangement. Lease classification, recognition, and measurement are then determined at the lease commencement date. For arrangements that contain a lease we (i) identify lease and non-lease components, (ii) determine the consideration in the contract, (iii) determine whether the lease is an operating or financing lease; and iv)

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recognize lease ROU assets and liabilities. Lease liabilities and their corresponding ROU assets are recorded based on the present value of fixed, or in substance fixed, lease payments over the expected lease term. When the interest rate implicit in lease contracts is not readily determinable we use our incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.

We have elected to combine lease components with non-lease components on our office real estate asset class. Fixed, or in substance fixed, lease payments on operating leases are recognized over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed, or in substance fixed, are recognized as incurred. Fixed and variable lease expense on operating leases is recognized within operating expenses within our consolidated statements of operations and comprehensive loss. Some leases include options to extend or terminate the lease and the Company includes these options in the recognition of the Company’s ROU assets and lease liabilities when it is reasonably certain that the Company will exercise such options. We have elected the short-term lease exemption and, therefore, do not recognize a ROU asset or corresponding liability for lease arrangements with an original term of 12 months or less.

Income Taxes—The Company uses the asset and liability method of accounting for income taxes, as set forth in ASC 740, Accounting for Income Taxes ("ASC 740"). Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequence of temporary differences between the carrying amounts and the tax basis of assets and liabilities and net operating loss carry forwards, all calculated using presently enacted tax rates. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company evaluates whether deferred tax assets are more likely than not of being realized in determining whether a valuation allowance is necessary. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. As of December 31, 2022 and 2021, the Company determined that it is more likely than not that deferred taxes will not be realized and as a result recorded a valuation allowance against its deferred tax assets. Following the Reorganization, the Company files a consolidated U.S. federal income tax return and has elected to include all subsidiaries owned more than 80%. Prior to the Reorganization, the LLCs owned 100% by the Company have each elected to be treated as and taxed as a corporation and each filed a separate U.S. federal income tax return.

Research and Development Expenses—Research and development expenses are comprised of costs incurred in performing research and development activities including personnel salaries, benefits, and equity-based compensation; external research and development expenses incurred under arrangements with third parties, such as contract research organization agreements, investigational sites, and consultants; the cost of developing and manufacturing clinical study materials, program regulatory costs, expenses associated with obligations under asset acquisitions, license agreements and other direct and indirect costs. Costs incurred in connection with research and development activities are expensed as incurred. Costs are considered incurred based on an evaluation of the progress to completion of each contract using information and data provided by the respective vendors, including the Company’s clinical sites. Depending upon the timing of invoicing by the service providers, the Company recognizes prepaid expenses or accrued expenses related to these costs. These prepaid expenses or accrued expenses are based on management’s estimates of the work performed under service agreements, milestones achieved, and experience with similar contracts. The Company monitors each of these factors and adjusts estimates accordingly.

Deferred Offering Costs— The Company capitalizes incremental legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such equity financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders' equity as a reduction of additional paid-in-capital generated as a result of the offering. Should the planned equity financing no longer be considered probable of being consummated, the offering costs are expensed immediately as a charge to operating expense. Deferred offering costs are included in prepaid expenses and other assets on the consolidated balance sheets. Deferred offering costs as of December 31, 2022 were $0.1 million. There were no deferred offering costs as of December 31, 2021.

Stock Warrants — The Company accounts for stock warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance included in ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. Warrants

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that meet all of the criteria for equity classification are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance and remeasured each balance sheet date thereafter.

Share-Based Compensation—The Company accounts for share-based compensation in accordance with ASC 718, Compensation—Stock Compensation ("ASC 718"). Generally, share-based compensation is measured at the grant date for all equity-based awards made to employees based on the fair value of the awards and is recognized over the requisite service period, which is generally the vesting period. Share-based compensation for awards with performance conditions are recognized over the service period when achievement of the performance condition is probable. The Company has elected to recognize the actual forfeitures by reducing the share-based compensation in the same period as the forfeitures occur. The Company classifies share-based compensation in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipients’ payroll costs are classified.

The Company estimates the fair value of options granted using the Black-Scholes option pricing model ("Black-Scholes") for stock option grants. The fair value of the Company’s common stock is used to determine the fair value of restricted stock awards.Black-Scholes requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the award, the risk-free interest rate and expected dividends. Due to the lack of a public market for the Company’s common stock and lack of company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company. The historical volatility is calculated based on a period of time corresponding with expected term assumption. The Company uses the simplified method to calculate the expected term for options granted where the expected term equals the arithmetic average of the vesting term and the original contractual term of the options due to its lack of sufficient historical data. The risk-free interest rate is based on U.S. Treasury securities with a maturity date corresponding with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

Fair Value Measurements—ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the assets or liabilities and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the price that would be received to sell an asset or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tiered value hierarchy that distinguishes between the following:

Level 1—Quoted market prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

Level 3—Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgement. Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considers counterparty credit risk in its assessment of fair value.

Segment Information—Operating segments are defined as components of an enterprise for which discrete financial information is regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. The Company manages its operations as a single segment for the purposes of

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allocating resources, assessing performance, and making operating decisions. All tangible assets of the Company are held in the U.S.

Basic and Diluted Net Loss Per Share—The Company calculates basic net loss per share by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of potential dilutive securities. Basic shares outstanding includes the weighted-average effect of the Company's pre-funded warrants to purchase shares of our common stock requiring little consideration upon exercise. Unvested restricted common shares as of December 31, 2022 and 2021 are not considered participating securities and as such are excluded from the weighted-average number of shares used for calculating basic and diluted net loss per share. Diluted net loss per share is computed by dividing the net loss by the sum of the weighted-average number of common shares outstanding during the period plus the dilutive effects of potentially dilutive securities outstanding during the period. Potentially dilutive securities include restricted common shares and stock options. The Company has generated a net loss for all periods presented, therefore diluted net loss per share is the same as basic net loss per share since the inclusion of potentially dilutive securities would be anti-dilutive.

Recently Adopted Accounting Pronouncements—In February 2016, FASB issued ASU 2016-02, Leases (ASU 2016-02"), that requires lessees to recognize leases on-balance sheet and to make certain disclosures associated with their leasing arrangements. The new standard establishes a right-of-use ("ROU") model that requires a lessee to recognize an ROU asset and lease liability on the consolidated balance sheets for all leases with a term longer than twelve months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of operations and comprehensive loss. The Company adopted ASU 2016-02 Leases on January 1, 2022 using the modified retrospective approach and elected to apply the transition method that allows companies to continue applying guidance under the lease standard in effect at that time in the comparative periods consolidated financial statements and recognize a cumulative-effect adjustment to the consolidated balance sheets on the date of adoption. The Company elected the package of practical expedients to not reassess its prior conclusions about lease identification, lease classification and initial direct costs. At adoption we recognized approximately $0.7 million of ROU assets and corresponding lease liabilities. See Note 5, “Leases” for additional details.

In June 2016, the FASB issued ASC 2016-13, Financial Instruments - Credit Losses ("ASC 2016-13"),a new standard intended to improve reporting requirements specific to loans, receivables and other financial instruments. The new standard requires that credit losses on financial assets measured at amortized cost be determined using an expected loss model, instead of the current incurred loss model, and requires that credit losses related to available-for-sale debt securities be recorded through an allowance for credit losses and limited to the amount by which carrying value exceeds fair value. We adopted the new standard on January 1, 2022 and have completed our assessment of the standard based on the composition of our portfolio of financial instruments. Our significant financial assets that are within the scope of the new standard consist of available for sale debt securities. There was no impact to our consolidated statements of operations and comprehensive loss or consolidated balance sheets upon adoption. See Note 4 for discussion of unrealized losses on our available for sale marketable securities.

Recently Issued Accounting Pronouncements—The Company qualifies as an emerging growth company ("EGC") as defined in the Jumpstart Our Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and non-public companies, the Company can adopt the new or revised standard at the time non-public companies adopt the new or revised standard and can do so until such time that the Company either irrevocably elects to “opt out” of such extended transition period or no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for non-public companies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial statements and disclosures during the year ended December 31, 2022.

3. LICENSE AND COLLABORATION AGREEMENTS

Asset Acquisition

In May 2022, we obtained worldwide exclusive rights to RLYB331, with Kymab Limited ("Sanofi") a preclinical antibody. We believe RLYB331 has the potential to address a significant unmet need for patients with severe anemias with ineffective erythropoiesis and iron overload, including beta thalassemia and a subset of lower risk myelodysplastic syndromes. Under the terms of the license agreement, we made an upfront payment to Sanofi of $3.0 million in the second quarter of 2022 for the exclusive license to KY1066. We could also be required to pay up to an aggregate of $43.0

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million in development and regulatory milestones and up to an aggregate of $150.0 million in commercial milestones for a product in its first indication, plus tiered low-to-mid double digit percentages of such milestone amounts for up to three additional indications, and mid to high single digit royalties on net sales.

The license was accounted for as an asset acquisition as substantially all of the fair value of the asset acquired was concentrated in a single asset and thus the acquisition was deemed not to be a business combination. The acquired license rights represent an IPR&D asset that was determined to have no alternative future use. Accordingly, the Company recorded an IPR&D charge of $3.1 million to research and development expense, including transaction costs associated with this asset acquisition of $0.1 million, in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.

AbCellera Collaboration

In December 2022, the Company entered into a multi-year, multi-target collaboration with AbCellera to discover, develop, and commercialize novel antibody-based therapeutics for rare diseases. Under the terms of the agreement, AbCellera and Rallybio will co-develop and share the development costs of up to five rare disease therapeutic targets, which will be chosen together by both companies. At the point one party in the collaboration opts-out of future co-development cost sharing, that party will be entitled to a share of future profit sharing from commercialization of the collaboration target, dependent on the proportion of their co-development contributions compared to the total development costs of a target as defined within the agreement. The agreement also has defined profit sharing floors that correspond to the stage of development at the time a collaboration party opts-out of co-developing a target.

The Company concluded that the agreement with AbCellera will be accounted under the scope of ASC 808 as both parties will actively participate in joint operating activities and are exposed to significant risks and rewards that depend on the commercial success of those activities. Under ASC 808, certain transactions between collaborative arrangement participants should follow the accounting for revenue under ASC 606 when the collaborative arrangement participant is a customer.

The Company determined that co-development arrangement as defined in our agreement with AbCellera does not meet the definition of a customer as defined by ASC 606. As a result, these activities will be accounted for as research and development costs. Payments due because of the co-development will be recorded as research and development expense in the period such expenses are incurred and for payments owed to us from our collaboration partner for the reimbursement of research and development costs will be recorded as a contra-research and development expense in the period such expenses are incurred. Costs related to the AbCellera collaboration were not material for the year ended December 31, 2022.

4. MARKETABLE SECURITIES

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of our marketable securities by type of security as of December 31, 2022 was as follows:

The fair values of marketable securities by classification in the consolidated balance sheets was as follows:

(in thousands) DECEMBER 31, 2022

Cash and cash equivalents $ 16,629

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The fair values of available-for-sale debt securities as of December 31, 2022, by contractual maturity, are summarized as follows:

(in thousands) DECEMBER 31, 2022

Due in one year or less $ 127,667

Due after one year through two years 998

The aggregate fair value of available-for-sale debt securities in an unrealized loss position as of December 31, 2022 was $70.0 million. We did not have any investments in a continuous unrealized loss position for more than twelve months as of December 31, 2022. As of December 31, 2022, we believe that the cost basis of our available-for-sale debt securities is recoverable. No allowance for credit losses was recorded as of December 31, 2022.

For the year ended December 31, 2021, the Company held money market funds that were classified as cash and cash equivalents on the Company's consolidated balance sheets of $4.0 million. These money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

5. LEASES

We have operating leases for approximately nine thousand square feet of corporate office space. The weighted-average remaining lease term is 2.6 years. The weighted-average discount rate utilized on our operating lease liabilities as of December 31, 2022 was 4.00%.

Operating leases are included in operating lease ROU assets, operating lease liabilities, and operating lease liabilities, noncurrent in our consolidated balance sheets as of December 31, 2022.

The following table summarizes the presentation of the Company's operating lease as presented on the consolidated balance sheets:

(in thousands) DECEMBER 31, 2022

Assets:

Operating lease right-of-use assets $ 524

Liabilities:

Operating lease liabilities $ 181

Operating lease liabilities, noncurrent 374

Total operating lease liabilities $ 555

Future minimum lease payments from December 31, 2022 until the expiration of the operating lease are as follows:

(in thousands)

Thereafter —

Total lease payments 586

Less: imputed discount rate (31 )

Carrying value of operating lease liabilities $ 555

The Company incurred $0.2 million and $0.1 million in operating lease rent expense for the years ended December 31, 2022 and 2021, respectively. Lease payments made were $0.2 million and $0.1 million for the years ended December 31, 2022 and 2021, respectively, with such amounts reflected in the consolidated statements of cash flows in operating activities.

As the result of adopting ASU 2016-02 using the modified retrospective transition method, we did not restate periods prior to the adoption date of January 1, 2022. These periods continue to be presented in accordance with ASC 840. As of December 31, 2021, the future undiscounted minimum lease payments on our operating leases were as follows:

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YEAR ENDING DECEMBER 31,

(in thousands)

Thereafter —

6. BALANCE SHEET COMPONENTS

Property and Equipment—

Property and equipment consisted of the following as of December 31, 2022 and 2021:

Computer and other equipment $ 180 $ 154

Capitalized software 89 89

Construction in progress — 8

Less accumulated depreciation (373 ) (206 )

Property and equipment—net $ 385 $ 511

Depreciation expense totaled $0.2millionand $0.1 million for the years ended December 31, 2022 and 2021, respectively.

Prepaid Expenses and Other Assets—

Prepaid expenses and other assets consisted of the following as of December 31, 2022 and 2021:

Accrued Expenses—

Accrued expenses consisted of the following as of December 31, 2022 and 2021:

Compensation and related expenses 4,703 2,955

7. STOCKHOLDERS' EQUITY

Common Stock

In August 2021, the Company completed its IPO, pursuant to which it issued and sold 7,130,000 shares of the Company’s common stock, inclusive of 930,000 shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $13.00 per share. The gross proceeds from the IPO, including the exercise

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of the underwriter's option to purchase additional shares were $92.7 million and the net proceeds were approximately $83.0 million, after deducting underwriting discounts and commissions and other offering costs.

In November 2022, the Company completed a follow-on offering of approximately $54.8 million consisting of 5,803,655 shares of common stock, inclusive of 803,654 shares of common stock sold pursuant to the partial exercise of the underwriters' option to purchase additional shares at the price of $6.00 per share and to certain investors in lieu of common stock, pre-funded warrants to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price for the shares less the $0.0001 per share exercise price for each pre-funded warrant. The net proceeds from the November 2022 follow-on offering were approximately $50.8 million, after deducting underwriting discounts and commissions and other offering costs.

See Note 2 for a summary of the Reorganization and Liquidation of Rallybio Holdings that was completed prior to the Company's IPO, which resulted in a change in reporting entity. In accordance with the applicable accounting guidance related to changes in reporting entities, the financial statements for all periods presented have been retrospectively adjusted giving effect to the Reorganization and Liquidation as applicable to all periods presented.

The Company evaluated the liquidation of Rallybio Holdings units and subsequent issuance of common stock awards of the Company, discussed in Note 2, as a modification under ASC 718, Share Based Payments. Under ASC 718, a modification is a change in the terms or conditions of a stock-based compensation award. In assessing the modification, the Company considered the fair value, vesting conditions and classification as an equity or liability award before Liquidation and replacement, compared to the Company’s common stock received as of the Liquidation to determine whether modification accounting must be applied. As the number of shares of common stock of the Company that the unitholders of Rallybio Holdings received in the Liquidation was based on the fair value of those units in Rallybio Holdings immediately prior to the Liquidation, unvested units were replaced with restricted common shares with the same vesting terms as the initial awards, and the classification of the awards as equity awards did not change from this action, no incremental stock-based compensation expense resulted from the modification.

The Company had 200,000,000 shares of common stock authorized as of December 31, 2022 and 2021, respectively, of which 37,837,369 and 32,129,970 shares were issued and outstanding as of December 31, 2022 and 2021, respectively.

Preferred Stock

The Company had 50,000,000 shares of preferred stock authorized as of December 31, 2022 and 2021, respectively, of which no shares were outstanding as of December 31, 2022 and 2021, respectively.

Pre-Funded Warrants

In connection with the follow-on offering entered into in November 2022, the Company entered into an agreement with certain investors for pre-funded warrants in lieu of common stock to purchase up to an aggregate of 3,333,388 shares of common stock at a price of $5.9999, which represents the per share public offering price at the November 2022 follow-on offering for common stock less a $0.0001 per share exercise price for each pre-funded warrant.

The Company may not effect the exercise of any pre-funded warrant, and a holder will not be entitled to exercise any portion of any pre-funded warrant if, upon giving effect to such exercise, the aggregate number of shares of common stock beneficially owned by the holder (together with its affiliates) would exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, which percentage may be increased or decreased at the holder’s election upon 61 days’ notice to the Company subject to the terms of such pre-funded warrants, provided that such percentage may in no event exceed 19.99%.

The Company has assessed the pre-funded warrant for appropriate equity or liability classification. During this assessment, the Company determined the pre-funded warrant is a freestanding instrument that does not meet the definition of a liability pursuant to ASC 480 and does not meet the definition of a derivative pursuant to ASC 815. The pre-funded warrant is indexed to the Company’s common stock and meets all other conditions for equity classification under ASC 480 and ASC 815. Accordingly, the pre-funded warrant classified as equity and accounted for as a component of additional paid-in capital at the time of issuance. All of the pre-funded warrants related to our November 2022 follow-on offering remain outstanding and unexercised as of December 31, 2022.

Share-based Compensation

Share-based compensation which comprised of stock options, restricted stock awards, restricted stock units and the employee stock purchase plan is classified in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021 and was as follows:

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FOR THE YEAR ENDEDDECEMBER 31,