What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-09 compared with 2021-05-10 · 80 added, 46 removed, 159 unchanged (44% of the section changed)

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You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited financial statements and notes thereto i ncluded in “Item 1.

Financial Statements” of this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2020 included in our Prospectus dated March 25, 2021 filed pursuant to Rule 424(b) under the Securities Act with the Securities and Exchange Commission (SEC) on March 26, 2021 .

Financial Statements” of this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2020 included in our Prospectus dated March 25, 2021 filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended (Securities Act) with the Securities and Exchange Commission (SEC) on March 26, 2021 .

In addition to historical information, this Quarterly Report contains forward-looking statements that involve risks, uncertainties, and assumptions.

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In preclinical studies for our lead program, we have observed restoration of frataxin (FXN) levels in cells from FA patients using our FA GeneTACs.

FA GeneTACs administered to various species, at doses that were observed to be well tolerated, achieved biodistribution to brain and heart, the key organs affected by FA, at concentrations that were consistent with those observed to restore FXN levels in FA patient cells.

Further, and consistent with this good biodistribution, we observed increased FXN expression in the brain and heart in an animal model of FA after treatment with our FA GeneTACs.

Subject to receiving regulatory clearance to proceed into clinical trials, we anticipate a first-in-human dosing of our first product candidate in the first half of 2022.

FA GeneTACs administered to rodents and to non-human primates, at doses that were observed to be well tolerated, achieved biodistribution to brain and heart, the key organs affected by FA, at concentrations that exceeded those observed to restore FXN levels in FA patient cells.

Further, and consistent with this favorable target-organ biodistribution, we observed increased endogenous FXN expression in the brain and heart in an animal model of FA after treatment with our FA GeneTACs.

Investigational new drug (IND)-enabling studies for two FA GeneTAC development candidates are underway, in alignment with feedback received from the Food and Drug Administration (FDA) through a pre-IND meeting and from the European Medicines Agency (EMA) through a scientific advice procedure.

Subject to receiving regulatory clearance, one of these FA GeneTAC development candidates will be selected to proceed into clinical trials.

We anticipate a first-in-human dosing in FA patients in the first half of 2022.

In our second GeneTAC program in DM1, we observed reduced nuclear foci in DM1 patient muscle cells after administration of our DM1 GeneTACs.

We expect to complete investigational new drug (IND)-enabling studies and seek regulatory clearance for a first-in-human clinical trial in 2023.

We are also advancing our GeneTAC portfolio in preclinical studies to address other serious nucleotide repeat expansion-driven monogenic diseases, and intend to declare an additional product candidate in 2023.

To date, we have incurred net losses and negative cash flows from operations since our inception and as of March 31, 2021, had an accumulated deficit of $17.4 million.

We expect to complete IND-enabling studies and seek regulatory clearance for a first-in-human clinical trial in 2023.

We continue to make significant progress in advancing our GeneTAC portfolio in preclinical studies to address other serious nucleotide repeat expansion-driven monogenic diseases, and intend to declare an additional product candidate in 2023.

To date, we have incurred net losses and negative cash flows from operations since our inception and as of June 30, 2021, had an accumulated deficit of $25.1 million.

Our net losses have resulted primarily from costs incurred in connection with organizing and staffing our company, business planning, raising capital, developing and optimizing our technology platform, identifying potential product candidates, undertaking research and preclinical studies, engaging in manufacturing for our development programs, and providing general and administrative support for these operations.

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Further, in January 2021, we issued 19,083,979 shares of Series B convertible preferred stock at $6.55 per share for net proceeds of approximately $124.7 million.

Our cash, cash equivalents and investment securities balance as of March 31, 2021, was $411.3 million.

Our cash, cash equivalents and investment securities balance as of June 30, 2021, was $402.8 million.

Components of Our Results of Operations

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the efficacy and safety profile of the product candidate;

the timing, receipt, and terms of any approvals from applicable regulatory authorities including the Food and Drug Administration (FDA) and non-U.S.

the timing, receipt, and terms of any approvals from applicable regulatory authorities including FDA and non-U.S.

maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates;

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General and administrative expenses consist primarily of personnel-related expenses, including employee salaries, bonuses, benefits, and stock-based compensation charges, for personnel in executive and administrative functions.

Other significant general and administrative expenses include legal fees relating to intellectual property and corporate matters, professional fees for accounting, tax and consulting services and insurance costs.

Other significant general and administrative expenses include insurance costs, legal fees relating to intellectual property and corporate matters and professional fees for accounting, tax and consulting services.

We anticipate that our general and administrative expenses will substantially increase in the foreseeable future as we add general and administrative personnel to support our expanded research and development activities and infrastructure and, if any of our product candidates or any future candidates receive marketing approval, commercialization activities, as well as to support our operations generally, including facility-related expenses and patent-related costs.

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Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Comparison of the Three Months Ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30,

Grant revenue

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Loss from operations

Other income, net

Grant Revenue.

During the three months ended June 30, 2020, we recognized $31,000 of grant revenue from research grants provided by the National Science Foundation and the Friedreich’s Ataxia Research Alliance for research related to FA and for the development of a genomic targeting drug delivery platform.

As of December 31, 2020, we had fully recognized all revenue pursuant to the grant awards and hence, there was no such revenue recognized for the three months ended June 30, 2021.

Research and Development Expenses.

Research and development expenses were $5.0 million and $1.1 million for the three months ended June 30, 2021 and 2020, respectively.

The increase of $4.0 million was due primarily to additional expense to support the advancement of our FA program, including chemistry and manufacturing development costs, and cost incurred on our DM1 program during the three months ended June 30, 2021 which were not incurred in the same period of 2020.

Further, we incurred higher personnel and related costs during the three months ended June 30, 2021 as compared to the same period in 2020, as we expanded the number of research and development employees to support our programs.

The increased personnel related costs include an additional $0.5 million of non-cash stock-based compensation costs incurred during 2021 as compared to 2020.

The following table summarizes our research and development expenses by direct and indirect costs for the three months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30,

Direct costs (1)

Indirect costs

Total research and development expenses

In future periods when clinical trial expenses are incurred, external costs will be broken out between our clinical programs and our preclinical programs.

General and Administrative Expenses.

General and administrative expenses were $2.7 million and $0.4 million for the three months ended June 30, 2021 and 2020, respectfully.

The increase of $2.2 million was due primarily to additional personnel and related costs incurred during the three months ended June 30, 2021 as compared to the same period in 2020, as we increased the number of general and administrative personnel to support our organization, including our expanded research and development team and public company operations.

The increased personnel related costs includes an additional $0.7 million of non-cash stock-based compensation costs incurred during 2021 as compared to 2020.

Further, we incurred increased costs to operate as a public company during the three months ended June 30, 2021 as compared to the same period in 2020, including insurance expense and professional fees for legal and accounting services.

Other Income, Net.

Other income was less than $0.1 million for the three months ended June 30, 2021 and 2020.

Other income recognized during the periods consisted primarily of interest income from investments of our excess cash reserves , made pursuant to guidelines in our investment policy.

Comparison of the Six Months Ended June 30, 2021 and 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended June 30,

Grant revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense), net

Grant Revenue.

During the three months ended March 31, 2020, we recognized $0.1 million of grant revenue from research grants provided by the National Science Foundation, the National Institutes of Health and the Friedreich’s Ataxia Research Alliance for research related to FA and for the development of a genomic targeting drug delivery platform.

As of December 31, 2020, we had fully recognized all revenue pursuant to the grant awards and hence, there was no such revenue recognized for the three months ended March 31, 2021.

During the six months ended June 30, 2020, we recognized $0.2 million of grant revenue from research grants provided by the National Science Foundation, the National Institutes of Health and the Friedreich’s Ataxia Research Alliance for research related to FA and for the development of a genomic targeting drug delivery platform.

As of December 31, 2020, we had fully recognized all revenue pursuant to the grant awards and hence, there was no such revenue recognized for the six months ended June 30, 2021.

Research and Development Expenses.

Research and development expenses were $3.9 million and $0.4 million for the three months ended March 31, 2021 and 2020, respectively.

The increase of $3.5 million was due primarily to additional expense to support the advancement of our FA program, including chemistry and manufacturing development costs , and cost incurred on our DM1 program during the three months ended March 31, 2021 which were not incurred in the same period of 2020.

Further, we incurred higher personnel related costs during the three months ended March 31, 2021 as compared to the same period in 2020, as we expanded the number of research and development employees to support our programs, including an additional $0.2 million of non-cash stock-based compensation costs.

The following table summarizes our research and development expenses by direct and indirect costs for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31,

Research and development expenses were $8.9 million and $1.4 million for the six months ended June 30, 2021 and 2020, respectively.

The increase of $7.5 million was due primarily to additional expense to support the advancement of our FA program, including chemistry and manufacturing development costs, and cost incurred on our DM1 program during the six months ended June 30, 2021 which were not incurred in the same period of 2020.

Further, we incurred higher personnel and related costs during the six months ended June 30, 2021 as compared to the same period in 2020, as we expanded the number of research and development employees to support our programs.

The increased personnel related costs include an additional $0.7 million of non-cash stock-based compensation costs incurred during 2021 as compared to 2020.

The following table summarizes our research and development expenses by direct and indirect costs for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended June 30,

Direct costs (1)

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General and Administrative Expenses.

General and administrative expenses were $1.8 million and $0.4 million for the three months ended March 31, 2021 and 2020 , respectfully.

The increase of $1.4 million was due primarily to additional personnel-related costs incurred during the three months ended March 31, 2021 as compared to the same period in 2020, as we increased the number of general and administrative personnel to support our organization, including an additional $0.5 million of non-cash stock-based compensation costs.

Further, we incurred increased professional fees for legal and accounting services during the three months ended March 31, 2021 as compared to same period in 2020.

General and administrative expenses were $4.5 million and $0.8 million for the six months ended June 30, 2021 and 2020, respectfully.

The increase of $3.6 million was due primarily to additional personnel and related costs incurred during the six months ended June 30, 2021 as compared to the same period in 2020, as we increased the number of general and administrative personnel to support our organization, including our expanded research and development team and public company operations.

The increased personnel related costs includes an additional $1.2 million of non-cash stock-based compensation costs incurred during 2021 as compared to 2020.

Further, we incurred increased insurance expense and professional fees for legal and accounting services during the six months ended June 30, 2021 as compared to same period in 2020.

Other Income (Expense), Net.

Other income was $0.2 million for the three months ended March 31, 2021 as compared to net other expense of less than $0.1 million for the same period in 2020.

Other income was $0.2 million for the six months ended June 30, 2021, as compared to net other expense of less than $0.1 million for the same period in 2020.

Other income recognized in 2021 consisted primarily of interest income on our excess cash reserves.

Net other expense in 2020 consisted primarily of interest expense related to borrowings pursuant to our convertible notes and notes payable and the change in fair value of the conversion feature of our convertible notes.

Liquidity and Capital Resources

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future.

Since our inception, we have funded our operations primarily through the sale of our

common stock, convertible preferred stock, grant income and the issuance of convertible notes and notes payable.

Since our inception, we have funded our operations primarily through the sale of our common stock, convertible preferred stock, grant income and the issuance of convertible notes and notes payable.

For example, in March 2021, we completed our initial public offering in which we sold 13,800,000 shares of our common stock at $20.00 per share and received net proceeds, after underwriting discount and offering costs, of $254.3 million.

Further, in January 2021, we issued 19,083,979 shares of Series B convertible preferred stock at $6.55 per share for net proceeds of approximately $124.7 million.

As of March 31, 2021, we had $400.7 million of cash and cash equivalents, an increase of $398.3 million from the $2.4 million of cash and cash equivalents at December 31, 2020.

The increase in our cash and cash equivalents balance during the three months ended March 31, 2021 was primarily due to the proceeds received from our initial public offering of common stock and Series B convertible preferred stock offering completed during the three months ended March 31, 2021.

In addition, a portion of our investment securities matured during the three months ended March 31, 2021 which provided additional cash during the period.

Further detail of the change in our cash and cash equivalents for the three months ended March 31, 2021 and 2020 is summarized below (in thousands):

Three Months Ended March 31,

As of June 30, 2021, we had $370.8 million of cash and cash equivalents, an increase of $368.4 million from the $2.4 million of cash and cash equivalents at December 31, 2020.

In addition, we had $32.0 million of available-for-sale investment securities at June 30, 2021, a decrease of $1.7 million from the $33.7 million of available-for-sale investment securities held at December 31, 2020.

The increase in our cash and cash equivalents balance during the six months ended June 30, 2021 was primarily due to the proceeds received from our initial public offering of common stock completed in March 2021 and Series B convertible preferred stock offering completed in January 2021.

Further detail of the change in our cash and cash equivalents for the six months ended June 30, 2021 and 2020 is summarized below (in thousands):

Six Months Ended June 30,

Net cash (used in) provided by:

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Operating Activities.

Net cash used in operating activities was $3.7 million and $2.7 million for the three months ended March 31, 2021 and 2020, respectively.

The $1.0 million increase in our use of cash was primarily due to the $4.9 million increase in the net loss we incurred during the three months ended March 31, 2021 as compared to the same period in 2020.

The increased loss during the 2021 period was due primarily to the advancement of our research and development programs and increased personnel costs to support these activities, and our preparations to become, and operations as, a public company.

Partially offsetting the cash impact of the increase in our net loss during the 2021 period was an increase in our accounts payable and accrued expense balances and higher non-cash expenses incurred during the period.

Further, during the three months ended March 31, 2020, we used cash to reduce our accounts payable and accrued expense balances.

Net cash used in operating activities was $12.0 million and $4.0 million for the six months ended June 30, 2021 and 2020, respectively.

The $8.0 million increase in our use of cash was primarily due to the $11.0 million increase in the net loss we incurred during the six months ended June 30, 2021, as compared to the same period in 2020.

The higher net loss incurred during the 2021 period was due primarily to the advancement of our research and development programs and higher personnel costs to support these activities and our preparations to become, and operations as, a public company.

Further, during the six months ended June 30, 2020, we used cash to reduce our accounts payable and accrued expense balances.

Investing Activities.

Net cash provided by investing activities was $23.0 million for the three months ended March 31, 2021, due primarily to the net proceeds received from the maturity of investment securities during the period.

During the three months ended March 31, 2020, we used $39.2 million of cash to invest in investment securities.

Net cash provided by investing activities was $1.5 million for the six months ended June 30, 2021, due primarily to the net proceeds received from the maturity of investment securities during the period.

During the six months ended June 30, 2020, we used $38.7 million of cash to invest in investment securities.

We have classified our investments securities as available-for-sale and all investments are made in accordance with our investment policy.

Financing Activities.

Net cash provided by financing activities was $379.0 million for the three months ended March 31, 2021, primarily from the $254.3 million of net proceeds received from our initial public offering in March 2021 and the $124.7 million of net proceeds received from the closing of our Series B convertible preferred stock financing in January 2021.

Net cash provided by financing activities during the three months ended March 31, 2020 was $44.5 million, primarily from the $44.7 million of net proceeds received from our Series A convertible preferred stock financing during the period.

Net cash provided by financing activities was $379.0 million for the six months ended June 30, 2021, primarily from the $254.3 million of net proceeds received from our initial public offering in March 2021 and the $124.7 million of net proceeds received from the closing of our Series B convertible preferred stock financing in January 2021.

Net cash provided by financing activities during the six months ended June 30, 2020 was $44.5 million, primarily from the $44.7 million of net proceeds received from our Series A convertible preferred stock financing during the period.

Funding Requirements

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the emergence of competing therapies and other adverse market developments;

the cost, timing and outcome of seeking FDA, European Medicines Agency (EMA) and any other regulatory approvals for any future product candidates;

the cost, timing and outcome of seeking FDA, EMA and any other regulatory approvals for any future product candidates;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

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the costs associated with being a public company;

the timing of any milestone and royalty payments to Wisconsin Alumni Research Foundation, or other future licensors;

the timing of any milestone and royalty payments to Wisconsin Alumni Research Foundation (WARF), or other future licensors;

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

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the effects of the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide from the COVID-19 pandemic;

the cost associated with commercialization activities for any our future product candidates, if approved.

the cost associated with commercialization activities for any of our future product candidates, if approved.

Until such time, if ever, as we can generate substantial revenues from product sales to support our cost structure, we expect to finance our cash needs through public or private equity offerings, debt financings, or other capital sources which may include strategic collaborations, licensing arrangements or other arrangements with third parties.

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generally accepted accounting principles (GAAP).

The preparation of

these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our financial statements.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to grant revenue and research and development expenses.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis