What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-06 · 72 added, 70 removed, 188 unchanged (43% of the section changed)

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In connection with these events, our Board of Directors approved a reduction in workforce designed to substantially reduce our operating expenses while we undertake a comprehensive assessment of our strategic options to maximize stockholder value.

Ardent Phase 2b Sickle Cell Disease Interim Analysis

The interim analysis for the Ardent trial was conducted when all participants completed the week 24 assessment or terminated early.

The intent-to-treat population was used for the primary efficacy analysis, which is a comparison of the median annualized vaso-occlusive crisis, or VOC, rate between the high dose tovinontrine group (n=47, once daily oral dose of 300 mg or 400 mg based on patient weight) and placebo group (n=32).

Safety was analyzed across all participants enrolled in the Ardent trial, including the high dose, low dose (n=33, 200 mg or 300 mg once daily oral dose based on patient weight) and placebo groups.

Data from the interim analysis demonstrated that tovinontrine was generally well-tolerated, with the most frequent adverse events (at least 10% of participants in any treatment group) considered at least possibly related to study drug by the investigator being nausea, headache, dizziness and vomiting.

Four (3.6%) participants discontinued prior to week 24 due to adverse events.

The median annualized VOC rate in the placebo group was 2.02 VOCs per year and was 1.89 VOCs per year in the high dose tovinontrine group, for a treatment difference of 0.13 VOCs per year, or 6.4%.

Based on the minimal decrease observed in VOCs with the high dose and low VOC rate in the placebo arm, we enacted an addendum to the statistical analysis plan for the trial and noted trends of VOC benefit with tovinontrine.

The median annualized rate of VOCs in the low dose tovinontrine group was zero, as compared to 2.02 in the placebo group, and as compared to placebo, the low dose tovinontrine group experienced an increase in median time to first VOC and a higher proportion of participants who were VOC-free.

A trend for lower median annualized rate of VOCs was also observed for participants in the high and low dose tovinontrine groups on monotherapy (not on background hydroxyurea) as compared to placebo.

Although these additional data were encouraging, none were statistically significant.

In addition, no meaningful difference was observed in fetal hemoglobin response in either the high or low dose tovinontrine groups as compared to placebo.

Collectively, the overall additional data did not materially increase the likelihood of success for this trial.

Forte Phase 2b Beta-thalassemia Interim Analysis

The Forte trial interim analysis evaluated safety and biomarker data for both transfusion-dependent thalassemia, or TDT, and non-transfusion-dependent thalassemia, or NTDT, cohorts, as well as data on transfusion burden reduction in the TDT cohort.

In both cohorts, tovinontrine was well-tolerated, with the most frequent adverse events (at least 10% of participants in any treatment group) considered at least possibly related to study drug by the investigator being nausea and headache.

One NTDT and eight TDT participants (3.3% and 10.8%, respectively) discontinued study drug due to adverse events.

Participants in the TDT cohort of the Forte trial were randomized to either placebo (n=20), low dose (n=25, 200 mg or 300 mg) or high dose (n=29, 300 mg or 400 mg).

No meaningful benefit was observed in transfusion burden in either tovinontrine group when compared to placebo.

Participants in the NTDT cohort of the Forte trial were randomized to either placebo (n=7), low-dose group (n=8, 200 mg or 300 mg), or high-dose group (n=14, 300 mg or 400 mg).

No meaningful improvements were observed in most disease-related biomarkers, including total hemoglobin.

See “Item 1A.

Risk Factors – Risks Related to Strategic Process and Potential Strategic Transaction” for a discussion regarding risks related to our business, financial condition, future operations and prospects in connection with our decision to discontinue our current research and development programs and pursue one or more strategic alternatives for our company.

Financial Overview

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We also simultaneously entered into a sales agreement, or Sales Agreement, with Cantor Fitzgerald & Co, LLC, or Cantor, as sales agent, providing for the offering, issuance and sale by us of up to an aggregate $75.0 million of our common stock from time to time in “at-the-market” offerings under the Shelf.

As of March 31, 2022, we have issued and sold 231,291 shares of common stock under the Sales Agreement , resulting in net proceeds of $1.4 million after deducting commissions and offering expenses.

As of June 30, 2022, we have issued and sold 231,291 shares of common stock under the Sales Agreement , resulting in net proceeds of $1.4 million after deducting commissions and offering expenses.

On July 16, 2021, we completed a public offering of shares of our common stock and issued and sold 8,333,333 shares of common stock at a public offering price of $6.00 per share, resulting in net proceeds of $46.8 million after deducting underwriting discounts and commissions and estimated offering expenses.

We have incurred significant operating losses since inception.

Our losses from operations were $14.7 million and $10.3 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of approximately $162.1 million.

Our losses from operations were $11.5 million and $26.2 million for the three and six months ended June 30, 2022, respectively, and $13.2 million and $23.4 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of approximately $173.6 million.

In April 2022, we discontinued development of tovinontrine and implemented reduction in workforce, each of which was designed to substantially reduce our operating expenses while we undertake a comprehensive assessment of our strategic options.

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If we decide to pursue any future product development efforts, we will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for any future product candidate.

In addition, if we obtain regulatory approval for any product candidate and to the extent that we engage in commercialization activities on our own, we expect we will incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing, and distribution activities.

In addition, if we obtain regulatory approval for any product candidate and to the extent that we engage in commercialization activities on our own, we expect we will

incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing, and distribution activities.

If we decide to pursue any future product development efforts, we will need substantial additional funding to support our continuing operations and develop a growth strategy.

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We will need to generate significant revenue to achieve profitability, and we may never do so.

As of March 31, 2022 we had $72.9 million in cash, cash equivalents and investments.

We believe that our cash, cash equivalents and investments as of March 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.

As of June 30, 2022 we had $60.3 million in cash, cash equivalents and investments.

We believe that our cash, cash equivalents and investments as of June 30, 2022 will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

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We continue to actively monitor the impact of the COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry and workforce.

Although we have not experienced any significant adverse impact from the COVID-19 pandemic on our financial condition, results of operations or liquidity as of the date of this Quarterly Report on Form 10-Q, the COVID-19 pandemic has resulted in disruptions to our clinical trial operations.

In addition, many of our employees are currently working remotely .

In addition, our employees are currently working remotely .

Our financial condition, results of operations and liquidity could be negatively impacted by the COVID-19 pandemic in future periods.

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As the COVID-19 pandemic continues, it may have an adverse effect on our results of future operations, financial position and liquidity, and on our ability to access capital.

Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future .

Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of an economic recession or depression that may occur in the future .

Lundbeck License Agreement

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Research and development expenses consist primarily of costs incurred in connection with the preclinical and clinical development and manufacture of our products.

We expect our research and development expenses to decrease significantly beginning in the second half of 2022 as a result of our April 2022 decision to discontinue development of tovinontrine and our related reduction in workforce.

We expect our research and development expenses to decrease significantly beginning in the third quarter of 2022 as a result of our April 2022 decision to discontinue development of tovinontrine and our related reduction in workforce.

For the periods presented in this Quarterly Report on Form 10-Q, research and development expenses include :

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external research and development expenses incurred under agreements with contract research organizations, or CROs, investigative sites, and consultants that conducted our preclinical studies and clinical trials and other scientific development services;

costs incurred under agreements with contract manufacturing organizations, or CMOs, who develop ed and manufactur ed material for our preclinical studies and clinical trials;

costs incurred under agreements with contract manufacturing organizations, or CMOs, who developed and manufactured material for our preclinical studies and clinical trials;

costs related to compliance with regulatory requirements;

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We did not track our internal research and development expenses on a program-by-program basis as our personnel were deployed across multiple projects under development .

The following table summarizes our research and development expenses for the three months ended March 31, 2022 and 2021:

The following table summarizes our research and development expenses for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

Six Months Ended

(in thousands)

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the number and scope of preclinical and clinical programs we decide to pursue;

our ability to maintain our current research and development programs and to establish new ones;

our ability to maintain research and development programs or to establish new ones;

establishing an appropriate safety profile with investigational new drug application, or IND, enabling studies;

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Other significant general and administrative expenses include the cost of director and officer insurance premiums, legal fees relating to patent, intellectual property and corporate matters, and fees paid for accounting, consulting and other professional services.

We anticipate that our general and administrative expenses will decrease beginning in the second half of 2022 following our April 2022 decision to discontinue development of tovinontrine and the related reduction in workforce.

We anticipate that our general and administrative expenses will decrease beginning in the third quarter of 2022 following our April 2022 decision to discontinue development of tovinontrine and the related reduction in workforce.

Our future general and administrative expenses will be significantly dependent on the outcome of our strategic process and on whether we decide to pursue any future product development efforts.

Total Other Income, Net

Total other income, net primarily consists of interest earned on our cash, cash equivalents and investments.

Total other income, net primarily consisted of interest earned on our cash, cash equivalents and investments.

Results of Operations

Comparison of the Three months ended March 31, 2022 and 2021

The following table summarizes our results of operations for the Three months ended March 31, 2022 and 2021:

Comparison of the Three Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021:

Three Months Ended

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Research and Development Expenses

Research and development expenses increased by approximately $4.1 million from $7.1 million for the three months ended March 31, 2021, to $11.2 million for the three months ended March 31, 2022.

The increase in research and development expenses was primarily attributable to the following:

Research and development expenses decreased by approximately $2.7 million from $10.1 million for the three months ended June 30, 2021, to $7.4 million for the three months ended June 30, 2022.

The decrease in research and development expenses was primarily attributable to the following:

a $3.2 million decrease in costs related to the development and manufacturing of clinical materials, clinical research and oversight of our clinical trials and investigative fees for tovinontrine following discontinuation of clinical development;

a $0.5 million increase in personnel related increase in personnel-related costs, including approximately $1.6 million in costs related to our April 2022 workforce reduction partially offset by a decrease of $0.4 million in stock-based compensation expense;

General and Administrative Expenses

General and administrative expenses increased by approximately $1.0 million from $3.1 million for the three months ended June 30, 2021, to $4.1 million for the three months ended June 30, 2022.

The increase in general and administrative expenses was primarily attributable to the following:

a $0.4 million increase in personnel-related costs, including approximately $0.3 million in costs related to our April 2022 workforce reduction;

a $0.4 million increase in depreciation expense due to a revision of the useful lives of our leasehold improvements and furniture related to our lease termination, which becomes effective on August 7, 2022;

a $0.2 million increase in consulting and professional fees, including legal, business development, accounting and audit fees

Total Other Income, Net

Total other income, net for the three months ended June 30, 2022 was primarily comprised of interest earned on our cash, cash equivalents and investments.

Total other income, net was de minimis for the three months ended June 30, 2021.

Comparison of the Six Months Ended June 30, 2022 and 2021

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021:

Six Months Ended

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Total other income, net

Research and Development Expenses

Research and development expenses increased by approximately $1.4 million from $17.2 million for the six months ended June 30, 2021 to $18.6 million for the six months ended June 30, 2022.

The increase in research and development expenses prior to discontinuation of clinical development in April 2022 was primarily attributable to the following:

a $0.2 million increase in costs related to the development and manufacturing of clinical materials, clinical research and oversight of our clinical trials and investigative fees for tovinontrine;

a $0.4 million increase in personnel-related costs, primarily due to an increase headcount which occurred prior to our April 2022 workforce reduction;

a $0.9 million increase in personnel-related costs, including approximately $1.6 million in costs related to our April 2022 workforce reduction partially offset by a decrease of $0.4 million in stock-based compensation expense;

a $0.3 million increase in other research and development operational costs, including professional services, supplies, and travel.

General and Administrative Expenses

General and administrative expenses increased by approximately $0.3 million from $3.2 million for the three months ended March 31, 2021, to $3.5 million for the three months ended March 31, 2022.

The increase in general and administrative expenses was primarily attributable to the following:

a $0.3 million increase in personnel-related costs, including a $0.1 million increase in stock-based compensation expense, primarily due to an increase headcount which occurred prior to our April 2022 workforce reduction;

a $0.1 million increase in other general and administrative operational costs, including facilities and franchise tax;

a $0.1 million decrease in consulting and professional fees, including legal, business development, accounting and audit fees

General and administrative expenses increased by approximately $1.3 million from $6.3 million for the six months ended June 30, 2021 to $7.6 million for the six months ended June 30, 2022.

The increase in general and administrative expenses was primarily attributable the following:

a $0.7 million increase in personnel-related costs, including approximately $0.3 million in costs related to our April 2022 workforce reduction;

a $0.2 million increase in consulting and professional fees, including legal, business development, accounting and audit fees.

Total Other Income, Net

Total other income, net was less than $0.1 million for the three months ended March 31, 2022 and less than $0.1 million for the three months ended March 31, 2021, in each case consisting primarily of interest earned on our cash, cash equivalents and investments.

Total other income, net for the six months ended June 30, 2022 and 2021 was primarily comprised of interest earned on our cash, cash equivalents and investments.

Liquidity and Capital Resources

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We have not yet commercialized or generated revenue from sales of any product candidate.

Through March 31, 2022, we have funded our operations primarily through the issuance of common stock and convertible preferred stock.

Through June 30, 2022, we have funded our operations primarily through the issuance of common stock and convertible preferred stock.

On April 1, 2021, we filed 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 $200.0 million.

The Shelf was declared effective on April 8, 2021.We also simultaneously entered into the Sales Agreement with Cantor, as sales agent, providing for the offering, issuance and sale by us of up to an aggregate $75.0 million of our common stock from time to time in “at-the-market” offerings under the Shelf.

As of March 31, 2022, we have issued and sold 231,291 shares of common stock under the Sales Agreement, resulting in net proceeds of $1.4 million after deducting commissions and offering expenses.

As of June 30 , 2022, we have issued and sold 231,291 shares of common stock under the Sales Agreement, resulting in net proceeds of $1.4 million after deducting commissions and offering expenses.

The extent to which we utilize the Sales Agreement as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, general market conditions, the extent to which we are able to secure funds from other sources, and restrictions on our ability to sell common stock pursuant to the Sales Agreement to the extent we are then subject to restrictions on our ability to utilize the Form S-3 shelf registration statement to sell more than one-third of the market value of our public float, meaning the aggregate market value of voting and non-voting common stock held by non-affiliates, in any trailing 12-month period.

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As of March 31, 2022, we had $72.9 million in cash, cash equivalents and investments.

As of June 30, 2022, we had $60.3 million in cash, cash equivalents and investments.

While we do not currently expect that the COVID-19 pandemic will have a material adverse impact on our short-term or long-term liquidity, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity.

See “Impact of COVID-19 Pandemic.”

The following table provides information regarding our cash flows for the three months ended March 31, 2022 and 2021:

Three Months Ended

The following table provides information regarding our cash flows for the six months ended June 30, 2022 and 2021:

Six Months Ended

(in thousands)

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Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended March 31, 2022 was $17.2 million primarily due to our net loss of $14.6 million and net cash outflow from a change in operating assets and liabilities of $3.6 million, partially offset by stock-based compensation expense of $1.0 million.

Net cash used in operating activities for the three months ended March 31, 2021 was $13.0 million, primarily due to our net loss of $10.3 million and net cash outflow from the change in operating assets and liabilities of $3.8 million, partially offset by stock-based compensation expense of $0.9 million and amortization of $0.1 million on our short-term investments.

Net cash used in operating activities for the six months ended June 30, 2022 was $29.5 million primarily due to our net loss of $26.1 million and net cash outflow from a change in working capital of $5.4 million, partially offset by stock-based compensation expense of $1.4 million, depreciation expense of $0.5 million, and amortization of investments of $0.1 million.

Net cash used in operating activities for the six months ended June 30, 2021 was $23.4 million primarily due to our net loss of $23.4 million and net cash outflow from a change in working capital of $2.0 million, partially offset by stock-based compensation expense of $1.9 million and depreciation expense of $0.1 million.

Net Cash Provided by Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2022 was $5.3 million due to proceeds from maturities of short-term investments of $5.5 million, partially offset by purchases of property and equipment of $0.1 million.

Net cash provided by investing activities for the three months ended March 31, 2021 was $18.3 million due to proceeds from sales and maturities of short-term investments of $22.0 million, partially offset by purchases of marketable securities of $3.7 million.

Net cash provided by investing activities for the six months ended June 30, 2022 was $11.6 million due to proceeds from maturities of short-term investments of $11.9 million, partially offset by purchases of property and equipment of $0.3 million.

Net cash provided by investing activities for the six months ended June 30, 2021 was $21.7 million due to proceeds from maturities of short-term investments of $29.2 million, partially offset by purchases of short-term investments of $7.5 million .

Net Cash Provided by Financing Activities

We did not incur any financing cash outflow or inflow activities for the three months ended March 31, 2022.

Net cash provided by financing activities for the three months ended March 31, 2021 was $0.5 million, primarily due to $0.5 million of net proceeds received from the exercise of stock options.

We did not incur any financing cash outflow or inflow activities for the six months ended June 30, 2022.

Net cash provided by financing activities for the six months ended June 30, 2021 was $2.1 million, primarily due to $1.7 million of net proceeds received from the sale of common stock under our Sales Agreement with Cantor and $0.7 million of net proceeds received from the exercise of stock options, partially offset by payment of $0.3 million of issuance costs under the Sales Agreement .

Funding Requirements

We expect our operating expenses to decrease significantly beginning in the second half of 2022 following our April 2022 decision to discontinue development of tovinontrine and implement a reduction in workforce.

We expect our operating expenses to decrease significantly beginning in the third quarter of 2022 following our April 2022 decision to discontinue development of tovinontrine and implement a reduction in workforce.

However, we may not realize, in full or in part, the anticipated benefits and savings in operating expenses from these decisions due to unforeseen difficulties, delays or unexpected costs.

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our ability to bring any product candidates through preclinical and clinical development, and the timing and scope of these research and development activities;

the costs of obtaining clinical and commercial supplies of any product candidates we may develop;

the costs of obtaining clinical and commercial supplies of any product candidates we may seek to develop;

our ability to successfully commercialize any product candidates we may develop;

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Additional debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research program or product candidates, or grant licenses on terms that may not be favorable to us.

terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate any product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

In the normal course of business , we enter into agreements that contain contractual obligations, of which the most significant to date include our facility lease and our licensing agreement with Lundbeck.

In May 2019, we entered into a lease agreement for 4,210 square feet of office space located in Boston, Massachusetts.

In June 2021, we entered into an amendment to the lease agreement pursuant to which we lease an additional 5,026 square feet of office space, brining our total leased space to 9,236 square feet.

The lease for this additional space commenced in February 2022.

As of the commencement of the additional lease space, the remaining required payments for our operating lease, not including the optional extension period is approximately $3.1 million.

For further information regarding our operating lease agreement, please see Note 7 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

In the normal course of business , we enter into agreements that contain contractual obligations, of which the most significant to date include our licensing agreement with Lundbeck.

Our license agreement with Lundbeck, as well as certain other agreements, requires us to pay third parties upon achievement of certain development, regulatory or commercial milestones.

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We have not included payments contingent upon the achievement of certain development, regulatory or commercial milestones on our consolidated balance sheets.

For further information regarding certain of our license agreement with

Lundbeck and amounts that could become payable in the future under that agreement , please see Note 7 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q .

For further information regarding certain of our license agreement with Lundbeck and amounts that could become payable in the future under that agreement, please see Note 6 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q .

In addition, we are party to certain agreements with contract research organizations for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes.

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The effects of material revisions in estimates, if any, will be reflected in the unaudited condensed consolidated financial statements prospectively from the date of change in estimates.

During the three months ended March 31, 2022, there were no material changes to our critical accounting policies from those described in our audited consolidated financial statements for the year ended December 31, 2021 included in our Annual Report on Form 10-K filed with the SEC on March 15, 2022.

During the three and six months ended June 30, 2022, there were no material changes to our critical accounting policies from those described in our audited consolidated financial statements for the year ended December 31, 2021 included in our Annual Report on Form 10-K filed with the SEC on March 15, 2022.

Recent Accounting Pronouncements

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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