What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-11 compared with 2021-11-10 · 51 added, 89 removed, 169 unchanged (45% of the section changed)

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The following discussion of the financial condition and results of operations of Edgewise Therapeutics, Inc.

should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and the audited financial statements and notes included in our final prospectus for our initial public offering filed pursuant to Rule 424(b) under the Securities Act of 1933 with the Securities and Exchange Commission, on March 26, 2021.

should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and the audited financial statements and notes included in our Annual Report on Form 10-K, or Annual Report, filed with the Securities and Exchange Commission, on February 24, 2022.

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

As a result of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, our actual results could differ materially from the results described in or implied by these forward-looking statements.

As a result of many factors, including those factors set forth in the “Risk Factors” section of this quarterly report, our actual results could differ materially from the results described in or implied by these forward-looking statements.

You should carefully read the “Risk Factors” to gain an understanding of the factors that could cause actual results to differ materially from our forward-looking statements.

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Our platform utilizes custom-built high throughput and translatable systems that measure integrated muscle function in whole organ extracts to identify small molecule precision medicines regulating key proteins in muscle tissue, initially focused on addressing rare neuromuscular and cardiac diseases.

Our lead candidate, EDG-5506, is an orally administered allosteric, selective, fast myofiber (type II) myosin small molecule inhibitor designed to address the root cause of dystrophinopathies including Duchenne muscular dystrophy (DMD) and Becker muscular dystrophy (BMD), and is currently in a Phase 1 clinical trial.

We have developed and characterized a library of selective fast skeletal myosin inhibitors exhibiting a broad range of pharmacological and pharmacokinetic (PK) properties.

We are characterizing EDG-6289 as a faster onset alternative to EDG-5506 for the treatment of movement disorders, including muscle spasticity associated with multiple sclerosis, cerebral palsy and stroke.

We also intend to advance two other muscle-focused precision medicines into clinical development.

We also intend to develop two other muscle-focused precision medicines.

Our second program, EDG-5440, is a next generation myosin ATPase modulator designed to target skeletal muscle in a specific set of rare neuromuscular diseases.

Our third program, EDG-002, focuses on identification of novel mechanism cardiac modulators.

We are initially pursuing a new target for inherited hypertrophic cardiomyopathy (HCM) in addition to exploring the potential of this novel mechanism across other rare cardiac disorders.

Our fourth program, EDG-003, is focused on developing a next-generation approach to improve muscle and preserve nerves in a specific set of rare neuromuscular diseases.

We are initially pursuing a new target for inherited hypertrophic cardiomyopathy (HCM) in addition to exploring the potential of this novel mechanism across other cardiac disorders.

Our preliminary preclinical studies have generated promising data, such that our EDG-002 program has the potential to yield molecules that could become a new therapeutic option for the treatment of HCM as well as other cardiac disorders.

We plan to initiate IND-enabling studies in 2022.

We believe our programs also offer substantial opportunities for us to expand into related rare diseases for which there are limited or no approved treatments.

The Company announced in October 2021 positive topline results from the multiple ascending dose (MAD) portion of a first-in-human Phase 1, healthy volunteer (HV), clinical trial assessing the safety, tolerability, PK and pharmacodynamics of escalating doses of EDG-5506, an orally administered small molecule myosin inhibitor designed to protect injury-susceptible fast skeletal muscle fibers in dystrophinopathies such as DMD and BMD.

Based on these favorable results, the Company anticipates initiation of Phase 2 trials in individuals with BMD in the first half of 2022 and DMD in the second half of 2022.

Moreover, the Company has also started dosing individuals with BMD as part of the ongoing Phase 1b clinical trial.

The Company also expects to initiate a follow-on open-label study in BMD patients in the first quarter of 2022 to explore the above parameters over 3 months.

While EDG-5440 and EDG-002 are important preclinical programs to us, we have not needed to devote significant financial resources to these programs to date since they are still in preclinical development and have not yet advanced into clinical trials.

In October 2021, we announced positive topline results from the MAD portion of a first-in-human Phase 1, HV clinical trial.

In addition, in January 2022, we announced positive topline results from the BMD, or Phase 1b, portion of a first-in-human Phase 1 clinical trial assessing the safety, tolerability, PK and PD of EDG-5506.

We have fully enrolled a follow-on open-label, single-center study that will assess the safety and PK of EDG-5506 over one year in adults with BMD .

We anticipate initiation of Phase 2 trials in individuals with BMD in the second quarter of 2022 and DMD in the second half of 2022.

Since our inception in 2017, we have devoted substantially all of our focus and financial resources to discovering, identifying and developing potential product candidates, including advancing our development programs, conducting preclinical studies of our product candidates and initiating a clinical trial, organizing and staffing our company, business planning, raising capital and securing related intellectual property rights.

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We will need substantial additional funding to support our continuing operations and pursue our development and commercialization strategy.

Until such time that we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including income from collaborations, strategic partnerships or marketing,

distribution or licensing arrangements with third parties or from grants from organizations and foundations.

Until such time that we can generate

significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including income from collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties or from grants from organizations and foundations.

We may be unable to raise additional funds or to enter into such other agreements or arrangements when needed on favorable terms, or at all.

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We have incurred significant losses since the commencement of our operations.

Our net losses were $12.9 million and $30.1 million for the three and nine months ended September 30, 2021, respectively and $3.6 million and $10.8 million for the three and nine months ended September 30, 2020, respectively, and we expect to continue to incur significant losses for the foreseeable future as we advance our product candidates through preclinical development and clinical trials and seek regulatory approval of our product candidates.

Our net losses were $14.7 million and $6.8 million for the three months ended March 31, 2022 and 2021, respectively, and we expect to continue to incur significant losses for the foreseeable future as we advance our product candidates through preclinical development and clinical trials and seek regulatory approval of our product candidates.

Our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities.

As of September 30, 2021, we had an accumulated deficit of $64.3 million.

As of March 31, 2022, we had an accumulated deficit of $91.6 million.

To date, we have financed our operations primarily through private placements of convertible preferred stock and an initial public offering (IPO) of our common stock.

From inception through September 30, 2021, these private placements have provided gross proceeds of $160.7 million and the IPO generated net proceeds of $186.1 million after deducting underwriting discounts and commissions and offering costs of $16.3 million.

From inception through December 31, 2021, these private placements have provided gross proceeds of $160.7 million and the IPO generated net proceeds of $186.1 million.

We believe that our existing cash and cash equivalents and marketable securities of $265.8 million will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 12 months.

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As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of our clinical trial and other related business activities.

We are carefully monitoring the pandemic and the potential length and depth of the resulting economic impact on its financial condition and results of operations.

Components of Our Results of Operations

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General and administrative expenses also include facilities and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the continued research and development of our programs and also anticipate that we will incur higher expenses relating to accounting, audit, legal, regulatory, compliance, director and officer insurance and investor and public relations as a result of being a public company.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the continued research and development of our programs.

Interest income

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Results of Operations

Comparison of the three months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:

Three months ended September 30,

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Interest income

Research and development expenses

The following table summarizes our research and development expenses:

Three months ended September 30,

(in thousands)

External research and development expenses:

EDG-5506 clinical program

Discovery and preclinical

Internal and other unallocated costs

Total research and development expenses

Research and development expenses were $9.9 million and $3.2 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $6.6 million was primarily driven by $3.1 million of higher external research and development expenses related to our Phase 1 clinical trial of EDG-5506, an increase of $1.2 million related to increased drug discovery and preclinical development of our other programs and an increase of $2.3 million in employee-related costs, due largely to an increased employee headcount and stock-based compensation to support the growth of our research and development programs.

General and administrative expenses

General and administrative expenses were $3.2 million and $0.4 million for the three months ended September 30, 2021 and 2020, respectively.

The increase of $2.8 million was primarily related to the cost related to operating as a public company, including $1.1 million in increased employee-related costs from increased headcount and stock-based compensation, $0.7 million in increased directors and officers insurance and $1.0 million in increased professional and consulting and other administrative costs.

Interest income

Interest income was $127,000 and $1,000 for the three months ended September 30, 2021 and 2020, respectively.

The increase of $126,000 was the result of higher cash and marketable securities balances from the proceeds of our IPO in 2021 as compared to our cash balances in 2020, resulting in higher interest income earned.

Comparison of the nine months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:

Nine months ended September 30,

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:

Three months ended March 31,

(in thousands)

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The following table summarizes our research and development expenses:

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Discovery and preclinical

Internal and other unallocated costs

Internal costs, including personnel related

Total research and development expenses

Research and development expenses were $23.1 million and $9.8 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $13.3 million was primarily driven by $6.2 million of higher external research and development expenses related to our Phase 1 clinical trial of EDG-5506, an increase of $2.6 million related to increased drug discovery and preclinical development of our other programs and an increase of $4.4 million in employee-related costs, due largely to an increased employee headcount and stock-based compensation to support the growth of our research and development programs.

Research and development expenses were $11.1 million and $5.4 million for the three months ended March 31, 2022 and 2021, respectively.

The increase of $5.8 million was primarily driven by $1.8 million of higher external research and development expenses related to our EDG-5506 clinical program including clinical trial costs and product candidate manufacturing costs to support future trials, an increase of $2.3 million related to increased drug discovery and preclinical development of our other programs and an increase of $1.7 million in employee-related costs to support the growth of our research and development programs.

General and administrative expenses

General and administrative expenses were $7.3 million and $1.0 million for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $6.3 million was primarily related to the cost related to operating as a public company, including $2.8 million in increased employee-related costs from increased headcount and stock-based compensation, $1.5 million in increased directors and officers insurance and $2.0 million in increased professional and consulting costs and other administrative costs.

General and administrative expenses were $3.7 million and $1.5 million for the three months ended March 31, 2022 and 2021, respectively.

The increase of $2.2 million was primarily related to the cost of operating as a public company, including $0.9 million in increased employee-related costs from increased headcount and stock-based compensation, $0.7 million in increased directors and officers insurance and $0.6 million in increased professional and consulting and other administrative costs.

Interest income

Interest income was $276,000 and $67,000 for the nine months ended September 30, 2021 and 2020, respectively.

The increase of $209,000 was the result of higher cash and marketable securities balances from the proceeds of our IPO in 2021 as compared to our cash balances in 2020, resulting in higher interest income earned.

Interest income was $166,000 and $42,000 for the three months ended March 31, 2022 and 2021, respectively.

The increase of $124,000 was primarily due to higher marketable securities balances during the three months ended March 31 2022, as compared to the three months ended March 31, 2021.

Liquidity and Capital Resources

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We have funded our operations to date primarily with proceeds from the sale of convertible preferred stock and the initial public offering of our common stock.

Through September 30, 2021, we had received gross proceeds of $160.7 million from the sale of convertible preferred stock and $186.1 million in net proceeds from the initial public offering of our common stock after deducting underwriting discounts, commissions and offering costs of $16.3 million.

As of September 30, 2021, we had cash, cash equivalents and marketable securities in the amount of $290.5 million.

Through March 31, 2022, we had received gross proceeds of $160.7 million from the sale of convertible preferred stock and $186.1 million in net proceeds from the initial public offering of our common stock.

As of March 31, 2022, we had cash, cash equivalents and marketable securities in the amount of $265.8 million.

The following table summarizes our sources and uses of cash for each of the periods presented:

Nine months ended September 30,

Three months ended March 31,

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Operating activities

Cash used in operating activities in the nine months ended September 30, 2021 was primarily driven by our net loss for the period of $30.1 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $3.3 million.

Cash used in operating activities was reduced by non-cash charges of $2.7 million relating to stock-based compensation expense of $2.5 million and depreciation of $0.2 million.

Cash used in operating activities in the nine months ended September 30, 2020 was primarily driven by our net loss for the period of $10.8 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $0.5 million.

Cash used in operating activities in the three months ended March 31, 2022 was primarily driven by our net loss for the period of $14.7 million, and was also impacted by changes in operating assets and liabilities which increased net working capital by $0.7 million.

Cash used in operating activities was reduced by non-cash charges of $2.8 million relating to stock-based compensation expense of $2.0 million, amortization of premium and accretion of discounts, net on marketable securities of $0.7 million and depreciation of $0.1 million.

Cash used in operating activities in the three months ended March 31, 2021 was primarily driven by our net loss for the period of $6.8 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $0.4 million.

Cash used in operating activities was reduced by non-cash charges of $0.4 million relating to stock-based compensation expense of $0.3 million and depreciation of $0.1 million.

Investing activities

Cash used in investing activities during the nine months ended September 30, 2021 amounted to $256.4 million which was due to $273.2 million in purchases of marketable securities and $0.6 million for purchases of equipment, which was partially offset by $17.4 million in maturities of marketable securities.

Cash used in investing activities during the nine months ended September 30, 2020 amounted to $0.2 million and was for purchases of equipment.

Cash provided by investing activities during the three months ended March 31, 2022 amounted to $31.4 million which was due to $36.9 million in maturities of marketable securities and $8.8 million in sales of marketable securities, which was partially offset by $14.0 million in purchases of marketable securities and $0.4 million for purchases of equipment.

Cash used in investing activities during the three months ended March 31, 2021 amounted to $64.8 million which was due to $64.7 million in purchases of marketable securities and $0.1 million for purchases of equipment.

Financing activities

Net cash provided by financing activities during the nine months ended September 30, 2021 was $186.1 million, primarily consisting of cash proceeds from the initial public offering of the Company’s common stock.

Net cash provided by financing activities during the three months ended March 31, 2022 was $0.1 million, which was due to cash proceeds of $73,000 from the issuance of common stock upon the exercise of stock options.

Net cash provided by financing activities during the three months ended March 31, 2021 was $187.0 million, primarily consisting of cash proceeds from the initial public offering of the Company’s common stock.

In addition, we generated cash proceeds of $23,000 from the issuance of common stock upon the exercise of stock options and paid $0.1 million in preferred stock issuance costs.

Net cash provided by financing activities during the nine months ended September 30, 2020 was $25.3 million which was generated from cash proceeds from the issuance of Series B-2 convertible preferred stock for $25.1 million and the issuance of common stock upon the exercise of stock options for $0.2 million.

Funding requirements

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We are subject to all of the risks incident in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business.

In addition, we expect to incur additional costs associated with operating as a public company.

In addition, we expect to continue to incur additional costs associated with operating as a public company.

Our expenses will also increase if, and as, we:

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● acquire or in-license other product candidates and technologies.

We expect that our existing cash and cash equivalents and marketable securities, will be sufficient to enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 24 months.

We do not currently have material any long-term capital requirements other than what will be required to fund operations for the foreseeable future and the amounts disclosed on the contractual obligations and commitments section below.

In order to complete the process of obtaining regulatory approval for our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding.

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● the compliance and administrative costs associated with being a public company;

● the potential effects of inflation on our business operations;

● the extent to which we acquire or invest in businesses, products, or technologies, although we currently have no commitments or agreements relating to any of these types of transactions.

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Future equity or debt financings may contain terms that are not favorable to us or our stockholders including debt instruments imposing covenants that restrict our operations and limit our ability to incur liens, issue additional debt, pay dividends, repurchase our common stock, make certain investments or engage in merger, consolidation, licensing or asset sale transactions.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of September 30, 2021:

Payments Due by Period

(in thousands)

Operating lease commitments (1)

(1) Reflects minimum payments due for office and laboratory space in Boulder, Colorado leased under an operating lease that was amended in August 2021 and expires in August 2022, and laboratory space in Portland, Oregon, leased under a short-term arrangement with renewal options.

We have exclusively licensed intellectual property from The Ohio State Innovation Foundation (OSIF) pursuant to a license agreement effective November 20, 2020.

Under the license agreement, we are obligated to make payments to OSIF aggregating up to $1.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified development and regulatory approval milestones and approximately $2.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified sales milestones.

We are also obligated to pay low single-digit royalties to OSIF based on net sales by us and our affiliates and sublicensees of each product covered by the OSIF licensed patent rights.

In addition, in the event we sublicense the OSIF licensed patent rights, we are obligated to pay OSIF a specified portion of income we receive from sublicensing.

In addition, we have entered into contracts in the normal course of business with CROs, CDMOs and other third parties for preclinical research studies and testing, clinical trials and manufacturing services.

These contracts do not contain any minimum purchase commitments and are cancelable by us upon prior notice and, as a result, are not included in the table of contractual obligations and commitments above.

Payments due upon cancellation consist only of payments for services provided and expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation.

Off-Balance Sheet Arrangements

We currently do not have, and did not have during the periods presented, any off-balance sheet arrangements, as defined in the rules and regulations of the U.S.

Securities and Exchange Commission.

Critical Accounting Policies and Significant Judgments and Estimates

Critical Accounting Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States.

The preparation of our 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 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 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 a periodic basis.

Our actual results may differ from these estimates.

Our critical accounting policies are described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our final prospectus for our IPO filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on March 26, 2021 and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

During the three and nine months ended September 30, 2021, there were no material changes to our critical accounting policies from those discussed in our final prospectus filed on March 26, 2021.

Our critical accounting policies are described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K filed with the SEC on February 24, 2022 and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

During the three months ended March 31, 2022, there were no material changes to our critical accounting estimates from those discussed in our Annual Report on Form 10-K filed on February 24, 2022.

Recently Issued 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