What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-05-11 · 64 added, 37 removed, 183 unchanged (36% of the section changed)

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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 recently completed 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 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 also developing a second muscle-focused precision medicine that focuses on identification of novel mechanism cardiac modulators as part of our EDG-002 program.

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.

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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.

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.

While EDG-002 is an important preclinical program to us, we have not needed to devote significant financial resources to this program to date since it is still in preclinical development and has 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.

We have fully enrolled an open-label, single-center study that will assess the safety and PK of EDG-5506 over one year in adults with BMD and in June 2022, announced positive interim 2-month results from the ongoing study .

We initiated a Phase 2 trial in individuals with BMD in July 2022 and anticipate initiation of a Phase 2 trial in boys with 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 have incurred significant losses since the commencement of our operations.

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 were $16.1 million and $30.7 million for the three and six months ended June 30, 2022, respectively and $10.4 million and $17.2 million for the three and six months ended June 30, 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 March 31, 2022, we had an accumulated deficit of $91.6 million.

As of June 30, 2022, we had an accumulated deficit of $107.7 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 December 31, 2021, these private placements have provided gross proceeds of $160.7 million and the IPO generated net proceeds of $186.1 million.

From inception through June 30, 2022, 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 $248.4 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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Such expenses include:

● employee and consultant-related expenses including salaries, bonuses, benefits and stock-based compensation expense for employees engaged in research and development functions;

● expenses incurred in connection with the planned clinical development of our product candidates including under agreements with third parties, such as consultants and contract research organizations (CROs);

● the cost of manufacturing drug products for use in our preclinical studies and ongoing and planned clinical trials including under agreements with third parties such as consultants and contract development and manufacturing organizations (CDMOs);

● expenses incurred in connection with the preclinical development of our product candidates including outsourced professional scientific development services, consulting research fees and payments made under sponsored research arrangements with third parties;

● employee and external consultant-related expenses including salaries, bonuses, benefits and stock-based compensation expense for employees engaged in research and development functions;

● external expenses incurred in connection with the clinical development of our product candidates including under agreements with third parties, such as consultants and contract research organizations (CROs);

● the cost of external manufacturing drug products for use in our preclinical studies and ongoing and planned clinical trials including under agreements with third parties such as consultants and contract development and manufacturing organizations (CDMOs);

● expenses incurred in connection with the preclinical development of our product candidates including external, or outsourced professional scientific development services, consulting research fees and payments made under sponsored research arrangements with third parties;

● laboratory supplies;

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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:

Three months ended March 31,

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 June 30,

(in thousands)

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The following table summarizes our research and development expenses:

Three months ended March 31,

Three months ended June 30,

(in thousands)

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Total research and development expenses

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.

Research and development expenses were $12.4 million and $7.9 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $4.5 million was primarily driven by $0.6 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 current and future trials, an increase of $2.4 million related to increased drug discovery and preclinical development of our EDG-002 program and an increase of $1.6 million in employee-related costs to support the growth of our research and development programs.

General and administrative expenses

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.

General and administrative expenses were $4.1 million and $2.6 million for the three months ended June 30, 2022 and 2021, respectively.

The increase of $1.5 million was primarily due to $0.8 million in increased employee-related costs from increased headcount and stock-based compensation and $0.7 million in increased professional and consulting and other administrative costs.

Interest income

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.

Interest income was $424,000 and $107,000 for the three months ended June 30, 2022 and 2021, respectively.

The increase of $317,000 was primarily due to higher interest rates on our marketable securities balances during the three months ended June 30, 2022, as compared to 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

Interest income

Research and development expenses

The following table summarizes our research and development expenses:

Six Months Ended

(in thousands)

External research and development expenses:

EDG-5506 clinical program

Discovery and preclinical

Internal costs, including personnel related

Total research and development expenses

Research and development expenses were $23.5 million and $13.2 million for the six months ended June 30, 2022 and 2021, respectively.

The increase of $10.3 million was primarily driven by $2.0 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 current and future trials, an increase of $4.6 million related to increased drug discovery and preclinical development of our EDG-002 program and an increase of $3.7 million in employee-related costs to support the growth of our research and development programs.

General and administrative expenses

General and administrative expenses were $7.8 million and $4.1 million for the six months ended June 30, 2022 and 2021, respectively.

The increase of $3.7 million was primarily related to $1.8 million in increased employee-related costs from increased headcount, $1.3 million in increased professional and consulting costs and $0.6 million in increased directors and officers insurance.

Interest income

Interest income was $590,000 and $149,000 for the six months ended June 30, 2022 and 2021, respectively.

The increase of $441,000 was primarily due to higher interest rates on our marketable securities balances during the six months ended June 30, 2022, as compared to the six months ended June 30, 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 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.

Through June 30, 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 June 30, 2022, we had cash, cash equivalents and marketable securities in the amount of $248.4 million.

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

Three months ended March 31,

Six months ended June 30,

(in thousands)

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Net cash provided by financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Operating activities

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 during the six months ended June 30, 2022 was primarily driven by our net loss for the period of $30.7 million, and was also impacted by changes in operating assets and liabilities which increased net working capital by $3.5 million.

Cash used in operating activities was reduced by non-cash charges of $5.4 million relating to stock-based compensation expense of $4.0 million, amortization of premium and accretion of discounts, net on marketable securities of $1.1 million, depreciation of $0.2 million and amortization of right-of-use asset of $0.1 million.

Cash used in operating activities during the six months ended June 30, 2021 was primarily driven by our net loss for the period of $17.2 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $0.2 million.

Cash used in operating activities was reduced by non-cash charges of $1.1 million relating to stock-based compensation expense of $1.0 million and depreciation of $0.1 million.

Investing activities

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.

Cash provided by investing activities during the six months ended June 30, 2022 amounted to $31.3 million which was due to $96.6 million in maturities of marketable securities and $13.3 million in sales of marketable securities, which was partially offset by $77.7 million in purchases of marketable securities and $0.9 million for purchases of equipment.

Cash used in investing activities during the six months ended June 30, 2021 amounted to $224.7 million which was due to $231.8 million in purchases of marketable securities, $7.2 million in maturities of marketable securities and $0.1 million for purchases of equipment.

Financing activities

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.

Cash provided by financing activities during the six months ended June 30, 2022 was $0.3 million, which was due to cash proceeds of $328,000 from the issuance of common stock upon the exercise of stock options, $254,000 for the payment of deferred offering costs and $178,000 in proceeds from the employee stock purchase plan.

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

In addition, we generated cash proceeds of $30,000 from the issuance of common stock upon the exercise of stock options and paid $0.1 million in preferred stock issuance costs.

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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 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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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.

During the three and six months ended June 30, 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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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.

Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk from the information provided in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” in our 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022.

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