What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-11 compared with 2022-11-03 · 66 added, 85 removed, 166 unchanged (48% of the section changed)

9 unchanged sentences

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 and began a Phase 2 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 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.

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.

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.

Our lead product 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).

In October 2021, we announced positive topline results from the multiple ascending dose (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 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 October 2022, announced positive interim 6-month results from the ongoing study .

We have fully enrolled an open-label, single-center study that will assess the safety and PK of EDG-5506 over two years in adults with BMD and in October 2022, announced positive interim 6-month results from the ongoing study .

We initiated a Phase 2 clinical trial in individuals with BMD in July 2022 and initiated our Phase 2 clinical trial in children with DMD in October 2022.

We have also identified a second muscle-targeted precision medicine that focuses on identification of novel mechanism cardiac modulators.

We are initially pursuing our lead product candidate, EDG-7500, for hypertrophic cardiomyopathy (HCM) in addition to exploring the potential of this novel mechanism in disorders of diastolic dysfunction.

Our EDG-003 cardiovascular discovery program is exploring the potential of other novel mechanisms to address other cardiac disorders.

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

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.

2 unchanged sentences

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.

If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay or terminate our efforts to expand our product pipeline.

If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly

delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay or terminate our efforts to expand our product pipeline.

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

Our net losses were $17.5 million and $48.2 million for the three and nine months ended September 30, 2022, respectively and $12.9 million and $30.1 million for the three and nine months ended September 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 were $22.8 million and $14.7 million for the three months ended March 31, 2023 and 2022, 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, 2022, we had an accumulated deficit of $125.2 million.

As of March 31, 2023, we had an accumulated deficit of $167.4 million.

To date, we have financed our operations primarily through private placements of convertible preferred stock, and public offerings of our common stock.

From inception through September 30, 2022, these private placements have provided gross proceeds of $160.7 million, and the initial public offering and follow-on public offering of our common stock have generated net proceeds of $315.3 million.

From inception through March 31, 2023, these private placements have provided gross proceeds of $160.7 million, and the initial public offering and follow-on public offering of our common stock have generated net proceeds of $315.3 million.

We believe that our existing cash and cash equivalents and marketable securities of $328.0 million will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 12 months.

In March 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) outbreak a global pandemic.

To limit the spread of COVID-19, governments took various actions including the issuance of stay-at-home orders and physical distancing guidelines.

Accordingly, businesses have adjusted, reduced or suspended their operating activities.

Disruptions caused by the COVID-19 pandemic, including the effects of the stay-at-home orders and work-from-home policies, have impacted our productivity, have resulted in increased operational expenses, certain adjustments to the operations of our clinical trial, delays in the enrollment of new patients at our clinical trial site, and delays in certain supply chain activities and collecting and analyzing data from patients in our clinical trial.

As the COVID-19 pandemic continues and new variants emerge, it may further disrupt our business and delay our development programs and regulatory timelines, the magnitude of which will depend, in part, on the length and severity of any restrictions and other limitations on our ability to conduct business in the ordinary course as well as the spread, severity and potential resurgence of COVID-19, the impact of new COVID-19 variants, and vaccination deployment efforts.

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 also monitoring other macro-economic and geopolitical developments, such as the Russia-Ukraine conflict, inflation, cybersecurity risks and sanctions so that the Company can be prepared to react to new developments as they arise.

Macroeconomic and Geopolitical Developments

We are monitoring macroeconomic and geopolitical developments, such as inflation, instability in the banking and financial services sector, tightening of the credit markets, cybersecurity risks, the Russia-Ukraine conflict, and sanctions so that the Company can be prepared to react to new developments as they arise.

We are carefully monitoring these developments, as well as the COVID-19 pandemic, and the resulting economic impact.

13 unchanged sentences

● payments made under third-party licensing agreements.

The majority of these expenses have been incurred to advance our lead product candidate, EDG-5506.

We expect that significant additional spending will be required to progress EDG-5506 through the remainder of the clinical development phases.

The majority of these expenses have been incurred to advance our lead product candidate, EDG-5506 and to a lesser degree EDG-7500.

We expect that significant additional spending will be required to progress these and other potential discoveries through the remainder of the clinical development phases.

These expenses will primarily consist of expenses for the administration of clinical trials as well as manufacturing costs for clinical material supply.

7 unchanged sentences

We initiated a Phase 2 clinical trial in individuals with BMD in July 2022 and a Phase 2 clinical trial in children with DMD in October 2022.

As a result, we expect that our research and development expenses will increase substantially over the next several years as we advance EDG-5506 through clinical trials and additional product candidates enter clinical trials;

As a result, we expect that our research and development expenses will increase substantially over the next several years as we advance EDG-5506, EDG-7500, a product from our EDG-003 cardiovascular discovery program through clinical trials and additional product candidates enter clinical trials;

continue to develop our proprietary drug discovery platform;

3 unchanged sentences

We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset these expenses.

Our expenditures on current and future preclinical and clinical development programs are subject

to numerous uncertainties in timing and cost to completion.

Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion.

The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

10 unchanged sentences

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

● development and timely delivery of commercial-grade drug formulations that can be used in our planned clinical trials and for commercial launch;

● development and timely delivery of sufficient supplies of our drug product that can be used in our planned clinical trials and for commercial launch upon approval;

● obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;

10 unchanged sentences

Results of Operations

Comparison of the three months ended September 30, 2022 and 2021

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

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 costs, including personnel related

Total research and development expenses

Research and development expenses were $13.9 million and $9.9 million for the three months ended September 30, 2022 and 2021, respectively.

The increase of $4.0 million was primarily driven by an increase of $2.4 million related to increased drug discovery and preclinical development of our EDG-002 program, an increase of $1.5 million in employee-related costs to support the growth of our research and development programs and an increase of $0.2 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.

General and administrative expenses

General and administrative expenses were $4.4 million and $3.2 million for the three months ended September 30, 2022 and 2021, respectively.

The increase of $1.2 million was primarily due to $1.1 million in increased employee-related costs from increased headcount and stock-based compensation and $0.1 million in increased professional and consulting and other administrative costs.

Interest income

Interest income was $0.8 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively.

The increase of $0.6 million was primarily due to higher interest rates on our marketable securities balances during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

Comparison of the nine months ended September 30, 2022 and 2021

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

Nine months ended September 30,

Comparison of the three months ended March 31, 2023 and 2022

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

(in thousands)

7 unchanged sentences

The following table summarizes our research and development expenses:

Nine months ended September 30,

Three months ended March 31,

(in thousands)

4 unchanged sentences

Total research and development expenses

Research and development expenses were $37.4 million and $23.1 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase of $14.3 million was primarily driven by an increase of $6.7 million related to increased drug discovery and preclinical development of our EDG-002 program, an increase of $5.2 million in employee-related costs to support the growth of our research and development programs and $2.4 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.

Research and development expenses were $19.9 million and $11.1 million for the three months ended March 31, 2023 and 2022, respectively.

The increase of $8.8 million was primarily driven by an increase of $3.5 million in internal costs, including personnel related costs, due largely to an increased employee headcount and stock-based compensation to support the growth of our research and development programs.

EDG-5506 clinical program expenses increased by $3.2 million due to increased clinical trial activity in 2023 from our Canyon, Lynx, and Dune studies which were not active during the comparable period in 2022, in addition to higher product candidate manufacturing costs to support current and future trials.

Additionally, drug discovery and preclinical expenses increased $2.1 million, primarily due to increased development of our product candidate EDG-7500 and our EDG-003 cardiovascular discovery program.

General and administrative expenses

General and administrative expenses were $12.2 million and $7.3 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase of $4.9 million was primarily related to $2.8 million in increased employee-related costs from increased headcount, $1.5 million in increased professional and consulting costs and $0.6 million in increased directors and officers insurance.

General and administrative expenses were $5.8 million and $3.7 million for the three months ended March 31, 2023 and 2022, respectively.

The increase of $2.1 million was primarily due to $1.4 million in increased employee-related costs from increased headcount and stock-based compensation and $0.7 million in increased professional and consulting costs and other administrative costs.

Interest income

Interest income was $1.4 million and $0.3 million for the nine months ended September 30, 2022 and 2021, respectively.

The increase of $1.1 million was primarily due to higher interest rates on our marketable securities balances during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

Interest income was $2.9 million and $0.2 million for the three months ended March 31, 2023 and 2022, respectively.

The increase of $2.7 million was primarily due to higher interest rates on our marketable securities balances during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

Liquidity and Capital Resources

2 unchanged sentences

To date, we have financed our operations primarily through private placements of convertible preferred stock and public offerings of our common stock.

As of September 30, 2022, we had cash, cash equivalents and marketable securities in the amount of $364.8 million.

As of March 31, 2023, we had cash, cash equivalents and marketable securities in the amount of $328.0 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 provided by (used in) investing activities

Net cash provided by investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Operating activities

Cash used in operating activities during the nine months ended September 30, 2022 was primarily driven by our net loss for the period of $48.2 million, and was also impacted by changes in operating assets and liabilities which increased net working capital by $1.4 million.

Cash used in operating activities was reduced by non-cash charges of $8.9 million relating to stock-based compensation expense of $7.2 million, amortization of premium and accretion of discounts, net on marketable securities of $1.2 million, depreciation of $0.3 million and amortization of right-of-use asset of $0.2 million.

Cash used in operating activities during 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 during the three months ended March 31, 2023 was primarily driven by our net loss for the period of $22.8 million, and was also impacted by changes in operating assets and liabilities which increased net working capital by $2.0 million.

Cash used in operating activities was reduced by non-cash charges of $2.0 million relating to stock-based compensation expense of $3.8 million, amortization of premium and accretion of discounts, net on marketable securities of $2.1 million, depreciation of $0.2 million and amortization of right-of-use asset of $46,000.

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.

Investing activities

Cash provided by investing activities during the nine months ended September 30, 2022 amounted to $5.0 million which was due to $126.9 million in maturities of marketable securities and $26.0 million in sales of marketable securities, which was partially offset by $145.7 million in purchases of marketable securities and $2.3 million for purchases of equipment.

Cash used in investing activities during the nine months ended September 30, 2021 amounted to $256.3 million which was due to $273.2 million in purchases of marketable securities, $17.4 million in maturities of marketable securities and $0.6 million for purchases of equipment.

Cash provided by investing activities during the three months ended March 31, 2023 amounted to $49.0 million, which was due to $69.8 million in maturities of marketable securities and $0.6 million in sales of marketable securities, which was partially offset by $17.0 million in purchases of marketable securities and $4.4 million 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.

Financing activities

Cash provided by financing activities during the nine months ended September 30, 2022 was $130.0 million, which was due to $129.7 million in net proceeds from the September 2022 Offering, cash proceeds of $0.4 million from the issuance of common stock upon the exercise of stock options, $0.3 million for the payment of deferred offering costs and $0.2 million in proceeds from the employee stock purchase plan.

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.

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

Cash provided by financing activities during the three months ended March 31, 2023 was $21,000, which was due to cash proceeds from the issuance of common stock upon the exercise of stock options.

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

Funding requirements

2 unchanged sentences

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 continue to incur additional costs associated with operating as a public company.

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:

18 unchanged sentences

● the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;

● the costs of manufacturing commercial-grade products and sufficient inventory to support commercial launch;

● the costs of manufacturing products of consistent quality and obtaining sufficient inventory to support commercial launch;

● the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;

15 unchanged sentences

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.

Operating and Capital Expenditure Requirements and Contractual Obligations

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 12 months.

Our short-term material cash requirements as of March 31, 2023 are to fund our operations, which consist primarily of research and development expenses related to our programs, and to a lesser extent, general and administrative expenses.

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.

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.

In addition, 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.

Our long-term cash requirements as of March 31, 2023 includes our lease obligations.

In January 2022, we entered into a lease agreement for approximately 18,614 square feet of office and laboratory space in Boulder, Colorado which includes escalating rent payments and an 8.2 year term.

In February 2023, the lease was modified to occupy an additional 9,624 square feet of office space, with aggregate payments of approximately $1.5 million over the initial 7.3 year term.

As of March 31, 2023 our total operating lease liability balance is $5.6 million, of which $0.8 million is a current liability.

Critical Accounting Estimates

1 unchanged sentence

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.

1 unchanged sentence

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 23, 2023 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, 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 months ended March 31, 2023, there were no material changes to our critical accounting estimates from those discussed in our Annual Report on Form 10-K filed on February 23, 2023.

Recently Issued Accounting Pronouncements

11 unchanged sentences

We may continue to be a smaller reporting company if either (1) the market value of our stock held by non-affiliates is less than $250 million or (2) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

If we are a smaller reporting company

at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

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.

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

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