What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-10 compared with 2023-05-11 · 81 added, 50 removed, 182 unchanged (42% of the section changed)

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Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for severe, rare muscle disorders for which there is significant unmet medical need.

We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for severe, genetic neuromuscular and cardiac disorders for which there is significant unmet medical need.

Guided by our holistic drug discovery approach to targeting the muscle as an organ, we have combined our foundational expertise in muscle biology and small molecule engineering to build our proprietary, muscle focused drug discovery platform.

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

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 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.

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

We have fully enrolled an open-label, single-center study, known as ARCH, that will assess the safety and PK of EDG-5506 over two years in adults with Becker and in June 2023, we announced positive interim 12-month results from the ongoing study .

We initiated a Phase 2 clinical trial in individuals with Becker in July 2022, known as CANYON, and anticipate initiating a potentially registrational cohort in individuals with Becker in the second half of 2023, known as GRAND CANYON.

We also initiated a Phase 2 clinical trial in children with Duchenne, known as LYNX, in October 2022.

We have also evolved a second muscle-targeted initiative that focuses on identification of novel cardiac muscle 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.

Additionally, our EDG-003 cardiovascular discovery program is exploring the potential of other novel mechanisms to address a variety of cardiac/metabolic disorders.

We believe our programs also offer substantial opportunities for us to expand into other rare muscle 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.

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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.

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.

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

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 were $21.5 million and $44.3 million for the three and six months ended June 30, 2023, respectively and $16.1 million and $30.7 million for the three and six months ended June 30, 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 March 31, 2023, we had an accumulated deficit of $167.4 million.

As of June 30, 2023, we had an accumulated deficit of $188.9 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 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.

From inception through June 30, 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 $309.9 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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Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials.

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.

We initiated a Phase 2 clinical trial in individuals with Becker in July 2022 and a Phase 2 clinical trial in children with Duchenne 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, EDG-7500, a product from our EDG-003 cardiovascular discovery program through clinical trials and additional product candidates enter clinical trials;

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Results of Operations

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,

Comparison of the three months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022:

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 $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.

Research and development expenses were $19.6 million and $12.4 million for the three months ended June 30, 2023 and 2022, respectively.

The increase of $7.2 million was primarily driven by an increase of $4.1 million in internal costs, including personnel related costs and stock-based compensation resulting from increased employee headcount to support the growth of our research and development programs.

EDG-5506 clinical program expenses increased by $2.7 million which was primarily due to costs incurred in connection with our LYNX trial which was not active during the comparable period in 2022, increased clinical trial activity in our CANYON study from site activations and patient enrollment and higher product candidate manufacturing costs to support current and future trials.

General and administrative expenses

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.

General and administrative expenses were $5.8 million and $4.1 million for the three months ended June 30, 2023 and 2022, respectively.

The increase of $1.7 million was primarily due to $1.3 million in increased personnel-related costs from increased headcount and stock-based compensation and $0.4 million in increased professional and consulting costs and other administrative costs.

Interest income

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.

Interest income was $3.9 million and $0.4 million for the three months ended June 30, 2023 and 2022, respectively.

The increase of $3.4 million was primarily due to higher balances and interest rates on our marketable securities during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

Comparison of the six months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022:

Six months ended June 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:

Six months ended June 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 $39.4 million and $23.5 million for the six months ended June 30, 2023 and 2022, respectively.

The increase of $15.9 million was primarily driven by an increase of $7.6 million in internal costs, including personnel related costs and stock-based compensation resulting from increased employee headcount to support the growth of our research and development programs.

EDG-5506 clinical program expenses increased by $5.9 million which was primarily due to the activation of our LYNX trial which was not active during the comparable period in 2022, increased clinical trial activity in our CANYON study from site activations and patient enrollment and higher product candidate manufacturing costs to support current and future trials.

Discovery and preclinical expenses increased $2.4 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 $11.6 million and $7.8 million for the six months ended June 30, 2023 and 2022, respectively.

The increase of $3.8 million was primarily due to $2.7 million in increased personnel-related costs from increased headcount and stock-based compensation and $1.1 million in increased professional and consulting costs and other administrative costs.

Interest income

Interest income was $6.7 million and $0.6 million for the six months ended June 30, 2023 and 2022, respectively.

The increase of $6.1 million was primarily due to higher balances and interest rates on our marketable securities during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

Liquidity and Capital Resources

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

As of March 31, 2023, we had cash, cash equivalents and marketable securities in the amount of $328.0 million.

As of June 30, 2023, we had cash, cash equivalents and marketable securities in the amount of $309.9 million.

We filed on April 1, 2022, a shelf registration statement on Form S-3 with the SEC that became effective on May 5, 2022 and allows us to undertake various equity and debt offerings up to $400,000,000.

On June 16, 2023, we entered into a Sales Agreement with BofA Securities under which we may offer and sell shares of common stock, having aggregate sales proceeds of up to $125,000,000 from time to time, through an “at the market offering” program under which BofA Securities will act as sales agent.

As of June 30, 2023, we have not sold any shares under the ATM Program.

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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Operating activities

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.

Cash used in operating activities during the six months ended June 30, 2023 was primarily driven by our net loss for the period of $44.3 million, and was also impacted by changes in operating assets and liabilities which increased net working capital by $2.3 million.

Cash used in operating activities was reduced by non-cash charges of $3.6 million relating to stock-based compensation expense of $7.8 million, amortization of premium and accretion of discounts, net on marketable securities of $5.0 million, depreciation of $0.6 million and amortization of right-of-use asset of 0.1 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.

Investing activities

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.

Cash provided by investing activities during the six months ended June 30, 2023 amounted to $52.5 million, which was due to $183.9 million in maturities of marketable securities and $5.1 million in sales of marketable securities, which was partially offset by $131.4 million in purchases of marketable securities and $5.1 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.

Financing activities

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.

Cash provided by financing activities during the six months ended June 30, 2023 was $0.4 million, which was due to cash proceeds of $52,000 from the issuance of common stock upon the exercise of stock options and $0.3 million in proceeds from the employee stock purchase plan.

Cash provided by financing activities during the six months ended June 30, 2022 was $0.3 million, which was due to cash proceeds of $0.3 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.

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.

addition, we expect to continue 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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We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements.

Because of the numerous risks and uncertainties

associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements.

Our future funding requirements will depend on many factors, including:

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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.

Our short-term material cash requirements as of June 30, 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.

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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.

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.

On July 27, 2023, we provided notice to OSIF to terminate the license agreement because the licensed technology is no longer relevant to the Company’s business, effective as of 90 days from the date of such notice.

Our long-term cash requirements as of June 30, 2023 includes our lease obligations.

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, plus our share of operating expenses.

As of June 30, 2023 our total operating lease liability balance is $5.6 million, of which $0.9 million is a current liability.

Critical Accounting Estimates

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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 23, 2023 and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

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.

During the three and six months ended June 30, 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

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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.

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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