What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-10 · 70 added, 54 removed, 209 unchanged (37% 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.

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

We have developed and characterized a library of novel sarcomere modulators exhibiting a broad range of pharmacological and pharmacokinetic (PK) properties regulating disease-related muscle biology.

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 (Duchenne) and Becker muscular dystrophy (Becker).

The Company is also advancing EDG-7500, a first-in-class oral, selective, cardiac sarcomere modulator, specifically designed to slow early contraction velocity and address impaired cardiac relaxation associated with HCM and other diseases of diastolic dysfunction.

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.

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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 initiated a Phase 2 clinical trial in individuals with Becker in July 2022, known as CANYON, which is now fully enrolled, and in September 2023, we initiated GRAND CANYON, a potentially registrational cohort in individuals with Becker.

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

In October 2023, we expanded enrollment in LYNX to include a new cohort for further dose escalation and an additional cohort that will study boys with Duchenne not currently treated with corticosteroids.

Also, in October 2023, we announced the initiation of FOX, a new Phase 2 placebo-controlled trial, which will assess the effect of EDG-5506 in children and adolescents with Duchenne who have been previously treated with gene therapy.

We are also continuing to recruit the DUNE Phase 2 exercise challenge study, to evaluate the effect of EDG-5506 on biomarkers of muscle damage following exercise in adults with Limb Girdle muscular dystrophy 2i (LGMD2i), BMD or McArdle disease at a single site in Denmark.

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.

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

In September 2023, we announced initial dosing in a Phase 1 trial of EDG-7500 which is assessing the tolerability, pharmacokinetics, and pharmacodynamics of EDG-7500 in healthy adults.

The Company is also planning to begin a Phase 1b study of EDG-7500 in individuals with obstructive HCM in the first half of 2024.

Additionally, our EDG-003 discovery program is exploring the potential of other unique and novel mechanisms to address a variety of disorders, including cardiometabolic disease.

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.

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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.

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

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.

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

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 were $25.7 million and $70.0 million for the three and nine months ended September 30, 2023, respectively and $17.5 million and $48.2 million for the three and nine months ended September 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 June 30, 2023, we had an accumulated deficit of $188.9 million.

As of September 30, 2023, we had an accumulated deficit of $214.6 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 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.

From inception through September 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 $289.7 million will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 12 months.

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 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 and Israel-Hamas conflicts, 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.

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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 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;

As of September 30, 2023 we have initiated four Phase 2 clinical trials for EDG-5506 (CANYON, LYNX, FOX and DUNE) and a potentially registrational cohort in individuals with Becker (GRAND CANYON).

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 cardiometabolic discovery program through clinical trials and additional product candidates enter clinical trials;

continue to develop our proprietary drug discovery platform;

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Results of Operations

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,

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

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

Three months ended September 30,

(in thousands)

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The following table summarizes our research and development expenses:

Three months ended June 30,

Three months ended September 30,

(in thousands)

1 unchanged sentence

EDG-5506 clinical program

EDG-7500 clinical program

Discovery and preclinical

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Total research and development expenses

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

Research and development expenses were $23.8 million and $13.9 million for the three months ended September 30, 2023 and 2022, respectively.

The increase of $9.9 million was primarily driven by an increase of $4.0 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.

EDG-5506 clinical program expenses increased by $3.7 million, which was primarily due to costs incurred in connection with our LYNX and GRAND CANYON trials which were 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.

EDG-7500 clinical program expenses of $4.0 million are now shown separately in the above table due to advancing into a Phase 1 trial.

These expenses include the trial costs as well as manufacturing costs to support current and future trials and nonclinical costs during the three months ended September 30, 2023.

Discovery and preclinical expenses decreased $1.7 million primarily due to EDG-7500 costs, now shown separately, were a significant portion of the 2022 period’s discovery and preclinical expenses along with other costs from the EDG-003 program.

General and administrative expenses

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

General and administrative expenses were $5.7 million and $4.4 million for the three months ended September 30, 2023 and 2022, respectively.

The increase of $1.3 million was primarily due to $1.0 million in increased personnel-related costs from increased headcount and stock-based compensation and $0.3 million in increased professional and consulting costs and other administrative costs.

Interest income

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,

Interest income was $3.7 million and $0.8 million for the three months ended September 30, 2023 and 2022, respectively.

The increase of $3.0 million was primarily due to higher balances and interest rates on our marketable securities during the three months ended September 30, 2023, as compared to the three months ended September 30, 2022.

Comparison of the nine months ended September 30, 2023 and 2022

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

Nine months ended September 30,

(in thousands)

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The following table summarizes our research and development expenses:

Six months ended June 30,

Nine months ended September 30,

(in thousands)

1 unchanged sentence

EDG-5506 clinical program

EDG-7500 clinical program

Discovery and preclinical

1 unchanged sentence

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.

Research and development expenses were $63.2 million and $37.4 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $25.8 million was primarily driven by an increase of $11.6 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.

EDG-5506 clinical program expenses increased by $9.6 million which was primarily due to the activation of our LYNX and GRAND CANYON trials which were 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.

EDG-7500 clinical program expenses of $4.0 million are now shown separately in the above table due to advancing into a Phase 1 trial.

These expenses include the trial costs as well as manufacturing costs to support current and future trials and nonclinical costs during the three months ended September 30, 2023.

Discovery and preclinical expenses increased $0.6 million primarily due to increased development of our product candidate EDG-7500, which has now advanced into a Phase 1 trial and our EDG-003 cardiometabolic 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.

General and administrative expenses were $17.3 million and $12.2 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $5.1 million was primarily due to $3.7 million in increased

personnel-related costs from increased headcount and stock-based compensation and $1.4 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.

Interest income was $10.5 million and $1.4 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase of $9.1 million was primarily due to higher balances and interest rates on our marketable securities during the nine months ended September 30, 2023, as compared to the nine months ended September 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 June 30, 2023, we had cash, cash equivalents and marketable securities in the amount of $309.9 million.

As of September 30, 2023, we had cash, cash equivalents and marketable securities in the amount of $289.7 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.

As of September 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:

Six months ended June 30,

Nine months ended September 30,

(in thousands)

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Operating activities

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 during the nine months ended September 30, 2023 was primarily driven by our net loss for the period of $70.0 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 $6.3 million relating to stock-based compensation expense of $12.4 million, amortization of premium and accretion of discounts, net on marketable securities of $7.3 million, depreciation of $1.1 million and amortization of right-of-use asset of 0.1 million.

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.

Investing activities

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.

Cash provided by investing activities during the nine months ended September 30, 2023 amounted to $75.9 million, which was due to $278.4 million in maturities of marketable securities and $19.2 million in sales of marketable securities, which was partially offset by $216.1 million in purchases of marketable securities and $5.6 million for purchases of equipment.

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.

Financing activities

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.

Cash provided by financing activities during the nine months ended September 30, 2023 was $0.2 million, which was due to cash proceeds of $0.3 million in proceeds from the employee stock purchase plan and cash proceeds of 0.1 million from the issuance of common stock upon the exercise of stock options, which was partially offset by $0.2 million for the payment of deferred offering costs.

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 offering costs and deferred offering costs and $0.2 million in proceeds from the employee stock purchase plan.

Funding requirements

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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 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.

Our short-term material cash requirements as of September 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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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.

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 addition, we previously had 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 were 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 were 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 sublicensed the OSIF licensed patent rights, we were obligated to pay OSIF a specified portion of income we receive from sublicensing.

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.

The license agreement was terminated effective, October 25, 2023.

Our long-term cash requirements as of September 30, 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, plus our share of operating expenses.

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.

As of September 30, 2023 our total operating lease liability balance is $5.5 million, of which $0.9 million is a current liability.

Critical Accounting Estimates

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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.

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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 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.

During the three and nine months ended September 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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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