What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-22 compared with 2023-02-23 · 53 added, 60 removed, 209 unchanged (35% 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.

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.

Since our inception in 2017, our precision medicine muscle platform has generated several programs to address a variety of muscle diseases.

We are advancing two clinical-stage programs and a number of preclinical programs.

The Company’s deep expertise in muscle physiology is driving a new generation of first-in-class therapeutics.

EDG-5506 is an orally administered skeletal myosin inhibitor in multiple Phase 2 clinical trials, including a pivotal cohort, in patients with either Becker, Duchenne, and Limb-Girdle muscular dystrophies or McArdle Disease.

EDG-7500, currently in a Phase 1 trial, is a novel cardiac sarcomere modulator for the treatment of hypertrophic cardiomyopathy (HCM) and other disorders of cardiac diastolic dysfunction.

We also continue to advance preclinical exploration, including novel cardiometabolic targets.

From this foundation and our dedication to muscle physiology and function, we will build a leading global biopharmaceutical company driving advances to improve the lives of people suffering from muscle diseases.

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

discovery platform.

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 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).

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

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 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-focused potential precision medicine that focuses on identification of novel mechanism cardiac modulators.

We are initially pursuing a new target with our lead product candidate for cardiomyopathy, EDG-7500, for inherited hypertrophic cardiomyopathy (HCM) in addition to exploring the potential of this novel mechanism across other cardiac disorders.

In addition, 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.

To date, we have not completed the development of any of our product candidates, have not generated any revenue and have never been profitable.

Our ability to achieve profitability, if ever, will depend heavily on the successful development and eventual commercialization of one or more of our product candidates.

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.

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

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

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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.

From inception through December 31, 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 December 31, 2023, these private placements have provided gross proceeds of $160.7 million, and the initial public offering, follow-on public offering and issuance of our common stock under an “at the market offering” program (the ATM Program) have generated net proceeds of $367.8 million.

We believe that our existing cash and cash equivalents and marketable securities of $318.4 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 and the COVID-19 Pandemic

We are monitoring macroeconomic 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.

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

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.

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, international conflicts, COVID-19, cybersecurity and sanctions so that the Company can be prepared to react to new developments as they arise.

Components of Our Results of Operations

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We track our direct research and development expenses on a program-by-program basis once a lead compound has been selected and clinical trials have been initiated.

These direct costs consist primarily of external costs such as fees paid to outside consultants, CROs, CDMOs, clinical trial sites and central laboratories in connection with our discovery

and preclinical activities, process development, manufacturing and clinical development activities.

These direct costs consist primarily of external costs such as fees paid to outside consultants, CROs, CDMOs, clinical trial sites and central laboratories in connection with our discovery and preclinical activities, process development, manufacturing and clinical development activities.

These expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date.

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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.

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 December 31, 2023 we have initiated four Phase 2 clinical trials for EDG-5506 (CANYON, LYNX, FOX and DUNE) and a potentially registrational, or pivotal 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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● 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;

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EDG-5506 clinical program

EDG-7500 clinical program

Discovery and preclinical

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Research and development expenses were $90.9 million for the year ended December 31, 2023 compared to $54.0 million for the year ended December 31, 2022.

The increase of $21.8 million was primarily driven by an increase of $8.4

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, an increase of $7.4 million related to increased drug discovery and preclinical development of our EDG-7500 candidate selected in the fourth quarter of 2022 and our EDG-003 cardiovascular discovery program and $6.1 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.

The increase of $36.9 million was driven by $14.8 million of higher research and development expenses related to our EDG-5506 program which consisted of $5.0 million incurred in connection with our GRAND CANYON, MESA and FOX trials which were not active during the comparable period in 2022, $7.0 million of increased clinical trial activity in our CANYON, LYNX and DUNE studies from site activations and patient enrollment and $2.8 million of increased product candidate manufacturing costs to support current and future trials.

Internal costs, including personnel related increased $14.7 million due largely to expenses associated with increased employee headcount, including stock-based compensation expense to support the growth of our research and development programs.

EDG-7500 clinical program expenses of $9.0 million are now shown separately in the above table due to advancing into a Phase 1 clinical trial during the third quarter of 2023.

These expenses include nonclinical costs of $3.8 million, clinical trial costs of $3.2 million, product candidate manufacturing costs of $1.4 million and $0.6 million in other development costs.

Discovery and preclinical expenses decreased $1.7 million primarily due to reclassification of EDG-7500 costs which are now shown separately.

General and administrative expenses

General and administrative expenses were $23.5 million for the year ended December 31, 2023 compared to $17.6 million for the year ended December 31, 2022.

The increase of $6.6 million was primarily related to the cost of operating as a public company, including $4.3 million in increased personnel-related costs from increased headcount, including stock-based compensation to support our growing research and development efforts, $1.7 million in increased professional and consulting costs and other administrative costs and $0.6 million in increased directors and officers insurance.

The increase of $5.8 million was primarily related to $4.3 million in increased personnel-related costs from increased headcount, including stock-based compensation to support our growing research and development efforts and $2.3 million in increased professional and consulting costs and other administrative costs which was partially offset by a $0.8 million decrease in directors’ and officers’ insurance.

Interest income

Interest income was $14.2 million and $4.0 million for the years ended December 31, 2023 and 2022, respectively.

The increase of $3.6 million was primarily due to higher interest rates on our marketable securities balances and larger cash and marketable securities balances from the proceeds of the September 2022 Offering.

The increase of $10.2 million was primarily due to higher balances for our marketable securities and higher interest rates.

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.

From inception through December 31, 2023, these private placements have provided gross proceeds of $160.7 million, and the initial public offering, follow-on public offering and issuance of our common stock under the ATM Program have generated net proceeds of $367.8 million.

Following December 31, 2023, the ATM Program generated an additional net proceeds of $7.0 million.

We also generated gross proceeds of $240.0 million from our underwritten registered direct offering in January 2024.

As of December 31, 2023, we had cash, cash equivalents and marketable securities in the amount of $318.4 million.

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Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Operating activities

Cash used in operating activities in the year ended December 31, 2022 was primarily driven by our net loss for the period of $67.6 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $4.1 million.

Cash used in operating activities in the year ended December 31, 2023 was primarily driven by our net loss for the period of $100.2 million, and was also impacted by changes in operating assets and liabilities which increased net working capital by $1.6 million.

Cash used in operating activities was reduced by non-cash charges of $9.8 million relating to stock-based compensation expense of $17.6 million, depreciation of $1.6 million and amortization of right-of-use asset of $0.2 million, which was partially offset by amortization of premium and accretion of discounts, net on marketable securities of $9.5 million.

Cash used in operating activities was reduced by non-cash charges of $4.7 million relating to stock-based compensation expense of $4.4 million and depreciation of $0.3 million.

Cash used in operating activities was reduced by non-cash charges of $10.9 million relating to stock-based compensation expense of $10.9 million, depreciation of $0.4 million and amortization of right-of-use asset of $0.2 million, which was partially offset by amortization of premium and accretion of discounts, net of marketable securities of $0.5 million.

Investing activities

Cash provided by investing activities during the year ended December 31, 2023 amounted to $102.9 million which was due to $255.9 million in purchases of marketable securities and $5.7 million for leasehold improvements for our new facility and the purchase of equipment, which was partially offset by $344.4 million in maturities of marketable securities and $20.1 million in sales of marketable securities.

Cash used in investing activities during the year ended December 31, 2022 amounted to $70.6 million which was due to $292.4 million in purchases of marketable securities and $5.5 million for leasehold improvements for our new facility and the purchase of equipment, which was partially offset by $196.8 million in maturities of marketable securities and $30.6 million in sales of marketable securities.

Cash used in investing activities during the year ended December 31, 2021 amounted to $242.2 million which was due to $288.2 million in purchases of marketable securities and $0.7 million for purchases of equipment, which was partially offset by $43.2 million in maturities of marketable securities and $3.4 million of sales of marketable securities.

Financing activities

Cash provided by financing activities during the year ended December 31, 2023 was $53.2 million, which was due to $52.6 million in net proceeds from the ATM Program, cash proceeds $0.6 million in proceeds from the employee stock purchase plan and $0.1 million from the issuance of common stock upon the exercise of stock options, which was offset by $0.2 million for the payment of deferred offering costs.

Cash provided by financing activities during the year ended December 31, 2022 was $129.6 million, which was due to $129.2 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 $0.3 million in proceeds from the employee stock purchase plan.

Cash provided by financing activities during the year ended December 31, 2021 was $186.4 million, primarily consisting of cash proceeds of $186.1 million from the initial public offering of the Company’s common stock.

In addition, we generated cash proceeds of $0.4 million from the issuance of common stock upon the exercise of stock options and the employee stock purchase plan, which was partially offset by $0.1 million in preferred stock issuance costs.

Funding requirements

We will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future.

Although we do not have any availability under our shelf registration statement that was filed on April 1, 2022 with the SEC that became effective on May 5, 2022, we intend to in the future file a shelf registration statement for additional equity or debt offerings.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development of and seek regulatory approvals for our product candidates and begin to commercialize any approved products.

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

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

In order to complete the process of obtaining regulatory approval for our product candidates and to build the

sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding.

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.

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● 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;

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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.

In addition, we exclusively licensed intellectual property from The Ohio State Innovation Foundation (OSIF) in a license agreement that was made 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, and as a result we no longer have any payment obligations to OSIF.

As of December 31, 2023, the Company has paid $0.7 million for license fees and milestones achieved in connection with the license agreement.

Our long-term cash requirements as of December 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.

As of December 31, 2022 our operating lease liability balance is $4.4 million, of which $0.6 million is current.

In February 2023, we signed an amendment to this lease to occupy additional 9,624 square feet of space.

Future minimum payments under this additional space totals $1.7 million, of which $0.1 million is current.

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 December 31, 2023, our total operating lease liability balance is $5.4 million, of which $1.0 million is a current liability.

Critical Accounting Estimates

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

The preparation of our financial statements and related disclosures requires us to make estimates and judgments

that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements.

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.

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Our actual results may differ from these estimates.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

While our significant accounting policies are described in the notes to our financial statements appearing elsewhere in this Annual Report, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.

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Stock-based compensation

We measure stock-based awards granted to employees, directors and non-employee consultants based on their fair value on the date of grant and recognize compensation expense for those awards over the requisite service

period, which is generally the vesting period of the respective award.

We issue stock options with only service-based vesting conditions and record the expense for these awards using the straight-line method.

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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.

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

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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-K

Item 7. Management’s Discussion and Analysis