What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 77 added, 50 removed, 169 unchanged (43% of the section changed)

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

Since our inception in 2017, we have been drawing on our deep expertise in muscle physiology to drive the next generation of first-in-class therapeutics to address a variety of severe muscle diseases.

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

Since our inception in 2017, we have been drawing on our deep expertise in muscle physiology and small molecule drug discovery to drive the next generation of first-in-class therapeutics to address a variety of severe muscle diseases.

We are advancing two clinical-stage programs in muscular dystrophies and severe cardiac diseases.

Sevasemten (EDG-5506) is an orally administered skeletal myosin inhibitor in a pivotal stage trial for Becker muscular dystrophy as well as ongoing Phase 2 programs in Duchenne muscular dystrophy.

EDG-7500, currently in a Phase 1 and Phase 2 trial, is a novel cardiac sarcomere modulator for the treatment of hypertrophic cardiomyopathy (HCM) and other disorders of diastolic dysfunction.

EDG-7500, currently in a Phase 2 trial, is a novel cardiac sarcomere modulator for the treatment of hypertrophic cardiomyopathy (HCM) and other disorders of diastolic dysfunction.

We also continue to advance our preclinical pipeline, including characterization of novel cardiometabolic targets.

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

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

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

Our net losses were $28.5 million and $22.8 million for the three months ended March 31, 2024 and 2023, 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 $31.5 million and $60.0 million for the three and six months ended June 30, 2024, respectively and $21.5 million and $44.3 million for the three and six months ended June 30, 2023, 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, 2024, we had an accumulated deficit of $273.3 million.

As of June 30, 2024, we had an accumulated deficit of $304.8 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, 2024, these private placements have provided gross proceeds of $160.7 million, and the initial public offering, follow-on public offering, issuance of our common stock under an “at the market offering” program (the ATM Program), and underwritten registered direct offering have generated net proceeds of $606.6 million.

From inception through June 30, 2024, these private placements have provided gross proceeds of $160.7 million, and the initial public offering, follow-on public offering, issuance of our common stock under an “at the market offering” program (the ATM Program), and underwritten registered direct offering have generated net proceeds of $606.6 million.

We believe that our existing cash and cash equivalents and marketable securities of $511.8 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, international conflicts, public health pandemics, cybersecurity 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, the upcoming U.S.

presidential election, international conflicts, public health pandemics, 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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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 are currently conducting four Phase 2 clinical trials for sevasemten (CANYON, LYNX, FOX and DUNE), a potentially registrational, or pivotal cohort in individuals with Becker (GRAND CANYON), and a Phase 1 and Phase 2 study for EDG-7500 (CIRRUS-HCM).

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

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Results of Operations

Comparison of the three months ended March 31, 2024 and 2023

The following table summarizes our results of operations for the three months ended March 31, 2024 and 2023:

Three months ended March 31,

Comparison of the three months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023:

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 $27.7 million and $19.9 million for the three months ended March 31, 2024 and 2023, respectively.

The increase of $7.8 million was driven by an increase of $4.9 million in sevasemten clinical program expenses, which was primarily due to increased clinical trial activity in our GRAND CANYON, CANYON, and LYNX studies from site activations and patient enrollment, costs incurred in connection with our MESA and FOX trials which were not active during the comparable period in 2023, 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 in the third quarter of 2023.

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 March 31, 2024.

Research and development expenses were $30.7 million and $19.6 million for the three months ended June 30, 2024 and 2023, respectively.

The increase of $11.1 million was driven by an increase of $5.1 million in sevasemten clinical program expenses, which was primarily due to increased clinical trial activity in our LYNX trial from site activations and patient enrollment and costs incurred in connection with our GRAND CANYON, MESA, and FOX trials which were not active during the comparable period in 2023.

EDG-7500 clinical program expenses of $5.1 million are now shown separately in the above table due to advancing into a clinical trial in the third quarter of 2023.

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 June 30, 2024.

Internal costs increased $2.3 million, primarily related to personnel costs and stock-based compensation resulting from increased employee headcount to support the growth of our research and development programs.

Discovery and preclinical expenses decreased $3.9 million primarily due to EDG-7500 costs, now shown separately, which were a significant portion of the 2023 period’s discovery and preclinical expenses along with other costs from the EDG-003 program.

Discovery and preclinical expenses decreased $1.4 million as a result of EDG-7500 costs, now shown separately, which were a significant portion of the 2023 period’s discovery and preclinical expenses along with other costs from our EDG-003 program.

General and administrative expenses

General and administrative expenses were $7.1 million and $5.8 million for the three months ended March 31, 2024 and 2023, respectively.

General and administrative expenses were $7.4 million and $5.8 million for the three months ended June 30, 2024 and 2023, respectively.

The increase of $1.6 million was primarily due to $1.1 million in increased personnel-related costs from increased headcount and stock-based compensation and $0.5 million in increased professional and consulting costs and other administrative costs.

Interest income

Interest income was $6.2 million and $2.9 million for the three months ended March 31, 2024 and 2023, 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 March 31, 2024, as compared to the three months ended March 31, 2023.

Interest income was $6.6 million and $3.9 million for the three months ended June 30, 2024 and 2023, respectively.

The increase of $2.7 million was primarily due to higher balances and interest rates on our marketable securities during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Comparison of the six months ended June 30, 2024 and 2023

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:

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:

Sevasemten clinical program

EDG-7500 clinical program

Discovery and preclinical

Internal costs, including personnel related

Total research and development expenses

Research and development expenses were $58.4 million and $39.4 million for the six months ended June 30, 2024 and 2023, respectively.

The increase of $18.9 million was primarily driven by an increase of $10.1 million in sevasemten clinical program expenses which was primarily due to the activation of our GRAND CANYON, LYNX, MESA, and FOX trials which were not active during the comparable period in 2023.

EDG-7500 clinical program expenses of $9.1 million are now shown separately in the above table due to advancing into a clinical trial.

These expenses include the trial costs as well as manufacturing costs to support current and future trials and nonclinical costs during the six months ended June 30, 2024.

Internal costs increased $5.1 million, primarily related to a $3.3 million increase in personnel costs related to salaries, benefits, and employee expenses resulting from increased employee headcount to support the growth of our research and development programs, a $1.2 million increase in stock-based compensation related to increased headcount and overall higher stock prices driving increased option fair values, and $0.6 million related to depreciation and other allocated costs.

Discovery and preclinical expenses decreased $5.4 million as a result of EDG-7500 costs, now shown separately, which were a significant portion of the 2023 period’s discovery and preclinical expenses along with other costs from our EDG-003 program.

General and administrative expenses

General and administrative expenses were $14.5 million and $11.6 million for the six months ended June 30, 2024 and 2023, respectively.

The increase of $2.9 million was primarily due to $2.1 million in increased personnel-related costs from increased headcount and stock-based compensation and $0.8 million in increased professional and consulting costs and other administrative costs.

Interest income

Interest income was $12.8 million and $6.7 million for the six months ended June 30, 2024 and 2023, 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, 2024, as compared to the six months ended June 30, 2023.

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, 2024, we had cash, cash equivalents and marketable securities in the amount of $532.8 million.

As of June 30, 2024, we had cash, cash equivalents and marketable securities in the amount of $511.8 million.

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

Three months ended March 31,

Six months ended June 30,

(in thousands)

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Operating activities

Cash used in operating activities during the three months ended March 31, 2024 was primarily driven by our net loss for the period of $28.5 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 during the six months ended June 30, 2024 was primarily driven by our net loss for the period of $60.0 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $0.9 million.

Cash used in operating activities was reduced by non-cash charges of $4.5 million relating to stock-based compensation expense of $10.1 million, amortization of premium and accretion of discounts, net on marketable securities of $6.7 million, depreciation of $1.0 million and amortization of right-of-use asset of $0.1 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 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.

Investing activities

Cash used in investing activities during the three months ended March 31, 2024 amounted to $268.3 million, which was due to $327.6 million in purchases of marketable securities and $0.1 million for purchases of equipment, which was partially offset by $58.7 million in maturities of marketable securities and $0.9 million in sales of marketable securities.

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 used in investing activities during the six months ended June 30, 2024 amounted to $230.9 million, which was due to $368.6 million in purchases of marketable securities and $0.5 million for purchases of equipment, which was partially offset by $136.4 million in maturities of marketable securities and $1.8 million in sales of marketable securities.

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.

Financing activities

Cash provided by financing activities during the three months ended March 31, 2024 was $241.1 million, which was due to cash proceeds of $7.0 million from the ATM Program, $240.0 million from the underwritten registered direct offering, and $1.9 million in proceeds from the issuance of common stock upon exercise of stock options, which was partially offset by $7.8 million for the payment of underwriting commissions and offering 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 six months ended June 30, 2024 was $243.0 million, which was due to cash proceeds of $7.0 million from the ATM Program, $240.0 million from the underwritten registered direct offering, $3.5 million in proceeds from the issuance of common stock upon exercise of stock options, and $0.4 million in proceeds from the employee stock purchase plan, which was partially offset by $7.9 million for the payment of underwriting commissions and offering costs.

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.

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 and was amended on January 19, 2024, 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.

On May 10, 2024, we filed an automatic shelf registration statement on Form S-3ASR that allows us to undertake various equity and debt offerings and entered into the Leerink Sales Agreement under which we may offer and sell shares of common stock, having aggregate sales proceeds of up to $175,000,000 from time to time, through the Leerink ATM.

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.

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.

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● acquire or in-license other product candidates and technologies.

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.

We do not currently have any long-term material 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.

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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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, 2024 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, 2024 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.

Our long-term cash requirements as of March 31, 2024 includes our lease obligations.

Our long-term cash requirements as of June 30, 2024 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 March 31, 2024 our total operating lease liability balance is $5.2 million, of which $1.0 million is a current liability.

As of June 30, 2024 our total operating lease liability balance is $5.0 million, of which $1.0 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 22, 2024 and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

During the three months ended March 31, 2024, there were no material changes to our critical accounting estimates from those discussed in our Annual Report on Form 10-K filed on February 22, 2024.

During the three and six months ended June 30, 2024, there were no material changes to our critical accounting estimates from those discussed in our Annual Report on Form 10-K filed on February 22, 2024.

Recently Issued Accounting Pronouncements

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Emerging Growth Company and Smaller Reporting Company Status

Section 107 of The Jumpstart Our Business Startups Act of 2012 (JOBS Act) permits an “emerging growth company” such as us to take advantage of an extended transition time to comply with new or revised accounting standards as applicable to public companies.

standards as applicable to public companies.

Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have elected to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies.

We will remain an emerging growth company until the earliest to occur of:

(1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue;

(2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates;

(3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period;

and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year.

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.

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.

We will remain an emerging growth company until December 31, 2024.

We are also currently a “smaller reporting company,” and based on the market value of our common stock held by non-affiliates exceeding $700.0 million as of June 30, 2024, we will transition to a “large accelerated filer” status with effect as of January 1, 2025.

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-Q

Item 2. Management’s Discussion and Analysis