What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-11 compared with 2021-05-20 · 70 added, 48 removed, 166 unchanged (42% of the section changed)

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REN001 has been shown to increase transcription of genes involved in mitochondrial function and increase fatty acid oxidation, and may increase production of new mitochondria.

The PPAR family of nuclear hormone receptors, PPAR a , PPAR g , and PPAR δ , control the transcription of genes critical for regulating energy metabolism and homeostasis.

The PPAR family of nuclear hormone receptors, PPAR a , PPAR b , and PPAR δ , control the transcription of genes critical for regulating energy metabolism and homeostasis.

PPAR δ is highly expressed in muscle, kidney, brain, and liver tissue.

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As a PPAR δ agonist, REN001 may benefit patients with genetic mitochondrial myopathies who experience weakness, fatigue, and/or deterioration in muscle due to impaired mitochondrial energy production.

initially developing REN001 in three rare genetic diseases that typically present with myopathy and have high unmet medical needs:

We are initially developing REN001 in three rare genetic diseases that typically present with myopathy and have high unmet medical needs:

primary mitochondrial myopathies (PMM), long-chain fatty acid oxidation disorders (LC-FAOD), and McArdle disease.

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Patients with PMM or LC-FAOD also typically have a reduced life expectancy.

We completed an open-label Phase 1b clinical trial in patients with PMM to assess the safety and tolerability of REN001, and to measure changes in functional tests such as walk distance and exercise capacity, as well as patient-reported symptoms that could serve as potential endpoints in future clinical studies.

REN001 was well-tolerated in this trial.

Compared to baseline, patients receiving REN001 once-daily for 12 weeks experienced an average increase in a 12-minute walk test (12MWT) of 104 meters, and an average increase of 1.7mL/kg/min in oxygen consumption ( V O 2 ), as well as a reduction in patient-reported fatigue and pain.

Based on these results, we initiated the STRIDE study, a global, randomized, double-blind, placebo-controlled Phase 2b clinical trial of REN001 in patients with PMM, and we plan to begin enrollment in mid-year 2021.

We also plan to conduct an open-label, long-term safety trial outside the United States in a subset of patients from the STRIDE study.

We anticipate results from these clinical trials will be available in 2023.

Based on these results, we initiated the STRIDE study, a global, randomized, double-blind, placebo-controlled Phase 2b clinical trial of REN001 in patients with PMM.

In July 2021, we announced that the first patient was dosed in the STRIDE study, and we expect to announce topline results from this study in 2023.

We also plan to conduct an open-label, long-term safety trial outside the United States in a subset of patients from the STRIDE

study, with preliminary data anticipated to be available in 2023.

Following our interactions with the U.S.

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We are also conducting two exploratory, open-label Phase 1b clinical trials of REN001 in patients with LC-FAOD and with McArdle disease.

Both Phase 1b clinical trials are currently enrolling and we anticipate results from both studies in the first half of 2022.

We are also conducting an observational, international study of REN001 in patients with LC-FAOD to better understand disease characteristics of patients (FORWARD study) through exercise tests and symptom questionnaires.

We completed enrollment of the McArdle study in July 2021, and expect to announce results in the first quarter of 2022.

The LC-FAOD study is continuing to enroll patients, and we also expect to announce results from this study in the first half of 2022.

We are also enrolling an observational, non-international study of REN001 in patients with LC-FAOD to better understand disease characteristics of patients through exercise tests and symptom questionnaires (FORWARD study).

The FORWARD study will also include work for validation of a new Reneo-developed patient questionnaire focused on muscle symptoms in LC-FAOD, which we plan to use in future trials.

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Since inception, we have incurred significant operating losses.

For the three months ended March 31, 2021, our net loss was $7.2 million.

Our net losses were $12.4 million and $19.5 million for the years ended December 31, 2019 and 2020, respectively.

As of March 31, 2021, we had an accumulated deficit of $52.2 million, and cash and cash equivalents of $91.2 million.

Our net losses were $16.4 million and $19.5 million for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively.

As of June 30, 2021, we had an accumulated deficit of $61.4 million, and cash, cash equivalents and short-term investments of $167.3 million.

We have funded our operations primarily through the issuance and sale of equity securities.

From our inception through March 31, 2021, we have raised an aggregate of $146.7 million in gross proceeds primarily from the sale of our convertible preferred stock and exercise of stock options, including approximately $47.4 million raised from the second closing of our Series B convertible preferred stock in March 2021.

In April 2021, we raised net proceeds of approximately $84.8 million in connection with our initial public offering (IPO).

From our inception through June 30, 2021, we have raised an aggregate of $230.6 million in net proceeds primarily through equity financings, including the net proceeds from our initial public offering (IPO).

We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase as we conduct our ongoing and planned clinical trials and preclinical studies, engage in other research and development activities, seek regulatory approvals for any product candidates that successfully complete clinical trials, incur development milestone payments related to our research and development activities, prepare for commercialization, hire additional personnel, protect our intellectual property and incur additional expenses as a result of operating as a public company.

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If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.

Based upon our current operating plan, we believe that our existing cash and cash equivalents, together with the net proceeds from our IPO, will enable us to fund our operating expenses and capital expenditure requirements through at least the next 24 months.

Based upon our current operating plan, we believe that our cash, cash equivalents, and short-term investments as of June 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements through our planned near-term clinical milestones.

We do not own or operate manufacturing facilities.

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We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of REN001.

The COVID-19 pandemic continues to rapidly evolve, and we will continue to monitor the COVID-19 situation closely.

The extent of the impact of the COVID-19 on our business, operations and clinical development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the pandemic and its impact on our clinical trial enrollment, trial sites, contract research organizations, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel.

The COVID-19 pandemic continues to evolve, and we will continue to monitor the COVID-19 situation closely.

The extent of the impact of the COVID-19 on our business, operations and clinical development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the pandemic, including new variants of the virus, and its impact on our clinical trial enrollment, trial sites, contract research organizations, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel.

For example, our Phase 1b clinical trial of REN001 in PMM patients was closed early as a result of COVID-19, and we may face future clinical trial disruptions.

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As a result of COVID-19, we have taken precautionary measures in order to minimize the risk of the virus to our employees and the communities in which we operate.

Although the majority of our workforce now works remotely, there has been a minimal disruption in our ability to ensure the effective operation of our business.

To date, there has been a minimal disruption in our ability to ensure the effective operation of our business.

We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business.

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In addition, we are obligated to pay vTv Therapeutics tiered royalty payments at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions.

In July 2021, a milestone under the vTv License Agreement was achieved, and we became obligated to make a payment of $2.0 million to vTv Therapeutics.

Components of Our Results of Operations

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Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

Costs for certain activities, such as manufacturing and preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

Costs for certain

activities, such as manufacturing and preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

We expense amounts paid to acquire licenses associated with products under development when the ultimate recoverability of the amounts paid is uncertain and the technology has no alternative future use when acquired.

The following table summarizes our research and development expenses for the three months ended March 31, 2021 and 2020:

The following table summarizes our research and development expenses for the three and six months ended June 30, 2021 and 2020:

THREE MONTHS ENDED

SIX MONTHS ENDED

(in thousands)

Contract manufacturing cost

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We expect our general and administrative expenses to increase significantly for the foreseeable future to support continued research and development activities, including our ongoing and planned research and development of our product candidate for multiple indications.

We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, and tax-related services associated

with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

Other income consists of interest income on our cash, cash equivalents and short-term investments.

Results of Operations

Comparison of Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020 (in thousands):

Comparison of Three and Six Months Ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

THREE MONTHS ENDED

SIX MONTHS ENDED

Operating expenses:

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Research and Development Expenses

Research and development expenses for the three months ended March 31, 2021 were $5.5 million, compared to $3.6 million for the three months ended March 31, 2020.

This increase of $1.9 million was primarily due to an increase of $1.5 million related to clinical trial costs associated with the launch of our STRIDE and FORWARD studies and $0.4

million in employee and personnel related costs due to additional headcount required to support our clinical and CMC programs.

Research and development expenses for the three months ended June 30, 2021 were $6.3 million, compared to $2.8 million for the three months ended June 30, 2020.

This increase of $3.5 million was primarily due to an increase of $2.3 million related to clinical trial costs associated with the launch of our STRIDE and FORWARD studies as well as the restart of our Phase 1b clinical trials of LC-FAOD and McArdle disease and $0.4 million in employee and personnel related costs due to additional headcount required to support our clinical and CMC programs, offset by a $0.7 million decrease in expense related to completion of preclinical studies.

The net increase was further offset by a reduction in credits to research and development expenses related to tax rebates paid in cash by the United Kingdom (UK) government, as we did not receive a credit in the three months ended June 30, 2021, but received a $1.5 million tax rebate in the three months ended June 30, 2020.

Research and development expenses for the six months ended June 30, 2021 were $11.8 million, compared to $6.4 million for the six months ended June 30, 2020.

This increase of $5.4 million was primarily due to an increase of $3.8 million related to clinical trial costs associated with the launch of our STRIDE and FORWARD studies as well as the restart of our Phase 1b clinical trials of LC-FAOD and McArdle disease and $1.5 million in employee and personnel related costs due to additional headcount required to support our clinical and CMC programs, offset by a $0.9 million decrease in expense related to completion of preclinical studies and a net decrease of $0.5 million in various other expense items.

The net increase was further offset by a reduction in credits to research and development expenses related to tax rebates paid in cash by the UK government, as we received a $32,000 tax rebate in the six months ended June 30, 2021, as compared to a $1.5 million tax rebate received in the six months ended June 30, 2020.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2021 were $1.7 million, compared to $0.9 million during the three months ended March 31, 2020.

This increase of $0.8 million was primarily attributable to an increase of $0.8 million in employee and personnel related expenses, and an increase of $0.2 million of professional service expenses, offset by a reduction of $0.2 million of market research expenses.

Other income for the three months ended March 31, 2021 was $2,000 compared to $71,000 during the three months ended March 31, 2020.

This decrease of $69,000 was primarily attributable to lower interest income earned on deposits in money market accounts indexed to the federal funds rates, which declined significantly during the three months ended March 31, 2021.

General and administrative expenses for the three months ended June 30, 2021 were $2.9 million, compared to $0.9 million during the three months ended June 30, 2020.

This increase of $2.0 million was primarily attributable to an increase of $1.0 million in employee and personnel related expenses, an increase of $0.4 million of directors and officers insurance premiums following our IPO, an increase of $0.4 million of compensation expense related to the Performance Award (Note 7), and a net increase of $0.2 million of various other expense items.

General and administrative expenses for the six months ended June 30, 2021 were $4.7 million, compared to $1.8 million during the six months ended June 30, 2020.

This increase of $2.9 million was primarily attributable to an increase of $1.9 million in employee and personnel related expenses, an increase of $0.4 million of directors and officers insurance premiums following our IPO, an increase of $0.4 million of compensation expense related to the Performance Award (Note 7), and a net increase of $0.2 million of various other expense items.

Other income for the three months ended June 30, 2021 and 2020 was $12,000, and represents interest and dividends on cash balances.

While cash balances increased, the earnings rate substantially decreased in accordance with the decline in the federal funds rate.

Other income for the six months ended June 30, 2021 was $14,000 compared to $84,000 during the six months ended June 30, 2020.

This decrease of $70,000 was primarily attributable to lower interest income earned on deposits in money market accounts indexed to the federal funds rates, which declined significantly during the six months ended June 30, 2021.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have incurred significant operating losses.

To date, we have funded our operations primarily through the issuance and sale of equity securities.

From our inception through March 31, 2021, we have raised an aggregate of $146.7 million in gross proceeds primarily from the sale of our convertible preferred stock and exercises of stock options.

As of March 31, 2021, we had $91.2 million in cash and cash equivalents and an accumulated deficit of $52.2 million.

We do not have any product candidates approved for sale and have not generated any revenue from product sales, and we do not expect to generate revenues from the commercial sale of our product candidate for at least the foreseeable future, if ever.

The following table summarizes our cash flows for the three months ended March 31, 2021 and 2020:

THREE MONTHS ENDED

To date, we have incurred operating losses and negative cash flows from operations.

As of June 30, 2021, we had an accumulated deficit of $61.4 million.

We anticipate that we will continue to incur net losses for the foreseeable future as we continue research efforts and the development of our product candidates, hire additional staff, including clinical, scientific, operational, financial and management personnel, and incur additional costs associated with being a public company.

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

On April 13, 2021, we completed our IPO and issued an aggregate of 6,250,000 shares of common stock at a price of $15.00 per share.

We received net proceeds of $84.6 million, after deducting underwriting discounts, commissions and offering expenses.

Through June 30, 2021, we have raised net cash proceeds of approximately $230.6 million primarily through equity financings, including the net proceeds from our IPO.

As of June 30, 2021, we had cash, cash equivalents and short-term investments of $167.3 million.

We expect our cash, cash equivalents and short-term investments as of June 30, 2021 will be sufficient to fund our operations through our planned near-term clinical milestones .

The following table summarizes our cash flows for the six months ended June 30, 2021 and 2020:

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(in thousands)

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Net cash provided by financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2021 was $8.6 million, consisting primarily of our net loss of $7.2 million and a $1.9 million net change in operating assets and liabilities, partially offset by a $0.5 million in non-cash charges primarily consisting of stock-based compensation expense.

Net cash used in operating activities for the three months ended March 31, 2020 was $4.4 million, consisting primarily of our net loss of $4.4 million and a $0.1 million net change in operating assets and liabilities, partially offset by a $0.1 million stock-based compensation expense.

Net cash used in operating activities for the six months ended June 30, 2021 was $18.3 million, consisting primarily of our net loss of $16.4 million and a $3.6 million net decrease in operating assets and liabilities, partially offset by $1.7 million in non-cash charges primarily consisting of stock-based compensation expense.

Net cash used in operating activities for the six months ended June 30, 2020 was $7.4 million, consisting primarily of our net loss of $8.1 million and a $0.5 million net increase in operating assets and liabilities, partially offset by $0.2 million of stock-based compensation expense.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2021 was $25,000 consisting primarily of payments made for the acquisition of property and equipment.

Net cash provided by investing activities for the three months ended March 31, 2020 was $5.2 million, consisting primarily of maturities of available-for-sale short-term investments.

Net cash used in investing activities for the six months ended June 30, 2021 was $27.0 million consisting primarily of purchase of available-for-sale short-term investments.

Net cash provided by investing activities for the six months ended June 30, 2020 was $6.2 million, consisting primarily of maturities of available-for-sale short-term investments.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2021 was $46.2 million, consisting primarily of $47.2 million of proceeds from the issuance of shares of Series B convertible preferred stock, and $0.2 million of proceeds from the exercise of stock options, offset by $1.2 million of costs paid in connection with the IPO.

Net cash provided by financing activities for the three months ended March 31, 2020 was $26,000, consisting of proceeds from the exercise of stock options.

Net cash provided by financing activities for the six months ended June 30, 2021 was $132.1 million, consisting primarily of $93.8 million of gross proceeds, net of issuance costs of $9.2 million paid during the six months ended June 30, 2021, raised from our IPO, $47.2 million of proceeds from the issuance of shares of Series B convertible preferred stock, and $0.2 million of proceeds from the exercise of stock options.

Net cash provided by financing activities for the six months ended June 30, 2020 was $26,000, consisting of proceeds from the exercise of stock options.

Funding Requirements

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In December 2020 and March 2021, we raised total gross proceeds of $94.8 million from the sale of Series B convertible preferred stock.

As of March 31, 2021, we had $91.2 million in cash and cash equivalents.

We believe, based upon our current operating plan, that our cash and cash equivalents as of March 31, 2021, together with the net proceeds from our IPO in April 2021, will be sufficient to fund our operations for at least the next 24 months.

In April 2021, we raised net proceeds of approximately $84.6 million in connection with our IPO.

As of June 30, 2021, we had $167.3 million in cash, cash equivalents and short-term investments.

We believe, based upon our current operating plan, that our cash, cash equivalents and short-term investments as of June 30, 2021 will be sufficient to fund our operations through our planned near-term clinical milestones .

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive, and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales.

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Contractual Obligations & Commitments

During the three months ended March 31, 2021, there were no material changes to our contractual obligations as set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Prospectus .

During the six months ended June 30, 2021, there were no material changes to our contractual obligations as set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Prospectus , except the following:

In June 2021, we began leasing 5,137 square feet of office space for our U.S.

headquarters in Irvine, California under a non-cancelable operating lease with terms through November 2026.

The lease provides for a 3% annual rent increase, five months of abated rent and a tenant improvement allowance of $6.50 per square foot.

The total minimum lease payments over the life of the lease is $1.6 million.

Off-Balance Sheet Arrangements

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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 Policies and Estimates” in the Prospectus and the notes to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

three months ended March 31, 2021, there were no material changes to our critical accounting policies from those discussed in the Prospectus.

During the three months ended June 30, 2021, there were no material changes to our critical accounting policies from those discussed in the Prospectus.

Recent 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