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Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-12 · 82 added, 44 removed, 186 unchanged (40% of the section changed)

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The potency and selectivity of our product candidates is supported by preclinical data demonstrating nanomolar inhibition of PRMT5 and no inhibition of related enzymes at 1,000 times higher concentration of our product candidates.

We are currently advancing our first clinical candidate, PRT543, in a Phase 1 clinical trial in select solid tumors and myeloid malignancies in patients who are refractory to or intolerant of established therapies.

Interim Phase 1 results indicate dose-dependent increases in exposure and target engagement, and we have observed early signs of clinical activity, including an ongoing confirmed complete response, or CR, in a patient with HRD+ high grade serous ovarian cancer through nine months of therapy.

Updated data from the dose escalation phase of the ongoing Phase 1 trial of PRT543 was presented at the AACR-NCI-EORTC Virtual International Conference on Molecular Targets and Cancer Therapeutics held October 7, 2021 through October 10, 2021.

As of an August 6, 2021 data cutoff date, the dose escalation portion of the ongoing Phase 1 trial of PRT543 enrolled a total of 49 patients across 18 unselected advanced solid tumors and lymphoma.

Patients enrolled received an average of three prior lines of therapy.

PRT543 demonstrated target engagement and inhibition of PRMT5 functional activity as evidenced by a 69% reduction in serum symmetric dimethylarginine, or sDMA, at a dose of 45 mg/5x per week.

In addition, PRT543 demonstrated signs of preliminary clinical activity, including a durable complete response, or CR, maintained for over 18 months in a patient with HRD+ ovarian cancer who remains on treatment and prolonged stable disease, or SD, persisting for over six months in five patients, including four patients with ACC and one patient with uveal melanoma.

A complete response is defined as the disappearance of all target lesions.

We will need to enroll and demonstrate objective responses in additional patients to support further development and potential approval by the FDA or other regulatory authorities, and while such approval is not guaranteed, we are encouraged by the clinical activity as of the date of this Quarterly Report on Form 10-Q.

Patient enrollment is continuing in multiple biomarker-selected solid tumor and hematologic malignancy expansion cohorts.

We anticipate presenting data from the dose escalation portion of the Phase 1 trial in unselected patient populations, including safety, PK and PD data and markers of target engagement, at the AACR-NCI-EORTC Annual Meeting in October 2021 and data from the expansion cohorts of the trial at medical meetings throughout 2022.

PRT543 was generally well tolerated:

the most common grade 3 or higher treatment-related adverse events, or AE, occurring in at least 5% of patients were thrombocytopenia (27%) and anemia (12%), both of which were reversible upon treatment interruption.

Patients were largely able to remain on therapy with few AE-related dose interruptions (27%), reductions (22%), or discontinuations (4%).

Patient enrollment is continuing in specific biomarker -selected solid tumor and hematologic malignan cy expansion cohorts.

We anticipate presenting data from the expansion cohorts of the trial at medical meetings throughout 2022.

We are also advancing PRT811, a second PRMT5 inhibitor that we have optimized for high brain exposure, in a Phase 1 clinical trial in solid tumors, including GBM .

As of the date of this Quarterly Report on Form 10-Q, the trial has demonstrated early signs of clinical activity and tolerability.

The previously disclosed refractory GBM patient whose tumor had demonstrated a 66% reduction on monotherapy PRT811 subsequently underwent a follow-up MRI at week 18 and the regression improved to 77% from baseline, confirming a partial response, or PR, per RANO (response assessment in neuro-oncology) criteria.

We will present data from the dose escalation portion of the Phase 1 trial in unselected patient populations, including safety, PK and PD data and markers of target engagement, at the AACR-NCI-EORTC Annual Meeting in October 2021.

We anticipate beginning the dose expansion portion of the Phase 1 trial in the third quarter of 2021 in selected patients with central nervous system cancers, including high grade gliomas and CNS metastatic cancers.

We expect to present data from these expansion cohorts at medical meetings throughout 2022.

Updated data from the dose escalation phase of the ongoing Phase 1 trial of PRT811 was presented at the AACR-NCI-EORTC Virtual International Conference on Molecular Targets and Cancer Therapeutics held October 7, 2021 through October 10, 2021.

As of an August 13, 2021 data cutoff date, the dose escalation portion of the ongoing Phase 1 trial of PRT811 enrolled a total of 45 patients, including 27 patients across 16 unselected advanced solid tumors and 18 patients with high-grade gliomas, including 17 patients with glioblastoma multiforme, or GBM.

PRT811 demonstrated dose dependent inhibition of PRMT5 activity as evidenced by an 83% reduction in serum sDMA at a dose of 600 mg daily (QD).

In addition, PRT811 demonstrated signs of preliminary clinical activity, including an IDH1 mutated GBM patient who experienced a partial response, or PR, that evolved into a durable CR for more than 13 months and remains on treatment.

In addition, a patient with splicing-mutant, or SF3B1, uveal melanoma demonstrated SD for more than six months with a 25% tumor regression and remains on treatment.

At a post data-cutoff on September 20, 2021, one additional patient (800 mg QD) with SF3B1 uveal melanoma had an unconfirmed PR and 47% decrease in target lesion, and a patient with triple negative breast cancer (800 mg QD) demonstrated a 27% decrease in target lesions.

Both patients continue treatment.

PRT811 was generally well-tolerated;

the most common grade 3 or higher treatment-related AE was thrombocytopenia (7%), which was reversible upon treatment interruption.

Patients were largely able to remain on therapy with few AE-related dose interruptions (13%), reductions (4%), or discontinuations (3%).

The study remains ongoing, and the Company expects to commence enrollment in the expansion portion of the trial in the fourth quarter of 2021.

Data from the expansion cohorts are expected to be presented at medical meetings throughout 2022.

PRT1419, our third clinical candidate, is designed to be a potent and selective inhibitor of the anti-apoptotic protein, MCL1.

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We expect to add dose expansion and combination cohorts to the Phase 1 clinical trial in the second half of 2021.

Additionally, in March 2021, the FDA cleared our IND for an intravenous (IV) formulation of PRT1419.

Additionally, in March 2021, the FDA cleared our IND for an intravenous, or IV, formulation of PRT1419.

The Phase 1 trial of the IV formulation of PRT1419, which leverages the optimized physicochemical properties of PRT1419, is now underway in patients with solid tumors.

We recently received clearance for an IND application for our fourth clinical candidate, PRT2527.

We remain on track to initiate a clinical trial for PRT2527 by year end.

We were incorporated in February 2016 under the laws of the State of Delaware.

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We have funded our operations primarily through the sale of convertible preferred stock and common stock.

Our net loss was $48.2 million for the six months ended June 30, 2021 as compared to $20.9 million for the six months ended June 30, 2020, and as of June 30, 2021, we had an accumulated deficit of $155.6 million.

Our net loss was $78.9 million for the nine months ended September 30, 2021 as compared to $37.7 million for the nine months ended September 30, 2020, and as of September 30, 2021, we had an accumulated deficit of $186.3 million.

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.

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Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.

If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.

As of June 30, 2021, we had $343.1 million in cash and cash equivalents.

We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditures into mid-2023.

If we are unable to secure adequate additional

funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.

As of September 30, 2021, we had $320.9 million in cash, cash equivalents and marketable securities.

We expect our existing cash, cash equivalents, and marketable securities will enable us to fund our operating expenses and capital expenditures into the second half of 2023.

Departure of Chief Financial Officer, Hiring of New Chief Financial Officer

On November 5, 2021, Brian Piper, the Chief Financial Officer of Prelude Therapeutics, Incorporated (the “Company”), notified the Company that he will be resigning from the Company, effective November 19, 2021, to pursue other opportunities.

The Company has appointed Laurent Chardonnet, age 57, as Chief Financial officer, effective November 29, 2021.

Chardonnet brings to Prelude more than 25 years of biopharma financial experience.

Chardonnet served as Sr.

VP, CFO of Axcella Health and prior to Axcella, he spent 15 years at Incyte where he held roles of increasing responsibilities including VP Finance, Treasurer and Principal Accounting Officer, Head of Finance and Administration for the company’s European division, VP Alliances and Global Strategy.

Chardonnet received his Master of Business Administration from Vanderbilt University and his initial business degree from the Institut Supérieur de Gestion in Paris.

Departure of Chief Medical Officer

The Company and Dr.

David Mauro, the Company’s Chief Medical Officer, mutually agreed that Dr.

Mauro would depart from the Company to pursue other opportunities.

Mauro’s last day with the Company was on November 9, 2021.

The Company has an ongoing search for a successor.

Victor Sandor, former Chief Medical Officer of Array Biopharma and current board member and chair of the Science and Technology Committee, will provide strategic and operational oversight of clinical development during this time.

COVID-19 Impact

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Other Income, Net

Other income, net consists primarily of interest earned on our cash equivalents and grant income received from the State of Delaware.

Other income, net consists primarily of interest earned on our cash equivalents and marketable securities and grant income received from the State of Delaware.

We anticipate re-applying for the grant from the State of Delaware from time to time as long as we maintain qualifying headcount levels in the State of Delaware.

We expect our interest income, net to increase due to our investment of cash received our stock offerings.

We expect our interest income, net to increase due to our investment of cash received from our stock offerings.

Since our inception, we have not recorded any income tax benefits for the net operating losses, or NOLs, we have incurred or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our NOLs and tax credits will not be realized.

Results of Operations

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

The following table sets forth our results of operations for the three months ended June 30, 2021 and 2020.

Comparison of the Three Months Ended September 30, 2021 and 2020

The following table sets forth our results of operations for the three months ended September 30, 2021 and 2020.

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Research and Development Expenses

Research and development expenses increased by $12.6 million to $22.4 million for the three months ended June 30, 2021 from $9.8 million for the three months ended June 30, 2020.

The increase was mainly due to increased clinical research costs for the PRT543, PRT811 and PRT1419 (Oral and IV).

Our chemistry, manufacturing and other costs for those trials also increased.

Research and development expenses increased by $7.4 million to $22.7 million for the three months ended September 30, 2021 from $15.3 million for the three months ended September 30, 2020.

The increase was mainly due to increased clinical research costs to support the advancement of our clinical programs, as well as an increase in discovery-stage program expenses.

Our chemistry, manufacturing and other costs for the trials also increased.

We track our external research and development expenses on a program-by-program basis, such as fees paid to CROs, CMOs and research laboratories in connection with our pre-clinical development, process development, manufacturing and clinical development activities.

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General and Administrative Expenses

General and administrative expenses increased by $3.9 million to $5.5 million for the three months ended June 30, 2021 from $1.6 million for the three months ended June 30, 2020.

General and administrative expenses increased by $5.2 million to $8.1 million for the three months ended September 30, 2021 from $2.9 million for the three months ended September 30, 2020.

The increase was primarily due to an increase in personnel related expense due to an increase in employee headcount and an increase in our professional fees as we expanded our operations to support our research and development efforts and incurred additional costs to operate as a public company.

Other Income, net

Other income, net increased by $1.0 million primarily due to the receipt and recognition of a research and development tax credit from the State of Delaware in the second quarter of 2021.

Other income, net decreased by $1.2 million primarily due to the receipt and recognition of a research and development tax credit from the State of Delaware in the third quarter of 2020.

We did not receive any research and development tax credits in the third quarter of 2021.

Results of Operations

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

The following table sets forth our results of operations for the six months ended June 30, 2021 and 2020.

Six months ended

Comparison of the Nine Months Ended September 30, 2021 and 2020

The following table sets forth our results of operations for the nine months ended September 30, 2021 and 2020.

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Research and Development Expenses

Research and development expenses increased by $20.6 million to $38.9 million for the six months ended June 30, 2021 from $18.3 million for the six months ended June 30, 2020.

The increase was mainly due to increased clinical research costs for the PRT543 and PRT811.

Our chemistry, manufacturing and other costs for those trials also increased.

Research and development expenses increased by $28.0 million to $61.6 million for the nine months ended September 30, 2021 from $33.6 million for the nine months ended September 30, 2020.

The increase was mainly due to increased clinical research costs to support the advancement of our clinical programs, as well as an increase in discovery-stage program expenses.

Our chemistry, manufacturing and other costs for the trials also increased.

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Research and development expenses by program are summarized in the table below:

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General and Administrative Expenses

General and administrative expenses increased by $8.1 million to $11.0 million for the six months ended June 30, 2021 from $2.9 million for the six months ended June 30, 2020.

General and administrative expenses increased by $13.4 million to $19.1 million for the nine months ended September 30, 2021 from $5.7 million for the nine months ended September 30, 2020.

The increase was primarily due to an increase in personnel related expense due to increases in employee headcount and an increase in our professional fees as we expanded our operations to support our research and development efforts and incurred additional costs to operate as a public company.

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Since our inception, we have funded our operations through the sale of convertible preferred stock and common stock .

As of June 30, 2021, we had $343.1 million in cash and cash equivalents and had an accumulated deficit of $155.6 million.

We expect our existing cash and cash equivalents to enable us to fund our operating expenses and capital expenditure requirements into mid-2023.

As of September 30, 2021, we had $320.9 million in cash, cash equivalents and marketable securities and had an accumulated deficit of $186.3 million.

We expect our existing cash, cash equivalents and marketable securities to enable us to fund our operating expenses and capital expenditure requirements into the second half of 2023 .

We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.

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The following table shows a summary of our cash flows for the periods indicated:

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Cash provided by financing activities

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Operating Activities

During the six months ended June 30, 2021, we used $36.1 million of cash in operating activities.

Cash used in operating activities reflected our net loss of $48.2 million, offset by a $3.1 million net decrease in our operating assets and liabilities and noncash charges of $9.1 million, which consisted of $0.4 million in depreciation, $0.6 million noncash lease expense and $8.1 million in stock-based compensation.

During the nine months ended September 30, 2021, we used $57.8 million of cash in operating activities.

Cash used in operating activities reflected our net loss of $78.9 million, offset by a $4.0 million net decrease in our operating assets and liabilities and noncash charges of $17.1 million, which consisted of $15.2 million in stock-based compensation, $0.6 million in depreciation, $0.9 million noncash lease expense, and $0.4 million in amortization of premiums and discounts on marketable securities.

The primary use of cash was to fund our operations related to the development of our product candidates.

During the six months ended June 30, 2020, we used $18.8 million of cash in operating activities.

During the nine months ended September 30, 2020, we used $31.3 million of cash in operating activities.

Cash used in operating activities reflected our net loss of $37.7 million, offset by a $3.5 million net decrease in our operating assets and liabilities and noncash charges of $2.9 million, which consisted of $0.4 million in depreciation and $2.5 million in stock-based compensation.

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Investing Activities

During the six months ended June 30, 2021 and 2020, we used $1.4 million and $0.1 million of cash, respectively, for the purchase of property and equipment.

During the nine months ended September 30, 2021, we used $260.0 million of cash to purchase marketable securities and $2.0 million of cash for the purchase of property and equipment.

During the nine months ended September 30, 2020, we used $0.3 million of cash for the purchase of property and equipment.

Financing Activities

During the six months ended June 30, 2021, financing activities provided $162.2 million, which reflected the receipt of net cash of $161.4 million from the sale of common stock as well as the receipt of $0.8 million from the exercise of stock options.

During the six months ended June 30, 2020, financing activities provided $29.8 million of cash.

Net cash provided by financing activities for the six months ended June 30, 2020 consisted of $29.9 million from the sale of our Series B convertible preferred stock and $31,000 of proceeds received from the exercise of stock options, offset by payments of $0.2 million for our capital lease obligation.

During the nine months ended September 30, 2021, financing activities provided $162.9 million, which reflected the receipt of net cash of $161.4 million from the sale of common stock as well as the receipt of $1.5 million from the exercise of stock options.

During the nine months ended September 30, 2020, financing activities provided $247.5 million of cash.

During the nine months ended September 30, 2020, we completed our IPO and received net cash of $167.9 million.

We also received $49.8 million from the sale of our Series C convertible preferred stock, $29.9 million from the sale of our Series B convertible preferred stock and $96,000 from the exercise of stock options.

During the nine months ended September 30, 2020, we made $0.3 million in payments for our capital lease obligation.

Off-Balance Sheet Arrangements

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Critical Accounting Policies

During the three months ended June 30, 2021, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” on our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2021.

During the three months ended September 30, 2021, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” on our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2021.

JOBS Act Accounting Election

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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