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Item 7. Management’s Discussion and Analysis

2021-03-26 compared with 2020-03-13 · 136 added, 133 removed, 80 unchanged (77% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read together with our consolidated financial statements and the related notes thereto appearing elsewhere in this Annual Report .

The following discussion and analysis should be read together with our consolidated financial statements and the related notes thereto included in our consolidated financial statements and related notes thereto included elsewhere in this Annual Report.

This discussion and other parts of this report contain forward-looking statements reflecting our current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, intentions, and beliefs.

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Actual results and the timing of events could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” included elsewhere in this Annual Report .

All references to 2019 and 2018 refer to calendar years ended December 31, 2019 and 2018 , respectively.

We are a clinical-stage biopharmaceutical company discovering and developing proprietary RNA-targeted therapies with a specific focus on microRNAs and their role in diseases where there is a high unmet medical need.

We have three clinical stage product candidates:

cobomarsen, remlarsen, and MRG-110.

We are developing cobomarsen for the treatment of patients with certain cancers that have elevated miR-155, including CTCL and ATLL.

Cobomarsen is an inhibitor of miR-155, which is found at abnormally high levels in malignant cells of several blood cancers.

We are also developing remlarsen and MRG-229, which are product candidates being developed for the potential treatment of patients with pathological fibrosis, including IPF.

These product candidates are replacements for miR-29, which is found at abnormally low levels in a number of pathological fibrotic conditions, including cutaneous, cardiac, renal, hepatic, pulmonary and ocular fibrosis, as well as in systemic sclerosis.

MRG-110, an inhibitor of miR-92, is our product candidate for the treatment of heart failure, wound healing, and other ischemic disease.

We believe our experience in microRNA biology and chemistry, drug discovery, bioinformatics, translational medicine, and drug development allows us to identify and develop microRNA-targeted drugs that are designed to regulate gene pathways to return diseased tissues to a healthy state.

We believe that our drug discovery and development strategy will enable us to progress our product candidates from preclinical discovery to confirmation of mechanism of action in humans quickly and efficiently.

The elements of this strategy include identification of mechanistic biomarkers, in early-stage clinical trials to assess target engagement in humans, as well as monitoring outcomes in these early-stage clinical trials to help guide later clinical development.

Recent Developments and Anticipated Milestones

Cobomarsen is currently being evaluated for the potential treatment of patients with miR-155 elevated hematological malignancies, including CTCL and ATLL.

Cutaneous T-Cell Lymphoma:

In December 2019, we announced plans to stop the enrollment of new patients in the SOLAR trial and conduct an analysis of topline clinical response.

This analysis will provide controlled data to assess the benefit of cobomarsen based on disease response in the skin in comparison to vorinostat.

A total of 37 patients have been enrolled and will continue to be evaluated for safety and clinical response in the coming months.

We plan to assess the rate of an objective response in the skin, that is durable for four months, defined as 50% or greater improvement in the severity of a patient’s skin disease over the entire body (mSWAT).

This change from assessing overall response to skin response was driven by the fact that patients allowed into the study only have skin disease and are verified not to have blood, nodes, or visceral involvement at study entry.

Improvements in skin disease are thus intended to reflect efficacy of the drug whereas progression in skin disease reflect lack of efficacy.

Follow up analysis for blood, nodes or visceral disease may be conducted based on the results obtained using mSWAT.

We believe that obtaining controlled clinical data from this cohort of patients may allow for a better assessment of the clinical potential of cobomarsen as compared to data from the Phase 1 trial.

We intend for this controlled clinical data to form the basis of determining what additional clinical investigation of cobomarsen in CTCL is warranted, if any, and what would be required to potentially obtain regulatory approval.

Topline data from this amended trial is expected to be announced in the third quarter of 2020.

Adult T-Cell Leukemia/Lymphoma:

In January 2020, we announced positive data for cobomarsen in ATLL patients with residual disease from this first-in-human Phase 1 clinical trial.

In this trial, cobomarsen was observed to improve disease stabilization and reduce cellular proliferation and activation biomarker expression associated with ATLL cellular proliferation and activation in patients with persistent residual disease after chemotherapy and other therapies.

Based on these results, we announced that we are focusing our cobomarsen expansion indication efforts on ATLL and expect to meet with the FDA in the third quarter of 2020 to explore a potential expedited development path for cobomarsen in ATLL.

Remlarsen and MRG-229 are miR-29 mimics, or replacements for miR-29, a microRNA that is found at abnormally low levels in a number of pathologic fibrotic conditions.

Cutaneous Fibrosis (Remlarsen):

During the fourth quarter of 2019, we reported interim data from a Phase 2 clinical trial assessing remlarsen for safety, tolerability, and activity in the potential prevention or reduction of keloid formation in patients with a history of keloid scars, a form of pathological scarring.

These data suggest that remlarsen was generally safe and well tolerated and treatment had no negative effect on healing reported.

In addition, we observed initial volume reductions in treated keloids compared to placebo in a subset of patients.

Based on these data, we decided to continue our analysis of patient data at the one-year primary endpoint of the clinical trial.

With these data, we may seek a collaboration partner for the future development of remlarsen.

Ocular Fibrosis (Remlarsen):

We are also evaluating remlarsen in ocular fibrotic indications, such as corneal injury and keratitis.

In April 2019, we presented data in preclinical studies testing ability of remlarsen to penetrate injured corneas and reduce fibrosis after a corneal injury.

Topical administration of remlarsen to an injured rat cornea resulted in faster healing of the cornea and reduced scarring/hazing.

Remlarsen has also been observed in in vitro studies to regulate miR-29 pharmacodynamic biomarkers in the cornea.

Idiopathic Pulmonary Fibrosis (MRG-229):

In December 2019, we announced that our preclinical pipeline development efforts will be primarily focused on the development of MRG-229 as a potential treatment for patients with IPF.

We believe that the efficacy and safety profile of MRG-229 positions it as a potentially differentiated approach for IPF.

This program is supported in part by a grant in collaboration with the National Institutes of Health and Yale University.

We expect to report additional preclinical safety and efficacy data for MRG-229 during the second quarter of 2020.

MRG-110 is an inhibitor of miR-92, a microRNA expressed in endothelial cells, which has been observed in preclinical studies to be a regulator of new blood vessel creation and other wound healing processes.

Tissue Repair:

During the fourth quarter of 2019, we announced data from two Phase 1 clinical trials of MRG-110 in normal human volunteers, in which administration of MRG-110 was observed to increase angiogenesis, as demonstrated by increased perfusion and histological markers of neoangiogenesis, as well as reduce alpha-smooth muscle actin (α-SMA) expression, which has been shown to correlate with activation of myofibroblasts.

A total of 65 subjects were exposed for up to three weeks.

MRG-110 was shown to be generally safe and well tolerated, with no evidence of unwanted distal angiogenesis, acute inflammatory toxicities, or significant abnormalities in liver, kidney, or blood, and no injection site

We believe that MRG-110 may have the potential to be used for the treatment of heart failure and other conditions where patients may benefit from increased vascular flow and accelerated healing in indications such as burns, skin flaps, grafts, or laparotomy or sternotomy incisions in patients with high risk of poor wound closure.

Cost Restructuring Plan

In 2019 we began implementing two phases of a cost restructuring plan to streamline the organization, reduce costs, and direct resources to advance cobomarsen and miR-29 mimics, including remlarsen and MRG-229, while reducing investments in new discovery research.

The restructuring plan identified approximately 44 positions for elimination, or approximately 50% of our total workforce, primarily associated with research and development and corresponding project, general, and administrative support.

Through December 31, 2019, we had recorded approximately $2.0 million in restructuring expense and expect to incur another $0.2 million during the first half of 2020.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this Annual Report.

Overview and Recent Developments

We are a biotechnology company advancing new treatments for patients with diseases that are underserved by current therapies.

We are developing multiple product candidates to treat patients who suffer from TED, a debilitating auto-immune disease that causes inflammation and fibrosis of the orbit and tissues surrounding the eye which can lead to proptosis, or bulging of the eyes, redness and swelling, double vision, pain, and potential blindness.

TED significantly impacts quality of life, imposing a high physical and mental burden on patients.

There is currently one FDA-approved treatment for TED, which is an intravenously administered monoclonal antibody that targets IGF-1R.

Our most advanced program, VRDN-001, is an intravenously administered anti-IGF-1R monoclonal antibody licensed from ImmunoGen for TED, a debilitating condition that can cause bulging eyes, or proptosis, as well as double vision and potential blindness.

Manufacturing is underway, and we expect to have clinical drug product on hand in the third quarter of 2021 and to file an IND in the fourth quarter of 2021, with initial proof of concept data in patients expected in the second quarter of 2022.

We are also developing VRDN-002, a distinct anti-IGF-1R antibody that incorporates half-life extension technology and is intended for subcutaneous administration.

Manufacturing of VRDN-002 is underway, and we expect to file an IND before the end of 2021.

We expect to initiate clinical development with a Phase 1 single ascending dose trial to explore safety, tolerability, pharmacokinetics, and target engagement of VRDN-002 in healthy volunteers.

Data from this trial is expected in mid-year 2022, and we expect to initiate the dosing of patients later in 2022.

In addition to developing therapies for TED, we have applied criteria similar to those used to select our TED research and development programs to identify other opportunities to develop fast-follower therapies in other rare disease indications.

We intend to identify and initiate additional programs over time and plan to disclose these when we are closer to initiating clinical trials in these programs.

Agreement and Plan of Merger

On October 27, 2020, we acquired Private Viridian.

In accordance with the terms of the Agreement and Plan of Merger, dated October 27, 2020 (the “Merger Agreement”), by and among us, Oculus Merger Sub I, Inc., a Delaware corporation and our wholly owned subsidiary (the “First Merger Sub”), Oculus Merger Sub II, LLC, a Delaware limited liability company and our wholly owned subsidiary (the “Second Merger Sub”), and Viridian.

Pursuant to the Merger Agreement, First Merger Sub merged with and into Viridian, pursuant to which Viridian was the surviving corporation and became our wholly owned subsidiary (the “First Merger”).

Immediately following the First Merger, Viridian merged with and into Second Merger Sub, pursuant to which Second Merger Sub was the surviving entity (the “Second Merger,” and together with the First Merger, the “Merger”).

The Merger is intended to qualify as a tax-free reorganization for U.S.

federal income tax purposes.

Our board of directors approved the Merger Agreement and the related transactions.

The consummation of the Merger was not subject to approval of our stockholders.

Under the terms of the Merger Agreement, at the closing of the Merger on October 27, 2020 (the “Closing”) we issued 72,131 shares of our common stock and 203,197 shares of Series A Non-Voting Convertible Preferred Stock (the “Series A Preferred Stock”) (as described below) to the securityholders of Private Viridian.

Each share of Series A Preferred Stock is convertible into 66.67 shares of our common stock, subject to certain conditions described below.

Certain shares of our common stock outstanding immediately after the Merger are held by stockholders subject to lock-up restrictions, pursuant to which such stockholders have agreed, except in limited circumstances, not to sell or transfer, or engage in swap or similar transactions with respect to, shares of our common stock, including, as applicable, shares received in the Merger and issuable upon exercise of certain options, for a period of 180 days following the closing of the Merger.

Concurrently and in connection with the execution of the Merger Agreement, certain Private Viridian securityholders as of immediately prior to the Merger, and our directors and officers as of immediately following the Merger entered into lock-up agreements with us and Private Viridian, pursuant to which each such stockholder will be subject to a 180-day lockup on the sale or transfer of shares of our common stock held by each such stockholder at the closing of the Merger, including those shares received by Private Viridian securityholders in the Merger (the “Lock-up Agreements”).

Contingent Value Rights Agreement

In accordance with the Merger Agreement, on November 4, 2020, we and the Rights Agent (as defined therein) executed and delivered a contingent value rights agreement (the “CVR Agreement”), pursuant to which each holder of our common stock as of November 6, 2020, other than former stockholders of Private Viridian, is entitled to one contractual contingent value right issued by us, subject to and in accordance with the terms and conditions of the CVR Agreement, for each share of our common stock held by such holder.

Each contingent value right entitles the holder thereof to receive certain cash payments equal to 80% of the net proceeds, if any, related to the disposition of our legacy programs to develop product candidates that modulate microRNAs within five years following the date of the Merger.

The contingent value rights are not transferable, except in certain limited circumstances as will be provided in the CVR Agreement, will not be certificated or evidenced by any instrument, and will not be registered with the SEC or listed for trading on any exchange.

Private Placement and Securities Purchase Agreement

On October 27, 2020, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers named therein (the “Investors”).

Pursuant to the Purchase Agreement, we sold an aggregate of approximately 195,290 shares of Series A Preferred Stock for an aggregate purchase price of approximately $91.0 million (collectively, the “Financing”).

Each share of Series A Preferred Stock is convertible into 66.67 shares of our common stock, as described below.

The powers, preferences, rights, qualifications, limitations, and restrictions applicable to the Series A Preferred Stock are set forth in the Certificate of Designation filed in connection with the Merger.

We plan to use the proceeds from the Financing to potentially advance multiple compounds through Phase 2 proof of concept studies in TED and expand our orphan disease pipeline and for general and working capital purposes.

Holders of Series A Preferred Stock are entitled to receive dividends on shares of Series A Preferred Stock equal, on an as-if-converted-to-Common-Stock basis, and in the same form as dividends actually paid on shares of our common stock.

otherwise required by law, the Series A Preferred Stock does not have voting rights.

However, as long as any shares of Series A Preferred Stock are outstanding, we will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock, (b) alter or amend the Certificate of Designation, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series A Preferred Stock, (d) increase the number of authorized shares of Series A Preferred Stock, (e) at any time while at least 30% of the originally issued Series A Preferred Stock remains issued and outstanding, consummate a Fundamental Transaction (as defined in the Certificate of Designation) or (f) enter into any agreement with respect to any of the foregoing.

The Series A Preferred Stock does not have a preference upon any liquidation, dissolution, or winding-up of us.

Following stockholder approval of the conversion of the Series A Preferred Stock into shares of Common Stock in December 2020, each share of Series A Preferred Stock is convertible into shares of our common stock at any time at the option of the holder thereof, into 66.67 shares of our common stock, subject to certain limitations, including that a holder of Series A Preferred Stock is prohibited from converting shares of Series A Preferred Stock into shares of our common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be established by the holder between 4.99% and 19.99%) of the total number of shares of our common stock issued and outstanding immediately after giving effect to such conversion.

On October 30, 2020, we entered into a Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which we agreed to register for resale the shares of common stock sold to Investors in the Financing.

The registration statement that was filed pursuant to the Registration Rights Agreement was declared effective by the SEC on December 22, 2020.

Reverse Stock Split

On November 12, 2020, we effected a reverse stock split of our shares of common stock at a ratio of 1-for-15, and trading of our common stock began on a split-adjusted basis on November 13, 2020.

Our common stock is traded on the Nasdaq Capital Market under the ticker symbol “VRDN,” under CUSIP number 92790C104.

As a result of the reverse stock split, every 15 shares of our pre-reverse split common stock were combined and reclassified into one share of our common stock.

No fractional shares were issued in connection with the reverse stock split, and in the case the stock split resulted in any stockholders owning a fractional share, then such stockholders received a cash payment in lieu of such fractional share.

The reverse stock split did not modify any rights of our common stock.

The reverse stock split reduced the number of shares of our common stock issuable upon the conversion of our outstanding shares of Series A Preferred Stock to a ratio of 66.67 and the exercise or vesting of outstanding stock options and warrants in proportion to the ratio of the reverse stock split and caused a proportionate increase in the conversion and exercise prices of such preferred stock, stock options, and warrants.

The accompanying consolidated financial statements and notes to the consolidated financial statements in this Annual Report give retroactive effect to the exchange ratio for all periods presented.

The COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic.

To date, the COVID-19 pandemic continues to spread throughout the United States and worldwide.

We could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic or other public health crisis, such as the COVID-19 pandemic, including but not limited to potential delays in our clinical trials.

The ultimate extent of the impact of any epidemic, pandemic or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other public health crisis and actions taken to contain or prevent the further spread, among others.

Accordingly, we cannot predict the extent to which our business, financial condition and results of operations may be affected by the COVID-19 pandemic, but we are monitoring the situation closely.

Financial Operations Overview

Our revenue consists primarily of up-front payments for licenses, milestone payments, and payments for other research and development services earned under the Servier Collaboration Agreement.

Our revenue has historically consisted primarily of up-front payments for licenses, milestone payments, and payments for other research and development services earned under a license and collaboration agreement (the “Servier Collaboration Agreement”), with Les Laboratoires Servier and Institut de Recherches Servier (collectively, “Servier”) for the research,

development, and commercialization of RNA-targeting therapeutics in cardiovascular disease.

We also recognize revenue for amounts received or receivable under certain grants we have been awarded.

In August 2019, Servier terminated the Servier Collaboration Agreement effective in February 2020.

We completed certain activities under the Servier Collaboration Agreement through the effective termination date in February 2020, which included finalizing two Phase 1 clinical trials of MRG-110, for which we previously reported data.

The activities eligible for reimbursement under the Servier Collaboration Agreement are considered a research and development performance obligation and revenue is recognized through the termination date.

In August 2019, Servier terminated the Servier Collaboration Agreement, with such termination becoming effective in February 2020.

We completed certain activities under the Servier Collaboration Agreement through the effective termination date in February 2020.

The activities eligible for reimbursement under the Servier Collaboration Agreement were considered a research and development performance obligation and revenue was recognized through the termination date.

In October 2020, we became party to a license agreement with Zenas BioPharma.

In February 2021, we entered into a letter agreement with Zenas BioPharma in which we agreed to provide assistance to Zenas BioPharma with certain manufacturing activities.

Under the terms of the Zenas Agreements, we granted Zenas BioPharma an exclusive license to develop, manufacture, and commercialize certain IGF-1R directed antibody products for non-oncology indications in the greater area of China in exchange for upfront non-cash consideration and non-refundable milestone payments upon achieving specific milestone events during the contract term.

Additionally, we may receive royalty payments based on a percentage of the annual net sales of any licensed products sold on a country-by-country basis in the greater area of China.

The royalty percentage may vary based on different tiers of annual net sales of the licensed products made.

Zenas BioPharma is obligated to make royalty payments to us for the royalty term in the Zenas Agreements.

The Zenas Agreements may be considered related party transactions because Tellus BioVentures, a 5% or greater stockholder of our Company (on an as-converted basis, assuming that only the shares of convertible preferred stock held by Tellus BioVentures are converted into shares of our common stock), is also a 5% or greater stockholder of Zenas BioPharma and has a seat on Zenas BioPharma’s board of directors.

In the future, we may generate revenue from a combination of license fees and other up-front payments, payments for research and development services, milestone payments, product sales, and royalties in connection with strategic alliances.

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• employee-related expenses, including salaries, severance, retention, benefits, insurance, and share-based compensation expense;

expenses incurred under agreements with contract research organizations, or CROs, investigative sites that conduct our clinical trials, and other clinical trial-related vendors, and consultants;

the costs of acquiring, developing, and manufacturing and testing clinical and preclinical materials, including costs incurred under agreements with contract manufacturing organizations, or CMOs;

• expenses incurred under agreements with CROs, investigative sites that conduct our clinical trials, and other clinical trial-related vendors, and consultants;

• the costs of acquiring, developing, and manufacturing and testing clinical and preclinical materials, including costs incurred under agreements with CMOs;

• costs associated with non-clinical activities and regulatory operations;

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These payments are recorded as expense in the period in which we receive or take ownership of the goods or when the services are performed.

We record up-front and milestone payments to acquire and retain contractual rights to in-licensed technology and intellectual property rights as research and development expenses when incurred if there is uncertainty in our receiving future economic benefit from the acquired contractual rights.

benefit from the acquired contractual rights.

We consider future economic benefits from acquired contractual rights to licensed technology to be uncertain until such a drug candidate is approved by the FDA, or when other significant risk factors are abated.

We expect our research and development expenses to increase for the foreseeable future as we continue to conduct our ongoing clinical trials, initiate new clinical trials, and advance our preclinical research programs.

Our research and development expenses may increase if we initiate new clinical trials.

The process of conducting clinical trials and preclinical studies necessary to obtain regulatory approval is costly and time consuming.

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General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefits, including share-based compensation, related to our finance, accounting, human resources, legal, business development, and other support functions, professional fees for auditing, tax, and legal services, as well as insurance, board of director compensation, and other administrative expenses.

General and administrative expenses consist primarily of salaries and related benefits, including share-based compensation, and severance and retention benefits related to our finance, accounting, human resources, legal, business development, and other support functions, professional fees for auditing, tax, and legal services, as well as insurance, board of director compensation, consulting, and other administrative expenses.

Acquired In-process Research and Development Expense

Acquired in-process research and development (“IPR&D”) expense resulted from the acquisition of Private Viridian in October 2020.

The acquisition cost allocated to acquire IPR&D with no alternative future use was recorded as expense at the acquisition date.

Other Income (Expense)

Other income (expense) consists primarily of interest income and expense, and various income or expense items of a non-recurring nature.

Other income (expense) consists primarily of interest income, interest expense, and various income or expense items of a non-recurring nature.

We earn interest income from interest-bearing accounts, money market funds, and short-term investments.

Interest expense is comprised of interest incurred under our note payable.

Interest expense is comprised of interest incurred under prior notes payable.

Critical Accounting Policies and Estimates

This discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles, or U.S.

generally accepted accounting principles (“U.S.

The preparation of financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses.

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Our accrued expenses for preclinical studies and clinical trials are based on estimates of costs incurred for services provided by external service providers and for other trial-related activities.

The timing and amount of expenses we incur though our external service providers depend on a number of factors, such as site initiation, patient screening, enrollment, delivery of reports, and other events.

The timing and amount of expenses we incur through our external service providers depend on a number of factors, such as site initiation, patient screening, enrollment, delivery of reports, and other events.

In accruing for these activities, we obtain information from various sources and estimate the level of effort or expense allocated to each period.

Adjustments to our research and development expenses may be necessary in future periods as our estimates change.

Acquisition of Private Viridian

On October 27, 2020, we completed our acquisition of Private Viridian in accordance with the terms of the Merger Agreement.

We concluded that the acquisition of Private Viridian did not result in the acquisition of a business, as substantially all of the fair value of the non-monetary assets acquired was concentrated in a single identifiable asset, the exclusive license agreement with ImmunoGen.

We considered several pertinent factors and identified the Company as the accounting acquirer in the transaction.

Significant judgment was required in evaluating the terms of the Merger Agreement and in identifying, valuing, and recording the acquired assets at fair value, including acquired IPR&D, and determining the acquirer for accounting purposes..

Results of Operations

Comparison of the Year Ended December 31, 2019 and 2018

Comparison of the Years Ended December 31, 2020 and 2019

(in thousands)

Revenue $ 1,050 $ 4,461

Research and development expenses 28,304 34,794

General and administrative expenses 13,265 11,646

Other income, net

Revenue was $4.5 million during the year ended December 31, 2019 , compared to $8.4 million during the year ended December 31, 2018 .

The decrease in revenue was due primarily to a €3.0 million (or $3.7 million ) development milestone payment earned and received under the Servier Collaboration Agreement during the year ended December 31, 2018 , which did not recur in 2019.

Also impacting revenue was a decrease in grant revenue of $0.9 million and an increase of $0.6 million in research and development and other activities reimbursable to us under the Servier Collaboration Agreement during the year ended December 31, 2019 , compared to the year ended December 31, 2018 .

Acquired in-process research and development expense 69,861 —

Other income (expense), net (335) 106

Net loss $ (110,715) $ (41,873)

Revenue was $1.1 million for the year ended December 31, 2020, compared to $4.5 million for the year ended December 31, 2019.

The $3.4 million decrease in revenue was primarily due to a decrease in research and development activities related to the legacy microRNA programs r eimbursable to us under a prior collaboration agreement.

Research and Development Expenses

Research and development expenses were $28.3 million during the year ended December 31, 2020, compared to $34.8 million during the year ended December 31, 2019.

The increase in research and development expenses of $4.4 million in 2019 was driven primarily by:

increased clinical development and related manufacturing expenses of $3.4 million, primarily related to expenses incurred in connection with the clinical development of cobomarsen;

increased personnel-related costs of $2.5 million, including restructuring costs, share-based compensation charges, consulting and contract labor costs;

partially offset by

decreased technology license fees of $0.8 million, primarily related to a milestone payment under one of our license agreements related to the initiation of clinical development of MRG-110 during 2018 that did not recur in 2019;

decreased other miscellaneous expenses of $0.3 million associated with the reduction in headcount, travel, and other research activities.

The $6.5 million decrease in research and development expenses was primarily attributable to an $5.8 million decrease in clinical and related manufacturing development activities associated with our legacy microRNA programs and a $5.5 million decrease in personnel-related costs, including restructuring charges.

These decreases were partially offset by a $6.0 million increase in licensing fees primarily attributable to the Xencor License Agreement.

Acquired In-process Research and Development (IPR&D) Expense

Acquired IPR&D expense was $69.9 million during the year ended December 31, 2020.

Acquired IPR&D expense resulted from the acquisition of Private Viridian in October 2020.

The acquisition cost allocated to acquire IPR&D with no alternative future use was recorded as an expense at the acquisition date.

No acquired IPR&D expenses were incurred in 2019.

General and Administrative Expenses

General and administrative expenses were $13.3 million during the year ended December 31, 2020, compared to $11.6 million during the year ended December 31, 2019.

During 2019, the Company’s general and administrative costs increased as compared to 2018 primarily due to increased personnel-related, including restructuring costs, and increased legal expense.

The $1.6 million increase in general and administrative expenses was due primarily to a $1.3 million increase in professional and personnel-related costs, including consulting and contract labor.

Liquidity and Capital Resources

We have funded our operations to date principally through proceeds received from the sale of our common stock and other equity securities, debt financings, and from amounts received under the Servier Collaboration Agreement.

We have funded our operations to date principally through proceeds received from the sale of our common stock, our preferred stock, and other equity securities, debt financings, and from amounts received under a prior collaboration agreement.

As of December 31, 2020, we had $127.6 million in cash, cash equivalents, and short-term investments.

Based on our current operating plans, we believe that our cash, cash equivalents, and short-term investments, after giving effect to the proceeds received in sales of our common stock subsequent to December 31, 2019 and through the date of this Annual Report, will be sufficient to fund our operations for the period one year following the issuance of the accompanying consolidated financial statements in this Annual Report.

We expect that our current cash, cash-equivalents, and short-term investments will be sufficient to fund our current operations into the third quarter of 2021 .

In March 2017, we entered into the ATM Agreement with Cowen, under which we may offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million through Cowen as our sales agent.

Cumulative net proceeds received from the sale of 1,871,386 shares of our common stock through March 13, 2020 were approximately $11.0 million , after giving effect to commissions to Cowen as sales agent and initial expenses for executing the “at the market offering.”

In February 2018, we entered into the 2018 Underwriting Agreement with Jefferies LLC, Evercore Group L.L.C., and Deutsche Bank Securities Inc., as representatives of the several underwriters.

Pursuant to the 2018 Underwriting Agreement, in February 2018 we sold 7,414,996 shares of our common stock, which resulted in net proceeds of approximately $37.9 million after deducting underwriting commissions and discounts and other offering expenses payable by us.

In August 2018, we and LLS entered into the LLS Stock Purchase Agreement for the sale of up to $5.0 million of shares of our common stock to LLS and its affiliates in the Offering.

In October 2019, the LLS Stock Purchase Agreement was assigned to LLS TAP.

Under the terms of the LLS Stock Purchase Agreement, we may raise up to approximately $5.0 million in gross proceeds by selling shares of our common stock to LLS and its affiliates, including LLS TAP, in up to five separate closings upon the achievement of specified development milestones.

At the initial closing in August 2018, we issued 150,987 shares of our common stock to LLS under the LLS Stock Purchase Agreement for net proceeds of $0.9 million .

Subsequently, on October 31, 2019, the Company issued 606,364 shares of common stock to LLS TAP for net proceeds of $0.5 million in a subsequent closing.

The Company has received net proceeds of $1.4 million , in the aggregate to date under the LLS Stock Purchase Agreement.

The price per share of our common stock to be sold in any subsequent closing will be equal to the average of the volume weighted-average prices of a share of our common stock on the Nasdaq Capital Market for the three trading days beginning with the first trading day after the date of achievement of the relevant milestone for each such closing.

Each closing is subject to our achievement of specified operational milestones under the LLS Stock Purchase Agreement and other customary closing conditions, provided, however, that each such closing must be completed prior to December 31, 2021.

As a result of the modifications of the SOLAR trial we announced in December 2019, we do not anticipate meeting the milestones under the LLS Stock Purchase Agreement and as such, do not expect we will receive the remaining proceeds available under the LLS Stock Purchase Agreement unless the agreement is amended, which we can provide no assurances will occur.

In December 2019, we entered into the Aspire Agreement with Aspire Capital, which provides that, subject to the terms, conditions, and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock over the 30-month term of the Aspire Agreement.

Upon execution of the Aspire Agreement, we sold to Aspire Capital 1,598,465 shares of common stock at $0.63 per share for proceeds of $1.0 million as the Initial Purchase Shares.

In January 2020, we sold to Aspire Capital 2,200,000 shares our common stock at a weighted-average price of $1.84 per share for proceeds of $4.1 million .

After giving effect to these sales, we may sell an additional $14.9 million to Aspire Capital.

Under the Aspire Agreement, we have the right, in our sole discretion, on any trading day selected by us, and within certain specified limitations, to present Aspire Capital with a purchase notice, directing Aspire Capital (as principal) to purchase up to 200,000 shares of our common stock per business day, up to $20.0 million of our common stock, in the aggregate and inclusive of the Initial Purchase Shares, at a per share price equal to the lesser of (i) the lowest sale price of our common stock on the purchase date or (ii) the average of the three lowest closing sale prices for our common stock during the 10 consecutive business days ending on the business day immediately preceding the purchase date.

We also have the right to require Aspire Capital to purchase up to an additional 30% of the trading volume of the shares for the next business day at a purchase price, or the VWAP Purchase Price, equal to the lesser of:

(i) the closing sale price of the shares on the purchase date, or (ii) ninety-seven percent (97%) of the next business day’s volume weighted average price, or each such purchase, a VWAP Purchase.

We have the right, in our sole discretion, to determine a maximum number of shares and set a minimum market price threshold for each VWAP Purchase.

We can only require a VWAP Purchase if we have also submitted a regular purchase on the notice date for the VWAP Purchase.

There are no limits on the number of VWAP purchases that we may require.

In consideration for entering into the Aspire Agreement, concurrently with the execution of the Aspire Agreement, we issued to Aspire Capital 959,079 shares of our common stock.

In February 2020, we entered into the 2020 Underwriting Agreement with the Underwriter.

Pursuant to the 2020 Underwriting Agreement, the Underwriter purchased 15,000,000 shares of our common stock and warrants to purchase 7,500,000 shares of our common stock.

Each whole warrant has an exercise price of $1.10 per share, was exercisable immediately and expires on the fifth anniversary of the date of issuance.

Though the shares of common stock and warrants were sold together as a fixed combination, each consisting of one share of our common stock and one-half warrant, with each whole warrant exercisable to purchase one whole share of our common stock, the shares of our common stock and warrants were issued separately and were immediately separable upon issuance.

The combined price to the public in the 2020 Public Offering for each share of common stock and accompanying one-half warrant was $1.00 , which resulted in approximately $14.0 million of net proceeds to us after deducting underwriting commissions and discounts and other estimated offering expenses payable by us and excluding the proceeds, if any, from the exercise of the warrants.

We expect that our current resources will enable us to fund our planned operations into the second half of 2023.

We have no products approved for commercial sale and have not generated any revenue from product sales.

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Substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

Cost Restructuring Plan

Through December 31, 2019, we had recorded approximately $2.0 million in restructuring expense and expect to incur another $0.2 million during the first half of 2020.

We will continue to require substantial additional capital to continue our clinical development and potential commercialization activities.

Accordingly, we will need substantial additional capital to continue to fund our operations.

We will continue to require substantial additional capital to continue the development of our product candidates, and potential commercialization activities, and to fund our ongoing operations.

The amount and timing of future funding requirements will depend on many factors, including the pace and results of our clinical development efforts, equity financings, securing additional license and collaboration agreements, and issuing debt or other financing vehicles.

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We may be forced to reduce our operating expenses and raise additional funds to meet our working capital needs, principally through the additional sales of our securities or debt financings or entering into strategic collaborations.

We expect to incur significant expenses and increased operating losses for at least the next several years as we continue the clinical development of, and seek regulatory approval for, our product candidates.

We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical development programs and efforts to achieve regulatory approval.

We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of our development activities and efforts to achieve regulatory approval.

If we raise additional funds through the issuance of debt, the obligations related to such debt could be senior to rights of holders of our capital stock and could contain covenants that may restrict our operations.

Should additional capital not be available to us in the near term, or not be available on acceptable terms, we may be unable to realize value from our assets and discharge our liabilities in the normal course of business, which may, among other alternatives, cause us to further delay, substantially reduce, or discontinue operational activities to conserve our cash resources.

In March 2017, we entered into the ATM Agreement, with Cowen under which we may offer and sell, from time to time, at our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million through Cowen as our sales agent.

Cumulative net proceeds received from the sale of 189,763 shares of our common stock through December 31, 2020 were approximately $11.6 million, after giving effect to commissions to Cowen as sales agent and initial expenses for executing the “at the market offering.” We are not obligated to make any sales of our common stock under the ATM Agreement.

The offering of shares of our common stock pursuant to the ATM Agreement will terminate upon the earlier of:

(i) the sale of all Common Stock subject to the ATM Agreement or (ii) termination of the ATM Agreement in accordance with its terms.

In December 2019, we entered into the Common Stock Purchase Agreement with Aspire Capital, which provides that, subject to the terms, conditions, and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock over the 30-month term of the Common Stock Purchase Agreement.

Upon execution of the Common Stock Purchase Agreement, we sold to Aspire Capital 106,564 shares of common stock at $9.38 per share for proceeds of $1.0 million as the Initial Purchase Shares.

During the year ended December 31, 2020, we sold to Aspire Capital 412,187 shares of our common stock at a weighted-average price of $21.35 per share for aggregate net proceeds of $8.8 million.

As of December 31, 2020, we may sell an additional $10.2 million of shares of our common stock to Aspire Capital.

In February 2020, we entered into the 2020 Underwriting Agreement with the Underwriter for the sale and issuance of 1,000,000 shares of our common stock and warrants to purchase 500,000 shares of our common stock (the 2020 Public Offering).

Each warrant has an exercise price of $16.50 per share, was exercisable immediately and expires on the fifth anniversary of the date of issuance.

The 2020 Public Offering resulted in approximately $13.9 million of net proceeds to us after deducting underwriting commissions and discounts and other estimated offering expenses payable by us and excluding the proceeds from the exercise of the warrants.

In October 2020, we entered into the Purchase Agreement with the Investors.

Pursuant to the Purchase Agreement, we agreed to sell an aggregate of approximately 195,290 shares of Series A Preferred Stock for an aggregate purchase price of approximately $91.0 million in the Financing.

Each share of Series A Preferred Stock is convertible into 66.67 shares of our common stock, subject to specified conditions.

The powers, preferences, rights, qualifications, limitations, and restrictions applicable to the Series A Preferred Stock are set forth in the Certificate of Designation.

Cost Restructuring Plan

In August 2019 we initiated a cost restructuring plan to streamline the organization, reduce costs, and direct resources towards prioritized initiatives and product candidates, which provided a reduction of approximately 50% of workforce in place at that time, primarily associated with research and development functions.

Through December 31, 2020, we had recorded cumulative restructuring expense of approximately $2.4 million.

As of December 31, 2020, the restructuring plan was completed and no additional expense under the restructuring plan is expected.

Summarized cash flows for the year ended December 31, 2020 and 2019 are as follows:

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Financing activities 101,311 70

Total $ 21,051 $ (7,760)

Operating Activities

Net cash used in operating activities was $29.8 million for the year ended December 31, 2020, compared to $36.1 million for the year ended December 31, 2019.

The $9.3 million increase in 2019 was primarily the result of a $9.2 million increase in net loss and a $0.3 million increase in payments of current liabilities and receipts associated with accounts receivable and prepaid expenses

and other assets, offset by a $0.3 million increase in share-based compensation expense during the year ended December 31, 2019 compared to the year ended December 31, 2018 .

The $6.3 million decrease was primarily the net result of a $68.8 million increase in net loss reduced by non-cash expenses related to IPR&D expense of $66.0 million that resulted from the acquisition of Private Viridian in October 2020, a $6.0 million non-cash charge related to the issuance of common stock as payment for certain licensing fees, and a $2.8 million net decrease related to changes in other working capital.

Investing Activities

Net cash provided by investing activities was $28.2 million during the year ended December 31, 2019 compared to net cash used in investing activities of $29.9 million during the year ended December 31, 2018 .

The change in cash flow from investing activities was driven primarily by a $29.8 million decrease in purchases of short-term investments and a $28.0 million increase in the maturities of short-term investments during 2019 during the year ended December 31, 2019 compared to the year ended December 31, 2018 .

Net cash used in investing activities was $50.5 million during the year ended December 31, 2020 compared to net cash provided by investing activities of $28.2 million during the year ended December 31, 2019.

The change in cash flow from investing activities was driven primarily by a $59.0 million decrease in the related maturities of short-term investments and a $49.1 million increase in purchases of short-term investments during 2020 compared to 2019.

This decrease was partially offset by $29.4 million of cash acquired in the acquisition of Private Viridian in October 2020.

Financing Activities

Net cash provided by financing activities was $101.3 million for the year ended December 31, 2020, compared to $0.1 million during the year ended December 31, 2019.

During the year ended December 31, 2018 , we received net proceeds from the sale of our common stock in a public offering of $37.9 million.

During the year ended December 31, 2019 , we received less in net proceeds from other sales of common stock by $1.4 million compared to the same period in 2018, and we made higher payments of principal of notes payable by $2.3 million compared to the same period in 2018.

During the year ended December 31, 2020, we received net proceeds from the issuance of preferred stock of $86.1 million, received increased net proceeds from the sale of our common stock and warrants and exercise of warrants of $21.4 million, and made increased net repayments on notes payable of $6.2 million.

Contractual Obligations and Commitments

As of December 31, 2019 , we had no material commitments other than the liabilities reflected and commitments disclosed in our consolidated financial statements.

We are a smaller reporting company, as defined by Rule 12b-2 under the Exchange Act and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

Off-Balance Sheet Arrangements

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

We are a smaller reporting company, as defined by Rule 12b-2 under the Exchange Act and in Item 10(f)(1) of Regulation S-K, and are not required to provide the information under this item.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplemental data required by this item are set forth at the pages indicated in Part IV, Item 15(a)(1) of this Annual Report.

The financial statements and supplemental data required by this item are set forth on the pages indicated in Part IV, Item 15(a)(1) of this Annual Report.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

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