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Item 7. Management’s Discussion and Analysis

2022-03-11 compared with 2021-03-26 · 101 added, 76 removed, 140 unchanged (56% of the section changed)

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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 are a biotechnology company advancing new treatments for patients with serious diseases that are underserved by today’s therapies.

Marketed therapies often leave room for improvements in efficacy, safety, and/or dosing convenience.

We believe that first-generation drugs rarely represent optimal solutions, and that the potential exists to develop alternatives that improve patient outcomes, moderate side effects, enhance quality of life, ease access, and augment market competition.

Our business model is to identify product opportunities in indications for which clinical trial data demonstrating compelling proof of concept for a targeted mechanism of action already exists, but the competitive evolution of product profiles and number of entrants appears incomplete.

We intend to prioritize indications that fast-follower and bio superior competition could create significant medical benefit for patients.

We are engineering medicines to advance patient care.

We are developing two product candidates, VRDN-001 and VRDN-002, to treat patients who suffer from thyroid eye disease (“TED”).

Our most advanced program, VRDN-001, is a differentiated humanized monoclonal antibody targeting IGF-1R for the treatment for TED.

In November 2021, we opened an investigational new drug (“IND”) application for VRDN-001 as a

new molecular entity and in December 2021, we initiated a Phase 1/2 clinical trial of VRDN-001, which will evaluate proof of concept in TED patients.

Initial proof of concept data in patients are expected in the second quarter of 2022.

VRDN-002, a distinct IGF-1R antibody that incorporates half-life extension technology, is designed to support administration as a convenient, low volume, subcutaneous injection, to treat patients who suffer from TED.

In January 2022, we announced FDA clearance of our IND application for VRDN-002.

During the first quarter of 2022, we expect to initiate a Phase 1 single ascending dose trial to explore safety, tolerability, pharmacokinetics, and pharmacodynamic properties of intravenously administered VRDN-002 in healthy volunteers.

Data from this Phase 1 trial will allow us to evaluate the feasibility of a low-volume dosing paradigm and are expected to be announced in mid-2022.

Pending results, we then plan to evaluate the potential efficacy of a low volume subcutaneous injection of VRDN-002 in TED patients.

In addition to developing therapies for TED, we are executing a similar strategic approach to identify opportunities to develop fast-follower therapies in other serious and/or 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”).

On October 27, 2020, we acquired Viridian Therapeutics, Inc.

(“Private Viridian”).

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

Immediately following the First Merger, Private 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.

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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.

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, was 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.

The CVR Agreement terminated as of December 31, 2021 and no CVRs were issued under the CVR Agreement.

Private Placement and Securities Purchase Agreement

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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.

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

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.

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 became 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.

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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.

Our common stock is traded on the Nasdaq Capital Market under the ticker symbol “VRDN”.

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.

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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.

Underwritten Public Offering

On September 23, 2021, we completed an underwritten public offering of 7,344,543 shares of common stock, which includes 1,159,089 shares of common stock issued in connection with the exercise in full by the underwriters of their option to purchase additional shares, at a public offering price of $11.00 per share and 23,126 shares of Series B Non-Voting Convertible Preferred Stock (the “Series B Preferred Stock”) at a public offering price of $733.37 per share (collectively, the “Offering”).

The gross proceeds of the Offering, before deducting underwriting discounts and commissions and other offering expenses payable by us, were approximately $97.7 million.

Each share of Series B Preferred Stock is convertible into 66.67 shares of common stock, subject to certain limitations, including that a holder of Series B Preferred Stock is prohibited from converting shares of Series B Preferred Stock into shares of 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 4.9% and 19.9%) of the total number of shares of common stock issued and outstanding immediately after giving effect to such conversion.

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

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

Except as otherwise required by law, the Series B Preferred Stock does not have voting rights.

However, as long as any shares of Series B 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 B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock, (b) alter or amend the Certificate of Designation, or (c) amend our certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series B Preferred Stock.

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

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 on-going COVID-19 pandemic continues to cause disruption 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 the COVID-19 pandemic or any other epidemic, pandemic or public health crisis.

Such risks include, but are not limited to, potential disruptions to our supply chain that may limit our ability to manufacture drug product for our clinical trials, and delays to our planned or future 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.

While our business has not been materially impacted by the COVID-19 pandemic to date, we cannot assure you that our business, financial condition and results of operations will not be affected by the COVID-19 pandemic in the future.

Financial Operations Overview

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.

Our revenue has historically consisted primarily of up-front payments for licenses, milestone payments, and payments for other research and development services earned under license and collaboration agreements as well as for amounts earned under certain grants we have been awarded.

In 2011, we entered into a license and collaboration agreement (the “Servier Collaboration Agreement”) with Les Laboratoires Servier and Institut de Recherches Servier (collectively, “Servier”).

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

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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.

Since February 2021, we have entered into several letter agreements with Zenas BioPharma in which we agreed to provide assistance to Zenas BioPharma with certain development activities, including manufacturing.

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.

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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.

We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing of our achievement of preclinical, clinical, regulatory, and commercialization milestones, the timing and amount of payments relating to such milestones, and the extent to which any of our products are approved and successfully commercialized by us or our strategic alliance collaborators, if any.

If our strategic alliance collaborators do not elect or otherwise agree to fund our development costs pursuant to our strategic alliance agreements, or we or our strategic alliance collaborators, if any, fail to develop product candidates in a timely manner or to obtain regulatory approval for them, then our ability to generate future revenue, and our results of operations and financial position would be adversely affected.

In the future, we expect to continue to 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.

We expect that any revenue we generate could fluctuate from quarter to quarter as a result of the timing of our achievement of development and commercial milestones, the timing and amount of payments relating to such milestones, and the extent to which any of our product candidates are approved and successfully commercialized by us or our strategic alliance collaborators, if any.

If we or our strategic alliance collaborators, if any, fail to develop product candidates in a timely manner or to obtain regulatory approval for them, then our ability to generate future revenue, and our results of operations and financial position would be adversely affected.

Research and Development Expenses

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

• 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;

• expenses incurred under agreements with clinical research organizations (“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 (“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.

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 consider future economic benefits from acquired contractual rights to licensed technology to be uncertain until such a drug candidate is approved by the U.S.

Food and Drug Administration (“FDA,”) or when other significant risk factors are abated.

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

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Revenue was $3.0 million for the year ended December 31, 2021, compared to $1.1 million for the year ended December 31, 2020.

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.

During the year ended December 31, 2021, revenue was attributable to our collaboration agreement with Zenas

Revenue recognized during the year ended December 31, 2020, was primarily related to research and development activities related to the legacy microRNA programs reimbursable to us under the Servier Collaboration Agreement.

Research and Development Expenses

Research and development expenses were $56.9 million during the year ended December 31, 2021, compared to $28.3 million during the year ended December 31, 2020.

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.

The $28.6 million increase in research and development expenses was primarily attributable to a $22.8 million increase in preclinical outsourcing and manufacturing for our VRDN programs, including expenses to support the IND submissions for VRDN-001 and VRDN-002;

a $6.0 million increase in personnel expenses, due to an increase in headcount;

and a $4.3 million increase in licensing fees.

This increase was partially offset by a $5.8 million decrease in clinical activities due to expenses incurred in 2020 related to our legacy microRNA programs.

We expect our research and development expenses to increase as we work to progress our clinical and preclinical programs.

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

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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.

No acquired IPR&D expenses were incurred during the year ended December 31, 2021.

General and Administrative Expenses

General and administrative expenses were $25.8 million during the year ended December 31, 2021, compared to $13.3 million during the year ended December 31, 2020.

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.

The $12.5 million increase in general and administrative expenses was due primarily to a $9.6 million increase in personnel-related costs, reflecting increases in headcount, salaries and bonus expense, severance costs and share-based compensation expense, as well as a $2.4 million increase in consulting and recruiting fees, and a $1.1 million increase in board compensation expenses.

These increases were slightly offset by a decrease of $0.8 million in legal and other professional services.

Liquidity and Capital Resources

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.

We have funded our operations to date principally through proceeds received from the sale of our common stock, our Series A Preferred Stock, our Series B Preferred Stock and other equity securities, debt financings, license fees, and reimbursements received under collaboration agreements.

As of December 31, 2021, we had $197.0 million in cash, cash equivalents, and short-term investments.

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

We expect that our current resources will enable us to fund our planned operations into 2024.

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

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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.

Our material cash requirements include obligations as of December 31, 2021, as well as resources required to fulfill our research and development activities and the effects that such obligations and activities are expected to have on our liquidity and cash flows in future periods.

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.

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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).

ATM Agreements

In November 2021, we entered into an Open Market Sale Agreement SM (the “November 2021 ATM Agreement”) with Jefferies LLC (“Jefferies”) under which we can offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $75.0 million through Jefferies as our sales agent in an “at the market” offering.

Jefferies will receive a commission equal to 3.0% of the gross sales proceeds of any common stock sold through Jefferies under the November 2021 ATM Agreement.

No shares were sold under the November 2021 ATM Agreement during the year ended December 31, 2021.

As described below, we were previously a party to the April 2021 ATM Agreement (defined below) with Jeffries and the Cowen ATM Agreement (defined below) with Cowen and Company, LLC (“Cowen”) during the years ended December 2021 and 2020, and those agreements are no longer in effect.

In April 2021, we entered into an Open Market Sale Agreement SM (the “April 2021 ATM Agreement”) with Jefferies under which we could 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 Jefferies as our sales agent in an “at the market” offering.

Jefferies received a commission equal to 3.0% of the gross sales proceeds of any common stock sold through Jefferies under the April 2021 ATM Agreement.

During the year ended December 31, 2021, we sold an aggregate of 2,551,269 shares of common stock pursuant to the terms of the April 2021 ATM Agreement, at a volume weighted-average price of $13.13 per share, for aggregate net proceeds of approximately $32.4 million, including initial expenses for executing the “at the market offering” and commissions to Jefferies as sales agent.

In March 2017, we entered into a common stock Sales Agreement (the “Cowen ATM Agreement”) with Cowen, which allowed for the offer and sale, 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.

Effective as of April 23, 2021, we reduced the aggregate offering price under the Cowen ATM Agreement to zero and ceased selling shares thereunder.

Cumulative net proceeds from the sale of 189,763 shares of our common stock through December 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.” No shares were issued in 2021 under the Cowen ATM Agreement.

Underwritten Public Offerings

In September 2021, we entered into an underwriting agreement (the “2021 Underwriting Agreement”) with Jeffries, SVB Leerink LLC and Evercore Group, LLC (collectively, the “Underwriters”) for the sale and issuance of 7,344,543 shares of common stock, which includes 1,159,089 shares of common stock issued in connection with the exercise in full by the underwriters of their option to purchase additional shares, at a public offering price of $11.00 per share and 23,126 shares of Series B Non-Voting Convertible Preferred Stock at a public offering price of $733.37 per share (the “2021 Public Offering”).

The aggregate gross proceeds to the Company from the 2021 Public Offering are approximately $97.7 million, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

In February 2020, we entered into an underwriting agreement with Oppenheimer & Co., Inc.

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.

Purchase Agreements

In October 2020, we entered into a securities purchase agreement (the “Purchase Agreement”) with the purchasers named therein (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.

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.

The powers, preferences, rights,

qualifications, limitations, and restrictions applicable to the Series A Preferred Stock are set forth in the applicable certificate of designations.

During the year ended December 31, 2021, 138,050 shares of Series A Preferred Stock were converted into 9,203,732 shares of common stock.

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 Purchase Agreement.

Upon execution of the 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 (as defined in the Purchase Agreement).

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, 2021, we have the ability to sell an additional $10.2 million of shares of our common stock to Aspire Capital.

Summarized cash flows for the year ended December 31, 2021 and 2020 are as follows:

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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 $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.

Net cash used in operating activities was $54.6 million for the year ended December 31, 2021, and primarily consisted of a net loss of $79.4 million, adjusted for non-cash items of $23.1 million (primarily share-based compensation of $14.5 million and a $7.5 million non-cash charge related to the issuance of common stock as payment for licensing fees to Xencor) and working capital adjustments of $1.7 million.

Net cash used in operating activities was $29.8 million for the year ended December 31, 2020, and primarily consisted of a net loss of $110.7 million, adjusted for non-cash items of $76.5 million (primarily 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 $3.6 million of share-based compensation expenses) and a $4.4 million increase in working capital.

Investing Activities

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.

Net cash used in investing activities was $74.3 million during the year ended December 31, 2021, compared to net cash used in investing activities of $50.5 million during the year ended December 31, 2020.

Net cash used in investing activities in 2021 primarily consisted of net purchases of investments of $74.0 million and property and equipment purchases of $0.3 million.

Net cash used in investing activities of $50.5 million in 2020 consisted of net purchases of investments of $79.8 million, 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, 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

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

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

Net cash provided by financing activities was $125.3 million for the year ended December 31, 2021.

Net cash provided by financing activities in 2021 was primarily driven by net proceeds of $107.3 million from the sale of common stock in 2021 through the 2021 Public Offering and the April 2021 ATM Agreement, $15.7 million in net proceeds from the sale of our Series B Preferred Stock, $1.3 million from the exercise of common stock warrants, and $1.0 million in proceeds from employee stock option exercises.

Net cash provided by financing activities was $101.3 million for the year ended December 31, 2020, and consisted primarily of $86.1 million in net proceeds from the sale of Series A Preferred Stock, $23.8 million in net proceeds from the sale of common stock warrants.

These inflows were offset by $8.6 million in repayments of then outstanding notes payable.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis