Verve Therapeutics(US:VERV)2023-11-07 12:30PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited consolidated financial statements for Q3 2023 show increased collaboration revenue, rising expenses, and a net loss Condensed Consolidated Balance Sheets | Balance Sheet Items (in thousands) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $78,370 | $115,412 | | Marketable securities | $406,856 | $439,396 | | Total current assets | $498,261 | $563,159 | | Total assets | $612,407 | $679,223 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $34,575 | $35,095 | | Deferred revenue, non-current | $48,554 | $20,014 | | Total liabilities | $152,038 | $128,291 | | Total stockholders' equity | $460,369 | $550,932 | Condensed Consolidated Statements of Operations and Comprehensive Loss | Statement of Operations (in thousands) | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | | Collaboration revenue | $6,614 | $929 | | Research and development expenses | $138,135 | $92,811 | | General and administrative expenses | $37,655 | $26,095 | | Loss from operations | $(169,176) | $(117,977) | | Net loss | $(151,716) | $(116,302) | | Net loss per common share | $(2.43) | $(2.26) | Condensed Consolidated Statements of Cash Flows | Cash Flow Activities (in thousands) | Nine months ended Sep 30, 2023 | Nine months ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(108,869) | $(89,440) | | Net cash provided by investing activities | $36,583 | $12,358 | | Net cash provided by financing activities | $35,194 | $289,358 | | Decrease in cash, cash equivalents and restricted cash | $(37,092) | $212,276 | Notes to Condensed Consolidated Financial Statements - The company expects its cash, cash equivalents, and marketable securities of $485.2 million as of September 30, 2023, will be sufficient to fund operations and capital expenditures beyond the next 12 months28 - Under the Vertex Agreement, the company recognized $2.4 million and $5.9 million of revenue for the three and nine months ended September 30, 2023, respectively. As of September 30, 2023, $20.0 million was recorded as non-current deferred revenue69 - The Lilly Agreement became effective in July 2023. The company received a $30.0 million upfront payment in August 2023 and recognized $0.7 million of revenue for the three and nine months ended September 30, 2023. As of September 30, 2023, $28.5 million was recorded as non-current deferred revenue707282 - On October 27, 2023, Eli Lilly and Company acquired certain rights from Beam Therapeutics under the Amended Beam Agreement, including opt-in rights for Verve's PCSK9 and ANGPTL3 programs102 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, detailing pipeline progress, collaboration impacts, and increased R&D expenses Overview - Verve is a clinical-stage genetic medicines company focused on single-course gene editing treatments for cardiovascular disease (CVD), targeting pathways like LDL, triglycerides, and Lp(a)104 - The company incurred net losses of $45.8 million for Q3 2023 and $151.7 million for the nine months ended September 30, 2023, with an accumulated deficit of $496.0 million111192 - As of September 30, 2023, the company had $485.2 million in cash, cash equivalents, and marketable securities, which is expected to fund operations into 2026115 Clinical and Development Programs - VERVE-101: The heart-1 Phase 1b clinical trial is ongoing in New Zealand and the UK. In October 2023, the FDA lifted the clinical hold on the IND, allowing for the activation of U.S. trial sites. Initial data is expected to be reported on November 12, 2023118121122 - VERVE-102: A second PCSK9-targeting candidate using GalNAc-LNP delivery. A Phase 1b clinical trial is expected to begin in the first half of 2024123 - VERVE-201: An ANGPTL3-targeting candidate for HoFH and refractory hypercholesterolemia. A Phase 1b clinical trial is expected to begin in the second half of 2024124 Results of Operations | Financials (in thousands) | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Collaboration Revenue | $3,117 | $929 | $2,188 | | Research & Development | $43,765 | $35,197 | $8,568 | | General & Administrative | $11,686 | $9,592 | $2,094 | | Net Loss | $(45,758) | $(45,190) | $(568) | | Financials (in thousands) | Nine Months 2023 | Nine Months 2022 | Change | | :--- | :--- | :--- | :--- | | Collaboration Revenue | $6,614 | $929 | $5,685 | | Research & Development | $138,135 | $92,811 | $45,324 | | General & Administrative | $37,655 | $26,095 | $11,560 | | Net Loss | $(151,716) | $(116,302) | $(35,414) | - The increase in R&D expenses for the nine months ended Sep 30, 2023 was primarily driven by an $18.6 million increase in employee-related costs, a $15.4 million increase in manufacturing costs, and an $8.6 million increase in facility-related costs152153 Liquidity and Capital Resources - As of September 30, 2023, the company had $485.2 million in cash, cash equivalents, and marketable securities157 - Recent financing activities in 2023 include receiving a $30.0 million upfront payment from Lilly and raising $30.0 million from a private placement with Lilly157 - The company believes its existing capital will fund operating expenses and capital expenditure requirements into 2026, but this is based on assumptions that may prove wrong169 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on cash and marketable securities, with other market risks not significant - The company's main market risk is interest rate risk on its $78.4 million in cash and cash equivalents and $406.9 million in marketable securities183 - Foreign currency exchange risk is not currently significant, though the company contracts with some vendors outside the U.S184 - Inflation is not believed to have had a material effect on the business during the reported period185 Item 4. Controls and Procedures Management concluded disclosure controls were effective as of September 30, 2023, with no material changes to internal controls - Management concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level187 - There were no changes in internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls188 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings but may face future litigation - As of the filing date, the company is not a party to any material legal proceedings190 Item 1A. Risk Factors This section details substantial risks including financial, development, third-party, intellectual property, commercialization, regulatory, and operational challenges Risks related to our financial position and need for additional capital - The company has a history of significant losses, with an accumulated deficit of $496.0 million as of September 30, 2023, and expects to incur losses for the foreseeable future192 - Substantial additional funding will be required to advance clinical trials and commercialization efforts. Failure to raise capital when needed could force delays or elimination of programs198 - The company's limited operating history since its 2018 inception makes it difficult to evaluate its business success and future viability206 Risks related to discovery and development - Gene editing, particularly base editing, is a novel and largely unproven technology that has not yet been clinically validated as safe and efficacious for human therapeutic use218 - The FDA placed the IND for VERVE-101 on clinical hold in November 2022, which was subsequently lifted in October 2023. There is no certainty that future holds will not occur or that planned trials for VERVE-102 and VERVE-201 will be permitted to start on schedule213214 - Significant risks in gene editing include "off-target" edits and potential adverse events from the LNP delivery system, which could delay or halt development258259 Risks related to our dependence on third parties - The company relies on third-party Contract Manufacturing Organizations (CMOs) and Contract Research Organizations (CROs) for manufacturing and clinical testing, reducing control over these critical activities279 - Manufacturing biologic products is complex and susceptible to product loss, contamination, and challenges in scaling up, which could delay development and commercialization283285 - Success of collaborations (e.g., with Vertex and Lilly) depends on the efforts of partners, who may have different priorities or may terminate agreements, potentially delaying programs289290 Risks related to our intellectual property - The company's success depends on obtaining and defending patent protection for its gene editing technology, which is uncertain and costly, especially in the highly litigious field of gene editing303306 - The company relies on licenses from third parties like Beam, Harvard, and Broad. Failure to comply with license obligations could result in the loss of critical intellectual property rights312313 - The intellectual property landscape for CRISPR-based technologies is subject to ongoing interference proceedings and disputes, the outcomes of which are uncertain and could adversely affect the company's licensed rights322324329 Risks related to commercialization - Even if approved, product candidates may fail to gain market acceptance from physicians, patients, and payors due to competition from well-established treatments like statins384385 - The company faces substantial competition from major pharmaceutical and biotech companies with approved products (e.g., Repatha®, Leqvio®) and investigational therapies targeting PCSK9, ANGPTL3, and Lp(a)389391 - The company's ability to commercialize products depends on securing coverage and adequate reimbursement from government and private payors, which is a time-consuming and uncertain process408 Risks related to regulatory approval and other legal compliance matters - The regulatory landscape for novel gene editing therapies is uncertain and evolving, which could lead to longer and more expensive approval processes420 - Healthcare reform legislation, such as the Inflation Reduction Act (IRA), could result in more rigorous coverage criteria and downward pressure on pricing for approved products457465 - The company is subject to complex global privacy and data security laws (e.g., GDPR, HIPAA, CCPA), and failure to comply could result in significant fines and penalties471475477 Risks related to employee matters and managing growth - The company is highly dependent on its key executives and scientific team, and the loss of their services could impede research and development objectives495496 - Expected expansion of operations may lead to difficulties in managing growth, which could disrupt operations and divert management resources498 - Internal IT systems are vulnerable to cybersecurity threats, which could result in a material disruption of development programs, compromise of sensitive information, and potential liability501503 Risks related to ownership of our common stock and our status as a public company - Executive officers, directors, and their affiliates beneficially owned approximately 21.3% of common stock as of October 31, 2023, giving them significant influence over stockholder matters510 - The company's stock price has been and is likely to continue to be volatile, influenced by factors such as clinical trial results, regulatory decisions, and market conditions516 - The company will cease to qualify as an "emerging growth company" and a "smaller reporting company" as of December 31, 2023, which will result in increased legal and financial compliance costs522527 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities No unregistered equity securities were issued during the quarter, and $281.6 million in IPO proceeds remain unused and invested - No unregistered equity securities were issued during the period covered by the report, other than those previously disclosed540 - As of September 30, 2023, the $281.6 million in net proceeds from the company's IPO in June 2021 had not been used and remain invested in money market funds and marketable securities542 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, key agreements, and officer certifications - The report includes key corporate governance documents, significant agreements such as the one with Eli Lilly, and required officer certifications as exhibits544