Viridian Therapeutics(VRDN) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of changes in stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, collaboration agreements, commitments, capital structure, and subsequent events CONDENSED CONSOLIDATED BALANCE SHEETS | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Total assets | $183,165 | $203,709 | | Cash and cash equivalents | $30,858 | $42,299 | | Short-term investments | $144,570 | $154,666 | | Total liabilities | $16,523 | $15,993 | | Total stockholders' equity | $166,642 | $187,716 | - Total assets decreased by $20.5 million from December 31, 2021, to March 31, 2022[15] - Total stockholders' equity decreased by $21.1 million over the same period[15] CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Collaboration revenue - related party | $216 | $1,451 | | Research and development expenses | $17,746 | $13,806 | | General and administrative expenses | $8,359 | $6,160 | | Loss from operations | $(25,889) | $(18,515) | | Net loss | $(25,693) | $(18,460) | | Comprehensive loss | $(26,471) | $(18,473) | | Net loss per share, basic and diluted | $(0.98) | $(2.91) | | Weighted-average shares outstanding | 26,126,092 | 6,336,347 | - Collaboration revenue decreased significantly by $1.2 million (85%) year-over-year[17] - Net loss increased by $7.2 million (39%) year-over-year, while net loss per share decreased due to a substantial increase in weighted-average shares outstanding[17] CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | Metric | December 31, 2021 (in thousands) | March 31, 2022 (in thousands) | | :--------------------------------- | :----------------------------- | :---------------------------- | | Total Stockholders' Equity | $187,716 | $166,642 | | Accumulated Deficit | $(358,300) | $(383,993) | | Additional Paid-in Capital | $412,101 | $439,187 | | Series A Preferred Stock (Amount) | $118,164 | $96,442 | | Common Stock (Shares) | 23,924,004 | 27,169,422 | - During Q1 2022, 47,871 shares of Series A Preferred Stock were converted into 3,191,555 shares of common stock[20] - Share-based compensation expense contributed $4.7 million to additional paid-in capital[20] CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(21,042) | $(11,539) | | Net cash provided by investing activities | $8,863 | $10,872 | | Net cash provided by financing activities | $738 | $1,259 | | Net increase (decrease) in cash and cash equivalents | $(11,441) | $592 | | Cash and cash equivalents at end of period | $30,858 | $46,489 | - Net cash used in operating activities increased by $9.5 million year-over-year[24] - The company experienced a net decrease in cash and cash equivalents of $11.4 million in Q1 2022, compared to a net increase of $0.6 million in Q1 2021[24] NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS - Viridian Therapeutics is a biotechnology company focused on developing new treatments for serious diseases, particularly Thyroid Eye Disease (TED) with product candidates VRDN-001 and VRDN-002[26] - The company has an accumulated deficit of $384.0 million as of March 31, 2022, and expects to continue generating operating losses[27] - As of March 31, 2022, the company had $175.4 million in cash, cash equivalents, and short-term investments, which are expected to fund operations for at least the next twelve months[29] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The unaudited condensed consolidated financial statements are prepared in conformity with U.S. GAAP for interim financial reporting[32] - The company operates in one segment, focusing on developing and commercializing novel therapeutics[34] - Revenue is recognized following a five-step model when the customer obtains control of promised goods or services, with variable consideration constrained if a significant revenue reversal is probable[43][44][47] - Research and development costs, including upfront and milestone payments for licensed technology, are expensed as incurred if future economic benefit is uncertain[54][55] - The COVID-19 pandemic has not materially impacted the company's financial condition or operations as of March 31, 2022, but potential future disruptions are acknowledged[37] 3. FAIR VALUE MEASUREMENTS | Investment Category | March 31, 2022 (Fair Value, in thousands) | December 31, 2021 (Fair Value, in thousands) | | :--------------------------------- | :---------------------------------------- | :----------------------------------------- | | Money market funds (Level 1) | $30,758 | $42,199 | | U.S. treasury securities (Level 2) | $27,109 | $22,161 | | U.S. corporate paper and bonds (Level 2) | $112,923 | $127,917 | | International corporate bond holdings (Level 2) | $4,538 | $4,588 | | Total cash equivalents and short-term investments | $175,328 | $196,865 | - The company considers unrealized losses in its investment portfolio to be temporary, with the intent and ability to hold investments until recovery[82] - All investments have contractual maturity dates of less than 24 months[82] 4. ACCRUED LIABILITIES | Accrued Liability | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Accrued outsourced clinical trials and preclinical studies | $8,647 | $6,316 | | Accrued employee compensation and related taxes | $1,548 | $3,652 | | Operating lease liability, short-term | $579 | $520 | | Accrued legal fees and expenses | $272 | $80 | | Other accrued liabilities | $414 | $350 | | Total accrued liabilities | $11,560 | $11,018 | - Total accrued liabilities increased by $0.5 million from December 31, 2021, to March 31, 2022[85] - The primary driver of the increase was a $2.3 million rise in accrued outsourced clinical trials and preclinical studies[85] 5. COLLABORATION AGREEMENTS - The company has a license agreement with Zenas BioPharma for exclusive rights to develop and commercialize IGF-1R antibody products in China, with potential milestone and royalty payments[86][87] - Collaboration revenue from Zenas BioPharma decreased from $1.5 million in Q1 2021 to $0.2 million in Q1 2022 due to the timing of activities[89] - In January 2022, the company entered an antibody and discovery option agreement with Paragon Therapeutics, paying a non-refundable $2.5 million fee recorded as R&D expense[91][92] 6. COMMITMENTS AND CONTINGENCIES - The ImmunoGen License Agreement involves potential future development milestone payments up to $48.0 million and commercial milestone payments up to $95.0 million, plus mid-single digit royalties[94] - The 2021 Xencor License Agreement involved issuing 394,737 common shares (valued at $7.5 million) and includes potential future milestone payments up to $27.8 million plus mid-single digit royalties[95] - Consolidated future minimum lease payments for office and lab spaces were approximately $1.8 million through 2025 as of March 31, 2022[100] 7. CAPITAL STOCK - The company is authorized to issue 200,000,000 shares of common stock and 5,000,000 shares of preferred stock[103] - As of March 31, 2022, no shares have been sold under the November 2021 ATM Agreement, which allows for sales of up to $75.0 million in common stock[105] - During Q1 2022, 47,871 shares of Series A Preferred Stock were converted into 3,191,555 shares of common stock, leaving 212,566 Series A shares outstanding[113] 8. WARRANTS | Warrant Type | Number of Underlying Shares (March 31, 2022) | Weighted-Average Exercise Price (March 31, 2022) | | :--------------------------------- | :------------------------------------------- | :----------------------------------------------- | | Liability-classified warrants | 781 | $127.95 | | Equity-classified warrants | 419,848 | $15.70 | | Total warrants | 420,629 | $15.91 | - No warrants were exercised during the three months ended March 31, 2022[117] 9. SHARE-BASED COMPENSATION | Metric | March 31, 2022 | | :--------------------------------- | :------------- | | Total Stock Options Outstanding | 4,801,711 | | Weighted-Average Exercise Price | $17.34 | | Weighted-Average Grant-Date Fair Value (Q1 2022) | $13.43 | | Weighted-Average Grant-Date Fair Value (Q1 2021) | $19.56 | | Share-Based Compensation Expense | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Research and development | $1,545 | $1,111 | | General and administrative | $3,114 | $2,064 | | Total | $4,659 | $3,175 | - As of March 31, 2022, the company had $56.3 million of total unrecognized share-based compensation costs, expected to be recognized over a weighted-average remaining period of 3.18 years[126] 10. NET LOSS PER SHARE - Basic and diluted net loss per share were $(0.98) for Q1 2022 and $(2.91) for Q1 2021[17] - The weighted-average shares used to compute net loss per share significantly increased from 6,336,347 in Q1 2021 to 26,126,092 in Q1 2022[17] - Potentially dilutive securities, totaling 20,935,925 as of March 31, 2022, were antidilutive due to the company's net loss position[128] 11. SUBSEQUENT EVENTS - On April 1, 2022, the company entered into a loan and security agreement with Hercules Capital, Inc., providing access to a term loan of up to $75.0 million in four tranches, with an initial draw of $5.0 million[129][130] - The Term Loan bears a floating interest rate (greater of 7.45% or 4.2% above Prime Rate, not exceeding 8.95%) with interest-only payments through April 1, 2024, extendable based on development milestones[131] - On April 13, 2022, a second amendment to the Massachusetts office lease was executed, adding 2,432 sq ft, terminating 1,087 sq ft, and extending the lease term for existing space[132][133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic focus on developing treatments for serious diseases, particularly Thyroid Eye Disease (TED) with VRDN-001 and VRDN-002. The analysis covers financial performance for Q1 2022, highlighting decreased collaboration revenue, increased R&D and G&A expenses, and details on liquidity, capital resources, and recent financing activities Overview and Recent Developments - Viridian Therapeutics is a biotechnology company developing VRDN-001 and VRDN-002 for Thyroid Eye Disease (TED)[135][136] - Top-line clinical data for VRDN-001 (10 mg/kg and 20 mg/kg cohorts) is expected in Q3 2022, with a 3 mg/kg cohort data expected in Q4 2022[136][138] - VRDN-002, designed for subcutaneous injection, has completed dose escalation in its Phase 1 trial, with top-line data expected in Q3 2022[139][140] - The company is expanding its pipeline with discovery-stage programs VRDN-004 and VRDN-005 for undisclosed rare diseases[141] The COVID-19 Pandemic - The COVID-19 pandemic has not materially impacted the company's business, financial condition, or results of operations to date[142] - Potential future risks include disruptions to the supply chain, delays in clinical trials, and impacts on capital raising[142] Financial Operations Overview - Revenue has historically consisted of upfront license payments, milestone payments, and R&D services, with future revenue expected from similar sources, product sales, and royalties[143][145] - Research and development expenses include personnel costs, CRO fees, manufacturing, regulatory activities, and license fees, all expensed as incurred[146][147] - General and administrative expenses primarily cover salaries, benefits, share-based compensation, professional fees (auditing, tax, legal), and other administrative costs[151] - Other income, net, is mainly derived from interest income on short-term investments and non-recurring items[152] Critical Accounting Policies and Estimates - There were no changes to the company's critical accounting policies during the three months ended March 31, 2022, as disclosed in its 2021 Annual Report on Form 10-K[153] Results of Operations | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (Decrease) (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------- | | Collaboration revenue - related party | $216 | $1,451 | $(1,235) | | Research and development expenses | $17,746 | $13,806 | $3,940 | | General and administrative expenses | $8,359 | $6,160 | $2,199 | | Other income, net | $196 | $55 | $141 | - Collaboration revenue decreased by $1.2 million due to the timing of activities under the Zenas BioPharma agreement[155] - Research and development expenses increased by $3.9 million, primarily due to higher personnel costs, a $2.5 million license fee to Paragon Therapeutics, and increased clinical trial expenses for VRDN-001 and VRDN-002[156][157] - General and administrative expenses increased by $2.2 million, driven by higher personnel, board of directors, and professional expenses[158] Liquidity and Capital Resources | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (Decrease) (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------- | | Operating activities | $(21,042) | $(11,539) | $(9,503) | | Investing activities | $8,863 | $10,872 | $(2,009) | | Financing activities | $738 | $1,259 | $(521) | | Total | $(11,441) | $592 | $(12,033) | - As of March 31, 2022, the company had $175.4 million in cash, cash equivalents, and short-term investments, expected to fund operations into 2024[167] - The company entered into a loan and security agreement with Hercules Capital, Inc. on April 1, 2022, providing access to a term loan of up to $75.0 million, with an initial draw of $5.0 million[172] - The November 2021 ATM Agreement allows for the sale of up to $75.0 million in common stock, with no shares sold as of March 31, 2022[174] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Viridian Therapeutics is not required to provide detailed quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is exempt from providing detailed quantitative and qualitative disclosures about market risk[180] Item 4. Controls and Procedures Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective at a reasonable level of assurance as of March 31, 2022. There were no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective at a reasonable level of assurance as of March 31, 2022[182] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[183] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business, financial condition, or results of operations - The company is not a party to any legal proceedings that are believed to have a material adverse effect on its business, financial condition, or results of operations[185] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes from the risk factors disclosed in Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2021[186] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the company for the reporting period - This item is not applicable[187] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - This item is not applicable[188] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - This item is not applicable[189] Item 5. Other Information On May 11, 2022, the company's board of directors approved an amendment and restatement of the Bylaws, clarifying stockholder voting standards for non-director matters and the chairman's power to adjourn meetings in the absence of a quorum - The company's Bylaws were amended and restated on May 11, 2022[190] - Amendments clarify the voting standard for stockholders (majority of votes cast for non-director matters) and the chairman's power to adjourn meetings in the absence of a quorum[190] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report, including corporate governance documents, preferred stock designations, warrant forms, and certifications required by the Securities Exchange Act - Exhibits include the Second Restated Certificate of Incorporation, Second Amended and Restated Bylaws, Certificates of Designation for Series A and B Preferred Stock, and Form of Warrant to Purchase Common Stock[192] - Certifications of the Principal Executive Officer and Principal Financial Officer (pursuant to Rule 13a-14(a) and 18 U.S.C. 1350) are included[192] - XBRL Instance Document and Taxonomy Extension Documents are furnished as part of the exhibits[192]