Viridian Therapeutics(VRDN) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company reported a net loss of $55.2 million for the six months ended June 30, 2022, an increase from a $36.4 million loss in the same period of 2021, with total assets decreasing to $169.8 million from $203.7 million, primarily due to cash used in operations, ending the period with $161.2 million in cash, cash equivalents, and short-term investments Condensed Consolidated Balance Sheets As of June 30, 2022, total assets decreased to $169.8 million from $203.7 million, driven by reduced cash and investments, while total liabilities increased to $27.9 million from $16.0 million, and stockholders' equity decreased to $141.9 million from $187.7 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $31,293 | $42,299 | | Short-term investments | $129,914 | $154,666 | | Total current assets | $166,151 | $200,163 | | Total assets | $169,814 | $203,709 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $21,388 | $13,636 | | Long-term debt, net | $4,585 | $— | | Total liabilities | $27,916 | $15,993 | | Total stockholders' equity | $141,898 | $187,716 | | Total liabilities and stockholders' equity | $169,814 | $203,709 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three and six months ended June 30, 2022, the company reported increased net losses of $29.5 million and $55.2 million, respectively, primarily driven by higher research and development expenses, which rose to $39.5 million for the six-month period Statement of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue - related party | $256 | $1,090 | $472 | $2,541 | | Research and development | $21,712 | $12,565 | $39,458 | $26,371 | | General and administrative | $8,108 | $6,523 | $16,467 | $12,683 | | Loss from operations | $(29,564) | $(17,998) | $(55,453) | $(36,513) | | Net loss | $(29,491) | $(17,964) | $(55,184) | $(36,424) | | Net loss per share, basic and diluted | $(1.06) | $(2.21) | $(2.05) | $(5.04) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, net cash used in operating activities was $39.1 million, offset by $22.8 million from investing and $5.3 million from financing, resulting in a net decrease of $11.0 million in cash and equivalents, ending at $31.3 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(39,128) | $(26,170) | | Net cash provided by (used in) investing activities | $22,826 | $(333) | | Net cash provided by financing activities | $5,296 | $8,311 | | Net decrease in cash and cash equivalents | $(11,006) | $(18,192) | | Cash and cash equivalents at end of period | $31,293 | $27,704 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business focus on developing treatments for Thyroid Eye Disease (TED) with its candidates VRDN-001, VRDN-002, and VRDN-003, confirming sufficient cash for at least the next twelve months while noting the need for additional capital, and outlining key accounting policies, collaboration agreements, debt facilities, and milestone payment commitments - The company is a biotechnology firm focused on treatments for Thyroid Eye Disease (TED), with VRDN-001, VRDN-002, and VRDN-003 as its leading product candidates[28] - As of June 30, 2022, the company had an accumulated deficit of $413.5 million and expects to continue generating operating losses[29] - The company believes its current cash, cash equivalents, and short-term investments of approximately $161.2 million are sufficient to fund operations for at least the next twelve months from the financial statement issuance date[31] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on developing Thyroid Eye Disease (TED) treatments with candidates VRDN-001, VRDN-002, and VRDN-003, noting positive VRDN-001 data in August 2022, attributing increased operating losses to higher R&D and G&A expenses, and confirming $161.2 million in cash as of June 30, 2022, sufficient to fund operations into 2024 Overview and Recent Developments The company is advancing Thyroid Eye Disease (TED) treatments with VRDN-001, VRDN-002, and VRDN-003, having announced positive VRDN-001 Phase 1/2 data in August 2022, completed VRDN-002 Phase 1, and plans to advance a candidate to registrational trials by late 2023 - Announced positive initial clinical data from the first cohort of the VRDN-001 Phase 1/2 trial in TED patients, showing an 83% proptosis responder rate and a 2.4mm mean reduction in proptosis at week 6[154] - VRDN-002, designed for low-volume subcutaneous injection, completed a Phase 1 trial, with a subcutaneous proof of concept trial in TED patients planned to start in the second half of 2023[159] - The company plans to advance either VRDN-002 or VRDN-003 to registrational trials by the end of 2023, with a global Phase 3 program for a subcutaneous therapy expected to start in early 2024[161] Results of Operations For the three and six months ended June 30, 2022, revenue decreased to $0.3 million and $0.5 million respectively, while R&D expenses significantly increased to $21.7 million and $39.5 million, and G&A expenses also rose, primarily due to higher clinical trial costs, personnel, and milestone fees Comparison of Operations for the Three Months Ended June 30 (in thousands) | Account | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $256 | $1,090 | $(834) | | Research and development | $21,712 | $12,565 | $9,147 | | General and administrative | $8,108 | $6,523 | $1,585 | Comparison of Operations for the Six Months Ended June 30 (in thousands) | Account | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $472 | $2,541 | $(2,069) | | Research and development | $39,458 | $26,371 | $13,087 | | General and administrative | $16,467 | $12,683 | $3,784 | - The increase in R&D expenses for the six months ended June 30, 2022 was driven by a $5.1 million increase in milestone, license, and option fees (including a $3.0M payment to ImmunoGen and a $2.5M fee to Paragon), a $4.3 million increase in clinical trial expenses for VRDN-001 and VRDN-002, and a $3.4 million increase in personnel costs[183] Liquidity and Capital Resources As of June 30, 2022, the company held $161.2 million in cash and investments, sufficient to fund operations into 2024, having secured a $75.0 million loan agreement with Hercules Capital and an active $75.0 million ATM offering with Jefferies - The company had $161.2 million in cash, cash equivalents, and short-term investments as of June 30, 2022, which is expected to fund operations into 2024[193] - In April 2022, the company entered into a loan and security agreement with Hercules Capital for up to $75.0 million, with an initial draw of $5.0 million[198] - The company has an active "at the market" (ATM) offering agreement with Jefferies to sell up to $75.0 million of common stock, but no shares had been sold under this agreement as of June 30, 2022[200] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Viridian is not required to provide quantitative and qualitative disclosures about market risk[207] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the quarter-end, with no material changes to internal control over financial reporting during the most recent fiscal quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the quarter covered by the report[210] - There were no changes in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[211] PART II. OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business, financial condition, or results of operations - The company reports that it is not currently involved in any material legal proceedings[213] Risk Factors The company outlines significant financial, developmental, regulatory, and operational risks, including the need for additional capital, a history of losses, dependence on early-stage clinical candidates, uncertainties of clinical trials, reliance on third parties, competition, intellectual property, and healthcare reforms Risks Related to Financial Condition and Capital Requirements This section details financial risks, including the critical need for additional capital to continue operations, a history of significant losses with an accumulated deficit of $413.5 million, and the potential for future capital raises to dilute ownership or impose restrictive covenants - The company will need to raise additional capital to fund operations and service obligations; failure to do so when needed would prevent it from continuing as a going concern[216] - The company has a history of net losses, with an accumulated deficit of $413.5 million as of June 30, 2022, and anticipates continued significant losses[221] - Raising additional capital may cause dilution to stockholders, restrict operations, or require relinquishing rights to technologies or product candidates[229] Risks Related to Product Candidate Discovery and Development This section covers inherent drug development risks, including costly and time-consuming clinical trials that may fail or cause side effects, heavy dependence on early-stage candidates where initial results may not predict future success, and potential delays from patient enrollment difficulties, especially for rare diseases - Clinical development is expensive and risky, with a high potential for failure at any stage, which could prevent or delay completion of trials[234] - The company is heavily dependent on the success of its product candidates, which are in early stages of clinical development, and cannot guarantee they will receive regulatory approval[241] - The company may face difficulties enrolling patients in clinical trials, particularly for rare diseases, which could delay or prevent the trials[247] Risks Related to Regulatory Approval and Legal Compliance This section discusses regulatory hurdles, including potential biosimilar competition for biologics, no guarantee of expedited designations, ongoing regulatory requirements and healthcare reform impacts post-approval, and critical compliance with fraud, abuse, and data privacy laws to avoid substantial penalties - Product candidates regulated as biologics may face competition from biosimilars sooner than anticipated due to the BPCIA, which allows for an abbreviated approval pathway for such products[258] - The company may not receive expedited designations like Orphan Drug, Breakthrough Therapy, or Fast Track, and even if granted, these do not guarantee faster development or approval[261][262][265] - The company is subject to numerous foreign, federal, and state healthcare laws, including anti-kickback, false claims, and data privacy regulations (like GDPR), with non-compliance leading to significant penalties[273] Risks Related to Reliance on Third Parties This section highlights dependencies on external partners, including vulnerability to health epidemics like COVID-19, reliance on CROs for clinical trials and CMOs for manufacturing, and the complex, difficult manufacturing process for biologics, given the company's lack of internal capabilities - The company relies on third-party CROs to conduct clinical trials and CMOs to manufacture product candidates; failure of these third parties to perform adequately could delay or halt development and commercialization[284][286] - The manufacturing process for biologic product candidates is complex and susceptible to production loss, failure, or variation, which could delay or prevent supply for trials or commercialization[288] - Health epidemics like the COVID-19 pandemic could adversely affect the operations of the company or the third parties it relies on, potentially disrupting the supply chain and clinical trials[280][281] Risks Related to Intellectual Property This section addresses intellectual property risks, including the uncertainty of obtaining and maintaining patent protection and trade secrets, potential challenges to patents, impact of U.S. patent law changes, risks of third-party infringement claims, and the need to comply with license agreement obligations to maintain product candidate rights - The company's success depends on its ability to obtain and maintain patent protection and trade secrets, but the patent process is uncertain and patents may be challenged or invalidated[301][302] - Third-party claims of intellectual property infringement could prevent or delay development and commercialization efforts, leading to substantial litigation expense and potential damages[317] - The company relies on licenses from third parties for its product candidates and could lose these important rights if it fails to comply with its contractual obligations[327] Risks Related to Commercialization This section details commercialization challenges, including the company's lack of experience in manufacturing, sales, and marketing, substantial competition from major pharmaceutical companies, and the dependence of commercial success on market acceptance by physicians, patients, and payors, along with adequate reimbursement - The company has no experience in commercial manufacturing, sales, or marketing and must either build these capabilities or rely on third-party collaborators to generate revenue[337] - The company faces substantial competition from well-established pharmaceutical companies with greater financial and technical resources, including Horizon Therapeutics, Immunovant, and Novartis in the TED space[342][344] - Commercial success depends on market acceptance and adequate reimbursement from third-party payors, which is uncertain[348][352] Risks Related to Business Operations This section covers operational risks, including high dependence on the CEO and key personnel, challenges in managing growth, restrictive covenants in the Hercules loan agreement, exposure to IT system failures and data breaches, and potential limitations on net operating loss (NOL) carryforwards due to ownership changes - The company is highly dependent on its President and CEO, Dr. Jonathan Violin, and faces intense competition for qualified personnel[355] - The Hercules Loan and Security Agreement contains covenants that could restrict operations and, in an event of default, could force accelerated repayment of debt[358][359] - The ability to use net operating loss (NOL) carryforwards to offset future taxable income may be limited by Section 382 of the Internal Revenue Code if the company undergoes an "ownership change"[367][368] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable[391] Defaults Upon Senior Securities This item is not applicable for the reporting period - Not applicable[392] Mine Safety Disclosures This item is not applicable for the reporting period - Not applicable[393] Other Information This item is not applicable for the reporting period - Not applicable[394] Exhibits This section lists exhibits filed with the quarterly report, including corporate governance documents, material contracts like the Hercules Loan and Security Agreement and lease amendments, CEO and CFO certifications, and XBRL data files - Filed exhibits include the Second Amendment to the Massachusetts lease, the Amended & Restated 2016 Equity Incentive Plan, and officer certifications[396] - The exhibit list incorporates by reference previously filed documents, such as the Certificate of Incorporation, Bylaws, and the Hercules Loan and Security Agreement[396]