Disc Medicine(IRON) - 2025 Q1 - Quarterly Report

Forward-Looking Statements This section outlines the report's forward-looking statements, which are subject to inherent risks and uncertainties, with no obligation for the company to update them except as required by law - The report contains forward-looking statements regarding the company's plans and expectations for its research and development programs, clinical trials (including for bitopertin, DISC-0974, and DISC-3405), potential for accelerated FDA approval, manufacturing capabilities, funding needs, and future financial performance[10] - These statements are based on current expectations and are not guarantees of future performance. The company cautions that actual results may differ materially due to various risks and uncertainties[11] - The company explicitly states it does not undertake any obligation to update forward-looking statements, except as required by law, and refers readers to the 'Risk Factors' section for a detailed discussion of these risks[11][12] Risk Factor Summary This section summarizes the principal risks, including limited operating history, significant losses, funding needs, clinical development uncertainties, third-party reliance, and internal control weaknesses - Financial Risks: The company has a limited operating history, has incurred significant net losses since inception, has no revenue from product sales, and may need to raise substantial additional funding[15] - Developmental Risks: No product candidates have progressed through a Phase 3 trial, the company's approach is novel and may not succeed, and early-stage clinical data may not predict later results. There is also a risk of significant adverse events in trials[15] - Operational and Competitive Risks: The company relies on third parties for clinical trials and manufacturing, faces substantial competition, and its intellectual property protection may not be sufficient[15][17] - Governance and Market Risks: A material weakness in internal controls over financial reporting has been identified. The stock price is expected to be volatile, and the company faces increased costs associated with being a public company[17] PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2025, reflecting increased assets and stockholders' equity from a stock offering, alongside a wider net loss due to higher operating expenses Condensed Consolidated Balance Sheets Total assets increased to $709.3 million by March 31, 2025, from $496.8 million at year-end 2024, driven by marketable securities and a $216.8 million rise in stockholders' equity from an equity offering Condensed Consolidated Balance Sheet Highlights (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $122,675 | $192,434 | | Marketable securities | $571,987 | $297,447 | | Total current assets | $705,600 | $493,615 | | Total assets | $709,266 | $496,773 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $18,741 | $23,316 | | Total liabilities | $48,904 | $53,186 | | Total stockholders' equity | $660,362 | $443,587 | | Total liabilities and stockholders' equity | $709,266 | $496,773 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss for Q1 2025 widened to $34.1 million from $26.9 million in Q1 2024, primarily due to increased R&D and SG&A expenses, partially offset by higher interest income Statement of Operations Highlights (in thousands, except per share data) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Research and development | $27,763 | $23,704 | | Selling, general and administrative | $12,183 | $7,758 | | Loss from operations | ($39,946) | ($31,462) | | Interest income | $6,880 | $4,519 | | Net loss | ($34,085) | ($26,949) | | Net loss per share, basic and diluted | ($1.02) | ($1.09) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $660.4 million by March 31, 2025, primarily due to $234.0 million from common stock and $9.4 million from pre-funded warrants in a January 2025 offering, offset by the $34.1 million net loss - In Q1 2025, the company completed an underwritten offering, issuing 4,533,182 shares of common stock for net proceeds of $234.0 million and pre-funded warrants for net proceeds of $9.4 million[25] Changes in Stockholders' Equity (in thousands) | | Amount | | :--- | :--- | | Balance at December 31, 2024 | $443,587 | | Sale of common stock in underwritten offering, net | $234,003 | | Sale of pre-funded warrants in underwritten offering, net | $9,386 | | Stock-based compensation expense | $6,363 | | Net loss | ($34,085) | | Balance at March 31, 2025 | $660,362 | Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $41.4 million in Q1 2025, while investing activities used $272.6 million, largely offset by $244.3 million from financing activities, resulting in a $69.8 million net decrease in cash Cash Flow Summary (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($41,376) | ($33,599) | | Net cash used in investing activities | ($272,633) | ($67) | | Net cash provided by financing activities | $244,251 | $15,900 | | Net decrease in cash, cash equivalents and restricted cash | ($69,758) | ($17,766) | Notes to Unaudited Condensed Consolidated Financial Statements These notes detail the company's focus on hematologic diseases, its $694.7 million capital position sufficient for 12 months, key license and loan agreements, and the $243.4 million net proceeds from the January 2025 equity offering - The company is a clinical-stage biopharmaceutical firm focused on hematologic diseases, with key product candidates including bitopertin, DISC-0974, DISC-3405, and DISC-0998[30] - As of March 31, 2025, the company had $694.7 million in cash, cash equivalents, and marketable securities, which is expected to fund planned operations for at least the next twelve months[32] - The company has a loan agreement for up to $200.0 million, with an initial $30.0 million borrowed in November 2024. The loan matures in December 2029[61] - In January 2025, the company raised net proceeds of $243.4 million from an underwritten offering of common stock and pre-funded warrants[70][71] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, highlighting a $34.1 million net loss driven by increased R&D and SG&A, significant clinical pipeline progress, and a strong $694.7 million liquidity position expected to fund operations into 2028 Overview This overview highlights the company's clinical pipeline progress, including planned NDA submission for bitopertin and Phase 2 trials for DISC-0974 and DISC-3405, supported by $694.7 million in cash expected to fund operations into 2028 - The company plans to submit a New Drug Application (NDA) for accelerated approval of bitopertin for EPP and XLP in the second half of 2025[98] - Key data readouts are expected in the second half of 2025 for the Phase 2 trial of DISC-0974 in anemia of MF and the MAD portion of the Phase 1b trial in non-dialysis dependent CKD[99][100] - A Phase 2 clinical trial of DISC-3405 for polycythemia vera (PV) is planned to be initiated in the first half of 2025[101] - As of March 31, 2025, the company had $694.7 million in cash, cash equivalents, and marketable securities, which it believes is sufficient to fund operations into 2028[102] Results of Operations Net loss increased by $7.1 million to $34.1 million in Q1 2025, driven by a $4.1 million rise in R&D and a $4.4 million increase in SG&A expenses, partially offset by higher interest income Comparison of Results of Operations (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Research and development | $27,763 | $23,704 | $4,059 | | Selling, general and administrative | $12,183 | $7,758 | $4,425 | | Loss from operations | ($39,946) | ($31,462) | ($8,484) | | Net loss | ($34,085) | ($26,949) | ($7,136) | - R&D expenses increased by $4.1 million, primarily due to a $2.4 million increase in DISC-0974 development and a $2.1 million increase for bitopertin, related to advancing clinical trials and manufacturing. This was partially offset by a $3.0 million decrease in DISC-3405 expenses[114] - SG&A expenses increased by $4.4 million, mainly from a $2.0 million increase in personnel-related costs due to higher headcount and a $2.1 million increase in legal and professional fees for commercialization readiness[115][116] Liquidity and Capital Resources The company maintains a strong liquidity position with $694.7 million in cash and marketable securities as of March 31, 2025, expected to fund operations into 2028, primarily bolstered by $244.3 million from the January 2025 equity offering - The company has funded operations primarily through sales of preferred and common stock and debt borrowings, with $694.7 million in cash, cash equivalents, and marketable securities as of March 31, 2025[120] - Management believes current cash reserves are sufficient to fund operating plans and debt service obligations into 2028[121] Cash Flow Summary (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($41,376) | ($33,599) | | Net cash used in investing activities | ($272,633) | ($67) | | Net cash provided by financing activities | $244,251 | $15,900 | Quantitative and Qualitative Disclosures About Market Risk The primary market risk is interest rate sensitivity, where a 1% increase could decrease the fair value of $694.7 million in investments by $3.6 million, while foreign currency and inflation risks are minimal - The company's main market risk is interest rate sensitivity. A hypothetical 1% increase in interest rates would decrease the fair value of its marketable securities by approximately $3.6 million[140] - Exposure to foreign currency risk is considered minimal as operations are primarily in the U.S. and contracts in foreign currencies are short-term[141] - Inflation is not believed to have had a material effect on the business during the reported periods[142] Controls and Procedures Disclosure controls were deemed ineffective as of March 31, 2025, due to a material weakness in IT General Controls, though no material misstatements occurred, and remediation efforts are underway - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective at a reasonable assurance level[144] - The ineffectiveness is due to a material weakness identified in the design and maintenance of Information Technology General Controls (ITGCs) over certain key financial IT systems[145] - The company has begun remediation efforts, including developing training programs, engaging third-party consultants, expanding internal resources, and enhancing reporting to the Audit Committee[147] PART II. OTHER INFORMATION Legal Proceedings The company reports no material legal proceedings or claims that would significantly adversely affect its business or financial condition - The company is not currently aware of any material legal proceedings or claims against it[151] Risk Factors This section details numerous risks, including limited operating history, substantial funding needs, clinical development uncertainties, reliance on third parties, intellectual property protection, regulatory hurdles, and internal control weaknesses - Financial Risks: The company has a limited operating history, has incurred significant net losses ($34.1 million for Q1 2025), and anticipates needing substantial additional funding to continue its development and potential commercialization efforts[153][155][166] - Clinical Development Risks: The company has no products approved for sale and has not yet progressed any candidate through a Phase 3 trial. The success of its clinical trials is uncertain, and early positive results are not predictive of final outcomes[158][174][196] - Third-Party Reliance: The business is highly dependent on third parties for conducting clinical trials (CROs, NIH) and for the manufacturing of its product candidates, which increases risks related to supply, quality, and regulatory compliance[236][253] - Intellectual Property Risks: The company's success depends on obtaining and maintaining robust patent protection for its technology and product candidates, much of which is in-licensed from partners like Roche, AbbVie, and Mabwell[268][270] - Regulatory and Commercialization Risks: The company may seek accelerated approval for bitopertin, but this pathway is not guaranteed and carries post-marketing requirements. The company also faces risks from healthcare reform, pricing pressures, and competition from potential generics or biosimilars[335][343][352] - Internal Control Risks: The company has identified a material weakness in its internal controls over financial reporting related to Information Technology General Controls (ITGCs), which could impact the accuracy of financial reporting[414] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of the company's equity securities during the quarter ended March 31, 2025 - There were no unregistered sales of equity securities during the reported quarter[430] Defaults Upon Senior Securities The company reports no defaults upon its senior securities - No defaults upon senior securities occurred[433] Mine Safety Disclosures This item is not applicable to the company's business - This section is not applicable[434] Other Information This section discloses that three executive officers adopted Rule 10b5-1 trading plans during the first quarter of 2025 Adoption of Rule 10b5-1 Trading Plans (Q1 2025) | Name and Title | Date of Adoption | Aggregate Securities to be Sold | | :--- | :--- | :--- | | William Savage, M.D., Ph.D. (CMO) | January 23, 2025 | Up to 2,996 | | John Quisel, J.D., Ph.D. (CEO) | February 13, 2025 | Up to 80,000 | | Jean Franchi (CFO) | March 10, 2025 | Up to 6,031 | Exhibits This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including required officer certifications and an employment agreement - The exhibit index lists all documents filed with the report, including required officer certifications under Sarbanes-Oxley Sections 302 and 906[438]