Graphite Bio(US:GRPH)2025-05-07 20:16PART I - FINANCIAL INFORMATION Financial Statements Presents LENZ Therapeutics, Inc.'s unaudited condensed consolidated financial statements as of March 31, 2025 Condensed Consolidated Balance Sheets Total assets decreased to $201.3 million by March 31, 2025, primarily from reduced marketable securities, affecting equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $23,042 | $20,158 | | Marketable securities | $170,934 | $188,872 | | Total assets | $201,252 | $215,304 | | Total current liabilities | $8,569 | $10,406 | | Total liabilities | $9,242 | $11,220 | | Accumulated deficit | ($159,633) | ($145,014) | | Total stockholders' equity | $192,010 | $204,084 | Condensed Consolidated Statements of Operations And Comprehensive Loss Net loss decreased to $14.6 million in Q1 2025, primarily due to lower R&D expenses and higher interest income, despite increased SG&A Condensed Consolidated Statements of Operations (in thousands) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Research and development | $5,818 | $10,537 | | Selling, general and administrative | $11,113 | $5,551 | | Loss from operations | ($16,931) | ($16,088) | | Interest income | $2,323 | $788 | | Net loss | ($14,619) | ($16,648) | | Net loss per share, basic and diluted | ($0.53) | ($3.53) | Condensed Consolidated Statements of Cash Flows Net cash used in operations decreased to $16.0 million in Q1 2025, with investing activities providing $18.9 million Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($16,049) | ($23,937) | | Net cash provided by investing activities | $18,889 | $18,000 | | Net cash provided by financing activities | $44 | $171,268 | | Net increase in cash, cash equivalents, and restricted cash | $2,884 | $165,331 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, reverse merger, liquidity, fair value, commitments, equity, and the CORXEL license - The company is a pre-commercial biopharmaceutical firm focused on therapies to improve vision, having completed a reverse merger with Graphite Bio, Inc. on March 21, 2024, with LENZ OpCo as the accounting acquirer3233 - As of March 31, 2025, the company had cash, cash equivalents, and marketable securities of $194.1 million and believes these funds are sufficient to support operations for at least the next 12 months35 - In April 2022, the company entered an exclusive license agreement with CORXEL for Greater China, receiving a $15.0 million upfront payment and eligibility for up to $95.0 million in milestones plus royalties106108 - In April 2025, the company entered an "at the market" (ATM) offering agreement to sell up to $150 million of its common stock, subsequently selling 600,500 shares for net proceeds of $16.3 million98 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, LNZ100 development, Q1 2025 results, liquidity, and capital resources, anticipating R&D decrease and SG&A increase for launch - The company is a pre-commercial biopharmaceutical firm focused on developing LNZ100, a once-daily eye drop for presbyopia, with an estimated U.S. market opportunity exceeding $3 billion116 - An NDA for LNZ100 was submitted to the FDA in August 2024, with a PDUFA target action date of August 8, 2025, and a commercial launch planned immediately following potential approval119129 - Management believes existing cash of $194.1 million (as of March 31, 2025) is sufficient to fund the company to positive operating cash flow following the commercial launch of LNZ100, if approved120144 Results of Operations Q1 2025 R&D expenses decreased 45% to $5.8 million, while SG&A increased 100% to $11.1 million due to pre-commercial activities Comparison of Operating Results (in thousands) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $5,818 | $10,537 | $(4,719) | (45)% | | Selling, general and administrative | $11,113 | $5,551 | $5,562 | 100% | - The $4.7 million decrease in R&D expenses was primarily due to a $4.8 million reduction in contract research expenses as Phase 3 CLARITY trials were substantially completed in March 2024138 - The $5.6 million increase in SG&A expenses was driven by a $2.7 million rise in employee-related costs from higher headcount, $1.8 million in pre-commercial marketing and sales infrastructure expenses, and $0.7 million in public company corporate costs139 Liquidity and Capital Resources As of March 31, 2025, the company held $194.1 million in cash and marketable securities, believed sufficient to fund operations to positive cash flow post-LNZ100 launch - As of March 31, 2025, the company had $194.1 million in cash, cash equivalents, restricted cash, and marketable securities, with an accumulated deficit of $159.6 million141 - In April 2025, the company initiated an "at the market" (ATM) offering and sold 600,500 shares for gross proceeds of $16.5 million ($16.3 million net)143 - Management believes that its cash position as of March 31, 2025, is sufficient to fund the company to positive operating cash flow after the commercial launch of LNZ100, if it is approved144 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, LENZ Therapeutics is not required to provide quantitative and qualitative disclosures about market risk169 Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2025, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025170 - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls171 PART II - OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to materially adversely affect its business or financial condition - The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business175 Risk Factors This section details risks including limited operating history, LNZ100 dependence, regulatory approval, market acceptance, competition, third-party reliance, intellectual property, and common stock - The company is a pre-commercial entity with a history of significant losses and its business depends entirely on the successful development and commercialization of its single lead product candidate, LNZ100177 - The company faces risks related to obtaining regulatory approval from the FDA and other authorities, potential failure to achieve market acceptance, and significant competition from existing and future therapies177 - There are substantial risks related to the company's reliance on third parties for manufacturing and clinical trials, as well as its ability to obtain and maintain sufficient intellectual property protection for its products180 Risks Related to Limited Operating History, Development and Commercialization Risks include limited operating history, net losses, LNZ100 dependence, clinical trial uncertainties, market acceptance challenges, and intense competition - The company is a pre-commercial entity with a limited operating history, has incurred significant net losses ($159.6 million accumulated deficit as of March 31, 2025), and has no products approved for sale178179 - The business is entirely dependent on the successful development and commercialization of LNZ100, with no assurance of approval despite an NDA PDUFA target action date of August 8, 2025182 - Even if approved, LNZ100 may fail to gain market acceptance due to competition from over-the-counter reading glasses, other pharmacological options like Qlosi, and potential reluctance from ECPs and patients who had negative experiences with Vuity201202203 - The company faces significant competition from major pharmaceutical companies like AbbVie, Bausch & Lomb, and Johnson & Johnson, which have substantially greater resources212216 Risks Related to Intellectual Property Risks include obtaining and maintaining LNZ100 patent protection, prosecution uncertainty, limited patent terms, infringement claims, and trade secret protection challenges - The company's success depends on its ability to obtain and maintain patent protection for LNZ100, with no guarantee that pending applications will issue as patents or that issued patents will provide sufficient protection228229230 - Patent terms are limited and may expire before or shortly after commercialization, opening the door to generic competition, and patent term extensions are not guaranteed242243245 - The company may face expensive litigation if third parties claim infringement of their patents, which could block the ability to commercialize LNZ100 or require substantial royalty payments253258 - Protecting trade secrets is critical but difficult, especially when sharing information with third-party manufacturers and collaborators, as unauthorized disclosure could impair the company's competitive position276277 Risks Related to Regulatory Approval and Other Legal Compliance Matters Risks include unpredictable FDA approval, ongoing regulatory compliance, potential side effects, healthcare reform impacts, and adherence to fraud, abuse, data privacy, and anti-corruption laws - The FDA regulatory approval process is lengthy and unpredictable, and the company's NDA for LNZ100 could be delayed or rejected for numerous reasons, including disagreements over clinical trial design or data interpretation299303 - Even if approved, LNZ100 will be subject to ongoing regulatory requirements, including for manufacturing (cGMP), labeling, and promotion, with failure to comply resulting in significant penalties, including product withdrawal317322 - Healthcare legislative changes, such as the Inflation Reduction Act (IRA), could indirectly impact the company's business by affecting competitor pricing, even though LNZ100 is targeted for the cash-pay market331333 - The company is subject to complex data privacy laws like GDPR in Europe and CCPA in California, as well as federal and state anti-kickback and false claims laws, which carry risks of significant penalties for non-compliance341350352 Risks Related to Reliance on Third Parties Risks include reliance on third-party manufacturers for supply and quality, dependence on CROs for clinical trials, and limited control over the CORXEL collaboration in Greater China - The company does not have its own manufacturing capabilities and relies on third-party manufacturers for clinical and future commercial supply of LNZ100, creating risks related to supply disruption, quality control, and cGMP compliance355356 - The company relies on CROs and independent investigators to conduct clinical trials, and their failure to perform duties, comply with GCPs, or meet deadlines could delay or prevent regulatory approval360361362 - The company is dependent on its partner, CORXEL, for the development and commercialization of LNZ products in Greater China, with limited control over CORXEL's resources and strategy, potentially impacting future milestone and royalty revenues366367 Risks Related to Business Operations Operational risks include dependence on key personnel, organizational growth challenges, potential securities litigation, and vulnerability to cybersecurity breaches - The company is highly dependent on its ability to attract and retain key management and scientific personnel in a competitive industry369 - The company expects to significantly expand its organization and may encounter difficulties managing this growth, particularly in building out commercial and public company infrastructure374 - Internal computer systems and those of third-party partners are vulnerable to cybersecurity breaches, which could result in material disruption, loss of confidential data, and significant liabilities376378379 Risks Related to Our Common Stock Risks for common stock investors include price volatility, dilution from future issuances, reduced disclosure as an emerging growth/smaller reporting company, and anti-takeover provisions - The market price of the company's common stock is expected to be volatile and could be influenced by clinical trial results, regulatory decisions, and competitor announcements385 - Sales of a substantial number of shares, including from recent PIPE financings and a new shelf registration, could cause the stock price to decline387389393 - The company is an "emerging growth company" and a "smaller reporting company," allowing it to rely on reduced disclosure exemptions, which may make its stock less attractive to some investors396398 - The company's ability to use its net operating loss (NOL) carryforwards of $72.9 million (federal) and other tax attributes is subject to limitation due to an ownership change that occurred as a result of the Merger416417 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during Q1 2025 that were not previously disclosed in Form 8-K reports - There were no unregistered sales of equity securities during the quarter ended March 31, 2025, that had not been previously reported on a Form 8-K419 Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the last fiscal quarter - No directors or officers adopted or terminated a Rule 10b5-1 trading plan or other non-Rule 10b5-1 trading arrangement during the last fiscal quarter422 Exhibits This section lists exhibits filed with the quarterly report, including corporate documents, a sales agreement, and CEO/CFO certifications Signatures The report is signed by the Chief Executive Officer and Chief Financial Officer on May 7, 2025