Avidity Biosciences(RNA) - 2023 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Financial Statements (unaudited) This section presents Avidity Biosciences, Inc.'s unaudited condensed financial statements for Q1 2023, reporting a net loss of $52.4 million and total assets of $614.0 million Condensed Balance Sheets As of March 31, 2023, total assets decreased to $614.0 million from $638.8 million, primarily due to reduced cash and cash equivalents, while total liabilities and stockholders' equity also decreased Condensed Balance Sheet Data (in thousands) | | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $118,710 | $340,396 | | Marketable securities | $467,590 | $270,331 | | Total current assets | $597,147 | $622,942 | | Total assets | $613,976 | $638,800 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $48,085 | $51,908 | | Total liabilities | $55,061 | $60,725 | | Total stockholders' equity | $558,915 | $578,075 | Condensed Statements of Operations and Comprehensive Loss For the three months ended March 31, 2023, collaboration revenue increased to $2.2 million, but significantly higher operating expenses, driven by R&D costs, resulted in a net loss of $52.4 million Condensed Statements of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Collaboration revenue | $2,233 | $1,795 | | Research and development | $47,765 | $27,688 | | General and administrative | $12,064 | $8,567 | | Total operating expenses | $59,829 | $36,255 | | Loss from operations | ($57,596) | ($34,460) | | Net loss | ($52,394) | ($34,235) | | Net loss per share, basic and diluted | ($0.74) | ($0.71) | Condensed Statements of Stockholders' Equity Total stockholders' equity decreased from $578.1 million at December 31, 2022, to $558.9 million at March 31, 2023, primarily due to the net loss, partially offset by stock issuances and compensation - Key changes in stockholders' equity for the three months ended March 31, 2023 include a net loss of $52.4 million, stock-based compensation of $9.1 million, and net proceeds of $22.4 million from a public offering[17] Condensed Statements of Cash Flows In Q1 2023, net cash used in operating activities increased to $49.0 million, while net cash used in investing activities was $195.7 million, resulting in a net decrease in cash, cash equivalents, and restricted cash of $221.7 million Summary of Cash Flows (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in Operating activities | ($48,967) | ($29,574) | | Net cash used in Investing activities | ($195,680) | ($175,475) | | Net cash provided by Financing activities | $22,961 | $24,113 | | Net decrease in cash, cash equivalents and restricted cash | ($221,686) | ($180,936) | Notes to Condensed Financial Statements This section provides detailed notes on the company's business, liquidity, and accounting policies, confirming $586.3 million in cash and marketable securities are sufficient for at least 12 months of operations - The company is a biopharmaceutical firm focused on a new class of RNA therapeutics called Antibody Oligonucleotide Conjugates (AOCs)[22] - As of March 31, 2023, the company had an accumulated deficit of $410.9 million and cash, cash equivalents, and marketable securities totaling $586.3 million[24] - Management believes existing cash, cash equivalents, and marketable securities are sufficient to fund operations for at least 12 months from the filing date[25] - Revenue of $2.2 million was recognized for the three months ended March 31, 2023, from the research collaboration and license agreement with Eli Lilly and Company[45] - During Q1 2023, the company sold 943,461 shares of common stock under its 2022 Sales Agreement, receiving net proceeds of $22.4 million[54] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, emphasizing the advancement of its Antibody Oligonucleotide Conjugates (AOCs) pipeline and its $586.3 million liquidity position Overview This section provides an overview of Avidity's biopharmaceutical focus on Antibody Oligonucleotide Conjugates (AOCs), detailing its three clinical-stage programs and recent trial data, including the partial clinical hold on the MARINA trial - The company's pipeline has three programs in clinical development: AOC 1001 (DM1), AOC 1020 (FSHD), and AOC 1044 (DMD)[68] - In April 2023, top-line data from the MARINA trial of AOC 1001 showed directional improvement in functional assessments and a favorable safety profile[68][76] - The FDA placed a partial clinical hold on new participant enrollment in the MARINA program in September 2022 following a serious adverse event; discussions with the FDA are ongoing[70][71] - The company anticipates sharing data from the MARINA-OLE study in late 2023, results from the EXPLORE44 trial in the second half of 2023, and a preliminary assessment from the FORTITUDE trial in the first half of 2024[72] Results of Operations For Q1 2023, revenue slightly increased to $2.2 million, while R&D expenses rose by $20.1 million to $47.8 million, and G&A expenses increased by $3.5 million to $12.1 million Comparison of Operations (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Revenue | $2,233 | $1,795 | $438 | | Research and development expenses | $47,765 | $27,688 | $20,077 | | General and administrative expenses | $12,064 | $8,567 | $3,497 | R&D Expense Breakdown by Program (in thousands) | Program | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | AOC 1001 | $6,960 | $4,490 | $2,470 | | AOC 1020 | $7,616 | $2,232 | $5,384 | | AOC 1044 | $2,536 | $2,897 | ($361) | | Other programs | $6,376 | $2,877 | $3,499 | - The increase in R&D expenses was primarily driven by a $12.6 million increase in external costs for clinical trials and preclinical studies, and a $7.4 million increase in internal costs from higher headcount and lab supplies[94][95] Liquidity and Capital Resources As of March 31, 2023, the company held $586.3 million in cash, cash equivalents, and marketable securities, which management believes is sufficient to fund operations for at least the next 12 months, with future funding expected from equity, debt, or collaborations - As of March 31, 2023, the company had cash, cash equivalents, and marketable securities of $586.3 million[104] - The company believes its existing cash will be sufficient to fund operations for at least 12 months from the filing date of the Form 10-Q[104] - Through March 31, 2023, the company has received net proceeds of $22.4 million under the 2022 Sales Agreement[101] - In December 2022, the company completed a public offering raising net proceeds of $223.8 million[102] Cash Flows In Q1 2023, net cash used in operating activities increased to $49.0 million, net cash used in investing activities was $195.7 million, and net cash provided by financing activities was $23.0 million Cash Flow Summary (in thousands) | | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in Operating activities | ($48,967) | ($29,574) | | Net cash used in Investing activities | ($195,680) | ($175,475) | | Net cash provided by Financing activities | $22,961 | $24,113 | Critical Accounting Estimates The company reports no material changes to its critical accounting estimates from those disclosed in its 2022 Annual Report on Form 10-K - As of March 31, 2023, there have been no material changes to the company's critical accounting estimates[111] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk from the information provided in its Annual Report on Form 10-K for the year ended December 31, 2022 - As of March 31, 2023, there have been no material changes in the company's market risk[114] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[116] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[117] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company reports that it is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings[120] Item 1A. Risk Factors The company reports no material changes to its risk factors from its 2022 Annual Report on Form 10-K, except for a new risk factor concerning unstable market and economic conditions - A new risk factor has been added regarding unstable market and economic conditions, including financial institution liquidity risk, which may adversely affect the business, financial condition, and stock price[122] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period and updates on the use of IPO proceeds, with approximately $243.8 million used for general corporate purposes and development programs - There were no unregistered sales of equity securities in the period[123] - As of March 31, 2023, approximately $243.8 million of the proceeds from the company's IPO have been used for general corporate purposes and to advance development programs[125] Item 3. Defaults Upon Senior Securities This item is not applicable Item 4. Mine Safety Disclosures This item is not applicable Item 5. Other Information The company reports no other information for this item Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Non-Employee Director Compensation Program and certifications by the CEO and CFO - Exhibits filed include certifications by the CEO and CFO under Sarbanes-Oxley Sections 302 and 906, and the Amended and Restated Non-Employee Director Compensation Program[131]