Viridian Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Viridian is a pre-commercial biopharmaceutical company developing therapies for thyroid eye disease (TED) and autoimmune diseases; it has no approved products and has generated no product-sales revenue.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Collaboration revenue | $0.1 million | $1.2 million | $0.2 million | $1.7 million |
| Research and development expense | $30.4 million | $22.1 million | $121.2 million | $61.6 million |
| General and administrative expense | $20.9 million | $8.9 million | $62.0 million | $25.3 million |
| Operating loss | $51.2 million | $29.8 million | $183.0 million | $85.2 million |
| Net loss | $47.7 million | $28.9 million | $170.9 million | $84.1 million |
| Net loss per share | $1.09 | $0.86 | $3.97 | $2.88 |
Q3 and nine-month revenue came from the Zenas BioPharma collaboration; the decline reflected the timing of activities. Revenue is immaterial relative to expenses, so operating margins are not meaningful as a measure of commercial performance. Net loss increased substantially year over year as clinical development, staffing, and corporate costs expanded. Higher interest income partly offset operating losses.
Cash flow: Operating cash use was $146.2 million for the first nine months of 2023, versus $59.8 million in 2022. Investing activities provided $75.5 million, primarily from net sales and maturities of investments; financing activities provided $26.7 million, including debt proceeds and employee equity-plan and warrant exercises. Cash and cash equivalents declined $44.0 million to $111.6 million.
Liquidity and balance sheet: Cash, cash equivalents, and short-term investments totaled $313.0 million at September 30, down from $424.6 million at December 31, 2022. The company reported total assets of $328.8 million, total liabilities of $45.2 million, and stockholders’ equity of $283.6 million. Accumulated deficit was $659.0 million. Long-term debt was $20.0 million, compared with $4.6 million net at year-end 2022.
Material changes and unusual items
- Q3 R&D expense rose $8.3 million, mainly from higher THRIVE and THRIVE-2 trial costs and increased personnel expense, partly offset by lower preclinical costs.
- Nine-month R&D expense rose $59.6 million, reflecting clinical and manufacturing costs, staffing, and license-related spending, including a $15.0 million upfront payment for subcutaneous delivery-system development and $5.7 million of stock issued under a license and collaboration agreement.
- Q3 G&A expense increased $12.1 million. Nine-month G&A increased $36.7 million, including executive separation costs and increased share-based compensation. Nine-month share-based compensation totaled $41.1 million; the filing attributes $7.5 million to former CEO vesting acceleration and $1.2 million to former CFO vesting acceleration.
- An August amendment expanded the Hercules term-loan facility to up to $150 million; $15 million was drawn at amendment closing, bringing funded principal to $20 million. The loan bears interest at up to 8.95%, is secured by substantially all borrower assets except intellectual property, and matures October 1, 2026. Further tranches are subject to milestones or lender approval.
- Common shares outstanding were 43.7 million at September 30. The filing reports 52.6 million outstanding as of November 7, reflecting subsequent share activity.
Outlook, management commentary, and risks
- Management said September 30 resources were expected to fund operations at least 12 months from issuance of the financial statements; MD&A stated the resources, including debt already drawn, were expected to fund the operating plan into 2026. These estimates are subject to development costs, trial outcomes, financing conditions, and other assumptions.
- After quarter-end, in November 2023, Viridian raised approximately $186 million gross in private placements through common and Series B preferred shares. This financing was not included in September 30 cash.
- Clinical milestones cited include VRDN-001 active TED Phase 3 THRIVE topline results expected mid-2024 and chronic TED Phase 3 THRIVE-2 results expected by year-end 2024. Preliminary healthy-volunteer data across VRDN-001, VRDN-002, and VRDN-003 were expected in Q4 2023; management planned to select a lead subcutaneous program by year-end 2023 and advance it into later-stage trials in mid-2024.
- For VRDN-006, the company planned an IND filing by year-end 2024 and expected healthy-volunteer data in the second half of 2025. The company said it planned to provide additional information on its FcRn portfolio in 2024.
- On October 30, 2023, Viridian exercised a Paragon option and entered a license agreement, requiring an initial $5.3 million payment and potential development milestones of up to $16 million per program, plus royalties. On October 29, the former CEO separation agreement resulted in $14.6 million of severance costs, including $13.5 million of incremental share-based compensation.
- Key risks include clinical failure or delay, safety and regulatory uncertainty, reliance on third-party manufacturers and trial providers, competition, continuing losses and need for future capital, potential dilution, and debt covenants. The company also noted macroeconomic, geopolitical, supply-chain, and banking risks. It disclosed no legal proceedings it believed would have a material adverse effect.
- Management reported disclosure controls were effective at a reasonable level of assurance and no material quarterly change in internal control over financial reporting. The company expected to become a large accelerated filer effective December 31, 2023, bringing auditor attestation requirements and added compliance costs.
Important facts for investors to verify
- Whether Phase 3 TED trial timing and results support the stated clinical-development plans, and how results compare with earlier data.
- Actual cash burn and runway against management’s estimates, including the effect of the November financing and planned development spending.
- Terms, availability, and costs of Hercules loan tranches, including milestone conditions, interest, security, and repayment obligations.
- Potential dilution from the November placements, convertible preferred stock, options, warrants, and any future equity financing.
- Full cost and obligations under the Paragon, Enable, and other license and collaboration agreements, including milestones and royalties.
- Impact of executive separation and retention costs, share-based compensation, and new public-company audit and compliance requirements.