Edgewise Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Financial statements are unaudited. Edgewise is a clinical-stage biopharmaceutical company developing treatments for rare muscle disorders; it has no approved products and has generated no revenue.
Financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $9.9m | $3.2m | $23.1m | $9.8m |
| General and administrative expense | $3.2m | $0.4m | $7.3m | $1.0m |
| Total operating expenses | $13.1m | $3.6m | $30.4m | $10.8m |
| Net loss | $12.9m | $3.6m | $30.1m | $10.8m |
| Basic and diluted net loss per share | $0.26 | $3.68 | $0.90 | $16.62 |
| Operating cash used | Not separately stated | Not separately stated | $24.1m | $10.0m |
Loss per share is shown as a loss in the filing. No gross margin or operating margin is meaningful because the company had no revenue. Q3 R&D expense rose $6.6m, principally from EDG-5506 clinical development, other discovery and preclinical work, and higher employee costs. Q3 G&A increased $2.8m, primarily from public-company costs, staffing, directors’ and officers’ insurance, and professional services.
Liquidity, capital and cash flow
- At September 30, 2021, cash and cash equivalents were $10.6m and available-for-sale marketable securities were $279.9m; management cited combined cash, equivalents and securities of approximately $290.5m. Current assets were $293.2m and current liabilities $8.8m.
- No debt was outstanding. The company reported an accumulated deficit of $64.3m.
- For the first nine months, investing cash use was $256.3m, mainly purchases of marketable securities ($273.2m), partly offset by maturities ($17.4m); property and equipment purchases were $0.6m. Financing provided $186.1m, primarily net IPO proceeds.
- The March 2021 IPO raised $202.4m gross and approximately $186.1m net after underwriting discounts, commissions and offering costs. Preferred stock converted into common shares at the IPO.
- Management’s MD&A says existing funds should cover its planned operating expenses and capital requirements for at least 24 months. The liquidity note says funds should meet needs through at least the next 12 months. This difference is not reconciled in the filing text.
Business developments, outlook and risks
- EDG-5506, an oral fast skeletal myosin inhibitor for dystrophinopathies including Duchenne and Becker muscular dystrophy, was in Phase 1. In October 2021, after the quarter, the company announced positive topline multiple-ascending-dose results in healthy volunteers, began dosing BMD patients in its ongoing Phase 1b study, and anticipated Phase 2 trials in BMD in the first half of 2022 and DMD in the second half of 2022. It also expected an open-label BMD study in Q1 2022. These are forward-looking plans and preliminary results, not established outcomes.
- Other programs included EDG-6289 for movement disorders and muscle spasticity, EDG-002 for cardiac disorders including hypertrophic cardiomyopathy, and EDG-003 for selected neuromuscular diseases. These remained in research or preclinical stages.
- The company expects substantial losses and rising R&D spending as it advances EDG-5506 and its pipeline. It expects to need substantial additional capital to complete development and, if successful, commercialize products; additional financing may dilute shareholders or impose restrictive terms.
- COVID-19 had affected trial operations, patient enrollment, productivity, supply activities, and data collection and analysis; further delays and cost changes were possible. The company also disclosed reliance on third parties for clinical trials and manufacturing, including a single current EDG-5506 manufacturer without an alternative in place.
- Commitments include office and laboratory lease payments of $173,000 due within one year and OSIF license milestone payments of up to $1.3m per covered product for development and regulatory milestones, approximately $2.3m per product for sales milestones, plus low single-digit royalties on net sales and certain sublicensing payments. Material litigation was not pending or threatened, and no material legal proceedings were reported.
- Management reported disclosure controls were effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Reconcile the stated 12-month liquidity period in the financial-statement note with the 24-month runway estimate in MD&A, including the assumptions and expected spending behind each.
- Review the full EDG-5506 Phase 1/1b data, safety findings, trial design, and subsequent enrollment and timing updates; the October topline results were preliminary.
- Monitor clinical-trial execution, COVID-related disruption, and the status and redundancy of third-party manufacturing and supply.
- Assess future cash burn, financing needs and potential dilution as development spending increases; no product revenue or profitability is currently established.
- Track the OSIF license obligations and the company’s ability to protect its intellectual property and address potential third-party patent claims.