Viridian Therapeutics, Inc. — Q2 2022 Form 10-Q
Business and period: The company is a clinical-stage biotechnology developer focused on thyroid eye disease (TED) and other serious or rare diseases. This unaudited report covers the quarter and six months ended June 30, 2022. Viridian had no approved products and no product-sales revenue.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Collaboration revenue | $0.3m | $1.1m | $0.5m | $2.5m |
| Research and development | $21.7m | $12.6m | $39.5m | $26.4m |
| General and administrative | $8.1m | $6.5m | $16.5m | $12.7m |
| Net loss | $29.5m | $18.0m | $55.2m | $36.4m |
| Net loss per share, basic and diluted | $1.06 | $2.21 | $2.05 | $5.04 |
| Operating cash used | Not separately stated | Not separately stated | $39.1m | $26.2m |
Quarterly revenue fell about 76% year over year; R&D increased about 73%, G&A about 24%, and net loss about 64%. For the six-month period, revenue fell about 81%, R&D rose about 50%, G&A about 30%, and net loss about 52%. Revenue was from the related-party Zenas collaboration, with the decline attributed to the timing of activities. No meaningful product gross margin was reported; operating expenses substantially exceeded collaboration revenue.
Liquidity and debt: At June 30, cash and cash equivalents were $31.3m and short-term investments were $129.9m, or approximately $161.2m combined. Total assets were $169.8m and stockholders’ equity was $141.9m. The company reported $4.6m of long-term debt, net, after drawing $5.0m under its Hercules term loan. It used $39.1m in operating activities, received $22.8m from investing activities, and $5.3m from financing activities during the first half; cash and cash equivalents declined by $11.0m.
The Hercules facility provides access to up to $75m across four tranches, subject to availability, milestones and lender approval. The loan bears interest at a variable rate capped at 8.95% (8.95% at June 30), has a stated maturity of October 2026, and is secured by substantially all borrower assets except intellectual property. Interest-only payments run through April 2024, with potential milestone-based extensions.
Business developments, outlook and risks
- Development outlook: Management said available resources, including the term loan, were expected to fund its clinical development plan into 2024, while also stating that substantial additional capital will be needed. The financial-statement note says resources were expected to cover at least 12 months from issuance. These are estimates, not assured financing.
- VRDN-001: In August 2022, after quarter-end, Viridian reported initial Phase 1/2 cohort results at week 6: 83% proptosis responder rate, 2.4 mm mean proptosis reduction, 83% overall responder rate, and complete resolution of diplopia in 75% of patients with baseline diplopia. The cohort was small; the filing describes eight patients randomized 3:1. The company planned to report the second cohort in Q4 2022 and topline results from the 3 mg/kg cohort in Q4 2022. In the 10 mg/kg TED cohort, it reported no serious adverse events, discontinuations, hyperglycemia or infusion reactions as of August 9; mild muscle spasms and one temporary report of tinnitus were noted.
- Other programs: VRDN-002 entered a first-in-human Phase 1 study; the company planned a subcutaneous proof-of-concept study in TED patients, targeted to start in the second half of 2023. It expected to file an IND for VRDN-003 in Q2 2023 and report proof-of-concept data in Q4 2023. Management expected to select one of VRDN-002 or VRDN-003 for registrational development by the end of 2023 and initiate a global Phase 3 program in early 2024.
- Spending and unusual items: R&D growth reflected increased personnel, clinical and preclinical activity, a $3.0m ImmunoGen milestone payment and a $2.5m Paragon option fee. Paragon-related R&D expense was $2.8m for the first half. The Zenas and Paragon arrangements were identified as related-party transactions through Fairmount affiliations. Series A preferred-stock conversions increased common shares outstanding to 28.46m at June 30 from 23.92m at year-end.
- Contingencies and operating risks: The ImmunoGen license includes up to $48m in future development milestones and up to $95m in commercial milestones, plus mid-single-digit royalties if products are commercialized. The company also disclosed potential Xencor milestones and royalties. Management highlighted clinical, regulatory, funding, manufacturing, competition and intellectual-property risks. It reported no material COVID-19 impact to date, but warned of possible trial and supply disruptions; its sole manufacturer also made COVID vaccines, which had affected scheduling, though no delays had resulted as of the filing. No material legal proceedings were reported.
Most important facts for investors to verify
- Whether subsequent VRDN-001 cohorts confirm the preliminary efficacy and safety findings, and whether larger controlled trials support them.
- Whether the stated runway into 2024 remains realistic as clinical-trial spending increases, and what additional financing may be required.
- Availability and conditions for undrawn Hercules tranches, including milestone requirements, covenants, interest cost and collateral provisions.
- Progress and timing of the VRDN-002 and VRDN-003 studies, including the proposed subcutaneous dosing and Phase 3 plans.
- Potential dilution from future equity issuance, preferred-stock conversions and equity compensation, as well as milestone, royalty and related-party obligations.