Viridian Therapeutics, Inc. annual report, FY2017

Business context and reporting period

The supplied filing is Miragen Therapeutics, Inc.’s Form 10-K for the fiscal year ended December 31, 2017, filed March 15, 2018; it is not a Viridian Therapeutics filing. The filing also reports unaudited fourth-quarter 2017 results. Miragen is a clinical-stage biotechnology company developing microRNA-targeted therapies and reported no product sales.

In February 2017, the company completed its merger with privately held Miragen, changed its name from Signal Genetics, Inc., and shifted its principal business to drug development. The merger also converted the former Miragen preferred stock into common stock.

Financial performance and condition

Revenue consisted of collaboration and grant income, not product sales. Collaboration revenue was $3.1 million and grant revenue was $0.9 million in 2017. Operating expenses exceeded revenue substantially; a product gross margin is not applicable because Miragen had no commercial product sales.

Revenue grew 15% year over year, principally from higher Servier-funded research activity and grant revenue, partly offset by the completion of recognition of prior license payments. R&D expense rose 43%, largely due to cobomarsen clinical development, outsourced clinical/manufacturing costs, and added personnel. G&A expense rose 61%, reflecting public-company costs, compensation, and patent expenses. Net loss increased 54%.

Fourth-quarter 2017 revenue was $1.2 million and net loss was $6.4 million, compared with fourth-quarter 2016 revenue of $0.5 million and net loss of $6.0 million. Quarterly loss per share was $0.29 in Q4 2017 and $9.20 in Q4 2016; the substantial per-share change is affected by the post-merger share structure and weighted-average share count.

Operating cash use increased to $28.2 million. Financing activities provided $52.5 million, including approximately $39.5 million net from a private placement, $7.5 million net from ATM sales, and net cash proceeds from debt transactions. Investing activities provided $1.0 million, mainly from cash acquired in the merger. Total assets were $52.5 million, total liabilities $14.0 million, and stockholders’ equity $38.5 million at year-end. The company had no preferred stock outstanding.

Liquidity, debt and financing

Management stated that year-end cash plus approximately $37.9 million of net proceeds from a February 2018 public offering was expected to fund operations into early 2020. That offering, completed after the reporting date, sold 7,414,996 shares at $5.50 per share and diluted existing holders. The company also had an ATM facility authorizing up to $50 million in gross sales; it had used approximately $7.9 million gross through year-end 2017.

The November 2017 Silicon Valley Bank loan provided $10 million, replacing the prior facility. It carries floating-rate interest (4.50% at December 31, 2017), an 18-month interest-only period followed by principal payments, and a $0.9 million final payment fee. No additional borrowing capacity remained. The loan is secured by business assets other than intellectual property, which is subject to a negative pledge, and includes restrictive covenants. The filing reports no material commitments beyond disclosed liabilities and commitments, and no off-balance-sheet arrangements.

Development progress, outlook and risks

• Cobomarsen (MRG-106): In a Phase 1 trial for cutaneous T-cell lymphoma, 26 of 29 systemically treated evaluable patients showed improvement in mSWAT skin-disease scores; four of five patients in the 300 mg IV subgroup had at least a 50% reduction. As of January 25, 2018, the company reported no serious adverse events attributed to the drug, but two dose-limiting toxicities occurred. Results are early-stage and from a small, open-label trial. The company planned a randomized Phase 2 CTCL trial in 2018 and interim data in an expansion indication in the second half of 2018.
• MRG-201: A Phase 1 study in 54 healthy volunteers reported a statistically significant reduction in fibroplasia, without apparent adverse effects on wound healing. A Phase 2 study in people predisposed to keloids was planned for the first half of 2018. Further lung and eye development depended on preclinical results.
• MRG-110: Servier collaboration covered cardiovascular development outside the United States and Japan; Miragen retained those territories. Two Phase 1 trials were planned for the first half of 2018. Reported support at filing was preclinical.
• Principal risks: Miragen had incurred recurring losses, had no approved products or product-sales revenue, and expected losses to continue. Its microRNA approach was novel and unproven, clinical results might not predict later-stage success, and regulatory approval, effective drug delivery, manufacturing scale-up, patient recruitment, intellectual-property protection, and future financing were uncertain. The company relied on third parties for clinical trials and manufacturing; management said current manufacturing costs were not commercially feasible.
• Other notable matters: Cobomarsen received U.S. orphan-drug designation for mycosis fungoides and European orphan designation for CTCL; these designations do not assure approval. The 2017 federal tax law reduced the corporate rate, but Miragen maintained a full valuation allowance against deferred tax assets and reported no income-tax provision. A merger-related ownership change limited use of tax attributes. The company reported no material legal proceedings and stated that disclosure controls and internal control over financial reporting were effective at year-end.

Most important facts for investors to verify

• Confirm the issuer and period: the document is Miragen’s FY 2017 10-K, not a Viridian filing; review the separate Q4 figures in that context.
• Check the underlying clinical-trial design, patient counts, follow-up, response definitions, adverse events, and whether subsequent Phase 2 results support the early cobomarsen and MRG-201 findings.
• Assess cash runway using actual spending after year-end, including the February 2018 offering, clinical-trial costs, loan payments, and any additional financing or dilution.
• Review the SVB loan’s floating-rate terms, final fee, covenants, security interests, and repayment schedule.
• Verify progress against announced 2018 milestones, Servier’s development responsibilities and territory rights, and the status of third-party manufacturing and intellectual-property arrangements.