Design Therapeutics, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Design Therapeutics is a preclinical-stage biotechnology company developing GeneTAC small molecules for inherited nucleotide repeat expansion diseases. It had no approved products and generated no product sales. The filing was signed March 10, 2022.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $0; grant revenue was $0 | $0.226 million grant revenue |
| Research and development expense | $24.778 million | $6.060 million |
| General and administrative expense | $11.053 million | $2.496 million |
| Total operating expenses | $35.831 million | $8.556 million |
| Net loss | $35.533 million | $8.280 million |
| Net loss per share, basic and diluted | $0.77 | $0.52 |
| Net cash used in operating activities | $29.377 million | $8.669 million |
At year-end, cash and cash equivalents were $298.569 million and available-for-sale investment securities were $85.495 million, totaling approximately $384.1 million. Total assets were $390.6 million; total liabilities were $8.4 million, including a $3.6 million operating lease liability. The filing reports no outstanding debt at December 31, 2021. The company had an accumulated deficit of $47.5 million. Profit margins are not meaningful because the company had no product revenue.
Changes versus 2020
- Net loss increased to $35.5 million from $8.3 million, reflecting expanded research and development activity and higher personnel and public-company costs.
- R&D expense rose $18.7 million, primarily from advancing the FA program, manufacturing and chemistry work, DM1 program costs, and increased staffing. G&A expense rose $8.6 million, including personnel, insurance, legal and accounting costs.
- Operating cash use increased to $29.4 million from $8.7 million. Investing cash use was $53.6 million, mainly reflecting purchases of investment securities.
- Financing provided $379.2 million, principally from $254.3 million of net IPO proceeds and $124.7 million of net Series B preferred financing proceeds. The IPO raised $276.0 million gross in March 2021.
Programs, outlook and principal risks
- Friedreich ataxia (FA): The company reported preclinical restoration of frataxin in patient-derived cells and animal models, and target-organ distribution in animals. The FDA cleared its IND in late February 2022, after the reporting year. Management anticipated first-in-human dosing in the first half of 2022 and initial topline data in the second half of 2022; these were expectations, not reported results.
- DM1: Preclinical studies reported reductions in nuclear foci and correction of splicing defects. Management expected to complete IND-enabling work and seek clearance for a first-in-human trial in 2023.
- FECD and other research: FECD findings were preclinical; further studies were planned. Additional discovery programs include other repeat expansion diseases.
- Management expected operating losses and expenses to rise as programs advance. Existing cash and investments were expected to fund planned operating expenses and capital needs for more than 12 months from the filing date, but not to fund any candidate through regulatory approval. Additional financing will be needed; equity financing could dilute holders, while collaborations could require relinquishing rights.
- Key uncertainties include early-stage development and no human trial history at year-end, clinical and regulatory failure or delay, safety, patient recruitment, dependence on third-party manufacturers and research organizations, competition, intellectual-property protection, financing needs, and possible COVID-19-related disruption.
- The company relies on a WARF license, with potential development and commercial milestone payments of up to $17.6 million, low-single-digit royalties on licensed-product sales and sublicense fees. It also leases laboratory and office space from an entity managed by its Executive Chairperson; 2021 lease expense was $0.313 million.
Investor facts to verify
- Whether the anticipated FA trial start and 2022 data milestones occurred, and what the complete clinical safety and efficacy data show.
- Actual cash burn and runway as clinical costs rise, including whether additional capital or collaboration financing is required.
- Progress toward the DM1 IND timeline and the evidence supporting the FECD and broader platform programs.
- Manufacturing capacity, supplier concentration and any supply or quality issues as candidates enter clinical development.
- WARF license obligations, patent status and the terms and governance of the related-party lease.
Other filing notes: The independent auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls were effective at the reasonable-assurance level; no auditor attestation of internal control over financial reporting was included because of the company’s reporting transition status. Management reported no material pending legal proceedings.