Disc Medicine, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; financial statements are unaudited. Disc Medicine is a clinical-stage biopharmaceutical company developing treatments for hematologic diseases. It has no approved products and has generated no product revenue. The December 2022 Gemini merger was accounted for as a reverse recapitalization; prior-period operating results reflect Private Disc.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $20.2 million | $7.8 million |
| General and administrative expense | $4.9 million | $2.1 million |
| Total operating expenses | $25.1 million | $10.0 million |
| Net loss | $22.8 million | $9.9 million |
| Basic and diluted loss per share | $1.20 | $10.67 |
| Net cash used in operations | $35.5 million | $13.7 million |
| Net cash from financing | $77.3 million | $0.1 million |
At March 31, cash and cash equivalents were $236.4 million, versus $194.6 million at year-end; working capital was $232.2 million. Total liabilities were $10.9 million, primarily accounts payable, accruals, and operating lease liabilities; no material borrowing balance was disclosed. The company briefly borrowed $0.5 million from an existing investor in March and repaid it four days later. Operating lease commitments totaled $1.4 million. Profit margins are not applicable given the absence of revenue.
Operating cash use exceeded net loss, in part because of working-capital movements, including payment of merger-related amounts previously in accounts payable. Cash increased by $41.8 million overall, principally because of equity financing. Q1 financing included $62.4 million net proceeds from a registered direct offering and $14.6 million net proceeds from ATM sales. The company reported $236.4 million of cash would fund planned needs into 2025; the notes also state it expects to fund requirements for at least 12 months from issuance. After quarter-end, it sold additional ATM shares for $5.0 million gross proceeds through the financial statement issuance date.
Material changes versus prior period
- Operating expenses rose $15.2 million year over year, and net loss increased $12.9 million. R&D expense increased $12.4 million, primarily including a $10.0 million upfront payment under the Mabwell license and higher R&D personnel costs.
- G&A expense increased $2.8 million, mainly due to higher legal, consulting, and professional fees and increased headcount.
- Interest income increased to $2.4 million from near zero, reflecting higher cash balances and interest rates. The derivative liability expense/income line was no longer present after settlement in connection with the merger.
- Loss per share comparisons are affected by the substantial increase in weighted-average shares following the merger and financing activity; the filing reports 18.95 million weighted-average shares in Q1 2023 versus 0.92 million in Q1 2022.
Pipeline, outlook, and principal risks
- Bitopertin: Phase 2 BEACON trial in EPP/XLP in Australia and Phase 2 AURORA trial in EPP in the U.S. Management expected BEACON interim data in June 2023 and topline data from BEACON and AURORA by year-end 2023. An NIH-sponsored DBA trial was expected to begin by mid-2023.
- DISC-0974: Phase 1b/2 trials underway in myelofibrosis anemia and non-dialysis-dependent CKD anemia; interim data from both were expected by year-end 2023.
- MWTX-003: FDA-cleared IND; the company planned to initiate a Phase 1 healthy-volunteer trial in the second half of 2023. The January Mabwell license included the $10.0 million upfront payment and potential development, regulatory, commercial milestone, and royalty obligations.
- DISC-0998 remains preclinical. Management expects R&D and G&A spending to increase as programs advance; the company expects ongoing losses and will likely need additional capital over time. No profitability or product-revenue guidance was provided.
- Key risks include clinical failure or delay, patient enrollment, safety findings, regulatory uncertainty, reliance on CROs/CDMOs and single-source suppliers, intellectual-property protection, competition, and the need for future financing that could dilute shareholders. Interim trial data may change. The company also disclosed risks from financial-sector disruption and global economic conditions.
- The company reported no material legal proceedings, no material changes in internal control over financial reporting, and effective disclosure controls as of March 31, 2023. It had no material claims known under its indemnification arrangements.
Most important facts for investors to verify
- Whether 2023 trial-data and trial-initiation timelines were achieved, and review the final data and safety findings rather than relying solely on interim results.
- Cash burn and the assumptions behind the stated runway into 2025; reconcile that outlook with the shorter “at least twelve months” liquidity statement and future development costs.
- The pace and terms of further equity issuance, including ATM use, pre-funded warrants, and resulting dilution. As of May 10, 2023, 19,799,357 common shares were outstanding.
- The Mabwell license’s contingent milestone and royalty exposure, and the development and manufacturing requirements for MWTX-003.
- Whether clinical, regulatory, manufacturing, or financing setbacks could materially change the pipeline schedule or capital requirements.