Viridian Therapeutics, Inc. quarterly report, Q3 FY2020

Business context and reporting period

This is Miragen Therapeutics, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2020—not a post-merger Viridian reporting period. The October 27, 2020 acquisition of Viridian occurred after quarter-end, so the reported financial statements are for Miragen before the acquisition. Following the merger, management described a strategic shift toward Viridian’s thyroid eye disease programs, including VRDN-001 and VRDN-002, and away from Miragen’s legacy microRNA programs.

Financial results and liquidity

The company had no approved products and no product-sales revenue. With no revenue in Q3 2020, a revenue-based operating margin is not meaningful; the filing does not provide a clear gross-margin measure. At September 30, 2020, cash and cash equivalents were $30.079 million, current assets were $31.972 million, current liabilities were $7.558 million, and total liabilities were $11.791 million. Notes payable totaled $8.834 million on the balance sheet, including the PPP loan.

For the nine months, operating cash outflow was $20.343 million, investing cash inflow was $1.948 million, and financing cash inflow was $23.628 million. Cash increased $5.233 million from $24.846 million at year-end 2019. The company reported an accumulated deficit of $188.145 million.

Material changes versus prior comparable periods

• Q3 revenue fell to zero from $0.695 million; nine-month revenue declined to $0.996 million from $3.581 million. The principal reason was reduced reimbursable work under the Servier collaboration, which terminated in February 2020.
• R&D expense fell $5.916 million in Q3 and $13.327 million for the nine-month period. Management attributed the reductions mainly to lower clinical and manufacturing activity for the Phase 2 SOLAR cobomarsen trial, personnel costs, and other development spending.
• Net loss narrowed by $5.736 million in Q3 and $11.782 million year to date, reflecting lower operating expenses, partly offset by sharply lower revenue year to date.
• Financing supported the higher cash balance: the company received approximately $13.9 million net from a February public offering, additional proceeds from equity sales, and $1.7 million under the PPP. Shares outstanding increased substantially during 2020.

Outlook, risks, contingencies, and unusual items

• Management expected cash and cash equivalents, the approximately $91 million gross proceeds from an October 2020 preferred-stock financing, and cash held by Viridian at acquisition to fund operating and capital needs through the end of 2023. This is a forward-looking estimate dependent on assumptions; the filing says additional capital will still be needed.
• Management expected to initiate a Phase 2 VRDN-001 trial in thyroid eye disease in 2021, subject to regulatory feedback, and planned to file an IND for VRDN-002 by the end of 2021.
• The Series A preferred stock issued in connection with the merger and financing was convertible into common stock subject to stockholder approval. If conversion approval is not obtained timely, holders may have a right to require cash settlement; the company warned it would not have sufficient liquidity to settle a significant amount.
• The company received a Nasdaq minimum-bid-price deficiency notice on October 8, 2020, with an initial compliance deadline of April 6, 2021. It also planned a 1-for-15 reverse stock split, anticipated to take effect in November 2020.
• The company applied in October 2020 for forgiveness of its $1.7 million PPP loan but could not assure that any amount would be forgiven. Failure to qualify could require repayment; the filing also discusses potential eligibility, enforcement, and reputational risks.
• COVID-19 had not materially affected the company as of September 30, 2020, but could disrupt trials, operations, supply, and access to financing. The filing identifies clinical-development, safety, manufacturing, competition, intellectual-property, and capital-raising risks.
• A 2019 restructuring targeted approximately 50% of the workforce. Cumulative restructuring expense was $2.4 million through September 30, 2020, with about $0.1 million of additional expense expected in the rest of 2020.
• Management concluded disclosure controls and procedures were effective at a reasonable level of assurance. No material legal proceedings were reported.

Important facts for investors to verify

• Whether stockholders approved conversion of the Series A preferred shares, and the resulting dilution or any cash-settlement obligation.
• Post-merger cash, debt, and operating runway, including the actual cash acquired with Viridian and the pace of spending against the stated end-2023 runway.
• Regulatory feedback and execution of the VRDN-001 Phase 2 and VRDN-002 IND timelines.
• Nasdaq listing compliance, completion and effects of the reverse split, and any related warrant provisions.
• The outcome of the PPP forgiveness application and any impact on liabilities or compliance exposure.
• How the merger affects legacy microRNA programs, including the terms and potential value of contingent value rights tied to their disposition.