10-Q 1 ewtx-20220331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to  

Commission File Number: 001-40236

Edgewise Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware

82-1725586

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

3415 Colorado Ave.

Boulder, CO 80303

(Address of Principal Executive Offices)

(720) 262-7002

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Exchange on which registered

Common stock, par value $0.0001 per share

EWTX

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No

As of April 30, 2022, there were 49,575,689 of the registrant’s ordinary shares outstanding.

TABLE OF CONTENTS

Page

Part I

Financial Information

Item 1.

Financial Statements (Unaudited)

6

Condensed Balance Sheets

6

Condensed Statements of Operations and Comprehensive Loss

7

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity

8

Condensed Statements of Cash Flows

10

Notes to Condensed Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

30

Item 4.

Controls and Procedures

31

Part II

Other Information

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

97

Item 3.

Defaults Upon Senior Securities

98

Item 4.

Mine Safety Disclosures

98

Item 5.

Other Information

98

Item 6.

Exhibits

98

Signatures

100

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, development plans, planned preclinical studies and clinical trials, future results of clinical trials, expected research and development costs, regulatory strategy, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

• the ability of our preclinical studies and planned clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;

• our ability to utilize our proprietary drug discovery platform to develop a pipeline of product candidates to address muscle disorders;

• the timing, progress and results of preclinical studies and clinical trials for EDG-5506, product candidates in our EDG-5440 and EDG-002 programs, and other product candidates we may develop, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the studies or trials will become available, and our research and development programs;

• the timing, scope and likelihood of regulatory filings and approvals, including timing of INDs and final FDA approval of EDG-5506, product candidates in our EDG-5440 and EDG-002 programs and any other future product candidates;

• the timing, scope or likelihood of foreign regulatory filings and approvals;

• our ability to develop and advance our current product candidates and programs into, and successfully complete, clinical studies;

• our manufacturing, commercialization, and marketing capabilities and strategy;

• our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and sales strategy;

• the need to hire additional personnel and our ability to attract and retain such personnel;

• the size of the market opportunity for our product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting and our expectations regarding the implementation of newborn screening for muscular dystrophy;

• our expectations regarding the approval and use of our product candidates in combination with other drugs;

• our competitive position and the success of competing therapies that are or may become available;

• our estimates of the number of patients that we will enroll in our clinical trials;

• the beneficial characteristics, and the potential safety, efficacy and therapeutic effects of our product candidates;

• our ability to obtain and maintain regulatory approval of our product candidates;

3

• our plans relating to the further development of our product candidates, including additional indications we may pursue;

• existing regulations and regulatory developments in the United States, Europe and other jurisdictions;

• our expectations regarding the impact of the COVID-19 pandemic on our business;


our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering EDG-5506, product candidates in our EDG-5440 and EDG-002 programs, and other product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;

our continued reliance on third parties to conduct additional preclinical studies and planned clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials;

• our relationships with patient advocacy groups, key opinion leaders, regulators, the research community and payors;

• our ability to obtain, and negotiate favorable terms of, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;

• the pricing and reimbursement of EDG-5506, product candidates in our EDG-5440 and EDG-002 programs, and other product candidates we may develop, if approved;

• the rate and degree of market acceptance and clinical utility of EDG-5506, product candidates in our EDG-5440 and EDG-002 programs, and other product candidates we may develop;

• our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

• our financial performance;

• the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements;

• the impact of laws and regulations; and

• our expectations regarding the period during which we will qualify as an emerging growth company under The Jumpstart Our Business Startups Act of 2012 and a smaller reporting company under the Securities Exchange Act of 1934, as amended.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any

4

forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

5

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

EDGEWISE THERAPEUTICS, INC.

Condensed Balance Sheets

(In thousands, except share and per share data)

As of

As of

March 31, 

December 31, 

    

2022

2021

Assets

(Unaudited)

Current assets

 

  

  

Cash and cash equivalents

$

34,453

$

15,566

Marketable securities, available for sale

 

231,380

 

265,223

Prepaid expenses and other assets

 

2,784

 

2,984

Total current assets

 

268,617

 

283,773

Property and equipment

 

2,224

 

1,614

Less: accumulated depreciation

 

(785)

 

(702)

Total property and equipment

 

1,439

 

912

Operating lease right-of-use asset

2,130

Other non-current assets

 

559

 

548

Total assets

$

272,745

$

285,233

Liabilities and stockholders' equity

 

  

 

  

Current liabilities

 

 

  

Accounts payable

$

5,340

$

3,843

Accrued compensation

 

1,346

 

2,797

Accrued other expenses

 

3,318

 

3,881

Total current liabilities

 

10,004

 

10,521

Operating lease long-term liability

2,198

Other long term liabilities

187

329

Total liabilities

 

12,389

 

10,850

Commitments and contingencies (see note 5)

 

  

 

Stockholders' equity:

 

  

 

  

Preferred stock, $.0001 par value per share; 200,000,000 shares authorized as of March 31, 2022 and December 31, 2021, respectively; no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Common stock, $.0001 par value per share; 1,000,000,000 shares authorized, 49,556,306 shares and 49,500,308 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

5

 

5

Additional paid-in capital

 

353,903

 

351,852

Accumulated other comprehensive loss

(1,932)

(514)

Accumulated deficit

 

(91,620)

 

(76,960)

Total stockholders' equity

 

260,356

 

274,383

Total liabilities and stockholders' equity

$

272,745

$

285,233

The accompanying notes are an integral part of these condensed financial statements.

6

EDGEWISE THERAPEUTICS, INC.

Condensed Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

Three months ended March 31, 

    

2022

    

2021

Operating expenses

 

  

  

Research and development

$

11,124

$

5,360

General and administrative

 

3,702

 

1,497

Total operating expenses

 

14,826

 

6,857

Loss from operations

 

(14,826)

 

(6,857)

Other income

 

  

 

  

Interest income

 

166

 

42

Total other income

 

166

 

42

Net loss

(14,660)

(6,815)

Other comprehensive loss:

Unrealized loss on available-for-sale securities

(1,418)

(54)

Total comprehensive loss

$

(16,078)

$

(6,869)

Net loss per share, basic and diluted

$

(0.30)

$

(4.37)

Weighted-average shares outstanding, basic and diluted

 

49,544,589

 

1,559,868

The accompanying notes are an integral part of these condensed financial statements.

7

EDGEWISE THERAPEUTICS, INC.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

Series A Convertible

Series B-1 Convertible

Series B-2 Convertible

Series C Convertible

Convertible

Accumulated

Preferred Stock

Preferred Stock

Preferred Stock

Preferred Stock

Preferred Stock

Common Stock

Additional

Other Comprehensive

Accumulated

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Total

 

 

Shares

  

Amount

  

Paid-In Capital

  

(Loss) Income

  

Deficit

  

Total

Balance as of December 31, 2020

 

8,187,100

$

15,484

 

7,888,392

$

24,778

 

6,527,654

$

25,056

 

12,954,423

$

94,896

$

160,214

 

1,009,479

$

$

727

$

$

(34,147)

$

(33,420)

Convertible preferred stock converted into shares of common stock

 

(8,187,100)

 

(15,484)

 

(7,888,392)

 

(24,778)

 

(6,527,654)

 

(25,056)

 

(12,954,423)

 

(94,896)

 

(160,214)

 

35,557,569

 

4

 

160,210

 

 

160,214

Initial public offering of common stock, net of $2.1 million in offering costs

 

 

 

 

 

 

 

 

 

 

12,650,000

 

1

 

186,147

 

 

186,148

Exercise of stock options

 

 

 

 

 

 

 

 

 

37,263

 

 

25

 

 

25

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

296

 

 

296

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(54)

 

 

(54)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,815)

 

(6,815)

Balance as of March 31, 2021

 

$

 

$

 

$

 

$

$

 

49,254,311

$

5

$

347,405

$

(54)

$

(40,962)

$

306,394

The accompanying notes are an integral part of these condensed financial statements.

8

EDGEWISE THERAPEUTICS, INC.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

Accumulated

Other

Common Stock

Additional

Comprehensive

Accumulated

  

Shares

  

Amount

  

Paid-In Capital

  

(Loss) Income

  

Deficit

  

Total

Balance as of December 31, 2021

49,500,308

$

5

$

351,852

$

(514)

$

(76,960)

$

274,383

Exercise of stock options

 

55,998

 

 

73

 

 

73

Stock-based compensation

 

 

 

1,978

 

 

1,978

Other comprehensive income

 

 

 

(1,418)

 

 

(1,418)

Net loss

 

 

 

 

(14,660)

 

(14,660)

Balance as of March 31, 2022

 

49,556,306

$

5

$

353,903

$

(1,932)

$

(91,620)

$

260,356

The accompanying notes are an integral part of these condensed financial statements.

9

EDGEWISE THERAPEUTICS, INC.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

Three months ended March 31, 

   

2022

   

2021

Cash flows from operating activities

 

Net loss

$

(14,660)

$

(6,815)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

  

Depreciation

83

 

79

Stock-based compensation

 

1,978

 

296

Amortization (accretion) of premium (discount) on marketable securities, net

670

Amortization of right-of-use asset

44

Changes in assets and liabilities:

 

 

  

Prepaid expenses and other assets

 

398

 

(66)

Accounts payable

 

1,188

 

(63)

Accrued compensation

 

(1,451)

 

(503)

Accrued other expenses

 

(846)

 

1,015

Lease liability

 

24

Net cash used in operating activities

 

(12,572)

 

(6,057)

Cash flows from investing activities

 

 

  

Purchases of marketable securities

 

(13,956)

 

(64,711)

Sales of marketable securities

8,832

Maturities of marketable securities

36,879

Purchases of property and equipment

 

(369)

 

(62)

Net cash provided by (used in) investing activities

 

31,386

 

(64,773)

Cash flows from financing activities

 

  

 

  

Proceeds from initial public offering of common stock, net of underwriting discounts and commissions and offering costs

 

 

187,051

Payment of preferred stock issuance costs

(124)

Exercise of stock options

 

73

 

23

Net cash provided by financing activities

 

73

 

186,950

Net change in cash and cash equivalents

 

18,887

 

116,120

Cash and cash equivalents at beginning of period

 

15,566

 

104,916

Cash and cash equivalents at end of period

$

34,453

$

221,036

Supplemental disclosures of non-cash investing and financing activities:

 

  

 

  

Right-of-use asset obtained in exchange for new operating lease liability, net of tenant improvement receivable

$

2,174

$

Deferred offering costs included in accrued expenses

$

141

$

Property and equipment purchases included in accounts payable

$

309

$

Receivable for option exercises

$

$

2

Unpaid initial public offering costs included in accounts payable

$

$

495

Unpaid initial public offering costs included in accrued expenses

$

$

408

Conversion of convertible preferred stock upon closing of initial public offering

$

$

160,214

The accompanying notes are an integral part of these condensed financial statements.

10

EDGEWISE THERAPEUTICS, INC.

Notes to Condensed Financial Statements

(Unaudited)

NOTE 1  DESCRIPTION OF BUSINESS

Organization and Description of Business

Edgewise Therapeutics, Inc. (the Company) was incorporated as a Delaware corporation in May 2017, and it is headquartered in Boulder, Colorado. The Company is a clinical stage biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for severe, rare muscle disorders for which there is significant unmet medical need. The Company’s lead product candidate, EDG-5506, is an orally administered small molecule designed to address the root cause of dystrophinopathies including Duchenne muscular dystrophy (DMD) and Becker muscular dystrophy (BMD). The Company is using its proprietary drug discovery platform to develop a pipeline of precision medicine product candidates that target key muscle proteins and modulators to address a broad array of genetically defined muscle disorders.

Initial Public Offering

On March 30, 2021, the Company completed its initial public offering (IPO) in which it issued and sold 12,650,000 shares of common stock at a price of $16.00 per share, including 1,650,000 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO was $186.1 million after deducting underwriting discounts and commissions of $14.2 million and offering expenses of approximately $2.1 million. In addition, in connection with the IPO, all shares of convertible preferred stock outstanding at the time of the IPO converted into 35,557,569 shares of common stock.

Risks and Uncertainties

In March 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) outbreak a pandemic. The Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 outbreak will have on its financial condition and operations. Disruptions caused by the COVID-19 pandemic, including the effects of the stay-at-home orders and work-from-home policies, have impacted productivity, have resulted in increased operational expenses, certain adjustments to the operations of the Company’s clinical trial, the suspension of enrollment of new patients at the Company’s clinical trial site, and delays in certain supply chain activities and collecting and analyzing data from patients in the Company’s clinical trial, and may further disrupt the business and delay the development programs and regulatory timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct business in the ordinary course as well as the spread, severity and potential resurgence of COVID-19, the impact of new COVID-19 variants, and vaccination deployment efforts. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of the clinical trial and other related business activities. The Company is carefully monitoring the pandemic and the potential length and depth of the resulting economic impact on its financial condition and results of operations.

Liquidity and Capital Resources

The Company has an accumulated deficit of $91.6 million and cash, cash equivalents and marketable securities of $265.8 million as of March 31, 2022. The Company’s ability to fund ongoing operations is highly dependent upon raising additional capital through the issuance of equity securities and issuing debt or other financing vehicles. On April 1, 2022, the Company filed: (i) a shelf registration statement on Form S-3 with the U.S. Securities and Exchange Commission (SEC) that became effective on May 5, 2022 and allows us to undertake various equity and debt offerings up to $400,000,000; and (ii) a prospectus supplement to the shelf registration statement that covers the offering, issuance and sale of up to $125 million of our common stock from time to time through an “at-the-market” program under the Securities Act of 1933, as amended (Securities Act).

11

The Company’s ability to secure capital is dependent upon success in developing its technology and product candidates. The Company cannot provide assurance that additional capital will be available on acceptable terms, if at all. The issuance of additional equity or debt securities will likely result in substantial dilution to the Company’s stockholders. Should additional capital not be available to the Company in the near term, or not be available on acceptable terms, the Company may be unable to realize value from the Company’s assets or discharge liabilities in the normal course of business, which may, among other alternatives, cause the Company to delay, substantially reduce, or discontinue operational activities to conserve cash balances, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. The Company believes that the $265.8 million of cash, cash equivalents and marketable securities on hand as of March 31, 2022 will be sufficient to fund its operations in the normal course of business and meet its liquidity needs through at least the next 12 months from the issuance of these financial statements.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP) and applicable rules and regulations of the SEC for interim reporting. As permitted under those rules and regulations, certain notes or other financial information normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The interim condensed financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments that are necessary to present fairly the Company’s results for the interim periods presented. The condensed balance sheet as of December 31, 2021, is derived from the Company’s audited financial statements. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, or for any other future annual or interim period.

The accompanying interim unaudited condensed financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K that was filed with the SEC on February 24, 2022. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of our financial position as of March 31, 2022, the results of operations for the three months ended March 31, 2022 and 2021, and cash flows for the three months ended March 31, 2022 and 2021 have been made.

Segment Information

The Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein. All equipment and other fixed assets are physically located within the United States.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

12

Cash Equivalents

The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents as of March 31, 2022 and December 31, 2021 primarily consist of money market accounts and cash.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and marketable securities. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. The Company believes that it is not exposed to significant credit risk as its deposits are held at financial institutions that management believes to be of high credit quality. The Company has not experienced any losses on deposits since inception. The Company regularly invests excess cash with major financial institutions in money market funds, corporate debt securities, and commercial paper, all of which can be readily purchased and sold using established markets. The Company believes that the market risk arising from our holdings of these financial instruments is mitigated based on the fact that many of these securities are of high credit rating.

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the statement of operations. Deferred offering costs as of March 31, 2022 and December 31, 2021 were $0.2 million and $0, respectively. Such costs are classified in other non-current assets in the accompanying balance sheets.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful life of the related asset, which is generally three to five years, and in the case of leasehold improvements, the shorter of the estimated useful lives of the assets or the term of the lease. Depreciation expense was $83,000 and $79,000 for the three months ended March 31, 2022 and 2021, respectively.

Leases

The Company accounts for its leases under Accounting Standards Codification (ASC) Topic 842, Leases (ASC 842). At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than 12 months are recognized on the balance sheet as Right-of-Use (ROU) assets and current and non-current lease liabilities, as applicable. The Company has elected not to recognize on the balance sheet leases with terms of 12 months or less. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew. The Company monitors its material leases on a quarterly basis.

Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected remaining lease term. Lease cost for operating leases is recognized on a straight-line basis over the lease term as an operating expense. Certain adjustments to the ROU asset may be required for items such as lease prepayments or incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

For all asset classes of its leases, the Company has elected to account for the lease and non-lease components together for existing classes of underlying asset. Costs determined to be variable and not based on an index or rate are not include in the measurement of the lease liability.

13

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be fully recoverable. Impairment is evaluated based on the sum of undiscounted estimated future cash flows expected to result from use of the related asset compared to its carrying value. If impairment is recognized, the carrying value of the impaired asset is reduced to its fair value. There were no impairment charges or long-lived assets disposed of during the three months ended March 31, 2022 and 2021, respectively.

Income Taxes

Deferred income taxes are provided on temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases.

Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if such deferred tax assets are deemed more likely than not that some or all of the deferred tax assets will not be realized. Historically, the Company has not recognized these potential benefits in its financial statements and has fully reserved for such net deferred tax assets, as its believes it is more likely than not that the full benefit of these net deferred tax assets will not be realized before expiration. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years. The Company evaluated its tax positions and determined it has no uncertain tax positions as of March 31, 2022.

Fair Value of Financial Instruments

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 820, Fair Value Measurements and Disclosures (ASC 820), establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are those that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of financial instruments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1—quoted prices in active markets for identical assets and liabilities.

Level 2—other significant observable inputs (including quoted prices for similar assets and liabilities, interest rates, credit risk, etc.).

Level 3—significant unobservable inputs (including the Company’s own assumptions in determining the fair value of assets and liabilities).

Marketable Securities, Available For Sale

All marketable securities have been classified as “available-for-sale” and are carried at fair value, based upon quoted market prices. The Company considers its available-for-sale portfolio as available for use in current operations. Accordingly, the Company may classify certain investments as short-term marketable securities, even though the stated maturity date may be one year or more beyond the current balance sheet date. Unrealized gains and losses, net of any related tax effects, are excluded from earnings and are included in other comprehensive income and reported as a separate component of stockholders’ equity until realized. Interest income, realized gains and losses, and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in other income, net. The cost of securities sold is based on the specific-identification method. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. In accordance with the Company’s investment policy, management invests in money market funds, corporate bonds, commercial paper, asset-backed securities and government securities. The

14

Company has not experienced any realized losses on its deposits of cash, cash equivalents, and marketable securities since inception.

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

As of March 31, 2022

Fair Value 

Amortized

Unrealized

Unrealized

Fair Market

    

Hierarchy

    

 Cost Basis

    

 Gains

    

 Losses

    

 Value

Cash equivalents:

 

  

 

  

 

  

 

  

 

  

Money market funds

 

Level 1

$

34,353

$

$

$

34,353

Marketable securities, available for sale:

 

  

 

 

  

 

  

 

  

Asset-backed securities

 

Level 2

 

27,700

 

 

(159)

 

27,541

Corporate debt securities

 

Level 2

 

71,903

 

 

(671)

 

71,232

Commercial paper

 

Level 2

 

51,922

 

 

 

51,922

U.S. government treasury and agency securities

Level 2

 

59,470

 

 

(817)

 

58,653

Supranational and sovereign government securities

Level 2

 

22,317

 

 

(285)

 

22,032

Total financial assets

 

  

$

267,665

$

$

(1,932)

$

265,733

As of December 31, 2021

Fair Value

Amortized

Unrealized

Unrealized

Fair Market

Hierarchy

    

 Cost Basis

    

 Gains

    

 Losses

    

 Value

Cash equivalents:

 

  

 

  

 

  

 

  

 

  

Money market funds

 

Level 1

$

15,466

$

$

$

15,466

Marketable securities, available for sale:

 

  

 

  

 

  

 

  

 

  

Asset-backed securities

 

Level 2

 

36,681

 

 

(42)

 

36,639

Corporate debt securities

 

Level 2

 

88,084

 

 

(160)

 

87,924

Commercial paper

Level 2

58,970

58,970

U.S. government treasury and agency securities

Level 2

59,596

(222)

59,374

Supranational and sovereign government securities

 

Level 2

 

22,406

 

 

(90)

 

22,316

Total financial assets

 

  

$

281,203

$

$

(514)

$

280,689

The Company’s money market funds are classified as Level 1 because they are valued using quoted market prices. Investments in asset-backed securities, corporate debt securities, commercial paper and U.S. government treasury and agency securities, and supranational and sovereign government securities have been classified as Level 2 as they are valued using quoted prices in less active markets or other directly or indirectly observable inputs. Fair values of asset-backed securities, corporate debt securities, commercial paper, U.S. government treasury and agency securities, and supranational and sovereign government securities were derived based on input of market prices from multiple sources at each reporting period. With regard to commercial paper, all of the securities had high credit ratings and one year or less to maturity; therefore, fair value was derived from accretion of purchase price to face value over the term of maturity or quoted market prices for similar instruments if available. During the three months ended March 31, 2022, there were no transfers of financial assets between Level 1 and Level 2. As of March 31, 2022, the remaining contractual maturities of $186.4 million of marketable securities were less than one year and $46.9 million were one to three years.

The Company periodically reviews its portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For debt securities where the fair value of the investment is less than the amortized cost basis, the Company has assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses on

15

marketable securities at March 31, 2022 were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and/or circumstances from non-owner sources. The Company’s only element of other comprehensive loss was net unrealized loss on marketable securities.

Stock-Based Compensation

In accordance with ASC Topic 718, Compensation—Stock Compensation, the Company recognizes compensation expense for all stock-based awards issued to employees based on the estimated grant-date fair value, which is recognized as expense on a straight-line basis over the requisite service period. The Company has elected to recognize forfeitures as they occur. The fair value of stock options is determined using the Black-Scholes option-pricing model. The determination of fair value for stock-based awards on the date of grant using an option-pricing model requires management to make certain assumptions including expected volatility, expected term, risk-free interest rate and expected dividends in addition to the Company’s common stock valuation (see Note 4).

Due to the absence of an active market for the Company’s common stock prior to the closing of the Company’s IPO, the Company utilized methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation to estimate the fair value of its common stock. In determining the exercise prices for options granted, the Company considered the fair value of the common stock as of the grant date. The fair value of the common stock had previously been determined based upon a variety of factors, including the Company’s financial position, historical performance and operating results, the Company’s stage of development, the progress of the Company’s research and development programs, the prices at which the Company sold its convertible preferred stock, the superior rights, preferences and privileges of the Company’s convertible preferred stock relative to its common stock, external market conditions affecting the biotechnology industry, the lack of marketability of the Company’s common stock and the prospects of a liquidity event and the analysis of IPO and market performance of similar companies as well as recently completed mergers and acquisitions of peer companies. Following the completion of the Company’s IPO, the fair value of its common stock is determined based on the closing price of its common stock on the date of grant.

Research and Development Expenses and Accrued Research and Development Expenses

Expenditures made for research and development are charged to expense as incurred. External costs consist primarily of payments to contract research organizations (CROs), contract development and manufacturing organizations (CDMOs), sample acquisition costs and laboratory supplies purchased in connection with the Company’s discovery and preclinical activities, and process development and clinical development activities. Internal costs consist primarily of employee-related costs, facilities, depreciation and costs related to compliance with regulatory requirements. Non-refundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

The Company records expenses related to external research and development services based on its estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs and CDMOs that supply, conduct and manage preclinical studies and clinical trials on its behalf. The financial terms of these contracts vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided under such contracts. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts the accrual or the amount of prepaid expenses accordingly.

16

Emerging Growth Company Status

The Company is an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act). Under the JOBS Act, emerging growth companies can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (1) no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02), which requires the lessee to recognize a ROU asset and a lease liability for operating leases, initially measured at the present value of lease payments, in its consolidated balance sheet. The Company adopted ASU 2016-02 effective January 1, 2022, using the alternative modified transition method, which applies ASU 2016-02 as of the adoption date and therefore, the Company has not applied the standard to the comparative periods presented in the Company's financial statements. The Company elected the “package of practical expedients,” which permits the Company to not reassess its prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the hindsight practical expedient to determine the lease term, the practical expedient to not separate lease and non-lease components and the policy election to not recognize ROU assets or lease liabilities for short-term leases. The adoption of ASC 842 did not have a material effect on our balance sheet as of January 1, 2022 due to the terms related to our existing leases.

NOTE 3  CONVERTIBLE PREFERRED STOCK AND COMMON STOCK

The Company is authorized to issue two classes of stock designated as common stock and preferred stock. As of March 31, 2022 the total number of shares authorized was 1,200,000,000. The total number of shares of common stock authorized was 1,000,000,000. The total number of shares of preferred stock authorized was 200,000,000. All shares of the Company’s capital stock have a par value of $0.0001 per share.

Common stockholders are entitled to dividends if and when declared by the Board of Directors of the Company and after any convertible preferred share dividends are fully paid. The holder of each share of common stock is entitled to one vote.

The Company had no convertible preferred stock outstanding as of March 31, 2022. Immediately prior to the completion of the IPO in March 2021, all outstanding shares of the Company’s convertible preferred stock were automatically converted into 35,557,569 shares of common stock.

17

NOTE 4  STOCK-BASED COMPENSATION AWARDS

Equity Incentive Plans

In March 2021, the Company’s Board of Directors adopted, and its stockholders approved, the Company’s 2021 Equity Incentive Plan (2021 Plan), which became effective in March 2021 in connection with the IPO. Upon adoption of the 2021 Plan, the Company restricted the grant of future equity awards under its 2017 Equity Incentive Plan, as amended and restated (the 2017 Plan).

The 2021 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any of its parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares to its employees, directors, and consultants and its subsidiary corporations’ employees and consultants. The vesting of stock options is stated in each individual grant agreement, which is generally four years. Options granted expire 10 years after the date of grant. A total of 5,040,000 shares of the Company’s common stock were initially reserved for issuance pursuant to the 2021 Plan. The 2021 Plan share reserve will be increased by the number of shares under the 2017 Plan that are repurchased, forfeited, expired or cancelled after the effective date of the 2021 Plan up to the limit under the 2021 Plan. The number of shares available for issuance under the 2021 Plan increases annually on the first day of each fiscal year beginning with the Company’s 2022 fiscal year, equal to the least of (1) 5,040,000 shares, (2) five percent (5%) of the outstanding shares of its common stock as of the last day of the immediately preceding fiscal year; or (c) such other amount as the Company’s Board of Directors may determine. In February 2022, the number of shares of common stock authorized for issuance under the 2021 Plan was increased from 5,040,000 to 7,515,015. As of March 31, 2022, 5,491,108 shares remained available for future grant under the 2021 Plan.

Founder Stock Options

On September 19, 2017, the Company granted one of its founders the option to purchase 1,795,880 shares of the Company’s common stock at an exercise price of $0.18 per share which vest monthly over a four-year period that expires 15 years after the date of grant. This grant is separate from the Company’s equity incentive plans discussed above. As of March 31, 2022, 1,531,780 options were outstanding and exercisable. There were no options exercised during the three months ended March 31, 2022.

Total stock-based compensation expense related to all equity awards granted was allocated as follows (in thousands):

Three months ended

March 31, 

    

2022

    

2021

Research and development

 

$

1,216

 

$

144

General and administrative

 

762

 

152

Total stock-based compensation expense

$

1,978

$

296

NOTE 5  COMMITMENTS AND CONTINGENCIES

License Agreements

On November 20, 2020 the Company exclusively licensed intellectual property from The Ohio State Innovation Foundation (OSIF) pursuant to a license agreement. Under the license agreement, the Company is obligated to make payments to OSIF aggregating up to $1.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified development and regulatory approval milestones and approximately $2.3 million per product covered by the OSIF licensed patent rights upon the achievement of specified sales milestones. The Company is also obligated to pay low single-digit royalties to OSIF based on net sales by the Company and its affiliates and sublicensees of each product covered by the OSIF licensed

18

patent rights. In addition, in the event the Company sublicenses the OSIF licensed patent rights, the Company is obligated to pay OSIF a specified portion of income received from sublicensing.

Lease Agreements

In January 2022, we entered into a lease agreement for approximately 18,614 square feet of office and laboratory space in Boulder, Colorado (the “New Boulder Lease”) with aggregate payments of approximately $3.3 million over the initial 8.2-year term of the lease. The Company has the option to extend the New Boulder Lease for two additional terms of five years each. Further, the Company provided a standby letter of credit (LOC) of $0.8 million during the term of the lease as collateral for the Company’s obligations under the lease. Provided there has been no event of default by the Company during the initial 36-month term, the Company will replace the initial LOC with a replacement LOC in the amount of $0.5 million. The lease agreement includes a tenant improvement allowance for $1.0 million of construction costs to be reimbursed by the landlord and up to an additional $2.0 million of tenant improvement allowance for which the Company will repay the landlord on an amortized straight-line basis over the initial term of the lease, commencing on the commencement date and continuing for the duration of the initial term at 6% interest. The Company is obligated to pay the lessor an amount not to exceed 5% of the net rents from the property for operating costs. Such amounts are not included in the measurement of the lease liability but will be recognized as variable lease expense when they are incurred. The New Boulder Lease is classified as an operating lease.

The Company recorded lease liabilities and ROU lease assets for the New Boulder Lease based on the present value of lease payments over the expected lease term, discounted using the Company’s incremental borrowing rate. The option to extend the New Boulder Lease was not recognized as part of the Company’s lease liability and ROU lease asset, as such extensions are not reasonably certain to occur. As of March 31, 2022, the weighted-average remaining lease term and the weighted-average discount rate for the New Boulder Lease was 8.0 years and 6%, respectively. Rent expense under the New Boulder Lease was $67 thousand for the three months ended March 31, 2022. Tenant improvements totaling $326 thousand were incurred during the period and are expected to be reimbursed by the lessor.

As of December 31, 2021, future minimum lease payments totaled $141,000, all of which will be paid in 2022. Future minimum lease payments under the New Boulder Lease as of March 31, 2022 are as follows (in thousands):

Year Ending December 31,

    

2022, remainder

$

2023

328

2024

 

446

2025

457

2026

468

Thereafter

1,602

Total undiscounted future minimum lease payments

3,301

Less: discount

(777)

Less: tenant improvement receivable

(326)

Total long-term operating lease liability

$

2,198

19

The Company additionally leases office and lab space under lease agreements which expire in August 2022. These leases were excluded from our lease liability and ROU asset calculations due to their short-term nature. Future minimum lease payments under these short-term leases as of March 31, 2022 total $87,000, all of which will be paid through the end of fiscal year 2022. Total rent expense under these short term leases were $54,000 and $22,000 for the three months ended March 31, 2022 and 2021, respectively.

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the three months ended March 31, 2022 and no material legal proceedings are currently pending or threatened.

Indemnification Agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its Board of Directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any claims under indemnification arrangements, and it has not accrued any liabilities related to such obligations in its financial statements as of March 31, 2022.

NOTE 6  NET LOSS PER SHARE

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, the convertible preferred stock and common stock options are considered to be potentially dilutive securities. Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security. The Company’s participating securities do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. As the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.

The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):

Three Months Ended March 31, 

2022

    

2021

Numerator

Net loss

$

(14,660)

 

$

(6,815)

Denominator

 

 

Weighted-average shares outstanding used in computing net loss per share, basic and diluted

49,544,589

1,559,868

Net loss per share, basic and diluted

$

(0.30)

$

(4.37)

20

The following weighted average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive:

Three Months Ended March 31, 

2022

    

2021

Options to purchase common stock

9,089,966

7,371,325

Convertible preferred stock

35,162,501

Total

9,089,966

42,533,826

NOTE 7  ACCRUED OTHER EXPENSES

Accrued other expenses consisted of the following amounts (in thousands):

As of March 31, 

As of December 31,

    

2022

    

2021

Accrued research and development costs

$

2,445

$

3,470

Accrued other

873

411

Total accrued other expenses

$

3,318

$

3,881

NOTE 8 SUBSEQUENT EVENT

On April 1, 2022, the Company entered into a Sales Agreement with Cowen and Company, LLC, as the Company’s sales agent pursuant to which the Company may offer and sell from time to time through the Agents up to $125 million in shares (the “Shares”) of the Company’s common stock through an “at-the-market” program.

The Shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-264083) which was declared effective on May 5, 2022. The Company filed a prospectus supplement dated May 5, 2022 with the SEC in connection with the offer and sale of the Shares.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of Edgewise Therapeutics, Inc. should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and the audited financial statements and notes included in our Annual Report on Form 10-K, or Annual Report, filed with the Securities and Exchange Commission, on February 24, 2022. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this quarterly report, our actual results could differ materially from the results described in or implied by these forward-looking statements. You should carefully read the “Risk Factors” to gain an understanding of the factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of innovative treatments for severe, rare muscle disorders for which there is significant unmet medical need. Guided by our holistic drug discovery approach to targeting the muscle as an organ, we have combined our foundational expertise in muscle biology and small molecule engineering to build our proprietary, muscle focused drug discovery platform. Our platform utilizes custom-built high throughput and translatable systems that measure integrated muscle function in whole organ extracts to identify small molecule precision medicines regulating key proteins in muscle tissue, initially focused on addressing rare neuromuscular and cardiac diseases. Our lead candidate, EDG-5506, is an orally administered allosteric, selective, fast myofiber (type II) myosin small molecule inhibitor designed to address the root cause of dystrophinopathies including Duchenne muscular dystrophy (DMD) and Becker muscular dystrophy (BMD), and recently completed a Phase 1 clinical trial. We have developed and characterized a library of selective fast skeletal myosin inhibitors exhibiting a broad range of pharmacological and pharmacokinetic (PK) properties.

We also intend to develop two other muscle-focused precision medicines. Our second program, EDG-5440, is a next generation myosin ATPase modulator designed to target skeletal muscle in a specific set of rare neuromuscular diseases. Our third program, EDG-002, focuses on identification of novel mechanism cardiac modulators. We are initially pursuing a new target for inherited hypertrophic cardiomyopathy (HCM) in addition to exploring the potential of this novel mechanism across other cardiac disorders. Our preliminary preclinical studies have generated promising data, such that our EDG-002 program has the potential to yield molecules that could become a new therapeutic option for the treatment of HCM as well as other cardiac disorders. We plan to initiate IND-enabling studies in 2022. We believe our programs also offer substantial opportunities for us to expand into related rare diseases for which there are limited or no approved treatments. While EDG-5440 and EDG-002 are important preclinical programs to us, we have not needed to devote significant financial resources to these programs to date since they are still in preclinical development and have not yet advanced into clinical trials.

In October 2021, we announced positive topline results from the MAD portion of a first-in-human Phase 1, HV clinical trial. In addition, in January 2022, we announced positive topline results from the BMD, or Phase 1b, portion of a first-in-human Phase 1 clinical trial assessing the safety, tolerability, PK and PD of EDG-5506. We have fully enrolled a follow-on open-label, single-center study that will assess the safety and PK of EDG-5506 over one year in adults with BMD. We anticipate initiation of Phase 2 trials in individuals with BMD in the second quarter of 2022 and DMD in the second half of 2022.

Since our inception in 2017, we have devoted substantially all of our focus and financial resources to discovering, identifying and developing potential product candidates, including advancing our development programs, conducting preclinical studies of our product candidates and initiating a clinical trial, organizing and staffing our company, business planning, raising capital and securing related intellectual property rights. To date, we have not completed the development of any of our product candidates, have not generated any revenue and have never been profitable. Our ability to achieve profitability, if ever, will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. We will need substantial additional funding to support our continuing operations and pursue our development and commercialization strategy. Until such time that we can generate

22

significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including income from collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties or from grants from organizations and foundations. We may be unable to raise additional funds or to enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay or terminate our efforts to expand our product pipeline.

We have incurred significant losses since the commencement of our operations. Our net losses were $14.7 million and $6.8 million for the three months ended March 31, 2022 and 2021, respectively, and we expect to continue to incur significant losses for the foreseeable future as we advance our product candidates through preclinical development and clinical trials and seek regulatory approval of our product candidates. Our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities.

As of March 31, 2022, we had an accumulated deficit of $91.6 million. To date, we have financed our operations primarily through private placements of convertible preferred stock and an initial public offering (IPO) of our common stock. From inception through December 31, 2021, these private placements have provided gross proceeds of $160.7 million and the IPO generated net proceeds of $186.1 million. We believe that our existing cash and cash equivalents and marketable securities of $265.8 million will enable us to fund our planned operating expenses and capital expenditure requirements through at least the next 12 months.

In March 2020, the World Health Organization declared the novel coronavirus disease (COVID-19) outbreak a global pandemic. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and physical distancing guidelines. Accordingly, businesses have adjusted, reduced or suspended operating activities. Disruptions caused by the COVID-19 pandemic, including the effects of the stay-at-home orders and work-from-home policies, have impacted productivity, have resulted in increased operational expenses, certain adjustments to the operations of our clinical trial, delays in the enrollment of new patients at our clinical trial site, and delays in certain supply chain activities and collecting and analyzing data from patients in our clinical trial, and may further disrupt our business and delay our development programs and regulatory timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct business in the ordinary course as well as the spread, severity and potential resurgence of COVID-19, the impact of new COVID-19 variants, and vaccination deployment efforts. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of our clinical trial and other related business activities. We are carefully monitoring the pandemic and the potential length and depth of the resulting economic impact on its financial condition and results of operations.

Components of Our Results of Operations

Operating expenses

Research and development expenses

Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We record research and development expenses when these are incurred. Such expenses include:

employee and consultant-related expenses including salaries, bonuses, benefits and stock-based compensation expense for employees engaged in research and development functions;
expenses incurred in connection with the planned clinical development of our product candidates including under agreements with third parties, such as consultants and contract research organizations (CROs);

23

the cost of manufacturing drug products for use in our preclinical studies and ongoing and planned clinical trials including under agreements with third parties such as consultants and contract development and manufacturing organizations (CDMOs);
expenses incurred in connection with the preclinical development of our product candidates including outsourced professional scientific development services, consulting research fees and payments made under sponsored research arrangements with third parties;
laboratory supplies;
facilities, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities;
expenses related to compliance with regulatory requirements; and
payments made under third-party licensing agreements.

The majority of these expenses have been incurred to advance our lead product candidate, EDG-5506. We expect that significant additional spending will be required to progress EDG-5506 through the remainder of the clinical development phases. These expenses will primarily consist of expenses for the administration of clinical trials as well as manufacturing costs for clinical material supply.

We track our direct research and development expenses on a program-by-program basis once a lead compound has been selected and clinical trials have been initiated. These direct costs consist primarily of external costs such as fees paid to outside consultants, CROs, CDMOs, clinical trial sites and central laboratories in connection with our discovery and preclinical activities, process development, manufacturing and clinical development activities. These expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. Our direct research and development expenses by program also include costs of laboratory supplies that can be directly attributed to a specific program as well as any fees incurred under license agreements. We do not allocate employee-related costs, including stock-based compensation, or facility expenses, including rent, depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery activities and to manage our preclinical development, manufacturing and clinical development activities.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years as we advance EDG-5506 through clinical trials and additional product candidates enter clinical trials; continue to develop our proprietary drug discovery platform; continue to discover and develop additional product candidates; and hire additional personnel.

The successful development of our product candidates is highly uncertain, and we do not believe it is possible at this time to accurately project the nature, timing and extent of expenses necessary to complete the development of our product candidates. We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset these expenses. Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

the timing and progress of preclinical and clinical development activities;
the number and scope of preclinical and clinical programs we decide to pursue;
our ability to maintain our current research and development programs and to establish new ones;

24

establishing an appropriate safety profile with IND-enabling studies;
successful patient enrollment in, and the initiation and completion of, clinical trials;
the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
the receipt of regulatory approvals from applicable regulatory authorities;
the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
our ability to establish new licensing or collaboration arrangements;
the performance of our future collaborators, if any;
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
development and timely delivery of commercial-grade drug formulations that can be used in our planned clinical trials and for commercial launch;
obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;
launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others; and
maintaining a continued acceptable safety profile of the product candidates following approval.

Any changes in the outcome of any of these factors could significantly impact the costs and timing

associated with the development of our product candidates.

General and administrative expenses

General and administrative expenses consist primarily of salaries, related benefits and stock-based compensation expense for personnel in executive, finance, accounting, legal and administrative functions. General and administrative expenses also include facilities and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the continued research and development of our programs.

Interest income

Interest income primarily consists of interest income generated from our cash, cash equivalents and marketable securities.

25

Results of Operations

Comparison of the three months ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

Three months ended March 31, 

    

2022

    

2021

    

Change

(in thousands)

Operating expenses:

Research and development

$

11,124

$

5,360

$

5,764

General and administrative

 

3,702

 

1,497

 

2,205

Total operating expenses

 

14,826

 

6,857

 

7,969

Loss from operations

 

 

 

Interest income

 

166

 

42

 

124

Net loss

$

14,660

$

6,815

$

7,845

Research and development expenses

The following table summarizes our research and development expenses:

Three months ended March 31, 

    

2022

    

2021

    

Change

(in thousands)

External research and development expenses:

EDG-5506 clinical program

$

4,014

$

2,196

$

1,818

Discovery and preclinical

 

3,357

 

1,068

 

2,289

Internal costs, including personnel related

 

3,753

 

2,096

 

1,657

Total research and development expenses

$

11,124

$

5,360

$

5,764

Research and development expenses were $11.1 million and $5.4 million for the three months ended March 31, 2022 and 2021, respectively. The increase of $5.8 million was primarily driven by $1.8 million of higher external research and development expenses related to our EDG-5506 clinical program including clinical trial costs and product candidate manufacturing costs to support future trials, an increase of $2.3 million related to increased drug discovery and preclinical development of our other programs and an increase of $1.7 million in employee-related costs to support the growth of our research and development programs.

General and administrative expenses

General and administrative expenses were $3.7 million and $1.5 million for the three months ended March 31, 2022 and 2021, respectively. The increase of $2.2 million was primarily related to the cost of operating as a public company, including $0.9 million in increased employee-related costs from increased headcount and stock-based compensation, $0.7 million in increased directors and officers insurance and $0.6 million in increased professional and consulting and other administrative costs.

Interest income

Interest income was $166,000 and $42,000 for the three months ended March 31, 2022 and 2021, respectively. The increase of $124,000 was primarily due to higher marketable securities balances during the three months ended March 31 2022, as compared to the three months ended March 31, 2021.

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Liquidity and Capital Resources

Sources of liquidity

Since our inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. We have funded our operations to date primarily with proceeds from the sale of convertible preferred stock and the initial public offering of our common stock. Through March 31, 2022, we had received gross proceeds of $160.7 million from the sale of convertible preferred stock and $186.1 million in net proceeds from the initial public offering of our common stock. As of March 31, 2022, we had cash, cash equivalents and marketable securities in the amount of $265.8 million.

Cash flows

The following table summarizes our sources and uses of cash for each of the periods presented:

Three months ended March 31, 

    

2022

    

2021

(in thousands)

Net cash used in operating activities

$

(12,572)

$

(6,057)

Net cash provided by (used in) investing activities

 

31,386

 

(64,773)

Net cash provided by financing activities

 

73

 

186,950

Net increase in cash and cash equivalents

$

18,887

$

116,120

Operating activities

Cash used in operating activities in the three months ended March 31, 2022 was primarily driven by our net loss for the period of $14.7 million, and was also impacted by changes in operating assets and liabilities which increased net working capital by $0.7 million. Cash used in operating activities was reduced by non-cash charges of $2.8 million relating to stock-based compensation expense of $2.0 million, amortization of premium and accretion of discounts, net on marketable securities of $0.7 million and depreciation of $0.1 million.

Cash used in operating activities in the three months ended March 31, 2021 was primarily driven by our net loss for the period of $6.8 million, and was also impacted by changes in operating assets and liabilities which decreased net working capital by $0.4 million. Cash used in operating activities was reduced by non-cash charges of $0.4 million relating to stock-based compensation expense of $0.3 million and depreciation of $0.1 million.

Investing activities

Cash provided by investing activities during the three months ended March 31, 2022 amounted to $31.4 million which was due to $36.9 million in maturities of marketable securities and $8.8 million in sales of marketable securities, which was partially offset by $14.0 million in purchases of marketable securities and $0.4 million for purchases of equipment.

Cash used in investing activities during the three months ended March 31, 2021 amounted to $64.8 million which was due to $64.7 million in purchases of marketable securities and $0.1 million for purchases of equipment.

Financing activities

Net cash provided by financing activities during the three months ended March 31, 2022 was $0.1 million, which was due to cash proceeds of $73,000 from the issuance of common stock upon the exercise of stock options.

27

Net cash provided by financing activities during the three months ended March 31, 2021 was $187.0 million, primarily consisting of cash proceeds from the initial public offering of the Company’s common stock. In addition, we generated cash proceeds of $23,000 from the issuance of common stock upon the exercise of stock options and paid $0.1 million in preferred stock issuance costs.

Funding requirements

We will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development of and seek regulatory approvals for our product candidates, and begin to commercialize any approved products. We are subject to all of the risks incident in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. In addition, we expect to continue to incur additional costs associated with operating as a public company. Our expenses will also increase if, and as, we:

advance our product candidates through preclinical and clinical development;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
continue to invest in our proprietary drug discovery platform;
seek to discover and develop additional product candidates;
establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly;
hire additional clinical, quality control, scientific and other personnel;
expand our operational, financial and management systems and increase personnel including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company;
maintain, expand, protect and enforce our intellectual property portfolio; and
acquire or in-license other product candidates and technologies.

We do not currently have material any long-term capital requirements other than what will be required to fund operations for the foreseeable future and the amounts disclosed on the contractual obligations and commitments section below. In order to complete the process of obtaining regulatory approval for our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements. Our future funding requirements will depend on many factors, including:

the scope, progress, results and costs of researching and developing our product candidates including
conducting preclinical studies and clinical trials;
the costs, timing and outcome of regulatory review of our product candidates;

28

the number and characteristics of other product candidates that we pursue;
the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval;
the costs of manufacturing commercial-grade products and sufficient inventory to support commercial launch;
the revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;
the cost and timing of hiring new employees to support our continued growth;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
the effect of competing products that may limit market penetration of our products;
the ability to establish and maintain collaborations on favorable terms, if at all;
the extent to which we acquire or in-license other product candidates and technologies;