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Nov. 10, 2021, 7:06 a.m. EST


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(EDGAR Online via COMTEX) -- Item 2. Management's discussion and analysis of financial condition and results of operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our final prospectus for our initial public offering filed pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, or the Securities Act, with the Securities and Exchange Commission, or SEC, on June 17, 2021. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in "Risk Factors" in Part II, Item 1A. You should carefully read the section entitled "Risk Factors" to gain an understanding of the important factors that could cause actual results to differ materially from our forward- looking statements.


We are a genetic medicines company pioneering a new approach to the care of cardiovascular disease, or CVD, transforming treatment from chronic management to single-course gene editing medicines. Despite advances in treatment over the last 50 years, CVD remains the leading cause of death worldwide. The current paradigm of chronic care is fragile-requiring rigorous patient adherence, extensive healthcare infrastructure and regular healthcare access-and leaves many patients without adequate care. Our goal is to disrupt the chronic care model for CVD by providing a new therapeutic approach with single-course in vivo gene editing treatments focused on addressing the root causes of this highly prevalent and life-threatening disease. Our initial two programs target PCSK9 and ANGPTL3, respectively, genes that have been extensively validated as targets for lowering blood lipids, such as low-density lipoprotein cholesterol, or LDL-C. We believe that single-course treatments could provide substantial health benefits that are sustained throughout the lifetimes of patients with or at risk for atherosclerotic cardiovascular disease, or ASCVD, the most common form of CVD.

We were incorporated in March 2018 and commenced operations shortly thereafter. Since our inception, we have devoted substantially all of our resources to building our gene editing capabilities and advancing development of our portfolio of programs, establishing and protecting our intellectual property, conducting research and development activities, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations. To date, we have financed our operations primarily through the sales of our preferred stock and, most recently, common stock in our initial public offering, or IPO.

On June 21, 2021, we completed our IPO in which we issued and sold an aggregate of 16,141,157 shares of our common stock, including 2,105,368 shares of common stock sold pursuant to the underwriters' full exercise of their option to purchase additional shares, at a public offering price of $19.00 per share, for aggregate net proceeds of $281.6 million, after deducting underwriting discounts and estimated offering expenses payable by us. Upon completion of the IPO, all 256,682,054 shares of outstanding convertible preferred stock automatically converted into 27,720,923 shares of common stock. Through September 30, 2021, we had raised an aggregate of $523.2 million in gross proceeds from the sale of our preferred stock in private placements and common stock in our IPO.

We are a development-stage company, and all of our programs are at a preclinical stage of development. To date, we have not generated any revenue and do not expect to generate revenue from the sale of products for the foreseeable future. Since our inception, we have incurred significant operating losses. Our net losses for the three and nine months ended September 30, 2021 were $22.7 million and $89.0 million, respectively, and $9.0 million and $22.2 million for the three and nine months ended September 30, 2020, respectively. Our net loss for the year ended December 31, 2020 was $45.7 million. As of September 30, 2021, we had an accumulated deficit of $155.5 million.

Since our inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing development activities related to our portfolio of programs as we continue our preclinical development of product candidates; advance these product candidates toward clinical development; further develop our base editing technology and manufacturing capabilities; seek to discover and develop additional product candidates; maintain, expand enforcement, defend, and protect our intellectual property portfolio; hire research and development and clinical personnel; ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval; and add operational, legal, compliance, financial and management information systems and personnel to support our research, product development, future commercialization efforts and operations as a public company.

As a result, we will need substantial additional funding to support our continuing operations and pursue our strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings and other sources of capital, which may include collaborations or licensing arrangements with other companies or other strategic transactions. If we are unable to raise capital or obtain adequate funds when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our research and development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of September 30, 2021, we had cash, cash equivalents and marketable securities of $389.2 million. We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements into 2024. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. To finance our operations beyond that point we will need to raise additional capital, which cannot be assured. See "Liquidity and capital resources."

Recent Developments


Our lead product candidate, VERVE-101, is designed to be a single-course gene editing treatment that permanently turns off the PCSK9 gene in the liver. We are advancing VERVE-101 initially for the treatment of heterozygous familial hypercholesterolemia, or HeFH. We plan to expand clinical development of VERVE-101 in a stepwise fashion beyond HeFH for the treatment of patients with established ASCVD. We plan to pursue regulatory submissions and begin clinical development of VERVE-101 in 2022.

In an ongoing in vivo proof-of-concept study of a precursor formulation of VERVE-101 in non-human primates, or NHPs, we observed substantial lowering of LDL-C levels that was sustained over an extended period of time following treatment. In this study, following a single intravenous infusion of a base editor targeting PCSK9, we observed an average reduction of blood PCSK9 protein of 89% accompanied by an average reduction of blood LDL-C levels of 59% at two weeks after treatment. This LDL-C reduction was maintained at an average of 60% for 15 months following treatment.

In an ongoing preclinical study with the clinical go-forward formulation of VERVE-101 NHPs, we observed 70% mean editing following a single administration of 1.5 mg/kg dose at the PCSK9 target gene site in liver biopsies taken at day

In our preclinical studies in NHPs, VERVE-101 and its precursor formulations have been well tolerated following a single administration, with only mild elevations in liver function tests that resolved within two weeks. In a dedicated study in sexually-mature male NHPs, we isolated sperm before and after treatment with VERVE-101 in order to evaluate whether on-target editing was occurring in germline sperm cells. We did not observe on-target editing in sperm cells. In primary human hepatocytes treated with VERVE-101, we observed on-target editing at the PCSK9 target site without bystander edits and did not observe editing at any of 244 identified potential off-target sites.

ANGPTL3 Program

Our ANGPTL3 program is designed to be a single-course gene editing treatment that permanently turns off the ANGPTL3 gene in the liver. We plan to develop this program initially for the treatment of familial hypercholesterolemia, including both homozygous familial hypercholesterolemia, or HoFH, and HeFH. We plan to select the development candidate for this program and initiate investigational new drug application, or IND, -enabling studies in 2022.

We are evaluating using a proprietary GalNAc-LNP approach for delivering of our ANGPTL3-targeting base editor. In a preclinical study using our GalNAc-LNP delivery technology in a novel NHP model of HoFH, we observed approximately 94% (n=3) and 97% (n=3) reductions in blood ANGPTL3 protein and marked reductions in LDL-C. Additionally, in a wild-type NHP model, we have observed an 89% reduction in blood ANGPTL3 protein in mice treated with our ANGPTL3-targeted base editor delivered via our GalNAc-LNP versus a 74% reduction in wild-type NHPs treated with our ANGPTL-3-targeted base editor delivered via standard LNPs. We are conducting additional preclinical studies with our GalNAc-LNP technology.

Impact of COVID-19 on our business

In March 2020, COVID-19 was declared a global pandemic by the World Health Organization and to date, the COVID-19 pandemic continues to present a substantial public health and economic challenge around the world. The length of time and full extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and difficult to predict. We, our contract manufacturing organizations, or CMOs, and our contract research organizations, or CROs, experienced temporary reductions in the capacity to undertake research-scale production and to execute some preclinical studies. While these operations have since normalized, we, together with our CMOs and CROs, are closely monitoring the impact of the COVID-19 pandemic on these operations.

We also plan to continue to closely monitor the ongoing impact of the COVID-19 pandemic on our employees and our other business operations. In an effort to provide a safe work environment for our employees, we have, among other things, increased the cadence of sanitization of our office and lab facilities, implemented various social distancing measures in our offices and labs including replacing all in-person meetings with virtual interactions, and are providing personal protective equipment for our employees present in our office and lab facilities. We are continuing to monitor the impact and effects of the COVID-19 pandemic and our response to it, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and other business partners in light of the pandemic.

While the COVID-19 pandemic did not significantly impact our business or results for the three and nine months ended September 30, 2021 and 2020, the length and extent of the pandemic, its consequences, and containment efforts will determine the future impact on our operations and financial condition.

License and collaboration agreements

We have obligations under various license and collaboration agreements to make potentially significant milestone and success payments in the future and to pay royalties on sales of any product candidates covered by those agreements that eventually achieve regulatory approval and commercialization. For information regarding these agreements, see Note 8, License agreements to our condensed consolidated financial statements included in this Quarterly Report.

Components of our results of operations


To date, we have not generated any revenue. We do not expect to generate any revenue from the sale of products in the near future and unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates. If our development efforts for our product candidates are successful and result in regulatory approval or we successfully enter into license or collaboration agreements with third parties, we may generate revenue in the future from product sales, payments from third-party collaboration or license agreements, or any combination thereof.

Operating expenses

Research and development expenses

Research and development expenses consist of costs incurred in performing research and development activities, which include:


We expense research and development costs as incurred. Nonrefundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the benefits are consumed.

In the early phases of development, our research and development costs are often devoted to proof-of-concept studies that are not necessarily allocable to a specific target; therefore, we have not yet begun tracking our expenses on a program-by-program basis.

Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase for the foreseeable future as we advance our programs and product candidates into and through clinical development, and as we continue to develop additional product candidates. We also expect our discovery research efforts and our related personnel costs will increase and, as a result, we expect our research and development expenses, including costs associated with stock-based compensation, will increase above historical levels. In addition, we may incur additional expenses related to milestone and royalty payments payable to third parties with whom we may enter into license, acquisition and option agreements to acquire the rights to future product candidates.

At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of, and obtain regulatory approval for, any of our product candidates or programs. The successful development of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development, including the following:


A change in any of these variables with respect to any of our current or future product candidates could significantly change the costs, timing and viability associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any product candidate we may develop.

General and administrative expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for personnel in our executive, intellectual property, business development, and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate

matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel, and direct and allocated facility-related expenses and other operating costs.

We anticipate that our general and administrative expenses will increase in the future to support increased research and development activities. We also expect to incur increased costs associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance costs, and investor and public relations costs.

Other income (expense)

Change in fair value of preferred stock tranche liability

Change in fair value of preferred stock tranche liability consists primarily of remeasurement gains or losses associated with changes in the fair value of the tranche rights associated with our Series A Preferred Stock. The preferred stock tranche liability was settled as of March 31, 2020, and therefore, there will be no further remeasurement.

Change in fair value of antidilution rights liability

Change in fair value of antidilution rights liability consists of remeasurement gains or losses associated with changes in the antidilution rights liability associated with our license agreements with Harvard and Broad, or the Harvard/Broad License Agreement, and Broad, or the Broad License Agreement.

The antidilution rights represent the obligation to issue additional shares of common stock to Harvard and Broad following the completion of preferred stock financings and other equity financings, which was fully satisfied upon the closing of our IPO. At the inception of the agreements, the liability for the antidilution rights was recorded at fair value with the cost recorded as research and development expense and will be remeasured at each reporting period with changes recorded in other income (expense) while the instruments are outstanding.

The antidilution rights liability was partially satisfied in 2019 and 2020 and was fully satisfied during the three months ended June 30, 2021 with the issuance of an aggregate of an additional 878,098 shares of common stock to Harvard and Broad upon the closing of our IPO.

Change in fair value of success payment liability

We are also obligated to pay to Harvard and Broad tiered success payments in the event our average market capitalization exceeds specified thresholds ascending from a high nine-digit dollar amount to $10.0 billion for a specified period of time, or sale of our company for consideration in excess of those thresholds. In the event of a change of control of our company or a sale of our company, we are required to pay any related success payment in cash within a specified period following such event. Otherwise, the success payments may be settled at our option in either cash or shares of our common stock, or a combination of cash and shares of our common stock. The maximum aggregate success payments that could be payable by us is $31.3 million. At inception of the agreements, the success payment liabilities were recorded at fair value with the cost recorded as research and development expense and will be remeasured at each reporting period with charges recorded in other income (expense) while the instrument is outstanding. In September 2021, certain success payments were triggered and amounts due to Harvard and Broad totaled $6.3 million. These amounts remained payable at September 30, 2021 and will be settled in cash in the three months ending December 31, 2021.

Depending on our valuation, the fair value of the success payment liability, and the corresponding changes in fair value that we record in our statements of operations, could fluctuate significantly from period to period.

Interest and other income (expense), net

Interest and other income primarily consisted of interest earned on our marketable securities and other miscellaneous income and expenses unrelated to our core operations.

Income tax

During the three and nine months ended September 30, 2021 and 2020, we recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast that we will be in a taxable position in the near future.

Results of operations

Comparison of three months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:

                                                                Three months ended
                                                                     September 30,
        (in thousands)                                         2021           2020         Change
        Operating expenses:
        Research and development                        $    17,495     $    7,618     $    9,877
        General and administrative                            6,007          1,354          4,653
        Total operating expenses                        $    23,502     $    8,972     $   14,530
        Other income (expense):
        Change in fair value of antidilution rights
        liability                                                 -            (59 )           59
        Change in fair value of success payment
        liability                                               700              4            696
        Interest income and other income (expense),
        net                                                      53             37             16
        Total other income (expense)                    $       753     $      (18 )   $      771
        Net loss                                        $   (22,749 )   $   (8,990 )   $  (13,759 )

Research and development expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2021 and 2020:

                                                                            Three months ended
                                                                                 September 30,
        (in thousands)                                                   2021             2020
        Employee-related expenses                               $       5,505            1,906
        Raw material costs and external expenses associated
        with manufacturing activities, including third-party
        contract manufacturing organizations, or CMOs                   3,962              199
        External expenses associated with preclinical studies
        performed by outside consulting services, including
        third-party contract research organizations, or CROs            4,770            3,288
        Lab supplies                                                    1,190              566
        Facility-related costs (including depreciation)                   925            1,067
        License and milestone payments                                     45               50
        Other costs                                                     1,098              542
        Total research and development expenses                 $      17,495     $      7,618

Research and development expenses were $17.5 million for the three months ended September 30, 2021, compared to $7.6 million for the three months ended September 30, 2020. The increase of $9.9 million was primarily due to the following:


Nov 10, 2021


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