SEC Filing | Design Therapeutics, Inc

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 30, 2022


☐	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: 001-40288

Design Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		82-3929248
( State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
6005 Hidden Valley Road, Suite 110 Carlsbad, California		92011
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (858) 293-4900

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

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

DSGN

The 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, 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.

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 ☒

The number of outstanding shares of the registrant’s common stock, $0.0001 par value per share, as of August 3, 2022, was 55,807,935.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•

our plans to research, develop and commercialize our product candidates;

•

the initiation, progress, success, cost and timing of our preclinical studies, clinical trials and product development activities;

•

the therapeutic potential of our product candidates, and the disease indications for which we intend to develop our product candidates;

•

our ability and timing to advance our product candidates into, and to successfully initiate, conduct, enroll and complete, clinical trials;

•

our ability to manufacture our product candidates for clinical development and, if approved, for commercialization, and the timing and costs of such manufacture;

•

the performance of third parties in connection with the development and manufacture of our product candidates, including third parties conducting our preclinical studies and clinical trials as well as third-party suppliers and manufacturers;

•

our ability to obtain funding for our operations, including funding necessary to initiate and complete clinical trials of our product candidates;

•

the size and growth of the potential markets for our product candidates and our ability to serve those markets;

•

the potential scope, duration and value of our intellectual property rights;

•

our ability, and the ability of our licensors, to obtain, maintain, defend and enforce intellectual property rights protecting our platform technologies and product candidates, and our ability to develop and commercialize our product candidates without infringing the proprietary rights of third parties;

•

our ability to recruit and retain key personnel;

•

the effects of macroeconomic factors and the COVID-19 pandemic on our operations; and

•

other risks and uncertainties, including those described under Part II, Item 1A, “Risk Factors” of this Quarterly Report.

In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A, “Risk Factors” of this Quarterly Report. 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.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Unless the context otherwise indicates, references in this Quarterly Report to the terms “Design”, “the Company”, “we,” “our, and “us” refer to Design Therapeutics, Inc., and references to our “common stock” refers to our voting common stock.

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

An investment in shares of our common stock involves a high degree of risk. Below is a list of the more significant risks associated with our business. This summary does not address all of the risks that we face. Additional discussion of the risks listed in this summary, as well as other risks that we face, are set forth under Part II, Item 1A, “Risk Factors” in this Quarterly Report. Some of the material risks associated with our business include the following:

•

We have a limited operating history, have incurred net losses since our inception, and anticipate that we will continue to incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, may not be able to sustain it.

•

We are early in our development efforts and we have only one product candidate in clinical development, with all other research programs still in the preclinical or discovery stage. We have a limited history of conducting clinical trials to test our product candidates in humans.

•

Preclinical and clinical development involves a lengthy and expensive process with uncertain timelines and outcomes, and results of preclinical studies and clinical trials may not be predictive of future trial results. If development of our programs is unsuccessful or delayed, we may be unable to obtain required regulatory approvals and be unable to commercialize our product candidates on a timely basis, if at all.

•

Our product candidates are based on novel technologies, which make it difficult to predict the timing, results and cost of product candidate development and likelihood of obtaining regulatory approval.

•

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, cause us to suspend or discontinue our ongoing or planned clinical trials, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

•

The regulatory approval process is lengthy, expensive and uncertain, and we may be unable to obtain regulatory approval for our product candidates under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of our product candidates and adversely impact our ability to generate revenue, our business and our results of operations.

•

The COVID-19 pandemic or other health epidemic could adversely impact our business and affect our operations, as well as the business or operations of our manufacturers or other third parties with whom we conduct business.

•

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

•

We may rely on third parties to conduct, supervise, and monitor our ongoing and planned clinical trials and perform some of our research and preclinical studies. If these third parties do not satisfactorily carry out their contractual duties or fail to meet expected deadlines, our development programs may be delayed or subject to increased costs, each of which may have an adverse effect on our business and prospects.

•

We contract with third parties for the manufacturing and supply of our product candidates for use in preclinical testing and clinical trials, which supply may become limited or interrupted or may not be of satisfactory quality and quantity.

•

Any approved products may fail to achieve the degree of market acceptance by physicians, patients, hospitals, healthcare payors and others in the medical community necessary for commercial success.

•

If the market opportunities for any of our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

•

If any of our product candidates are approved for marketing and commercialization and we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, we will be unable to successfully commercialize our product candidates if and when they are approved.

•

We may not realize the benefits of any acquisitions, in-license or strategic alliances that we enter into.

•

We may wish to form collaborations in the future with respect to our product candidates, but may not be able to do so or to realize the potential benefits of such transactions, which may cause us to alter or delay our development and commercialization plans.

•

We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

iii

•

Our business operations and current and future relationships with investigators, health care professionals, consultants, third-party payors and customers are subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, transparency laws and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

•

If we are unable to obtain and maintain sufficient intellectual property protection for our platform technologies and product candidates, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.

•

We may not be able to protect our intellectual property rights throughout the world.

•

We may rely on trade secrets and proprietary know-how which can be difficult to trace and enforce and, if we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

•

The price of our common stock could be subject to volatility related or unrelated to our operations.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations	2
	Condensed Statements of Comprehensive Loss	3
	Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity	4
	Condensed Statements of Cash Flows	5
	Notes to Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
Item 3.	Defaults Upon Senior Securities	70
Item 4.	Mine Safety Disclosures	70
Item 5.	Other Information	70
Item 6.	Exhibits	71
Signatures		72

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DESIGN THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and par value data)


	June 30,			December 31,
	2022			2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	119,654		$	298,569
Investment securities		239,723			85,495
Prepaid expense and other current assets		2,345			1,371
Total current assets		361,722			385,435
Property and equipment, net		1,804			1,508
Right-of-use asset, related party		3,932			3,614
Other assets		474			—
Total assets	$	367,932		$	390,557
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable (including related party amounts of $8 and $0, respectively)	$	2,071		$	1,620
Accrued expenses and other current liabilities (including related party amounts of $604 and $504 respectively)		5,317			3,663
Total current liabilities		7,388			5,283
Operating lease liability, net, related party		3,381			3,144
Total liabilities		10,769			8,427
Commitments and contingencies (See Note 8)
Stockholders’ equity:
Common stock, $0.0001 par value; 200,000,000 shares authorized at June 30, 2022 and December 31, 2021; 55,807,935 and 55,681,752 shares issued, 55,716,761 and 55,441,926 shares outstanding at June 30, 2022 and December 31, 2021, respectively		6			6
Additional paid-in capital		435,192			429,824
Accumulated deficit		(75,720	)		(47,456	)
Accumulated other comprehensive loss		(2,315	)		(244	)
Total stockholders’ equity		357,163			382,130
Total liabilities and stockholders’ equity	$	367,932		$	390,557

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

DESIGN THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Operating expenses:
Research and development (including related party amounts of $226, $45, $442 and $90, respectively)	$	11,295		$	5,027		$	20,054		$	8,902
General and administrative (including related party amounts of $129, $60, $254 and $120, respectively)		4,344			2,660			8,955			4,465
Total operating expenses		15,639			7,687			29,009			13,367
Loss from operations		(15,639	)		(7,687	)		(29,009	)		(13,367	)
Other income, net		640			51			745			217
Net loss	$	(14,999	)	$	(7,636	)	$	(28,264	)	$	(13,150	)

Net loss per share, basic and diluted	$	(0.27	)	$	(0.14	)	$	(0.51	)	$	(0.36	)
Weighted-average shares of common stock outstanding, basic and diluted		55,670,780			55,081,397			55,589,510			36,459,244

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

DESIGN THERAPEUTICS, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net loss	$	(14,999	)	$	(7,636	)	$	(28,264	)	$	(13,150	)
Other comprehensive loss:
Unrealized loss on available-for-sale securities		(993	)		(14	)		(2,071	)		(168	)
Comprehensive loss	$	(15,992	)	$	(7,650	)	$	(30,335	)	$	(13,318	)

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

DESIGN THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(Unaudited)


													Accumulated
	Convertible										Additional		Other						Total
	Preferred Stock						Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders’
	Shares			Amount			Shares		Amount		Capital		(Loss) Income			Deficit			Equity
Balance at March 31, 2022		—		$	—			55,618,326	$	6	$	432,346	$	(1,322	)	$	(60,721	)	$	370,309
Exercises of stock options and vesting of restricted stock		—			—			74,226		—		4		—			—			4
Issuance of common stock under employee stock purchase plan		—			—			24,209		—		225								225
Stock-based compensation		—			—			—		—		2,617		—			—			2,617
Unrealized gain on investments		—			—			—		—		—		(993	)		—			(993	)
Net loss		—			—			—		—		—		—			(14,999	)		(14,999	)
Balance at June 30, 2022		—		$	—			55,716,761	$	6	$	435,192	$	(2,315	)	$	(75,720	)	$	357,163

Balance at December 31, 2021		—		$	—			55,441,926	$	6	$	429,824	$	(244	)	$	(47,456	)	$	382,130
Exercises of stock options and vesting of restricted stock		—			—			250,626		—		166		—			—			166
Issuance of common stock under employee stock purchase plan		—			—			24,209		—		225		—			—			225
Stock-based compensation		—			—			—		—		4,977		—			—			4,977
Unrealized loss on investments		—			—			—		—		—		(2,071	)		—			(2,071	)
Net loss		—			—			—		—		—		—			(28,264	)		(28,264	)
Balance at June 30, 2022		—		$	—			55,716,761	$	6	$	435,192	$	(2,315	)	$	(75,720	)	$	357,163

Balance at March 31, 2021		—		$	—			55,042,550	$	6	$	425,435	$	2		$	(17,437	)	$	408,006
Vesting of restricted stock		—			—			72,179		—		2		—			—			2
Stock-based compensation		—			—			—		—		1,243		—			—			1,243
Unrealized loss on investments		—			—			—		—		—		(14	)		—			(14	)
Net loss		—			—			—		—		—		—			(7,636	)		(7,636	)
Balance at June 30, 2021		—		$	—			55,114,729	$	6	$	426,680	$	(12	)	$	(25,073	)	$	401,601

Balance at December 31, 2020		22,012,499		$	45,356			15,957,821	$	1	$	451	$	156		$	(11,923	)	$	(11,315	)
Issuance of Series B convertible preferred stock, net of $288 of issuance costs		19,083,979			124,712			—		—		—		—			—			—
Preferred stock converted into shares of common stock		(41,096,478	)		(170,068	)		25,212,548		4		170,064		—			—			170,068
Initial public offering of common shares, net of $21,728 of issuance costs		—			—			13,800,000		1		254,270		—			—			254,271
Vesting of restricted stock		—			—			144,360		—		5		—			—			5
Stock-based compensation		—			—			—		—		1,890		—			—			1,890
Unrealized loss on investments		—			—			—		—		—		(168	)		—			(168	)
Net loss		—			—			—		—		—		—			(13,150	)		(13,150	)
Balance at June 30, 2021		—		$	—			55,114,729	$	6	$	426,680	$	(12	)	$	(25,073	)	$	401,601

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

DESIGN THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2022	2021
Cash flows from operating activities