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 March 31, 2023


☐	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 May 5, 2023, was 55,945,551.

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 on our operations; and

•

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

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.

Trademarks and Service Marks

“Design Therapeutics,” “Design,” “GeneTAC,” the Design logo and other trademarks, trade names or service marks of Design Therapeutics, Inc. appearing in this Quarterly Report on Form 10-Q are the property of Design Therapeutics, Inc. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

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.

•

A health epidemic or pandemic 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.

•

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.

iii

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 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	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70
Signatures		71

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

DESIGN THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and par value data)


	March 31,			December 31,
	2023			2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	28,809		$	26,500
Investment securities		286,583			303,887
Prepaid expenses and other current assets		3,547			4,732
Total current assets		318,939			335,119
Property and equipment, net		1,905			1,947
Right-of-use asset, related party		3,447			3,612
Other assets		452			459
Total assets	$	324,743		$	341,137
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,744		$	3,025
Accrued expenses and other current liabilities (including related party amounts of $658 and $640 respectively)		6,303			7,751
Total current liabilities		9,047			10,776
Operating lease liability, net, related party		2,878			3,051
Total liabilities		11,925			13,827
Commitments and contingencies (See Note 8)
Stockholders’ equity:
Common stock, $0.0001 par value; 200,000,000 shares authorized at March 31, 2023 and December 31, 2022; 55,945,551 and 55,943,314 shares issued, 55,919,561 and 55,895,596 shares outstanding at March 31, 2023 and December 31, 2022, respectively		6			6
Additional paid-in capital		444,852			441,424
Accumulated deficit		(130,058	)		(110,764	)
Accumulated other comprehensive loss		(1,982	)		(3,356	)
Total stockholders’ equity		312,818			327,310
Total liabilities and stockholders’ equity	$	324,743		$	341,137

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 March 31,
	2023			2022
Operating expenses:
Research and development (including related party amounts of $259 and $216, respectively)	$	15,730		$	8,759
General and administrative (including related party amounts of $135 and $125, respectively)		5,921			4,611
Total operating expenses		21,651			13,370
Loss from operations		(21,651	)		(13,370	)
Other income, net		2,357			105
Net loss	$	(19,294	)	$	(13,265	)

Net loss per share, basic and diluted	$	(0.35	)	$	(0.24	)
Weighted-average shares of common stock outstanding, basic and diluted		55,908,033			55,507,338

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 March 31,
	2023			2022
Net loss	$	(19,294	)	$	(13,265	)
Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities		1,374			(1,078	)
Comprehensive loss	$	(17,920	)	$	(14,343	)

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

DESIGN THERAPEUTICS, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


							Accumulated
					Additional		Other						Total
	Common Stock				Paid-in		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		(Loss) Income			Deficit			Equity
Balance at December 31, 2022		55,895,596	$	6	$	441,424	$	(3,356	)	$	(110,764	)	$	327,310
Exercises of stock options and vesting of restricted stock		23,965		—		2		—			—			2
Stock-based compensation		—		—		3,426		—			—			3,426
Unrealized gain on investments		—		—		—		1,374			—			1,374
Net loss		—		—		—		—			(19,294	)		(19,294	)
Balance at March 31, 2023		55,919,561	$	6	$	444,852	$	(1,982	)	$	(130,058	)	$	312,818

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		176,400		—		162		—			—			162
Stock-based compensation		—		—		2,360		—			—			2,360
Unrealized loss on investments		—		—		—		(1,078	)		—			(1,078	)
Net loss		—		—		—		—			(13,265	)		(13,265	)
Balance at March 31, 2022		55,618,326	$	6	$	432,346	$	(1,322	)	$	(60,721	)	$	370,309

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

DESIGN THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities
Net loss	$	(19,294	)	$	(13,265	)
Reconciliation of net loss to net cash used in operating activities:
Depreciation		129			82
Stock-based compensation		3,426			2,360
Amortization of premiums on investment securities, net		(1,142	)		19
Non-cash lease expense		10			14
Change in operating assets and liabilities:
Prepaid expense and other assets		1,192			(1,237	)
Accounts payable and other liabilities		(1,745	)		215
Accounts payable and other liabilities—related party		—			(15	)
Net cash used in operating activities		(17,424	)		(11,827	)
Cash flows from investing activities
Purchases of investment securities		(33,615	)		—
Proceeds from maturities of investment securities		53,435			490
Purchases of property and equipment		(87	)		(76	)
Net cash provided by investing activities		19,733			414
Cash flows from financing activities
Proceeds from the exercise of stock options		—			156
Net cash provided by financing activities		—			156
Net increase (decrease) in cash and cash equivalents		2,309			(11,257	)
Cash and cash equivalents at beginning of period		26,500			298,569
Cash and cash equivalents at end of period	$	28,809		$	287,312
Supplemental disclosures
Purchases of property and equipment included in accounts payable and accrued expenses	$	—		$	19

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

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

1. Organization

Design Therapeutics, Inc. (the “Company”) was incorporated in Delaware in December 2017 and is based in Carlsbad, California. The Company is a clinical-stage biopharmaceutical company pioneering the research and development of GeneTACTM molecules, which are a novel class of small-molecule gene targeted chimera therapeutic candidates designed to be disease-modifying by addressing the underlying cause of diseases caused by inherited nucleotide repeat expansion mutations. The Company’s lead product candidate is in Friedreich ataxia (“FA”), its second product candidate is in Fuchs Endothelial Corneal Dystrophy (“FECD”), and it is also advancing its GeneTACTM program to address other serious nucleotide repeat-driven monogenic diseases.

Initial Public Offering

In March 2021, the Company completed its initial public offering (“IPO”) selling 13,800,000 shares of its common stock at $20.00 per share. Proceeds from the Company's IPO, net of underwriting discounts and commissions and other offering costs, were $254.3 million.

Liquidity and Capital Resources

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 satisfaction of liabilities in the normal course of business. The Company has incurred net operating losses since inception and had an accumulated deficit of $130.1 million as of March 31, 2023. The Company had cash, cash equivalents and investment securities of $315.4 million as of March 31, 2023, and has not generated positive cash flow from operations.

Management expects to incur net losses for the foreseeable future. There can be no assurance that the Company will ever earn revenues or achieve profitability, or if achieved, that they will be sustained on a continuing basis. In addition, the preclinical manufacturing, and clinical development activities as well as the commercialization of the Company's products, if approved, will require significant additional financing. The Company may be unable to secure such financing when needed, or if available, such financings may be under terms that are unfavorable to the Company or the current stockholders. If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations. The Company's currently available cash and cash equivalents as of March 31, 2023 are sufficient to meet its anticipated cash requirements for more than 12 months following the date the financial statements are issued.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles and following the requirements of the United States Securities and Exchange Commission (“SEC”) for interim reporting. The Company's financial statements include all adjustments, consisting of only normal recurring adjustments, which in the opinion of management are necessary to present fairly the Company’s financial position as of the reporting date and results of operations and cash flows for the periods presented.

The preparation of the Company’s financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The most significant estimates in the Company’s financial statements relate to accruals for research and development expenses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company manages its operations as a single reportable segment for the purposes of assessing performance and making operating decisions.

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(continued)

(unaudited)

3. Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of restricted common stock subject to repurchase, stock options outstanding under the Company’s equity incentive plans, employee stock purchase rights under the Company’s 2021 Employee Stock Purchase Plan (the “ESPP”).. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company's net loss position.

The following table sets forth the outstanding, potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:


	March 31, 2023		March 31, 2022
Stock options		7,914,191		5,061,629
Shares subject to repurchase		25,990		163,355
Employee stock purchase plan		46,573		22,950
Total	$	7,986,754	$	5,247,934

4. Fair Value Measurements

Accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs, other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying value of the Company’s cash, accounts payable and accrued liabilities are considered to be representative of their respective fair values due to the short-term nature of those instruments. The Company’s investment securities, which may include money market accounts, money market funds, certificates of deposits, U.S. Treasury securities, and high quality, marketable debt instruments of corporations and government sponsored enterprises, are measured at fair value in accordance with the fair value hierarchy. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis and no transfers between levels have occurred during the periods presented.

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(continued)

(unaudited)

The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis at March 31, 2023 and December 31, 2022 (in thousands):


	Fair Value Measurement at End of Period Using:
			Quoted Prices
			In Active
			Markets		Significant
			For		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2023:
Assets:
Money market funds(1)	$	27,447	$	27,447	$	—	$	—
Certificates of deposit		9,445		9,445		—		—
U.S. Treasury securities		247,143		247,143		—		—
U.S. Government agency securities		29,995		—		29,995		—
Total	$	314,030	$	284,035	$	29,995	$	—
As of December 31, 2022:
Assets:
Money market funds(1)	$	20,895	$	20,895	$	—	$	—
Certificates of deposit		7,929		7,929		—		—
U.S. Treasury securities		265,966		265,966		—		—
U.S. Government agency securities		29,992		—		29,992		—
Total	$	324,782	$	294,790	$	29,992	$	—

(1)

Included in cash and cash equivalents on the accompanying balance sheets.

Interest bearing money market accounts and certificates of deposit are valued at amortized cost, which approximates fair value. The carrying value of the Company’s cash, accounts payable and accrued liabilities are considered to be representative of their respective fair values due to the short-term nature of those instruments. The Company’s investment securities, which may include money market accounts, money market funds, certificates of deposits, U.S. Treasury securities, and high quality, marketable debt instruments of corporations and government sponsored enterprises, are measured at fair value. The Company obtains the fair value of its available-for-sale debt securities from a professional pricing service. Level II securities are valued using quoted market prices for similar instruments, non-binding market prices that are corroborated by observable market data and include our investments in marketable debt instruments of government sponsored enterprises. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis and no transfers between levels have occurred during the periods presented.

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(continued)

(unaudited)

5. Investment Securities

The Company’s investment policy defines allowable investment securities and establishes guidelines relating to credit quality, diversification, and maturities of its investments to preserve principal and maintain liquidity. In accordance with the Company’s investment policy, it has invested funds in marketable securities. The cost, gross unrealized holding gains, gross unrealized holding losses, allowances for credit losses and fair value of available-for-sale investments by types, maturities and classes of securities at March 31, 2023 and December 31, 2022 consisted of the following (in thousands):


		As of March 31, 2023
											Estimated
									Allowance		Fair
		Amortized		Unrealized		Unrealized			for Credit		Market
	Maturity	Cost		Gains		Losses			Losses		Value
Certificates of deposits	Within 1 year	$	4,623	$	1	$	(38	)	$	—	$	4,586
U.S. Treasury securities	Within 1 year		190,695		10		(1,494	)		—		189,211
U.S. Government agency securities	Within 1 year		27,663		—		(141	)		—		27,522
Certificates of deposits	1 year to 2 years		4,900		1		(42	)		—		4,859
U.S. Treasury securities	1 year to 2 years		58,184		105		(357	)		—