DYNE THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage muscle disease company dedicated to advancing innovative life-transforming therapeutics for people living with genetically driven diseases. We are utilizing our proprietary FORCE platform to overcome the current limitations of muscle tissue delivery and advance modern oligonucleotide therapeutics for muscle diseases. Our proprietary FORCE platform therapeutics consist of an oligonucleotide payload that we rationally design to target the genetic basis of the disease we are seeking to treat, a clinically validated linker and an antigen-binding fragment, or Fab, that we attach to the payload using the linker. With our FORCE platform, we have the flexibility to deploy different types of oligonucleotide payloads with specific mechanisms of action that modify target functions. We leverage this modularity to focus on muscle diseases with high unmet need, with etiologic targets and with clear translational potential from preclinical disease models to well-defined clinical development and regulatory pathways.
Using our FORCE platform, we are assembling a broad portfolio of muscle disease therapeutics, including our programs in myotonic dystrophy type 1, or DM1, Duchenne muscular dystrophy, or DMD, and facioscapulohumeral dystrophy, or FSHD. In addition, we plan to expand our portfolio through development efforts focused on rare skeletal muscle diseases, as well as cardiac and metabolic muscle diseases, including some with larger patient populations. We have identified product candidates for each of our DM1, DMD and FSHD programs that are in varying stages of preclinical and clinical development.
For our product candidate DYNE-101, in
For our product candidate DYNE-251, in
In
We were incorporated and commenced operations in 2017. Since our incorporation, we have devoted substantially all of our financial resources and efforts to organizing and staffing our company, business planning, raising capital, conducting research and development activities and filing and prosecuting patent applications. We do not have any products for sale and have not generated any revenue from product sales or otherwise. To date, we have principally raised capital through sales of equity securities.
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On
Since our inception, we have incurred significant operating losses. Our ability
to generate any product revenue or product revenue sufficient to achieve
profitability will depend on the successful development and eventual
commercialization of one or more product candidates. For the years ended
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We expect that our expenses and capital expenditure requirements will increase substantially in connection with our ongoing activities, particularly if and as we:
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advance our product candidates for DM1, DMD and FSHD and conduct research programs in additional indications;
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expand the capabilities of our proprietary FORCE platform;
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seek marketing approvals for any product candidates that successfully complete clinical trials;
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obtain, expand, maintain, defend and enforce our intellectual property portfolio;
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hire additional clinical, regulatory and scientific personnel;
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establish manufacturing sources for any product candidate we may develop, including the Fab antibody, Val-cit linker and therapeutic payload that will comprise the product candidate, and secure supply chain capacity to provide sufficient quantities for preclinical and clinical development and commercial supply;
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ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; and
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add operational, legal, compliance, financial and management information systems and personnel to support our research, product development and future commercialization efforts, as well as to support our operations as a public company.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for any product candidates we may develop. If we obtain regulatory approval for or otherwise commercialize any product candidates we may develop, we expect to incur significant expenses related to developing our commercialization capabilities to support product sales, marketing and distribution. Further, we expect to continue to incur additional costs associated with operating as a public company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth 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, collaborations, strategic alliances and licensing arrangements. We may be unable to raise additional funds or 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 or arrangements as and when needed, we may have to significantly delay, reduce or eliminate the development or future commercialization of one or more product candidates we may develop.
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Because of the numerous risks and uncertainties associated with product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to raise capital, maintain our research and development efforts, expand our business or continue our operations at planned levels, and as a result we may be forced to substantially reduce or terminate our operations.
We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements through 2024. We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong. We could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing, which may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. See "-Liquidity and capital resources" below.
Components of our results of operations
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If our development efforts are successful and we commercialize products, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from product sales, as well as upfront, milestone and royalty payments from such collaboration or license agreements, or a combination thereof.
Research and development expenses Research and development expenses consist primarily of costs incurred for our research activities and development of our programs. These expenses include:
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development and operation of our proprietary FORCE platform;
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employee-related expenses, including salaries, related benefits and stock-based compensation expense, for employees engaged in research and development functions;
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expenses incurred in connection with our research programs and development of our product candidates, including those incurred under agreements with third parties, such as consultants and contract research organizations, or CROs to conduct preclinical studies and clinical trials;
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the cost of laboratory supplies and acquiring, developing and manufacturing materials for use in our research, preclinical studies and clinical trials, including those incurred under agreements with third parties, such as consultants and contract manufacturing organizations, or CMOs;
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facilities, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance; and
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costs related to compliance with regulatory requirements.
We expense research and development costs as incurred. 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 related goods are delivered or the services are performed.
Our direct external research and development expenses consist of costs that include fees, reimbursed materials and other costs paid to consultants, contractors, CMOs and CROs in connection with our development, manufacturing and clinical activities. We have not allocated our direct external research and development costs to specific programs or product candidates that are not in clinical development.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of
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later-stage clinical trials. Accordingly, we expect that our research and development expenses will increase substantially as we advance DYNE-101 and DYNE-251 through clinical trials and in connection with our preclinical and clinical development activities if and as we advance any other product candidates through preclinical studies and clinical trials. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any product candidates we may develop. The successful development of any product candidate is highly uncertain. This is due to the numerous risks and uncertainties associated with product development, including the following:
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the timing and progress of preclinical and clinical development activities;
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the number and scope of programs we decide to pursue and their regulatory paths to market;
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the need to raise funding to complete preclinical and clinical development of any product candidates we may develop;
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our ability to establish new licensing or collaboration arrangements and the progress of the development efforts of third parties with whom we may enter into such arrangements;
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our ability to maintain our current research and development programs and to establish new programs;
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the successful initiation, enrollment and completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
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the receipt and related terms of regulatory approvals from applicable regulatory authorities for any product candidates we may develop;
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the availability of specialty raw materials for use in production of any product candidate we may develop;
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establishing agreements with third-party manufacturers for supply of product candidate components for our clinical trials;
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our ability to obtain and maintain patents, trade secret protection and
regulatory exclusivity, both in
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our ability to protect our other rights in our intellectual property portfolio;
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commercializing product candidates, if and when approved, whether alone or in collaboration with others; and
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obtaining and maintaining third-party insurance coverage and adequate reimbursement for any approved products.
A change in the outcome of any of these variables with respect to the development of any product candidate we may develop could significantly change the costs and timing 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 employee-related expenses, including salaries, related benefits and stock-based compensation for employees in executive, finance, corporate and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and administrative consulting services; insurance costs; administrative travel expenses; and facility-related expenses, which include allocated expenses for rent, depreciation and maintenance of facilities and other operating costs.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our growth strategy. In addition, if we obtain regulatory approval for a product candidate and do not enter into a third-party commercialization collaboration, we expect to incur
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significant expenses related to building a sales and marketing team to support product sales, marketing and distribution activities.
Interest income
Interest income consists of interest earned on our cash, cash equivalents and marketable securities.
Other income (expense), net
Other income (expense), net consists of realized gains and losses on sales of marketable securities and foreign currency gains and losses.
Income taxes
Since our inception, we have not recorded any
Results of operations
Comparison of the years ended
The following table summarizes our results of operations for the years endedDecember 31, 2022 and 2021: Year Ended December 31, (in thousands) 2022 2021 Change Operating expenses: Research and development$ 142,760 $ 121,308 $ 21,452 General and administrative 28,202 28,717 (515 ) Total operating expenses 170,962 150,025 20,937 Loss from operations (170,962 ) (150,025 ) (20,937 ) Other income (expense): Interest income 2,917 742 2,175 Other income (expense), net (54 ) (8 ) (46 ) Total other expense, net 2,863 734 2,129 Net loss$ (168,099 ) $ (149,291 ) $ (18,808 )
Research and development expenses
The following table summarizes our research and development expenses for the
years ended
Year Ended December 31,
(in thousands) 2022 2021 Change
Direct research and development expenses by
product candidate:
DYNE-101 (DM1) $ 31,343 $ 21,623 $ 9,720
DYNE-251 (DMD) 48,388 52,115 (3,727 )
Unallocated research and development expenses:
Platform and external research and development 12,757 14,526 (1,769 )
Personnel related (including stock-based
compensation) 35,681 23,534 12,147
Facility related and other 14,591 9,510 5,081
Total research and development expenses $ 142,760 $ 121,308 $ 21,452
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The increase in expenses related to DYNE-101 was primarily due to increased clinical trial activity associated with the preparation and conduct of the ACHIEVE trial, which we initiated in the third quarter of 2022, and higher variable manufacturing costs in 2022 to produce a sufficient clinical supply of drug product for the ACHIEVE trial. The decrease in expenses related to DYNE-251 was primarily due to the timing of variable manufacturing costs incurred in 2021, including the purchase of raw materials to produce a sufficient clinical supply of drug product for the DELIVER trial, which we initiated in the third quarter of 2022, partially offset by increased clinical trial activity associated with the preparation and conduct of the DELIVER trial.
The decrease in platform and external research and development expenses was
primarily due to the prioritization of our focus and resources on our clinical
programs, which resulted in lower platform related costs associated with less
preclinical and research activity. The increase in personnel-related expenses
was primarily due to increased headcount in our research and development
function. The increase in facility-related and other expenses was primarily due
to the increased costs of supporting a larger number of research and development
personnel, their research efforts and increased rent expense related to our
facility lease that commenced in
General and administrative expenses
The following table summarizes our general and administrative expenses for the
years ended
Year Ended December 31,
(in thousands) 2022 2021 Change
Personnel-related $ 7,789 $ 7,333 $ 456
Stock-based compensation expense 6,960 10,214 (3,254 )
Professional and consulting fees 6,968 7,351 (383 )
Facility-related and other 6,484 3,819 2,665
Total general and administrative expenses
The increase in personnel-related costs was primarily the result of an increase
in headcount in our general and administrative function. The decrease in
stock-based compensation expense was primarily due to the timing of recognizing
stock-based compensation expense for awards with performance-based vesting
conditions in 2021. Professional and consulting fees decreased primarily due to
an increase in headcount in our general and administrative function, which
allowed us to reduce our utilization of external professionals and consultants.
The increase in facility-related and other expenses was primarily due to the
increased costs of supporting a larger number of general and administrative
personnel and increased rent expense related to our new facility lease that
commenced in
Interest income
Interest income for the years ended
Other (expense) income, net
Other expense for the year ended
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Liquidity and capital resources
Sources of liquidity
Since our inception, we have incurred significant operating losses. We expect to
incur significant expenses and operating losses for the foreseeable future as we
support our continued research activities and development of our programs and
platform. We have not yet commercialized any product candidates, and we do not
expect to generate revenue from sales of any product candidates for several
years, if at all. To date, we have funded our operations primarily with proceeds
from sales of equity securities. As of
In
Cash flows
The following table summarizes our sources and uses of cash for each of the periods presented:
Year Ended December 31,
(in thousands) 2022 2021
Net cash used in operating activities $ (153,645 ) $ (119,563 )
Net cash provided by (used in) investing activities 87,202 (137,892 )
Net cash provided by financing activities 37,390 157,821
Net decrease in cash, cash equivalents and restricted cash
Operating activities
During the year ended
Investing activities
During the year ended
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purchases of property and equipment of
Financing activities
During the year ended
During the year ended
Funding requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we advance the clinical development of DYNE-101 and DYNE-251, the development of DYNE-301 and additional research programs. The timing and amount of our operating expenditures will depend largely on:
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the identification of additional research programs and product candidates;
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the scope, progress, costs and results of preclinical and clinical development of any product candidates we may develop;
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the costs, timing and outcome of regulatory review of any product candidates we may develop;
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our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
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changes in laws or regulations applicable to any product candidates we may develop, including but not limited to clinical trial requirements for approvals;
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the cost and timing of obtaining materials to produce adequate product supply for any preclinical or clinical development of any product candidate we may develop;
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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any product candidate we may develop for which we obtain marketing approval;
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the legal costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims;
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additions or departures of key scientific or management personnel;
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our ability to establish and maintain collaborations on favorable terms, if at all, as well as the costs and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; and
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the costs of operating as a public company.
We believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements through 2024. We expect that our liquidity will be sufficient to achieve proof-of-concept data readouts for DYNE-101 and DYNE-251. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of holders of our common stock. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring
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dividends. If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. We may be unable to raise additional funds or 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 other arrangements as and when needed, we may have to significantly delay, reduce or eliminate the development or future commercialization of one or more of our product candidates we may develop. See Item 1A. "Risk factors" in this Annual Report on Form 10-K for additional risks associated with our substantial capital requirements.
Contractual and other obligations
We enter into contracts in the normal course of business with CROs, CMOs and other third parties for preclinical research studies, clinical trials and testing and manufacturing services. These contracts typically do not contain minimum purchase commitments and are generally cancelable by us upon written notice. Payments due upon cancellation consist of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation and in the case of certain arrangements with CROs and CMOs may include non-cancelable fees.
We have also entered into a license agreement with the
On
Critical accounting estimates
Our consolidated financial statements are prepared in accordance with generally
accepted accounting principles in
We define our critical accounting policies as those accounting principles
generally accepted in
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our financial condition and results of operations. For a more detailed description of our significant accounting policies, refer to Note 2, "Summary of Significant Accounting Policies," in the accompanying notes to the consolidated financial statements.
Accrued research and development expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our service providers and applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of these estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include fees paid to:
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CROs in connection with the ACHIEVE and DELIVER clinical trials;
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CROs and investigative sites in connection with research activities;
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CMOs in connection with the production of research materials; and
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vendors in connection with preclinical development activities.
We measure the expense recognized based on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CMOs and CROs that supply, conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the achievement of specified milestones. In accruing service fees, we estimate 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, we adjust the accrual or the amount of prepaid expenses accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.
Stock-based compensation
We measure stock-based awards granted to employees and directors based on fair value on the date of the grant using the Black-Scholes option-pricing model for options, and we measure awards of restricted stock units based on the closing price of our common stock on the date of grant. Compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. We use the straight-line method to record the expense of awards with service-based vesting conditions. We use the graded-vesting method to record the expense of awards with both service-based and performance-based vesting conditions, commencing when achievement of the performance condition becomes probable. During 2022, all of our awards with performance conditions were fully vested and our outstanding awards only include time-based vesting conditions.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield.
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Prior to our IPO, there was no public market for our common stock, and consequently, the estimated fair value of our common stock was determined by our board of directors as of the date of each option grant, with input from management, considering third-party valuations of our common stock as well as our board of directors' assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent third-party valuation through the date of the grant. Since our IPO, we have determined the fair market value of our common stock using the closing price of our common stock as reported on the Nasdaq Global Select Market.
Recently issued accounting pronouncements
Refer to Note 2, "Summary of Significant Accounting Policies," in the accompanying notes to the consolidated financial statements for a discussion of recent accounting pronouncements that were adopted in 2021. There are no recently issued accounting pronouncements that have not yet been adopted that are expected to have a material impact on the Company's financial statements.
Emerging growth company and smaller reporting company status
We are an "emerging growth company," as defined in the Jumpstart Our Business
Startups Act, or JOBS Act, and may take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies
that are not emerging growth companies. We may take advantage of these
exemptions until we are no longer an "emerging growth company." Section 107 of
the JOBS Act provides that an "emerging growth company" can take advantage of
the extended transition period afforded by the JOBS Act for the implementation
of new or revised accounting standards. We have elected to use the extended
transition period for complying with new or revised accounting standards and as
a result of this election, our financial statements may not be comparable to
companies that comply with public company effective dates. We may take advantage
of these exemptions until
We are also a "smaller reporting company" as defined in Rule 12b-2 under the
Exchange Act. We may continue to be a smaller reporting company if either (i)
the market value of our shares held by non-affiliates is less than
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