November 9, 2022 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

Form: 10-Q

Documents

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 September 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: 001-40532

GRAPHITE BIO, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware	84-4867570
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
201 Haskins Way, Suite 210 South San Francisco, CA	94080
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 484-0886

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, par value $0.00001 per share

GRPH

The Nasdaq Global 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 ☒

As of November 4, 2022, the registrant had 58,152,317 shares of common stock, $0.00001 par value per share, outstanding.

Summary of Risk Factors

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this Form 10-Q. These risks include, but are not limited to, the following:

•

We have incurred significant losses since inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

•

Our limited operating history may make it difficult for you to evaluate the performance of our business to date and to assess our future viability.

•

We have never generated revenue from product sales, may never generate any revenue from product sales and may never become profitable.

•

We will need substantial additional funding. If we are unable to raise capital when needed on acceptable terms, or at all, we would be forced to delay, reduce, or terminate our research and product development programs, future commercialization efforts or other operations.

•

We face risks related to health epidemics, pandemics and other widespread outbreaks of contagious disease, including the ongoing and evolving COVID-19 pandemic, which could significantly disrupt our operations, impact our financial results or otherwise adversely impact our business.

•

We are very early in our development efforts. Other than nulabeglogene autogedtemcel (nula-cel), formerly GPH101, which is in early clinical development, all of our product candidates are still in preclinical development or earlier stages and it will be many years before we or our collaborators commercialize a product candidate, if ever. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

•

Our gene editing technology is not approved for human therapeutic use. The approaches we are taking to discover and develop novel therapeutics may never lead to marketable products.

•

If serious adverse events, undesirable side effects, or unexpected characteristics are identified with respect to our product candidates, we may need to abandon or limit our clinical development or commercialization of those product candidates.

•

We face significant competition in an environment of rapid technological change, and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies that are safer, less expensive or more advanced or effective than ours, which may harm our financial condition and our ability to successfully market or commercialize our product candidates.

•

Adverse events or side effects involving genetic medicines and gene editing in particular, as well as adverse public perception of these approaches, may negatively impact regulatory approval of, and/or demand for, our potential products, if approved.

•

We contract with third parties for the manufacture of materials for our research programs, preclinical studies and ongoing Phase 1/2 CEDAR clinical trial of nula-cel and expect to continue to do so for future clinical trials and for commercialization of our product candidates. This reliance on third parties increases the risk that we will not have sufficient quantities of such materials, product candidates, or any products that we may develop and commercialize, or that such supply will not be available to us at an acceptable quality, cost or timelines, which could delay, prevent, or impair our development or commercialization efforts.

•

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

•

Our rights to develop and commercialize our gene editing platform technology and product candidates are subject, in part, to the terms and conditions of licenses granted to us by others, and we may lose rights to these licenses if we fail to comply with the applicable license terms or otherwise incur significant expenses to comply with our obligations under such licenses.

•

The intellectual property landscape around gene editing technology is highly dynamic, and third parties may initiate legal proceedings alleging that we are infringing, misappropriating, or otherwise violating their intellectual property rights, the outcome of which would be uncertain and may prevent, delay or otherwise interfere with our product discovery and development efforts.

•

Our owned and in-licensed patents and other intellectual property may be subject to priority disputes or inventorship disputes or we may be subject to claims that we have infringed, misappropriated or otherwise violated the intellectual property of a third party and similar proceedings. If we or our licensors are unsuccessful in any of these proceedings, we may be required to obtain licenses from third parties, which may not be available on commercially reasonable terms or at all, or to cease the development, manufacture, and commercialization of one or more of our product candidates, which could have a material adverse impact on our business.

•

Unfavorable global economic conditions, including market volatility, inflationary pressures, acts of war and civil and political unrest, could have a negative impact on our stock price, increase our operating expenses and impair our ability to raise additional capital on acceptable terms, or at all.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Form 10-Q”), including its section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or 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. Forward-looking statements in this Form 10-Q may include, but are not limited to, statements about:

•

the success, cost and timing of our product development activities and clinical trials of our lead product candidates, nula-cel and GPH102, including the progress of, and results from, our Phase 1/2 CEDAR clinical trial of nula-cel and whether the clinical trial will support the intended uses for treatment of sickle cell disease, and future clinical trials of these and any of our other product candidates;

•

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

•

the timing and likelihood of, and our ability to obtain and maintain, regulatory clearance of our Investigational New Drug (“IND”) applications for and regulatory approval of our product candidates;

•

our ability and the ability of third-party suppliers upon which we rely to manufacture our product candidates for clinical development and, if approved, for commercialization, and the timing and costs of such manufacture;

•

estimates of our expenses, ongoing losses, future revenue, capital requirements and our need for or ability to obtain additional funding before we can expect to generate any revenue from product sales;

•

our ability to compete with companies currently marketing or engaged in the development and commercialization of precision gene repair therapies or other treatments for disease indications that our product candidates are intended to address;

•

our ability to establish or maintain licenses, collaborations, partnerships or strategic relationships;

•

our ability to create and maintain a pipeline of product candidates;

•

our ability to advance any product candidate into, and successfully complete clinical trials;

•

our ability to obtain and maintain intellectual property protection for our current and future product candidates, the duration of such protection and our ability to operate our business without infringing on the intellectual property rights of others;

•

our ability to retain and recruit key personnel;

•

our expectations regarding use of our cash and cash equivalents, including the proceeds from our initial public offering;

•

our financial performance;

•

our competitive position and the development of and projections relating to our competitors or our industry, including in gene editing and gene therapy;

•

impacts of the ongoing COVID-19 pandemic and macroeconomic factors that could impact our business, such as the effects of the Russian invasion of Ukraine on the global economy and supply chain and inflationary pressures;

•

the impact of laws and regulations in the United States and foreign countries on various aspects of our operations, including our regulatory and clinical strategy; and

•

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.

In some cases, forward-looking statements can be identified by terminology such as “will,” “may,” “should,” “could,” “expects,” “intends,” “plans,” “aims,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section entitled “Risk Factors” and elsewhere in this Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those expressed or implied by the forward-looking statements. No forward-looking statement is a promise or a guarantee of future performance.

The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q.

This Form 10-Q may include statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We have not independently verified the information contained in such sources.

We use various trademarks and trade names in our business, including without limitation our corporate name and logo. All other trademarks or trade names referred to in this Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Form 10-Q may be referred to without the ® and symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Balance Sheets	1
	Condensed Statements of Operations and Comprehensive Loss	2
	Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	3
	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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	81
Item 3.	Defaults Upon Senior Securities	82
Item 4.	Mine Safety Disclosures	82
Item 5.	Other Information	82
Item 6.	Exhibits	83
Signatures		84

Graphite Bio, Inc.

Condensed Balance Sheets

(in thousands, except share and per share data)


	September 30, 2022			December 31, 2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	56,391		$	376,976
Investments in marketable securities, current		235,294			—
Prepaid expenses and other current assets		6,807			4,760
Total current assets		298,492			381,736
Restricted cash, non-current		1,716			1,716
Investments in marketable securities, non-current		13,403			—
Property and equipment, net		13,270			6,507
Operating lease right-of-use assets		7,120			11,574
Other assets		844			454
Total assets	$	334,845		$	401,987
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,972		$	2,453
Accrued compensation		3,346			2,689
Accrued research costs		353			633
Accrued expenses and other current liabilities		1,297			886
Operating lease liabilities, current		4,556			5,482
Total current liabilities		13,524			12,143
Operating lease liabilities, non-current		2,451			5,794
Other long- term liabilities		2,417			—
Total liabilities		18,392			17,937
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.00001 par value, 10,000,000 shares authorized as of September 30, 2022 and December 31, 2021; and no shares issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Common stock, $0.00001 par value, 300,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 58,149,317 and 58,010,823 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		1			1
Additional paid-in capital		535,852			525,400
Accumulated other comprehensive loss		(1,596	)		—
Accumulated deficit		(217,804	)		(141,351	)
Total stockholders’ equity		316,453			384,050
Total liabilities and stockholders’ equity	$	334,845		$	401,987

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

Graphite Bio, Inc.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating expenses:
Research and development	$	18,302		$	8,683		$	54,325		$	26,727
General and administrative		7,852			5,919			24,563			14,776
Total operating expenses		26,154			14,602			78,888			41,503
Loss from operations		(26,154	)		(14,602	)		(78,888	)		(41,503	)
Other income (expense), net:
Interest income, net		1,472			10			2,435			14
Change in fair value of the Series A redeemable convertible preferred stock tranche liability		—			—			—			(10,341	)
Total other income (expense), net		1,472			10			2,435			(10,327	)
Net loss	$	(24,682	)	$	(14,592	)	$	(76,453	)	$	(51,830	)
Unrealized loss on investments		(563	)		—		$	(1,596	)		—
Comprehensive loss	$	(25,245	)	$	(14,592	)	$	(78,049	)	$	(51,830	)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.45	)	$	(0.28	)	$	(1.40	)	$	(2.51	)
Weighted-average shares used in computing net loss per share—basic and diluted		55,206,139			52,769,916			54,591,593			20,668,560

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

Graphite Bio, Inc.

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

(unaudited)


																Accumulated
	Redeemable Convertible Preferred Stock								Common					Additional		Other						Total
	Series A				Series B				Stock					Paid-In		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount		Capital		Loss			Deficit			Equity (Deficit)
Balance at December 31, 2021		—	$	—		—	$	—		58,010,823		$	1	$	525,400	$	—		$	(141,351	)	$	384,050
Stock-based compensation expense		—		—		—		—		—			—		3,342		—			—			3,342
Vesting of early exercised shares		—		—		—		—		—			—		51		—			—			51
Unrealized loss on investment		—		—		—		—		—			—		—		(309	)		—			(309	)
Net loss		—		—		—		—		—			—		—		—			(25,835	)		(25,835	)
Balance at March 31, 2022		—	$	—		—	$	—		58,010,823		$	1	$	528,793	$	(309	)	$	(167,186	)	$	361,299
Common stock issued upon exercise of options		—		—		—		—		43,945			—		13		—			—			13
Common stock issued under ESPP		—		—		—		—		207,137			—		414		—			—			414
Vesting of early exercised shares		—		—		—		—		-			—		30		—			—			30
Repurchase of unvested early exercised shares		—		—		—		—		(50,713	)		—		—		—			—			—
Stock-based compensation expense		—		—		—		—		-			-		3,360		—			—			3,360
Unrealized loss on investment		—		—		—		—		—			—		—		(724	)		—			(724	)
Net loss		—		—		—		—		—			—		—		—			(25,936	)		(25,936	)
Balance at June 30, 2022		—	$	—		—	$	—		58,211,192		$	1	$	532,610	$	(1,033	)	$	(193,122	)	$	338,456
Common stock issued upon exercise of options		—		—		—		—		17,000			—		5		—			—			5
Vesting of early exercised shares		—		—		—		—		—			—		27		—			—			27
Repurchase of unvested early exercised shares		—		—		—		—		(78,875	)		—		—		—			—			—
Stock-based compensation expense		—		—		—		—		—			—		3,210		—			—			3,210
Unrealized loss on investment		—		—		—		—		—			—		—		(563	)		—			(563	)
Net loss		—		—		—		—		—			—		—		—			(24,682	)		(24,682	)
Balance at September 30, 2022		—	$	—		—	$	—		58,149,317		$	1	$	535,852	$	(1,596	)	$	(217,804	)	$	316,453

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

Graphite Bio, Inc.

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share data)

(unaudited)

Accumulated

Redeemable Convertible Preferred Stock

Common

Additional

Other

Total

Series A

Series B

Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

Shares

Amount

Shares

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company