rna-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________________________

FORM 10-Q

_____________________________________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-39321

_____________________________________________________

Avidity Biosciences, Inc.

(Exact name of registrant as specified in its charter)

_____________________________________________________


Delaware						46-1336960
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

10578 Science Center Drive, Suite 125 San Diego, California						92121
(Address of principal executive offices)						(Zip Code)

(858) 401-7900

(Registrant’s telephone number, including area code)

_____________________________________________________

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	RNA	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 x No o

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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.


Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of July 24, 2023, the registrant had 74,096,207 shares of common stock outstanding.


PART I – FINANCIAL INFORMATION

Item 1.	Condensed Financial Statements (unaudited)	3
	Condensed Balance Sheets (unaudited)	3
	Condensed Statements of Operations and Comprehensive Loss (unaudited)	4
	Condensed Statements of Stockholders' Equity (unaudited)	5
	Condensed Statements of Cash Flows (unaudited)	7
	Notes to Condensed Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	29

SIGNATURES		30


	June 30, 2023		December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	153,880	$	340,396
Marketable securities	422,623		270,331
Prepaid and other assets	18,031		12,215
Total current assets	594,534		622,942
Property and equipment, net	7,776		6,254
Restricted cash	295		251
Right-of-use assets	7,755		8,755
Other assets	424		598
Total assets	$	610,784	$	638,800
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	31,756	$	32,572
Accrued compensation	6,527		11,190
Lease liabilities, current portion	3,151		3,105
Deferred revenue, current portion	3,810		5,041
Total current liabilities	45,244		51,908
Lease liabilities, net of current portion	6,362		7,582
Deferred revenue, net of current portion	—		1,235
Total liabilities	51,606		60,725
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.0001 par value; authorized shares – 400,000; issued and outstanding shares – 74,070 and 69,768 at June 30, 2023 and December 31, 2022, respectively	7		7
Additional paid-in capital	1,019,800		939,310
Accumulated other comprehensive loss	(2,666)		(2,698)
Accumulated deficit	(457,963)		(358,544)
Total stockholders’ equity	559,178		578,075
Total liabilities and stockholders’ equity	$	610,784	$	638,800


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Collaboration revenue	$	2,316	$	2,178	$	4,549	$	3,973
Operating expenses:
Research and development	42,672		39,789		90,437		67,477
General and administrative	12,278		8,688		24,342		17,255
Total operating expenses	54,950		48,477		114,779		84,732
Loss from operations	(52,634)		(46,299)		(110,230)		(80,759)
Other income (expense):
Interest income	5,771		611		11,287		861
Other expense	(162)		(2)		(476)		(27)
Total other income	5,609		609		10,811		834
Net loss	(47,025)		(45,690)		(99,419)		(79,925)
Other comprehensive loss:
Net unrealized (losses) gains on marketable securities	(1,137)		(960)		32		(2,799)
Comprehensive loss	$	(48,162)	$	(46,650)	$	(99,387)	$	(82,724)
Net loss per share, basic and diluted	$	(0.66)	$	(0.92)	$	(1.40)	$	(1.63)
Weighted-average shares outstanding, basic and diluted	71,390		49,927		70,914		49,091


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2022	69,768	$	7	$	939,310	$	(2,698)	$	(358,544)	$	578,075
Issuance of common stock upon exercise of stock options	102	—		520		—		—		520
Issuance of common stock in public offering, net of issuance costs of $408	943	—		22,441		—		—		22,441
Stock-based compensation	—	—		9,104		—		—		9,104
Net loss	—	—		—		—		(52,394)		(52,394)
Other comprehensive income	—	—		—		1,169		—		1,169
Balance at March 31, 2023	70,813	$	7	$	971,375	$	(1,529)	$	(410,938)	$	558,915
Issuance of common stock upon exercise of stock options	12	—		7		—		—		7
Issuance of common stock in public offerings, net of issuance costs of $977	3,164	—		38,106		—		—		38,106
Issuance of common stock under Employee Stock Purchase Plan	81	—		859		—		—		859
Stock-based compensation	—	—		9,453		—		—		9,453
Net loss	—	—		—		—		(47,025)		(47,025)
Other comprehensive loss	—	—		—		(1,137)		—		(1,137)
Balance at June 30, 2023	74,070	$	7	$	1,019,800	$	(2,666)	$	(457,963)	$	559,178


(in thousands)	June 30, 2023		December 31, 2022
Accounts receivable	$	1,183	$	2,364
Prepaid assets	10,990		8,340
Other assets	5,858		1,511
Total prepaid and other assets	$	18,031	$	12,215


	June 30,
	2023	2022
Common stock options	10,978	8,636
Restricted stock units	635	—
Employee Stock Purchase Plan shares pending issuance	9	4
Total	11,622	8,640


			Fair Value Measurements Using
As of June 30, 2023	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Marketable securities:
U.S. Treasury securities	$	405,384	$	405,384	$	—	$	—
U.S. Government agency securities	4,976		—		4,976		—
Negotiable certificates of deposit	7,786		—		7,786		—
Corporate debt securities	4,477		—		4,477		—
Total	$	422,623	$	405,384	$	17,239	$	—


			Fair Value Measurements Using
As of December 31, 2022	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
U.S. Treasury securities	$	2,498	$	2,498	$	—	$	—
Marketable securities:
U.S. Treasury securities	244,945		244,945		—		—
U.S. Government agency securities	4,966		—		4,966		—
Negotiable certificates of deposit	4,346		—		4,346		—
Corporate debt securities	16,074		—		16,074		—
Total	$	272,829	$	247,443	$	25,386	$	—


As of June 30, 2023	Maturity (in years)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Treasury securities	1 or less	$	326,395	$	3	$	(1,624)	$	324,774
U.S. Government agency securities	1 or less	5,000		—		(24)		4,976
Negotiable certificates of deposit	1 or less	5,630		—		(30)		5,600
Corporate debt securities	1 or less	4,525		—		(48)		4,477
U.S. Treasury securities	1 - 2	81,534		—		(924)		80,610
Negotiable certificates of deposit	1 - 2	2,205		—		(19)		2,186

Total		$	425,289	$	3	$	(2,669)	$	422,623


Balance at December 31, 2022	$	6,276
Revenue recognized that was included in the balance at the beginning of the period	(2,466)
Balance at June 30, 2023	$	3,810


	June 30, 2023		December 31, 2022
Laboratory equipment	$	9,486	$	7,217
Computers and software	127		116
Office furniture and equipment	1,954		1,792
Leasehold improvements	249		249
Property and equipment, gross	11,816		9,374
Less accumulated depreciation	(4,040)		(3,120)
Total property and equipment, net	$	7,776	$	6,254


	Number of Options	Weighted- Average Exercise Price Per Share
Outstanding at December 31, 2022	9,352	$	15.28
Granted	2,032	21.12
Exercised	(114)	4.60
Forfeited/expired	(292)	19.74
Outstanding at June 30, 2023	10,978	$	16.35


	Options		ESPP
	Six Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Risk-free interest rate	3.5% - 4.0%	1.5% - 3.4%	5.4%	2.2%
Expected volatility	81% - 82%	85%	76%	79%
Expected term (in years)	5.5 - 6.1	5.5 - 6.1	0.5	0.5
Expected dividend yield	—%	—%	—%	—%


	Three Months Ended June 30,				Change		Six Months Ended June 30,				Change
	2023		2022				2023		2022
External costs:
AOC 1001	$	4,216	$	3,310	$	906	$	11,176	$	7,403	$	3,773
AOC 1020	1,501		3,231		(1,730)		9,117		5,463		3,654
AOC 1044	5,156		2,348		2,808		7,692		5,245		2,447
Other programs	1,511		6,157		(4,646)		4,988		9,034		(4,046)
Unallocated	8,360		9,080		(720)		14,991		11,564		3,427
Total external costs	20,744		24,126		(3,382)		47,964		38,709		9,255
Internal costs:
Employee-related expenses	16,996		10,991		6,005		32,974		21,173		11,801
Facilities, lab supplies and other	4,932		4,672		260		9,499		7,595		1,904
Total research and development expenses	$	42,672	$	39,789	$	2,883	$	90,437	$	67,477	$	22,960


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested at December 31, 2022	—	$	—
Granted	669	21.60
Vested	—	—
Forfeited	(34)	22.47
Unvested at June 30, 2023	635	$	21.55

SEC Form 10-Q filed by Avidity Biosciences Inc.