SEC Filing - Disc Medicine Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 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: 001-39438

Disc Medicine, Inc.

(Exact name of registrant as specified in its charter)


Delaware	85-1612845
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
321 Arsenal Street, Suite 101 Watertown, Massachusetts	02472
(Address of principal executive offices)	(Zip Code)

(617) 674-9274

(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

IRON

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, 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	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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 August 8, 2023, there were 22,877,552 shares of Common Stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page

RISK FACTOR SUMMARY		1
FORWARD LOOKING STATEMENTS		3

PART I.	FINANCIAL INFORMATION	5

Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Preferred Stock and Stockholders’ Equity (Deficit)	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION	32

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	81
Signatures		82

RISK FACTOR SUMMARY

The risk factors detailed in Item 1A entitled “Risk Factors” in this Quarterly Report on Form 10-Q are the risks that we believe are material to our investors and a reader should carefully consider them. Those risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. The following is a summary of the risk factors detailed in Item 1A:

•

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

•

We have incurred significant net losses since our inception and anticipate that we will continue to incur losses for the foreseeable future.

•

We have no products approved for commercial sale and have not generated any revenue from product sales.

•

We will need to raise substantial additional funding. If we are unable to raise capital when needed or on terms acceptable to us, we would be forced to delay, reduce, or eliminate some of our product development programs or commercialization efforts.

•

We have only successfully completed one Phase 1 clinical trial, and may be unable to successfully complete any additional clinical trials for any product candidates we develop. Certain of our programs are still in preclinical development and may never advance to clinical development.

•

Our programs are focused on the development of therapeutics for patients with hematologic diseases, which is a rapidly evolving area of science, and the approach we are taking to discover and develop product candidates is novel and may never lead to approved or marketable products.

•

Interim, top-line, initial, and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to confirmation, audit, and verification procedures that could result in material changes in the final data.

•

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

•

Results from early preclinical studies and clinical trials of our programs and product candidates are not necessarily predictive of the results of later preclinical studies and clinical trials of our programs and product candidates. If we cannot replicate the results from earlier preclinical studies and clinical trials of our programs and product candidates in our later preclinical studies and clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our product candidates.

•

Our clinical trials or those of our future collaborators may reveal significant adverse events not seen in prior preclinical studies or clinical trials and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

•

Some of our product candidates modulate pathways for which there are currently no approved or effective therapies, which may result in greater research and development expenses, regulatory issues that could delay or prevent approval, or discovery of unknown or unanticipated adverse effects on safety or efficacy.

•

We are currently conducting a Phase 2 clinical trial for bitopertin in Australia and may in the future conduct additional clinical trials of our product candidates outside the United States, and the FDA and comparable foreign regulatory authorities may not accept data from such trials.

•

If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals for our product candidates, we will not be able to commercialize, or will be delayed in commercializing, our product candidates, and our ability to generate revenue will be materially impaired.

•

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

•

If our current product candidates or any future product candidates do not achieve broad market acceptance, the revenue that we generate from our sales may be limited, and we may never become profitable.

•

We rely on third parties to conduct our Phase 2 clinical trials of bitopertin, Phase 1b/2 clinical trials of DISC-0974 and planned Phase 1 clinical trial of MWTX-003 and expect to rely on third parties to conduct other clinical trials for our product candidates, as well as potential investigator-sponsored clinical trials of our product candidates. If these third parties do not successfully carry out their contractual duties, comply with regulatory requirements, or meet expected deadlines,

we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

•

We might not realize the anticipated benefits of our current collaborations with Mabwell or NIH, or any other collaborations we enter into in the future.

•

We contract with third parties for the manufacture of our product candidates for preclinical development and clinical testing, and expect to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, 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 our technology and product candidates, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology and drugs may be impaired, and we may not be able to compete effectively in our market.

•

We may not obtain or grant licenses or sublicenses to intellectual property rights in all markets on equally or sufficiently favorable terms with third parties.

•

Intellectual property rights do not guarantee commercial success of current or future product candidates or other business activities. Numerous factors may limit any potential competitive advantage provided by our intellectual property rights.

•

Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.

•

Our future success depends on our ability to retain key executives and experienced scientists and to attract, retain, and motivate qualified personnel.

•

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect the Company’s current and projected business operations and its financial condition and results of operations.

•

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

•

The market price of our common stock is expected to be volatile.

•

We will incur additional costs and increased demands upon management as a result of complying with the laws and regulations affecting public companies.

•

Once we are no longer an emerging growth company, a smaller reporting company or otherwise no longer qualify for applicable exemptions, we will be subject to additional laws and regulations affecting public companies that will increase our costs and the demands on management and could harm our operating results.

•

Provisions in our charter documents and under Delaware law could make an acquisition of us more difficult and may discourage any takeover attempts our stockholders may consider favorable, and may lead to entrenchment of management.

This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements under the caption “Forward Looking Statements” of this Quarterly Report on Form 10-Q.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, of Disc Medicine, Inc., or the Company, contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:

•

the initiation, timing, progress, results, and cost of our research and development programs and our current and future preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;

•

our ability to efficiently discover and develop product candidates;

•

our ability and the potential to successfully manufacture our drug substances and product candidates for preclinical use, for clinical trials and on a larger scale for commercial use, if approved;

•

our ability to obtain funding for our operations necessary to complete further development and commercialization of our product candidates;

•

our ability to obtain and maintain regulatory approval of our product candidates;

•

our ability to commercialize our products, if approved;

•

the pricing and reimbursement of our product candidates, if approved;

•

the implementation of our business model, and strategic plans for our business and product candidates;

•

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;

•

estimates of our future expenses, revenues, capital requirements, and our needs for additional financing;

•

the potential benefits of strategic collaboration agreements, our ability to enter into strategic collaborations or arrangements, and our ability to attract collaborators with development, regulatory and commercialization expertise;

•

future agreements with third parties in connection with the commercialization of product candidates and any other approved product;

•

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

•

our financial performance;

•

the rate and degree of market acceptance of our product candidates;

•

regulatory developments in the United States and foreign countries;

•

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•

our ability to produce our products or product candidates with advantages in turnaround times or manufacturing cost;

•

the success of competing therapies that are or may become available;

•

our ability to attract and retain key scientific or management personnel;

•

the impact of laws and regulations;

•

developments relating to our competitors and our industry;

•

the impact of global economic and political developments on our business, including rising inflation and capital market disruptions, the current conflict in Ukraine, economic sanctions and economic slowdowns or recessions that may result from such developments which could harm our research and development efforts as well as the value of our common stock and our ability to access capital markets; and

•

other risks and uncertainties, including those listed under the caption “Risk Factors.”

These forward-looking statements are based on information available to us at the time of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

•

the ability to maintain the listing of our common stock on Nasdaq;

•

the price of our securities may be volatile due to a variety of factors, including the volatility in capital markets, changes in the competitive and highly regulated industries in which we operate, variations in performance across competitors, changes in laws and regulations affecting our business and changes in our capital structure;

•

the risk of downturns in the economy and the possibility of rapid change in the highly competitive industry in which we operate;

•

the risk that we will need to raise additional capital to execute our business plan, which may not be available on acceptable terms or at all; and

•

the risk that we experience difficulties in managing our growth and expanding operations.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DISC MEDICINE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	June 30,			December 31,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	377,602		$	194,611
Prepaid expenses and other current assets		4,131			3,880
Total current assets		381,733			198,491
Property and equipment, net		159			168
Right-of-use assets, operating leases		2,166			1,430
Other assets		116			116
Total assets	$	384,174		$	200,205
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,214		$	16,162
Accrued expenses		4,148			6,109
Operating lease liabilities, current		321			307
Total current liabilities		9,683			22,578
Operating lease liabilities, non-current		1,772			1,027
Contingent value right liability		1,500			—
Total liabilities		12,955			23,605
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.0001 par value; 100,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 22,850,894 and 17,405,231 shares issued June 30, 2023 and December 31, 2022, respectively; and 22,850,894 and 17,403,315 shares outstanding as of June 30, 2023 and December 31, 2022, respectively		2			2
Additional paid-in capital		522,161			288,814
Accumulated deficit		(150,944	)		(112,216	)
Total stockholders’ equity		371,219			176,600
Total liabilities and stockholders’ equity	$	384,174		$	200,205

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

DISC MEDICINE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Operating expenses:
Research and development	$	12,100		$	7,714		$	32,280		$	15,535
General and administrative		5,228			4,301			10,173			6,440
Total operating expenses		17,328			12,015			42,453			21,975
Loss from operations		(17,328	)		(12,015	)		(42,453	)		(21,975	)
Other income (expense), net:
Interest income		2,910			45			5,277			52
Change in fair value of contingent value right liability		(1,500	)		—			(1,500	)		—
Change in fair value of derivative liability		—			2,390			—			2,490
Other expense		(5	)		—			(5	)		—
Total other income (expense), net		1,405			2,435			3,772			2,542
Loss before income taxes		(15,923	)		(9,580	)		(38,681	)		(19,433	)
Income tax expense		(24	)		—			(47	)		—
Net loss and comprehensive loss	$	(15,947	)	$	(9,580	)	$	(38,728	)	$	(19,433	)
Net loss attributable to common stockholders-basic and diluted	$	(15,947	)	$	(9,580	)	$	(38,728	)	$	(19,433	)
Weighted-average common shares outstanding-basic and diluted		21,484,955			944,706			20,226,923			934,286
Net loss per share attributable to common stockholders-basic and diluted	$	(0.74	)	$	(10.14	)	$	(1.91	)	$	(20.80	)

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

DISC MEDICINE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share and per share amounts)

(Unaudited)


	Convertible Preferred Stock
	Series Seed $0.0001 Par Value				Series A $0.0001 Par Value				Series B $0.0001 Par Value				Common Stock $0.0001 Par Value				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance at December 31, 2021		5,000,000	$	2,350		41,666,666	$	49,762		37,499,999	$	89,744		909,418	$	1	$	1,185	$	(65,389	)	$	(64,203	)
Issuance of common stock upon exercise of stock options		—		—		—		—		—		—		31,725		—		55		—			55
Vesting of restricted common stock		—		—		—		—		—		—		2,285		—		—		—			—
Stock-based compensation expense		—		—		—		—		—		—		—		—		332		—			332
Net loss		—		—		—		—		—		—		—		—		—		(9,853	)		(9,853	)
Balance at March 31, 2022		5,000,000	$	2,350		41,666,666	$	49,762		37,499,999	$	89,744		943,428	$	1	$	1,572	$	(75,242	)	$	(73,669	)
Issuance of common stock upon exercise of stock options		—		—		—		—		—		—		8,768		—		86		—			86
Vesting of restricted common stock		—		—		—		—		—		—		2,285		—		—		—			—
Stock-based compensation expense		—		—		—		—		—		—		—		—		382		—			382
Net loss		—		—		—		—		—		—		—		—		—		(9,580	)		(9,580	)
Balance at June 30, 2022		5,000,000	$	2,350		41,666,666	$	49,762		37,499,999	$	89,744		954,481	$	1	$	2,040	$	(84,822	)	$	(82,781	)

	Convertible Preferred Stock
	Series Seed $0.0001 Par Value				Series A $0.0001 Par Value				Series B $0.0001 Par Value				Common Stock $0.0001 Par Value				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2022		—	$	—		—	$	—		—	$	—		17,403,315	$	2	$	288,814	$	(112,216	)	$	176,600
Issuance of common stock upon exercise of stock options		—		—		—		—		—		—		74,753		—		1,067		—			1,067
Vesting of restricted common stock		—		—		—		—		—		—		958		—		—		—			—
Stock-based compensation expense		—		—		—		—		—		—		—		—		1,024		—			1,024
Sale of common stock in registered direct offering, net of issuance costs of $80		—		—		—		—		—		—		1,488,166		—		34,148		—			34,148
Sale of pre-funded warrants in registered direct offering, net of issuance costs of $66		—		—		—		—		—		—		—		—		28,206		—			28,206
Sale of common stock in at-the-market offerings, net of issuance costs of $408		—		—		—		—		—		—		608,050		—		14,591		—			14,591
Net loss		—		—		—		—		—		—		—		—