SEC Filing - Graybug Vision, Inc.

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gray-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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, 2021

☐	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 001-39538

GRAYBUG VISION, INC.

(Exact name of Registrant as specified in its Charter)

Delaware

45-2120079

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

203 Redwood Shores Parkway, Suite 620

Redwood City, CA 94065

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (650) 487-2800

275 Shoreline Drive, Suite 450, Redwood City, CA 94065

(Former name, former address and former fiscal year, if changed since last report)

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 $0.0001 per share		GRAY		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.

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 ☒

The number of shares of the Registrant’s common stock outstanding as of November 8, 2021 was 21,319,635.

Table of Contents

		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Balance Sheets (See Note 2)	4
	Condensed Statements of Operations (unaudited)	5
	Condensed Statements of Comprehensive Loss (unaudited)	6
	Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (unaudited)	7
	Condensed Statements of Cash Flows (unaudited)	9
	Notes to the Condensed Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	69
SIGNATURES		70

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Graybug” and the “Company” refer to Graybug Vision, Inc. This report contains references to trademarks belonging to other entities, which are the property of their respective holders. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of present and historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, prospective products, planned preclinical studies and clinical trials, regulatory approvals, research and development costs, and timing and likelihood of success, as well as plans and objectives of management for future operations, may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II. Item 1A “Risk Factors.” These risks and uncertainties include, but are not limited to:

•

our recently completed clinical trial of GB-102 and our planned clinical trials of GB-401;

•

our ability to identify and secure partner funding of further clinical trials of GB-102;

•

the success, cost and timing of our development activities, preclinical studies and clinical trials;

•

the translation of our preclinical results and data and early clinical trial results into future clinical trials in humans;

•

the effects of the ongoing COVID-19 pandemic, and the corresponding responses of businesses and governments, on our business and financial results;

•

the timing or likelihood of regulatory filings and approvals;

•

our ability to receive the required regulatory approvals to market and sell our products in the United States and other countries;

•

our ability to develop sales and marketing capabilities;

•

the rate and degree of market acceptance of any products we are able to commercialize;

•

the effects of increased competition as well as innovations by new and existing competitors in our market;

•

our ability to obtain funding for our operations;

•

our ability to establish and maintain collaborations;

•

our ability to effectively manage our anticipated growth;

•

our ability to maintain, protect and enhance our intellectual property rights and proprietary technologies;

•

our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;

•

costs associated with defending intellectual property infringement, product liability and other claims;

•

regulatory developments in the United States and other foreign countries;

•

our ability to attract and retain qualified employees;

•

our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act; and

•

statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and stock performance.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

GRAYBUG VISION, INC.

Condensed Balance Sheets

(in thousands)

	September 30, 2021			December 31, 2020
	(unaudited)			(See Note 2)
Assets
Current assets:
Cash and cash equivalents	$	11,452		$	33,418
Short-term investments		61,102			61,615
Prepaid expenses and other current assets		1,942			4,207
Total current assets		74,496			99,240
Property and equipment, net		2,113			1,946
Prepaid expenses and other non-current assets		29			608
Total assets	$	76,638		$	101,794
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,066		$	2,513
Accrued research and development		264			1,356
Other current liabilities		2,160			3,128
Total current liabilities		4,490			6,997
Deferred rent, long-term portion		12			11
Total liabilities		4,502			7,008
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock		—			—
Common stock		2			2
Additional paid-in capital		232,641			228,155
Accumulated deficit		(160,513	)		(133,367	)
Accumulated other comprehensive income (loss)		6			(4	)
Total stockholders’ equity		72,136			94,786
Total liabilities and stockholders’ equity	$	76,638		$	101,794

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

Condensed Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Operating expenses:
Research and development	$	4,021		$	4,757		$	14,635		$	15,474
General and administrative		3,996			2,064			12,611			5,183
Total operating expenses		8,017			6,821			27,246			20,657
Loss from operations		(8,017	)		(6,821	)		(27,246	)		(20,657	)
Interest income		28			3			100			120
Change in fair value of preferred stock tranche obligation		—			2,102			—			2,158
Net loss		(7,989	)		(4,716	)		(27,146	)		(18,379	)
Cumulative dividends on convertible preferred stock		—			(2,396	)		—			(7,189	)
Net loss attributable to common stockholders	$	(7,989	)	$	(7,112	)	$	(27,146	)	$	(25,568	)
Net loss per common share—basic and diluted	$	(0.38	)	$	(2.52	)	$	(1.28	)	$	(13.74	)
Weighted-average number of shares outstanding used in computing net loss per common share—basic and diluted		21,287,498			2,818,349			21,153,185			1,861,229

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

Condensed Statements of Comprehensive Loss

(in thousands)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net loss	$	(7,989	)	$	(4,716	)	$	(27,146	)	$	(18,379	)
Unrealized gain (loss) on available-for-sale securities, net of tax		—			—			10			(3	)
Comprehensive loss	$	(7,989	)	$	(4,716	)	$	(27,136	)	$	(18,382	)

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

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

(in thousands, except share amounts)

(Unaudited)

	Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance—December 31, 2020		—	$	—		20,979,265	$	2	$	228,155	$	(133,367	)	$	(4	)	$	94,786
Stock issued on exercise of stock options		—		—		76,679		—		92		—			—			92
Stock-based compensation expense		—		—		—		—		1,129		—			—			1,129
Net loss		—		—		—		—		—		(11,449	)		—			(11,449	)
Unrealized gain on available-for-sale securities, net of tax		—		—		—		—		—		—			4			4
Balance—March 31, 2021		—	$	—		21,055,944	$	2	$	229,376	$	(144,816	)	$	—		$	84,562
Stock issued on exercise of stock options		—		—		228,732		—		495		—			—			495
Stock-based compensation expense		—		—		—		—		1,312		—			—			1,312
Net loss		—		—		—		—		—		(7,708	)		—			(7,708	)
Unrealized gain on available-for-sale securities, net of tax		—		—		—		—		—		—			6			6
Balance—June 30, 2021		—	$	—		21,284,676	$	2	$	231,183	$	(152,524	)	$	6		$	78,667
Stock issued on exercise of stock options		—		—		11,915		—		27		—			—			27
Issuance of common stock upon vesting of restricted stock units		—		—		20,000		—		—		—			—			—
Stock-based compensation expense		—		—		—		—		1,431		—			—			1,431
Net loss		—		—		—		—		—		(7,989	)		—			(7,989	)
Balance—September 30, 2021		—	$	—		21,316,591	$	2	$	232,641	$	(160,513	)	$	6		$	72,136

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

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

(in thousands, except share amounts)

(Unaudited)

	Convertible Preferred Stock						Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares			Amount			Shares		Amount		Capital		Deficit			Income (Loss)			Deficit
Balance—December 31, 2019		117,809,883		$	131,363			1,371,467	$	—	$	2,879	$	(105,836	)	$	3		$	(102,954	)
Stock issued on exercise of stock options		—			—			5,446		—		11		—			—			11
Stock-based compensation expense		—			—			—		—		226		—			—			226
Net loss		—			—			—		—		—		(7,794	)		—			(7,794	)
Unrealized loss on available-for-sale securities, net of tax		—			—			—		—		—		—			(3	)		(3	)
Balance—March 31, 2020		117,809,883		$	131,363			1,376,913	$	—	$	3,116	$	(113,630	)	$	—		$	(110,514	)
Stock issued on exercise of stock options		—			—			5,287		—		12		—			—			12
Stock-based compensation expense		—			—			—		—		214		—			—			214
Net loss		—			—			—		—		—		(5,869	)		—			(5,869	)
Balance—June 30, 2020		117,809,883			131,363			1,382,200		—		3,342		(119,499	)		—			(116,157	)
Issuance of common stock upon the initial public offering, net								5,625,000	$	1	$	79,528	$	—		$	—		$	79,529
Conversion of convertible preferred stock into common stock upon the initial public offering		(117,809,883	)	$	(131,363	)		13,085,913	$	1	$	131,362	$	—		$	—		$	131,363
Stock issued on exercise of stock options		—			—			42,402		—		54		—			—			54
Stock-based compensation expense		—			—			—		—		561		—			—			561
Net loss		—			—			—		—		—		(4,716	)		—			(4,716	)
Balance—September 30, 2020		—			—			20,135,515		2		214,847		(124,215	)		—			90,634

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
Operating activities:
Net loss	$	(27,146	)	$	(18,379	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		3,872			1,001
Depreciation		383			284
Change in fair value of preferred stock tranche obligation		—			(2,158	)
Accretion of premium and discounts on investments, net		74			(17	)
Changes in operating assets and liabilities:
Prepaid expenses and other current and non-current assets		2,844			227
Accounts payable		(513	)		(1,204	)
Accrued research and development		(1,092	)		(1,310	)
Other current and non-current liabilities		(968	)		(747	)
Deferred rent, long term portion		1			10
Net cash used in operating activities		(22,545	)		(22,293	)
Investing activities:
Purchases of property and equipment		(484	)		(197	)
Purchases of investments		(72,610	)		—
Maturity of investments		73,059			20,100
Net cash (used in) provided by investing activities		(35	)		19,903
Financing activities:
Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions.		—			83,700
Proceeds from exercise of stock options		614			77
Payment of offering costs