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 SEPTEMBER 30, 2022

or

☐ 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  ☒    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 October 25, 2022, the registrant had 54,462,518 shares of common stock outstanding.

Avidity Biosciences, Inc.

FORM 10-Q

TABLE OF CONTENTS

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	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
SIGNATURES		34

2

PART I - FINANCIAL INFORMATION

Item 1.  Condensed Financial Statements (unaudited)

Avidity Biosciences, Inc.

Condensed Balance Sheets

(in thousands, except par value)

	September 30, 2022			December 31, 2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	143,699		$	320,448
Marketable securities		261,849			85,095
Prepaid and other assets		8,916			5,598
Total current assets		414,464			411,141
Property and equipment, net		6,037			4,805
Restricted cash		251			251
Right-of-use assets		9,264			10,784
Other assets		523			599
Total assets	$	430,539		$	427,580
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	26,375		$	14,085
Accrued compensation		7,747			8,940
Lease liabilities, current portion		3,090			1,769
Deferred revenue, current portion		5,454			4,864
Total current liabilities		42,666			29,658
Lease liabilities, net of current portion		8,185			9,960
Deferred revenue, net of current portion		2,706			6,532
Total liabilities		53,557			46,150
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.0001 par value; authorized shares – 400,000; issued and    outstanding shares – 54,446 and 47,754 at September 30, 2022 and    December 31, 2021, respectively		5			5
Additional paid-in capital		688,513			566,161
Accumulated other comprehensive loss		(3,463	)		(187	)
Accumulated deficit		(308,073	)		(184,549	)
Total stockholders’ equity		376,982			381,430
Total liabilities and stockholders’ equity	$	430,539		$	427,580

See accompanying notes.

3

Avidity Biosciences, Inc.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Collaboration revenue	$	2,482		$	2,163		$	6,455		$	7,474
Operating expenses:
Research and development		37,317			24,831			104,794			68,214
General and administrative		10,094			6,612			27,349			18,764
Total operating expenses		47,411			31,443			132,143			86,978
Loss from operations		(44,929	)		(29,280	)		(125,688	)		(79,504	)
Other income (expense):
Interest income		1,342			17			2,203			49
Other expense		(12	)		(11	)		(39	)		(16	)
Total other income		1,330			6			2,164			33
Net loss		(43,599	)		(29,274	)		(123,524	)		(79,471	)
Other comprehensive income (loss):
Net unrealized (losses) gains on marketable    securities		(477	)		(1	)		(3,276	)		4
Comprehensive loss	$	(44,076	)	$	(29,275	)	$	(126,800	)	$	(79,467	)
Net loss per share, basic and diluted	$	(0.82	)	$	(0.68	)	$	(2.45	)	$	(2.01	)
Weighted-average shares outstanding, basic and    diluted		53,069			43,265			50,432			39,477

See accompanying notes.

4

Avidity Biosciences, Inc.

Condensed Statements of Stockholders' Equity

(in thousands)

(unaudited)

	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Loss			Deficit			Equity
Balance at December 31, 2021		47,754	$	5	$	566,161	$	(187	)	$	(184,549	)	$	381,430
Issuance of common stock upon exercise    of stock options		7		—		10		—			—			10
Vesting of early exercise options		—		—		1		—			—			1
Issuance of common stock in public offerings,    net of issuance costs of $745		1,520		—		24,103		—			—			24,103
Stock-based compensation		—		—		6,238		—			—			6,238
Net loss		—		—		—		—			(34,235	)		(34,235	)
Other comprehensive loss		—		—		—		(1,839	)		—			(1,839	)
Balance at March 31, 2022		49,281	$	5	$	596,513	$	(2,026	)	$	(218,784	)	$	375,708
Issuance of common stock upon exercise    of stock options		5		—		4		—			—			4
Issuance of common stock in public offerings,    net of issuance costs of $1,184		2,746		—		38,281		—			—			38,281
Issuance of common stock under employee    stock purchase plan		49		—		499		—			—			499
Vesting of early exercise options		—		—		1		—			—			1
Stock-based compensation		—		—		6,508		—			—			6,508
Net loss		—		—		—		—			(45,690	)		(45,690	)
Other comprehensive loss		—		—		—		(960	)		—			(960	)
Balance at June 30, 2022		52,081	$	5	$	641,806	$	(2,986	)	$	(264,474	)	$	374,351
Issuance of common stock upon exercise    of stock options		270		—		303		—			—			303
Issuance of common stock in public offering,    net of issuance costs of $1,216		2,095		—		39,317								39,317
Vesting of early exercise options		—		—		1		—			—			1
Stock-based compensation		—		—		7,086		—			—			7,086
Net loss		—		—		—		—			(43,599	)		(43,599	)
Other comprehensive loss		—		—		—		(477	)		—			(477	)
Balance at September 30, 2022		54,446	$	5	$	688,513	$	(3,463	)	$	(308,073	)	$	376,982

See accompanying notes.

5

Avidity Biosciences, Inc.

Condensed Statements of Stockholders' Equity

(in thousands)

(unaudited)

	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Loss			Deficit			Equity
Balance at December 31, 2020		37,569	$	4	$	372,764	$	(5	)	$	(66,540	)	$	306,223
Issuance of common stock upon exercise    of stock options		31		—		24		—			—			24
Vesting of early exercise options		—		—		10		—			—			10
Stock-based compensation		—		—		3,701		—			—			3,701
Net loss		—		—		—		—			(23,844	)		(23,844	)
Other comprehensive gain		—		—		—		2			—			2
Balance at March 31, 2021		37,600	$	4	$	376,499	$	(3	)	$	(90,384	)	$	286,116
Issuance of common stock upon exercise    of stock options		51		—		98		—			—			98
Issuance of common stock under employee    stock purchase plan		14		—		318		—			—			318
Vesting of early exercise options		—		—		9		—			—			9
Stock-based compensation		—		—		4,289		—			—			4,289
Net loss		—		—		—		—			(26,353	)		(26,353	)
Other comprehensive gain		—		—		—		3			—			3
Balance at June 30, 2021		37,665	$	4	$	381,213	$	—		$	(116,737	)	$	264,480
Issuance of common stock upon exercise    of stock options		32		—		34		—			—			34
Vesting of early exercise options		—		—		6		—			—			6
Issuance of common stock in public offering,    net of issuance costs of $10,518		9,200		1		155,081		—			—			155,082
Stock-based compensation		—		—		4,550		—			—			4,550
Net loss		—		—		—		—			(29,274	)		(29,274	)
Other comprehensive loss		—		—		—		(1	)		—			(1	)
Balance at September 30, 2021		46,897	$	5	$	540,884	$	(1	)	$	(146,011	)	$	394,877

See accompanying notes.

6

Avidity Biosciences, Inc.

Condensed Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities
Net loss	$	(123,524	)	$	(79,471	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,006			431
Stock-based compensation expense		19,832			12,540
Amortization of premiums and discounts on marketable securities, net		184			87
Gain on disposal of property and equipment		—			(16	)
Changes in operating assets and liabilities:
Prepaid and other assets		(3,242	)		(5,654	)
Accounts payable and accrued liabilities		12,028			3,869
Accrued compensation		(1,193	)		3,001
Operating lease right-of-use assets and liabilities, net		1,066			449
Deferred revenue		(3,236	)		(3,834	)
Net cash used in operating activities		(97,079	)		(68,598	)
Cash flows from investing activities
Maturities of marketable securities		85,975			3,580
Purchases of marketable securities		(266,189	)		—
Purchases of property and equipment		(1,973	)		(2,033	)
Net cash (used in) provided by investing activities		(182,187	)		1,547
Cash flows from financing activities
Proceeds from issuance of common stock in public offerings, gross		104,846			165,600
Payment of issuance costs related to public offerings		(3,145	)		(10,399	)
Proceeds from issuance of common stock under employee stock   purchase plan		499			318
Proceeds from exercise of stock options		317			156
Payment of deferred financing costs		—			(73	)
Net cash provided by financing activities		102,517			155,602
Net (decrease) increase in cash, cash equivalents and restricted cash		(176,749	)		88,551
Cash, cash equivalents and restricted cash at beginning of period		320,699			321,713
Cash, cash equivalents and restricted cash at end of period	$	143,950		$	410,264
Supplemental schedule of noncash investing and financing activities:
Costs incurred, but not paid, in connection with public offering    included in accounts payable and accrued liabilities	$	—		$	119
Costs incurred, but not paid, in connection with deferred financing costs    included in accounts payable and accrued liabilities	$	—		$	61
Costs incurred, but not paid, in connection with purchases of property    and equipment included in accounts payable and accrued liabilities	$	485		$	134

See accompanying notes.

7

Avidity Biosciences, Inc.

Notes to Unaudited Condensed Financial Statements

1. Description of Business and Basis of Presentation

Description of Business

Avidity Biosciences, Inc. (the Company or Avidity) is a biopharmaceutical company committed to delivering a new class of RNA therapeutics called Antibody Oligonucleotide Conjugates (AOCs). The Company’s proprietary AOC platform is designed to combine the specificity of monoclonal antibodies with the precision of RNA therapeutics to target the root cause of diseases previously untreatable with such therapeutics.

Liquidity

On June 16, 2020, the Company completed its initial public offering (IPO), and it has since raised additional financing through additional public offerings and a sales agreement which are described further in Note 8 (Stockholders’ Equity).

To date, the Company has devoted substantially all of its resources to organizing and staffing the Company, business planning, raising capital, developing its proprietary AOC platform, identifying potential product candidates, establishing its intellectual property portfolio, conducting research, preclinical and clinical studies, and providing other general and administrative support for these operations. In addition, the Company has a limited operating history, has incurred operating losses since inception and expects that it will continue to incur net losses into the foreseeable future as it continues the development of its product candidates and development programs. As of September 30, 2022, the Company had an accumulated deficit of $308.1 million and cash, cash equivalents and marketable securities of $405.5 million.

The Company believes that existing cash, cash equivalents and marketable securities will be sufficient to fund the Company’s operations for at least 12 months from the date of the filing of this Form 10-Q. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. If the Company is not able to secure adequate additional funding, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or delay or reduce the scope of its planned development programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s annual report on Form 10-K filed with the SEC on March 1, 2022.

2. Summary of Significant Accounting Policies

Use of Estimates

The Company’s condensed financial statements are prepared in accordance with GAAP, which requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the condensed financial statements and accompanying notes. The most significant estimates in the Company’s condensed financial statements relate to revenue recognition, stock-based compensation, and accrued research and development costs. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

8

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. Restricted cash represents cash held as collateral for the letter of credit required under the Company’s facility lease and is reported as a long-term asset in the accompanying condensed balance sheets.

Marketable Securities

The Company’s marketable securities primarily consist of U.S. Government and corporate debt securities. The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the condensed balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the condensed statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than one year as current assets because such marketable securities are available to fund the Company’s current operations. Realized gains and losses are calculated on the specific identification method and recorded as interest income. There were no realized gains and losses during any of the periods presented.

At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the unrealized loss is other-than-temporary. When the Company determines that a decline in the fair value below its cost basis is other-than-temporary, the Company recognizes an impairment loss in the period in which the other-than-temporary decline occurred. There have been no other-than-temporary impairments recognized during any of the periods presented.

See Note 4 (Marketable Securities) for further information.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial position of the depository institutions in which those deposits are held. Additionally, the Company has established guidelines regarding approved investments, credit quality, diversification, liquidity and maturities of investments, which are designed to maintain safety and liquidity.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

None of the Company’s non-financial assets are recorded at fair value on a non-recurring basis. The carrying amounts reflected in the Company’s condensed balance sheets for prepaid and other assets and accounts payable and accrued liabilities approximate their fair values due to their short-term nature. The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. No transfers between levels have occurred during the periods presented.

9

See Note 3 (Fair Value Measurements) for information on assets measured at fair value.

Property and Equipment, net

Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the related assets, which ranges from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease term. Repairs and maintenance charges that do not increase the useful life of the assets are charged to operating expenses as incurred.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company has not recognized any impairment losses in any of the periods presented in these condensed financial statements.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by management in making decisions regarding resource allocation and assessing performance. The Company manages its operations as a single operating segment in the United States for the purposes of assessing performance and making operating decisions.

Revenue Recognition

To date, all the Company’s revenue has been derived from collaboration and research agreements. The terms of these arrangements include the following types of payments to the Company: non-refundable, upfront license fees; development, regulatory and commercial milestone payments; payments for research and development services provided by the Company or for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products.  

The Company performs the following steps in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of these agreements: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, the Company satisfies each performance obligation.

The Company receives payments from its collaborators based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under its research and collaboration arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

See Note 5 (Collaboration, License and Research Agreements) for further information.

Research and Development Costs

Research and development costs are expensed as incurred and include salaries, benefits and stock-based compensation associated with research and development personnel, third-party research and development expenses, license fees, laboratory supplies, facilities, overhead costs, and consultants. Nonrefundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

Upfront and milestone payments to acquire contractual rights to licensed technology are expensed when incurred if there is uncertainty in the Company receiving future economic benefit from the acquired contractual rights. Certain of these contractual rights may require the Company to make additional milestone payments upon initiation of a pivotal trial and the U.S. Food and Drug Administration approval, which are not expected to exceed $8.5 million.

10

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification (ASC) 740, Income Taxes, which provides for deferred taxes using the asset and liability method. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

The Company is subject to taxation in the United States and various state jurisdictions. As of December 31, 2021, the Company’s tax years since conversion to a corporation in 2019 are subject to examination by taxing authorities.

Stock-Based Compensation

Stock-based compensation expense for employee and non-employee stock option grants is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period (usually the vesting period) of the stock-based award, and forfeitures are recognized as incurred. Stock-based compensation expense for employee stock purchases under the Company’s Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of fair value for stock-based compensation requires management to make estimates and judgments about, among other things, the estimated life of options and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on marketable securities. Comprehensive gains (losses) have been reflected in the statements of operations and comprehensive loss for all periods presented.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, adjusted for the weighted-average number of common shares outstanding that are subject to repurchase or forfeiture. The Company has excluded 8,936 and 22,158 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three months ended September 30, 2022 and 2021, respectively, and 11,435 and 39,345 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the nine months ended September 30, 2022 and 2021, respectively. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be anti-dilutive.

11

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

	September 30,
	2022		2021
Common stock options issued and outstanding		9,093		5,649
Common stock subject to repurchase or forfeiture		8		18
ESPP shares pending issuance		27		12
Total		9,128		5,679

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Statements (Topic 326), which intends to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as available-for-sale debt securities. Subsequent to the issuance of ASU 2016-13, the FASB issued several additional Accounting Standard Updates (ASUs) to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company was a smaller reporting company at the determination date, and therefore the new standard will be effective for the Company on January 1, 2023. The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 may have on its financial statements and related disclosures.

3. Fair Value Measurements

The Company determines the fair value of its marketable securities based on one or more valuations from its investment accounting and reporting service provider. The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by an industry-recognized valuation service. Such valuations may be based on trade prices in active markets for identical assets (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets, yield curves, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, and broker and dealer quotes, as well as other relevant economic measures.

The following tables summarize the Company’s marketable securities measured at fair value (in thousands):

			Fair Value Measurements Using
As of September 30, 2022	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	$	236,553	$	236,553	$	—	$	—
U.S. Government agency securities		4,927		—		4,927		—
Negotiable certificates of deposit		3,340		—		3,340		—
Corporate debt securities		17,029		—		17,029		—
Total	$	261,849	$	236,553	$	25,296	$	—

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			Fair Value Measurements Using
As of December 31, 2021	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	$	65,372	$	65,372	$	—	$	—
Negotiable certificates of deposit		3,873		—		3,873		—
Corporate debt securities		15,850		—		15,850		—
Total	$	85,095	$	65,372	$	19,723	$	—

4. Marketable Securities

The Company’s marketable securities, which consist of highly liquid marketable debt securities, are classified as available-for-sale and are stated at fair value. The following tables summarize the Company’s marketable securities (in thousands):

As of September 30, 2022	Maturity (in years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
U.S. Treasury securities	1 or less	$	197,652	$	—	$	(1,938	)	$	195,714
U.S. Government agency securities	1 or less		5,000		—		(73	)		4,927
Negotiable certificates of deposit	1 or less		2,683		—		(48	)		2,635
Corporate debt securities	1 or less		16,131		—		(344	)		15,787
U.S. Treasury securities	1 - 2		41,823		—		(984	)		40,839
Negotiable certificates of deposit	1 - 2		734		—		(29	)		705
Corporate debt securities	1 - 2		1,289		—		(47	)		1,242
Total		$	265,312	$	—	$	(3,463	)	$	261,849

As of December 31, 2021	Maturity (in years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
U.S. Treasury securities	1 or less	$	2,492	$	—	$	(1	)	$	2,491
Negotiable certificates of deposit	1 or less		1,190		—		(1	)		1,189
U.S. Treasury securities	1 - 2		63,034		—		(153	)		62,881
Negotiable certificates of deposit	1 - 2		2,687		—		(3	)		2,684
Corporate debt securities	1 - 2		15,879		—		(29	)		15,850
Total		$	85,282	$	—	$	(187	)	$	85,095

The unrealized losses on the Company’s marketable securities of $3.5 million as of September 30, 2022 were caused by interest rate increases which resulted in the decrease in market value of these securities. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those marketable securities to be other-than-temporarily impaired at September 30, 2022. None of the Company’s marketable securities have been in a continuous unrealized loss position for 12 months or greater as of September 30, 2022.

5. Collaboration, License and Research Agreements

Research Collaboration and License Agreement with Eli Lilly and Company

In April 2019, the Company entered into a Research Collaboration and License Agreement (the Lilly Agreement) with Eli Lilly and Company (Lilly) for the discovery, development and commercialization of AOC products directed against certain targets in immunology and other select indications on a worldwide basis. Under the Lilly Agreement, the Company granted Lilly an exclusive, worldwide, royalty-bearing license, with the right to sublicense (subject to certain conditions), under the Company’s technology to research, develop, manufacture and sell products containing AOCs that are directed to up to six mRNA targets. The Company retains the right to use its technology to perform its obligations under the Lilly Agreement and for all purposes not granted to Lilly. The Company agreed that it will not, itself or with a third party, research, develop, manufacture or commercialize or otherwise exploit any compound or product directed against targets subject to the Lilly Agreement.

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In consideration of the rights granted to Lilly under the Lilly Agreement, the Company received a one-time upfront fee of $20.0 million and is eligible to receive up to $60.0 million in development milestone payments per target, up to $140.0 million in regulatory milestone payments per target and up to $205.0 million in commercialization milestone payments per target. In addition, Lilly is obligated to reimburse the Company for research expenses, as defined in and incurred under the Lilly Agreement. Lilly is obligated to pay the Company a tiered royalty ranging from the mid-single to low-double digits on worldwide annual net sales of licensed products, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. Lilly’s royalty obligations and the Lilly Agreement will expire on a licensed product-by-licensed product and country-by-country basis on the later of ten years from the date of the first commercial sale or when there is no longer a valid patent claim covering such licensed product in such country.

The Company has identified multiple promises to deliver goods and services, which include at inception of the agreement: (i) a license to technology and patents, information and know-how; and (ii) collaboration, including research services, technical and regulatory support provided by the Company. At inception and through September 30, 2022, the Company has identified one performance obligation for all the deliverables under the Lilly Agreement since the delivered elements are either not capable of being distinct or are not distinct within the context of the contract. Accordingly, the Company will recognize revenue for the fixed or determinable collaboration in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses over the five-year period over which it expects to deliver its performance obligations. The Company periodically reviews and updates the estimated collaboration expenses, when appropriate, which adjusts the percentage of revenue that is recognized for the period. In connection with the Lilly Agreement, the Company recognized revenue of $2.4 million and $2.1 million for the three months ended September 30, 2022 and 2021, respectively, and $6.3 million and $7.3 million for the nine months ended September 30, 2022 and 2021, respectively, and had deferred revenue of $8.0 million and $11.1 million as of September 30, 2022 and December 31, 2021, respectively. Collaboration receivables related to the Lilly Agreement were $1.3 million and $0.9 million as of September 30, 2022 and December 31, 2021, respectively, which are included in prepaid and other assets on the condensed balance sheets.

A reconciliation of the closing balance of deferred revenue related to the Lilly Agreement is as follows (in thousands):

Balance at December 31, 2021	$	11,108
Revenue recognized		(3,068	)
Balance at September 30, 2022	$	8,040

Research Agreement with MyoKardia, Inc.

In December 2020, the Company entered into a research collaboration (the MyoKardia Agreement) with MyoKardia, Inc. (MyoKardia), a wholly-owned subsidiary of Bristol Myers Squibb, to demonstrate the potential utility of AOCs in cardiac tissue by leveraging MyoKardia’s genetic cardiomyopathy platform including, among other aspects, its novel target discovery engine and proprietary cardiac disease models. In connection with the MyoKardia Agreement, the Company recognized revenue of $36.7 thousand and $0.2 million for the three months ended September 30, 2022 and 2021, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively.

6. Property and Equipment, net

Property and equipment consist of the following (in thousands):

	September 30, 2022			December 31, 2021
Laboratory equipment	$	6,788		$	4,775
Computers and software		116			116
Office furniture and equipment		1,623			1,398
Leasehold improvements		249			249
Property and equipment, gross		8,776			6,538
Less accumulated depreciation		(2,739	)		(1,733	)
Total property and equipment, net	$	6,037		$	4,805

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Depreciation expense related to property and equipment was $0.4 million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively, and $1.0 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively.

7. Commitments and Contingencies

Lease Agreements

The Company determines if an arrangement is a finance lease, operating lease or short-term lease at inception, or as applicable, and accounts for the arrangement under the relevant accounting literature. During the periods presented, the Company was party to various non-cancellable office and laboratory space operating leases and short-term leases. Under the relevant guidance, the Company recognizes operating lease right-of-use (ROU) assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date, using the Company’s assumed incremental borrowing rate, and amortizes the ROU assets and liabilities over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Short-term leases are not subject to recognition of an ROU asset or liability or straight-line lease expense requirements.

As of September 30, 2022, future minimum payments for the Company’s operating lease liabilities are as follows (in thousands):

Year ending December 31,
2022 (remaining)	$	767
2023		3,113
2024		3,207
2025		3,303
2026		3,111
Total lease payments		13,501
Less imputed interest		(2,226	)
Total operating lease liabilities		11,275
Less lease liabilities, current portion		(3,090	)
Lease liabilities, net of current portion	$	8,185

Supplemental cash flow information related to cash paid for amounts included in the measurement of operating lease liabilities was as follows (in thousands):

	Nine Months Ended September 30,
	2022		2021
Cash paid included in operating cash flows	$	1,002	$	—

Rent expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating leases	$	689	$	150	$	2,068	$	449
Short-term leases		26		78		26		159
Total rent expense	$	715	$	228	$	2,094	$	608

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. There are no matters currently outstanding for which any liabilities have been accrued.

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8. Stockholders’ Equity

Amended and Restated Certificate of Incorporation

On June 16, 2020, the Company’s certificate of incorporation was amended and restated to authorize 400,000,000 shares of common stock and 40,000,000 shares of undesignated preferred stock, each with a par value of $0.0001 per share. There was no preferred stock issued for any of the periods presented in the condensed financial statements.

Common Stock

On June 16, 2020, the Company completed its IPO in which it sold 16,560,000 shares of common stock at an offering price of $18.00 per share. Proceeds from the IPO, net of underwriting discounts, commissions and offering costs, were $274.1 million.

On July 2, 2021, the Company entered into a sales agreement (the 2021 Sales Agreement) with Cowen and Company, LLC (the Sales Agent), under which the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $150.0 million through the Sales Agent. Sales of the Company’s common stock made pursuant to the 2021 Sales Agreement are made under the Company’s shelf registration statement on Form S-3, which became automatically effective upon filing on July 2, 2021 (the Shelf Registration Statement). In addition, the 2021 Sales Agreement may be terminated by the Company or the Sales Agent at any time upon ten days’ notice to the other party, or by the Sales Agent, with respect to itself, at any time in certain circumstances, including the occurrence of a material adverse change. During the nine months ended September 30, 2022, the Company sold 6,361,212 shares of its common stock pursuant to the 2021 Sales Agreement and received net proceeds of $101.7 million, after deducting offering-related transaction costs and commissions. Through September 30, 2022, the Company has sold 7,141,761 shares of its common stock pursuant to the 2021 Sales Agreement and received net proceeds of $121.3 million, after deducting offering-related transaction costs and commissions. See Note 10 (Subsequent Events) for information on additional shares sold after September 30, 2022.

On August 6, 2021, the Company completed a public offering of 9,200,000 shares of its common stock at a public offering price of $18.00 per share. The net proceeds from the offering were $155.1 million, after deducting underwriting discounts, commissions and offering costs. The shares sold in the offering were registered pursuant to the Company’s Shelf Registration Statement.

Equity Incentive Plans

In January 2013, the Company adopted the 2013 Equity Incentive Plan (the 2013 Plan). The 2013 Plan provided for the issuance of incentive units to employees and nonemployees of the Company and non‑statutory unit options, restricted unit awards, unit appreciation rights, and unit bonuses to directors, employees and consultants of the Company. Under the 2013 Plan, 2,127,013 units were initially reserved for issuance. Upon the conversion of the Company to a C corporation, the 2013 Plan continued on the same terms and conditions. In 2019, the number of shares reserved under the 2013 Plan was increased to 4,771,615 shares.

In June 2020, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2020 Incentive Award Plan (the 2020 Plan), which became effective in connection with the IPO. Pursuant to the 2020 Plan, the Company ceased granting awards under the 2013 Plan. Under the 2020 Plan, the Company may grant stock options, restricted stock, dividend equivalents, restricted stock units, stock appreciation rights, and other stock or cash-based awards to individuals who are then employees, officers, non-employee directors or consultants of the Company. A total of 3,900,000 shares of common stock were initially reserved for issuance under the 2020 Plan. In addition, the number of shares of common stock available for issuance under the 2020 Plan will be increased annually on the first day of each fiscal year during the term of the 2020 Plan, beginning with the 2021 fiscal year, by an amount equal to the lesser of (a) 5% of the shares of common stock outstanding on the final day of the immediately preceding calendar year or (b) such smaller number of shares as determined by the Company’s board of directors. At September 30, 2022, 1,364,998 shares remain available for issuance under the 2020 Plan.

Stock Options

Options granted from the 2013 Plan and 2020 Plan are exercisable at various dates and will expire no more than ten years from their date of grant. Options generally vest over a four-year period. Prior to the IPO, the exercise price of options was determined by the Company’s board of directors. Following the IPO, the Company grants options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant.

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Stock option activity for employee and nonemployee awards and related information is as follows (in thousands, except per share data):

	Number of Options			Weighted- Average Exercise Price Per Share
Outstanding at December 31, 2021		5,778		$	14.49
Granted		4,040			15.42
Exercised		(282	)		1.12
Forfeited/expired		(443	)		16.60
Outstanding at September 30, 2022		9,093		$	15.22

The weighted-average grant date fair value of options granted during the nine months ended September 30, 2022 and 2021 were $11.08 and $16.83 per share, respectively.

Employee Stock Purchase Plan

In June 2020, the Company adopted the ESPP, which permits participants to contribute up to 15% of their eligible compensation during defined rolling six-month periods to purchase the Company’s common stock. The purchase price of the shares will be 85% of the lower of the fair market value of the Company’s common stock on the first day of trading of the offering period or on the applicable purchase date. The Company issued 48,760 and 14,235 shares of common stock under the ESPP during the nine months ended September 30, 2022 and 2021, respectively. The Company had an outstanding liability of $0.3 million at September 30, 2022, which is included in accounts payable and accrued liabilities on the condensed balance sheet, for employee contributions to the ESPP for shares pending issuance at the end of the offering period. As of September 30, 2022, 589,803 shares of common stock were available for issuance under the ESPP.

Stock-Based Compensation Expense

The assumptions used in the Black-Scholes model to determine the fair value of stock option grants and shares purchasable under the ESPP were as follows:

	Nine Months Ended September 30,
Stock Option Grants	2022	2021
Risk-free interest rate	1.5% - 3.4%	0.5% - 1.2%
Expected volatility	85%	87%-88%
Expected term (in years)	5.5 - 6.1	5.5 - 6.1
Expected dividend yield	—%	—%

	Nine Months Ended September 30,
ESPP	2022	2021
Risk-free interest rate	2.2%	0.1%
Expected volatility	79%	75%
Expected term (in years)	0.5	0.5
Expected dividend yield	—%	—%

The allocation of stock-based compensation expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development expense	$	4,151	$	2,433	$	10,948	$	6,930
General and administrative expense		2,935		2,117		8,884		5,610
Total stock-based compensation expense	$	7,086	$	4,550	$	19,832	$	12,540

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As of September 30, 2022, the unrecognized compensation cost related to outstanding time-based options was $68.3 million, which is expected to be recognized over a weighted-average period of 2.7 years. As of September 30, 2022, the unrecognized compensation cost related to stock purchase rights under the ESPP was $87.3 thousand, which is expected to be recognized over a weighted-average period of 0.2 years.

9. COVID-19

The COVID-19 outbreak in the United States has caused significant business disruption. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the continued spread of COVID-19 and the measures taken by the governmental authorities, and its impact on the Company’s preclinical studies and clinical trials, employees and vendors, all of which are uncertain and cannot be predicted, particularly as the Company advances its product candidates into and through clinical development. In December 2021, the Company transitioned to a hybrid model with its employees generally working both remotely and onsite, and the Company anticipates it will continue to use this model going forward. To date, the Company has not experienced material disruptions in its business operations. However, a prolonged outbreak could have a material adverse impact on the financial results and business operations of the Company, including the timing and ability of the Company to complete certain clinical trials and other efforts required to advance the development of its product candidates and raise additional capital.

10.    Subsequent Events

From October 1, 2022 through November 8, 2022, the Company sold 1,410,600 shares of its common stock pursuant to the 2021 Sales Agreement and received net proceeds of $19.4 million, after deducting offering-related transaction costs and commissions.

On November 8, 2022, the Company entered into a sales agreement (the 2022 Sales Agreement) with the Sales Agent, with substantially similar terms as the 2021 Sales Agreement described in Note 8 (Stockholders’ Equity). Under the 2022 Sales Agreement, the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $200.0 million through the Sales Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Sales Agent. The Company is not obligated to sell, and the Sales Agent is not obligated to buy or sell, any shares of common stock under the 2022 Sales Agreement. Upon entry into the 2022 Sales Agreement, the 2021 Sales Agreement was terminated.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q and with our audited financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations, both of which are contained in our annual report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission, or SEC, on March 1, 2022.

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategies and plans, research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned preclinical studies and clinical trials for our product candidates, the timing and likelihood of resolution of the partial clinical hold on our ongoing Phase 1/2 MARINA clinical trial, the timing and likelihood of regulatory filings and approvals for our product candidates, the impact of COVID-19 on our business, the timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated product development efforts, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other comparable terminology. These forward-looking statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors.” The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking 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.

Overview

We are a biopharmaceutical company committed to delivering a new class of RNA therapeutics called Antibody Oligonucleotide Conjugates, or AOCs. Our proprietary AOC platform is designed to combine the specificity of monoclonal antibodies, or mAbs, with the precision of RNA therapeutics to target the root cause of diseases previously untreatable with such therapeutics. We are initially focused on muscle diseases to demonstrate the capabilities of our AOCs, and have three muscle programs in clinical development. Our lead product candidate, AOC 1001, is designed to treat myotonic dystrophy type 1, or DM1, a rare monogenic muscle disease. AOC 1001 is currently in clinical testing with the ongoing Phase 1/2 MARINA^TM trial and the MARINA open label extension, or MARINA-OLE^TM, trial. The U.S. Food and Drug Administration, or FDA, placed a partial clinical hold on new participant enrollment in the Phase 1/2 MARINA clinical trial of AOC 1001 in September 2022. All participants, whether they are on AOC 1001 or placebo, may continue in their current dosing cohort although no additional participants may be enrolled until the partial clinical hold is resolved. All participants in MARINA may roll over into the MARINA-OLE where they will receive AOC 1001. The partial clinical hold is in response to a serious adverse event, or SAE, reported in a single participant in the 4mg/kg cohort of the MARINA study. We are working closely with the FDA and the trial investigator to assess the cause of this event and plan to take all necessary steps to resolve the partial clinical hold on new participant enrollment as quickly as possible.

In the fourth quarter of 2022, we plan to conduct a preliminary assessment of safety, tolerability and key biomarkers in approximately half of the trial participants from the MARINA study. The FDA and European Medicines Agency, or EMA, have granted Orphan Designation for AOC 1001. The FDA has also granted Fast Track Designation to AOC 1001 for the treatment of DM1.

Additionally, the FDA cleared us to proceed with Phase 1/2 trials for AOC 1020 and AOC 1044 under two INDs. AOC 1020 is designed to treat people living with facioscapulohumeral muscular dystrophy, or FSHD, and is currently in Phase 1/2 development with the FORTITUDE™ trial.  In the first half of 2024, we plan to conduct a preliminary assessment in approximately half of the study participants in the FORTITUDE trial. AOC 1044, the lead of three programs for the treatment of Duchenne muscular dystrophy, or DMD, and the first of our AOCs to deliver a phosphorodiamidate morpholino oligomers, or PMO, is currently in Phase 1/2 development with the EXPLORE44™ trial. EXPLORE44 is designed for people with DMD

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mutations amenable to exon 44 skipping. We plan to share results from the healthy volunteers portion of the EXPLORE44 trial in the second half of 2023. We are also broadening the development of AOCs beyond muscle tissues through both internal discovery efforts and key partnerships that are focused on immune cells, cardiac tissue and other cell types.

Since our inception in 2012, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, developing our proprietary AOC platform, identifying potential product candidates, establishing our intellectual property portfolio, conducting research, preclinical and clinical studies, and providing other general and administrative support for these operations. We have not generated any revenue from product sales. In June 2020, we completed our initial public offering, or IPO, and have since raised capital through additional public offerings, sales agreements, convertible preferred stock/units, convertible notes, and under collaboration and research service agreements. Refer to Liquidity and Capital Resources for further information on the capital raised since inception and the Company’s future capital requirements.

We have incurred operating losses in each year since inception. Our net losses were $118.0 million and $44.4 million for the years ended December 31, 2021 and 2020, respectively, and $123.5 million for the nine months ended September 30, 2022. As of September 30, 2022, we had an accumulated deficit of $308.1 million. We expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned preclinical studies and clinical trials, continue our research and development activities, utilize third parties to manufacture our product candidates and related raw materials, hire additional personnel and protect our intellectual property. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our preclinical studies and clinical trials and our expenditures on other research and development activities, as well as the generation of any collaboration and services revenue.

Based upon our current operating plans, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least 12 months from the date of the filing of this Form 10-Q. While we may generate revenue under our current and/or future collaboration agreements, we do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and may never occur. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

COVID-19

The COVID-19 outbreak in the United States has caused significant business disruption. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the continued spread of COVID-19 and the measures taken by the governmental authorities, and its impact on our preclinical studies and clinical trials, employees and vendors, all of which are uncertain and cannot be predicted, particularly as we advance our product candidates into and through clinical development. In December 2021, we transitioned to a hybrid model with our employees generally working both remotely and onsite, and we anticipate we will continue to use this model going forward. To date, we have not experienced material disruptions in our business operations. However, a prolonged outbreak could have a material adverse impact on our financial results and business operations, including the timing of and our ability to complete certain clinical trials and other efforts required to advance the development of our product candidates and raise additional capital.

Research Collaboration and License Agreement with Eli Lilly and Company

In April 2019, we entered into a Research Collaboration and License Agreement, or the Lilly Agreement, with Eli Lilly and Company, or Lilly, for the discovery, development and commercialization of AOC products in immunology and other select indications on a worldwide basis. Under the Lilly Agreement, we and Lilly will collaborate on preclinical research and discovery activities for such products, with Lilly being responsible for funding the cost of such activities by both parties. Lilly will also lead the clinical development, regulatory approval and commercialization of all such products, at its sole cost. We granted Lilly an exclusive, worldwide, royalty-bearing license, with the right to sublicense, under our technology to research, develop, manufacture, and sell products containing AOCs that are directed to up to six mRNA targets. We retain the right to use our technology to perform our obligations under the agreement and for all purposes not granted to Lilly. Lilly paid us

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an upfront license fee of $20.0 million in 2019, and we are eligible to receive up to $60.0 million in development milestone payments per target, up to $140.0 million in regulatory milestone payments per target and up to $205.0 million in commercialization milestone payments per target. We are eligible to receive a tiered royalty ranging from the mid-single to low-double digits from Lilly on worldwide annual net sales of licensed products, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory.

Components of Results of Operations

Revenue

Our revenue to date has been derived from payments received under the Lilly Agreement and other license and research collaboration agreements. For the foreseeable future, we may generate revenue from reimbursements of services under the Lilly Agreement, as well as a combination of upfront payments and milestone payments under our current and/or future collaboration agreements. We do not expect to generate any revenue from the sale of products unless and until such time that our product candidates have advanced through clinical development and regulatory approval, if ever. We expect that any revenue we generate, if at all, will fluctuate from quarter-to-quarter as a result of the timing and amount of payments relating to such services and milestones and the extent to which any of our products are approved and successfully commercialized. If we fail to complete preclinical and clinical development of product candidates or obtain regulatory approval for them, our ability to generate future revenues and our results of operations and financial position would be adversely affected.

Operating Expenses

Research and Development

Research and development expenses consist of external and internal costs associated with our research and development activities, including our discovery and research efforts, and the preclinical and clinical development of our product candidates. Our research and development expenses include:

• external costs, including expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturers, consultants and our scientific advisors; and

• internal costs, including;

o employee-related expenses, including salaries, benefits and stock-based compensation;

o the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study materials; and

o facilities, information technology and depreciation, which include direct and allocated expenses for rent and maintenance of facilities and depreciation of leasehold improvements and equipment.

Research and development costs, including costs reimbursed under the Lilly Agreement, are expensed as incurred, with reimbursements of such amounts being recognized as revenue. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received.

At any one time, we are working on multiple programs. Our internal resources, employees and infrastructure are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs. As such, we do not track internal costs on a specific program basis. The following table summarizes our external costs and internal costs for the periods presented (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
External costs	$	20,516	$	13,986	$	59,224	$	38,667
Internal costs:
Employee-related expenses		12,299		8,558		33,472		22,593
Facilities, lab supplies and other costs		4,502		2,287		12,098		6,954
Total internal costs		16,801		10,845		45,570		29,547
Total research and development expenses	$	37,317	$	24,831	$	104,794	$	68,214

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We expect our research and development expenses to increase for the foreseeable future as we continue to conduct our ongoing research and development activities, advance our preclinical research programs toward clinical development, including conducting IND-enabling studies, and conduct clinical trials. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for any of our product candidates.

The timelines and costs associated with research and development activities are uncertain, can vary significantly for each product candidate and development program, and are difficult to predict. We anticipate we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to preclinical and clinical results, regulatory developments, ongoing assessments as to each program’s commercial potential, and our ability to maintain or enter into new collaborations, to the extent we determine the resources or expertise of a collaborator would be beneficial for a given program. We will need to raise substantial additional capital in the future. In addition, we cannot forecast which development programs may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Our development costs may vary significantly based on factors such as:

• the number and scope of clinical, preclinical and IND-enabling studies;

• the timing and likelihood of resolution of the partial clinical hold on our ongoing Phase 1/2 MARINA clinical trial;

• per patient trial costs;

• the number of trials required for approval;

• the number of sites included in the trials;

• the countries in which the trials are conducted;

• the length of time required to enroll eligible patients;

• the number of patients that participate in the trials;

• the number of doses that patients receive;

• the drop-out or discontinuation rates of patients;

• potential additional safety monitoring requested by regulatory agencies;

• the duration of patient participation in the trials and follow-up;

• the cost and timing of manufacturing our product candidates;

• the phase of development of our product candidates; and

• the efficacy and safety profile of our product candidates.

General and Administrative

General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation, for employees in our executive, finance, accounting, legal, business development and support functions. Other general and administrative expenses include allocated facility, information technology and depreciation related costs not otherwise included in research and development expenses and professional fees for auditing, tax, intellectual property and legal services. Costs related to filing and pursuing patent applications are recognized as general and administrative expenses as incurred since recoverability of such expenditures is uncertain.

We expect our general and administrative expenses will increase for the foreseeable future to support our increased research and development and other corporate activities.

Other Income (Expense)

Other income (expense) consists primarily of interest earned on our cash, cash equivalents and marketable securities.

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Results of Operations

Comparison of the Three Months Ended September 30, 2022 and 2021

The following table summarizes our results of operations for the periods presented (in thousands):

	Three Months Ended September 30,				Increase
	2022		2021		(decrease)
Revenue	$	2,482	$	2,163	$	319
Research and development expenses		37,317		24,831		12,486
General and administrative expenses		10,094		6,612		3,482
Other income		1,330		6		1,324

Revenue

Revenue was $2.5 million for the three months ended September 30, 2022 compared to $2.2 million for the three months ended September 30, 2021. Revenue during both periods was primarily derived from the Lilly Agreement. The increase was primarily due to an increase of reimbursable internal costs driven by an increase in labor rates.

Research and Development Expenses

Research and development expenses were $37.3 million for the three months ended September 30, 2022 compared to $24.8 million for the three months ended September 30, 2021. External costs increased by $6.5 million and was primarily driven by contract services, manufacturing, and costs related to the progression of clinical trials and preclinical studies in the following programs: $1.2 million increase in costs related to the AOC 1001 program, a $0.4 million increase in costs related to the AOC 1020 program, $1.8 million increase in costs related to other potential programs, and $5.5 million in indirect costs primarily for the manufacture of antibodies, partially offset by a $2.4 million decrease in costs related to the AOC 1044 program consistent with the stage of the study.

Internal costs increased by $6.0 million driven by a $3.7 million increase of employee-related expenses, including $2.0 million for salaries and benefits and $1.7 million for stock-based compensation, both due to increased headcount, and a $2.3 million increase of costs related to lab supplies and facilities costs.

General and Administrative Expenses

General and administrative expenses were $10.1 million for the three months ended September 30, 2022 compared to $6.6 million for the three months ended September 30, 2021. The increase was primarily due to higher personnel costs, including $0.7 million for salaries and benefits and $0.8 million for stock-based compensation, and $1.4 million in professional fees to support our expanded operations.

Other Income

Other income was $1.3 million for the three months ended September 30, 2022 compared to $6.0 thousand for the three months ended September 30, 2021. The increase was primarily driven by higher interest income earned on marketable securities investments.

Comparison of the Nine Months Ended September 30, 2022 and 2021

The following table summarizes our results of operations for the periods presented (in thousands):

	Nine Months Ended September 30,				Increase
	2022		2021		(decrease)
Revenue	$	6,455	$	7,474	$	(1,019	)
Research and development expenses		104,794		68,214		36,580
General and administrative expenses		27,349		18,764		8,585
Other income		2,164		33		2,131

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Revenue

Revenue was $6.5 million for the nine months ended September 30, 2022 compared to $7.5 million for the nine months ended September 30, 2021. Revenue during both periods was primarily derived from the Lilly Agreement. The change was primarily due to a decrease in direct reimbursable collaboration-related expenses resulting in lower corresponding revenue under the Lilly Agreement.

Research and Development Expenses

Research and development expenses were $104.8 million for the nine months ended September 30, 2022 compared to $68.2 million for the nine months ended September 30, 2021.The increase was primarily driven by the $20.6 million increase in external costs associated with upfront license costs, contract services, increased product development costs and clinical costs related to the progression of clinical trials and preclinical studies in the following programs: a $6.1 million increase in costs related to the AOC 1020 program, $8.8 million increase in costs related to other potential programs, and $12.5 million in indirect costs primarily for the manufacture of antibodies, partially offset by a $3.8 million decrease in costs related to the AOC 1001 program consistent with the clinical stage and a $3.0 million decrease in costs related to the AOC 1044 program.

Internal costs increased by $16.0 million driven by a $10.9 million increase in employee-related expenses, including $6.9 million for salaries and benefits and $4.0 million for stock-based compensation, both due to increased headcount, and a $5.1 million increase of costs related to lab supplies and facilities costs.

General and Administrative Expenses

General and administrative expenses were $27.3 million for the nine months ended September 30, 2022 compared to $18.8 million for the nine months ended September 30, 2021. The increase was primarily due to higher personnel costs, including $1.5 million for salaries and benefits and $3.3 million for stock-based compensation, and $2.2 million in professional fees to support our expanded operations.

Other Income

Other income was $2.2 million for the nine months ended September 30, 2022 compared to $33 thousand for the nine months ended September 30, 2021. The increase was primarily driven by higher interest income earned on marketable securities investments.

Liquidity and Capital Resources

Sources of Liquidity

In June 2020, we completed our IPO of 16,560,000 shares of our common stock at a price to the public of $18.00 per share, including the exercise in full by the underwriters of their option to purchase 2,160,000 additional shares of our common stock. Including the option exercise, our aggregate net proceeds from the offering were $274.1 million, net of underwriting discounts, commissions and offering costs. In August 2021, we completed a public offering of 9,200,000 shares of our common stock at a public offering price of $18.00 per share, for aggregate net proceeds of $155.1 million, after deducting underwriting discounts, commissions and offering costs.

In July 2021, we entered into a sales agreement, or the 2021 Sales Agreement, with Cowen and Company, LLC, or the Sales Agent, under which we may, from time to time, sell shares of common stock having an aggregate offering price of up to $150.0 million through the Sales Agent. Through September 30, 2022, we have sold 7,141,761 shares of our common stock pursuant to the 2021 Sales Agreement and received net proceeds of $121.3 million, after deducting offering-related transaction costs and commissions. From October 1, 2022 through November 8, 2022, we sold 1,410,600 shares of our common stock pursuant to the 2021 Sales Agreement and received net proceeds of $19.4 million, after deducting offering-related transaction costs and commissions. Since our inception through September 30, 2022, other significant sources of capital raised to fund our operations were comprised of aggregate gross proceeds of $131.6 million from the sale and issuance of convertible preferred stock/units and convertible notes and $38.1 million from funding under collaboration and research services agreements.

On November 8, 2022, we entered into a new sales agreement, or the 2022 Sales Agreement, with the Sales Agent, with substantially similar terms as the 2021 Sales Agreement described above. Under the 2022 Sales Agreement, we may, from time to time, sell shares of our common stock having an aggregate offering price of up to $200.0 million through the Sales Agent.

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Future Capital Requirements

As of September 30, 2022, we had cash, cash equivalents and marketable securities of $405.5 million. Based upon our current operating plans, we believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least 12 months from the date of the filing of this Form 10-Q. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain.

Our future capital requirements are difficult to forecast and will depend on many factors, including but not limited to:

• the type, number, scope, progress, expansions, results, costs and timing of discovery, preclinical studies and clinical trials of our product candidates that we are pursuing or may choose to pursue in the future;

• the costs and timing of manufacturing for our product candidates and commercial manufacturing if any product candidate is approved;

• the costs, timing and outcome of regulatory review of our product candidates;

• the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;

• the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

• the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;

• the timing and amount of the milestone or other payments made to us under the Lilly Agreement or any future collaboration agreements;

• the costs and timing of establishing or securing sales and marketing capabilities if any product candidate is approved;

• our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products; and

• costs associated with any products or technologies that we may in-license or acquire.

While we may generate revenue under our current and/or future collaboration agreements, we do not expect to generate any revenues from product sales until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and may never occur. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including current and potential future collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed, on favorable terms or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Our failure to raise capital or enter into such other arrangements when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Cash Flows

The following table summarizes our cash flows for the periods presented (in thousands):

	Nine Months Ended September 30,
	2022			2021
Net cash provided by (used in):
Operating activities	$	(97,079	)	$	(68,598	)
Investing activities		(182,187	)		1,547
Financing activities		102,517			155,602
Net (decrease) increase in cash, cash equivalents    and restricted cash	$	(176,749	)	$	88,551

Operating Activities

Net cash used in operating activities was $97.1 million for the nine months ended September 30, 2022, which consisted primarily of cash used to fund our operations related to the development of AOC 1001, AOC 1044, AOC 1020 and other potential programs. Net cash used in operating activities was $68.6 million for the nine months ended September 30, 2021, which consisted primarily of cash used to fund our operations related to the development of AOC 1001, AOC 1044 and AOC 1020. The change in cash used in operating activities is due to increased research and development costs as well as general and administrative expenses as described under “Results of Operations” above.

Investing Activities

Net cash used in investing activities was $182.2 million for the nine months ended September 30, 2022, which consisted of $266.2 million for purchases of marketable securities and $2.0 million in purchases of property and equipment partially offset by $86.0 million of proceeds from maturities of marketable securities. Net cash provided by investing activities was $1.55 million for the nine months ended September 30, 2021, which consisted of proceeds of $3.58 million from maturities of marketable securities, partially offset by cash used to purchase $2.03 million of property and equipment.

Financing Activities

Net cash provided by financing activities was $102.5 million for the nine months ended September 30, 2022, which consisted primarily of net proceeds from sales of our common stock made pursuant to the Sales Agreement. Net cash provided by financing activities was $155.6 million for the nine months ended September 30, 2021, which consisted primarily of proceeds from the issuance of common stock in the August 2021 public offering.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these condensed financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue and expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. As of September 30, 2022, there have been no material changes to our critical accounting policies and estimates from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates,” included in our annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022.

Contractual Obligations and Commitments

As of September 30, 2022, there have been no material changes outside the ordinary course of our business to the contractual obligations we reported in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commitments,” included in our annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2022, there have been no material changes in our market risk from that described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures About Market Risk,” included in our annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated, as of the end of the period covered by this quarterly report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently subject to any material legal proceedings. From time to time, we may be involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

Item 1A. Risk Factors

Other than as set forth below, we do not believe that there have been any material changes to the risk factors set forth in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022. The risk factors described in such report and below are not the only risks we face. Factors that are not currently known to us, factors that we currently consider immaterial or factors that are not specific to us, such as general economic conditions, may also materially adversely affect our business or financial condition.

Any difficulties or delays in the commencement or completion, or termination or suspension, of our current or planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

In order to obtain FDA approval to market a new drug we must demonstrate the safety and efficacy of our product candidates in humans to the satisfaction of the FDA. To meet these requirements, we will have to conduct adequate and well-controlled clinical trials. Clinical testing is expensive, time-consuming and subject to uncertainty.

Before we can initiate clinical trials for a product candidate, we must submit the results of preclinical studies to the FDA or comparable foreign regulatory authorities along with other information, including information about product candidate chemistry, manufacturing and controls and our proposed clinical trial protocol, as part of an IND or similar regulatory filing required for authorization to proceed with clinical development. The FDA or comparable foreign regulatory authorities may require us to conduct additional preclinical studies for any product candidate before it allows us to initiate clinical trials under any IND or similar regulatory filing, which may lead to delays and increase the costs of our preclinical development programs.

Moreover, even if these trials begin, issues may arise that could cause regulatory authorities to suspend or terminate such clinical trials. For example, the FDA has placed a partial clinical hold on new participant enrollment in our Phase 1/2 MARINA clinical trial of AOC 1001 in adults with myotonic dystrophy type 1, or DM1, in response to a serious adverse event reported in a single participant in the 4mg/kg cohort of the MARINA study. While we are working closely with the FDA and the investigators to assess the cause of this serious adverse event and to resolve the partial clinical hold, if we do not resolve the partial clinical hold on our expected timeline or if the results of the assessment do not support a continued development, this may cause the trial to be delayed or not completed at all. Any delays in the commencement or completion of our ongoing and planned clinical trials for our current and any future product candidate could significantly affect our product development timelines and product development costs.

We do not know whether our planned trials will begin on time or if our ongoing or future clinical trials will be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

• obtaining regulatory authorizations to commence a trial or reaching a consensus with regulatory authorities on trial design;

• the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical studies;

• any failure or delay in reaching an agreement with contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

• obtaining approval from one or more institutional review boards, or IRBs;

• IRBs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial;

• changes to clinical trial protocol;

• clinical sites deviating from trial protocol or dropping out of a trial;

• manufacturing sufficient quantities of product candidate for use in clinical trials;

• subjects failing to enroll or remain in our trials at the rate we expect, or failing to return for post-treatment follow-up, including subjects failing to remain in our trials due to movement restrictions, heath reasons or otherwise resulting from the novel strain of coronavirus, COVID-19;

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• subjects choosing an alternative treatment for the indications for which we are developing our product candidates, or participating in competing clinical trials;

• lack of adequate funding to continue the clinical trial;

• subjects experiencing severe or unexpected drug-related adverse effects;

• occurrence of serious adverse events in trials of the same class of agents conducted by other companies;

• selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data;

• a facility manufacturing our product candidates or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of current good manufacturing practice, or cGMP, regulations or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process;

• any changes to our manufacturing process that may be necessary or desired;

• third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices, or GCP, or other regulatory requirements;

• third-party contractors not performing data collection or analysis in a timely or accurate manner; or

• third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications.

In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned clinical trials.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA or comparable foreign regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial.

Further, conducting clinical trials in foreign countries, as we may do for our product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks, including war, relevant to such foreign countries.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. Moreover, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues.

In addition, many of the factors that cause, or lead to, the termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. We may make formulation or manufacturing changes to our product candidates, in which case we may need to conduct additional preclinical studies to bridge our modified product candidates to earlier versions. Any delays to our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize our product candidates and our competitors may be able to bring products to market before we do, and the commercial viability

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of our product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects significantly.

We may find it difficult to enroll patients in our clinical trials. If we encounter difficulties enrolling subjects in our clinical trials, including as a result of the partial clinical hold on our ongoing Phase 1/2 MARINA trial, our clinical development activities could be delayed or otherwise adversely affected.

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as may be required by the FDA or similar regulatory authorities outside the United States. Subject enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility and exclusion criteria for the trial, the design of the clinical trial, the risk that enrolled patients will not complete a clinical trial, our ability to recruit clinical trial investigators with the appropriate competencies and experience, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new products that may be approved for the indications we are investigating as well as any product candidates under development. We will be required to identify and enroll a sufficient number of subjects for each of our clinical trials. Potential subjects for any planned clinical trials may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for such trials. We are initially developing product candidates targeting genetically defined, rare muscle disorders with limited patient pools from which to draw for clinical trials. Genetically defined diseases generally, including those for which our current product candidates are targeted, have low incidence and prevalence. We also may encounter difficulties in identifying and enrolling subjects with a stage of disease appropriate for our planned clinical trials and monitoring such subjects adequately during and after treatment. We may not be able to initiate or continue clinical trials if we are unable to locate a sufficient number of eligible subjects to participate in the clinical trials required by the FDA or comparable foreign regulatory authorities. In addition, the process of finding and diagnosing subjects may prove costly.

The timing of our clinical trials depends, in part, on the speed at which we can recruit patients to participate in our trials, as well as completion of required follow-up periods. The eligibility criteria of our clinical trials, once established, will further limit the pool of available trial participants. If patients are unwilling to participate in our trials for any reason, including the existence of concurrent clinical trials for similar patient populations or the availability of approved therapies, or we otherwise have difficulty enrolling a sufficient number of patients, the timeline for recruiting subjects, conducting studies and obtaining regulatory approval of our product candidates may be delayed. In particular, the FDA has placed a partial clinical hold on new participant enrollment in our Phase 1/2 MARINA clinical trial of AOC 1001 as described in the risk factor titled, “Any difficulties or delays in the commencement or completion, or termination or suspension, of our current or planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.” Our inability to enroll a sufficient number of subjects for the MARINA trial or any of our future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. In addition, we expect to rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will have limited influence over their actual performance.

We cannot assure you that our assumptions used in determining expected clinical trial timelines are correct or that we will not experience delays in enrollment, which would result in the delay of completion of such trials beyond our expected timelines.

Use of our product candidates could be associated with side effects, adverse events or other properties or safety risks, which could delay or preclude approval, cause us to suspend or discontinue clinical trials, abandon a product candidate, limit the commercial profile of an approved label or result in other significant negative consequences that could severely harm our business, prospects, operating results and financial condition.

As is the case with biopharmaceuticals generally, it is likely that there may be side effects and adverse events associated with our product candidates’ use. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Although other oligonucleotide therapeutics have received regulatory approval, our AOCs, which combine oligonucleotides with a mAb, are a novel approach to oligonucleotide therapies, which may present enhanced risk and uncertainty for our product candidates compared to more well-established classes of therapies, or oligonucleotide or mAb-based therapies on their own. Moreover, there have been only a limited number of clinical trials involving the use of oligonucleotide therapeutics and the proprietary technology used in our AOC platform. It is impossible to predict when or if any product candidates we may develop will prove safe in humans.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. For example, the FDA has placed a partial clinical hold on new participant enrollment in our Phase 1/2 MARINA clinical trial of AOC 1001 as described in the risk factor titled, “Any difficulties or delays in the commencement or completion, or termination or suspension, of our current or planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.” Likewise, side-effects that are reported as drug-related such as the serious adverse event reported in the 4mg/kg cohort of the MARINA study could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.

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Moreover, if our product candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we may elect to abandon their development or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial expectations for the product candidate if approved. We may also be required to modify our study plans based on findings after we commence our clinical trials. Many compounds that initially showed promise in early-stage testing have later been found to cause side effects that prevented further development of the compound. In addition, regulatory authorities may draw different conclusions or require additional testing to confirm these determinations.

It is possible that as we test our product candidates in larger, longer and more extensive clinical trials, or as the use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, may be reported by subjects. If such side effects become known later in development or upon approval, if any, such findings may harm our business, financial condition and prospects significantly.

Patients treated with our products, if approved, may experience previously unreported adverse reactions, and it is possible that the FDA or other regulatory authorities may ask for additional safety data as a condition of, or in connection with, our efforts to obtain approval of our product candidates. If safety problems occur or are identified after our products, if any, reach the market, we may make the decision or be required by regulatory authorities to amend the labeling of our products, recall our products or even withdraw approval for our products.

In addition, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such product, a number of potentially significant negative consequences could result, including:

• regulatory authorities may withdraw, suspend or limit approvals of such product, or seek an injunction against its manufacture or distribution;

• we may be required to recall a product or change the way such product is administered to patients;

• regulatory authorities may require additional warnings on the label, such as a “black box” warning or a contraindication;

• we may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a medication guide outlining the risks of such side effects for distribution to patients;

• we may be required to change the way a product is distributed, conduct additional clinical trials or change the labeling of a product or be required to conduct additional post-marketing studies or surveillance;

• we could be sued and held liable for harm caused to patients;

• sales of the product may decrease significantly, or the product could become less competitive; and

• our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Use of Proceeds

On June 11, 2020, the SEC declared effective our registration statement on Form S-1 (File No. 333-238612), as amended, filed in connection with our IPO. Our IPO closed on June 16, 2020, and we issued and sold 16,560,000 shares of our common stock at a price to the public of $18.00 per share, which included the exercise in full of the underwriters’ option to purchase additional shares. We received gross proceeds from our IPO of $298.1 million, before deducting underwriting discounts, commissions and offering costs of $24.0 million. The managing underwriters of the offering were Cowen and Company, LLC, SVB Leerink LLC, Credit Suisse Securities (USA) LLC and Wells Fargo Securities, LLC. No offering costs were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities or to any of our affiliates.

As of September 30, 2022, we have used approximately $150.0 million of the proceeds from our IPO for general corporate purposes, including the advancement of our development programs. There has been no material change in our planned use of such proceeds from that described in the prospectus for our IPO dated June 11, 2020. We have invested a portion of the remaining proceeds from our IPO in short- and intermediate-term, investment-grade, interest-bearing securities.

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Issuer Repurchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

ITEM 5. OTHER INFORMATION

2022 ATM Offering

On November 8, 2022, we entered into a sales agreement, or the 2022 Sales Agreement, with Cowen and Company, LLC, or the Sales Agent, pursuant to which we may, from time to time, sell shares of our common stock, or the ATM Shares, having an aggregate offering price of up to $200.0 million through the Sales Agent, as our agent.

Subject to the terms and conditions of the 2022 Sales Agreement, the Sales Agent will use its commercially reasonable efforts to sell the ATM Shares from time to time, based upon our instructions. We have provided the Sales Agent with customary indemnification rights, and the Sales Agent will be entitled to a commission of up to 3.0% of the gross sales price of the ATM Shares sold through it pursuant to the Sales Agreement.

We will offer and sell the ATM Shares pursuant to a registration statement on Form S-3 (File No. 333-257691), which became automatically effective upon filing with the Securities and Exchange Commission, or SEC, on July 2, 2021, or the Registration Statement. We will file a prospectus supplement with the SEC in connection with the offer and sale of up to $200.0 million of ATM Shares pursuant to the 2022 Sales Agreement on November 8, 2022.

The ATM Shares may be offered only by means of a prospectus forming a part of the effective registration statement. Sales of the ATM Shares, if any, under the Sales Agreement may be made in transactions that are deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, including sales made by means of ordinary brokers’ transactions, including on The Nasdaq Global Market, at market prices, or as otherwise agreed with the Sales Agent. We have no obligation to sell any of the ATM Shares, and may at any time suspend offers under the Sales Agreement or terminate the Sales Agreement.

The foregoing description of the Sales Agreement does not purport to be complete and is qualified in its entirety by reference to the full 2022 Sales Agreement, a copy of which is filed herewith as Exhibit 10.1 and is incorporated by reference herein.

A copy of the opinion of Latham & Watkins LLP relating to the validity of the securities to be issued pursuant to the 2022 Sales Agreement is filed hereto as Exhibit 5.1.

This Quarterly Report on Form 10-Q does not constitute an offer to sell the ATM Shares or a solicitation of an offer to buy the ATM Shares, nor shall there be any sale of the ATM Shares in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

2021 ATM Offering

On July 2, 2021, we entered into a sales agreement with the Sales Agent, or the 2021 Sales Agreement, pursuant to which we could, from time to time, sell shares of our common stock having an aggregate offering price of up to $150.0 million through the Sales Agent, as our agent, or the 2021 ATM Offering. In connection with the 2021 ATM Offering, we filed a prospectus, dated July 2, 2021, with the Registration Statement, or the 2021 ATM Prospectus. Pursuant to the terms of the 2022 Sales Agreement, effective November 8, 2022, we terminated the 2021 Sales Agreement, and we have discontinued all offers and sales of shares of our common stock under the 2021 Sales Agreement and the 2021 ATM Prospectus. Between July 2, 2021 and November 8, 2022, we sold an aggregate of 8,552,361 shares of common stock pursuant to the 2021 Sales Agreement for aggregate gross proceeds of approximately $145.1 million.

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Item 6. Exhibits

Exhibit Number	Exhibit Description	Incorporated by Reference			Filed Herewith
		Form	Date	Number
3.1	Amended and Restated Certificate of Incorporation	8-K	6/16/2020	3.1
3.2	Amended and Restated Bylaws	8-K	6/16/2020	3.2
4.1	Form of Common Stock Certificate	S-1	5/22/2020	4.1
4.2	Amended and Restated Registration Rights Agreement, dated November 8, 2019, by and among Avidity Biosciences, Inc. and certain of its stockholders	S-1	5/22/2020	4.2
5.1	Opinion of Latham & Watkins LLP				X
10.1	Sales Agreement, dated November 8, 2022, between Avidity Biosciences, Inc. and Cowen and Company, LLC				X
23.1	Consent of Latham & Watkins LLP (included in Exhibit 5.1 hereto)				X
31.1	Certification of Chief Executive Officer of Avidity Biosciences, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of Chief Financial Officer of Avidity Biosciences, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.				X
101.SCH	Inline XBRL Taxonomy Extension Schema Document				X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document				X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				X
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)				X

* This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Avidity Biosciences, Inc.
Date: November 8, 2022	By:	/s/ Sarah Boyce
		Sarah Boyce
		President, Chief Executive Officer and Director (Principal Executive Officer)
Date: November 8, 2022	By:	/s/ Michael F. MacLean
		Michael F. MacLean
		Chief Financial and Chief Business Officer (Principal Financial and Accounting Officer)

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EX-5.1

Exhibit 5.1

	12670 High Bluff Drive
	San Diego, California 92130
	Tel: +1.858.523.5400  Fax: +1.858.523.5450
	www.lw.com

	FIRM / AFFILIATE OFFICES
	Austin	Milan
	Beijing	Munich
	Boston	New York
	Brussels	Orange County
November 8, 2022	Century City	Paris
	Chicago	Riyadh
	Dubai	San Diego
	Düsseldorf	San Francisco
	Frankfurt	Seoul
	Hamburg	Shanghai
	Hong Kong	Silicon Valley
	Houston	Singapore
	London	Tel Aviv
	Los Angeles	Tokyo
	Madrid	Washington, D.C.

Avidity Biosciences, Inc.

10975 N. Torrey Pines Road, Suite 150

La Jolla, California 92037

Re: Registration Statement on Form S-3; Shares of Common Stock, par value $0.0001 per share, having an aggregate offering price of up to $200,000,000

To the addressees set forth above:

We have acted as special counsel to Avidity Biosciences, Inc., a Delaware corporation (the “Company”), in connection with the sale through Cowen and Company, LLC (“Cowen”) as the sales agent from time to time by the Company of shares (the “Shares”) of common stock of the Company, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $200,000,000, to be issued pursuant to a registration statement on Form S-3 filed by the Company with the Securities and Exchange Commission (the “Commission”) on July 2, 2021 (the “Registration Statement”), the base prospectus included in the Registration Statement (the “Base Prospectus”) and the related prospectus supplement filed by the Company with the Commission on November 8, 2022 (together with the Base Prospectus, the “Prospectus”), and that certain Sales Agreement, dated as of November 8, 2022, by and between the Company and Cowen (the “Sales Agreement”).

The term “Shares” shall include any additional shares of common stock registered by the Company pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Act”), in connection with the offering contemplated by the Registration Statement.  This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the

November 8, 2022

Page 2

Registration Statement or related Prospectus, other than as expressly stated herein with respect to the issue of the Shares.

As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter.  With your consent, we have relied upon certificates and other assurances of officers of the Company and others as to factual matters without having independently verified such factual matters.  We are opining herein as to the General Corporation Law of the State of Delaware (the “DGCL”), and we express no opinion with respect to any other laws.

Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, when the Shares shall have been duly registered on the books of the transfer agent and registrar therefor in the name or on behalf of the purchasers, and have been issued by the Company against payment therefor (not less than par value) in the circumstances contemplated by the Sales Agreement, the issue and sale of the Shares will have been duly authorized by all necessary corporate action of the Company, and the Shares will be validly issued, fully paid and nonassessable.  In rendering the foregoing opinion, we have assumed that (i) the Company will comply with all applicable notice requirements regarding uncertificated shares provided in the DGCL and (ii) upon the issue of any of the Shares, the total number of shares of Common Stock issued and outstanding will not exceed the total number of shares of Common Stock that the Company is then authorized to issue under its Amended and Restated Certificate of Incorporation.

This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act.  We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectus under the heading “Legal Matters.”  In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.

Sincerely,

/s/ Latham & Watkins LLP

EX-10.1

Exhibit 10.1

Execution Version

Avidity Biosciences, Inc.

$200,000,000

COMMON STOCK


SALES AGREEMENT

November 8, 2022

Cowen and Company, LLC

599 Lexington Avenue

New York, NY 10022

Ladies and Gentlemen:

Avidity Biosciences, Inc., a Delaware corporation (the “Company”), confirms its agreement (this “Agreement”) with Cowen and Company, LLC (“Cowen”), as follows:

1.  Issuance and Sale of Placement Shares.  The Company agrees that, from time to time during the term of this Agreement, on the terms and subject to the conditions set forth herein, it may issue and sell through Cowen, acting as agent and/or principal, shares (the “Placement Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $200,000,000. Notwithstanding anything to the contrary contained herein, the parties hereto agree that compliance with the limitation set forth in this Section 1 on the number of shares of Common Stock issued and sold under this Agreement shall be the sole responsibility of the Company, and Cowen shall have no obligation in connection with such compliance.  The issuance and sale of the Placement Shares through Cowen will be effected pursuant to the Registration Statement (as defined below) filed by the Company, which became automatically effective under Rule 462(e) of the Securities Act (as defined below) upon filing with the Securities and Exchange Commission (the “Commission”), although nothing in this Agreement shall be construed as requiring the Company to use the Registration Statement (as defined below) to issue the Placement Shares. The Registration Statement is an “automatic shelf registration statement” (as defined in Rule 405) and the Placement Shares (as defined below) have been and remain eligible for registration by the Company on such automatic shelf registration statement.

The Company has filed, in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder (collectively, the “Securities Act”), with the Commission an automatic registration statement on Form S-3 (File No. 333-257691), including a base prospectus, relating to certain securities, including the Common Stock, to be issued from time to time by the Company, and which incorporates by reference documents that the Company has filed or will file in accordance with the provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (collectively, the “Exchange Act”). The Company has prepared a prospectus supplement specifically relating to the Placement Shares (the “Prospectus Supplement”) to the base prospectus included as part of such registration statement.  The Company has furnished to Cowen, for use by Cowen, copies of the

prospectus included as part of such registration statement, as supplemented by the Prospectus Supplement, relating to the Placement Shares.  Except where the context otherwise requires, such registration statement, and any post-effective amendment thereto, as amended when it became effective, including all documents filed as part thereof or incorporated by reference therein, and including any information contained in a Prospectus (as defined below) subsequently filed with the Commission pursuant to Rule 424(b) under the Securities Act or deemed to be a part of such registration statement pursuant to Rule 430B or 462(b) of the Securities Act, or any subsequent registration statement on Form S-3 filed pursuant to Rule 415(a)(6) under the Securities Act by the Company with respect to the Placement Shares, is herein called the “Registration Statement.”  The base prospectus, including all documents incorporated therein by reference, included in the Registration Statement, as it may be supplemented by the Prospectus Supplement, in the form in which such prospectus and/or Prospectus Supplement have most recently been filed by the Company with the Commission pursuant to Rule 424(b) under the Securities Act, together with any “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act (“Rule 433”), relating to the Placement Shares that (i) is consented to by Cowen, hereinafter referred to as a “Permitted Free Writing Prospectus,” (ii) is required to be filed with the Commission by the Company or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i), in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g), is herein called the “Prospectus.” Any reference herein to the Registration Statement, the Prospectus or any amendment or supplement thereto shall be deemed to refer to and include the documents incorporated by reference therein, and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include the filing after the execution hereof of any document with the Commission deemed to be incorporated by reference therein. For purposes of this Agreement, all references to the Registration Statement, the Prospectus or to any amendment or supplement thereto shall be deemed to include any copy filed with the Commission pursuant to the Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR”).

2.  Placements.  Each time that the Company wishes to issue and sell the Placement Shares hereunder (each, a “Placement”), it will notify Cowen by email notice (or other method mutually agreed to in writing by the parties) (a “Placement Notice”) containing the parameters in accordance with which it desires the Placement Shares to be sold, which shall at a minimum include the number of shares of Placement Shares to be issued, the time period during which sales are requested to be made, any limitation on the number of Placement Shares that may be sold in any one Trading Day (as defined in Section 3) and any minimum price below which sales may not be made, a form of which containing such minimum sales parameters necessary is attached hereto as Schedule 1.  The Placement Notice shall originate from any of the individuals from the Company set forth on Schedule 2(with a copy to each of the other individuals from the Company listed on such schedule), and shall be addressed to each of the individuals from Cowen set forth on Schedule 2, as such Schedule 2 may be amended from time to time in accordance herewith. The Placement Notice shall be effective upon receipt by Cowen unless and until (i) in accordance with the notice requirements set forth in Section 4, Cowen declines to accept the terms contained therein for any reason, in its sole discretion, (ii) the entire amount of the Placement Shares have been sold, (iii) in accordance with the notice requirements set forth in Section 4, the Company suspends or terminates the Placement Notice for any reason in its sole

discretion, (iv) the Company issues a subsequent Placement Notice with parameters superseding those on the earlier dated Placement Notice, or (v) this Agreement has been terminated under the provisions of Section 11.   The amount of any discount, commission or other compensation to be paid by the Company to Cowen in connection with the sale of the Placement Shares shall be calculated in accordance with the terms set forth in Schedule 3.  It is expressly acknowledged and agreed that neither the Company nor Cowen will have any obligation whatsoever with respect to a Placement or any Placement Shares unless and until the Company delivers a Placement Notice to Cowen and Cowen does not decline such Placement Notice pursuant to the terms set forth above, and then only upon the terms specified therein and herein.  In the event of a conflict between the terms of this Agreement and the terms of a Placement Notice, the terms of the Placement Notice will control.

3.  Sale of Placement Shares by Cowen.  Subject to the terms and conditions herein set forth, upon the Company’s delivery of a Placement Notice, and unless the sale of the Placement Shares described therein has been declined, suspended, or otherwise terminated in accordance with the terms of this Agreement, Cowen, for the period specified in the Placement Notice, will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the Nasdaq Stock Market, Inc. (“Nasdaq”) to sell such Placement Shares up to the amount specified in such Placement Notice, and otherwise in accordance with the terms of such Placement Notice.  Cowen will provide written confirmation to the Company (including by email correspondence to each of the individuals of the Company set forth on Schedule 2, if receipt of such correspondence is actually acknowledged by any of the individuals to whom the notice is sent, other than via auto-reply) no later than the opening of the Trading Day (as defined below) immediately following the Trading Day on which it has made sales of Placement Shares hereunder setting forth the number of Placement Shares sold on such day, the volume-weighted average price of the Placement Shares sold, and the Net Proceeds (as defined below) payable to the Company.  In the event the Company engages Cowen for a sale of Placement Shares that would constitute a “block” within the meaning of Rule 10b-18(a)(5) under the Exchange Act, the Company will provide Cowen, at Cowen’s request and upon reasonable advance notice to the Company, on or prior to the Settlement Date (as defined below), the opinions of counsel, accountant’s letter and officers’ certificates set forth in Section 8 hereof, each dated the Settlement Date, and such other documents and information as Cowen shall reasonably request. Cowen may sell Placement Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act, including without limitation sales made through Nasdaq or on any other existing trading market for the Common Stock.  Cowen shall not purchase Placement Shares for its own account as principal unless expressly authorized to do so by the Company in a Placement Notice.  The Company acknowledges and agrees that (i) there can be no assurance that Cowen will be successful in selling Placement Shares, and (ii) Cowen will incur no liability or obligation to the Company or any other person or entity if it does not sell Placement Shares for any reason other than a failure by Cowen to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell such Placement Shares as required under this Section 3.  For the purposes hereof, “Trading Day” means any day on which the Company’s Common Stock is purchased and sold on the principal market on which the Common Stock is listed or quoted.

Notwithstanding any other provision of this Agreement, the Company shall not offer, sell or deliver, or request the offer or sale, of any Placement Shares pursuant to this Agreement and, by notice to Cowen given by telephone (confirmed promptly by email), shall cancel any instructions for the offer or sale of any Placement Shares, and Cowen shall not be obligated to offer or sell any Placement Shares, (i) during any period in which the Company is, or could be deemed to be, in possession of material non-public information, or (ii) at any time from and including the date on which the Company shall issue a press release containing, or shall otherwise publicly announce, its earnings, revenues or other results of operations (an “Earnings Announcement”) through and including the time that the Company files a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K that includes consolidated financial statements as of and for the same period or periods, as the case may be, covered by such Earnings Announcement.

4.  Suspension of Sales.  

(a)The Company or Cowen may, upon notice to the other party in writing (including by email correspondence to each of the individuals of the other party set forth on Schedule 2, if receipt of such correspondence is actually acknowledged by any of the individuals to whom the notice is sent, other than via auto-reply) or by telephone (confirmed immediately by verifiable facsimile transmission or email correspondence to each of the individuals of the other party set forth on Schedule 2), suspend any sale of Placement Shares; provided, however, that such suspension shall not affect or impair either party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of such notice.  While a suspension is in effect, any obligation under Sections 7(m), 7(n) and 7(o) with respect to delivery of certificates, opinion, or comfort letters to Cowen shall be waived.  Each of the parties agrees that no such notice under this Section 4 shall be effective against the other unless it is made to one of the individuals named on Schedule 2 hereto, as such schedule may be amended from time to time.

(b)If either Cowen or the Company has reason to believe that the exemptive provisions set forth in Rule 101(c)(1) of Regulation M under the Exchange Act are not satisfied with respect to the Common Stock, it shall promptly notify the other party, and Cowen may, at its sole discretion, suspend sales of the Placement Shares under this Agreement.

(c)Notwithstanding any other provision of this Agreement, during any period in which the Registration Statement is not effective under the Securities Act, the Company shall promptly notify Cowen, the Company shall not request the sale of any Placement Shares, and Cowen shall not be obligated to sell or offer to sell any Placement Shares.

5.  Settlement.

(a) Settlement of Placement Shares.  Unless otherwise specified in the applicable Placement Notice, settlement for sales of Placement Shares will occur on the second (2^nd) Trading Day (or such earlier day as is industry practice for regular-way trading) following the date on which such sales are made (each, a “Settlement Date” and the first such settlement date, the “First Delivery Date”).  The amount of proceeds to be delivered to the Company on a Settlement Date against receipt of the Placement Shares sold (the “Net Proceeds”) will be equal to the aggregate sales price received by Cowen at which such Placement Shares were sold, after

deduction for (i) Cowen’s commission, discount or other compensation for such sales payable by the Company pursuant to Section 2 hereof, (ii) any other amounts due and payable by the Company to Cowen hereunder pursuant to Section 7(g) (Expenses) hereof, and (iii) any transaction fees imposed by any governmental or self-regulatory organization in respect of such sales.  

(b) Delivery of Placement Shares.  On or before each Settlement Date, the Company will, or will cause its transfer agent to, electronically transfer the Placement Shares being sold by crediting Cowen’s or its designee’s account (provided Cowen shall have given the Company written notice of such designee prior to the Settlement Date) at The Depository Trust Company through its Deposit and Withdrawal at Custodian System or by such other means of delivery as may be mutually agreed upon by the parties hereto which in all cases shall be freely tradeable, transferable, registered shares in good deliverable form.  On each Settlement Date, Cowen will deliver the related Net Proceeds in same day funds to an account designated by the Company on, or prior to, the Settlement Date.  The Company agrees that if the Company, or its transfer agent (if applicable), defaults in its obligation to deliver duly authorized Placement Shares on a Settlement Date through no fault of Cowen, the Company agrees that in addition to and in no way limiting the rights and obligations set forth in Section 9(a) (Indemnification and Contribution) hereto, it will (i) hold Cowen harmless against any loss, claim, damage, or reasonable and documented expense (including reasonable and documented legal fees and expenses), as incurred, arising out of or in connection with such default by the Company and (ii) pay to Cowen (without duplication) any commission, discount, or other compensation to which it would otherwise have been entitled absent such default.

6.  Representations and Warranties of the Company.  The Company represents and warrants to, and agrees with, Cowen that as of (i) the date of this Agreement, (ii) each Time of Sale (as defined below), (iii) each Settlement Date, and (iv) each Bring-Down Date (as defined below) (each date included in (i) through (iv), a “Representation Date”):

(a) Compliance with Registration Requirements. The Registration Statement became effective automatically upon filing with the Commission under the Securities Act. The Registration Statement is an “automatic shelf registration statement” on Form S-3 as defined in Rule 405 of the Securities Act and was filed not earlier than three (3) years prior to the date hereof. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto is in effect and no proceedings for such purpose have been instituted or are pending or, to the knowledge of the Company, contemplated or threatened by the Commission. The Company meets the requirements for use of Form S‑3 under the Securities Act.  The sale of the Placement Shares hereunder meets the requirements of General Instruction I.B.1 of Form S-3.

(b) No Misstatement or Omission.  The Prospectus when filed complied and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act.  Each of the Registration Statement, any Rule 462(b) Registration Statement, the Prospectus and any post-effective amendments or supplements thereto, at the time it became effective or its date, as applicable, complied and as of each Representation Date, complied and will comply in all material respects with the Securities Act and did not and, as of each Representation Date, did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The

Prospectus, as amended or supplemented, as of its date, did not and, as of each Representation Date, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Registration Statement, any Rule 462(b) Registration Statement, or any post-effective amendment thereto, or the Prospectus, or any amendments or supplements thereto, made in reliance upon and in conformity with information relating to Agent’s Information (as defined below).  There are no contracts or other documents required to be described in the Prospectus or to be filed as exhibits to the Registration Statement which have not been described or filed as required.  As used herein, “Time of Sale” means with respect to each offering of Placement Shares pursuant to this Agreement, the time of Cowen’s initial entry into contracts with purchasers for the sale of such Placement Shares.

(c) Offering Materials Furnished to Cowen. The Company has delivered to Cowen one complete copy of the Registration Statement and a copy of each consent and certificate of experts filed as a part thereof, and conformed copies of the Registration Statement (without exhibits) and the Prospectus, as amended or supplemented, in such quantities and at such places as Cowen has reasonably requested. The Registration Statement, the Prospectus and any Permitted Free Writing Prospectus (to the extent any such Permitted Free Writing Prospectus was required to be filed with the Commission) delivered to Cowen for use in connection with the public offering of the Placement Shares contemplated herein have been and will be identical to the versions of such documents transmitted to the Commission for filing via EDGAR, except to the extent permitted by Regulation S-T.

(d) Emerging Growth Company.  The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act.  The Company agrees to notify Cowen promptly upon the Company ceasing to be an emerging growth company.  

(e) Not an Ineligible Issuer. The Company currently is not an “ineligible issuer,” as defined in Rule 405 under the Securities Act.  The Company agrees to notify Cowen promptly upon the Company becoming an “ineligible issuer.”

(f) Distribution of Offering Material By the Company. The Company has not distributed and will not distribute, prior to the completion of Cowen’s distribution of the Placement Shares, any offering material in connection with the offer and sale of the Placement Shares other than the Prospectus or the Registration Statement.

(g) WKSI.(i) At the time of filing the Registration Statement, (ii) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the Securities Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), (iii) at the time the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163(c) under the Securities Act) made any offer relating to the Placement Shares in reliance on the exemption of Rule 163 under the Securities Act, and (iv) as of the time of any Placement, the Company was and is a “well known seasoned issuer” as defined in Rule 405; the Registration Statement is an “automatic shelf registration statement,” as defined in Rule 405, that has become or became effective automatically not more not more than three (3) years prior to the date of any

Placement and the Company has not received from the Commission any notice pursuant to Rule 401(g)(2) under the Securities Act objecting to use of the automatic shelf registration statement form; and the Company has not otherwise ceased to be eligible to use the automatic shelf registration form.

(h) The Sales Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles.  

(i) Authorization of the Common Stock. The Placement Shares, when issued and delivered, will be duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company against payment therefor pursuant to this Agreement, will be duly authorized, validly issued, fully paid and nonassessable, free and clear of any pledge, lien, encumbrance, security interest or other claim, and the issuance and sale of the Placement Shares by the Company is not subject to preemptive or other similar rights arising by operation of law, under the organizational documents of the Company or under any agreement to which the Company or any subsidiary is a party or otherwise.

(j) No Applicable Registration or Other Similar Rights. There are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by this Agreement, except for such rights as have been duly waived.  

(k) Organization and Good Standing. The Company and each of its subsidiaries (as defined in Rule 405 under the Securities Act) have been duly organized and are validly existing as corporations or other legal entities in good standing (or the foreign equivalent thereof) under the laws of their respective jurisdictions of organization. The Company and each of its subsidiaries are duly qualified to do business and are in good standing as foreign corporations or other legal entities in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification and have all power and authority (corporate or other) necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to so qualify or have such power or authority would not reasonably be expected to (i) have, singly or in the aggregate, a material adverse effect on the business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its subsidiaries taken as a whole, or (ii) impair in any material respect the ability of the Company to perform its obligations under this Agreement or to consummate any transactions contemplated by this Agreement or the Prospectus (any such effect as described in clauses (i) or (ii), a “Material Adverse Effect”). The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the most recently ended fiscal year and other than (i) those subsidiaries not required to be listed on Exhibit 21.1 by Item 601 of Regulation S-K under the Exchange Act and (ii) those subsidiaries formed since the last day of the most recently ended fiscal year.

(l) Capitalization. The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company, have been duly and validly authorized and issued, are fully paid and non-assessable and not subject to any preemptive or similar rights that have not been complied with or otherwise validly waived, have been issued in compliance with federal and state securities laws, and conform in all material respects to the description thereof contained in the Registration Statement and the Prospectus. All of the Company’s options, warrants and other rights to purchase or exchange any securities for shares of the Company’s capital stock have been duly authorized and validly issued and were issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. As of the date set forth in the Prospectus, there were no authorized or outstanding shares of capital stock, options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries other than those described above or accurately described in the Registration Statement and the Prospectus. Since such date, the Company has not issued any securities other than Common Stock issued pursuant to the exercise of warrants or upon the exercise of stock options or other awards outstanding under the Company’s stock option plans, options or other securities granted or issued pursuant to the Company’s existing equity compensation plans or other plans, and the issuance of Common Stock pursuant to employee stock purchase plans. The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, as described in the Registration Statement and the Prospectus, accurately and fairly present in all material respects the information required to be shown with respect to such plans, arrangements, options and rights.

(m) No Conflicts. The execution, delivery and performance of this Agreement by the Company, the issue and sale of the Placement Shares by the Company and the consummation of the transactions contemplated hereby will not (with or without notice or lapse of time or both) (i) conflict with or result in a breach or violation of any of the terms or provisions of, constitute a default or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any lien, encumbrance, security interest, claim or charge upon any property or assets of the Company or any subsidiary pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or by-laws (or analogous governing instruments, as applicable) of the Company or any of its subsidiaries or (iii) result in the violation of any law, statute, rule, regulation, judgment, order or decree of any court or governmental or regulatory agency or body, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets except, in the case of clauses (i) and (iii) above, for any such conflict, breach, violation or default that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. A “Debt Repayment Triggering Event” means any event or condition that gives, or with the giving of notice or lapse of time would give the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company of any of its subsidiaries.

(n) No Consents Required. Except for the registration of the Placement Shares under the Securities Act and applicable state securities laws, and such consents, approvals, authorizations, orders and registrations or qualifications as may be required by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Nasdaq Global Market (the “Exchange”) in connection with the purchase and distribution of the Placement Shares by Cowen and the listing of the Placement Shares on the Exchange, no consent, approval, authorization or order of, or filing, qualification or registration (each an “Authorization”) with, any court, governmental or regulatory agency or body, foreign or domestic, which has not been made, obtained or taken and is not in full force and effect, is required for the execution, delivery and performance of this Agreement by the Company, the issuance and sale of the Placement Shares or the consummation of the transactions contemplated hereby; and no event has occurred that allows or results in, or after notice or lapse of time or both would allow or result in, revocation, suspension, termination or invalidation of any such Authorization or any other impairment of the rights of the holder or maker of any such Authorization. All corporate approvals (including those of stockholders) necessary for the Company to consummate the transactions contemplated by this Agreement have been obtained and are in effect.

(o) Independent Auditors. BDO USA, LLP, who have certified certain financial statements and related schedules of the Company and its subsidiaries included or incorporated by reference in the Registration Statement and the Prospectus, is an independent registered public accounting firm with respect to the Company and its subsidiaries within the meaning of Article 2-01 of Regulation S-X and the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and as required by the Securities Act and the Exchange Act.

(p) Financial Statements. The financial statements, together with the related notes, included or incorporated by reference in the Prospectus and the Registration Statement fairly present, in all material respects, the financial position and the results of operations and changes in financial position of the Company and its consolidated subsidiaries at the respective dates or for the respective periods therein specified. Such statements and related notes have been prepared in accordance with the generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout the periods involved except as may be set forth in the related notes included or incorporated by reference in the Registration Statement and the Prospectus and provided that unaudited interim financial statements, which are subject to normal year-end adjustments, may not contain certain footnotes, as permitted by the rules of the Commission. The financial statements, together with the related notes, included or incorporated by reference in the Registration Statement and the Prospectus comply in all material respects with Regulation S-X. No other financial statements or supporting schedules or exhibits are required by Regulation S-X to be described or included in the Registration Statement or the Prospectus. The summary and selected financial data included in the Prospectus and the Registration Statement fairly present in all material respects the information shown therein at the respective dates and for the respective periods specified and are derived from the consolidated financial statements set forth in the Registration Statement and the Prospectus and other financial information.

(q) No Material Adverse Change. Except as otherwise disclosed in the Prospectus, subsequent to the respective dates as of which information is given in the Prospectus, neither the Company nor any of its subsidiaries has sustained, (i) any material loss or interference with its

business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or action, order or decree of any court or governmental or regulatory authority; (ii) any change in the capital stock (other than the issuance of shares of Common Stock upon exercise of stock options and warrants described as outstanding in, and the grant of options and awards under existing equity incentive plans described in, the Registration Statement and the Prospectus) or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock, or any material adverse changes, or any development involving a prospective material adverse change, in or affecting the business, properties, assets, general affairs, management, financial position, prospects, stockholders’ equity or results of operations of the Company and its subsidiaries taken as a whole.

(r) Legal Proceedings. There is no legal or governmental proceeding to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject, including any proceeding before the United States Food and Drug Administration of the U.S. Department of Health and Human Services (the “FDA”) or comparable federal, state, local or foreign governmental bodies (it being understood that the interaction between the Company and the FDA and such comparable governmental bodies relating to the clinical development and product approval process shall not be deemed proceedings for purposes of this representation), which is required to be described in the Registration Statement or the Prospectus and is not described therein, or which, singly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have a Material Adverse Effect, and no such proceedings, to the Company’s knowledge, are threatened by governmental or regulatory authorities or threatened by others. The Company is in compliance with all applicable federal, state, local and foreign laws, regulations, orders and decrees governing its business as prescribed by the FDA, or any other federal, state or foreign agencies or bodies engaged in the regulation of drug products, except where failures to so comply would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries is a party to any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders, or similar agreements with or imposed by any governmental or regulatory authority. Additionally, neither the Company, any of its subsidiaries nor any of their respective employees, officers, directors, or agents has been excluded, suspended or debarred from participation in any U.S. federal healthcare program or human clinical research or, to the Company’s knowledge, is subject to a governmental inquiry, investigation, proceeding, or other similar action that could reasonably be expected to result in debarment, suspension, or exclusion.

(s) No Violation or Default. Neither the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws (or analogous governing instrument, as applicable), (ii) in default in any respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (iii) in violation in any respect of any law, ordinance, governmental rule, regulation or court order, decree or judgment to which it or its property or assets may be subject except, in the case of clauses (ii) and (iii) above, for any such violation or default that would not, singly or in the aggregate, have a Material Adverse Effect.

(t) Licenses or Permits. The Company and each of its subsidiaries possess all licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate local, state, federal or foreign governmental or regulatory agencies or bodies (including, without limitation, those administered by the FDA or by any foreign, federal, state or local governmental or regulatory authority performing functions similar to those performed by the FDA) that are necessary for the lease of their respective properties or the conduct of their respective businesses as described in the Registration Statement and the Prospectus (collectively, the “Governmental Permits”) except where any failures to possess or make the same would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company and its subsidiaries are in compliance with all such Governmental Permits, except where noncompliance would not reasonably be expected to have a Material Adverse Effect, and all such Governmental Permits are valid and in full force and effect, except where the invalidity or failure to be in full force and effect would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor any subsidiary has received written, and to the Company’s knowledge, oral, notification of any revocation, modification, suspension, termination or invalidation (or proceedings related thereto) of any such Governmental Permit and the Company has no reason to believe that any such Governmental Permit will not be renewed, except for such revocations, modifications, suspensions, terminations or invalidations which would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(u) Preclinical Studies. The preclinical studies conducted by or on behalf of the Company that are described in the Registration Statement and the Prospectus (the “Company Studies”) were and, if still pending, are being, conducted in all material respects with all applicable federal, state and foreign laws, rules, orders and regulations; the descriptions of the results of the Company Studies contained in the Registration Statement and Prospectus are accurate in all material respects; the Company has no knowledge of any other studies or tests not described in the Registration Statement and the Prospectus, the results of which are inconsistent with or call in question the results described or referred to in the Registration Statement and the Prospectus; and the foreign, state or local governmental body exercising comparable authority requiring the termination, suspension or material modification of any Company Studies; except for such terminations, suspensions or material modifications which would not reasonably be expected to have a Material Adverse Effect and, to the Company’s knowledge, there are no reasonable grounds for the same.

(v) Regulatory Compliance. The Company has not, for the past three years, received any written notice of adverse filing, warning letter, untitled letter or other written correspondence or written notice from the FDA, or any other court or arbitrator or federal, state, local, or foreign governmental or regulatory authority, alleging or asserting material noncompliance with the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 301 et seq.) (the “FDCA”). Except as would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and, to the Company’s knowledge, its directors, officers, employees and agents is and have been, for the past three years, in material compliance with applicable health care laws, including without limitation, the FDCA, the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), the criminal False Claims Law (42 U.S.C. § 1320a-7b(a)), the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.), as amended by

the Health Information Technology for Economic and Clinical Health Act of 2009 (42 U.S.C. § 17921 et seq.) the exclusion laws (42 U.S.C. § 1320a-7), Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), the Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h), and the regulations promulgated pursuant to such laws, and comparable state and foreign laws (collectively, “Health Care Laws”).

(w) Investment Company Act. The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the “Investment Company Act”).  The Company is not, and after receipt of payment for the Placement Shares will not be, an “investment company” within the meaning of Investment Company Act.

(x) No Stabilization. Neither the Company nor, to the Company’s knowledge, any of its officers, directors or affiliates has taken or will take, directly or indirectly, any action designed or intended to stabilize or manipulate the price of any security of the Company, or which caused or resulted in, or which might in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company.

(y) Intellectual Property. The Company and its subsidiaries own or possess the valid right to use all (i) patents, patent applications, trademarks, trademark registrations, service marks, service mark registrations, Internet domain name registrations, copyrights, copyright registrations, licenses, trade secret rights (“Intellectual Property Rights”) and (ii) inventions, software, works of authorships, trademarks, service marks, trade names, databases, formulae, know how, Internet domain names and other intellectual property (including trade secrets and other unpatented and/or unpatentable proprietary confidential information, systems, or procedures) (collectively, “Intellectual Property Assets”) necessary to conduct their respective businesses as currently conducted, and as proposed to be conducted and described in the Registration Statement and the Prospectus. The Company and its subsidiaries have not received any opinion from their legal counsel concluding that any activities of their respective businesses infringe, misappropriate, or otherwise violate, valid and enforceable Intellectual Property Rights of any other person, and have not received written notice of any challenge, which is to their knowledge still pending, by any other person to the rights of the Company and its subsidiaries with respect to any Intellectual Property Rights or Intellectual Property Assets owned or used by the Company or its subsidiaries. To the Company’s knowledge, the Company and its subsidiaries’ respective businesses as now conducted do not give rise to any infringement of, any misappropriation of, or other violation of, any valid and enforceable Intellectual Property Rights of any other person. All licenses for the use of the Intellectual Property Rights described in the Registration Statement and the Prospectus are valid, binding upon, and enforceable by or against the parties thereto in accordance to its terms. The Company has complied in all material respects with, and is not in breach nor has received any asserted or threatened claim of breach of any Intellectual Property license, and the Company has no knowledge of any breach or anticipated breach by any other person to any Intellectual Property license. Except as described in the Registration Statement or the Prospectus, no claim has been made against the Company alleging the infringement by the Company of any patent, trademark, service mark, trade name, copyright, trade secret, license in or other intellectual property right or franchise right of any person. The Company has taken all reasonable steps to protect, maintain and safeguard its Intellectual Property Rights, including the execution of appropriate nondisclosure and confidentiality agreements. The consummation of the transactions contemplated by this Agreement will not

result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other person in respect of, the Company’s right to own, use, or hold for use any of the Intellectual Property Rights as owned, used or held for use in the conduct of the business as currently conducted. With respect to the use of the software in the Company’s business as it is currently conducted, the Company has not experienced any material defects in such software including any material error or omission in the processing of any transactions other than defects which have been corrected, and to the Company’s knowledge, no such software contains any device or feature designed to disrupt, disable, or otherwise impair the functioning of any software or is subject to the terms of any “open source” or other similar license that provides for the source code of the software to be publicly distributed or dedicated to the public. To the Company’s knowledge, except as disclosed in the Registration Statement or the Prospectus, (i) all patents and patent applications have been properly filed and each issued patent is being diligently maintained; (ii) the Company has taken reasonable steps to obtain executed nondisclosure, confidentiality agreements and invention assignment agreements and invention assignments with its employees, (iii) no employee of the Company is in or has been in violation of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement, or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company; (iv) the duty of candor and good faith as required by the United States Patent and Trademark Office during the prosecution of the United States patents and patent applications included in the Intellectual Property Rights have been complied with, and in all foreign offices having similar requirements, all such requirements have been complied with; (v) there are no third parties who have rights to any Intellectual Property Rights owned by the Company, except for non-exclusive out-licenses to such Intellectual Property granted in the ordinary course of business; and (vi) there is no infringement by third parties of any Intellectual Property Rights owned or licensed to the Company; in each case that would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

(z) IT Systems. (A)(x) To the Company’s knowledge, there has been no security breach or attack or other compromise of or relating to any of the Company’s and its subsidiaries’ information technology and computer systems, networks, hardware, software, data (including the data of their respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of them), equipment or technology (“IT Systems and Data”), and (y) the Company and its subsidiaries have not been notified of, and have no knowledge of any event or condition that would reasonably be expected to result in any security breach, attack or compromise to their IT Systems and Data, (B) the Company and its subsidiaries have complied, and are presently in compliance with, all applicable laws, statutes or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority and all industry guidelines, standards, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, and (C) the Company and its subsidiaries have implemented commercially reasonable backup and disaster recovery technology consistent with industry standards and practice, and (D) neither the Company nor any of its subsidiaries (x) has received notice of any actual or potential liability under or relating to any applicable law, industry guidelines, standards, internal policies and contractual obligations governing the IT Systems and Data, and (y) is party to any order, decree or agreement that

imposed any obligations or liability under or relating to any applicable law, industry guidelines, standards, internal policies and contractual obligations governing the IT Systems and Data.

(aa) Title to Real and Personal Property. The Company does not own any real property and the Company and each of its subsidiaries have valid and marketable rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and its subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, security interests, claims and defects that (i) do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries or (ii) could not reasonably be expected, singly or in the aggregate, to have a Material Adverse Effect.

(bb) No Labor Dispute. There is (A) no significant unfair labor practice complaint pending against the Company, or any of its subsidiaries, nor to the Company’s knowledge, threatened against it or any of its subsidiaries, before the National Labor Relations Board, any state or local labor relation board or any foreign labor relations board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Company or any of its subsidiaries, or, to the Company’s knowledge, threatened against it and (B) no labor disturbance by or dispute with, employees of the Company or any of its subsidiaries exists or, to the Company’s knowledge, is threatened, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or its subsidiaries’ principal suppliers, manufacturers, customers or contractors, that could reasonably be expected, singly or in the aggregate, to have a Material Adverse Effect. The Company is not aware that any key employee or significant group of employees of the Company or any subsidiary plans to terminate employment with the Company or any such subsidiary.

(cc) Compliance with ERISA. No “prohibited transaction” (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)) or “accumulated funding deficiency” (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the thirty (30)-day notice requirement under Section 4043 of ERISA has been waived) has occurred or could reasonably be expected to occur with respect to any employee benefit plan of the Company or any of its subsidiaries which could, singly or in the aggregate, have a Material Adverse Effect. Each employee benefit plan of the Company or any of its subsidiaries is in compliance in all material respects with applicable law, including ERISA and the Code. The Company and its subsidiaries have not incurred and could not reasonably be expected to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan (as defined in ERISA). Each pension plan for which the Company or any of its subsidiaries would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified, and to the Company’s knowledge, nothing has occurred, whether by action or by failure to act, which could, singly or in the aggregate, reasonably be expected to cause the loss of such qualification.

(dd) Environmental Laws and Hazardous Materials. The Company and its subsidiaries are in compliance in all material respects with all foreign, federal, state and local rules, laws and regulations relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety or the environment which are applicable to their

businesses (“Environmental Laws”). There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company or any of its subsidiaries (or, to the Company’s knowledge, any other entity for whose acts or omissions the Company or any of its subsidiaries is or may otherwise be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in violation of any law, statute, ordinance, rule, regulation, order, judgment, decree or permit or which would, under any law, statute, ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability that could, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company or any of its subsidiaries has knowledge.

(ee) Taxes. The Company and its subsidiaries each (i) have timely filed all necessary federal, state, local and foreign tax returns, and all such returns were true, complete and correct in all material respects, (ii) have paid all federal, state, local and foreign taxes, for which it is liable, including, without limitation, all sales and use taxes and all taxes which the Company or any of its subsidiaries is obligated to withhold from amounts owing to employees, creditors and third parties, and (iii) do not have any tax deficiency or claims outstanding or assessed or, to its knowledge, proposed against any of them, except those, in each of the cases described in clauses (i), (ii) and (iii) above, that would not, singly or in the aggregate, have a Material Adverse Effect.

(ff) Insurance. The Company and each of its subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as the Company reasonably believes is adequate for the conduct of their respective businesses and the value of their respective properties. Neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has received written notice from any insurer, agent of such insurer or the broker of the Company or any of its subsidiaries that any material capital improvements or any other material expenditures (other than premium payments) are required or necessary to be made in order to continue such insurance.

(gg) Accounting Controls. The Company and each of its subsidiaries maintains a system of “internal control over financial reporting” (as such term is defined in Rule 13a-15(f) of the General Rules and Regulations (the “Exchange Act Rules”) under the Exchange Act that complies with the requirements of the Exchange Act and has been designed by their respective principal executive and principal financial officers, or under their supervision, to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences and (v) interactive data in eXtensible Business Reporting Language included or incorporated by

reference in the Registration Statement fairly presents the Commission’s rules and guidelines applicable thereto. The Company’s internal control over financial reporting is effective. Except as described in the Registration Statement or the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (A) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (B) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

(hh) Disclosure Controls. The Company and its subsidiaries maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Exchange Act Rules) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company and its subsidiaries in reports that they file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management to allow timely decisions regarding disclosures. The Company and its subsidiaries have conducted evaluations of the effectiveness of their disclosure controls as required by Rule 13a-15 of the Exchange Act.

(ii) No Undisclosed Relationships. No relationship, direct or indirect, exists between or among the Company or any of its subsidiaries on the one hand, and the directors, officers, stockholders (or analogous interest holders), customers or suppliers of the Company or any of its affiliates on the other hand, which is required to be described in the Registration Statement and the Prospectus and which is not so described.

(jj) Margin Rules. The application of the proceeds received by the Company from the issuance, sale and delivery of the Placement Shares as described in the Registration Statement  and the Prospectus will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve system or any other regulation of such Board of Governors.

(kk) No Broker’s Fees. Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against the Company or any of its subsidiaries or Cowen for a brokerage commission, finder’s fee or like payment as a result of any transactions contemplated by this Agreement.

(ll) No Restrictions on Subsidiaries. Except as described in the Registration Statement and the Prospectus, no subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s properties or assets to the Company or any other subsidiary of the Company.

(mm) PFIC. The Company is not a Passive Foreign Investment Company (“PFIC”) within the meaning of Section 1296 of the United States Internal Revenue Code of 1966, and the Company is not likely to become a PFIC.

(nn) Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in either the Registration Statement or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

(oo) Listing. The Company is subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act.  The Common Stock is registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act and is listed on the Nasdaq, and the Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the Exchange, nor has the Company received any notification that the Commission or Nasdaq is contemplating terminating such registration or listing.  All of the Placement Shares that have been or may be sold under this Agreement have been approved for listing on the Nasdaq, subject to official notice of issuance; the Company has taken all necessary actions to ensure that, upon and at all times after the Nasdaq shall have approved the Placement Shares for listing, it will be in compliance with all applicable corporate governance requirements set forth in the Nasdaq’s listing rules that are then in effect.

(pp) Sarbanes-Oxley Act. There is and has been no failure on the part of the company or, to the Company’s knowledge, any of the Company’s officers or directors, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith applicable to the Company or such officers or directors as of the date hereof, including Section 402 related to loans.

(qq) No Unlawful Payments. Neither the Company nor any of its subsidiaries nor any director, officer, or employee thereof, or, to the Company’s knowledge, any agent, affiliate or other person acting on behalf of the Company or any subsidiary, has (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (ii) made any direct or indirect unlawful payment to foreign or domestic government officials or employees, political parties or campaigns, political party officials, or candidates for political office from corporate funds, (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any applicable anti-corruption laws, rules, or regulations of any other jurisdiction in which the Company or any subsidiary conducts business, or (iv) made any other unlawful bribe, rebate, payoff, influence payment, kickback, or other unlawful payment to any person.

(rr) Loans. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members, except as disclosed in the Registration Statement and the Prospectus.

(ss) Statistical and Market Data. The statistical and market related data included in the Registration Statement and the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate, and such data agree with the sources from which they are derived.

(tt) Compliance with Anti-Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with all applicable

financial recordkeeping and reporting requirements, including those of the U.S. Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of jurisdictions where the Company and its subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

(uu) Compliance with OFAC Regulations.

(A) Neither the Company nor any of its subsidiaries, nor any director, officer or employee thereof, nor, to the Company’s knowledge, any agent, affiliate, representative or other person acting on behalf of the Company or any of its subsidiaries, is an individual or entity (“Person”) that is, or is owned or controlled by a Person that is: (i) the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations Security Council, the European Union, His Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor (ii) located, organized or resident in a country or territory that is the subject of a U.S. government embargo (including, without limitation, Cuba, the so-called Donetsk People’s Republic, Iran, the so-called Luhansk People’s Republic, North Korea, Syria and the Crimea Region).

(B) The Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person: (i) to fund or facilitate any activities or business of or with any Person that, at the time of such funding or facilitation, is the subject of Sanctions, or in any country or territory that, at the time of such funding or facilitation, is the subject of a U.S. government embargo; or (ii) in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).

(C) For the past five (5) years, the Company and its subsidiaries have not knowingly engaged in, are not now knowingly engaged in, and will not engage in, any direct or indirect dealings or transactions with any Person that at the time of the dealing or transaction is or was the subject of Sanctions or any country or territory that, at the time of the dealing or transaction is or was the subject of a U.S. government embargo.

(vv) No Associated Persons; FINRA Matters. Neither the Company nor any of its affiliates (within the meaning of FINRA Rule 5121(f)(1)) directly or indirectly controls, is controlled by, or is under common control with, or is an associated person (within the meaning of Article I, Section 1(ee) of the By-laws of FINRA) of, any member firm of FINRA.

(ww) No Acquisitions or Dispositions. Except as are described in the Registration Statement and the Prospectus, there are no contracts, letters of intent, term sheets, agreement,

arrangements or understandings with respect to the direct or indirect acquisition or disposition by the Company of material interests in real or personal property.

(xx) Exchange Act Compliance.  The documents incorporated or deemed to be incorporated by reference in the Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Exchange Act, and, when read together with the other information in the Prospectus, at the Settlement Dates, will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.  

(yy) No Reliance.  The Company has not relied upon Cowen or legal counsel for Cowen for any legal, tax or accounting advice in connection with the offering and sale of the Placement Shares.

Any certificate signed by an officer of the Company and delivered to Cowen or to counsel for Cowen pursuant to or in connection with this Agreement shall be deemed to be a representation and warranty by the Company to Cowen as to the matters set forth therein.

The Company acknowledges that Cowen and, for purposes of the opinions to be delivered pursuant to Section 7 hereof, counsel to the Company and counsel to Cowen, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance.

7.  Covenants of the Company.  The Company covenants and agrees with Cowen that:

(a) Registration Statement Amendments.  After the date of this Agreement and during any period in which a Prospectus relating to any Placement Shares is required to be delivered by Cowen under the Securities Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), (i) the Company will notify Cowen promptly of the time when any subsequent amendment to the Registration Statement, other than documents incorporated by reference, has been filed with the Commission and/or has become effective or any subsequent supplement to the Prospectus has been filed and of any request by the Commission for any amendment or supplement to the Registration Statement or Prospectus or for additional information, (ii) the Company will prepare and file with the Commission, promptly upon Cowen’s reasonable request, any amendments or supplements to the Registration Statement or Prospectus that, in Cowen’s reasonable opinion, may be necessary or advisable in connection with the distribution of the Placement Shares by Cowen (provided, however, that (x) the failure of Cowen to make such request shall not relieve the Company of any obligation or liability hereunder, or affect Cowen’s right to rely on the representations and warranties made by the Company in this Agreement and (y) the only remedy Cowen shall have with respect to the failure by the Company to make such filing (other than Cowen’s rights under Section 9 hereof) shall be to cease making sales under this Agreement until such amendment or supplement is filed); (iii) the Company will not file any amendment or supplement to the Registration Statement or Prospectus, other than documents incorporated by reference, relating to the Placement Shares or a security convertible into the Placement Shares unless a copy thereof has been submitted to Cowen within a reasonable period of time before the filing and Cowen has not

reasonably objected thereto (provided, however, that (A) the failure of Cowen to make such objection shall not relieve the Company of any obligation or liability hereunder, or affect Cowen’s right to rely on the representations and warranties made by the Company in this Agreement, (B) the Company has no obligation to provide Cowen any advance copy of such filing or to provide Cowen an opportunity to object to such filing if the filing does not name Cowen and does not relate to the transaction herein and (C) the only remedy Cowen shall have with respect to the failure by the Company to provide Cowen with such copy, to make such filings, or to obtain such consent (other than Cowen’s rights under Section 9 hereof) shall be to cease making sales under this Agreement)) and the Company will furnish to Cowen at the time of filing thereof a copy of any document that upon filing is deemed to be incorporated by reference into the Registration Statement or Prospectus, except for those documents available via EDGAR; (iv) the Company will cause each amendment or supplement to the Prospectus, other than documents incorporated by reference, to be filed with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the Securities Act, and (v) prior to the termination of this Agreement, the Company will notify Cowen if at any time the Registration Statement shall no longer be effective as a result of the passage of time pursuant to Rule 415 under the Securities Act or otherwise.

(b) Notice of Commission Stop Orders.  The Company will advise Cowen, promptly after it receives notice or obtains knowledge thereof, of the issuance or threatened issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, of the suspension of the qualification of the Placement Shares for offering or sale in any jurisdiction, or of the initiation or threatening of any proceeding for any such purpose; and it will promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.

(c) Delivery of Prospectus; Subsequent Changes.  During any period in which a Prospectus relating to the Placement Shares is required to be delivered by Cowen under the Securities Act with respect to a pending sale of the Placement Shares, (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), the Company will comply with all requirements imposed upon it by the Securities Act, as from time to time in force, and to file on or before their respective due dates all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange Act.  If during such period any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend or supplement the Registration Statement or Prospectus to comply with the Securities Act, the Company will promptly notify Cowen to suspend the offering of Placement Shares during such period and the Company will promptly amend or supplement the Registration Statement or Prospectus (at the expense of the Company) so as to correct such statement or omission or effect such compliance; provided, that, the Company may delay the filing of any amendment or supplement, if in the judgment of the Company, it is in the best interest of the Company, during which time of delay of Cowen shall be under no obligation to make any sales of the Placement Shares hereunder.

(d) Listing of Placement Shares.  During any period in which the Prospectus relating to the Placement Shares is required to be delivered by Cowen under the Securities Act with respect to a pending sale of the Placement Shares (including in circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), the Company will use its commercially reasonable efforts to cause the Placement Shares to be listed on Nasdaq and to qualify the Placement Shares for sale under the securities laws of such jurisdictions as Cowen reasonably designates and to continue such qualifications in effect so long as required for the distribution of the Placement Shares; provided, however, that the Company shall not be required in connection therewith to qualify as a foreign corporation or dealer in securities or file a general consent to service of process in any jurisdiction.

(e) Delivery of Registration Statement and Prospectus.  The Company will furnish to Cowen and its counsel (at the expense of the Company) copies of the Registration Statement, the Prospectus (including all documents incorporated by reference therein) and all amendments and supplements to the Registration Statement or Prospectus that are filed with the Commission during any period in which a Prospectus relating to the Placement Shares is required to be delivered under the Securities Act (including all documents filed with the Commission during such period that are deemed to be incorporated by reference therein), in each case as soon as reasonably practicable and in such quantities as Cowen may from time to time reasonably request and, at Cowen’s request, will also furnish copies of the Prospectus to each exchange or market on which sales of the Placement Shares may be made; provided, however, that the Company shall not be required to furnish any document (other than the Prospectus) to Cowen to the extent such document is available on EDGAR.  

(f) Earnings Statement.  The Company will make generally available to its security holders as soon as practicable, but in any event not later than 15 months after the end of the Company’s current fiscal quarter, an earnings statement covering a 12-month period that satisfies the provisions of Section 11(a) and Rule 158 of the Securities Act.

(g) Expenses.  The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, in accordance with the provisions of Section 11 hereunder, will pay the following expenses all incident to the performance of its obligations hereunder, including, but not limited to, expenses relating to (i) the preparation, printing and filing of the Registration Statement and each amendment and supplement thereto, of each Prospectus and of each amendment and supplement thereto, (ii) the preparation, issuance and delivery of the Placement Shares, (iii) the qualification of the Placement Shares under securities laws in accordance with the provisions of Section 7(d) of this Agreement, including filing fees (provided, however, that any fees or disbursements of counsel for Cowen in connection therewith shall be paid by Cowen except as set forth in (vii) below), (iv) the printing and delivery to Cowen of copies of the Prospectus and any amendments or supplements thereto, and of this Agreement, (v) the fees and expenses incurred in connection with the listing or qualification of the Placement Shares for trading on Nasdaq, (vi) the filing fees and expenses, if any, of the Commission, (vii) the filing fees and associated legal expenses of Cowen’s outside counsel for filings with the FINRA Corporate Financing Department, such legal expense reimbursement not to exceed $15,000 and, (viii) the reasonable fees and disbursements of Cowen’s counsel, such legal expense reimbursement set forth in clauses (vii) and (viii) in an amount not to exceed $75,000 in connection with the execution of this Agreement.

(h) Use of Proceeds.  The Company will use the Net Proceeds as described in the Prospectus in the section entitled “Use of Proceeds.”

(i) Notice of Other Sales.  During the pendency of any Placement Notice given hereunder, and for five (5) trading days following the termination of any Placement Notice given hereunder, the Company shall provide Cowen notice as promptly as reasonably practicable before it offers to sell, contracts to sell, sells, grants any option to sell or otherwise disposes of any shares of Common Stock (other than Placement Shares offered pursuant to the provisions of this Agreement) or securities convertible into or exchangeable for Common Stock, warrants or any rights to purchase or acquire Common Stock; provided, that such notice shall not be required in connection with the (i) issuance, grant or sale of Common Stock, options to purchase shares of Common Stock or Common Stock issuable upon the exercise of options or other equity awards pursuant to any stock option, stock bonus or other stock plan or arrangement described in the Prospectus, (ii) adopt a new equity incentive plan, and file a registration statement on Form S-8 under the Securities Act to register the offer and sale of securities to be issued pursuant to such new equity incentive plan, and issue securities pursuant to such new equity incentive plan (including, without limitation, the issuance of shares of Common Stock upon the exercise of options or other securities issued pursuant to such new equity incentive plan), provided that such new equity incentive plan satisfies the transaction requirements of General Instruction A.1 of Form S-8 under the Securities Act, (iii) issue shares of Common Stock in connection with a licensing agreement, joint venture, acquisition or business combination or other collaboration or strategic transaction (including the filing of a registration statement on Form S-4 or other appropriate form with respect thereto), provided that the sum of the aggregate number of shares of Common Stock so issued shall not exceed 5% of the total outstanding shares of Common Stock outstanding immediately following the completion of such issuance, (iv) the issuance or sale of Common Stock pursuant to any dividend reinvestment plan that the Company may adopt from time to time provided the implementation of such is disclosed to Cowen in advance or (v) the issuance of any shares of Common Stock issuable upon the exchange, conversion or redemption of securities or the exercise of warrants, options or other rights in effect or outstanding.

(j) Change of Circumstances.  The Company will, at any time during a fiscal quarter in which the Company intends to tender a Placement Notice or sell Placement Shares, advise Cowen promptly after it shall have received notice or obtained knowledge thereof, of any information or fact that would alter or affect in any material respect any opinion, certificate, letter or other document provided to Cowen pursuant to this Agreement.

(k) Due Diligence Cooperation.  The Company will cooperate with any reasonable due diligence review conducted by Cowen or its agents in connection with the transactions contemplated hereby, including, without limitation, providing information and making available documents and senior corporate officers, during regular business hours and at the Company’s principal offices, as Cowen may reasonably request.

(l) Required Filings Relating to Placement of Placement Shares.  The Company agrees that on such dates as the Securities Act shall require, the Company will (i) file a prospectus supplement with the Commission under the applicable paragraph of Rule 424(b) under the Securities Act, and (ii) deliver such number of copies of each such prospectus supplement to each exchange or market on which such sales were effected as may be required by

the rules or regulations of such exchange or market.  The Company shall disclose in its quarterly reports on Form 10-Q and in its annual report on Form 10-K, the number of the Placement Shares sold through Cowen under this Agreement, and the gross proceeds and Net Proceeds to the Company from the sale of the Placement Shares and the compensation paid by the Company with respect to sales of the Placement Shares pursuant to this Agreement during the relevant quarter or, in the case of an Annual Report on Form 10-K, during the fiscal year covered by such Annual Report and the fourth quarter of such fiscal year.

(m) Bring-Down Dates; Certificate.  On or prior to the First Delivery Date and each time (i) the Company files the Prospectus relating to the Placement Shares or amends or supplements the Registration Statement or the Prospectus relating to the Placement Shares (other than a prospectus supplement filed in accordance with Section 7(l) of this Agreement) by means of a post-effective amendment, sticker, or supplement but not by means of incorporation of document(s) by reference to the Registration Statement or the Prospectus relating to the Placement Shares; (ii) the Company files an annual report on Form 10-K under the Exchange Act; (iii) the Company files its quarterly reports on Form 10-Q under the Exchange Act; or (iv) the Company files a report on Form 8-K containing amended financial information (other than an earnings release) under the Exchange Act (each date of filing of one or more of the documents referred to in clauses (i) through (iv) shall be a "Bring-Down Date"); the Company shall furnish Cowen with a certificate, in the form attached hereto as Exhibit 7(m) within three (3) Trading Days of any Bring-Down Date if requested by Cowen.  The requirement to provide a certificate under this Section 7(m) shall be waived for any Bring-Down Date occurring at a time at which no Placement Notice is pending, which waiver shall continue until the earlier to occur of the date the Company delivers a Placement Notice hereunder (which for such calendar quarter shall be considered a Bring-Down Date) and the next occurring Bring-Down Date.  Notwithstanding the foregoing, if the Company subsequently decides to sell Placement Shares following a Bring-Down Date when the Company relied on such waiver and did not provide Cowen with a certificate under this Section 7(m), then before the Company delivers the Placement Notice or Cowen sells any Placement Shares, the Company shall provide Cowen with a certificate, in the form attached hereto as Exhibit 7(m), dated the date of the Placement Notice.

(n) Legal Opinion.  On or prior to the First Delivery Date and within three (3) Trading Days of each Bring-Down Date with respect to which the Company is obligated to deliver a certificate in the form attached hereto as Exhibit 7(m) for which no waiver is applicable, the Company shall cause to be furnished to Cowen a written opinion of Latham & Watkins, LLP (“Company Counsel”), or other counsel satisfactory to Cowen, in form and substance satisfactory to Cowen and its counsel, dated the date that the opinion is required to be delivered, modified, as necessary, to relate to the Registration Statement and the Prospectus as then amended or supplemented; provided, however, that in lieu of such opinions for subsequent Bring-Down Dates, counsel may furnish Cowen with a letter to the effect that Cowen may rely on a prior opinion delivered under this Section 7(n) to the same extent as if it were dated the date of such letter (except that statements in such prior opinion shall be deemed to relate to the Registration Statement and the Prospectus as amended or supplemented at such Bring-Down Date).  

(o) Comfort Letter.  On or prior to the First Delivery Date and within three (3) Trading Days of each Bring-Down Date with respect to which the Company is obligated to

deliver a certificate in the form attached hereto as Exhibit 7(m) for which no waiver is applicable, the Company shall cause its independent accountants to furnish Cowena letter (the "Comfort Letter"), dated the date the Comfort Letter is delivered, in form and substance satisfactory to Cowen, (i) confirming that they are an independent registered public accounting firm within the meaning of the Securities Act and the PCAOB, (ii) stating, as of such date, the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to Cowen in connection with registered public offerings (the first such letter, the “Initial Comfort Letter”) and (iii) updating the Initial Comfort Letter with any information that would have been included in the Initial Comfort Letter had it been given on such date and modified as necessary to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter; provided that the Company shall be required to furnish to Cowen no more than one Comfort Letter hereunder in connection with each filing of an annual report on Form 10-K or a quarterly report on Form 10-Q.

(p) Reserved.

(q) Market Activities.  The Company will not, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Placement Shares or (ii) sell, bid for, or purchase the Placement Shares to be issued and sold pursuant to this Agreement, or pay anyone any compensation for soliciting purchases of the Placement Shares other than Cowen; provided, however, that the Company may bid for and purchase shares of its common stock in accordance with Rule 10b-18 under the Exchange Act.

(r) Insurance.  The Company and its subsidiaries shall maintain, or cause to be maintained, insurance in such amounts and covering such risks as is reasonable and customary for the business for which it is engaged.

(s) Compliance with Laws.  The Company and each of its subsidiaries shall maintain, or cause to be maintained, all material environmental permits, licenses and other authorizations required by federal, state and local law in order to conduct their businesses as described in the Prospectus, and the Company and each of its subsidiaries shall conduct their businesses, or cause their businesses to be conducted, in substantial compliance with such permits, licenses and authorizations and with applicable Environmental Laws, except where the failure to maintain or be in compliance with such permits, licenses and authorizations could not reasonably be expected to result in a Material Adverse Effect.

(t) Investment Company Act.  The Company will conduct its affairs in such a manner so as to reasonably ensure that neither it nor its subsidiaries will be or become, at any time prior to the termination of this Agreement, an “investment company,” as such term is defined in the Investment Company Act, assuming no change in the Commission’s current interpretation as to entities that are not considered an investment company.

(u) Securities Act and Exchange Act.  The Company will use its best efforts to comply with all requirements imposed upon it by the Securities Act and the Exchange Act as

from time to time in force, so far as necessary to permit the continuance of sales of, or dealings in, the Placement Shares as contemplated by the provisions hereof and the Prospectus.

(v) No Offer to Sell.  Other than a Permitted Free Writing Prospectus, neither Cowen nor the Company (including its agents and representatives, other than Cowen in its capacity as such) will make, use, prepare, authorize, approve or refer to any written communication (as defined in Rule 405 under the Securities Act), required to be filed with the Commission, that constitutes an offer to sell or solicitation of an offer to buy Placement Shares hereunder.

(w) Sarbanes-Oxley Act.  The Company and its subsidiaries will use their best efforts to comply with all effective applicable provisions of the Sarbanes-Oxley Act.

(x) Affirmation.  Each Placement Notice delivered by the Company to Cowen shall be deemed to be (i) an affirmation that the representations, warranties and agreements of the Company herein contained and contained in any certificate delivered to Cowen pursuant hereto are true and correct at the time of delivery of such Placement Notice, and (ii) an undertaking that such representations, warranties and agreements will be true and correct on any applicable Time of Sale and Settlement Date, as though made at and as of each such time (it being understood that such representations, warranties and agreements shall relate to the Registration Statement and the Prospectus as amended and supplemented to the time of such Placement Notice acceptance).

(y) Renewal.    If immediately prior to the third anniversary (the “Renewal Deadline”) of the initial effective date of the Registration Statement, the aggregate gross sales price of Placement Shares sold by the Company is less than the Maximum Amount and this Agreement has not expired or been terminated, the Company will, prior to the Renewal Deadline, file, if it has not already done so and is eligible to do so, a new shelf registration statement relating to the Placement Shares, in a form satisfactory to Cowen, and, if not automatically effective, will use its best efforts to cause such registration statement to be declared effective within 60 days after the Renewal Deadline. The Company will take all other action necessary or appropriate to permit the issuance and sale of the Placement Shares to continue as contemplated in the expired registration statement relating to the Placement Shares. References herein to the Registration Statement shall include such new shelf registration statement.

8.  Conditions to Cowen’s Obligations. The obligations of Cowen hereunder with respect to a Placement Notice will be subject to the continuing accuracy and completeness of the representations and warranties made by the Company herein, to the due performance by the Company of its obligations hereunder and thereunder, to the completion by Cowen of a due diligence review satisfactory to Cowen in its reasonable judgment, and to the continuing satisfaction (or waiver by Cowen in its sole discretion) of the following additional conditions:

(a) Registration Statement Effective.  The Registration Statement shall be effective and shall be available for (i) all sales of Placement Shares issued pursuant to all prior Placement Notices and (ii) the sale of all Placement Shares contemplated to be issued pursuant to any Placement Notice.

(b) No Material Notices.  None of the following events shall have occurred and be continuing:  (i) receipt by the Company or any of its subsidiaries of any request for additional information from the Commission or any other federal or state governmental authority during the period of effectiveness of the Registration Statement, the response to which would require any post-effective amendments or supplements to the Registration Statement or the Prospectus; (ii) the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Placement Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv) the occurrence of any event that makes any material statement made in the Registration Statement or the Prospectus or any material document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related Prospectus or such documents so that, in the case of the Registration Statement, it will not contain any materially untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and, that in the case of the Prospectus, it will not contain any materially untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(c) No Misstatement or Material Omission.  Cowen shall not have advised the Company that the Registration Statement or Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact that in Cowen’s reasonable opinion is material, or omits to state a fact that in Cowen’s reasonable opinion is material and is required to be stated therein or is necessary to make the statements therein not misleading.

(d) Material Changes.  Except as contemplated in the Prospectus, or disclosed in the Company’s reports filed with the Commission, there shall not have been any material adverse change, on a consolidated basis, in the authorized capital stock of the Company or any Material Adverse Effect or any development that could reasonably be expected to result in a Material Adverse Effect, or any downgrading in or withdrawal of the rating assigned to any of the Company’s securities (other than asset backed securities) by any rating organization or a public announcement by any rating organization that it has under surveillance or review its rating of any of the Company’s securities (other than asset backed securities), the effect of which, in the case of any such action by a rating organization described above, in the reasonable judgment of Cowen (without relieving the Company of any obligation or liability it may otherwise have), is so material as to make it impracticable or inadvisable to proceed with the offering of the Placement Shares on the terms and in the manner contemplated in the Prospectus.

(e) Company Counsel Legal Opinion.  Cowen shall have received the opinion of Company Counsel required to be delivered pursuant to Section 7(n) on or before the date on which such delivery of such opinion is required pursuant to Section 7(n).

(f) Cowen Counsel Legal Opinion.  Cowen shall have received from Cooley LLP, counsel for Cowen, such opinion or opinions, on or before the date on which the delivery of the Company Counsel legal opinion is required pursuant to Section 7(n), with respect to such matters

as Cowen may reasonably require, and the Company shall have furnished to such counsel such documents as they request for enabling them to pass upon such matters.

(g) Comfort Letter.  Cowen shall have received the Comfort Letter required to be delivered pursuant to Section 7(o) on or before the date on which such delivery of such Comfort Letter is required pursuant to Section 7(o).

(h) Representation Certificate.  Cowen shall have received the certificate required to be delivered pursuant to Section 7(m) on or before the date on which delivery of such certificate is required pursuant to Section 7(m).

(i) Secretary’s Certificate.  On or prior to the First Delivery Date, Cowen shall have received a certificate, signed on behalf of the Company by its corporate secretary, in form and substance satisfactory to Cowen and its counsel.

(j) Reserved.

(k) No Suspension.  Trading in the Common Stock shall not have been suspended on Nasdaq.

(l) Other Materials.  On each date on which the Company is required to deliver a certificate pursuant to Section 7(m), the Company shall have furnished to Cowen such appropriate further information, certificates and documents as Cowen may have reasonably requested. All such opinions, certificates, letters and other documents shall have been in compliance with the provisions hereof. The Company will furnish Cowen with such conformed copies of such opinions, certificates, letters and other documents as Cowen shall have reasonably requested.

(m) Securities Act Filings Made.  All filings with the Commission required by Rule 424 under the Securities Act to have been filed prior to the issuance of any Placement Notice hereunder shall have been made within the applicable time period prescribed for such filing by Rule 424.

(n) Approval for Listing.  The Placement Shares shall either have been (i) approved for listing on Nasdaq, subject only to notice of issuance, or (ii) the Company shall have filed an application for listing of the Placement Shares on Nasdaq at, or prior to, the issuance of any Placement Notice.

(o) No Termination Event.  There shall not have occurred any event that would permit Cowen to terminate this Agreement pursuant to Section 11(a).

9.  Indemnification and Contribution.

(a) Company Indemnification.  The Company agrees to indemnify and hold harmless Cowen, the directors, officers, partners, employees and agents of Cowen and each person, if any, who (i) controls Cowen within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, or (ii) is controlled by or is under common control with Cowen from and against any and all losses, claims, liabilities, expenses and damages (including, but not limited to, any and all reasonable and documented investigative, legal and other expenses incurred in

connection with, and any and all amounts paid in settlement (in accordance with Section 9(c)) of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), as and when incurred, to which Cowen, or any such person, may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based, directly or indirectly, on (x) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or any amendment or supplement to the Registration Statement or the Prospectus or in any free writing prospectus or in any application or other document executed by or on behalf of the Company or based on written information furnished by or on behalf of the Company filed in any jurisdiction in order to qualify the Common Stock under the securities laws thereof or filed with the Commission, (y) the omission or alleged omission to state in any such document a material fact required to be stated in it or necessary to make the statements in it not misleading or (z) any breach by any of the indemnifying parties of any of their respective representations, warranties and agreements contained in this Agreement; provided, however, that this indemnity agreement shall not apply to the extent that such loss, claim, liability, expense or damage arises from the sale of the Placement Shares pursuant to this Agreement and is caused directly or indirectly by an untrue statement or omission made in reliance upon and in conformity with solely Agent’s Information. “Agent’s Information” means, solely, the following information in the Prospectus: the tenth paragraph under the caption “Plan of Distribution” in the Prospectus.  This indemnity agreement will be in addition to any liability that the Company might otherwise have.

(b) Cowen Indemnification. Cowen agrees to indemnify and hold harmless the Company and its directors and each officer of the Company that signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendments thereto) or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Agent’s Information.

(c) Procedure.  Any party that proposes to assert the right to be indemnified under this Section 9 will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 9, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party will not relieve the indemnifying party from (i) any liability that it might have to any indemnified party otherwise than under this Section 9 and (ii) any liability that it may have to any indemnified party under the foregoing provision of this Section 9 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be

liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable and documentedcosts of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party will not, in any event, be liable for any settlement of any action or claim effected without its written consent.  No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 9 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding.

(d) Contribution.  In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 9 is applicable in accordance with its terms but for any reason is held to be unavailable from the Company or Cowen, the Company and Cowen will contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than Cowen, such as persons who control the Company within the meaning of the Securities Act, officers of the Company who signed the Registration Statement and directors of the Company, who also may be liable for contribution) to which the Company and Cowen may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and Cowen on the other. The relative benefits received by the Company on the one hand and Cowen on the other hand shall be deemed to be in the same proportion as the total Net Proceeds from the sale of the Placement Shares (before deducting expenses) received by the Company bear to the total compensation received by Cowen from the sale of Placement Shares on behalf of the Company.  If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the

one hand, and Cowen, on the other, with respect to the statements or omission that resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or Cowen, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and Cowen agree that it would not be just and equitable if contributions pursuant to this Section 9(d) were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense, or damage, or action in respect thereof, referred to above in this Section 9(d) shall be deemed to include, for the purpose of this Section 9(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim to the extent consistent with Section 9(c) hereof.  Notwithstanding the foregoing provisions of this Section 9(d), Cowen shall not be required to contribute any amount in excess of the commissions received by it under this Agreement and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 9(d), any person who controls a party to this Agreement within the meaning of the Securities Act, and any officers, directors, partners, employees or agents of Cowen, will have the same rights to contribution as that party, and each officer of the Company who signed the Registration Statement and each director of the Company will have the same rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 9(d), will notify any such party or parties from whom contribution may be sought, but the omission to so notify will not relieve that party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 9(d) except to the extent that the failure to so notify such other party materially prejudiced the substantive rights or defenses of the party from whom contribution is sought. Except for a settlement entered into pursuant to the last sentence of Section 9(c) hereof, no party will be liable for contribution with respect to any action or claim settled without its written consent if such consent is required pursuant to Section 9(c) hereof.

10.  Representations and Agreements to Survive Delivery.  The indemnity and contribution agreements contained in Section 9 of this Agreement and all representations and warranties of the Company herein or in certificates delivered pursuant hereto shall survive, as of their respective dates, regardless of (i) any investigation made by or on behalf of Cowen, any controlling persons, or the Company (or any of their respective officers, directors or controlling persons), (ii) delivery and acceptance of the Placement Shares and payment therefor or (iii) any termination of this Agreement.

11.  Termination.

(a) Cowen shall have the right by giving written notice as hereinafter specified at any time to terminate this Agreement if (i) any Material Adverse Effect, or any development that could reasonably be expected to result in a Material Adverse Effect has occurred that, in the

reasonable judgment of Cowen, may materially impair the ability of Cowen to sell the Placement Shares hereunder, (ii) the Company shall have failed, refused or been unable to perform any agreement on its part to be performed hereunder, (iii) any other condition of Cowen’s obligations hereunder is not fulfilled, or (iv) any suspension or limitation of trading in the Placement Shares or in securities generally on Nasdaq shall have occurred.  Any such termination shall be without liability of any party to any other party except that the provisions of Section 7(g) (Expenses), Section 9 (Indemnification and Contribution), Section 10 (Representations and Agreements to Survive Delivery), Section 16 (Applicable Law; Consent to Jurisdiction) and Section 17 (Waiver of Jury Trial) hereof shall remain in full force and effect notwithstanding such termination. If Cowen elects to terminate this Agreement as provided in this Section 11(a), Cowen shall provide the required written notice as specified in Section 12 (Notices).

(b) The Company shall have the right, by giving ten (10) days’ notice as hereinafter specified to terminate this Agreement in its sole discretion at any time after the date of this Agreement.  Any such termination shall be without liability of any party to any other party except that the provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in full force and effect notwithstanding such termination.

(c) Cowen shall have the right, by giving ten (10) days’ notice as hereinafter specified to terminate this Agreement in its sole discretion at any time after the date of this Agreement.  Any such termination shall be without liability of any party to any other party except that the provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in full force and effect notwithstanding such termination.

(d) Unless earlier terminated pursuant to this Section 11, this Agreement shall automatically terminate upon the issuance and sale of all of the Placement Shares through Cowen on the terms and subject to the conditions set forth herein; provided that the provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in full force and effect notwithstanding such termination.

(e) This Agreement shall remain in full force and effect unless terminated pursuant to Sections 11(a), (b), (c), or (d) above or otherwise by mutual agreement of the parties; provided, however, that any such termination by mutual agreement shall in all cases be deemed to provide that Section 7(g), Section 9, Section 10, Section 16 and Section 17 shall remain in full force and effect.

(f) Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided, however, that such termination shall not be effective until the close of business on the date of receipt of such notice by Cowen or the Company, as the case may be. If such termination shall occur prior to the Settlement Date for any sale of Placement Shares, such Placement Shares shall settle in accordance with the provisions of this Agreement.

12.  Notices.  All notices or other communications required or permitted to be given by any party to any other party pursuant to the terms of this Agreement shall be in writing, unless otherwise specified in this Agreement, and if sent to Cowen, shall be delivered to Cowen at Cowen and Company, LLC, 599 Lexington Avenue, New York, NY 10022, fax no. 646-562-1130, Attention:  General Counsel, email: Bradley.friedman@cowen.com, with a copy to Cooley LLP, e-mail: dgoldberg@cooley.com, attention: Daniel I. Goldberg; or if sent to the Company,

shall be delivered to Avidity Biosciences, Inc., 10975 N. Torrey Pines Road, Suite 150, La Jolla, California, 92037 Attention: General Counsel, email: john@aviditybio.com, with a copy to Latham & Watkins LLP, attention: Matthew T. Bush, email: matt.bush@lw.com. Each party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose.  Each such notice or other communication shall be deemed given (i) when delivered personally or by verifiable facsimile transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a Business Day (as defined below), or, if such day is not a Business Day on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to a nationally-recognized overnight courier and (iii) on the BusinessDay actually received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid). For purposes of this Agreement, “Business Day” shall mean any day on which the Nasdaq and commercial banks in the City of New York are open for business.

13.  Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the Company and Cowen and their respective successors and the affiliates, controlling persons, officers and directors referred to in Section 9 hereof. References to any of the parties contained in this Agreement shall be deemed to include the successors and permitted assigns of such party. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Neither party may assign its rights or obligations under this Agreement without the prior written consent of the other party; provided, however, that Cowen may assign its rights and obligations hereunder to an affiliate of Cowen without obtaining the Company’s consent.

14.  Adjustments for Share Splits.  The parties acknowledge and agree that all share-related numbers contained in this Agreement shall be adjusted to take into account any share split, share dividend or similar event effected with respect to the Common Stock.

15.  Entire Agreement; Amendment; Severability.  This Agreement (including all schedules and exhibits attached hereto and Placement Notices issued pursuant hereto) constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral, among the parties hereto with regard to the subject matter hereof. The Company and Cowen agree that the Sales Agreement dated July 2, 2021, by and between the Company and Cowen is hereby terminated. Neither this Agreement nor any term hereof may be amended except pursuant to a written instrument executed by the Company and Cowen.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable as written by a court of competent jurisdiction, then such provision shall be given full force and effect to the fullest possible extent that it is valid, legal and enforceable, and the remainder of the terms and provisions herein shall be construed as if such invalid, illegal or unenforceable term or provision was not contained herein, but only to the extent that giving effect to such provision and the remainder of the terms and provisions hereof shall be in accordance with the intent of the parties as reflected in this Agreement.

16.  Applicable Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the principles of conflicts of laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan,

for the adjudication of any dispute hereunder or in connection with any transaction contemplated hereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof (certified or registered mail, return receipt requested) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.

17.  Waiver of Jury Trial.  The Company and Cowen each hereby irrevocably waives any right it may have to a trial by jury in respect of any claim based upon or arising out of this Agreement or any transaction contemplated hereby.

18.  Absence of Fiduciary Relationship.  The Company acknowledges and agrees that:

(a) Cowen has been retained solely to act as an arm’s length contractual counterparty to the Company in connection with the sale of the Placement Shares contemplated hereby and that no fiduciary, advisory or agency relationship between the Company and Cowen has been created in respect of any of the transactions contemplated by this Agreement, irrespective of whether Cowen has advised or is advising the Company on other matters;

(b) the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement;

(c) the Company has been advised that Cowen and its affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company and that Cowen has no obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; and

(d) the Company waives, to the fullest extent permitted by law, any claims it may have against Cowen, for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that Cowen shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including stockholders, partners, employees or creditors of the Company.

19.  Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed Agreement by one party to the other may be made by facsimile or by electronic delivery of a portable document format (PDF) file (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com).

[Remainder of Page Intentionally Blank]

If the foregoing correctly sets forth the understanding between the Company and Cowen, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Company and Cowen.  

Very truly yours,

COWEN AND COMPANY, LLC

By:	/s/ Michael Murphy
Name:	Michael Murphy
Title:	Managing Director

ACCEPTED as of the date

first-above written:

AVIDITY BIOSCIENCES, INC.

By:	/s/ Michael F. MacLean
Name:	Michael F. MacLean
Title:	Chief Financial Officer

34

SCHEDULE 1

form of PLACEMENT NOTICE

From:	[                              ]
Cc:	[                              ]
To:	[                              ]
Subject:	Cowen At the Market Offering—Placement Notice

Gentlemen:

Pursuant to the terms and subject to the conditions contained in the Sales Agreement between Avidity Biosciences, Inc., a Delaware corporation (the “Company”), and Cowen and Company, LLC (“Cowen”) dated November 8, 2022 (the “Agreement”), I hereby request on behalf of the Company that Cowen sell up to [ ] shares of the Company’s common stock, par value $0.0001 per share, at a minimum market price of $_______ per share.  Sales should begin on the date of this Notice and shall continue until [DATE] [all shares are sold].

SCHEDULE 2

Notice Parties

Company

Sarah Boyce	President & Chief Executive Officer
Mike MacLean	Chief Financial Officer
With a copy to:
John W. Wallen III, PhD, JD	General Counsel
Lisa Brockman	Vice President of Finance
Cowen
Michael J. Murphy	Managing Director
William Follis	Managing Director

SCHEDULE 3

Compensation

Cowen shall be paid compensation up to 3.0% of the gross proceeds from the sales of Placement Shares pursuant to the terms of this Agreement.

Exhibit 7(m)

OFFICER CERTIFICATE

The undersigned, the duly qualified and elected _______________________, of Avidity Biosciences, Inc.(“Company”), a Delaware corporation, does hereby certify in such capacity and on behalf of the Company, pursuant to Section 7(m) of the Sales Agreement dated November 8, 2022 (the “Sales Agreement”) between the Company and Cowen and Company, LLC, that to the best of the knowledge of the undersigned.

(i)The representations and warranties of the Company in Section 6 of the Sales Agreement (A) to the extent such representations and warranties are subject to qualifications and exceptions contained therein relating to materiality or Material Adverse Effect, are true and correct on and as of the date hereof with the same force and effect as if expressly made on and as of the date hereof, except for those representations and warranties that speak solely as of a specific date and which were true and correct as of such date, and (B) to the extent such representations and warranties are not subject to any qualifications or exceptions, are true and correct in all material respects as of the date hereof as if made on and as of the date hereof with the same force and effect as if expressly made on and as of the date hereof except for those representations and warranties that speak solely as of a specific date and which were true and correct as of such date; and

(ii)The Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied pursuant to the Sales Agreement at or prior to the date hereof.

Cooley LLP and Latham & Watkins LLP are entitled to rely upon this Certificate in connection with the opinions given by such firms pursuant to the Sales Agreement.

Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Sales Agreement.

By:

Name:

Title:

Date:

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sarah Boyce, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Avidity Biosciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2022	/s/ Sarah Boyce
	Sarah Boyce
	President, Chief Executive Officer and Director
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael F. MacLean, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Avidity Biosciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2022	/s/ Michael F. MacLean
	Michael F. MacLean
	Chief Financial and Chief Business Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Avidity Biosciences, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sarah Boyce, President, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2022	/s/ Sarah Boyce
	Sarah Boyce
	President, Chief Executive Officer and Director (Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Avidity Biosciences, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael F. MacLean, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2022	/s/ Michael F. MacLean
	Michael F. MacLean
	Chief Financial and Chief Business Officer (Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2022	Oct. 25, 2022
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Registrant Name	Avidity Biosciences, Inc.
Entity Central Index Key	0001599901
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		54,462,518
Entity File Number	001-39321
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-1336960
Entity Address, Address Line One	10578 Science Center Drive
Entity Address, Address Line Two	Suite 125
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92121
City Area Code	858
Local Phone Number	401-7900
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	RNA
Security Exchange Name	NASDAQ
Document Quarterly Report	true
Document Transition Report	false

XML

Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 143,699	$ 320,448
Marketable securities	261,849	85,095
Prepaid and other assets	8,916	5,598
Total current assets	414,464	411,141
Property and equipment, net	6,037	4,805
Restricted cash	251	251
Right-of-use assets	9,264	10,784
Other assets	523	599
Total assets	430,539	427,580
Current liabilities:
Accounts payable and accrued liabilities	26,375	14,085
Accrued compensation	7,747	8,940
Lease liabilities, current portion	3,090	1,769
Deferred revenue, current portion	5,454	4,864
Total current liabilities	42,666	29,658
Lease liabilities, net of current portion	8,185	9,960
Deferred revenue, net of current portion	2,706	6,532
Total liabilities	53,557	46,150
Commitments and contingencies (Note 7)	0	0
Stockholders’ equity:
Common stock, $0.0001 par value; authorized shares – 400,000; issued and outstanding shares – 54,446 and 47,754 at September 30, 2022 and December 31, 2021, respectively	5	5
Additional paid-in capital	688,513	566,161
Accumulated other comprehensive loss	(3,463)	(187)
Accumulated deficit	(308,073)	(184,549)
Total stockholders’ equity	376,982	381,430
Total liabilities and stockholders’ equity	$ 430,539	$ 427,580

XML

Condensed Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	54,446,000	47,754,000
Common stock, shares outstanding	54,446,000	47,754,000

XML

Condensed Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
Collaboration revenue	$ 2,482	$ 2,163	$ 6,455	$ 7,474
Revenue from Contract with Customer, Product and Service [Extensible Enumeration]	us-gaap:LicenseAndServiceMember	us-gaap:LicenseAndServiceMember	us-gaap:LicenseAndServiceMember	us-gaap:LicenseAndServiceMember
Operating expenses:
Research and development	$ 37,317	$ 24,831	$ 104,794	$ 68,214
General and administrative	10,094	6,612	27,349	18,764
Total operating expenses	47,411	31,443	132,143	86,978
Loss from operations	(44,929)	(29,280)	(125,688)	(79,504)
Other income (expense):
Interest income	1,342	17	2,203	49
Other expense	(12)	(11)	(39)	(16)
Total other income	1,330	6	2,164	33
Net loss	(43,599)	(29,274)	(123,524)	(79,471)
Other comprehensive income (loss):
Net unrealized (losses) gains on marketable securities	(477)	(1)	(3,276)	4
Comprehensive loss	$ (44,076)	$ (29,275)	$ (126,800)	$ (79,467)
Net loss per share, basic	$ (0.82)	$ (0.68)	$ (2.45)	$ (2.01)
Net loss per share, diluted	$ (0.82)	$ (0.68)	$ (2.45)	$ (2.01)
Weighted-average shares outstanding, basic	53,069	43,265	50,432	39,477
Weighted-average shares outstanding, diluted	53,069	43,265	50,432	39,477

XML

Condensed Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	ATM	Common Stock	Common Stock ATM	Additional Paid-in Capital	Additional Paid-in Capital ATM	Accumulated Other Comprehensive Loss	Accumulated Deficit
Balance at Dec. 31, 2020	$ 306,223		$ 4		$ 372,764		$ (5)	$ (66,540)
Balance, Shares at Dec. 31, 2020			37,569
Issuance of common stock upon exercise of stock options	24				24
Issuance of common stock upon exercise of stock options, Shares			31
Vesting of early exercise options	10				10
Stock-based compensation	3,701				3,701
Net loss	(23,844)							(23,844)
Other comprehensive gain (loss)	2						2
Balance at Mar. 31, 2021	286,116		$ 4		376,499		(3)	(90,384)
Balance, Shares at Mar. 31, 2021			37,600
Balance at Dec. 31, 2020	306,223		$ 4		372,764		(5)	(66,540)
Balance, Shares at Dec. 31, 2020			37,569
Net loss	(79,471)
Balance at Sep. 30, 2021	394,877		$ 5		540,884		(1)	(146,011)
Balance, Shares at Sep. 30, 2021			46,897
Balance at Mar. 31, 2021	286,116		$ 4		376,499		(3)	(90,384)
Balance, Shares at Mar. 31, 2021			37,600
Issuance of common stock upon exercise of stock options	98				98
Issuance of common stock upon exercise of stock options, Shares			51
Issuance of common stock under employee stock purchase plan	318				318
Issuance of common stock under employee stock purchase plan, Shares			14
Vesting of early exercise options	9				9
Stock-based compensation	4,289				4,289
Net loss	(26,353)							(26,353)
Other comprehensive gain (loss)	3						3
Balance at Jun. 30, 2021	264,480		$ 4		381,213			(116,737)
Balance, Shares at Jun. 30, 2021			37,665
Issuance of common stock upon exercise of stock options	34				34
Issuance of common stock upon exercise of stock options, Shares			32
Vesting of early exercise options	6				6
Issuance of common stock in public offerings, net of issuance costs		$ 155,082		$ 1		$ 155,081
Issuance of common stock in public offerings, net of issuance costs, Shares				9,200
Stock-based compensation	4,550				4,550
Net loss	(29,274)							(29,274)
Other comprehensive gain (loss)	(1)						(1)
Balance at Sep. 30, 2021	394,877		$ 5		540,884		(1)	(146,011)
Balance, Shares at Sep. 30, 2021			46,897
Balance at Dec. 31, 2021	381,430		$ 5		566,161		(187)	(184,549)
Balance, Shares at Dec. 31, 2021			47,754
Issuance of common stock upon exercise of stock options	10				10
Issuance of common stock upon exercise of stock options, Shares			7
Vesting of early exercise options	1				1
Issuance of common stock in public offerings, net of issuance costs		24,103				24,103
Issuance of common stock in public offerings, net of issuance costs, Shares				1,520
Stock-based compensation	6,238				6,238
Net loss	(34,235)							(34,235)
Other comprehensive gain (loss)	(1,839)						(1,839)
Balance at Mar. 31, 2022	375,708		$ 5		596,513		(2,026)	(218,784)
Balance, Shares at Mar. 31, 2022			49,281
Balance at Dec. 31, 2021	$ 381,430		$ 5		566,161		(187)	(184,549)
Balance, Shares at Dec. 31, 2021			47,754
Issuance of common stock upon exercise of stock options, Shares	282
Net loss	$ (123,524)
Balance at Sep. 30, 2022	376,982		$ 5		688,513		(3,463)	(308,073)
Balance, Shares at Sep. 30, 2022			54,446
Balance at Mar. 31, 2022	375,708		$ 5		596,513		(2,026)	(218,784)
Balance, Shares at Mar. 31, 2022			49,281
Issuance of common stock upon exercise of stock options	4				4
Issuance of common stock upon exercise of stock options, Shares			5
Issuance of common stock under employee stock purchase plan	499				499
Issuance of common stock under employee stock purchase plan, Shares			49
Vesting of early exercise options	1				1
Issuance of common stock in public offerings, net of issuance costs		38,281				38,281
Issuance of common stock in public offerings, net of issuance costs, Shares				2,746
Stock-based compensation	6,508				6,508
Net loss	(45,690)							(45,690)
Other comprehensive gain (loss)	(960)						(960)
Balance at Jun. 30, 2022	374,351		$ 5		641,806		(2,986)	(264,474)
Balance, Shares at Jun. 30, 2022			52,081
Issuance of common stock upon exercise of stock options	303				303
Issuance of common stock upon exercise of stock options, Shares			270
Vesting of early exercise options	1				1
Issuance of common stock in public offerings, net of issuance costs		$ 39,317				$ 39,317
Issuance of common stock in public offerings, net of issuance costs, Shares				2,095
Stock-based compensation	7,086				7,086
Net loss	(43,599)							(43,599)
Other comprehensive gain (loss)	(477)						(477)
Balance at Sep. 30, 2022	$ 376,982		$ 5		$ 688,513		$ (3,463)	$ (308,073)
Balance, Shares at Sep. 30, 2022			54,446

XML

Condensed Statements of Stockholders' Equity (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021
Common Stock | ATM
Stock issuance costs	$ 1,216	$ 1,184	$ 745	$ 10,518

XML

Condensed Statements of Cash Flows (unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities
Net loss	$ (123,524)	$ (79,471)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	1,006	431
Stock-based compensation expense	19,832	12,540
Amortization of premiums and discounts on marketable securities, net	184	87
Gain on disposal of property and equipment	0	(16)
Changes in operating assets and liabilities:
Prepaid and other assets	(3,242)	(5,654)
Accounts payable and accrued liabilities	12,028	3,869
Accrued compensation	(1,193)	3,001
Operating lease right-of-use assets and liabilities, net	1,066	449
Deferred revenue	(3,236)	(3,834)
Net cash used in operating activities	(97,079)	(68,598)
Cash flows from investing activities
Maturities of marketable securities	85,975	3,580
Purchases of marketable securities	(266,189)	0
Purchases of property and equipment	(1,973)	(2,033)
Net cash (used in) provided by investing activities	(182,187)	1,547
Cash flows from financing activities
Proceeds from issuance of common stock in public offerings, gross	104,846	165,600
Payment of issuance costs related to public offerings	(3,145)	(10,399)
Proceeds from issuance of common stock under employee stock purchase plan	499	318
Proceeds from exercise of stock options	317	156
Payment of deferred financing costs	0	(73)
Net cash provided by financing activities	102,517	155,602
Net (decrease) increase in cash, cash equivalents and restricted cash	(176,749)	88,551
Cash, cash equivalents and restricted cash at beginning of period	320,699	321,713
Cash, cash equivalents and restricted cash at end of period	143,950	410,264
Supplemental schedule of noncash investing and financing activities:
Costs incurred, but not paid, in connection with public offering included in accounts payable and accrued liabilities	0	119
Costs incurred, but not paid, in connection with deferred financing costs included in accounts payable and accrued liabilities	0	61
Costs incurred, but not paid, in connection with purchases of property and equipment included in accounts payable and accrued liabilities	$ 485	$ 134

XML

Description of Business and Basis of Presentation

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Description of Business and Basis of Presentation

1. Description of Business and Basis of Presentation

Description of Business

Avidity Biosciences, Inc. (the Company or Avidity) is a biopharmaceutical company committed to delivering a new class of RNA therapeutics called Antibody Oligonucleotide Conjugates (AOCs). The Company’s proprietary AOC platform is designed to combine the specificity of monoclonal antibodies with the precision of RNA therapeutics to target the root cause of diseases previously untreatable with such therapeutics.

Liquidity

On June 16, 2020, the Company completed its initial public offering (IPO), and it has since raised additional financing through additional public offerings and a sales agreement which are described further in Note 8 (Stockholders’ Equity).

To date, the Company has devoted substantially all of its resources to organizing and staffing the Company, business planning, raising capital, developing its proprietary AOC platform, identifying potential product candidates, establishing its intellectual property portfolio, conducting research, preclinical and clinical studies, and providing other general and administrative support for these operations. In addition, the Company has a limited operating history, has incurred operating losses since inception and expects that it will continue to incur net losses into the foreseeable future as it continues the development of its product candidates and development programs. As of September 30, 2022, the Company had an accumulated deficit of $308.1 million and cash, cash equivalents and marketable securities of $405.5 million.

The Company believes that existing cash, cash equivalents and marketable securities will be sufficient to fund the Company’s operations for at least 12 months from the date of the filing of this Form 10-Q. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses and other similar arrangements. If the Company is not able to secure adequate additional funding, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or delay or reduce the scope of its planned development programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects.

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s annual report on Form 10-K filed with the SEC on March 1, 2022.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Use of Estimates

The Company’s condensed financial statements are prepared in accordance with GAAP, which requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the condensed financial statements and accompanying notes. The most significant estimates in the Company’s condensed financial statements relate to revenue recognition, stock-based compensation, and accrued research and development costs. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. Restricted cash represents cash held as collateral for the letter of credit required under the Company’s facility lease and is reported as a long-term asset in the accompanying condensed balance sheets.

Marketable Securities

The Company’s marketable securities primarily consist of U.S. Government and corporate debt securities. The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the condensed balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the condensed statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than one year as current assets because such marketable securities are available to fund the Company’s current operations. Realized gains and losses are calculated on the specific identification method and recorded as interest income. There were no realized gains and losses during any of the periods presented.

At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the unrealized loss is other-than-temporary. When the Company determines that a decline in the fair value below its cost basis is other-than-temporary, the Company recognizes an impairment loss in the period in which the other-than-temporary decline occurred. There have been no other-than-temporary impairments recognized during any of the periods presented.

See Note 4 (Marketable Securities) for further information.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial position of the depository institutions in which those deposits are held. Additionally, the Company has established guidelines regarding approved investments, credit quality, diversification, liquidity and maturities of investments, which are designed to maintain safety and liquidity.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

None of the Company’s non-financial assets are recorded at fair value on a non-recurring basis. The carrying amounts reflected in the Company’s condensed balance sheets for prepaid and other assets and accounts payable and accrued liabilities approximate their fair values due to their short-term nature. The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. No transfers between levels have occurred during the periods presented.

See Note 3 (Fair Value Measurements) for information on assets measured at fair value.

Property and Equipment, net

Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the related assets, which ranges from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease term. Repairs and maintenance charges that do not increase the useful life of the assets are charged to operating expenses as incurred.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company has not recognized any impairment losses in any of the periods presented in these condensed financial statements.

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by management in making decisions regarding resource allocation and assessing performance. The Company manages its operations as a single operating segment in the United States for the purposes of assessing performance and making operating decisions.

Revenue Recognition

To date, all the Company’s revenue has been derived from collaboration and research agreements. The terms of these arrangements include the following types of payments to the Company: non-refundable, upfront license fees; development, regulatory and commercial milestone payments; payments for research and development services provided by the Company or for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products.  

The Company performs the following steps in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of these agreements: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, the Company satisfies each performance obligation.

The Company receives payments from its collaborators based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under its research and collaboration arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

See Note 5 (Collaboration, License and Research Agreements) for further information.

Research and Development Costs

Research and development costs are expensed as incurred and include salaries, benefits and stock-based compensation associated with research and development personnel, third-party research and development expenses, license fees, laboratory supplies, facilities, overhead costs, and consultants. Nonrefundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

Upfront and milestone payments to acquire contractual rights to licensed technology are expensed when incurred if there is uncertainty in the Company receiving future economic benefit from the acquired contractual rights. Certain of these contractual rights may require the Company to make additional milestone payments upon initiation of a pivotal trial and the U.S. Food and Drug Administration approval, which are not expected to exceed $8.5 million.

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification (ASC) 740, Income Taxes, which provides for deferred taxes using the asset and liability method. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

The Company is subject to taxation in the United States and various state jurisdictions. As of December 31, 2021, the Company’s tax years since conversion to a corporation in 2019 are subject to examination by taxing authorities.

Stock-Based Compensation

Stock-based compensation expense for employee and non-employee stock option grants is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period (usually the vesting period) of the stock-based award, and forfeitures are recognized as incurred. Stock-based compensation expense for employee stock purchases under the Company’s Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of fair value for stock-based compensation requires management to make estimates and judgments about, among other things, the estimated life of options and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on marketable securities. Comprehensive gains (losses) have been reflected in the statements of operations and comprehensive loss for all periods presented.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, adjusted for the weighted-average number of common shares outstanding that are subject to repurchase or forfeiture. The Company has excluded 8,936 and 22,158 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three months ended September 30, 2022 and 2021, respectively, and 11,435 and 39,345 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the nine months ended September 30, 2022 and 2021, respectively. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be anti-dilutive.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

	September 30,
	2022		2021
Common stock options issued and outstanding		9,093		5,649
Common stock subject to repurchase or forfeiture		8		18
ESPP shares pending issuance		27		12
Total		9,128		5,679

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Statements (Topic 326), which intends to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as available-for-sale debt securities. Subsequent to the issuance of ASU 2016-13, the FASB issued several additional Accounting Standard Updates (ASUs) to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company was a smaller reporting company at the determination date, and therefore the new standard will be effective for the Company on January 1, 2023. The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 may have on its financial statements and related disclosures.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The Company determines the fair value of its marketable securities based on one or more valuations from its investment accounting and reporting service provider. The investment service provider values the securities using a hierarchical security pricing model that relies primarily on valuations provided by an industry-recognized valuation service. Such valuations may be based on trade prices in active markets for identical assets (Level 1 inputs) or valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets, yield curves, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, and broker and dealer quotes, as well as other relevant economic measures.

The following tables summarize the Company’s marketable securities measured at fair value (in thousands):

			Fair Value Measurements Using
As of September 30, 2022	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	$	236,553	$	236,553	$	—	$	—
U.S. Government agency securities		4,927		—		4,927		—
Negotiable certificates of deposit		3,340		—		3,340		—
Corporate debt securities		17,029		—		17,029		—
Total	$	261,849	$	236,553	$	25,296	$	—

			Fair Value Measurements Using
As of December 31, 2021	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	$	65,372	$	65,372	$	—	$	—
Negotiable certificates of deposit		3,873		—		3,873		—
Corporate debt securities		15,850		—		15,850		—
Total	$	85,095	$	65,372	$	19,723	$	—

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Marketable Securities

9 Months Ended

Sep. 30, 2022

Investments Debt And Equity Securities [Abstract]

Marketable Securities

4. Marketable Securities

The Company’s marketable securities, which consist of highly liquid marketable debt securities, are classified as available-for-sale and are stated at fair value. The following tables summarize the Company’s marketable securities (in thousands):

As of September 30, 2022	Maturity (in years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
U.S. Treasury securities	1 or less	$	197,652	$	—	$	(1,938	)	$	195,714
U.S. Government agency securities	1 or less		5,000		—		(73	)		4,927
Negotiable certificates of deposit	1 or less		2,683		—		(48	)		2,635
Corporate debt securities	1 or less		16,131		—		(344	)		15,787
U.S. Treasury securities	1 - 2		41,823		—		(984	)		40,839
Negotiable certificates of deposit	1 - 2		734		—		(29	)		705
Corporate debt securities	1 - 2		1,289		—		(47	)		1,242
Total		$	265,312	$	—	$	(3,463	)	$	261,849

As of December 31, 2021	Maturity (in years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
U.S. Treasury securities	1 or less	$	2,492	$	—	$	(1	)	$	2,491
Negotiable certificates of deposit	1 or less		1,190		—		(1	)		1,189
U.S. Treasury securities	1 - 2		63,034		—		(153	)		62,881
Negotiable certificates of deposit	1 - 2		2,687		—		(3	)		2,684
Corporate debt securities	1 - 2		15,879		—		(29	)		15,850
Total		$	85,282	$	—	$	(187	)	$	85,095

The unrealized losses on the Company’s marketable securities of $3.5 million as of September 30, 2022 were caused by interest rate increases which resulted in the decrease in market value of these securities. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those marketable securities to be other-than-temporarily impaired at September 30, 2022. None of the Company’s marketable securities have been in a continuous unrealized loss position for 12 months or greater as of September 30, 2022.

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Collaboration, License and Research Agreements

9 Months Ended

Sep. 30, 2022

Collaboration License And Research Agreements [Abstract]

Collaboration, License and Research Agreements

5. Collaboration, License and Research Agreements

Research Collaboration and License Agreement with Eli Lilly and Company

In April 2019, the Company entered into a Research Collaboration and License Agreement (the Lilly Agreement) with Eli Lilly and Company (Lilly) for the discovery, development and commercialization of AOC products directed against certain targets in immunology and other select indications on a worldwide basis. Under the Lilly Agreement, the Company granted Lilly an exclusive, worldwide, royalty-bearing license, with the right to sublicense (subject to certain conditions), under the Company’s technology to research, develop, manufacture and sell products containing AOCs that are directed to up to six mRNA targets. The Company retains the right to use its technology to perform its obligations under the Lilly Agreement and for all purposes not granted to Lilly. The Company agreed that it will not, itself or with a third party, research, develop, manufacture or commercialize or otherwise exploit any compound or product directed against targets subject to the Lilly Agreement.

In consideration of the rights granted to Lilly under the Lilly Agreement, the Company received a one-time upfront fee of $20.0 million and is eligible to receive up to $60.0 million in development milestone payments per target, up to $140.0 million in regulatory milestone payments per target and up to $205.0 million in commercialization milestone payments per target. In addition, Lilly is obligated to reimburse the Company for research expenses, as defined in and incurred under the Lilly Agreement. Lilly is obligated to pay the Company a tiered royalty ranging from the mid-single to low-double digits on worldwide annual net sales of licensed products, subject to specified and capped reductions for the market entry of biosimilar products, loss of patent coverage of licensed products and for payments owed to third parties for additional rights necessary to commercialize licensed products in the territory. Lilly’s royalty obligations and the Lilly Agreement will expire on a licensed product-by-licensed product and country-by-country basis on the later of ten years from the date of the first commercial sale or when there is no longer a valid patent claim covering such licensed product in such country.

The Company has identified multiple promises to deliver goods and services, which include at inception of the agreement: (i) a license to technology and patents, information and know-how; and (ii) collaboration, including research services, technical and regulatory support provided by the Company. At inception and through September 30, 2022, the Company has identified one performance obligation for all the deliverables under the Lilly Agreement since the delivered elements are either not capable of being distinct or are not distinct within the context of the contract. Accordingly, the Company will recognize revenue for the fixed or determinable collaboration in an amount proportional to the collaboration expenses incurred and the total estimated collaboration expenses over the five-year period over which it expects to deliver its performance obligations. The Company periodically reviews and updates the estimated collaboration expenses, when appropriate, which adjusts the percentage of revenue that is recognized for the period. In connection with the Lilly Agreement, the Company recognized revenue of $2.4 million and $2.1 million for the three months ended September 30, 2022 and 2021, respectively, and $6.3 million and $7.3 million for the nine months ended September 30, 2022 and 2021, respectively, and had deferred revenue of $8.0 million and $11.1 million as of September 30, 2022 and December 31, 2021, respectively. Collaboration receivables related to the Lilly Agreement were $1.3 million and $0.9 million as of September 30, 2022 and December 31, 2021, respectively, which are included in prepaid and other assets on the condensed balance sheets.

A reconciliation of the closing balance of deferred revenue related to the Lilly Agreement is as follows (in thousands):

Balance at December 31, 2021	$	11,108
Revenue recognized		(3,068	)
Balance at September 30, 2022	$	8,040

Research Agreement with MyoKardia, Inc.

In December 2020, the Company entered into a research collaboration (the MyoKardia Agreement) with MyoKardia, Inc. (MyoKardia), a wholly-owned subsidiary of Bristol Myers Squibb, to demonstrate the potential utility of AOCs in cardiac tissue by leveraging MyoKardia’s genetic cardiomyopathy platform including, among other aspects, its novel target discovery engine and proprietary cardiac disease models. In connection with the MyoKardia Agreement, the Company recognized revenue of $36.7 thousand and $0.2 million for the three months ended September 30, 2022 and 2021, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2022 and 2021, respectively.

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Property and Equipment, Net

9 Months Ended

Sep. 30, 2022

Property Plant And Equipment [Abstract]

Property and Equipment, Net

6. Property and Equipment, net

Property and equipment consist of the following (in thousands):

	September 30, 2022			December 31, 2021
Laboratory equipment	$	6,788		$	4,775
Computers and software		116			116
Office furniture and equipment		1,623			1,398
Leasehold improvements		249			249
Property and equipment, gross		8,776			6,538
Less accumulated depreciation		(2,739	)		(1,733	)
Total property and equipment, net	$	6,037		$	4,805

Depreciation expense related to property and equipment was $0.4 million and $0.2 million for the three months ended September 30, 2022 and 2021, respectively, and $1.0 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

Lease Agreements

The Company determines if an arrangement is a finance lease, operating lease or short-term lease at inception, or as applicable, and accounts for the arrangement under the relevant accounting literature. During the periods presented, the Company was party to various non-cancellable office and laboratory space operating leases and short-term leases. Under the relevant guidance, the Company recognizes operating lease right-of-use (ROU) assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date, using the Company’s assumed incremental borrowing rate, and amortizes the ROU assets and liabilities over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Short-term leases are not subject to recognition of an ROU asset or liability or straight-line lease expense requirements.

As of September 30, 2022, future minimum payments for the Company’s operating lease liabilities are as follows (in thousands):

Year ending December 31,
2022 (remaining)	$	767
2023		3,113
2024		3,207
2025		3,303
2026		3,111
Total lease payments		13,501
Less imputed interest		(2,226	)
Total operating lease liabilities		11,275
Less lease liabilities, current portion		(3,090	)
Lease liabilities, net of current portion	$	8,185

Supplemental cash flow information related to cash paid for amounts included in the measurement of operating lease liabilities was as follows (in thousands):

	Nine Months Ended September 30,
	2022		2021
Cash paid included in operating cash flows	$	1,002	$	—

Rent expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating leases	$	689	$	150	$	2,068	$	449
Short-term leases		26		78		26		159
Total rent expense	$	715	$	228	$	2,094	$	608

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. There are no matters currently outstanding for which any liabilities have been accrued.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Stockholders' Equity

8. Stockholders’ Equity

Amended and Restated Certificate of Incorporation

On June 16, 2020, the Company’s certificate of incorporation was amended and restated to authorize 400,000,000 shares of common stock and 40,000,000 shares of undesignated preferred stock, each with a par value of $0.0001 per share. There was no preferred stock issued for any of the periods presented in the condensed financial statements.

Common Stock

On June 16, 2020, the Company completed its IPO in which it sold 16,560,000 shares of common stock at an offering price of $18.00 per share. Proceeds from the IPO, net of underwriting discounts, commissions and offering costs, were $274.1 million.

On July 2, 2021, the Company entered into a sales agreement (the 2021 Sales Agreement) with Cowen and Company, LLC (the Sales Agent), under which the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $150.0 million through the Sales Agent. Sales of the Company’s common stock made pursuant to the 2021 Sales Agreement are made under the Company’s shelf registration statement on Form S-3, which became automatically effective upon filing on July 2, 2021 (the Shelf Registration Statement). In addition, the 2021 Sales Agreement may be terminated by the Company or the Sales Agent at any time upon ten days’ notice to the other party, or by the Sales Agent, with respect to itself, at any time in certain circumstances, including the occurrence of a material adverse change. During the nine months ended September 30, 2022, the Company sold 6,361,212 shares of its common stock pursuant to the 2021 Sales Agreement and received net proceeds of $101.7 million, after deducting offering-related transaction costs and commissions. Through September 30, 2022, the Company has sold 7,141,761 shares of its common stock pursuant to the 2021 Sales Agreement and received net proceeds of $121.3 million, after deducting offering-related transaction costs and commissions. See Note 10 (Subsequent Events) for information on additional shares sold after September 30, 2022.

On August 6, 2021, the Company completed a public offering of 9,200,000 shares of its common stock at a public offering price of $18.00 per share. The net proceeds from the offering were $155.1 million, after deducting underwriting discounts, commissions and offering costs. The shares sold in the offering were registered pursuant to the Company’s Shelf Registration Statement.

Equity Incentive Plans

In January 2013, the Company adopted the 2013 Equity Incentive Plan (the 2013 Plan). The 2013 Plan provided for the issuance of incentive units to employees and nonemployees of the Company and non‑statutory unit options, restricted unit awards, unit appreciation rights, and unit bonuses to directors, employees and consultants of the Company. Under the 2013 Plan, 2,127,013 units were initially reserved for issuance. Upon the conversion of the Company to a C corporation, the 2013 Plan continued on the same terms and conditions. In 2019, the number of shares reserved under the 2013 Plan was increased to 4,771,615 shares.

In June 2020, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2020 Incentive Award Plan (the 2020 Plan), which became effective in connection with the IPO. Pursuant to the 2020 Plan, the Company ceased granting awards under the 2013 Plan. Under the 2020 Plan, the Company may grant stock options, restricted stock, dividend equivalents, restricted stock units, stock appreciation rights, and other stock or cash-based awards to individuals who are then employees, officers, non-employee directors or consultants of the Company. A total of 3,900,000 shares of common stock were initially reserved for issuance under the 2020 Plan. In addition, the number of shares of common stock available for issuance under the 2020 Plan will be increased annually on the first day of each fiscal year during the term of the 2020 Plan, beginning with the 2021 fiscal year, by an amount equal to the lesser of (a) 5% of the shares of common stock outstanding on the final day of the immediately preceding calendar year or (b) such smaller number of shares as determined by the Company’s board of directors. At September 30, 2022, 1,364,998 shares remain available for issuance under the 2020 Plan.

Stock Options

Options granted from the 2013 Plan and 2020 Plan are exercisable at various dates and will expire no more than ten years from their date of grant. Options generally vest over a four-year period. Prior to the IPO, the exercise price of options was determined by the Company’s board of directors. Following the IPO, the Company grants options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant.

Stock option activity for employee and nonemployee awards and related information is as follows (in thousands, except per share data):

	Number of Options			Weighted- Average Exercise Price Per Share
Outstanding at December 31, 2021		5,778		$	14.49
Granted		4,040			15.42
Exercised		(282	)		1.12
Forfeited/expired		(443	)		16.60
Outstanding at September 30, 2022		9,093		$	15.22

The weighted-average grant date fair value of options granted during the nine months ended September 30, 2022 and 2021 were $11.08 and $16.83 per share, respectively.

Employee Stock Purchase Plan

In June 2020, the Company adopted the ESPP, which permits participants to contribute up to 15% of their eligible compensation during defined rolling six-month periods to purchase the Company’s common stock. The purchase price of the shares will be 85% of the lower of the fair market value of the Company’s common stock on the first day of trading of the offering period or on the applicable purchase date. The Company issued 48,760 and 14,235 shares of common stock under the ESPP during the nine months ended September 30, 2022 and 2021, respectively. The Company had an outstanding liability of $0.3 million at September 30, 2022, which is included in accounts payable and accrued liabilities on the condensed balance sheet, for employee contributions to the ESPP for shares pending issuance at the end of the offering period. As of September 30, 2022, 589,803 shares of common stock were available for issuance under the ESPP.

Stock-Based Compensation Expense

The assumptions used in the Black-Scholes model to determine the fair value of stock option grants and shares purchasable under the ESPP were as follows:

	Nine Months Ended September 30,
Stock Option Grants	2022	2021
Risk-free interest rate	1.5% - 3.4%	0.5% - 1.2%
Expected volatility	85%	87%-88%
Expected term (in years)	5.5 - 6.1	5.5 - 6.1
Expected dividend yield	—%	—%

	Nine Months Ended September 30,
ESPP	2022	2021
Risk-free interest rate	2.2%	0.1%
Expected volatility	79%	75%
Expected term (in years)	0.5	0.5
Expected dividend yield	—%	—%

The allocation of stock-based compensation expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development expense	$	4,151	$	2,433	$	10,948	$	6,930
General and administrative expense		2,935		2,117		8,884		5,610
Total stock-based compensation expense	$	7,086	$	4,550	$	19,832	$	12,540

As of September 30, 2022, the unrecognized compensation cost related to outstanding time-based options was $68.3 million, which is expected to be recognized over a weighted-average period of 2.7 years. As of September 30, 2022, the unrecognized compensation cost related to stock purchase rights under the ESPP was $87.3 thousand, which is expected to be recognized over a weighted-average period of 0.2 years.

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COVID-19

9 Months Ended

Sep. 30, 2022

Extraordinary And Unusual Items [Abstract]

COVID-19

9. COVID-19

The COVID-19 outbreak in the United States has caused significant business disruption. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the continued spread of COVID-19 and the measures taken by the governmental authorities, and its impact on the Company’s preclinical studies and clinical trials, employees and vendors, all of which are uncertain and cannot be predicted, particularly as the Company advances its product candidates into and through clinical development. In December 2021, the Company transitioned to a hybrid model with its employees generally working both remotely and onsite, and the Company anticipates it will continue to use this model going forward. To date, the Company has not experienced material disruptions in its business operations. However, a prolonged outbreak could have a material adverse impact on the financial results and business operations of the Company, including the timing and ability of the Company to complete certain clinical trials and other efforts required to advance the development of its product candidates and raise additional capital.

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Subsequent Events

9 Months Ended

Sep. 30, 2022

Subsequent Events [Abstract]

Subsequent Events

10.    Subsequent Events

From October 1, 2022 through November 8, 2022, the Company sold 1,410,600 shares of its common stock pursuant to the 2021 Sales Agreement and received net proceeds of $19.4 million, after deducting offering-related transaction costs and commissions.

On November 8, 2022, the Company entered into a sales agreement (the 2022 Sales Agreement) with the Sales Agent, with substantially similar terms as the 2021 Sales Agreement described in Note 8 (Stockholders’ Equity). Under the 2022 Sales Agreement, the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $200.0 million through the Sales Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Sales Agent. The Company is not obligated to sell, and the Sales Agent is not obligated to buy or sell, any shares of common stock under the 2022 Sales Agreement. Upon entry into the 2022 Sales Agreement, the 2021 Sales Agreement was terminated.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and the rules and regulations of the Securities and Exchange Commission (SEC) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s annual report on Form 10-K filed with the SEC on March 1, 2022.

Use of Estimates

Use of Estimates

The Company’s condensed financial statements are prepared in accordance with GAAP, which requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the condensed financial statements and accompanying notes. The most significant estimates in the Company’s condensed financial statements relate to revenue recognition, stock-based compensation, and accrued research and development costs. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents include cash in readily available checking and money market accounts. Restricted cash represents cash held as collateral for the letter of credit required under the Company’s facility lease and is reported as a long-term asset in the accompanying condensed balance sheets.

Marketable Securities

Marketable Securities

The Company’s marketable securities primarily consist of U.S. Government and corporate debt securities. The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the condensed balance sheets, with unrealized gains and losses, if any, reported as a component of other comprehensive income (loss) within the condensed statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than one year as current assets because such marketable securities are available to fund the Company’s current operations. Realized gains and losses are calculated on the specific identification method and recorded as interest income. There were no realized gains and losses during any of the periods presented.

At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the unrealized loss is other-than-temporary. When the Company determines that a decline in the fair value below its cost basis is other-than-temporary, the Company recognizes an impairment loss in the period in which the other-than-temporary decline occurred. There have been no other-than-temporary impairments recognized during any of the periods presented.

See Note 4 (Marketable Securities) for further information.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial position of the depository institutions in which those deposits are held. Additionally, the Company has established guidelines regarding approved investments, credit quality, diversification, liquidity and maturities of investments, which are designed to maintain safety and liquidity.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

None of the Company’s non-financial assets are recorded at fair value on a non-recurring basis. The carrying amounts reflected in the Company’s condensed balance sheets for prepaid and other assets and accounts payable and accrued liabilities approximate their fair values due to their short-term nature. The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. No transfers between levels have occurred during the periods presented.

See Note 3 (Fair Value Measurements) for information on assets measured at fair value.

Property and Equipment, Net

Property and Equipment, net

Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the related assets, which ranges from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease term. Repairs and maintenance charges that do not increase the useful life of the assets are charged to operating expenses as incurred.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The Company has not recognized any impairment losses in any of the periods presented in these condensed financial statements.

Segment Information

Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by management in making decisions regarding resource allocation and assessing performance. The Company manages its operations as a single operating segment in the United States for the purposes of assessing performance and making operating decisions.

Revenue Recognition

Revenue Recognition

To date, all the Company’s revenue has been derived from collaboration and research agreements. The terms of these arrangements include the following types of payments to the Company: non-refundable, upfront license fees; development, regulatory and commercial milestone payments; payments for research and development services provided by the Company or for manufacturing supply services the Company provides through its contract manufacturers; and royalties on net sales of licensed products.  

The Company performs the following steps in determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of these agreements: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, the Company satisfies each performance obligation.

The Company receives payments from its collaborators based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under its research and collaboration arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional.

See Note 5 (Collaboration, License and Research Agreements) for further information.

Research and Development Costs

Research and Development Costs

Research and development costs are expensed as incurred and include salaries, benefits and stock-based compensation associated with research and development personnel, third-party research and development expenses, license fees, laboratory supplies, facilities, overhead costs, and consultants. Nonrefundable advance payments for goods and services that will be used in future research and development activities are capitalized and recorded as expense in the period that the Company receives the goods or when services are performed.

Upfront and milestone payments to acquire contractual rights to licensed technology are expensed when incurred if there is uncertainty in the Company receiving future economic benefit from the acquired contractual rights. Certain of these contractual rights may require the Company to make additional milestone payments upon initiation of a pivotal trial and the U.S. Food and Drug Administration approval, which are not expected to exceed $8.5 million.

Patent Costs

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.

Income Taxes

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification (ASC) 740, Income Taxes, which provides for deferred taxes using the asset and liability method. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

The Company is subject to taxation in the United States and various state jurisdictions. As of December 31, 2021, the Company’s tax years since conversion to a corporation in 2019 are subject to examination by taxing authorities.

Stock-Based Compensation

Stock-Based Compensation

Stock-based compensation expense for employee and non-employee stock option grants is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the requisite service period (usually the vesting period) of the stock-based award, and forfeitures are recognized as incurred. Stock-based compensation expense for employee stock purchases under the Company’s Employee Stock Purchase Plan (the ESPP) is recorded at the estimated fair value of the purchase as of the plan enrollment date and is recognized as expense on a straight-line basis over the applicable six-month ESPP offering period. The estimation of fair value for stock-based compensation requires management to make estimates and judgments about, among other things, the estimated life of options and volatility of the Company’s common stock. The judgments directly affect the amount of compensation expense that will be recognized.

Comprehensive Loss

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on marketable securities. Comprehensive gains (losses) have been reflected in the statements of operations and comprehensive loss for all periods presented.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, adjusted for the weighted-average number of common shares outstanding that are subject to repurchase or forfeiture. The Company has excluded 8,936 and 22,158 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the three months ended September 30, 2022 and 2021, respectively, and 11,435 and 39,345 weighted-average shares subject to repurchase or forfeiture from the weighted-average number of common shares outstanding for the nine months ended September 30, 2022 and 2021, respectively. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be anti-dilutive.

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

	September 30,
	2022		2021
Common stock options issued and outstanding		9,093		5,649
Common stock subject to repurchase or forfeiture		8		18
ESPP shares pending issuance		27		12
Total		9,128		5,679

Recently Issued Accounting Pronouncements and Accounting Standards Not Yet Adopted

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Statements (Topic 326), which intends to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as available-for-sale debt securities. Subsequent to the issuance of ASU 2016-13, the FASB issued several additional Accounting Standard Updates (ASUs) to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. In November 2019, the FASB issued an amendment making this ASU effective for fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company was a smaller reporting company at the determination date, and therefore the new standard will be effective for the Company on January 1, 2023. The Company is currently evaluating the potential impact that the adoption of ASU 2016-13 may have on its financial statements and related disclosures.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Schedule of Potentially Dilutive Securities not Included in Calculation of Diluted Net Loss Per Share

Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in common stock equivalent shares; in thousands):

	September 30,
	2022		2021
Common stock options issued and outstanding		9,093		5,649
Common stock subject to repurchase or forfeiture		8		18
ESPP shares pending issuance		27		12
Total		9,128		5,679

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Summary of Cash Equivalents and Marketable Securities Measured at Fair Value

The following tables summarize the Company’s marketable securities measured at fair value (in thousands):

			Fair Value Measurements Using
As of September 30, 2022	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	$	236,553	$	236,553	$	—	$	—
U.S. Government agency securities		4,927		—		4,927		—
Negotiable certificates of deposit		3,340		—		3,340		—
Corporate debt securities		17,029		—		17,029		—
Total	$	261,849	$	236,553	$	25,296	$	—

			Fair Value Measurements Using
As of December 31, 2021	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	$	65,372	$	65,372	$	—	$	—
Negotiable certificates of deposit		3,873		—		3,873		—
Corporate debt securities		15,850		—		15,850		—
Total	$	85,095	$	65,372	$	19,723	$	—

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Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2022

Investments Debt And Equity Securities [Abstract]

Summary of Marketable Securities

The Company’s marketable securities, which consist of highly liquid marketable debt securities, are classified as available-for-sale and are stated at fair value. The following tables summarize the Company’s marketable securities (in thousands):

As of September 30, 2022	Maturity (in years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
U.S. Treasury securities	1 or less	$	197,652	$	—	$	(1,938	)	$	195,714
U.S. Government agency securities	1 or less		5,000		—		(73	)		4,927
Negotiable certificates of deposit	1 or less		2,683		—		(48	)		2,635
Corporate debt securities	1 or less		16,131		—		(344	)		15,787
U.S. Treasury securities	1 - 2		41,823		—		(984	)		40,839
Negotiable certificates of deposit	1 - 2		734		—		(29	)		705
Corporate debt securities	1 - 2		1,289		—		(47	)		1,242
Total		$	265,312	$	—	$	(3,463	)	$	261,849

As of December 31, 2021	Maturity (in years)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
U.S. Treasury securities	1 or less	$	2,492	$	—	$	(1	)	$	2,491
Negotiable certificates of deposit	1 or less		1,190		—		(1	)		1,189
U.S. Treasury securities	1 - 2		63,034		—		(153	)		62,881
Negotiable certificates of deposit	1 - 2		2,687		—		(3	)		2,684
Corporate debt securities	1 - 2		15,879		—		(29	)		15,850
Total		$	85,282	$	—	$	(187	)	$	85,095

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Collaboration, License and Research Agreements (Tables)

9 Months Ended

Sep. 30, 2022

Collaboration License And Research Agreements [Abstract]

Summary of Reconciliation of Deferred Revenue Related to Lilly Agreement

A reconciliation of the closing balance of deferred revenue related to the Lilly Agreement is as follows (in thousands):

Balance at December 31, 2021	$	11,108
Revenue recognized		(3,068	)
Balance at September 30, 2022	$	8,040

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Property and Equipment, Net (Tables)

9 Months Ended

Sep. 30, 2022

Property Plant And Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consist of the following (in thousands):

	September 30, 2022			December 31, 2021
Laboratory equipment	$	6,788		$	4,775
Computers and software		116			116
Office furniture and equipment		1,623			1,398
Leasehold improvements		249			249
Property and equipment, gross		8,776			6,538
Less accumulated depreciation		(2,739	)		(1,733	)
Total property and equipment, net	$	6,037		$	4,805

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2022

Commitments And Contingencies Disclosure [Abstract]

Schedule of Future Minimum Payments for Operating Lease Liabilities

As of September 30, 2022, future minimum payments for the Company’s operating lease liabilities are as follows (in thousands):

Year ending December 31,
2022 (remaining)	$	767
2023		3,113
2024		3,207
2025		3,303
2026		3,111
Total lease payments		13,501
Less imputed interest		(2,226	)
Total operating lease liabilities		11,275
Less lease liabilities, current portion		(3,090	)
Lease liabilities, net of current portion	$	8,185

Supplemental Cash Flow Information Related to Cash Paid for Amounts Included in Measurement of Operating Lease Liabilities

Supplemental cash flow information related to cash paid for amounts included in the measurement of operating lease liabilities was as follows (in thousands):

	Nine Months Ended September 30,
	2022		2021
Cash paid included in operating cash flows	$	1,002	$	—

Schedule of Rent Expense

Rent expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating leases	$	689	$	150	$	2,068	$	449
Short-term leases		26		78		26		159
Total rent expense	$	715	$	228	$	2,094	$	608

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Summary of Stock Option Activity

Stock option activity for employee and nonemployee awards and related information is as follows (in thousands, except per share data):

	Number of Options			Weighted- Average Exercise Price Per Share
Outstanding at December 31, 2021		5,778		$	14.49
Granted		4,040			15.42
Exercised		(282	)		1.12
Forfeited/expired		(443	)		16.60
Outstanding at September 30, 2022		9,093		$	15.22

Schedule of Assumptions Used in Black-Scholes Model Pricing Model to to Determine Fair Value of Stock Option and Shares Purchasable Under ESPP

The assumptions used in the Black-Scholes model to determine the fair value of stock option grants and shares purchasable under the ESPP were as follows:

	Nine Months Ended September 30,
Stock Option Grants	2022	2021
Risk-free interest rate	1.5% - 3.4%	0.5% - 1.2%
Expected volatility	85%	87%-88%
Expected term (in years)	5.5 - 6.1	5.5 - 6.1
Expected dividend yield	—%	—%

	Nine Months Ended September 30,
ESPP	2022	2021
Risk-free interest rate	2.2%	0.1%
Expected volatility	79%	75%
Expected term (in years)	0.5	0.5
Expected dividend yield	—%	—%

Schedule of Allocated Stock-based Compensation Expense

The allocation of stock-based compensation expense was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development expense	$	4,151	$	2,433	$	10,948	$	6,930
General and administrative expense		2,935		2,117		8,884		5,610
Total stock-based compensation expense	$	7,086	$	4,550	$	19,832	$	12,540

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Description of Business and Basis of Presentation - Additional Information (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Accounting Policies [Abstract]
Accumulated deficit	$ 308,073	$ 184,549
Cash, cash equivalents and marketable securities	$ 405,500

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Summary of Significant Accounting Policies - Additional Information (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2022 USD ($) shares	Sep. 30, 2021 shares	Sep. 30, 2022 USD ($) Segment shares	Sep. 30, 2021 shares
Summary Of Significant Accounting Policies [Line Items]
Realized gains and losses on marketable securities			$ 0
Other-than-temporary impairments on marketable securities			0
Transfers of assets measured on recurring basis out of Level 1 into Level 2	$ 0		0
Transfers of assets measured on recurring basis out of Level 2 into Level 1	0		0
Transfers of liabilities measured on recurring basis out of Level 1 into Level 2	0		0
Transfers of liabilities measured on recurring basis out of Level 2 into Level 1	$ 0		0
Transfers of financial instrument classified as liability into level 3			0
Transfers of financial instrument classified as liability out of level 3			0
Transfers of financial instrument classified as asset into level 3			0
Transfers of financial instrument classified as asset out of level 3			$ 0
Number of operating segment | Segment			1
Maximum milestone payment to acquire contractual rights			$ 8,500,000
Weighted-average shares/units subject to repurchase or forfeiture | shares	8,936	22,158	11,435	39,345
Minimum
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of assets			3 years
Maximum
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives of assets			5 years

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Summary of Significant Accounting Policies - Schedule of Potentially Dilutive Securities not Included in Calculation of Diluted Net Loss Per Share (Details) - shares shares in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	9,128	5,679
Common Stock Options Issued and Outstanding
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	9,093	5,649
Common Stock Subject to Repurchase or Forfeiture
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	8	18
ESPP Shares Pending Issuance
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total	27	12

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Fair Value Measurements - Summary of Cash Equivalents and Marketable Securities Measured at Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	$ 261,849	$ 85,095
Recurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	261,849	85,095
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	236,553	65,372
Recurring | Significant Other Observable Inputs (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	25,296	19,723
Recurring | Significant Unobservable Inputs (Level 3)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0	0
Recurring | US Treasury Securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	236,553	65,372
Recurring | US Treasury Securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	236,553	65,372
Recurring | US Treasury Securities | Significant Other Observable Inputs (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0	0
Recurring | US Treasury Securities | Significant Unobservable Inputs (Level 3)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0	0
Recurring | Corporate debt securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	17,029	15,850
Recurring | Corporate debt securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0	0
Recurring | Corporate debt securities | Significant Other Observable Inputs (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	17,029	15,850
Recurring | Corporate debt securities | Significant Unobservable Inputs (Level 3)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0	0
Recurring | U.S. Government Agency Securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	4,927	0
Recurring | U.S. Government Agency Securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0	0
Recurring | U.S. Government Agency Securities | Significant Other Observable Inputs (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	4,927	0
Recurring | U.S. Government Agency Securities | Significant Unobservable Inputs (Level 3)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0	0
Recurring | Certificates of Deposit
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	3,340	3,873
Recurring | Certificates of Deposit | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0	0
Recurring | Certificates of Deposit | Significant Other Observable Inputs (Level 2)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	3,340	3,873
Recurring | Certificates of Deposit | Significant Unobservable Inputs (Level 3)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	$ 0	$ 0

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Marketable Securities - Summary of Marketable Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	$ 265,312	$ 85,282
Unrealized Gains	0	0
Unrealized Losses	(3,463)	(187)
Estimated Fair Value	261,849	85,095
U.S. Treasury Securities with 1 Year or Less Maturity
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	197,652	2,492
Unrealized Gains	0	0
Unrealized Losses	(1,938)	(1)
Estimated Fair Value	195,714	2,491
Corporate Debt Securities with 1 to 2 Years Maturity
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	1,289	15,879
Unrealized Gains	0	0
Unrealized Losses	(47)	(29)
Estimated Fair Value	1,242	15,850
U.S. Government Agency Securities with 1 Year or Less Maturity
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	5,000
Unrealized Gains	0
Unrealized Losses	(73)
Estimated Fair Value	4,927
Negotiable Certificates of Deposit with 1 Year or Less Maturity
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	2,683	1,190
Unrealized Gains	0	0
Unrealized Losses	(48)	(1)
Estimated Fair Value	2,635	1,189
U.S. Treasury Securities with 1 to 2 Years Maturity
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	41,823	63,034
Unrealized Gains	0	0
Unrealized Losses	(984)	(153)
Estimated Fair Value	40,839	62,881
Corporate Debt Securities with 1 Year or Less Maturity
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	16,131
Unrealized Gains	0
Unrealized Losses	(344)
Estimated Fair Value	15,787
Negotiable Certificates of Deposit with 1 to 2 Years Maturity
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	734	2,687
Unrealized Gains	0	0
Unrealized Losses	(29)	(3)
Estimated Fair Value	$ 705	$ 2,684

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Marketable Securities - Additional Information (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021
Investments Debt And Equity Securities [Abstract]
Unrealized losses on marketable securities	$ 3,463,000	$ 187,000
Unrealized losses position for 12 month or greater	$ 0

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Collaboration, License and Research Agreements - Additional Information (Details)	1 Months Ended	3 Months Ended		9 Months Ended
	Apr. 30, 2019 USD ($) Product	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) Obligation	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue recognized		$ 2,482,000	$ 2,163,000	$ 6,455,000	$ 7,474,000
Research Collaboration and License Agreement with Eli Lilly
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Upfront fees received	$ 20,000,000.0
License agreement expiry period	10 years
Number of performance obligation | Obligation				1
Period for expects performance obligation				5 years
Revenue recognized		2,400,000	2,100,000	$ 6,300,000	7,300,000
Deferred revenue		8,040,000		8,040,000		$ 11,108,000
Research Collaboration and License Agreement with Eli Lilly | Prepaid and Other Assets
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Collaboration receivables		1,300,000		1,300,000		$ 900,000
Research Collaboration and License Agreement with Eli Lilly | Maximum
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Rights to antibody oligonucleotide conjugates for messengers RNA targets. | Product	6
Development milestone payment eligible to receive per target	$ 60,000,000.0
Regulatory milestone payment eligible to receive per target	140,000,000.0
Commercialization milestone payment eligible to receive	$ 205,000,000.0
Research Collaboration with MyoKardia, Inc.
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue recognized		$ 36,700	$ 200,000	$ 200,000	$ 200,000

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Collaboration, License and Research Agreements - Reconciliation of Deferred Revenue Related to Lilly Agreement (Details) - Research Collaboration and License Agreement with Eli Lilly $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Balance	$ 11,108
Revenue recognized	(3,068)
Balance	$ 8,040

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Property and Equipment, Net - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 8,776	$ 6,538
Less accumulated depreciation	(2,739)	(1,733)
Total property and equipment, net	6,037	4,805
Laboratory Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	6,788	4,775
Computers and Software
Property Plant And Equipment [Line Items]
Property and equipment, gross	116	116
Office Furniture and Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	1,623	1,398
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 249	$ 249

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Property and Equipment, Net - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Property Plant And Equipment [Abstract]
Depreciation expenses related to property and equipment	$ 400	$ 200	$ 1,006	$ 431

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Commitments and Contingencies - Additional Information (Details)	9 Months Ended
	Sep. 30, 2022 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Operating lease, description	During the periods presented, the Company was party to various non-cancellable office and laboratory space operating leases and short-term leases. Under the relevant guidance, the Company recognizes operating lease right-of-use (ROU) assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date, using the Company’s assumed incremental borrowing rate, and amortizes the ROU assets and liabilities over the lease term. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Short-term leases are not subject to recognition of an ROU asset or liability or straight-line lease expense requirements.
Loss contingencies accrued	$ 0

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Commitments and Contingencies - Schedule of Future Minimum Payments For Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Commitments And Contingencies Disclosure [Abstract]
2022 (remaining)	$ 767
2023	3,113
2024	3,207
2025	3,303
2026	3,111
Total lease payments	13,501
Less imputed interest	(2,226)
Total operating lease liabilities	11,275
Less lease liabilities, current portion	(3,090)	$ (1,769)
Lease liabilities, net of current portion	$ 8,185	$ 9,960

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Commitments and Contingencies - Supplemental Cash Flow Information Related to Cash Paid for Amounts Included in Measurement of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Commitments And Contingencies Disclosure [Abstract]
Cash paid included in operating cash flows	$ 1,002	$ 0

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Commitments and Contingencies - Schedule of Rent Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Commitments And Contingencies Disclosure [Abstract]
Operating leases	$ 689	$ 150	$ 2,068	$ 449
Short-term leases	26	78	26	159
Total rent expense	$ 715	$ 228	$ 2,094	$ 608

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Stockholders' Equity - Additional Information (Details) - USD ($)				1 Months Ended	3 Months Ended		9 Months Ended		15 Months Ended
	Aug. 06, 2021	Jul. 02, 2021	Jun. 16, 2020	Jun. 30, 2020	Jun. 30, 2022	Jun. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Dec. 31, 2021	Dec. 31, 2019	Jan. 31, 2013
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock shares authorized			400,000,000				400,000,000		400,000,000	400,000,000
Preferred stock undesignated shares authorized			40,000,000
Common stock par value per share			$ 0.0001				$ 0.0001		$ 0.0001	$ 0.0001
Preferred stock par value per share			$ 0.0001
Preferred stock issued							0		0	0
Weighted-average grant date fair value of options granted							$ 11.08	$ 16.83
Time-based Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation cost							$ 68,300,000		$ 68,300,000
Weighted-average period of unrecognized compensation cost							2 years 8 months 12 days
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Award vesting period							4 years
2013 Equity Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Units initially reserved for issuance												2,127,013
Increased to number of shares reserved under plan											4,771,615
2013 Equity Incentive Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expiration period							10 years
2020 Incentive Award Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock initially reserved for issuance				3,900,000
Percentage of shares of common stock outstanding on final day of immediately preceding calendar year				5.00%
Number of remaining shares available for issuance							1,364,998		1,364,998
2020 Incentive Award Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expiration period							10 years
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Participant maximum contribution as percentage of eligible compensation				15.00%
Percentage of purchase price of shares of lower of fair market value				85.00%
Shares of common stock available for issuance							589,803		589,803
Shares issued under ESPP							48,760	14,235
Unrecognized compensation cost							$ 87,300		$ 87,300
Weighted-average period of unrecognized compensation cost							2 months 12 days
Employee Stock Purchase Plan | Accounts Payable and Accrued Liabilities
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Outstanding liability							$ 300,000		$ 300,000
Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares issued under ESPP					49,000	14,000
2021 Sales Agreement
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Sale of stock number of shares issued in transaction							6,361,212		7,141,761
Sale of common stock maximum aggregate offering price		$ 150,000,000.0
Termination notice period for sales agreement		10 days
Net proceeds from Issuance of common stock after deducting offering-related transaction costs and commissions							$ 101,700,000		$ 121,300,000
Public Offering
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Sale of stock number of shares issued in transaction			16,560,000
Sale of stock, price per share			$ 18.00
Proceeds from the IPO, net of underwriting discounts, commissions and offering costs			$ 274,100,000
Follow-on Public Offering | Common Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Sale of stock number of shares issued in transaction	9,200,000
Sale of stock, price per share	$ 18.00
Proceeds from the follow-on public offering, net of underwriting discounts, commissions and offering costs	$ 155,100,000

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Stockholders' Equity - Summary of Stock Option Activity (Details) shares in Thousands	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Number of Options
Outstanding at December 31, 2021 | shares	5,778
Granted | shares	4,040
Exercised | shares	(282)
Forfeited/expired | shares	(443)
Outstanding at September 30, 2022 | shares	9,093
Weighted-Average Exercise Price
Outstanding at December 31, 2021 | $ / shares	$ 14.49
Granted | $ / shares	15.42
Exercised | $ / shares	1.12
Forfeited/expired | $ / shares	16.60
Outstanding at September 30, 2022 | $ / shares	$ 15.22

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Stockholders' Equity - Schedule of Assumptions Used in Black-Scholes Model Pricing Model to to Determine Fair Value of Stock Option and Shares Purchasable Under ESPP (Details)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-free interest rate, Minimum	1.50%	0.50%
Risk-free interest rate, Maximum	3.40%	1.20%
Expected volatility	85.00%
Expected dividend yield	0.00%	0.00%
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-free interest rate	2.20%	0.10%
Expected volatility	79.00%	75.00%
Expected term (in years)	6 months	6 months
Expected dividend yield	0.00%	0.00%
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected volatility		87.00%
Expected term (in years)	5 years 6 months	5 years 6 months
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected volatility		88.00%
Expected term (in years)	6 years 1 month 6 days	6 years 1 month 6 days

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Stockholders' Equity - Schedule of Allocated Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 7,086	$ 4,550	$ 19,832	$ 12,540
Research and Development Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	4,151	2,433	10,948	6,930
General and Administrative Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 2,935	$ 2,117	$ 8,884	$ 5,610

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Subsequent Events - Additional Information (Details) - USD ($) $ in Millions		1 Months Ended	9 Months Ended	15 Months Ended
	Jul. 02, 2021	Nov. 08, 2022	Sep. 30, 2022	Sep. 30, 2022
2021 Sales Agreement
Subsequent Event [Line Items]
Sale of stock number of shares issued in transaction			6,361,212	7,141,761
Net proceeds from Issuance of common stock after deducting offering-related transaction costs and commissions			$ 101.7	$ 121.3
Sale of common stock maximum aggregate offering price	$ 150.0
Subsequent Event | 2021 Sales Agreement
Subsequent Event [Line Items]
Sale of stock number of shares issued in transaction		1,410,600
Net proceeds from Issuance of common stock after deducting offering-related transaction costs and commissions		$ 19.4
Subsequent Event | 2022 Sales Agreement
Subsequent Event [Line Items]
Sale of common stock maximum aggregate offering price		$ 200.0