UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

OR

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

For the transition period from _____________________ to _____________________

Commission File Number: 001-39397

INOZYME PHARMA, INC.

(Exact name of registrant as specified in its charter)

Delaware	38-4024528
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
321 Summer Street, Suite 400 Boston, Massachusetts	02210
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (857) 330-4340

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	INZY	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of August 10, 2022, the registrant had 40,145,674 shares of common stock, $0.0001 par value per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” and the negative version of these words and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described in the “Risk Factors” section in our most recent Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q and include, among other things:

•our ongoing Phase 1/2 clinical trials of INZ-701 for ENPP1 and ABCC6 Deficiencies, including statements regarding the timing of enrollment and completion of the clinical trials and the period during which the results of the clinical trials will become available;

•the timing and conduct of our planned later stage clinical trials of INZ-701 for patients with ENPP1 and ABCC6 Deficiencies;

•our plans to conduct research and preclinical testing of INZ-701 for additional indications;

•our plans to conduct research and preclinical testing of other product candidates;

•the timing of, and our ability to obtain and maintain, marketing approvals of INZ-701, and the ability of INZ-701 and our other product candidates to meet existing or future regulatory standards;

•our expectations regarding our ability to fund our operating expenses, capital expenditures, and debt service obligations with our cash, cash equivalents and short-term investments;

•the potential advantages of our product candidates;

•the rate and degree of market acceptance and clinical utility of our product candidates;

•our estimates regarding the potential market opportunity for our product candidates;

•our commercialization and manufacturing capabilities and strategy;

•our intellectual property position;

•the impact of COVID-19 on our business and operations;

•our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

•our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•the impact of government laws and regulations;

•our competitive position; and

•our expectations regarding the time during which we will be an emerging growth company under the Jumpstart our Business Startups Act of 2012.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in our most recent Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

i

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 6.	Exhibits	31
Signatures		32

ii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

INOZYME PHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

(Unaudited)

	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	62,620		$	23,316
Short-term investments		88,860			88,485
Prepaid expenses and other current assets		2,268			3,541
Total current assets		153,748			115,342
Property and equipment, net		2,208			2,383
Other assets		379			354
Right-of-use assets		1,844			2,053
Prepaid expenses, net of current portion		3,810			3,409
Total assets	$	161,989		$	123,541
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,339		$	2,394
Accrued expenses		8,461			8,508
Operating lease liabilities		773			731
Total current liabilities		10,573			11,633
Operating lease liabilities, net of current portion		2,240			2,640
Total liabilities		12,813			14,273
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred Stock, $0.0001 par value – 5,000,000 shares authorized at June 30, 2022 and December 31, 2021; No shares issued and outstanding at June 30, 2022 or December 31, 2021		—			—
Common Stock, $0.0001 par value – 200,000,000 shares authorized at June 30, 2022 and December 31, 2021; 40,097,076 shares issued and outstanding at June 30, 2022 and 23,668,747 shares issued and outstanding at December 31, 2021		4			2
Additional paid in-capital		329,414			256,948
Accumulated other comprehensive (loss) income		(397	)		18
Accumulated deficit		(179,845	)		(147,700	)
Total stockholders’ equity		149,176			109,268
Total liabilities and stockholders’ equity	$	161,989		$	123,541

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

1

INOZYME PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(amounts in thousands, except share and per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Operating expenses:
Research and development	$	10,007		$	8,220		$	21,821		$	14,823
General and administrative		5,384			4,435			10,409			8,804
Total operating expenses		15,391			12,655			32,230			23,627
Loss from operations		(15,391	)		(12,655	)		(32,230	)		(23,627	)
Other income (expense):
Interest income		321			58			381			121
Other (expenses) income		(191	)		57			(296	)		(84	)
Other income, net		130			115			85			37
Net loss	$	(15,261	)	$	(12,540	)	$	(32,145	)	$	(23,590	)
Other comprehensive (loss) income:
Unrealized (losses) gains on available-for-sale securities		(225	)		6			(357	)		16
Foreign currency translation adjustment		(43	)		—			(58	)		—
Total other comprehensive (loss) income		(268	)		6			(415	)		16
Comprehensive loss	$	(15,529	)	$	(12,534	)	$	(32,560	)	$	(23,574	)
Net loss attributable to common stockholders—basic    and diluted	$	(15,261	)	$	(12,540	)	$	(32,145	)	$	(23,590	)
Net loss per share attributable to common    stockholders—basic and diluted	$	(0.38	)	$	(0.53	)	$	(1.01	)	$	(1.01	)
Weighted-average common shares and pre-funded warrants outstanding—basic    and diluted		39,703,550			23,490,591			31,739,197			23,460,218

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

2

INOZYME PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(amounts in thousands, except share data)

(Unaudited)

	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Income (Loss)			Deficit
Balance at December 31, 2021		23,668,747	$	2	$	256,948	$	18		$	(147,700	)	$	109,268
Stock-based compensation		—		—		1,752		—			—			1,752
Exercise of stock options		149,664		—		240		—			—			240
Comprehensive loss:
Unrealized loss on investments		—		—		—		(132	)		—			(132	)
Foreign currency translation adjustment		—		—		—		(15	)		—			(15	)
Net loss		—		—		—		—			(16,884	)		(16,884	)
Balance at March 31, 2022		23,818,411	$	2	$	258,940	$	(129	)	$	(164,584	)	$	94,229
Stock-based compensation		—		—		2,185		—			—			2,185
Exercise of stock options		1,678		—		4		—			—			4
Issuance of common stock, net of issuance costs		16,276,987		2		56,135		—			—			56,137
Issuance of pre-funded warrants, net of issuance costs		—		—		12,150		—			—			12,150
Comprehensive loss:
Unrealized loss on investments		—		—		—		(225	)		—			(225	)
Foreign currency translation adjustment		—		—		—		(43	)		—			(43	)
Net loss		—		—		—		—			(15,261	)		(15,261	)
Balance at June 30, 2022		40,097,076	$	4	$	329,414	$	(397	)	$	(179,845	)	$	149,176
Balance at December 31, 2020		23,384,969	$	2	$	249,175	$	2		$	(91,076	)	$	158,103
Stock-based compensation		—		—		1,577		—			—			1,577
Exercise of stock options		88,734		—		249		—			—			249
Comprehensive income:
Unrealized gain on investments		—		—		—		10			—			10
Net loss		—		—		—		—			(11,050	)		(11,050	)
Balance at March 31, 2021		23,473,703	$	2	$	251,001	$	12		$	(102,126	)	$	148,889
Stock-based compensation		—		—		1,813		—			—			1,813
Exercise of stock options		96,890		—		106		—			—			106
Comprehensive income:
Unrealized gain on investments		—		—		—		6			—			6
Net loss		—		—		—		—			(12,540	)		(12,540	)
Balance at June 30, 2021		23,570,593	$	2	$	252,920	$	18		$	(114,666	)	$	138,274

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

3

INOZYME PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(Unaudited)

	Six Months Ended June 30,
	2022			2021
Operating activities
Net loss	$	(32,145	)	$	(23,590	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		357			325
Stock-based compensation expense		3,937			3,390
Amortization of premiums and discounts on marketable securities		(583	)		116
Reduction in the carrying value of right-of-use assets		209			183
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1,273			(216	)
Accounts payable		(1,090	)		(2,281	)
Accrued expenses		(21	)		(1,142	)
Operating lease liabilities		(358	)		(293	)
Other assets		(25	)		—
Prepaid expenses - noncurrent		(401	)		1,099
Net cash used in operating activities		(28,847	)		(22,409	)
Investing activities
Purchases of marketable securities		(81,647	)		(62,035	)
Maturities of marketable securities		81,500			82,560
Purchases of property and equipment		(217	)		(278	)
Net cash (used in) provided by investing activities		(364	)		20,247
Financing activities
Net proceeds from issuance of common stock		56,179			—
Net proceeds from issuance of pre-funded warrants		12,150			—
Proceeds from exercise of stock options		244			361
Net cash provided by financing activities		68,573			361
Net increase (decrease) in cash, cash equivalents and restricted cash		39,362			(1,801	)
Effect of foreign currency exchange rate in cash		(58	)		—
Cash, cash equivalents and restricted cash at beginning of period		23,670			28,394
Cash, cash equivalents and restricted cash at end of period	$	62,974		$	26,593
Supplemental cash flow information:
Cash and cash equivalents	$	62,620		$	26,239
Restricted cash		354			354
Cash, cash equivalents and restricted cash at end of period	$	62,974		$	26,593
Property and equipment unpaid at end of period	$	35		$	10
Right-of-use asset at adoption of Topic 842	$	—		$	2,431
Operating lease liabilities at adoption of Topic 842	$	—		$	3,997
Public offering costs included in accounts payable and accrued expenses at balance sheet dates	$	44		$	—

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

4

Inozyme Pharma, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Basis of Presentation

Inozyme Pharma, Inc. (the “Company”) is a clinical-stage rare disease biopharmaceutical company developing novel therapeutics for the treatment of diseases of abnormal mineralization impacting the vasculature, soft tissue and skeleton.

The Company is pursuing the development of therapeutics to address the underlying causes of these debilitating diseases. It is well established that two genes, ENPP1 and ABCC6, play key roles in a critical mineralization pathway and that defects in these genes lead to abnormal mineralization. The Company is initially focused on developing a novel therapy to treat rare genetic diseases of ENPP1 Deficiency and ABCC6 Deficiency.

The Company’s lead product candidate, INZ-701, is a soluble, recombinant, or genetically engineered, fusion protein that is designed to correct a defect in the mineralization pathway caused by ENPP1 and ABCC6 Deficiencies. This pathway is central to the regulation of calcium deposition throughout the body and is further associated with neointimal proliferation, or the overgrowth of smooth muscle cells inside blood vessels.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP") for interim financial information. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and note disclosures required by U.S. GAAP for audited year-end financial statements. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the interim period results. The results for the three and six month periods ended June 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Any reference in these notes to applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Liquidity, Capital Resources, and Going Concern

Since the Company’s incorporation in 2017 and through June 30, 2022, the Company has devoted substantially all of its efforts to raising capital, building infrastructure, developing intellectual property and conducting research and development activities. The Company incurred net losses of $32.1 million in the six months ended June 30, 2022 and $56.6 million in the year ended December 31, 2021 and had an accumulated deficit of $179.8 million as of June 30, 2022. The Company had cash, cash equivalents, and short-term investments of $151.5 million as of June 30, 2022.

On April 14, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC and Cowen and Company, LLC , relating to an underwritten offering of 16,276,987 shares of the Company’s common stock (the "Shares") and, in lieu of common stock to certain investors, pre-funded warrants to purchase 3,523,013 shares of common stock. The closing of the offering took place on April 19, 2022. The offering price of the Shares was $3.69