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 March 31, 2023

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 May 3, 2023, the registrant had 44,035,322 shares of common stock, $0.0001 par value per share, outstanding.

CAUTIONARY NOTE REGARDING 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 adults with 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 clinical trials of INZ-701 for patients with ENPP1 and ABCC6 Deficiencies;

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

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

•our plans to engage in regulatory meetings with the FDA and other regulatory authorities;

•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 cash flow requirements 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;

•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;

•our ability to comply with the covenants under our loan agreement;

•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.

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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	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 6.	Exhibits	24
Signatures		25

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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)

	March 31, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	49,024		$	32,915
Short-term investments		81,906			94,951
Prepaid expenses and other current assets		3,218			3,527
Total current assets		134,148			131,393
Property and equipment, net		1,981			2,018
Restricted cash		354			354
Right-of-use assets		1,503			1,620
Prepaid expenses, net of current portion		3,810			3,810
Total assets	$	141,796		$	139,195
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,815		$	2,544
Accrued expenses		9,927			11,355
Operating lease liabilities		839			816
Total current liabilities		12,581			14,715
Operating lease liabilities, net of current portion		1,603			1,823
Long-term debt, net		24,219			4,139
Other long-term liabilities		46			124
Total liabilities		38,449			20,801
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred Stock, $0.0001 par value – 5,000,000 shares authorized at March 31, 2023 and December 31, 2022; no shares issued and outstanding at March 31, 2023 or December 31, 2022		—			—
Common Stock, $0.0001 par value – 200,000,000 shares authorized at March 31, 2023 and December 31, 2022; 43,765,485 shares issued and outstanding at March 31, 2023 and 40,394,363 shares issued and outstanding at December 31, 2022		4			4
Additional paid in-capital		335,544			333,356
Accumulated other comprehensive loss		(36	)		(205	)
Accumulated deficit		(232,165	)		(214,761	)
Total stockholders’ equity		103,347			118,394
Total liabilities and stockholders’ equity	$	141,796		$	139,195

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)

	Three Months Ended March 31,
	2023			2022
Operating expenses:
Research and development	$	11,857		$	11,814
General and administrative		6,512			5,025
Total operating expenses		18,369			16,839
Loss from operations		(18,369	)		(16,839	)
Other income (expense):
Interest income, net		999			60
Other expense, net		(34	)		(105	)
Other income (expense), net		965			(45	)
Net loss	$	(17,404	)	$	(16,884	)
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities		150			(132	)
Foreign currency translation adjustment		19			(15	)
Total other comprehensive income (loss)		169			(147	)
Comprehensive loss	$	(17,235	)	$	(17,031	)
Net loss attributable to common stockholders—basic    and diluted	$	(17,404	)	$	(16,884	)
Net loss per share attributable to common    stockholders—basic and diluted	$	(0.40	)	$	(0.71	)
Weighted-average common shares and pre-funded warrants outstanding—basic    and diluted		43,720,578			23,686,351

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		(Loss) Income			Deficit
Balance at December 31, 2022		40,394,363	$	4	$	333,356	$	(205	)	$	(214,761	)	$	118,394
Stock-based compensation		—		—		2,092		—			—			2,092
Exercise of pre-funded warrants		3,325,644		—		—		—			—			—
Shares purchased in Employee Stock Purchase Plan		45,478		—		96		—			—			96
Comprehensive loss:														—
Unrealized gain on investments		—		—		—		150			—			150
Foreign currency translation adjustment		—		—		—		19			—			19
Net loss		—		—		—		—			(17,404	)		(17,404	)
Balance at March 31, 2023		43,765,485	$	4	$	335,544	$	(36	)	$	(232,165	)	$	103,347
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

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)

	Three Months Ended March 31,
	2023			2022
Operating activities
Net loss	$	(17,404	)	$	(16,884	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		207			178
Stock-based compensation expense		2,092			1,752
Amortization of premiums and discounts on marketable securities		(746	)		(76	)
Reduction in the carrying value of right-of-use assets		117			103
Non-cash interest expense and amortization of debt issuance costs		80			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		309			731
Accounts payable		(729	)		(194	)
Accrued expenses		(1,423	)		808
Operating lease liabilities		(197	)		(177	)
Prepaid expenses - noncurrent		—			(401	)
Other long-term liabilities		(78	)		—
Net cash used in operating activities		(17,772	)		(14,160	)
Investing activities
Purchases of marketable securities		(46,059	)		(30,421	)
Maturities of marketable securities		60,000			53,000
Purchases of property and equipment		(175	)		(17	)
Net cash provided by investing activities		13,766			22,562
Financing activities
Net proceeds from issuance of long-term debt		20,000			—
Proceeds from exercise of stock options		—			240
Proceeds from issuance of common stock for cash under Employee Stock Purchase Plan		96			—
Net cash provided by financing activities		20,096			240
Net increase in cash, cash equivalents and restricted cash		16,090			8,642
Effect of foreign currency exchange rate on cash		19			(15	)
Cash, cash equivalents and restricted cash at beginning of period		33,269			23,670
Cash, cash equivalents and restricted cash at end of period	$	49,378		$	32,297
Supplemental cash flow information:
Cash and cash equivalents	$	49,024		$	31,943
Restricted cash		354			354
Cash, cash equivalents and restricted cash at end of period	$	49,378		$	32,297
Property and equipment unpaid at end of period	$	5		$	12

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

4

Inozyme Pharma, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(amounts in thousands, except share and per share data and where otherwise noted)

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 impacting the vasculature, soft tissue, and skeleton. Through the Company’s in-depth understanding of a key biological pathway, 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 this critical pathway and that defects in these genes lead to low levels of plasma pyrophosphate, which drives pathologic mineralization, and low levels of adenosine, which drives intimal proliferation. The Company is initially focused on developing a novel therapy to treat rare genetic diseases of ENPP1 and ABCC6 Deficiencies.

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 a pathway involving ENPP1 and ABCC6 Deficiencies. This pathway is central to the regulation of calcium deposition throughout the body and is further associated with the inhibition of intimal proliferation, or narrowing and obstruction of 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-month period ended March 31, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, 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, 2022.

Liquidity, Capital Resources, and Going Concern

Since the Company’s incorporation in 2017 and through March 31, 2023, 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 $17.4 million in the three months ended March 31, 2023 and $67.1 million in the year ended December 31, 2022 and had an accumulated deficit of $232.2 million as of March 31, 2023. The Company had cash, cash equivalents, and short-term investments of $130.9 million as of March 31, 2023.

The Company has incurred recurring losses and negative cash flows from operations since inception and has primarily funded its operations with proceeds from the issuance of convertible preferred stock, offerings of common stock and pre-funded warrants, and its loan and security agreement (the “Loan Agreement”) with K2 HealthVentures LLC (see Note 8). The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. The Company believes its available cash, cash equivalents, and short-term investments as of March 31, 2023 will be sufficient to fund its cash flow requirements for at least 12 months from the filing date of this Quarterly Report on Form 10-Q. Management’s expectations with respect to its ability to fund current and long-term planned operations are based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. However, there is no guarantee that any of these strategic or financing opportunities will be executed on favorable terms, or at all, and some could be dilutive to existing stockholders. If the Company is unable to obtain additional funding on a timely basis, it may be forced to delay, reduce, or eliminate some or all of its research and development programs, portfolio expansion, or commercialization efforts, which could adversely affect its business.

5

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Inozyme Securities Corp., which is a Massachusetts subsidiary created to buy, sell, and hold securities; Inozyme Ireland Limited; and Inozyme Pharma Switzerland GmbH. All intercompany transactions and balances have been eliminated.

Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the accompanying condensed consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2023.

Use of Estimates

The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates and judgments are based on historical information and other market-specific or various relevant assumptions, including, in certain circumstances, future projections that management believes to be reasonable under the circumstances. Actual results could differ materially from estimates. Significant estimates and assumptions are used for, but not limited to, the accruals for research and development expenses. The Company evaluates its estimates and assumptions on an ongoing basis. All revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and short-term investments and, from time to time, long-term investments. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits and limits its exposure to credit risk by placing its cash with high credit quality financial institutions. The Company’s investments are comprised of U.S. Treasury securities and commercial paper of corporations. The Company mitigates credit risk by maintaining a diversified portfolio and limiting the amount of investment exposure as to institution, maturity, and investment type.

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.

3. Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("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.

Recently Adopted Accounting Standards

In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 and its subsequent related updates establish a new forward-looking “expected loss model” that requires entities to estimate current expected credit losses on accounts receivable and financial instruments by using all practical and relevant information. The Company adopted this standard effective January 1, 2023. There was no impact to the Company's financial statements upon adoption.

6

4. Balance Sheet Details

Short-term investments consisted of the following:

	March 31, 2023
Description	Maturity	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Commercial paper	1 year or less	$	76,449	$	5	$	(32	)	$	76,422
U.S. Treasury securities	1 year or less		5,494		—		(10	)		5,484
		$	81,943	$	5	$	(42	)	$	81,906

	December 31, 2022
Description	Maturity	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Commercial paper	1 year or less	$	78,451	$	4	$	(119	)	$	78,336
U.S. Treasury securities	1 year or less		16,698		—		(83	)		16,615
		$	95,149	$	4	$	(202	)	$	94,951

The Company did not have any investments in a continuous unrealized loss position for more than 12 months as of March 31, 2023. As of March 31, 2023, the Company believes that the cost basis of its available-for-sale securities is recoverable. No allowance for credit losses was recorded as of March 31, 2023.

Accrued expenses consisted of the following:

	At March 31, 2023		At December 31, 2022
Payroll and related liabilities	$	2,033	$	2,799
Other professional fees		1,756		746
Research and development costs		5,579		7,066
Other		559		744
Total	$	9,927	$	11,355

5. Fair Value Measurement

Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

•Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

•Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

•Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

7

The following tables represent the Company’s financial assets measured at fair value on a recurring basis and indicate the level of fair value hierarchy utilized to determine such fair values:

			Fair Value Measurements at Reporting Date Using
Description	March 31, 2023		Level 1		Level 2		Level 3
Assets:
Money market funds (included in cash and cash    equivalents)	$	37,919	$	37,919	$	—	$	—
Commercial paper (including amounts in cash and cash equivalents)		86,353		—		86,353		—
U.S. Treasury securities		5,484		5,484				—
Total assets	$	129,756	$	43,403	$	86,353	$	—

			Fair Value Measurements at Reporting Date Using
Description	December 31, 2022		Level 1		Level 2		Level 3
Assets:
Money market funds (included in cash and cash    equivalents)	$	26,587	$	26,587	$	—	$	—
Commercial paper		78,336		—		78,336		—
U.S. Treasury securities		16,615		16,615		—		—
Total assets	$	121,538	$	43,202	$	78,336	$	—

There have been no transfers between fair value levels during the three months ended March 31, 2023.

6. License and Sponsored Research Agreements

In January 2017, the Company entered into a license agreement with Yale University (“Yale”), which was amended in May 2020 and July 2020, under which the Company licensed certain intellectual property related to ectonucleotide pyrophosphatase/phosphodiesterase enzymes that is the basis for the Company’s INZ-701 development program. Pursuant to the license agreement, as partial upfront consideration, the Company made a payment of approximately $0.1 million to Yale, which amount reflected unreimbursed patent expenses incurred by Yale prior to the date of the license agreement. The Company is responsible for paying Yale an annual license maintenance fee in varying amount