SEC Filing - DICE Therapeutics

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2023

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

For the transition period from ______ to ______

Commission File Number: 001-40794

DICE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)


Delaware		47-2286244
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

400 East Jamie Court, Suite 300 South San Francisco, California		94080
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (650) 566-1420

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	DICE	The NASDAQ Stock Market LLC

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.

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 47,730,577 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page no.
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 Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17

PART II: OTHER INFORMATION		18
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
Item 3.	Defaults Upon Senior Securities	75
Item 4.	Mine Safety Disclosures	75
Item 5.	Other Information	75
Item 6.	Exhibits	76
Signatures		77

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “predict,” “potential” and similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these words. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk factors” and elsewhere in this filing. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. The forward-looking statements in this Quarterly Report include, among other things, statements about:

•

our ability to obtain funding for our operations, including funding necessary to complete the development and commercialization of our therapeutic candidates;

•

the success, cost and timing of our therapeutic candidate development activities and planned clinical trials;

•

the scope and timing of our pipeline expansion efforts;

•

the timing of and our ability to obtain and maintain regulatory approvals for our therapeutic candidates;

•

future agreements and partnerships with third parties in connection with the commercialization of our therapeutic candidates;

•

the estimated market size for, and the rate and degree of market acceptance and clinical utility of, our therapeutic candidates;

•

our commercialization, marketing and manufacturing capabilities and strategy;

•

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

•

our ability to attract and retain key management and technical personnel;

•

our expectations regarding our ability to obtain, maintain and enforce intellectual property protection for our therapeutic candidates;

•

our use of our existing cash, cash equivalents, and marketable securities;

•

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

•

our expectations regarding the impact of the macroeconomic and geopolitical environment, including inflation, actual or perceived instability in the U.S. and global banking systems, pandemics and geopolitical conflict, and their potentially material adverse impact on our business and the execution of our preclinical studies and clinical trials.

The forward-looking statements made in this filing relate only to events or information as of the date on which the statements are made in this Quarterly Report. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to actual results or to changes in our expectations, except as required by law. We intend the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

DICE THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)


	March 31, 2023			December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	101,594		$	461,393
Marketable securities		452,954			112,832
Prepaid expenses and other current assets		4,802			3,537
Total current assets		559,350			577,762
Property and equipment, net		3,345			2,921
Restricted cash		198			198
Operating lease right-of-use assets		12,711			13,097
TOTAL ASSETS	$	575,604		$	593,978
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	4,122		$	3,075
Accrued expenses and other current liabilities		11,640			10,650
Operating lease liabilities, current portion		1,479			1,424
Total current liabilities		17,241			15,149
Operating lease liabilities, noncurrent portion		11,458			11,841
TOTAL LIABILITIES		28,699			26,990
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.0001 par value; 500,000,000 shares authorized; 47,728,381 and 47,707,691 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		5			5
Additional paid-in capital		760,437			755,174
Accumulated deficit		(213,240	)		(187,594	)
Accumulated other comprehensive loss		(297	)		(597	)
TOTAL STOCKHOLDERS’ EQUITY		546,905			566,988
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	575,604		$	593,978

See accompanying notes.

DICE THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended March 31,
	2023			2022
Operating expenses:
Research and development	$	23,661			13,410
General and administrative		7,914			5,448
Total operating expenses		31,575			18,858
Loss from operations		(31,575	)		(18,858	)
Other income (expense):
Interest and other income, net		5,929			327
Interest expense		—			(60	)
Net loss		(25,646	)		(18,591	)
Other comprehensive loss:
Unrealized gain (loss) on marketable securities		300			(1,082	)
Comprehensive loss	$	(25,346	)	$	(19,673	)
Net loss per share, basic and diluted	$	(0.54	)	$	(0.50	)
Weighted-average shares used in computing net loss per share, basic and diluted		47,193,122			37,261,685

See accompanying notes.

DICE THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)


	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Capital		Deficit			Loss			Equity
Balances as of December 31, 2022		47,707,691	$	5	$	755,174	$	(187,594	)	$	(597	)	$	566,988
Issuance of common stock upon exercise of stock options		20,690		—		374		—			—			374
Stock-based compensation		—		—		4,889		—			—			4,889
Other comprehensive gain		—		—		—		—			300			300
Net loss		—		—		—		(25,646	)		—			(25,646	)
Balances as of March 31, 2023		47,728,381	$	5	$	760,437	$	(213,240	)	$	(297	)	$	546,905


	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Capital		Deficit			Loss			Equity
Balances as of December 31, 2021		38,224,299	$	4	$	416,710	$	(103,707	)	$	(58	)	$	312,949
Issuance of common stock upon exercise of stock options		4,976		—		84		—			—			84
Stock-based compensation		—		—		1,809		—			—			1,809
Other comprehensive loss		—		—		—		—			(1,082	)		(1,082	)
Net loss		—		—		—		(18,591	)		—			(18,591	)
Balances as of March 31, 2022		38,229,275	$	4	$	418,603	$	(122,298	)	$	(1,140	)	$	295,169

See accompanying notes.

DICE THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(25,646	)	$	(18,591	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		244			151
Stock-based compensation		4,889			1,809
Gain on asset disposal		—			(22	)
Amortization of operating lease right-of-use assets		386			368
Amortization of (discount) premium for marketable securities		(2,369	)		351
Amortization of debt issuance costs		—			29
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(1,088	)		607
Accounts payable		472			3,054
Accrued expenses and other liabilities		1,004			(1,552	)
Operating lease liabilities		(328	)		(368	)
Net cash used in operating activities		(22,436	)		(14,164	)
Cash flows from investing activities:
Purchases of property and equipment		(202	)		(385	)
Purchases of marketable securities		(397,724	)		(65,506	)
Proceeds from maturities of marketable securities		60,271			18,005
Net cash used in investing activities		(337,655	)		(47,886	)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options		351			84
Payments of public offering costs		(54	)		—
Payments of Series C issuance costs		—			(192	)
Payments for tax distributions		(5	)		—
Net cash provided by (used in) financing activities		292			(108	)
Net decrease in cash, cash equivalents and restricted cash		(359,799	)		(62,158	)
Cash, cash equivalents and restricted cash at beginning of period		461,591			116,174
Cash, cash equivalents and restricted cash at end of period	$	101,792		$	54,016
Supplemental non-cash operating information:
Right-of-use assets obtained in exchange for lease liabilities	$	—		$	14,477
Supplemental non-cash investing and financing information:
Property and equipment additions included in accounts payable and accrued liabilities	$	511		$	1,396
Stock option exercise proceeds included in prepaids and other current assets	$	73		$	—
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:
Cash and cash equivalents	$	101,594		$	53,668
Restricted cash		198			348
Total cash, cash equivalents and restricted cash	$	101,792		$	54,016

See accompanying notes.

DICE THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Organization and Description of Business

DICE Therapeutics, Inc. (“DICE”, or the “Company”), a successor to DiCE Molecules Holdings, LLC (“DiCE LLC”), is a Delaware Corporation headquartered in South San Francisco, California. DICE is a biopharmaceutical company leveraging its proprietary technology platform to build a pipeline of novel oral therapeutic candidates to treat chronic diseases in immunology and other therapeutic areas. The Company’s platform, DELSCAPE, is designed to discover selective oral small molecules with the potential to modulate protein-protein interactions (“PPIs”) as effectively as systemic biologics.

Liquidity

The Company has incurred significant operating losses since inception and has relied primarily on public and private equity to fund its operations. As of March 31, 2023, the Company had an accumulated deficit of $213.2 million. The Company expects to continue to incur substantial losses, and its ability to achieve and sustain profitability will depend on the successful development, approval, and commercialization of product candidates and on the achievement of sufficient revenue to support its cost structure. The Company may never achieve profitability, and until then, the Company will need to continue to raise additional capital. As of March 31, 2023, the Company had cash, cash equivalents, and marketable securities of $554.5 million. Based on the current plan, the Company believes that its cash, cash equivalents, and marketable securities as of March 31, 2023 provide sufficient capital resources to continue its operations for at least twelve months from the issuance date of these unaudited condensed consolidated financial statements.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) as defined by the Financial Accounting Standards Board (“FASB”).

Consolidation

The condensed consolidated financial statements include the accounts of DICE Therapeutics, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expense during the reporting period. The Company evaluates its estimates, including those related to the fair value of common stock warrants, income taxes uncertainties, stock-based compensation, lease assets and liabilities, clinical trial accruals, and related assumptions on an ongoing basis using historical experience and other factors that are believed to be reasonable under the circumstances, and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from these estimates.

Unaudited Interim Condensed Consolidated Financial Statements

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all necessary adjustments, which include only normal recurring adjustments necessary to present fairly the Company’s financial position as of March 31, 2023, and its results of operations and comprehensive loss and changes in stockholders’ equity and members’ deficit for the three months ended March 31, 2023 and 2022 and its cash flows for the three months ended March 31, 2023 and 2022. The financial data and the other financial information contained in these notes to the condensed consolidated financial statements related to the three month period are also unaudited. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022, as filed on March 15, 2023.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”). This standard requires measurement and recognition of expected credit losses for financial assets. The FASB subsequently issued clarifications to this standard. The Company adopted Topic 326 on a modified retrospective basis on January 1, 2023. The adoption did not have a material impact on its condensed consolidated financial statements and related disclosures.

Fair Value Measurements

The fair value hierarchy consists of the following three levels:

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2—Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


	March 31, 2023
	Level 1		Level 2		Level 3		Total
Money market funds	$	101,011	$	—	$	—	$	101,011
US treasury securities		91,643		—		—		91,643
Agency securities		—		93,371		—		93,371
Corporate securities and commercial paper		—		265,922		—		265,922
Asset-backed securities		—		2,018		—		2,018
Total assets measured at fair value	$	192,654	$	361,311	$	—	$	553,965


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Money market funds	$	459,184	$	—	$	—	$	459,184
US treasury securities		24,570		—		—		24,570
Corporate securities and commercial paper		—		80,266		—		80,266
Asset-backed securities		—		7,996		—		7,996
Total assets measured at fair value	$	483,754	$	88,262	$	—	$	572,016

Investments

The amortized cost, unrealized gain and loss, and fair value of the Company’s investments in marketable securities by major security type are as follows (in thousands):


	March 31, 2023
	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
Money market funds	$	101,011	$	—	$	—		$	101,011
US treasury securities		91,559		147		(63	)		91,643
Agency securities		93,287		85		(1	)		93,371
Corporate securities and commercial paper		266,397		16		(491	)		265,922
Asset-backed securities		2,008		10		—			2,018
Total	$	554,262	$	258	$	(555	)	$	553,965


	December 31, 2022
	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
Money market funds	$	459,184	$	—	$	—		$	459,184
US treasury securities		24,715		—		(145	)		24,570
Corporate securities and commercial paper		80,706		—		(440	)		80,266
Asset-backed securities		8,008		—		(12	)		7,996
Total	$	572,613	$	—	$	(597	)	$	572,016

During the three months ended March 31, 2023 and 2022, there have been no realized gains or losses on available-for-sale investments. Unrealized losses as of December 31, 2022 and March 31, 2023 were attributed to changes in market interest rates, were considered to be temporary in nature and do not represent credit losses. The Company does not intend to sell the investments in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis. As of December 31, 2022 and March 31, 2023, no allowance for credit losses was recorded.

As of March 31, 2023, the Company had 20 marketable securities in an unrealized loss position. The following table presents marketable securities that were in an unrealized loss position as of March 31, 2023, aggregated by major security type and length of time that the individual securities have been in a continuous loss position (in thousands):


	March 31, 2023
	Less than 12 months					More than 12 months					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
US treasury securities	$	8,327	$	(43	)	$	7,979	$	(20	)	$	16,306	$	(63	)
Agency securities		10,023		(1	)		—		—			10,023		(1	)
Corporate securities and commercial paper		78,687		(364	)		19,398		(127