SYNLOGIC, INC. Forward-Looking Information
The interim financial statements and this Management's Discussion and Analysis
of Financial Condition and Results of Operations should be read together with
our audited financial statements and accompanying notes for the year ended
Overview Business
We are a clinical-stage biopharmaceutical company focused on advancing our proprietary drug discovery and development platform to create Synthetic Biotic™ medicines. Our Synthetic Biotic medicines apply the principles and tools of synthetic biology to engineer beneficial therapeutic characteristics into microbes, transforming them into efficient and targeted biologic engines. We believe that many patients with serious diseases are underserved today based on the limitations of conventional therapeutic approaches, such as small or large molecules. Synthetic Biotic medicines have the potential to address unmet medical need by performing therapeutic mechanisms not achievable by other drug modalities. Synthetic Biotic medicines are designed to be programmed to metabolize, or consume, a toxic substance, compensate for damaged metabolic pathways in patients, or produce one or more therapeutic factors. Our platform has generated a portfolio of Synthetic Biotic medicines designed to impact both genetic and acquired metabolic diseases, as well as oncology and inflammatory disorders. In a clinical trial with our lead program SYNB1618, we have demonstrated consumption of a phenylalanine (Phe), an amino acid that accumulates in a rare metabolic disorder known as phenylketonuria (PKU), and are expanding our pipeline based on learnings from this program.
We believe we have the core competencies in synthetic biology and manufacturing,
as well as translational medicine, regulatory experience and clinical
development to successfully discover and develop our Synthetic Biotic medicines.
In
While we believe that our Synthetic Biotic platform has potential to address a broad range of diseases, our initial internal pipeline focus is on rare metabolic diseases. We will consider leveraging partnerships to advance programs for other diseases including oncology and inflammatory disorders. Our most advanced programs target rare metabolic diseases that could potentially be treated by oral delivery of Synthetic Biotic medicines. These includes conditions caused by a genetic mutation characterized by a dysfunctional metabolic pathway including PKU and maple syrup urine disease (MSUD), as well as acquired metabolic diseases caused by organ dysfunction, such as enteric hyperoxaluria. When delivered orally, Synthetic Biotic medicines are designed to function in the gut to consume a disease-causing toxic metabolite with the intended consequence of reducing its systemic levels. We believe that success in our metabolic disease programs will enable us to demonstrate the potential of our Synthetic Biotic medicines while bringing meaningful change to the lives of patients suffering from these debilitating conditions.
Our most advanced product candidate for the treatment of metabolic dysfunction
is SYNB1618, an oral therapy intended for the treatment of PKU, a rare metabolic
disease in which Phe accumulates in the body as a result of genetic defects.
Elevated levels of Phe are toxic to the brain and can lead to neurological
dysfunction. SYNB1618 is designed to function in the gut of patients to reduce
excess Phe, with the goal of lowering levels in the blood and other tissues.
SYNB1618 has received both Fast Track designation and orphan drug designation
for PKU from the
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appropriate presentation of SYNB1618 demonstrated improved tolerability over the
early liquid formulation. The next step for SYNB1618 is to conduct a Phase 2
clincial trial. This trial is designed to evaluate safety and tolerability of a
solid formulation of SYNB1618 as well as its potential to lower blood Phe levels
in PKU patients.
The strain design and engineering, translational research, clinical and regulatory planning and scalable manufacturing of our PKU program has informed development of future clinical candidates. We are also developing pre-clinical product candidates to address other metabolic conditions including enteric hyperoxaluria and MSUD. Enteric hyperoxaluria is a form of secondary hyperoxaluria caused by increased absorption of oxalate as a result of certain intestinal diseases, including Crohn's disease and short bowel syndrome or as a result of surgical procedures such as bariatric weight-loss surgery. The disorder can lead to a range of conditions of increasing severity from urinary tract infections to recurrent kidney stones and renal failure. MSUD is an inherited, rare metabolic disease characterized by a deficiency of enzymes required to break down certain amino acids. The most common and severe form of the disease is the classic type, which becomes apparent soon after birth and, if left untreated, can lead to seizures, coma, and death. Variant forms of the disorder become apparent later in infancy or childhood and are typically milder, but also lead to delayed development and other health problems if not treated. In our enteric hyperoxaluria program, we expect to move a clinical candidate into IND-enabling studies in 2020.
In
We have also developed a portfolio of Synthetic Biotic medicines to treat
certain cancers which are designed to modify the tumor microenvironment,
activate the immune system and result in tumor reduction. We envision that
multiple engineered functions could be combined in one Synthetic Biotic
medicine. These Synthetic Biotic medicines could also be used in combination
with other cancer therapies such as check-point inhibitors. Our first Synthetic
Biotic clinical immuno-oncology (IO) candidate is SYNB1891, an intratumorally
administered Synthetic Biotic medicine engineered to act as a dual innate and
adaptive immune activator. SYNB1891 has been designed to activate the immune
response in tumors via the E.coli Nissle chassis and production of cyclic
di-AMP, an activator of the Stimulator of Interferon Genes, also referred to as
the
We are also leveraging our proprietary technology platform to develop Synthetic Biotic medicines to treat a broader range of human diseases. To achieve this goal, we collaborate with key disease experts who have developed robust models of relevant diseases and to inform our translational medicine strategy. These collaborators bring complementary expertise in preclinical development, clinical development and commercialization. Inflammatory bowel disease (IBD) is an attractive target for our technology as Synthetic Biotic medicines can be designed to locally deliver combinations of complementary therapeutics to potentially address the unmet medical need for maintenance of disease remissions. We have a collaboration with AbbVie S.à.r.l. (AbbVie) to develop Synthetic Biotic medicines for the treatment of types of IBD, including Crohn's disease and ulcerative colitis. We may enter into additional strategic partnerships in the future to maximize the value of our programs and our Synthetic Biotic platform.
In
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We currently operate in one reportable business segment-the discovery and
development of Synthetic Biotic medicines. To date, we have dedicated
substantially all of our activities to the research and development of our
product candidates. As of
We have not generated any revenue to date from product sales and have incurred
significant operating losses since our inception. We have incurred net losses of
approximately
• complete preclinical studies, initiate and complete clinical trials for
product candidates;
• contract to manufacture product candidates;
• advance research and development related activities to expand our product
pipeline;
• seek regulatory approval for our product candidates;
• maintain, expand and protect our intellectual property portfolio;
• hire additional staff, including clinical, scientific, and management
personnel;
• expand our existing infrastructure and secure space in a facility to
support continued growth in our research and development efforts; and
• add operational and finance personnel to support product development
efforts and to support operating as a public company.
We do not expect to generate product revenue unless and until we successfully complete clinical development and obtain regulatory approvals for our product candidates, either alone or in collaboration with third parties. Additionally, we expect to utilize third-party contract research organizations (CROs) and contract manufacturing organizations (CMOs) to carry out our clinical development and manufacturing activities, and we do not yet have a commercial organization. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing and distribution. Accordingly, we anticipate that we will seek to fund our operations through public or private equity or debt financings, collaborations or licenses, finance lease transactions or other available financing transactions. However, we may be unable to raise additional funds through these or other means when needed. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if it will be able to achieve or maintain profitability. Even if we are able to generate product revenue, we may not become profitable.
Financial Overview Revenue
Revenue to date is generated from our collaboration agreement with AbbVie. The collaboration agreement contains multiple deliverables, which include an exclusive option for AbbVie to acquire IBDCo and research and development milestones. See Note 10, Collaboration Agreements: AbbVie Collaboration in the notes to the unaudited consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a full discussion of the arrangement. We expect our revenue to fluctuate for the foreseeable future as it is principally based on the achievement of research and development milestones under our collaboration agreement with AbbVie.
Research and Development Expense
Research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates, including the conduct of preclinical and clinical studies and product development, which are expensed as they are incurred. These expenses consist primarily of:
• compensation, benefits and other employee related expenses;
• supplies to support our internal research and development efforts;
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• research and development related facility and depreciation costs; and
• third-party contract costs relating to research, process and formulation
development, preclinical and clinical studies and regulatory operations.
The lengthy process of securing regulatory approvals for new drugs requires the expenditure of substantial resources. Any delay or failure to obtain regulatory approvals would materially adversely affect our product candidate development efforts and our business overall. Given the inherent uncertainties of pharmaceutical product development, we cannot estimate with any degree of certainty the likelihood, timing or cost of obtaining regulatory approval and marketing our product candidates and thus, when, if ever, our product candidates will generate revenues and cash flows.
The successful development of our product candidates is highly uncertain and subject to a number of risks. Refer to the risk factors under the heading Risks Related to the Development of Our Product Candidates in Part II, Item 1A, found elsewhere in this Quarterly Report on Form 10-Q.
We invest carefully in our pipeline, and the commitment of funding for each subsequent stage of our development programs is dependent upon the receipt of clear, supportive data. We anticipate that we will make determinations as to which additional programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical data of each product candidate, as well as the competitive landscape and ongoing assessments of such product candidate's commercial potential. We expect our research and development costs will be substantial for the foreseeable future. We expect costs associated with our SYNB1618 and SYNB1891 programs to increase as the programs progress through clinical trials and new programs progress toward IND and into development.
We track direct research and development expenses, consisting principally of external costs, such as costs associated with contract research organizations and manufacturing of preclinical and clinical drug product and other outsourced research and development expenses to specific product programs. Costs related to specific product candidates are tracked upon the selection of a product candidate. We do not allocate employee and consulting-related costs, costs associated with our platform and facility expenses, including depreciation or other indirect costs, to specific product candidate programs because these costs are deployed across multiple product candidate programs under research and development and, as such, are separately classified. The table below summarizes our research and development expenses by categories of costs for the periods presented (in thousands):
For the three months ended
March 31,
2020 2019
SYNB1020 $ 122 $ 1,038
SYNB1618 3,634 897
SYNB1891 372 1,198
External pre-development candidate expenses and
unallocated expenses 2,159 683
Internal research and development expenses 6,390 6,568
$ 12,677 $ 10,384 General and Administrative Expense
General and administrative expense consists primarily of compensation, benefits and other employee-related expenses for personnel in our administrative, finance, legal, information technology, investor relations, business development and human resource functions. Other costs include the legal costs of pursuing patent protection of our intellectual property, general and administrative related facility and information technology infrastructure costs and professional fees for accounting and legal services. We anticipate increases in expenses related to legal fees, accounting fees, costs for director and officer liability insurance, fees for investor relations services and costs associated with implementing and complying with corporate governance, internal controls and similar requirements applicable to public companies. We charge all general and administrative expenses to operations as incurred.
Other Income (Expense)
Interest and investment income consists primarily of income earned on investments. Interest expense consists of expense related to our finance leases. Other expense consists primarily of gains and losses on foreign currency invoices.
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Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations
is based upon our consolidated financial statements prepared in accordance with
generally accepted accounting principles in the
Our critical accounting policies are described in our 2019 Annual Report. During
the three months ended
Our estimates and assumptions, including those related to revenue recognition and research and development expenses are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. The estimates and assumptions involved in our revenue recognition policy, particularly (a) assessing the number of performance obligations; (b) determination of transaction price; (c) determining the pattern over which performance obligations are satisfied, including estimates to complete performance obligations, and those estimates and assumptions involved in our contract research accrual process, particularly estimates of work completed to date; involve a greater degree of judgment, and therefore we consider revenue recognition and research and development expenses to be our critical accounting policies. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from our estimates under different assumptions or conditions.
Results of Operations
The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial results.
Three Months Ended
For the three months ended Change
March 31, 2020 March 31, 2019 $
(in thousands)
Revenue $ 100 $ 338 $ (238 )
Operating expenses:
Research and development 12,677 10,384 2,293
General and administrative 3,821 3,651 170
Total operating expenses 16,498 14,035 2,463
Loss from operations (16,398 ) (13,697 ) (2,701 )
Other income (expense):
Interest and investment income 574 757 (183 )
Interest expense (3 ) (7 ) 4
Other expense (1 ) 1 (2 )
Other income (expense), net 570 751 (181 )
Net loss $ (15,828 ) $ (12,946 ) $ (2,882 )
Revenue
Revenue was
Operating Expenses
Research and Development Expense
Research and development expense was
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development costs for our SYNB1020 program, a decrease of
General and Administrative Expense
General and administrative expense was
Other Income (Expense)
Other income (expense) was
Liquidity and Capital Resources
We have incurred losses since our inception on
During the three months ended
The following table sets forth the major sources and uses of cash, cash equivalents and restricted cash for each of the periods below (in thousands):
Three Months Ended March 31,
2020 2019
(in thousands)
Net cash, cash equivalents and restricted cash
(used in) provided by:
Operating activities $ (12,479 ) $ (13,118 )
Investing activities 5,817 17,675
Financing activities (69 ) (65 )
Net increase (decrease) in cash, cash equivalents
and restricted cash $ (6,731 ) $ 4,492
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Cash Flows from Operating Activities
Net cash, cash equivalents and restricted cash used in operating activities was
approximately
Net cash, cash equivalents and restricted cash used in operating activities was
Cash Flows from Investing Activities
Net cash provided by investing activities for the three months ended
Net cash provided in investing activities for the three months ended
Cash Flows from Financing Activities
Net cash used in financing activities for the three months ended
Funding Requirements
To date, we have not commercialized any products and have not achieved profitability. We anticipate that we will continue to incur substantial net losses for the next several years as we further develop our product candidates, invest in our proprietary platform technology and operate as a publicly traded company.
We have generated revenue from our AbbVie collaboration, but have not generated
any product revenue since our inception and do not expect to generate any
product revenue unless we receive regulatory approval for our product
candidates. We believe that our cash, cash equivalents, and short-term
marketable securities as of
Due to the numerous risks and uncertainties associated with the development of our product candidates, we are unable to estimate precisely the amounts of capital outlays and operating expenditures necessary to complete the development of, and to obtain regulatory approval for, our product candidates. Our funding requirements will depend on many factors, including, but not limited to, the following:
• the success of our research and development efforts;
• the initiation, progress, timing, costs and results of clinical trials for
our product candidates;
• the time and costs involved in obtaining regulatory approvals for our
product candidates;
• the progress, timing and costs involved in developing manufacturing
processes and agreements with third-party manufacturers;
• the rate of progress and cost of our commercialization activities;
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• the expenses we incur in marketing and selling our product candidates;
• the revenue generated by sales of our product candidates;
• the emergence of competing or complementary technological developments;
• the costs of filing, prosecuting, defending and enforcing any patent
claims and other intellectual property rights;
• the terms and timing of any additional collaborative, licensing or other
arrangements that we may establish;
• the acquisition of businesses, products and technologies;
• our need to implement additional infrastructure and internal systems;
• our need to add personnel and financial and management information systems
to support our product development and potential future commercialization
efforts, and to enable us to operate as a public company; and
• the extent to which our business is adversely impacted by the effects of
the novel coronavirus outbreak or by other health epidemics or pandemics.
As an early-stage company, we are subject to a number of risks common to other life science companies, including, but not limited to, the ability to raise additional capital, development by our competitors of new technological innovations, risk of failure in preclinical studies, the safety and efficacy of our product candidates in clinical trials, the regulatory approval process, the ability to efficiently manufacture our products, market acceptance of our products once approved, lack of marketing and sales history, dependence on key personnel and protection of proprietary technology. Our therapeutic programs are currently pre-commercial, spanning discovery through early development and will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization of any product candidates. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities. There can be no assurance that our research and development will be successfully completed, that adequate protection for our intellectual property will be obtained, that any products developed will obtain necessary regulatory approval or that any approved products will be commercially viable. Even if our product development efforts are successful, it is uncertain when, if ever, we will generate revenue from product sales. We may never achieve profitability, and unless and until we do, we will continue to need to raise additional capital or obtain financing from other sources, such as strategic collaborations or partnerships. If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financial condition and results of operations could be materially adversely affected.
Contractual Commitments and Obligations
There have been no material changes to our contractual obligations and commitments set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations- Contractual Obligations and Commitments" in our 2019 Annual Report.
Related Party Transactions
For a description of transactions with related parties which may fall outside of
the reporting period of this section, please see the section entitled "Related
Party Transactions of Directors and Executive Officers of the
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships. We enter into guarantees in the ordinary course of business related to the guarantee of our performance and the performance of our subsidiaries.
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JOBS Act
Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other companies.
Recently Issued Accounting Pronouncements
For detailed information regarding recently issued accounting pronouncements and the expected impact on our consolidated financial statements, see Note 2, Summary of Significant Accounting Policies in the notes to the unaudited consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
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