SOLID BIOSCIENCES INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this quarterly report on Form 10-Q and our audited financial statements and related notes for the year endedDecember 31, 2020 included in our annual report filed on Form 10-K onMarch 15, 2021 . Some of the statements contained in this discussion and analysis or set forth elsewhere in this quarterly report on Form 10-Q, including information with respect to our plans and strategy for our business, constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this quarterly report on Form 10-Q particularly including those risks identified in Part II, Item 1A "Risk Factors" and our other filings with theSecurities and Exchange Commission , or theSEC . Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this quarterly report on Form 10-Q. Statements made herein are made as of the date of the filing of this Form 10-Q with theSEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this quarterly report on Form 10-Q, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of theSEC , to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made.
Overview
Our mission is to cure Duchenne muscular dystrophy, or Duchenne, a genetic muscle-wasting disease predominantly affecting boys, with symptoms that usually manifest between three and five years of age. Duchenne is a progressive, irreversible and ultimately fatal disease that affects approximately one in every 3,500 to 5,000 live male births and has an estimated prevalence of 10,000 to 15,000 cases inthe United States alone. Duchenne is caused by mutations in the dystrophin gene, which result in the absence or near-absence of dystrophin protein. Dystrophin protein works to strengthen muscle fibers and protect them from daily wear and tear. Without functioning dystrophin and certain associated proteins, muscles suffer excessive damage from normal daily activities and are unable to regenerate, leading to the build-up of fibrotic, or scar, and fat tissue. There is no cure for Duchenne and, for the vast majority of patients, there are no satisfactory symptomatic or disease-modifying treatments. Our efforts are focused on our lead product candidate, SGT-001, a gene transfer candidate under investigation for its ability to drive functional dystrophin protein expression in patients' muscles and improve the course of the disease. Based on our preclinical program that included multiple animal species of different phenotypes and genetic variations, as well as preliminary clinical trial biomarker results, we believe that SGT-001, has the potential to slow or even halt the progression of Duchenne, regardless of the type of genetic mutation or stage of the disease. SGT-001 has been granted Rare Pediatric Disease Designation, or RPDD, and Fast Track Designation, inthe United States and Orphan Drug Designations in both theUnited States andEuropean Union . The safety and efficacy of SGT-001 are currently being evaluated in a Phase I/II clinical trial called IGNITE DMD. InMarch 2021 , we announced that the seventh patient, who was the fourth patient in the 2E14 vg/kg cohort, was treated with SGT-001, under an amended clinical protocol designed to enhance patient safety, incorporating the prophylactic use of both anti-complement inhibitor eculizumab and C1 esterase inhibitor, and increasing the prednisone dose in the first month post dosing. This patient was safely dosed, with transient and manageable adverse events, none of which were serious. InApril 2021 , an eighth patient, also in the 2E14 vg/kg cohort, was treated with SGT-001. The patient experienced a systemic inflammatory response which has since fully resolved. The event was classified as a serious adverse event and considered by the investigator to be drug related. This type of event is described in our Investigators Brochure and is not considered unexpected. Following dosing of these two patients with our second-generation manufacturing process and clinical strategy, we conducted an extensive review of all clinical data, resulting in a strengthened risk mitigation plan, which has also been submitted to the FDA. Activities are underway to advance IGNITE DMD with the next patient dosing anticipated in the fourth quarter of 2021. 19 -------------------------------------------------------------------------------- No new drug-related safety findings have been identified in patients one through eight in post-dosing periods of 90 days to more than 3.5 years. We continue to follow dosed patients and collect data to support the potential benefit from dosing with SGT-001. InMay 2021 , we reported long-term biopsy data collected from patients four through six, who were dosed at the 2E14 vg/kg dose level. Analyses of the biopsies, taken 2 years, 1.5 years and 1 year post-dosing, respectively, demonstrated durable and widespread expression of the microdystrophin protein. The long-term results are consistent with the day 90, interim data reported inMarch 2021 and continue to demonstrate the functionality of the SGT-001 microdystrophin, as highlighted by the recruitment of key dystrophin associated proteins: beta-sarcoglycan and neuronal Nitric Oxide Synthase or nNOS. The long-term muscle biopsy results were analyzed by two methods, western blot and immunofluorescence. As reflected in the table below, the Western Blot data indicate that expression was maintained in patient four and increased compared to the day 90 biopsies in patients five and six. Immunofluorescence data show microdystrophin function via continued localization to the muscle membrane, with the percent positive fibers remaining comparable to the day 90 biopsies in all three patients. Last Immunofluorescence (% Patient No. Timepoint Western Blot Positive Fibers) Post-Dosing Day 90 Last Timepoint Day 90 Last Timepoint 4 24 months BLQ * BLQ * 10-20% 10-30% 5 18 months 17.50% 69.80% 50-70% 85% 6 12 months 8.00% 20.30% 50-70% 50-60%
*Below the limit of quantification
Further morphological analysis of the muscle biopsies conducted by us indicate that sustained microdystrophin protein expression and function resulted in membrane stabilization, evidenced by minimal progression of muscle deterioration since the day 90 timepoint. These long-term pathophysiological improvements support the recently reported positive trends in the clinical biomarker and functional data. InSeptember 2021 , we reported 1.5-year functional data and patient-reported outcome measures for patients four through six in IGNITE DMD, who were dosed at the 2E14 vg/kg dose level. Also inSeptember 2021 , we reported additional pulmonary function data from the first six patients in IGNITE DMD, three who were dosed at the 5E13 vg/kg dose level and three who were dosed at the 2E14 vg/kg dose level. InMay 2021 , we announced the advancement of a next-generation Duchenne microdystrophin gene transfer program, SGT-003. We have developed a library of novel capsids that show increased muscle tropism, decreased liver biodistribution and drive improved efficiency compared with AAV9 in various in vitro and in vivo models. SGT-003 is a preclinical candidate that combines a novel and rationally-designed capsid candidate from this library with Solid's proprietary nNOS containing microdystrophin construct. We are currently targeting an IND submission for SGT-003 in early-2023. InNovember 2021 , in collaboration with REGENXBIO, we formally launched thePathway Development Consortium (PDC), a multistakeholder initiative which aims to identify, develop, expand and maintain pathways to effective therapies for patients diagnosed early in life with rare diseases. The PDC seeks to achieve these goals by bringing together a broad and diverse group of stakeholders from the rare disease and AAV gene therapy communities, including patients, industry, regulators, academia and payers, among others, for meaningful scientific and policy discussions. Since our inception, we have devoted substantial resources to identifying and developing SGT-001, SGT-003 and our other product candidates, developing our manufacturing processes, organizing and staffing our company and providing general and administrative support for these operations. We have incurred significant losses every year since our inception. We do not have any products approved for sale. To date, we have not generated any revenue from product sales. Our ability to eventually generate any product revenue sufficient to achieve profitability will depend on the successful development, approval and eventual commercialization of SGT-001, SGT-003 and our other product candidates. If successfully developed and approved, we intend to commercialize SGT-001 and SGT-003 in theUnited States andEuropean Union and may enter into licensing agreements or strategic collaborations in other markets. If we generate product sales or enter into licensing agreements or strategic collaborations, we expect that any revenue we generate will fluctuate from quarter to quarter and year to year as a result of the timing and amount of any product sales, license fees, milestone payments and other payments. If we fail to complete the development of SGT-001, SGT-003 and our other product candidates in a timely manner or obtain regulatory approval of them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected. Due to our significant research and development expenditure, licensing and patent investment, and general administrative costs associated with our operations, we have generated substantial operating losses in each period since our inception. Our net losses were$53.6 million for the nine months endedSeptember 30, 2021 and$66.9 million for the nine months endedSeptember 30, 2020 . As ofSeptember 30, 2021 , we had an accumulated deficit of$458.1 million . We expect to incur significant expenses and operating losses for the foreseeable future. 20
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In
As we seek to develop and commercialize SGT-001, SGT-003 or any other product candidates, we anticipate that our expenses will increase significantly and that we will need substantial additional funding to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity financings, debt financings or other sources, which may include licensing agreements or strategic collaborations. We may be unable to raise additional funds or enter into such agreements or arrangements when needed on favorable terms, if at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of SGT-001, SGT-003 or our other product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or determine when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. InOctober 2020 , we entered into a collaboration and license agreement, or the Collaboration Agreement, with Ultragenyx Pharmaceutical Inc., or Ultragenyx, pursuant to which we granted Ultragenyx an exclusive worldwide license under certain intellectual property rights controlled by us to make, have made, use, distribute, offer for sale, sell, import and export, including to research, develop, modify, enhance, improve, register, distribute, commercialize, or otherwise dispose of AAV8 or other clade E AAV variant pharmaceutical products that express our MD5 nNOS binding domain form of microdystrophin protein for the diagnosis, treatment, cure, mitigation or prevention of Duchenne and other disease indications resulting from a lack of functional dystrophin, including Becker muscular dystrophy. On a product-by-product basis, we have the option to fund 30% of the development costs in theUnited States andEuropean Union and share 30% of the net income and net losses on net sales of such Licensed Product in theUnited States andEuropean Union . In connection with the execution of the Collaboration Agreement, we also entered into a stock purchase agreement with Ultragenyx, pursuant to which we issued and sold 7,825,797 shares of our common stock to Ultragenyx for an aggregate purchase price of approximately$40 million .
During the year ended
In
InMarch 2021 , we issued and sold in a public offering 25,000,000 shares of our common stock at a price per share to the public of$5.75 , including the full exercise by the underwriters of an option to purchase additional shares of common stock, or theMarch 2021 Offering. We received net proceeds of approximately$134.9 million after deducting underwriter discounts and commissions and offering expenses. As ofSeptember 30, 2021 , we had cash, cash equivalents, and available-for-sale securities of$229.8 million . We believe that our cash, cash equivalents, and available-for-sale securities as ofSeptember 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate. The ongoing COVID-19 pandemic has caused federal, state, and local governments to implement measures to slow the spread of the outbreak through quarantines, strict travel restriction and bans, heightened border scrutiny and other measures. We are following, and will continue to follow, recommendations from theU.S. Centers for Disease Control and Prevention as well as federal, state, and local governments regarding working-from-home practices for non-essential employees. As a result, we have modified our business practices, including implementing a work from home policy for all employees who are able to perform their duties remotely. We expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, and other business partners in light of COVID-19. The full extent of the impact of COVID-19 on our business, results of operations and financial condition will depend on future developments that are highly uncertain, including the length and severity of this pandemic, the actions taken to contain it or treat its impact and the impact on our clinical development, employees, vendors and suppliers, all of which are uncertain and cannot be predicted. We will continue to monitor the situation closely. Financial operations overview Revenue Collaboration revenue 21
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Collaboration revenue was
Product revenue
We have not generated any product revenue to date and do not expect to generate any product revenue from the sale of our products for the foreseeable future, if ever. If our development efforts for SGT-001, SGT-003 or our other product candidates are successful and result in marketing approval, we may generate product revenue in the future from product sales.
Operating expenses
We classify our operating expenses into two categories: research and development, and general and administrative expenses. Personnel costs, including salaries, benefits, bonuses and equity-based compensation expense, comprise a significant component of each of these expense categories. We allocate expenses associated with personnel costs based on the nature of work associated with these resources.
Research and development expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of SGT-001, SGT-003 and our other product candidates and include:
• expenses incurred under agreements with third parties, including contract
research organizations, or CROs, that conduct research and preclinical
activities on our behalf, as well as contract manufacturing organizations,
or CMOs, that manufacture SGT-001, SGT-003 and our other product candidates
for use in our preclinical studies and clinical trials;
• salaries, benefits and other related costs, including equity-basedcompensation expense, for personnel engaged in research and development
functions;
• costs of outside consultants, engaged to assist in our research and
development activities, including their fees, equity-based compensation and
related travel expenses;
• costs of laboratory supplies and acquiring, developing and manufacturing
preclinical study and clinical trial materials;
• costs incurred in seeking regulatory approval of SGT-001, SGT-003 and our
other product candidates;
• expenses incurred under our intellectual property licenses; and
• facility-related research and development expenses, which include direct
depreciation costs and allocated expenses for rent and maintenance of
facilities and other operating costs.
We expense research and development costs as incurred. We recognize costs for
certain development activities, such as preclinical research and development and
clinical trial costs, based on an evaluation of the progress to completion of
specific tasks using information and data provided to us by our vendors,
collaborators and third-party service providers. Payments for these activities
are based on the terms of the individual agreements, which may differ from the
pattern of costs incurred, and are reflected in our consolidated financial
statements as prepaid or accrued research and development expenses.
We typically use our employee and infrastructure resources across our product
candidates. We track outsourced development costs and milestone payments made
under our licensing arrangements by product candidates, but we do not allocate
personnel costs, license payments made under our licensing arrangements or other
internal costs to product candidates on a program-specific basis. These costs
are included in unallocated research and development expenses in the table
below.
The following table summarizes our research and development expenses by product candidates for the respective periods:
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands) 2021 2020 2021 2020
SGT-001 $ 5,088 $ 8,628 $ 17,995 $ 24,408
SGT-003 and other product candidates 127 83 627 465
Unallocated research and development
expenses
Personnel related expenses 6,295 5,179 17,572 16,512
External expenses 2,915 2,155 7,950 7,773
Total unallocated research and
development expenses 9,210 7,334 25,522 24,285
Total research and development
expenses $ 14,425 $ 16,045 $ 44,144 $ 49,158
22
-------------------------------------------------------------------------------- We cannot determine with certainty the duration, costs and timing of clinical trials of SGT-001, SGT-003 and our other product candidates or if, when or to what extent we will generate revenue from the commercialization and sale of any of our product candidates for which we obtain marketing approval or our other research and development expenses. We may never succeed in obtaining marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:
• the scope, rate of progress, expense and results of any clinical trials of
SGT-001, SGT-003 or other product candidates and other research and
development activities that we may conduct;
• the imposition of regulatory restrictions on clinical trials, including
full and partial clinical holds, and the time and activities required to
lift any such holds;
• uncertainties in clinical trial design and patient enrollment or drop out
or discontinuation rates;
• significant and changing government regulation and regulatory guidance;
• potential additional studies or clinical trials requested by regulatory
agencies;
• the timing and receipt of any marketing approvals; and
• the expense of filing, prosecuting, defending and enforcing any patent
claims and other intellectual property rights.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase for the foreseeable future as we proceed with clinical trials for SGT-001, initiate clinical trials for SGT-003 or any future product candidates and continue to identify and develop additional product candidates.
General and administrative expenses
General and administrative expenses consist primarily of salaries and other related costs, including equity-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel expenses, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of office facilities and other operating costs. We expect that our general and administrative expenses will increase in the future as we increase our general and administrative personnel headcount to support our research and development activities and activities related to the clinical trials for and potential commercialization of SGT-001, SGT-003 and our other product candidates. Restructuring charges InJanuary 2020 , we implemented changes to our organizational structure to create a leaner company focused on advancing SGT-001. In connection with the restructuring, we made changes to our management team and reduced headcount by approximately 30%. Other income (expense), net
Other income (expense), net consists of interest income earned on our cash, cash equivalents, available-for-sale securities, funding from charitable organizations, and financing leases interest expense.
23
--------------------------------------------------------------------------------Income taxes We account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements but have not been reflected in taxable income. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value. We account for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.
Critical accounting policies and use of estimates
Our management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States . The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. During the nine months endedSeptember 30, 2021 , there were no material changes to our critical accounting policies. Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical accounting policies and use of estimates" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 and the notes to the unaudited condensed consolidated financial statements included in Part I, Item 1, "Financial Statements (unaudited)," of this quarterly report on Form 10-Q. We believe that of our critical accounting policies, the following accounting policies involve the most judgment and complexity: • Revenue recognition; • Accrued research and development expenses; and • Equity-based compensation. Accordingly, we believe the policies set forth above are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected. 24 --------------------------------------------------------------------------------
Results of operations
Comparison of the three months ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
September 30, Increase
(in thousands) 2021 2020 (decrease)
Collaboration revenue - related party $ 3,537 $ - $ 3,537
Operating expenses:
Research and development 14,425 16,045 (1,620 )
General and administrative 7,143 5,181 1,962
Restructuring charges - - -
Total operating expenses 21,568 21,226 342
Loss from operations (18,031 ) (21,226 ) 3,195
Other income (expense), net 48 (20 ) 68
Net loss $ (17,983 ) $ (21,246 ) $ 3,263
Collaboration revenue
Collaboration revenue for the three months ended
Research and development expenses
Three Months Ended
September 30, Increase
(in thousands) 2021 2020 (decrease)
SGT-001 $ 5,088 $ 8,628 $ (3,540 )
SGT-003 and other product candidates 127 83 44
Unallocated research and development expenses
Personnel related expenses 6,295 5,179 1,116
External expenses 2,915 2,155 760 Total unallocated research and development expenses 9,210 7,334
1,876
Total research and development expenses
$ (1,620 ) Research and development expenses for the three months endedSeptember 30, 2021 were$14.4 million , compared to$16.0 million for the three months endedSeptember 30, 2020 . The decrease of$1.6 million in research and development expenses was primarily due to a$4.3 million decrease in manufacturing costs for our lead product candidate SGT-001, offset by an increase in unallocated research and development costs of$1.9 million , primarily due to an increase in personnel related expenses of$1.1 million and an increase in other R&D expenses of$0.8 million , and an increase in clinical and non-clinical costs of$0.8 million .
General and administrative expenses
General and administrative expenses were
Other income (expense), net
Other income (expense), net was less than
25
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Comparison of the nine months ended
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended September 30, Increase
(in thousands) 2021 2020 (decrease)
Collaboration revenue - related party $ 10,466 $ - $ 10,466
Operating expenses:
Research and development 44,144 49,158 (5,014 )
General and administrative 19,924 15,957 3,967
Restructuring charges - 1,944 (1,944 )
Total operating expenses 64,068 67,059 (2,991 )
Loss from operations (53,602 ) (67,059 ) 13,457
Other income (expense), net 24 132 (108 )
Net loss $ (53,578 ) $ (66,927 ) $ 13,349
Collaboration revenue
Collaboration revenue for the nine months ended
Research and development expenses
Nine Months Ended September 30, Increase
(in thousands) 2021 2020 (decrease)
SGT-001 $ 17,995 $ 24,408 $ (6,413 )
SGT-003 and other product candidates 627 465 162
Unallocated research and development expenses
Personnel related expenses 17,572 16,512 1,060
External expenses 7,950 7,773 177
Total unallocated research and development
expenses 25,522 24,285 1,237
Total research and development expenses
49,158$ (5,014 ) Research and development expenses for the nine months endedSeptember 30, 2021 were$44.1 million , compared to$49.1 million for the nine months endedSeptember 30, 2020 . The decrease of$5.0 million in research and development expenses was primarily due to a$6.4 million decrease in costs related to our lead product candidate SGT-001, driven by lower manufacturing costs of$7.4 million offset by an increase in clinical and non-clinical costs of$1.0 million . The decrease in research and development expenses was also offset by a$1.1 million increase in personnel related expenses. The decrease in research and development was offset by a$0.3 million increase in costs related to SGT-003 and other product candidates.
General and administrative expenses
General and administrative expenses were
Other income (expense), net
Interest expense was less than
Liquidity and capital resources
Sources of liquidity
To date, we have financed our operations primarily through the sale of redeemable preferred units and member units, the sale of common stock and prefunded warrants to purchase shares of our common stock in private placements and the sale of common stock in
26
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our initial public offering and a follow-on public offering. Through
September 30, 2021 , we raised an aggregate of $144.6 million of gross proceeds
from our sales of preferred units prior to the completion of our initial public
offering, and an aggregate of $471.3 million of net proceeds from the sale of
our common stock through public offerings, including our IPO, private
placements, our ATM Sales Agreement and pursuant to the stock purchase agreement
with Ultragenyx, as detailed in the following paragraphs.
We completed our initial public offering on January 30, 2018 , in which we sold
8,984,375 shares of common stock, including the underwriters' over-allotment
option, at a public offering price of $16.00 per share, resulting in net
proceeds of $129.1 million .
On July 30, 2019 , we issued and sold in a private placement (i) 10,607,525
shares of our common stock at a price per share of $4.65 and (ii) 2,295,699
pre-funded warrants to purchase shares of our common stock at a price per
warrant of $4.64 . Each pre-funded warrant is exercisable for one share of common
stock at an exercise price of $0.01 and the pre-funded warrants have no
expiration date. We received $57.9 million of net proceeds from the private
placement after deducting offering costs. On October 2, 2020 , 137,460 of these
pre-funded warrants were exercised.
On October 22, 2020 , we entered into the Collaboration Agreement with
Ultragenyx. In connection with the execution of the Collaboration Agreement, we
also entered into a stock purchase agreement with Ultragenyx, pursuant to which
we issued and sold 7,825,797 shares of our common stock to Ultragenyx for an
aggregate purchase price of approximately $40 million .
On
OnMarch 13, 2019 , we entered into the ATM Sales Agreement under which we may offer and sell, from time to time, shares of our common stock having aggregate gross proceeds of up to$50.0 million through Jefferies as sales agent. Any such sales being made by any method that is deemed an "at-the-market offering" as defined in Rule 415 promulgated under the Securities Act. We will pay Jefferies a commission of up to 3% of the gross proceeds of any sales of common stock pursuant to the ATM Sales Agreement. During the nine months endedSeptember 30, 2021 , we did not sell any shares pursuant to the ATM Sales Agreement. During the year endedDecember 31, 2020 , we sold 6,309,632 shares pursuant to the ATM Sales Agreement resulting in net proceeds of$23.2 million . OnMarch 23, 2021 , we issued and sold in a public offering 25,000,000 shares of our common stock at a price per share of$5.75 , including the full exercise by the underwriters of an option to purchase additional shares of common stock, or theMarch 2021 Offering. We received net proceeds of approximately$134.9 million after deducting underwriter discounts and commissions and offering expenses.
As of
Cash flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Nine Months Ended
September 30, Increase
(in thousands) 2021 2020 (decrease)
Cash used in operating activities $ (56,890 ) $ (57,906 ) $ 1,016
Cash (used in) provided by investing
activities (121,262 ) 6,660 (127,922 )
Cash provided by financing activities 134,919 - 134,919
Net decrease in cash, cash equivalents and restricted cash$ (43,233 ) $ (51,246 ) $ 8,013 Operating activities During the nine months endedSeptember 30, 2021 , operating activities used$56.9 million of cash, primarily resulting from our net loss of$53.6 million and cash used in changes in our operating assets and liabilities of 16.0 million offset by non-cash charges of$12.7 million due to equity-based compensation of$10.0 million , depreciation expense of$2.2 million and amortization on available for sale securities of$0.5 million . Net cash used in changes in our operating assets and liabilities during the nine months endedSeptember 30, 2021 consisted primarily of a decrease in accrued expenses and other liabilities of$4.8 million , a decrease in deferred revenue of$9.6 million , an increase in accounts receivable of$0.6 million and an increase prepaid expenses and other assets of$1.6 million , offset by an increase in accounts payable of$0.6 million . During the nine months endedSeptember 30, 2020 , operating activities used$57.9 million of cash, primarily resulting from our net loss of$66.9 million and cash used in changes in our operating assets and liabilities of$3.2 million offset by non-cash charges of 27
--------------------------------------------------------------------------------$12.2 million due primarily to equity-based compensation of$9.1 million and depreciation expense of$3.1 million . Net cash used in changes in our operating assets and liabilities during the nine months endedSeptember 30, 2020 consisted primarily of a decrease in accrued expenses and other liabilities of$2.0 million and a decrease in accounts payable of$2.6 million partially offset by a net decrease in prepaid expenses and other assets of$1.5 million . These changes were primarily due to the timing of payments.
Investing activities
During the nine months ended
During the nine months ended
Financing activities
During the nine months ended
During the nine months ended
Funding requirements
We expect our expenses to increase substantially in connection with our ongoing development activities related to SGT-001, SGT-003 and our other product candidates. In addition, we expect to incur additional costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:
• continue to enroll patients in IGNITE DMD and continue clinical development
of SGT-001;
• move SGT-003 and other product candidates into clinical trials;
• continue research and preclinical development of SGT-003 and our other
product candidates;
• seek to identify additional product candidates;
• seek marketing approvals for our product candidates that successfully
complete clinical trials, if any;
• establish a sales, marketing and distribution infrastructure tocommercialize any products for which we may obtain marketing approval;
• arrange for manufacture of larger quantities of our product candidates for
clinical development and potential commercialization;
• maintain, expand, protect and enforce our intellectual property portfolio;
• hire and retain additional clinical, quality control and scientific
personnel;
• build out new facilities or expand existing facilities to support our
activities;
• acquire or in-license other drugs, technologies and intellectual property;
• fund a portion of the development or commercialization of products in
collaboration with Ultragenyx pursuant to the Collaboration Agreement; and
• add operational, financial and management information systems and personnel.
As ofSeptember 30, 2021 , we had cash, cash equivalents and available-for-sale securities of$229.8 million . We believe that our cash, cash equivalents and available-for-sale securities as ofSeptember 30, 2021 will be sufficient to fund our operating expenses and capital requirements into the second quarter of 2023. As a result, in order to continue to operate our business beyond that time, we will need to raise additional funds. However, there can be no assurance that we will be able to generate funds on terms acceptable to us, on a timely basis, or at all. In addition, we have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently anticipate. 28 -------------------------------------------------------------------------------- Because of the numerous risks and uncertainties associated with the development of SGT-001, SGT-003 and our other product candidates and programs and because the extent to which we may enter collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including: • the progress and results of IGNITE DMD and future clinical trials of SGT-001, SGT-003 and our other product candidates;
• the costs, timing and outcome of regulatory review of SGT-001, SGT-003 and
our other product candidates;
• the scope, progress, results and costs of discovery, laboratory testing,
manufacturing, preclinical development and clinical trials for SGT-003 and
our other product candidates that we may pursue in the future, if any;
• the costs associated with our manufacturing process development andevaluation of third-party manufacturers;
• whether we decide to construct and validate our own manufacturing facility
and the associated costs;
• revenue, if any, received from commercial sale of SGT-001, SGT-003 or our
other product candidates, should any of our product candidates receive
marketing approval;
• the costs of preparing, filing and prosecuting patent applications,
maintaining, defending and enforcing our intellectual property rights and
defending intellectual property-related claims;
• the outcome of any lawsuits filed against us;
• the terms of our current and any future license agreements and
collaborations;
• the success of our collaboration with Ultragenyx;
• our ability to establish and maintain additional strategic collaborations,
licensing or other arrangements and the financial terms of such
arrangements;
• the payment or receipt of milestones, royalties and other
collaboration-based revenues, if any;
• the extent to which we acquire or in-license other product candidates,
technologies and intellectual property; and
• if and as we need to adapt our business in response to the COVID-19
pandemic and its collateral consequences.
We are supplying, and expect to continue to supply, our clinical development
program for SGT-001 with drug product produced at a cGMP compliant facility
located at one of our contract manufacturing organizations. We intend to
establish the capability and capacity to supply SGT-001 at commercial scale from
multiple sources.
Developing pharmaceutical products, including conducting preclinical studies and
clinical trials, is a time-consuming, expensive and uncertain process that takes
years to complete, and we may never generate the necessary data or results
required to obtain marketing approval for any product candidates or generate
revenue from the sale of any products for which we may obtain marketing
approval. In addition, our product candidates, if approved, may not achieve
commercial success. Our commercial revenues, if any, will be derived from sales
of products that we do not expect to be commercially available for many years,
if ever. Accordingly, we will need to obtain substantial additional funds to
achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at
all. We do not currently have any committed external source of funds. To the
extent that we raise additional capital through the sale of equity securities,
our existing stockholders' ownership interest may be diluted. Any debt or
preferred equity financing, if available, may involve agreements that include
restrictive covenants that may limit our ability to take specific actions, such
as incurring additional debt, making capital expenditures or declaring
dividends, which could adversely impact our ability to conduct our business, and
may require the issuance of warrants, which could potentially dilute existing
stockholders' ownership interests.
If we raise additional funds through licensing agreements and strategic
collaborations with third parties, we may have to relinquish valuable rights to
our technology, future revenue streams, research programs, or product candidates
or grant licenses on terms that may not be favorable to us. If we are unable to
raise additional funds, we may be required to delay, limit, reduce and/or
terminate development of our product candidates or any future commercialization
efforts or grant rights to develop and market product candidates that we would
otherwise prefer to develop and market ourselves.
29
--------------------------------------------------------------------------------Recently Issued Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q for information regarding recently adopted and issued accounting pronouncements. See also Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of theSEC . 30
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