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 ended
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 the
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 the
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 5,000
to 15,000 cases in
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, as well as SGT-003, our next-generation gene therapy candidate for the treatment of Duchenne.
In
In
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In connection with these activities, we announced in
In
SGT-003 is our next-generation gene transfer candidate. It is comprised of our nNOS binding domain microdystrophin transgene and muscle-specific promoter present in SGT-001 and uses a lead candidate novel, rationally designed AAV capsid, developed for enhanced muscle tropism, to deliver these components to target tissues. We believe that the properties of this novel capsid may allow for enhanced benefit over therapies using traditional capsids, potentially both in terms of efficacy and safety.
In
Since our inception, we have devoted substantial resources to identifying and
developing SGT-001, SGT-003 and other future 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 other future product
candidates. If successfully developed and approved, we intend to commercialize
SGT-001 and SGT-003 in the
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
As we seek to develop and commercialize SGT-001, SGT-003 or other future 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 other future 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.
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In
As of
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
the
Financial operations overview
Revenue
Collaboration revenue
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 other future 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 other future 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 other future product
candidates for use in our preclinical studies and clinical trials;
• salaries, benefits and other related costs, including equity-based
compensation 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 other
future product candidates;
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• 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
March 31, Increase %
(In thousands) 2022 2021 (decrease) Change
SGT-001 $ 5,422 $ 6,173 $ (751 ) (12)%
SGT-003 and other development programs 3,364 192 3,172 1652%
Unallocated research and development
expenses
Personnel related expenses 8,282 5,512 2,770 50%
External expenses 2,877 2,329 548 24%
Total unallocated research and
development expenses 11,159 7,841 3,318 42%
Total research and development expenses
We cannot determine with certainty the duration, costs and timing of clinical trials of SGT-001, SGT-003 and other future 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 future 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. Our research and development expenses will increase in the 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,
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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 support our research and development activities and activities related to the clinical trials for and potential commercialization of SGT-001, SGT-003 and other future product candidates.
Other income (expense), net
Other income (expense), net consists of interest income earned on our cash, cash equivalents, available-for-sale securities, and funding from charitable organizations, net of financing leases interest expense.
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 in
During the three months ended
• 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.
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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
March 31, Increase %
(in thousands) 2022 2021 (decrease) Change
Collaboration revenue - related party $ 1,925 $ 3,335 $ (1,410 ) (42%)
Operating expenses:
Research and development 19,945 14,206 5,739 40%
General and administrative 7,352 6,015 1,337 22%
Total operating expenses 27,297 20,221 7,076 35%
Loss from operations (25,372 ) (16,886 ) (8,486 ) 50%
Other income (expense), net 44 (14 ) 58 (414%)
Net loss $ (25,328 ) $ (16,900 ) $ (8,428 ) 50%
Collaboration revenue
Collaboration revenue for the three months ended
Research and development expenses
Three Months Ended
March 31, Increase %
(in thousands) 2022 2021 (decrease) Change
SGT-001 $ 5,422 $ 6,173 $ (751 ) (12)%
SGT-003 and other development
programs 3,364 192 3,172 1652%
Unallocated research and development
expenses
Personnel related expenses 8,282 5,512 2,770 50%
External expenses 2,877 2,329 548 24%
Total unallocated research and
development expenses 11,159 7,841 3,318 42%
Total research and development
expenses $ 19,945 $ 14,206 $ 5,739 40%
Research and development expenses for the three months ended
General and administrative expenses
General and administrative expenses were
Other income (expense), net
Other income (expense), net was less than
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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 our initial public offering and a follow-on
public offering. Through
On
On
As of
Cash flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Three Months Ended
March 31,
(in thousands) 2022 2021
Cash used in operating activities $ (27,190 ) $ (21,366 )
Cash provided by (used in) investing activities 37,743 (35 )
Cash provided by financing activities 22 135,154
Net increase in cash, cash equivalents and restricted cash
Operating activities
During the three months ended
During the three months ended
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and other liabilities of
Investing activities
During the three months ended
During the three months ended
Financing activities
During the three months ended
During the three 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 other future product candidates. In addition, we have incurred and expect to continue to incur costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:
• continue clinical development of SGT-001;
• move SGT-003 or other future product candidates into clinical trials;
• continue research and preclinical development of SGT-003 or other future
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 to
commercialize 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 of
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Because of the numerous risks and uncertainties associated with the development of SGT-001, SGT-003 and other future 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 other future product candidates;
• the costs, timing and outcome of regulatory review of SGT-001, SGT-003 and
other future product candidates;
• the scope, progress, results and costs of discovery, laboratory testing,
manufacturing, preclinical development and clinical trials for SGT-003 and
other future product candidates that we may pursue in the future, if any;
• the costs associated with our manufacturing process development and
evaluation 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 other
future 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.
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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
ended
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 the
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