Solid Biosciences Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Solid is a development-stage gene therapy company focused on rare neuromuscular and cardiac diseases. Its programs include SGT-003 for Duchenne muscular dystrophy, SGT-501 for CPVT, AVB-401 for BAG3-mediated dilated cardiomyopathy, and AVB-202-TT for Friedreich’s ataxia. The filing reports no product sales.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Collaboration revenue | $0 | $0 | $0 | $8.1 million |
| Research and development | $16.7 million | $14.0 million | $61.1 million | $57.1 million |
| General and administrative | $6.4 million | $7.1 million | $20.9 million | $21.3 million |
| Operating loss | $23.1 million | $21.1 million | $82.0 million | $71.9 million |
| Net loss | $21.0 million | $20.4 million | $75.7 million | $70.8 million |
| Net loss per share, basic and diluted | $1.05 | $2.71 | $3.83 | $9.42 |
Amounts are in U.S. dollars; financial statement figures are rounded. Gross or operating margins are not meaningful given the absence of product revenue.
- Cash and investments: $142.9 million in cash, cash equivalents and available-for-sale securities at September 30, 2023, excluding $1.8 million of restricted cash. Current assets were $148.3 million and current liabilities $15.8 million.
- Cash flow: Operating activities used $73.4 million during the first nine months of 2023, versus $63.5 million in the comparable 2022 period. Investing activities used $35.6 million, primarily reflecting purchases of securities net of maturities; financing activities provided $2.6 million.
- Debt and obligations: Management reported no debt outstanding. The balance sheet includes operating lease liabilities of $25.0 million and finance liabilities and finance lease liabilities of $1.8 million, current and non-current combined.
- Equity: Stockholders’ equity was $144.4 million, down from $211.7 million at December 31, 2022. Common shares outstanding were 20.1 million at quarter-end.
Changes versus the prior comparable periods
- Year-to-date net loss increased by $4.8 million, or about 7%, and operating loss increased by $10.1 million. The absence of $8.1 million of Ultragenyx collaboration revenue contributed to the year-over-year comparison.
- Year-to-date R&D expense rose $4.0 million. SGT-003 costs increased $13.0 million and other program costs increased $4.5 million; SGT-001 costs fell $16.5 million as Solid prioritized SGT-003.
- Q3 R&D expense increased $2.7 million, primarily due to SGT-003, other program and external costs. Q3 G&A declined $0.7 million, mainly reflecting lower acquisition-related legal costs and insurance premiums.
- Interest income and other income supported results: nine-month total other income was $6.3 million, compared with $1.1 million in 2022. The filing attributes the increase primarily to interest income on the investment portfolio.
- Loss per share is not directly comparable without considering the larger weighted-average share count in 2023, following the December 2022 acquisition-related private placement.
Outlook, commentary and risks
- Management expects continued operating losses and substantial expenses as it advances its pipeline. It estimates that September 30, 2023 cash, cash equivalents and available-for-sale securities will fund operating expenses and capital needs into 2025, subject to assumptions that could prove inaccurate. The financial statement note separately says resources are expected to last at least twelve months from issuance.
- Solid expects to need additional funding beyond that runway and identifies equity or debt financing, collaborations, strategic partnerships and licensing arrangements as potential sources. It has no committed external funding source; financing may dilute shareholders or require concessions on rights.
- In June 2023, Solid entered a license agreement with ICS Maugeri for cardiac-related products. The €1.5 million upfront fee was recorded as R&D expense in Q2. The agreement also provides for up to €15 million in development, regulatory and commercial milestones, up to €15 million in sales milestones, and tiered low-to-mid-single-digit royalties.
- Key risks include clinical and regulatory uncertainty, potential gene-therapy safety issues, manufacturing and supply constraints, dependence on third parties and licensed intellectual property, and the need to raise capital. The filing notes a prior FDA clinical hold and serious adverse events in the SGT-001 trial; SGT-001 is no longer being developed.
- The company reported no material legal proceedings and no material changes to contractual obligations during the nine-month period. Management concluded disclosure controls were effective as of September 30, 2023.
Important facts for investors to verify
- Whether progress and spending on SGT-003 and the acquired cardiac and FA programs remain consistent with the stated operating plan and cash runway.
- Whether actual quarterly cash burn, manufacturing costs and clinical-development needs could shorten the projected runway or accelerate the need for financing.
- The terms, timing and potential economics of the Maugeri license, including milestone and royalty obligations.
- Any subsequent clinical, regulatory or safety developments affecting the pipeline, particularly given the disclosed history of gene-therapy adverse events and clinical holds.
- Potential dilution from future equity issuance, equity compensation and the company’s remaining financing capacity.