Solid Biosciences Inc. — Q1 2023 Form 10-Q
Business context and period. This unaudited quarterly report covers the three months ended March 31, 2023, compared with Q1 2022. Solid is a clinical-stage gene therapy company focused on neuromuscular and cardiac diseases. Its programs include SGT-003 for Duchenne muscular dystrophy, AVB-202-TT for Friedreich’s ataxia, and AVB-401 for BAG3-mediated dilated cardiomyopathy. The AVB programs were added through the December 2022 acquisition of AavantiBio.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Collaboration revenue | $0 | $1.925 million |
| Research and development expense | $24.631 million | $19.945 million |
| General and administrative expense | $7.399 million | $7.352 million |
| Operating loss | $32.030 million | $25.372 million |
| Other income, net | $1.960 million | $0.044 million |
| Net loss | $30.070 million | $25.328 million |
| Net loss per share, basic and diluted | $1.54 | $3.37 |
| Cash used in operating activities | $27.995 million | $27.190 million |
- At March 31, 2023, cash and cash equivalents were $164.649 million and available-for-sale securities were $20.860 million. Combined, these totaled $185.509 million, excluding $1.833 million of restricted cash.
- Total assets were $229.588 million; total liabilities were $45.801 million; stockholders’ equity was $183.787 million. The company reported no debt outstanding, though it had finance liabilities and finance lease liabilities totaling approximately $2.0 million, as well as operating lease liabilities.
- Operating cash use was partly offset by $37.260 million of net investing cash inflow, primarily proceeds from maturing securities. Cash, cash equivalents and restricted cash increased by $9.265 million during the quarter.
- Product revenue and product sales have not been generated. With no collaboration revenue in Q1 2023, conventional revenue margins are not meaningful.
Material changes and unusual items
- Net loss increased by $4.742 million year over year, while operating expenses rose 17% to $32.030 million. R&D expense increased 23%, chiefly reflecting a $6.993 million rise in SGT-003 costs, primarily manufacturing-related, partly offset by a $2.903 million decline in SGT-001 costs as development shifted to SGT-003.
- Collaboration revenue fell to zero after the company completed the research and development services contemplated by its Ultragenyx agreement in Q2 2022. No further R&D had commenced under the agreement by this filing.
- Interest income increased to $1.678 million from $0.054 million, principally reflecting income on the investment portfolio.
- The company recorded a $0.374 million property and equipment impairment charge in Q1 2023. Separately, it recorded an $18.236 million gain on the AavantiBio acquisition in 2022; that gain was not Q1 2023 income.
- Weighted-average shares rose to 19.568 million from 7.507 million. The comparison reflects the company’s capital structure changes, including its reverse stock split and later equity issuances; per-share figures should be assessed in that context.
Outlook, commentary and risks
- Management expects cash, cash equivalents and available-for-sale securities at March 31, 2023 to fund operating expenses and capital requirements into 2025, based on its current operating plan. The financial statement note separately says these resources are expected to be sufficient for at least 12 months from issuance. Management cautions that its estimate depends on assumptions and capital could be depleted sooner.
- The company expects significant operating losses and rising expenses as it advances its pipeline. It expected to file an IND for SGT-003 in the second half of 2023; the filing does not provide a subsequent outcome. No product revenue is expected for the foreseeable future, if ever, and additional financing will be needed to continue operations beyond the projected runway.
- Potential funding sources include equity or debt financing, collaborations, strategic alliances and licensing. Financing may be unavailable or unfavorable, and could dilute shareholders, restrict operations or require relinquishing rights. Failure to obtain funds could force delays, reductions or termination of programs.
- Key risks include clinical and regulatory uncertainty, gene therapy safety and possible adverse events, manufacturing and third-party supplier execution, patient enrollment, intellectual property and licensing exposure, competition, and integration of AavantiBio. The filing notes that an earlier SGT-001 trial was placed on FDA clinical hold in 2019; the hold was lifted in 2020, but the company warns similar issues could arise in future trials.
- The company disclosed no material legal proceedings and no material changes in contractual obligations during the quarter. Management concluded disclosure controls and procedures were effective as of March 31, 2023.
Important facts for investors to verify
- Whether the SGT-003 IND filing and other pipeline milestones occurred as planned, and the status, timing and results of preclinical and clinical work for all programs.
- Whether the projected runway into 2025 remains achievable given cash burn, development plans and the stated need for future financing.
- Whether manufacturing capacity, process reproducibility and third-party supply can support planned development and clinical supply.
- How the AavantiBio programs and assets are progressing and whether integration delivers expected strategic benefits.
- Potential dilution and share-count effects from future financing, equity awards and other issuances; the filing reported 19,601,539 shares outstanding as of May 7, 2023.
- The terms and potential value of Ultragenyx collaboration options, milestones and royalties, which are contingent and not assured revenue.