Solid Biosciences Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; comparisons are with the corresponding 2020 periods. Amounts are in U.S. dollars. Solid is a clinical-stage biotechnology company developing treatments for Duchenne muscular dystrophy (Duchenne); it had no approved products and no product-sales revenue.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Collaboration revenue | $3.6m | — | $6.9m | — |
| Research and development expense | $15.5m | $13.4m | $29.7m | $33.1m |
| General and administrative expense | $6.8m | $5.5m | $12.8m | $10.8m |
| Operating loss | $18.7m | $19.0m | $35.6m | $45.8m |
| Net loss | $18.7m | $19.0m | $35.6m | $45.7m |
| Net loss per share, basic and diluted | $0.17 | $0.39 | $0.35 | $0.95 |
- Collaboration revenue came from research and development services and cost reimbursement under the Ultragenyx agreement; it is not product-sales revenue. Solid recognized $6.9m in the first half, while its related deferred-revenue balance was $14.4m at June 30.
- Q2 net loss improved by $0.3m year over year, with collaboration revenue largely offset by higher operating expenses. First-half net loss improved by $10.1m, reflecting collaboration revenue, lower R&D expense and the absence of $1.9m in 2020 restructuring charges.
- Q2 R&D rose $2.1m, mainly from higher SGT-001 manufacturing costs and unallocated personnel and other R&D costs. First-half R&D fell $3.4m, primarily because SGT-001 manufacturing costs were lower than in 2020. G&A increased in both comparisons, mainly from personnel and corporate costs.
- First-half operating cash use was $38.5m, compared with $42.3m in 2020. Investing activities used $48.8m, mainly for purchases of available-for-sale securities; financing provided $134.9m, primarily from the March 2021 share offering.
- At June 30, cash and cash equivalents were $200.6m and available-for-sale securities were $48.4m, totaling $249.0m. Total current assets were $255.1m; total liabilities were $27.9m. The company reported no debt outstanding; balance-sheet lease liabilities totaled approximately $2.8m.
- Stockholders’ equity was $237.9m, versus $132.1m at year-end 2020. The March offering issued 25.0m shares and generated $134.9m net proceeds. Shares issued and outstanding on the June 30 balance sheet were 110.3m, with 2.2m pre-funded warrants also outstanding.
- No meaningful product gross margin was reported, as the company had no product sales.
Material changes and operating developments
- The March 2021 public offering materially strengthened liquidity but increased the share count and diluted existing holders.
- In June, Solid signed a lease for approximately 49,869 square feet of office, laboratory, R&D and manufacturing space, with relocation planned for early 2022. The anticipated lease commencement was Q1 2022; rent begins 61 days afterward. The company also terminated another office lease, writing off approximately $1.3m of right-of-use assets and lease liabilities.
- Solid advanced SGT-003, a next-generation preclinical Duchenne gene-transfer candidate, and targeted an IND submission in early 2023.
Outlook, commentary and principal risks
- Management said June 30 cash, cash equivalents and securities were expected to fund operating expenses and capital needs into Q4 2022. The liquidity note separately says the same resources should cover at least 12 months from the financial statements’ issuance. Both estimates depend on assumptions that may prove incorrect; Solid expects to need additional financing.
- Solid expects significant future operating losses and rising expenses as it continues SGT-001 development, advances SGT-003 and supports clinical, manufacturing and facility activities. It has never generated product revenue and does not expect product revenue for several years, if ever.
- In IGNITE DMD, the FDA lifted a clinical hold in October 2020 and treatment resumed in February 2021. The eighth patient, treated in April 2021, experienced a systemic inflammatory response classified as a serious adverse event and considered drug-related by the investigator; it later resolved. Solid strengthened its risk-mitigation plan and anticipated the next patient dosing in Q4 2021.
- Solid reported long-term biopsy findings for three SGT-001 patients, including sustained microdystrophin expression. These are limited-patient findings and do not establish clinical benefit or predict later trial results.
- Key risks include serious or unforeseen gene-therapy adverse events, trial delays or further regulatory restrictions, uncertain efficacy, manufacturing variability and reliance on third-party manufacturers, competition, intellectual-property challenges, COVID-19 disruption, and the need to raise additional capital on acceptable terms.
- The 2020 audit report had included a going-concern explanatory paragraph. In this 10-Q, management stated that available resources were expected to fund operations for the stated runway, while cautioning that its estimate could be wrong. No material legal proceedings were reported; management said disclosure controls were effective.
Important facts for investors to verify
- Confirm the cash-runway assumptions and expected financing needs, particularly given the differing descriptions of coverage: at least 12 months from issuance versus into Q4 2022.
- Track FDA feedback, the strengthened safety plan, the expected Q4 2021 dosing and subsequent IGNITE DMD safety and efficacy data; distinguish interim biopsy results from demonstrated clinical benefit.
- Assess SGT-001 manufacturing consistency and supply, and whether the SGT-003 development timeline and early-2023 IND target remain achievable.
- Review Ultragenyx collaboration terms and progress, including cost reimbursement, deferred revenue, contingent milestones and royalties, and the license’s scope relative to Solid’s retained programs.
- Reconcile the filing’s March offering price disclosures: one section states $5.575 per share, while MD&A states $5.75. Also verify current basic and fully diluted share counts and potential future dilution.
- Evaluate the costs and timing of the new facility lease and the effect of ongoing clinical, manufacturing and operating spending on the stated runway.