Scholar Rock Holding Corp. — Q3 2023 Form 10-Q
Business context and reporting period
Clinical-stage biopharmaceutical company developing medicines that target growth-factor activation. This filing covers the quarter and nine months ended September 30, 2023. The company had no commercial product revenue and expects significant operating losses to continue.
- Apitegromab: In Phase 3 SAPPHIRE for nonambulatory Type 2 and Type 3 spinal muscular atrophy (SMA); enrollment was completed in September 2023.
- SRK-181: In the Phase 1 DRAGON trial for cancers resistant to checkpoint inhibitors.
- SRK-439: Preclinical antimyostatin candidate being advanced for cardiometabolic disorders, including obesity.
Financial results and liquidity
| Metric | Three months ended Sept. 30, 2023 | Nine months ended Sept. 30, 2023 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $30.3 million | $86.9 million |
| General and administrative expense | $13.3 million | $36.3 million |
| Net loss | $42.4 million | $119.7 million |
| Net loss per share, basic and diluted | $0.53 | $1.49 |
| Net cash used in operating activities | Not stated for quarter | $107.9 million |
At September 30, 2023, cash and cash equivalents were $67.6 million, marketable securities $151.0 million, and restricted cash $2.6 million. Cash, cash equivalents and marketable securities totaled $218.6 million, down from $315.4 million at December 31, 2022. Current assets were $228.5 million and current liabilities $26.7 million. Long-term debt was $50.0 million; total liabilities were $83.0 million.
There is no meaningful gross or operating margin to report because the company had no revenue. Other income, net, was $1.3 million for Q3 and $3.6 million for the nine-month period, principally reflecting interest income partly offset by debt interest expense.
Material changes versus prior comparable periods
- Q3 net loss narrowed to $42.4 million from $43.3 million a year earlier. Operating expenses were nearly flat: R&D declined 9.1% to $30.3 million, while G&A rose 27.4% to $13.3 million. Higher interest income contributed to improved other income.
- Nine-month net loss increased to $119.7 million from $95.2 million. The comparison includes $33.2 million of Gilead collaboration revenue recognized in January 2022; no revenue was recorded in 2023. Operating expenses fell 3.0% to $123.3 million, as R&D savings outweighed higher G&A.
- Nine-month operating cash use increased to $107.9 million from $103.8 million. Financing cash inflow was $6.0 million, compared with $195.8 million in 2022, which included a major equity offering. Investing activities provided $66.3 million, primarily from marketable-securities transactions.
Outlook, risks and unusual items
- Management estimated that September 30 liquidity, together with approximately $92.5 million of net proceeds from the October 2023 public offering, would fund operations and capital expenditure requirements into the second half of 2025. Management cautions that assumptions may prove incorrect and additional capital will be needed to complete development and commercialization.
- SAPPHIRE top-line results were expected in Q4 2024; a commercial launch was anticipated in 2025 if apitegromab is successful and approved. The company planned a Phase 2 apitegromab-plus-GLP-1 receptor agonist obesity study in 2024, subject to regulatory feedback, with data expected in mid-2025. SRK-439 was being advanced toward a potential IND filing in 2025, subject to regulatory feedback.
- DRAGON enrollment was expected to complete in December 2023; management expected SRK-181 costs to decrease as enrollment concluded. The filing also reports November 2023 clinical data presentation, subsequent to the quarter end.
- The October 2023 offering sold 14,270,074 shares at $6.85 per share and generated approximately $92.5 million net proceeds. The company had $24.4 million of pre-funded warrants outstanding at September 30, 2023, as well as 10.5 million common warrants outstanding.
- The debt facility bears interest at the greater of prime plus 4.60% or 9.35%. Principal payments were scheduled to begin in December 2024, or December 2025 if specified milestones are achieved; maturity was extended to November 2027.
- Key risks include clinical-trial failure or delay, regulatory uncertainty, reliance on third-party manufacturers and a single-source drug-substance supplier for apitegromab and SRK-181, future financing needs and potential dilution. The company reported no material legal proceedings and stated that disclosure controls were effective as of September 30, 2023.
Important facts for investors to verify
- Progress, safety, efficacy and timing for SAPPHIRE, including the Q4 2024 data-readout expectation, and the significance and limitations of earlier TOPAZ and DRAGON results.
- Whether the stated runway through the second half of 2025 remains achievable given trial spending, operating cash use and the assumptions underlying management’s estimate.
- Offering proceeds, shares outstanding after the offering, potential warrant exercises and resulting dilution; the filing reports 72,143,258 common shares outstanding on November 2, 2023.
- Debt interest terms, milestone conditions affecting principal-payment timing, and the availability of additional borrowing tranches.
- Regulatory feedback and execution timelines for the planned obesity study and SRK-439 program, along with manufacturing and supply continuity.