Solid Biosciences Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Filed November 5, 2020. Solid Biosciences is a clinical-stage biotechnology company focused on Duchenne muscular dystrophy (Duchenne); it has no approved products and has generated no revenue.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $16.0 million | $22.8 million | $49.2 million | $67.7 million |
| General and administrative | $5.2 million | $6.9 million | $16.0 million | $19.3 million |
| Restructuring charges | $0 | $0 | $1.9 million | $0 |
| Net loss | $21.2 million | $29.3 million | $66.9 million | $85.4 million |
| Basic and diluted net loss per share | $0.44 | $0.67 | $1.39 | $2.26 |
| Cash used in operating activities | Not separately provided | Not separately provided | $57.9 million | $71.5 million |
At September 30, 2020, cash and cash equivalents were $24.8 million, total current assets were $27.2 million, total current liabilities were $14.8 million, and total assets were $40.5 million. The company reported no debt outstanding. Accumulated deficit was $383.2 million. No meaningful operating margin is available because the company had no revenue.
For the first nine months of 2020, investing activities provided $6.7 million, financing activities provided no cash, and cash, cash equivalents and restricted cash decreased by $51.2 million to $25.1 million. Capital expenditures were $0.8 million.
Material changes and business developments
- Q3 net loss narrowed by $8.0 million year over year; nine-month net loss narrowed by $18.4 million. Lower R&D and G&A spending drove the improvement, partly offset in the year-to-date comparison by $1.9 million of restructuring costs and lower interest and other income.
- R&D fell $18.5 million year over year for the first nine months, mainly from lower personnel, facility and manufacturing costs following a January 2020 restructuring and a reduced emphasis on other candidates. The company reduced its workforce by approximately 30%.
- In October 2020, the FDA lifted the clinical hold on the SGT-001 IGNITE DMD Phase I/II trial. The company said it expected to resume dosing in Q1 2021, subject to completing required activities. It planned to limit the next two patients to 18 kg, reduce total viral load through manufacturing improvements, and use prophylactic eculizumab and C1 esterase inhibitor with an increased prednisone dose.
- In October 2020, the company entered a collaboration and license agreement with Ultragenyx for specified AAV8 and clade E microdystrophin products. Ultragenyx received worldwide exclusive rights for those licensed products and decision-making authority over their development, manufacturing and commercialization; Solid retained rights to other uses, including its existing SGT-001 program. The agreement provides for up to $255 million in cumulative milestones per product and tiered royalties from low double digits to mid-teens. Solid may opt in to co-fund programs after proof of concept in exchange for profit participation or increased royalties.
- After quarter-end, Solid sold shares to Ultragenyx for approximately $40.0 million and sold shares under its ATM program for net proceeds of $23.2 million. Management said these funds, together with September 30 cash, were expected to fund operations into the second half of 2021.
Outlook, risks and contingencies
- Going concern: Despite the October financing, management concluded that substantial doubt remained about the company’s ability to continue as a going concern within twelve months of issuance. The financial statements include no adjustments for this uncertainty. Additional financing will be needed, and management cautioned that cash could be used faster than expected.
- Clinical and regulatory risk: The FDA had maintained the SGT-001 hold earlier in 2020 after a serious drug-related adverse event involving complement activation, low platelets and red blood cells, acute kidney injury, and cardiopulmonary insufficiency. Although the patient recovered and the hold was later lifted, similar events may recur; the proposed dual complement-inhibition approach is untested in this disease.
- Development and operating risks: The company expects continued losses and substantial development costs. Clinical success, regulatory approval, patient enrollment, manufacturing consistency and commercial viability remain uncertain. COVID-19 could disrupt trials, suppliers, staffing and financing.
- Other items: The company reported no material legal claims as of September 30 and no legal proceedings in Part II. It recorded no income tax benefit because deferred tax assets were fully offset by a valuation allowance. Management reported disclosure controls effective as of quarter-end and no material change in internal control over financial reporting during Q3.
Investor verification priorities
- Confirm the timing and conditions for resuming IGNITE DMD dosing, and monitor safety outcomes, FDA requirements and manufacturing-process performance.
- Review the Ultragenyx agreement’s complete terms, including licensed-product scope, milestone conditions, royalties, cost reimbursement and Solid’s post-proof-of-concept opt-in rights.
- Reconcile the post-quarter financing proceeds and share issuances with the company’s cash runway, subsequent cash burn and dilution; assess the stated second-half-2021 runway against the going-concern warning.
- Track R&D spending reductions and restructuring effects to determine whether lower costs reflect sustainable operating changes or delayed development activity.
- Monitor COVID-19 and other clinical, manufacturing, regulatory, financing and intellectual-property risks, all of which could materially affect development plans and funding needs.