Solid Biosciences Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Solid Biosciences is a clinical-stage biotechnology company developing gene therapies, primarily for Duchenne muscular dystrophy (Duchenne). It had no approved products and generated no product sales.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data and where noted.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Collaboration revenue | $0.0 | $3.5 | $8.1 | $10.5 |
| Research and development expense | $14.0 | $14.4 | $57.1 | $44.1 |
| General and administrative expense | $7.1 | $7.1 | $21.3 | $19.9 |
| Restructuring expense | $0 | $0 | $1.5 | $0 |
| Net loss | $20.4 | $18.0 | $70.8 | $53.6 |
| Net loss per share | $2.71 | $2.40 | $9.42 | $7.68 |
| Cash used in operating activities | Not provided for quarter | Not provided for quarter | $63.5 | $56.9 |
- At September 30, 2022, cash and cash equivalents were $48.8 million and available-for-sale securities were $93.4 million, totaling $142.2 million. Current assets were $147.5 million and current liabilities $16.9 million.
- Total assets were $184.5 million; total liabilities were $41.2 million. The company reported no debt outstanding; lease liabilities are reported separately.
- Cash, cash equivalents and restricted cash fell $70.3 million over the first nine months, to $50.9 million. Financing activities provided only $0.1 million in that period, compared with $134.9 million in 2021, primarily from the March 2021 stock offering.
- Product gross margin is not applicable: the company had no product sales. Collaboration revenue was the only reported revenue.
Material changes and business developments
- Q3 collaboration revenue ended after the Ultragenyx research and development services contemplated in the agreement were completed in Q2 2022; the remaining deferred revenue was recognized then. Nine-month 2022 collaboration revenue declined 23% from the prior-year period.
- Nine-month R&D expense increased 29%, chiefly from higher SGT-003 manufacturing costs and higher unallocated personnel and facility costs. In Q3, lower SGT-001 spending largely offset increased SGT-003 spending.
- In April, Solid reduced headcount by approximately 35% as part of a strategic shift. It recorded $1.5 million in restructuring charges for the nine months and said it did not expect additional significant costs.
- In September, Solid said it would pause SGT-001 activities, while completing ongoing preclinical and manufacturing work to preserve the option to reactivate the program. It prioritized SGT-003 and reported nonclinical data showing higher microdystrophin expression in a mouse comparison with SGT-001.
- On September 29, Solid agreed to acquire AavantiBio, adding gene therapy programs including a lead candidate for Friedreich’s ataxia and candidates for cardiac diseases. Consideration includes $1,000 cash and stock equal to 15% of Solid’s post-acquisition common shares on a fully diluted basis, subject to the agreement’s formula and adjustments.
- Solid also agreed to a private placement of 10,638,290 shares at $7.05 per share, expected to raise approximately $75 million gross. Both transactions remained subject to closing conditions, including stockholder approval; the filing does not establish that either had closed by the reporting date.
Outlook, risks and unusual items
- Management said September 30 liquidity, excluding the proposed acquisition and private placement, was expected to fund operations and capital needs into the second quarter of 2024. The financial-statement note separately states that available resources were expected to cover at least 12 months from issuance. These are estimates dependent on assumptions and could change.
- If both transactions close, management estimated approximately $215 million of cash, cash equivalents and available-for-sale securities at closing, expected to fund operations into 2025. This is conditional, not assured.
- Solid anticipated filing an IND for SGT-003 in mid-2023 and, subject to IND clearance, beginning patient dosing in late 2023. It expected additional IGNITE DMD data in early 2023. The filing cautions that interim clinical data may change and may not predict later results.
- Key risks include continued operating losses and need for future financing; clinical, regulatory and manufacturing uncertainty for gene therapies; prior serious adverse events and clinical holds in the SGT-001 trial; dependence on third-party manufacturers; competition; and the possibility that the AavantiBio acquisition or associated financing does not close. If specified termination conditions apply, Solid may owe AavantiBio a $310,000 termination fee and up to $750,000 of expense reimbursement.
- Solid had received a Nasdaq minimum-bid-price deficiency notice, with a November 28, 2022 compliance deadline. A 1-for-15 reverse stock split became effective October 27, 2022, after quarter-end, in an effort to address the deficiency. The filing’s share and per-share financial data are retrospectively adjusted for the split.
- Management reported effective disclosure controls as of September 30, 2022, with no material change in internal control over financial reporting during Q3. The company reported no material legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the AavantiBio acquisition and $75 million private placement closed, on what final terms, and how much cash remained after closing costs and any acquired liabilities.
- Actual cash burn and updated runway versus management’s conditional estimates, especially given the absence of product revenue and ongoing losses.
- SGT-003 IND timing, clinical start, manufacturing readiness, and whether later clinical data support the reported nonclinical rationale.
- Complete IGNITE DMD results and the status of SGT-001 after the announced pause, including safety findings and any decision to reactivate the program.
- Whether the reverse split restored Nasdaq bid-price compliance and the resulting effect of transaction-related share issuance on dilution and trading liquidity.