Solid Biosciences Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Filed November 12, 2019. Solid Biosciences is a clinical-stage biotechnology company developing treatments for Duchenne muscular dystrophy (DMD); it had no approved products and generated no revenue.
Financial performance and position
Amounts below are in U.S. dollars; financial statement figures are converted from thousands to millions.
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $22.8m | $14.7m | $67.7m | $40.2m |
| General and administrative | $6.9m | $4.5m | $19.3m | $13.1m |
| Total operating expenses | $29.7m | $19.2m | $87.0m | $53.3m |
| Net loss | $29.3m | $19.0m | $85.4m | $52.9m |
| Basic and diluted net loss per share | $0.67 | $0.55 | $2.26 | $1.61 |
- Q3 operating expenses increased $10.6m year over year. R&D rose $8.1m, reflecting higher SGT-001 manufacturing and clinical activity, as well as personnel and facility costs. G&A increased $2.5m, principally from personnel and other corporate expenses.
- For the first nine months, operating cash use was $71.5m, versus $48.8m in 2018. Investing activities provided $21.7m, largely from securities maturities, while financing provided $58.2m, mainly from the July private placement.
- At September 30, cash and cash equivalents were $94.7m and available-for-sale securities were $10.9m, totaling $105.7m. Current assets were $113.5m and current liabilities $16.8m. The company reported no debt outstanding; it had operating and finance lease liabilities totaling approximately $7.5m.
- Total assets were $130.9m, total liabilities $22.4m, stockholders’ equity $108.5m, and accumulated deficit $284.4m.
Material changes and financing
- On July 30, 2019, the company raised $60.0m gross, or $57.9m net, through a private placement of 10.6m common shares and 2.3m pre-funded warrants. The warrants are exercisable at $0.01 per share and have no expiration date.
- Compared with the first nine months of 2018, R&D increased $27.5m and G&A increased $6.2m; net loss widened by $32.5m. Increased R&D included higher SGT-001 manufacturing costs and expanded personnel and laboratory operations.
- The company adopted lease accounting guidance in January 2019, recognizing operating lease right-of-use assets and liabilities. This adoption did not affect reported operating results.
Outlook, clinical development and key risks
- Management estimated that September 30 cash, cash equivalents and securities would fund operating expenses and capital requirements into Q4 2020. The filing also concludes that substantial doubt exists about the company’s ability to continue as a going concern within twelve months after issuance; additional financing was not considered probable for that assessment. Management warned that unavailable funding could force delays, reductions or termination of programs.
- Subsequent clinical event: After quarter-end, a patient dosed in late October in the higher-dose IGNITE DMD cohort experienced a serious adverse event considered related to SGT-001, involving complement activation, low platelet and red blood cell counts, acute kidney injury, and cardiopulmonary insufficiency. In November, the FDA placed the trial on clinical hold; enrollment and dosing were halted. The patient was reported to be recovering. The company was awaiting the formal hold letter and planned to work with the FDA on next steps.
- Earlier, a patient in the second cohort experienced a serious adverse event involving transient liver enzyme and bilirubin elevations that resolved after increased glucocorticoids; the company reported it as related to study drug. In August, the company amended the trial protocol, including a temporary upper weight limit for at least the next patient dosed and removal of the matched control arm for the remainder of the cohort.
- Management expected R&D and public-company costs to rise, but provided no specific financial guidance beyond its cash runway estimate. A possible company-owned manufacturing facility was estimated to require $60m–$75m in capital expenditure. The company also cited clinical, regulatory, manufacturing, financing, competition and intellectual-property uncertainties.
- Disclosure controls and procedures were deemed ineffective as of September 30 because of previously identified material weaknesses in staffing, formal accounting controls, and controls over complex transactions. Remediation efforts were underway but were not yet considered complete.
- A stockholder securities class action was voluntarily dismissed without prejudice on June 28, 2019. The filing’s legal-proceedings section reports none.
Most important facts for investors to verify
- Current status and terms of the FDA clinical hold, any requested corrective actions, and whether IGNITE DMD enrollment or dosing may resume.
- Further safety information from the serious adverse events, including any additional FDA or Data Safety Monitoring Board findings.
- Actual cash burn, financing availability and whether the company’s stated runway into Q4 2020 remains achievable.
- Progress in remediating material weaknesses and whether disclosure controls and internal financial reporting controls become effective.
- Manufacturing readiness, supply reliability and potential funding needs, including any decision to build a manufacturing facility.