Surrozen, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited results; comparison is with Q1 2023 unless noted. Surrozen is a clinical-stage biotechnology company developing medicines that modulate the Wnt pathway. It has no approved products and does not report product-sales revenue.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Research and development expense | $5.247 million | $8.086 million; down 35% |
| General and administrative expense | $3.883 million | $5.299 million; down 27% |
| Total operating expenses | $9.130 million | $14.592 million; down 37% |
| Net loss | $8.830 million | $14.297 million |
| Basic and diluted loss per share | $4.24 | $7.16 |
| Cash used in operating activities | $8.746 million | $14.170 million |
Revenue and gross margin are not presented as line items in the statements of operations; the filing says revenue to date has come only from the Boehringer Ingelheim (BI) collaboration. No revenue value for Q1 2024 is stated in the supplied filing text, so a clear quarterly revenue figure cannot be confirmed. Operating margins are not meaningful without reported quarterly revenue.
At March 31, cash and cash equivalents were $27.290 million; restricted cash was $0.688 million. Current assets were $32.015 million and current liabilities $6.179 million, implying working capital of approximately $25.836 million. Total liabilities were $6.580 million, including $2.786 million of operating lease liabilities; the filing reports no borrowings. Accumulated deficit was $230.525 million. Cash, cash equivalents and restricted cash declined $8.753 million during the quarter.
Changes versus prior period
- Net loss narrowed by $5.467 million, while operating expenses fell $5.462 million. The reductions reflect 2023 workforce restructuring and the absence of the $1.207 million Q1 2023 restructuring charge.
- R&D expense decreased across SZN-043, SZN-1326 and discovery/preclinical programs. SZN-1326 development was discontinued in January 2024.
- Interest income declined to $0.385 million from $0.547 million, primarily due to lower cash equivalents and marketable securities. Other expense, net, improved to $0.085 million from $0.252 million, mainly due to the change in warrant-liability fair value.
- Q1 2024 investing cash use was $0.007 million, versus $17.328 million of investing cash provided in Q1 2023, which included net marketable-securities maturities and purchases.
Outlook, material events and risks
- Runway and financing: Management says cash at quarter-end plus approximately $17.6 million of gross proceeds from an April 2024 private placement should fund operations for at least 12 months from the financial-statement issuance date. This estimate depends on expected spending and may change; the company expects to need additional capital over the longer term.
- April private placement: The company sold common stock and pre-funded warrants and issued warrants tied to the financing and clinical milestones. The filing reports approximately $17.6 million of upfront gross proceeds, before fees and expenses. Exercise of all warrants could provide approximately $175.5 million in additional gross proceeds, but those proceeds are not assured and a significant portion depends on clinical milestones. Potential share dilution is substantial relative to the 3,198,786 common shares outstanding as of May 6, 2024.
- SZN-043: The Phase 1a study was completed in February 2024. The company is initiating a Phase 1b study in severe alcohol-associated hepatitis and anticipates potential proof-of-concept data in the first half of 2025. Phase 1a showed acceptable safety and tolerability in the planned Phase 1b dose range, but several subjects had Grade 1 or 2 asymptomatic treatment-related transaminase elevations that resolved spontaneously; no serious adverse events were observed. Safety in the intended patient population remains a key uncertainty.
- SZN-413 / BI collaboration: Surrozen anticipates possible nomination of a lead Fzd4-targeted candidate in 2024, which would trigger a $10 million milestone. The agreement provides for up to $587 million in success-based milestones and royalties if licensed products reach sales; milestones and royalties are contingent, not assured revenue.
- Workspace: In April, Surrozen entered a month-to-month sublease of about 6,102 square feet to Nura Bio for approximately $35,087 monthly base rent, plus its share of operating expenses. The transaction is related-party: director Tim Kutzkey is Nura Bio’s chairman and is associated with significant Nura Bio investors. The audit committee approved and ratified the sublease.
- Principal risks: Clinical, regulatory, manufacturing and enrollment uncertainty; possible adverse effects from Wnt-pathway modulation; dependence on third-party manufacturers and trial providers; competition and intellectual-property risks; and continued losses and need for financing. The company warns that a higher-than-expected cash burn could require spending cuts or additional fundraising.
- Controls and contingencies: Management concluded disclosure controls were effective at a reasonable-assurance level, with no material quarterly change in internal control over financial reporting. The company reports no legal proceedings believed likely to have a material adverse effect and no material change in contractual obligations. Inflation may increase labor, research and trial costs, though management says it did not materially affect the periods presented.
Key facts investors should verify
- Actual enrollment, safety findings and development decisions in the SZN-043 Phase 1b trial, including follow-up on transaminase elevations and the timing and content of proof-of-concept data.
- Whether BI nominates a SZN-413 lead candidate and whether the associated $10 million milestone is achieved and paid.
- Net proceeds from the April private placement, warrant exercise conditions and resulting dilution; do not treat potential warrant proceeds as available cash.
- Cash burn and the assumptions supporting management’s stated 12-month runway, particularly as clinical-trial spending changes.
- Sublease commencement, duration and receipts, and related-party oversight and terms.