Scholar Rock Holding Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 7, 2024. Scholar Rock is a clinical-stage biopharmaceutical company with no product-sales revenue. Its lead candidate, apitegromab, is in Phase 3 development for spinal muscular atrophy (SMA).
Financial performance and position
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | None | None | No product revenue |
| Research and development expense | $43.1 million | $29.7 million | Up 44.9% |
| General and administrative expense | $15.3 million | $10.8 million | Up 42.2% |
| Total operating expenses | $58.4 million | $40.5 million | Up 44.2% |
| Net loss | $56.9 million | $39.4 million | Loss increased 44.4% |
| Net loss per share, basic and diluted | $0.59 | $0.49 | Greater loss per share |
| Net cash used in operating activities | $49.8 million | $43.1 million | Use increased |
Operating margin and conventional profitability margins are not meaningful because the company reported no revenue. R&D growth primarily reflected apitegromab Phase 3 SAPPHIRE and ONYX trial costs, clinical supply manufacturing, and cardiometabolic program spending. G&A growth reflected higher employee-related and professional-services costs. Equity-based compensation was $8.2 million, versus $6.2 million a year earlier.
At March 31, 2024, cash and cash equivalents were $92.0 million and marketable securities were $146.5 million, totaling $238.4 million. Total current assets were $246.9 million and current liabilities were $37.5 million. Total debt was approximately $50.1 million: $5.5 million current and $44.6 million long-term. Total liabilities were $84.5 million; accumulated deficit was $733.3 million.
Cash, cash equivalents and marketable securities declined $41.5 million from year-end 2023. Net cash from investing activities was $33.4 million, primarily reflecting maturities of marketable securities, while financing activities provided $6.5 million, mainly from warrant exercises. The reported net decrease in cash, cash equivalents and restricted cash was $9.9 million; this measure differs from the decline in cash plus marketable securities.
Material changes and business developments
- Net loss increased $17.5 million year over year as operating expenses rose $17.9 million.
- External apitegromab R&D costs increased $8.4 million, principally due to SAPPHIRE, ONYX, manufacturing and GLP-1 drug supply. SRK-181 external costs fell $2.2 million, partly reflecting prior-year pembrolizumab purchases.
- During the quarter, 2.5 million pre-funded warrants and 830,660 common warrants were exercised, providing $6.1 million in proceeds. No shares were sold through the ATM program in Q1. Common shares issued and outstanding rose to 79.7 million from 76.0 million at December 31, 2023.
- Management expects SAPPHIRE top-line results in Q4 2024. If apitegromab is approved, the company expects a potential commercial launch in 2025.
Outlook, risks and contingencies
- Management expects current cash, cash equivalents and marketable securities to fund operating expenses and capital requirements into the second half of 2025. The company also states that additional capital will be required to complete clinical development and commercialization; the runway estimate depends on assumptions that may prove inaccurate.
- The company plans a Phase 2 proof-of-concept trial of apitegromab with a GLP-1 receptor agonist in 2024, with data expected in mid-2025, to inform SRK-439 development. A potential SRK-439 IND submission is targeted for 2025.
- SRK-181 Phase 1 DRAGON enrollment was completed in December 2023; patients remaining on study continue treatment. Management expects SRK-181 costs to decrease. Management reported that DRAGON showed objective, durable responses in a clear-cell renal cell carcinoma cohort, but trial results remain subject to further review and are not a substitute for confirmatory evidence.
- Key risks include Phase 3 trial efficacy and safety outcomes, regulatory approval and launch execution, reliance on third-party manufacturers and clinical-trial providers, competition, and the need for additional financing. New equity financing could dilute shareholders; debt or partnership financing could impose restrictions or require relinquishing rights.
- The Oxford/SVB loan has a stated maturity in November 2027. Interest is the greater of prime plus 4.60% or 9.35%; interest-only payments run through November 2024, with principal payments scheduled to resume in December 2024.
- No material legal proceedings were reported. Management concluded disclosure controls and procedures were effective at the reasonable-assurance level as of March 31, 2024; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether SAPPHIRE reports top-line results in Q4 2024 and how the results compare with trial endpoints and regulatory requirements.
- Actual quarterly cash burn and whether the stated runway into the second half of 2025 remains supportable as trial, manufacturing and potential commercialization costs evolve.
- Timing, enrollment and data plans for the apitegromab/GLP-1 Phase 2 study, and progress toward SRK-439’s potential 2025 IND submission.
- Potential dilution from outstanding warrants, options and restricted stock units, as well as any future ATM or other financing. At quarter-end, 17.0 million pre-funded warrants and 9.2 million common warrants remained outstanding.
- Debt interest costs and the effect of principal payments beginning in December 2024 on liquidity.